1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7
9 ALEXIS WOOD and FELICIA CIPOLLA, individually and on behalf of all others 10 No. C 18-06867 WHA similarly situated,
11 Plaintiffs,
12 ORDER RE PLAINTIFF WOOD’S v. MOTION TO LIFT STAY AND 13 AMEND TEAM ENTERPRISES, LLC, and NEW 14 TEAM LLC, doing business as TEAM 15 ENTERPRISES, 16 Defendants.
17 INTRODUCTION 18 Before our court of appeals, defendants succeeded in obtaining an order that the 19 arbitration clause delegated the question of unconscionability to the arbitrator. On remand, 20 therefore, this Court required both plaintiffs to proceed to arbitration and stayed the case. Each 21 plaintiff got a different arbitrator. One of the arbitrators ruled that the arbitration clause was 22 unconscionable and therefore unenforceable. The other arbitrator found that the provision was 23 enforceable. The plaintiff who prevailed before the arbitrator now seeks to vacate the stay and 24 to proceed in the district court (Dkt. Nos. 1, 23, 25, 41, 48, 53). 25 Defendants resist on the ground that the other arbitrator came out the other way. The 26 proper answer is the case will proceed in the district court as to the plaintiff for whom the 27 arbitrator found the agreement is unconscionable. The other plaintiff will proceed in 1 arbitration (unless that arbitrator changes his or her mind). Having insisted on submitting the 2 question of arbitrability to an arbitrator and having stripped plaintiffs of their right to class 3 treatment, defendants will not be allowed to wiggle off their loss before the arbitrator. Their 4 fix is entirely of their own making. To the extent stated below, the motion to vacate the stay, 5 to amend, and to join additional plaintiffs, is GRANTED. 6 STATEMENT 7 Plaintiffs Alexis Wood and Felicia Cipolla commenced this putative wage-and-hour class 8 action in November 2018. A prior order detailed the facts (see Dkt. No. 48). As stated, Wood 9 and Cipolla individually moved in arbitration to strike the arbitration clause. Cipolla’s 10 arbitrator found her arbitration provision enforceable, and Cipolla has moved for 11 reconsideration. In September 2021, Judge Lynn Duryee (Ret.) ruled that Wood’s claims are 12 not subject to mandatory arbitration. Wood now requests that this order lift the stay and join 13 Bernadette Blanchard and Shirin Lessan as putative named plaintiffs. Blanchard and Lessan 14 worked as Team Enterprises promotion specialists in California (Blanchard for 2013–2017; 15 Lessan for 2014–2016). Both have arbitrated their motions to strike the arbitration clauses 16 before Judge Duryee, who found their arbitration provisions unenforceable (Wynne Decl. Exh. 17 1, ¶¶ 9–10). 18 This order follows full briefing and oral argument. 19 ANALYSIS 20 1. MOTION TO LIFT THE STAY. 21 Defendants contend that where (as here), identical claims by two plaintiffs were sent to 22 arbitration, the district court lacks discretion to lift the stay until both arbitrations finish. Our 23 court of appeals has not addressed this question head on. This order finds that Section 3 of the 24 Federal Arbitration Act (FAA) does not compel a stay as to Wood: 25 26 27 If any suit or proceeding be brought . . . upon any issue referable to 1 arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the 2 issue involved in such suit or proceeding is referable [sic] to arbitration under such an agreement, shall on application of one 3 of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing 4 the applicant for the stay is not in default in proceeding with such arbitration. 5 6 9 U.S.C. § 3 (emphasis added). When a plaintiff brings multiple claims, one of which is “not 7 subject to arbitration,” the “defendant [is] not entitled to a stay as a matter of right under the 8 provisions of the Arbitration Act, 9 U.S.C. § 3.” Leyva v. Certified Grocers of California, Ltd., 9 593 F.2d 857, 861 (9th Cir. 1979). 10 Applying Leyva, this Court came to the same conclusion about multiple plaintiffs. Each 11 plaintiff brought usury (among other) claims, but all parties agreed that just one was subject to 12 arbitration. Our order found that Section 3 did not require staying the other plaintiffs’ non- 13 arbitrable claims and the order refused to do so as a matter of discretion. See Blair, et. al. v. 14 Rent-A-Ctr., Inc., 2018 WL 2234049, at *3 (N.D. Cal. May 16, 2018). Our court of appeals 15 affirmed the denial of the Section-3 and discretionary stay requests by simply stating that it had 16 no jurisdiction to review the refusal of a discretionary stay. Blair, et. al. v. Rent-A-Ctr., Inc., 17 928 F.3d 819, 832 (9th Cir. 2019), 2018 WL 2244804 (quoting 9 U.S.C. § 16(a)(1)(A)) 18 (emphasis added); see Brief of Appellants at 3, Blair, 928 F.3d 819. Had our order erred in 19 denying a Section-3 stay, said error would have conferred jurisdiction. Our court of appeals 20 therefore implicitly agreed that Section 3 did not cover the non-arbitrable claims. 21 Similarly, in Mendez v. Puerto Rican Intern. Companies, Inc., 553 F.3d 709, 711 (3d Cir. 22 2009), the lower court found that arbitration agreements bound just eight of the plaintiffs and 23 refused to stay the forty-one others’ non-arbitrable claims. On appeal, the panel approved. 24 Mendez held that Section 3 was “not intended to mandate curtailment of the litigation rights of 25 anyone who has not agreed to arbitrate any of the issues before the court.” Ibid. At our 26 hearing, defendants protested that the Mendez plaintiffs brought individual, not class claims. 27 As defendants will doubtless argue at class certification, our plaintiffs also remain (for now) 1 Defendants rely on analogies in which various district courts denied motions to vacate 2 stays under Section 3 despite the presence of non-arbitrable claims. These analogies fail. Each 3 plaintiff sought to lift a Section-3 stay to amend the pleadings and delete the arbitrable claims 4 but lost because they were attempting to skirt the FAA. Unquestionably, vacating those stays 5 would have violated Section 3, because it would have required lifting the stay on still- 6 arbitrable claims. See Marron v. Healthsource Global Staffing, Inc., 2020 WL 4284818, at *3 7 (N.D. Cal. July 27, 2020) (Judge Kandis A. Westmore), Lovig v. Best Buy Stores LP, 2019 WL 8 2568851, at *1 (C.D. Cal. Jan. 25, 2019) (Judge Phyllis J. Hamilton), and Murphy v. Finish 9 Line, Inc., 2021 WL 2166875 (N.D. Cal. May 27, 2021) (Judge William H. Orrick). Johnson 10 v. JP Morgan Chase Bank, N.A., 2019 WL 2004140 at *9 (C.D. Cal. Jan. 25, 2019) (Judge 11 Jesus G. Bernal), similarly does not apply. There, a plaintiff sought to add an injunctive claim 12 and lost because he sought to evade the FAA. 13 Our facts fit within the four corners of Blair and Mendez. Cipolla’s claims must go 14 through arbitration (for now). Wood’s need not, Wood having prevailed on the threshold issue 15 of arbitrability. Section 3 does not require Wood to wait any longer and defendants do not 16 seek a discretionary stay. Wood’s motion to lift the stay is therefore GRANTED. 17 2. AMENDMENT AND JOINDER.
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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7
9 ALEXIS WOOD and FELICIA CIPOLLA, individually and on behalf of all others 10 No. C 18-06867 WHA similarly situated,
11 Plaintiffs,
12 ORDER RE PLAINTIFF WOOD’S v. MOTION TO LIFT STAY AND 13 AMEND TEAM ENTERPRISES, LLC, and NEW 14 TEAM LLC, doing business as TEAM 15 ENTERPRISES, 16 Defendants.
17 INTRODUCTION 18 Before our court of appeals, defendants succeeded in obtaining an order that the 19 arbitration clause delegated the question of unconscionability to the arbitrator. On remand, 20 therefore, this Court required both plaintiffs to proceed to arbitration and stayed the case. Each 21 plaintiff got a different arbitrator. One of the arbitrators ruled that the arbitration clause was 22 unconscionable and therefore unenforceable. The other arbitrator found that the provision was 23 enforceable. The plaintiff who prevailed before the arbitrator now seeks to vacate the stay and 24 to proceed in the district court (Dkt. Nos. 1, 23, 25, 41, 48, 53). 25 Defendants resist on the ground that the other arbitrator came out the other way. The 26 proper answer is the case will proceed in the district court as to the plaintiff for whom the 27 arbitrator found the agreement is unconscionable. The other plaintiff will proceed in 1 arbitration (unless that arbitrator changes his or her mind). Having insisted on submitting the 2 question of arbitrability to an arbitrator and having stripped plaintiffs of their right to class 3 treatment, defendants will not be allowed to wiggle off their loss before the arbitrator. Their 4 fix is entirely of their own making. To the extent stated below, the motion to vacate the stay, 5 to amend, and to join additional plaintiffs, is GRANTED. 6 STATEMENT 7 Plaintiffs Alexis Wood and Felicia Cipolla commenced this putative wage-and-hour class 8 action in November 2018. A prior order detailed the facts (see Dkt. No. 48). As stated, Wood 9 and Cipolla individually moved in arbitration to strike the arbitration clause. Cipolla’s 10 arbitrator found her arbitration provision enforceable, and Cipolla has moved for 11 reconsideration. In September 2021, Judge Lynn Duryee (Ret.) ruled that Wood’s claims are 12 not subject to mandatory arbitration. Wood now requests that this order lift the stay and join 13 Bernadette Blanchard and Shirin Lessan as putative named plaintiffs. Blanchard and Lessan 14 worked as Team Enterprises promotion specialists in California (Blanchard for 2013–2017; 15 Lessan for 2014–2016). Both have arbitrated their motions to strike the arbitration clauses 16 before Judge Duryee, who found their arbitration provisions unenforceable (Wynne Decl. Exh. 17 1, ¶¶ 9–10). 18 This order follows full briefing and oral argument. 19 ANALYSIS 20 1. MOTION TO LIFT THE STAY. 21 Defendants contend that where (as here), identical claims by two plaintiffs were sent to 22 arbitration, the district court lacks discretion to lift the stay until both arbitrations finish. Our 23 court of appeals has not addressed this question head on. This order finds that Section 3 of the 24 Federal Arbitration Act (FAA) does not compel a stay as to Wood: 25 26 27 If any suit or proceeding be brought . . . upon any issue referable to 1 arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the 2 issue involved in such suit or proceeding is referable [sic] to arbitration under such an agreement, shall on application of one 3 of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing 4 the applicant for the stay is not in default in proceeding with such arbitration. 5 6 9 U.S.C. § 3 (emphasis added). When a plaintiff brings multiple claims, one of which is “not 7 subject to arbitration,” the “defendant [is] not entitled to a stay as a matter of right under the 8 provisions of the Arbitration Act, 9 U.S.C. § 3.” Leyva v. Certified Grocers of California, Ltd., 9 593 F.2d 857, 861 (9th Cir. 1979). 10 Applying Leyva, this Court came to the same conclusion about multiple plaintiffs. Each 11 plaintiff brought usury (among other) claims, but all parties agreed that just one was subject to 12 arbitration. Our order found that Section 3 did not require staying the other plaintiffs’ non- 13 arbitrable claims and the order refused to do so as a matter of discretion. See Blair, et. al. v. 14 Rent-A-Ctr., Inc., 2018 WL 2234049, at *3 (N.D. Cal. May 16, 2018). Our court of appeals 15 affirmed the denial of the Section-3 and discretionary stay requests by simply stating that it had 16 no jurisdiction to review the refusal of a discretionary stay. Blair, et. al. v. Rent-A-Ctr., Inc., 17 928 F.3d 819, 832 (9th Cir. 2019), 2018 WL 2244804 (quoting 9 U.S.C. § 16(a)(1)(A)) 18 (emphasis added); see Brief of Appellants at 3, Blair, 928 F.3d 819. Had our order erred in 19 denying a Section-3 stay, said error would have conferred jurisdiction. Our court of appeals 20 therefore implicitly agreed that Section 3 did not cover the non-arbitrable claims. 21 Similarly, in Mendez v. Puerto Rican Intern. Companies, Inc., 553 F.3d 709, 711 (3d Cir. 22 2009), the lower court found that arbitration agreements bound just eight of the plaintiffs and 23 refused to stay the forty-one others’ non-arbitrable claims. On appeal, the panel approved. 24 Mendez held that Section 3 was “not intended to mandate curtailment of the litigation rights of 25 anyone who has not agreed to arbitrate any of the issues before the court.” Ibid. At our 26 hearing, defendants protested that the Mendez plaintiffs brought individual, not class claims. 27 As defendants will doubtless argue at class certification, our plaintiffs also remain (for now) 1 Defendants rely on analogies in which various district courts denied motions to vacate 2 stays under Section 3 despite the presence of non-arbitrable claims. These analogies fail. Each 3 plaintiff sought to lift a Section-3 stay to amend the pleadings and delete the arbitrable claims 4 but lost because they were attempting to skirt the FAA. Unquestionably, vacating those stays 5 would have violated Section 3, because it would have required lifting the stay on still- 6 arbitrable claims. See Marron v. Healthsource Global Staffing, Inc., 2020 WL 4284818, at *3 7 (N.D. Cal. July 27, 2020) (Judge Kandis A. Westmore), Lovig v. Best Buy Stores LP, 2019 WL 8 2568851, at *1 (C.D. Cal. Jan. 25, 2019) (Judge Phyllis J. Hamilton), and Murphy v. Finish 9 Line, Inc., 2021 WL 2166875 (N.D. Cal. May 27, 2021) (Judge William H. Orrick). Johnson 10 v. JP Morgan Chase Bank, N.A., 2019 WL 2004140 at *9 (C.D. Cal. Jan. 25, 2019) (Judge 11 Jesus G. Bernal), similarly does not apply. There, a plaintiff sought to add an injunctive claim 12 and lost because he sought to evade the FAA. 13 Our facts fit within the four corners of Blair and Mendez. Cipolla’s claims must go 14 through arbitration (for now). Wood’s need not, Wood having prevailed on the threshold issue 15 of arbitrability. Section 3 does not require Wood to wait any longer and defendants do not 16 seek a discretionary stay. Wood’s motion to lift the stay is therefore GRANTED. 17 2. AMENDMENT AND JOINDER. 18 Defendants oppose amendment, arguing the lenient Rule 15 standard rather than Rule 16. 19 The initial and amended scheduling orders, however, set June 9, 2019, as the final date for 20 amending the pleadings. Rule 16 would normally govern. With defendants’ concession, this 21 order applies Rule 15 (see Dkt. Nos. 23, 26). 22 Rule 15 dictates that leave to amend shall be freely given when justice requires. A 23 district court weighs: (1) bad faith; (2) undue delay; (3) prejudice to the opposing party; (4) 24 futility of amendment; and (5) whether the plaintiff has previously amended the complaint. 25 See Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004). “A motion to make an 26 amendment is to be liberally granted where from the underlying facts or circumstances, the 27 plaintiff may be able to state a claim.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 1 Contrary to defendants’ argument, leave to amend may be granted prior to class 2 certification. Defendants cite opposing, inapplicable district court decisions. In one, putative- 3 class-action plaintiffs who had already settled sought to join new plaintiffs as substitutes. See 4 Garcia v. Lane Bryant, Inc., 2012 WL 293544 at *3–4 (E.D. Cal. Jan. 31, 2012) (Judge Dennis 5 L. Bleck). In another, plaintiffs who had already withdrawn their claims moved to do the 6 same. See Velasquez v. GMAC Mortg. Corp., 2009 WL 2959838 at *3 (C.D. Cal. Sept. 10, 7 2009) (Judge Dean D. Pregerson). Having resolved their claims before class certification, 8 those plaintiffs stripped the district courts of case or controversy. Here, case and controversy 9 persevere. 10 We turn now to the Rule 15 factors. Defendants complain about (2), undue delay, and 11 (3), prejudice (Opp. Br. at 6–7). With respect to (1), (4), and (5), this order perceives no bad 12 faith, futility, or prior amendment. 13 As for undue delay, the defendants moved early in the case to compel arbitration; 14 thereafter the delays have resulted from defendants’ interlocutory appeal and arbitration. 15 Blanchard and Lessan apparently worked with plaintiffs’ counsel to arbitrate and have received 16 the decision that their arbitration agreements are unenforceable. Given the delegation clause, 17 moving to amend sooner would have proven futile. 18 Defendants claim prejudice because Wood is “benefiting” from litigating in two fora, 19 apparently by demanding discovery in the Cipolla arbitration (Garcia Perez Decl. ¶ 8). 20 Defendants compelled arbitration and defendants could consolidate proceedings at the district 21 court if they wished to streamline discovery. Wood, not knowing if the motion to vacate the 22 stay would succeed, cannot be blamed for pursuing discovery in the forum that defendants 23 chose. Nor is it a wasted effort. The same discovery will proceed in our litigation. 24 Defendants are correct, however, that plaintiffs should not have alleged representative Private 25 Attorneys General Act (PAGA) claims for Blanchard or Lessan as those claims are time- 26 barred. 27 As for permissive joinder, under Rule 20 of the Federal Rules of Civil Procedure, a 1 defendants relates to or arises out of the same transaction, occurrence, or series of transactions 2 or occurrences; and (2) there is at least one question of law or fact common to all the 3 defendants. See FRCP 20(a); Coughlin v. Rogers, 130 F.3d 1348, 1350 (9th Cir. 4 1997). Defendants neither mentioned Rule 20 nor opposed joinder (only amendment). 5 Blanchard and Lessan worked in the same position and for the same bosses as Wood and 6 Cipolla during the same basic period. They, too, allege violations of various wage laws. Both 7 have arbitrated. Their joinder satisfies the Rule 20 standard. 8 Leave to amend and join Blanchard and Lessan is GRANTED so long as Wood promptly 9 deletes Lessan and Blanchard’s PAGA claims, as she says she will (see Reply Br. at n. 1). 10 CONCLUSION 11 To the extent stated above, the motion to lift the stay, amend, and join new plaintiffs is 2 GRANTED. 5 13 IT IS SO ORDERED. 14 15 || Dated: October 26, 2021. A 16 Pee _ WILLIAM ALSUP 4 18 UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28