Cambron v. Scale Social, Inc.

Opinion

1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 AUTUMN CAMBRON, Case No.: 24-cv-2498-CAB-VET

14 Plaintiff, ORDER GRANTING DEFENDANTS’ 15 v. MOTION TO STAY PENDING ARBITRATION 16 SCALE SOCIAL, INC. and RALPH D.

GRAMAJO, 17 [Doc. No. 5] Defendants. 18

19 Defendant Scale Social, Inc. (“Scale Social”) and Defendant Ralph D. Gramajo 20 (“Gramajo”) filed a motion to stay this matter pending arbitration. [Doc. No. 5.] For the 21 reasons outlined below, the Court GRANTS Defendant’s Motion to Stay and ORDERS 22 the parties to continue arbitration. 23 I. BACKGROUND 24 a. Allegations in the Complaint 25 Defendant Scale Social is a California corporation. [Complaint (“Compl.”) ¶¶ 3–4.] 26 Defendant Gramajo is a resident of Arizona and the sole officer and director of Scale 27 Social. [Id. ¶ 6.] Plaintiff claims to be a model who works in the social media industry. 28 1 [Id. at 12.] Plaintiff entered into an agreement (the “Agreement”) with Defendants to have 2 Scale Social serve as Plaintiff’s talent management. [Id. ¶¶ 11, 18, 22.] Plaintiff alleges 3 that Defendants locked Plaintiff out of her social media accounts, failed to compensate 4 Plaintiff for her recruitment efforts, and wrongfully withheld Plaintiff’s profits generated 5 from her social media accounts. [Id. at ¶¶ 22–49.] 6 On December 31, 2024, Plaintiff filed a complaint asserting five causes of action 7 against Defendants. [See Compl.] Plaintiff first claims that the Agreement must be 8 declared null and void from inception because Defendants were not licensed under 9 California’s Talent Agencies Act (the “TAA”) and did not follow the TAA’s requirements. 10 [Id. ¶¶ 51–74.] Plaintiff next alleges that Defendants used false statements to entice 11 Plaintiff to enter into the Agreement. [Id. ¶¶ 76–84.] Third, Plaintiff claims that Defendant 12 Gramajo used photos of Plaintiff on his social media in violation of California Civil Code 13 § 3444. [Id. ¶¶ 86–95.] Fourth, Plaintiff alleges that Defendants used Plaintiff’s likeness 14 for Defendants’ commercial advantage without Plaintiff’s consent. [Id. ¶ 98.] Finally, 15 Plaintiff alleges that Defendants violated California’s Business and Professions Code 16 Section 17200 et seq. by engaging in unlawful, unfair, and fraudulent business acts and 17 practices. [Id. ¶¶ 100–103.] 18 b. Defendant’s Motion to Stay Pending Arbitration 19 On April 4, 2025, Defendants filed a Motion to Stay Pending Arbitration, Motion to 20 Strike Paragraph 8, Motion to Dismiss for Violation of Rule 7.1, Motion to Dismiss for 21 Lack of Personal Jurisdiction, Motion to Dismiss for Failure to State a Claim, and Motion 22 for More Definite Statement. [Doc. No. 5.] On June 11, 2025, the Court denied Gramajo’s 23 Motion to Dismiss for Lack of Personal Jurisdiction. [Doc. No. 24.] 24 Plaintiff incorporated the Agreement into her complaint. [Compl. at 23–34.] The 25 Agreement includes an arbitration clause, which states: 26 Arbitration. A cause of action arising out of this Agreement includes any cause of action seeking to enforce any provision of or based on any matter 27 arising out of or in connection with this Agreement or the transactions 28 contemplated by it. The parties agree to settle any dispute, action, or 1 proceeding, whether in contract, tort, or otherwise, arising out of this Agreement first via mediation, and if such mediation is unsuccessful, the 2 parties agree to binding arbitration according to the then-prevailing 3 procedures as set forth by the American Arbitration Association, with the venue taking place in San Diego, CA. 4 5 [Compl. at 30.] 6 Pointing to the Agreement’s arbitration provision, Defendants contend that Plaintiff 7 consented to binding arbitration. [Doc. No. 5 at 2.] Defendants also argue that the 8 arbitrator should determine whether Plaintiff’s claims are subject to arbitration in the first 9 instance. [Doc. No. 5-1 at 6.] 10 II. LEGAL STANDARD 11 The Federal Arbitration Act (“FAA”) governs the enforceability of arbitration 12 agreements in contracts. Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010). The 13 FAA makes such written arbitration agreements “valid, irrevocable, and enforceable, save 14 upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. 15 § 2. “Because arbitration is fundamentally a matter of contract, the central or primary 16 purpose of the FAA is to ensure that private agreements to arbitrate are enforced according 17 to their terms.” Momot v. Mastro, 652 F.3d 982, 986 (9th Cir. 2011) (internal quotation 18 marks and citation omitted). 19 Under the FAA, an aggrieved party to a written arbitration agreement “may petition 20 any United States district court . . . for an order directing that such arbitration proceed in 21 the manner provided for in [the arbitration] agreement.” 9 U.S.C. § 4. “A party seeking 22 to compel arbitration has the burden under the FAA to show (1) the existence of a valid, 23 written agreement to arbitrate; and, if it exists, (2) that the agreement to arbitrate 24 encompasses the dispute at issue.” Ashbey v. Archstone Prop. Mgmt., Inc., 785 F.3d 1320, 25 1323 (9th Cir. 2015). Upon such a showing, the FAA “mandates that district courts shall 26 direct the parties to proceed to arbitration on issues as to which an arbitration agreement 27 has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis 28 in original). The scope of an arbitration clause must be interpreted liberally, and “as a 1 matter of federal law, any doubts concerning the scope of arbitrable issues should be 2 resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 3 460 U.S. 1, 24 (1983). Accordingly, a motion to compel arbitration “should not be denied 4 unless it may be said with positive assurance that the arbitration clause is not susceptible 5 of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of 6 coverage.” United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582– 7 83 (1960). 8 III. ANALYSIS 9 Plaintiff argues that the Agreement did not clearly and unmistakably delegate the 10 issue of arbitrability to the arbitrator because the Agreement has conflicting provisions 11 regarding arbitrability. [Doc. No. 22 at 3–7.] Further, Plaintiff claims that the arbitration 12 clause does not bind the parties because of ambiguities, inconsistencies, and its 13 unconscionability. [Doc. No. 22 at 7–14.] Defendants respond that the parties executed a 14 valid Agreement, that the arbitration clause is not unconscionable, and that all doubts must 15 be construed in favor of arbitration. [Doc. No. 5-1 at 4–6; Doc. No. 23 at 6.] The Court 16 resolves these issues in turn. 17 a. Validity of the Arbitration Clause 18 Under the FAA, a party seeking to compel arbitration has the burden of showing that 19 a valid, written agreement to arbitrate exists between the parties. Ashbey, 785 F.3d at 1323. 20 “To determine whether the parties formed an agreement to arbitrate, courts ‘apply ordinary 21 state-law principles that govern the formation of contracts.’” Int’l Bhd. of Teamsters v. 22 NASA Servs., Inc., 957 F.3d 1038, 1042 (9th Cir. 2020) (quoting First Options of Chicago, 23 Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). Pursuant to California law, the moving party 24 must prove by a preponderance of the evidence that an agreement to arbitrate exists. Id. 25 (citing Knutson v. Sirius XM Radio Inc., 771 F.3d 559, 565 (9th Cir. 2014)). 26 Defendant argues that the Agreement contains an arbitration provision and Plaintiff 27 consented to that provision by executing the Agreement. [Doc. No. 5-1 at 5–6.] The parties 28 do not dispute that both have executed the Agreement. [Id.] Although Plaintiff claims that 1 she entered into the Agreement under fraudulent circumstances, an arbitration clause may 2 be enforced even though the rest of the contract is later held invalid by the arbitrator. 3 Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 476 (9th Cir. 1991). 4 Plaintiff replies that the parties’ agreement to delegate arbitration is unconscionable. 5 The arbitrator first decides whether the arbitration clause is unconscionable, unless the 6 party resisting arbitration specifically references the delegation provision and makes 7 arguments challenging it. See Bielski v. Coinbase, Inc., 87 F.4th 1003, 1011 (9th Cir. 8 2023). Here, Plaintiff specifically references the delegation to arbitration and makes 9 arguments against the provision. [See Doc. No. 22 at 4—6.] 10 “Unconscionability requires a showing of both procedural unconscionability and 11 substantive unconscionability.” Ajamian v. CantorCO2e, L.P., 203 Cal. App. 4th 771, 795 12 (2012). “The procedural element of unconscionability involves oppression and surprise.” 13 Baker v. Osborne Dev. Corp., 159 Cal. App. 4th 884, 895 (2008). “Oppression arises when 14 the parties have unequal bargaining power, leading to no real negotiation and lack of 15 meaningful choice.” Id. “Surprise may arise when challenged terms are hidden in a prolix 16 printed form drafted by a party in a superior bargaining position.” Id. (internal quotation 17 marks omitted). “The substantive element of unconscionability focuses on the actual terms 18 of the agreement and evaluates whether they create ‘overly harsh’ or ‘one-sided’ results, 19 that is, whether contractual provisions reallocate risks in an objectively unreasonable or 20 unexpected manner. To be substantively unconscionable, a contractual provision must 21 shock the conscience.” Id. at 894 (internal quotation marks and citation omitted). Plaintiff 22 argues the delegation provision is unconscionable because the arbitration clause conflicts 23 with other language in the agreement, that she unknowingly relinquished her rights to 24 pursue resolution in court, and the parties had unequal bargaining power. [Id. at 5—6, 25 12—13.]. The Court addresses these arguments below. 26 First, Plaintiff argues that the arbitration clause is not valid since the Agreement 27 contains conflicting clauses regarding arbitration, and that any ambiguities must be 28 resolved in favor of Plaintiff. [Doc. No. 22 at 7—14.] Plaintiff points out that the 1 Agreement explicitly requires the parties to bring “all legal actions” in a California court 2 of law, not through arbitration. [Id. at 8.] In relevant part: 3 All legal actions relating to this Agreement shall be brought in the state or federal courts located in the State of California. Each party knowingly and 4 voluntarily agrees to San Diego, California as the venue for any such action, 5 suit, or proceeding. 6 [Id. at 9]. Plaintiff claims that this language in Section 19 of the Agreement conflicts with 7 the arbitration provision found in Section 18 of the Agreement, and the Court should decide 8 arbitrability instead of the arbitrator. [Id. at 13]. 9 Defendant responds that by incorporating the then-prevailing procedures as set forth 10 by the American Arbitration Association (the “AAA”) in the Arbitration Agreement, the 11 Agreement intended for the arbitrator to “have the power to rule on his or her own 12 jurisdiction, including any objections with respect to the existence, scope, or validity of the 13 arbitration agreement or to the arbitrability of any claim or counterclaim.” [Doc. No. 5-1 14 at 7]; see American Arbitration Association Commercial Arbitration Rules and Mediation 15 Procedures § R-7 (AAA 2022). The Ninth Circuit, as well as the California Court of 16 Appeal, has held that language in an agreement stating that disputes shall be resolved with 17 the then-current rules of the AAA “incorporates the applicable rules of the AAA into the 18 terms of the contract.” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1122 (9th Cir. 19 2008); O’Hare v. Mun. Res. Consultants, 107 Cal. App. 4th 267, 280 (2003). Here, the 20 Agreement incorporates the AAA by directly referencing the AAA. [See Compl. at 30.] 21 Because the Agreement incorporates the AAA by direct reference, the Court finds that the 22 parties agreed to the AAA’s rules and the arbitration clause does not conflict with the rest 23 of the Agreement. 24 The Ninth Circuit has explained that the “incorporation of the AAA rules constitutes 25 clear and unmistakable evidence that contracting parties agreed to arbitrate arbitrability.” 26 Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). While Brennan carves out 27 exceptions for certain consumers or particularly complex contracts, the Court finds that 28 neither exception applies. Plaintiff next argues that Brennan should not apply because 1 Plaintiff was not a sophisticated party. However, Plaintiff pleads that she had previously 2 worked with a manager in the industry. [Doc. No. 22 at 2.] Regardless of whether Plaintiff 3 was a sophisticated party or not, the Brennan court specifically noted that its holding could 4 apply to unsophisticated parties. See Brennan, 796 F. 3d at 1130. The Court does not find 5 the straightforward arbitration provision unconscionable as it clearly incorporates the AAA 6 and does not shock the conscience. 7 Finally, Plaintiff replies that the parties had unequal bargaining power because 8 Plaintiff was surprised to find out about the arbitration clause. In establishing 9 unconscionability, courts in California consider the length of the proposed contract and the 10 length and complexity of the challenged provision. Ronderos v. USF Reddaway, Inc., 114 11 F.4th 1080, 1090 (9th Cir. 2024). The Court does not find Plaintiff’s surprise about the 12 contents of a 14-page Agreement credible. The relatively short and clear Agreement 13 plainly acknowledged that Plaintiff had the right to consult an attorney directly under the 14 text of the arbitration clause, yet Plaintiff chose to proceed without an attorney. The Court 15 does not find apparent oppression and surprise that rises to the level of unconscionability. 16 Plaintiff’s unconscionability challenge fails at this juncture. For the reasons stated 17 above, Defendant has shown by a preponderance of evidence that (1) the parties validly 18 executed the Agreement and (2) that it evidences a clear and explicit intention to arbitrate. 19 See Ashbey, 785 F.3d at 1323. 20 b. Scope of the Arbitration Clause 21 Regarding the scope of the arbitration clause, Plaintiff argues that the parties have 22 not agreed to submit any claims to arbitration because the parties agreed to first bring all 23 legal actions in state or federal court. [Doc. No. 22 at 14.] “[T]he party resisting arbitration 24 bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green 25 Tree Fin. Corp.–Alabama v. Randolph, 531 U.S. 79, 91 (2000). If there is ambiguity as to 26 the scope of the arbitration clause, the Court must resolve the ambiguities in favor of 27 arbitration. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995). 28 The parties have incorporated the AAA’s arbitration rules. Controlling law makes 1 that the issue of arbitrability is delegated to the arbitrator. See Brennan, 796 F.3d at 2 1130. Resolving any ambiguities in favor of arbitration, the Court finds Plaintiff's claims 3 || within the scope of the Agreement’s arbitration clause. 4 IV. CONCLUSION 5 Defendants’ motion to stay pending arbitration is GRANTED. See 9 U.S.C. § 3. 6 || At the status conference on June 25, 2025, the parties confirmed that they had begun 7 || arbitration with an arbitrator and that arbitrator had stayed the arbitration proceedings until 8 || this Court could rule on arbitrability. The Court ORDERS the parties to resume arbitration 9 the manner provided for in the Agreement. See 9 U.S.C. § 4. Accordingly, Defendant’s 10 |}motion to dismiss the complaint is hereby DENIED AS MOOT AND WITHOUT 11 PREJUDICE. The Court deems all other pending motions WITHDRAWN subject to 12 |/refiling if the matter is not resolved in arbitration. 13 □□ □□ SO ORDERED. 14 || Dated: July 8, 2025 € 15 Hon. Cathy Ann Bencivengo 16 United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28

°