Davis v. Movement Mortgage, LLC

• Court: District Court, E.D. California
• Decided: December 10, 2024
• Docket: 2:24-cv-02812
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 CANDICE DAVIS, No. 2:24-cv-02812 WBS JDP 13 Plaintiff, 14 v. ORDER RE: DEFENDANT’S MOTION TO COMPEL ARBITRATION 15 MOVEMENT MORTGAGE, LLC and DOES 1 through 100, inclusive, 16 Defendants. 17 18 ----oo0oo---- 19 Plaintiff Candice Davis, an employee of defendant 20 Movement Mortgage, LLC, filed this action in Placer County 21 Superior Court on August 23, 2024, bringing wage-and-hour claims 22 under the California Labor Code and gender discrimination claims 23 under the Labor Code and California Fair Employment and Housing 24 Act. (Docket No. 1-2.) Defendant removed to this court on the 25 basis of diversity. (Docket No. 1.) Defendant now moves to 26 compel the arbitration of all claims. (Docket No. 6.) 27 Plaintiff previously initiated an arbitration before 28 the American Arbitration Association (“AAA”), alleging wage-and- 1 hour violations under the Labor Code. (Docket No. 6-3.) The 2 arbitration was terminated following defendant’s failure to pay 3 the required fee, which defense counsel attributes to 4 inadvertence. (See Docket No. 6-1 ¶ 5.) 5 It is undisputed that the parties are subject to a 6 valid arbitration agreement that covers the claims at issue. 7 Plaintiff argues that defendant’s failure to pay the arbitration 8 fee constitutes waiver of its right to arbitrate. 9 Even assuming defendant’s failure to pay the fees 10 constituted a waiver, the arbitration demand provided “no 11 indication” that plaintiff would also assert discrimination 12 claims, and defendant “cannot be said to have ‘known’ that it 13 could compel arbitration on claims that it did not even know 14 existed.” See Musharbash v. JPMorgan Chase Bank, No. 2:22-cv- 15 02320 DAD KJN, 2024 WL 919186, at *5 (E.D. Cal. Mar. 1, 2024) 16 (quoting Morgan v. Sundance, Inc., 596 U.S. 411, 417 (2022)). 17 Indeed, the new discrimination claims involve entirely different 18 legal theories and would require different proof, for example 19 evidence of discriminatory intent and pay disparity in comparison 20 to other employees. 21 As the complaint in this action “unexpectedly change[d] 22 the scope or theory of the plaintiff’s claims,” defendant is 23 permitted to “rescind [its] earlier waiver.” See Krinsk v. 24 SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011) (cited 25 with approval in Burton v. Ghosh, 961 F.3d 960, 967 (7th Cir. 26 2020)); cf. Kim v. Hanlees Seven, Inc., No. 18-cv-00472 JSW, 2019 27 WL 13256105, at *4 (N.D. Cal. July 1, 2019) (defendants’ “right 28 to compel arbitration has not been revived by the filing of the 1 amended complaint” because the newly asserted claims were 2 “contained within the scope of Plaintiff’s original complaint”). 3 Accordingly, defendant has not waived its right to compel 4 arbitration. 5 Separately, plaintiff argues that the motion should be 6 denied based on California Code of Civil Procedure § 1281.97, 7 which provides: “In an employment or consumer arbitration that 8 requires . . . the drafting party to pay certain fees and costs 9 before the arbitration can proceed, if the fees or costs to 10 initiate an arbitration proceeding are not paid within 30 days 11 after the due date the drafting party is in material breach of 12 the arbitration agreement, is in default of the arbitration, and 13 waives its right to compel arbitration.” 14 Defendant argues that this statute is preempted by the 15 Federal Arbitration Act (“FAA”). There is a split among the 16 district courts on this issue, see Lee v. Citigroup Corp. 17 Holdings, No. 22-cv-02718-SK, 2023 WL 6132959, at *2 (N.D. Cal. 18 Aug. 29, 2023) (recognizing split), which is pending 19 consideration by the California Supreme Court, see Keeton v. 20 Tesla, 555 P.3d 2 (Cal. 2024); Hohenshelt v. Superior Ct., 549 21 P.3d 143 (Cal. 2024). For the following reasons, this court 22 sides with the courts that have found the California statute 23 preempted. 24 The FAA “preempts any state rule discriminating on its 25 face against arbitration.” Viking River Cruises, Inc. v. 26 Moriana, 596 U.S. 639, 650 (2022). This rule is premised on the 27 FAA’s “equal-treatment principle,” under which “a court may 28 invalidate or refuse to enforce an arbitration agreement based on eee eee en RID OE I OE OI OS NE

1 generally applicable contract defenses . . . but not on legal 2 rules that apply only to arbitration or that derive their meaning 3 | from the fact that an agreement to arbitrate is at issue.” Id. 4 (cleaned up); see also Kindred Nursing Centers Ltd. P’ship v. 5S | Clark, 581 U.S. 246, 252 (2017) (indicating that rules that are 6 “too tailor-made to arbitration agreements” are preempted by the 7 FAA); Morgan, 596 U.S. at 418 (the policy underlying the FAA is 8 to “make arbitration agreements as enforceable as other 9 contracts, but not more so”) (cleaned up, emphasis added). 10 Section 1281.97 “violates the equal-treatment principle under 11 [the FAA] because it makes arbitration provisions unenforceable 12 on arbitration-specific grounds.” Belyea v. GreenSky, Inc., 637 13 F. Supp. 3d 745, 756 (N.D. Cal. 2022); see also Lee, 2023 WL 14 6132959, at *2; Russell v. Siemens Indus. Software Inc., No. 23- 15 | cv-03884 LIC, 2024 WL 4545970, at *10 (N.D. Cal. Oct. 21, 2024). 16 Section 1281.97 is therefore preempted by the FAA and is 17 inapplicable here. 18 IT IS THEREFORE ORDERED that defendant’s motion to 19 compel arbitration (Docket No. 6) be, and the same hereby is, 20 GRANTED. IT IS FURTHER ORDERED that this case is STAYED pending 21 arbitration. 22 The Clerk shall close this file administratively, 23 subject to it being reopened upon the application of either party 24 after arbitration has been fully completed. 25 | Dated: December 10, 2024 tleom ah. A. be—~ 26 WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE 27 28