1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 AMOLAK DHALIWAL, No. 2:22-cv-00446-DAD-KJN 12 Plaintiff, 13 v. ORDER GRANTING AND DENYING IN PART DEFENDANTS’ MOTION TO 14 ACE HARDWARE CORPORATION, et COMPEL ARBITRATION, STRIKE CLASS al, CLAIMS, AND DISMISS THIS ACTION 15 Defendants. (Doc. No. 14) 16 17 This matter is before the court on defendants’ motion to compel arbitration, strike class 18 claims, and dismiss this putative class action. (Doc. No. 14.)1 On September 14, 2022, the court 19 vacated the hearing on the pending motion. (Doc. No. 19.) Having reviewed the parties’ 20 briefing, the court finds defendants’ motion suitable for a decision on the papers. For the reasons 21 set forth below, defendants’ motion will be granted in part and denied in part. 22 BACKGROUND 23 On September 8, 2021, plaintiff Amolak Dhaliwal initiated this putative wage and hour 24 class action against his employer defendant Ace Hardware Corporation (“Ace”) and a district 25 manager at Ace, defendant Doug Woodmansee (collectively, “defendants”) in the Placer County 26
27 1 The pending motion was brought by defendant Ace Hardware Corporation. However, the arguments apply equally to defendant Doug Woodmansee. For ease, the court will refer to the 28 pending motion as that of both defendants. 1 Superior Court. (Doc. No. 1 at 37.) On November 3, 2021, defendants filed their answer to the 2 complaint. (Id. at 65.) On December 2, 2021, plaintiff filed the operative first amended 3 complaint (“FAC”), in which he asserts claims under the California Labor Code and the 4 applicable wage orders and alleges that defendants failed to pay overtime wages, minimum 5 wages, and accrued vacation wages, and to provide meal periods, rest periods, all wages due upon 6 separation of employment, and accurate itemized wage statements. (Id. at 97.) Plaintiff also 7 asserts a claim under California’s Unfair Competition Law, as well as a representative action 8 claim for civil penalties under the Private Attorneys General Act of 2004, California Labor Code 9 §§ 2698–2699 (“PAGA”). (Id.) On January 4, 2022, defendants filed their answer to the FAC. 10 (Id. at 129.) 11 On March 10, 2022, defendant Ace removed this action to this federal court pursuant to 12 the Class Action Fairness Act (“CAFA”). (Id. at 1.) On April 8, 2022, plaintiff moved to remand 13 this action to the Placer County Superior Court. (Doc. No. 6.) The court denied plaintiff’s 14 motion to remand on December 8, 2022. (Doc. No. 22.) 15 On August 11, 2022, defendants filed the pending motion to compel arbitration and 16 dismiss this action, contending that on May 15, 2019, plaintiff executed an arbitration agreement 17 with Ace, entitled “ARBITRATION,” in which he agreed to arbitrate all claims arising out of his 18 employment with Ace and forgo any class or representative claims against the company (the 19 “Agreement”). (Doc. No. 14 at 10, 12.) The Agreement provides that “Ace Hardware 20 Corporation (and its partners, subsidiaries, affiliates, officers, directors, employees, agents, 21 representatives, shareholders, successors and assigns)” and plaintiff “will be agreeing to 22 arbitration as the exclusive method for economically and efficiently resolving the disputes and/or 23 claims set forth in Section 3 of [the Agreement].” (Doc. No. 14-2 at 7.) Section 3 of the 24 Agreement defines the covered claims as including: 25 all past, present, future disputes and claims related to your employment with . . . or termination of employment from the 26 Company . . . disputes and claims including, but not limited to . . . minimum wage; off the clock work; overtime; bonuses; meal/rest 27 periods; wage statements; reimbursement; penalties; benefits; violation of any federal, state or other government constitution, 28 statute, ordinance or regulation, including but not limited to . . . the 1 California Labor Code . . . the California Wage Orders, and/or the California Private Attorneys General Act . . . . 2 3 (Id.) Based on this provision, defendants argue that this court must grant their motion to compel 4 plaintiff to arbitrate his claims against them. (Doc. No. 14 at 17.) 5 On August 31, 2022, plaintiff filed his opposition to defendants’ motion. (Doc. No. 16.) 6 On September 12, 2022, defendants filed their reply thereto. (Doc. No. 18.) 7 LEGAL STANDARD 8 A written provision in any contract evidencing a transaction involving commerce to settle 9 a dispute by arbitration is subject to the Federal Arbitration Act (“FAA”). 9 U.S.C. § 2. The 10 FAA confers on the parties involved the right to obtain an order directing that arbitration proceed 11 in the manner provided for in a contract between them. 9 U.S.C. § 4. In considering a motion to 12 compel arbitration, the “court’s role under the Act . . . is limited to determining (1) whether a 13 valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the 14 dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 15 2000). The party seeking to compel arbitration bears the burden of proving by a preponderance 16 of the evidence the existence of an agreement to arbitrate. Ashbey v. Archstone Prop. Mgmt., 17 Inc., 785 F.3d 1320, 1323 (9th Cir. 2015); Knutson v. Sirius XM Radio Inc., 771 F.3d 559, 565 18 (9th Cir. 2014) (citing Rosenthal v. Great W. Fin. Sec. Corp., 14 Cal. 4th 394, 413 (1996)). 19 There is an “emphatic federal policy in favor of arbitral dispute resolution.” Mitsubishi 20 Motors Corp. v. Soler Chrysler–Plymouth, 473 U.S. 614, 631 (1985). As such, “any doubts 21 concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Id. at 626 22 (quoting Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24–25 (1983)). 23 However, the Supreme Court recently clarified that “the FAA’s ‘policy favoring arbitration’ does 24 not authorize federal courts to invent special, arbitration-preferring procedural rules.” Morgan v. 25 Sundance, Inc., __U.S.__, 142 S. Ct. 1708, 1713 (2022). Rather, the presumption in favor of 26 arbitration policy “is merely an acknowledgment of the FAA’s commitment to overrule the 27 judiciary’s longstanding refusal to enforce agreements to arbitrate and to place such agreements 28 upon the same footing as other contracts.” Id. (quoting Granite Rock Co. v. Int’l Bhd. of 1 Teamsters, 561 U.S. 287, 302 (2010)). 2 An arbitration agreement may only “be invalidated by ‘generally applicable contract 3 defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to 4 arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” 5 AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Dr.’s Assocs., Inc. v. 6 Casarotto, 517 U.S. 681, 687 (1996)). Accordingly, courts may not apply traditional contractual 7 defenses, like duress and unconscionability, in a broader or more stringent manner to invalidate 8 arbitration agreements and thereby undermine FAA’s purpose to “ensur[e] that private arbitration 9 agreements are enforced according to their terms.” Id. at 344 (quoting Volt Info. Scis., Inc. v. Bd. 10 of Trs., 489 U.S. 468, 478 (1989)). 11 DISCUSSION 12 A. Whether Defendants Waived Their Right to Compel Arbitration 13 Until recently, in the Ninth Circuit, a party seeking to prove waiver of a right to arbitrate 14 was required to demonstrate: “(1) knowledge of an existing right to compel arbitration; (2) acts 15 inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting 16 from such inconsistent acts.” Britton v. Co-op Banking Grp., 916 F.2d 1405, 1412 (9th Cir. 17 1990). However, the Supreme Court recently eliminated the third element of prejudice from the 18 required showing. See Morgan, 142 S. Ct. at 1712–13 (holding that, under the FAA, a court may 19 not “condition a waiver of the right to arbitrate on a showing of prejudice”). Thus, the waiver of 20 a right to arbitrate question now turns on whether the party opposing arbitration establishes only 21 the first two elements: (1) “knowledge of an existing right to compel arbitration” and (2) “acts 22 inconsistent with that existing right.” Britton, 916 F.2d at 1412; see also Armstrong v. Michaels 23 Stores, Inc., 59 F.4th 1011, 1014–15 (9th Cir. 2023) (noting that since the decision in Morgan, 24 “the party opposing arbitration still bears the burden of showing waiver, [but] the burden is no 25 longer ‘heavy,’” and explaining that “the burden for establishing waiver of an arbitration 26 agreement is the same as the burden for establishing waiver in any other contractual context”). 27 The parties do not dispute that the first element is satisfied here. (Doc. Nos. 16 at 12; 18 28 at 17–21.) Thus, the court need only consider the second element: whether plaintiff has 1 established that defendants’ intentional acts were inconsistent with exercising their right to 2 compel arbitration. In doing so, the court must consider “the totality of the parties’ actions.” 3 Armstrong, 59 F.4th at 1015 (citation omitted). “[A] party generally ‘acts inconsistently with 4 exercising the right to arbitrate when it (1) makes an intentional decision not to move to compel 5 arbitration and (2) actively litigates the merits of a case for a prolonged period of time in order to 6 take advantage of being in court.’” Id. (citation omitted). 7 First, it appears defendants’ actions in the early stages of this litigation reflect their 8 intention to exercise their right to arbitrate this dispute. Specifically, defendants pled arbitration 9 as an affirmative defense in their answers to both plaintiff’s original complaint and FAC. (Doc. 10 No. 1 at 74, 139.) Furthermore, defendants objected to plaintiff’s discovery requests specifically 11 on the grounds that plaintiff’s claims are subject to arbitration. (Doc. No. 14-1.) These actions 12 are consistent with defendants’ intent to compel arbitration. See Armstrong, 59 F.4th at 1015 13 (finding that the defendant acted consistent with its intent to compel arbitration where it “pleaded 14 arbitration as an affirmative defense in its answers to both the original complaint and amended 15 complaint”). 16 Second, the court is not persuaded by plaintiff’s arguments that defendants actively 17 litigated the merits of this case for a prolonged period to take advantage of being in court. (Doc. 18 No. 16 at 13–16.) Defendants filed the pending motion to compel arbitration approximately five 19 months after removing the case to federal court and within a year after plaintiff filed the original 20 complaint. During that time, defendants did not seek or obtain a court ruling on the merits. See 21 Armstrong, 59 F.4th at 1016 (finding that the defendant did not waver from its position that it had 22 the right to arbitrate because it moved to compel arbitration within a year after the plaintiff filed 23 the complaint and it never sought or obtained a ruling on the merits). The court disagrees with 24 plaintiff’s contention that defendants sought a ruling on the merits merely by arguing that 25 defendant Woodmansee was a “sham defendant” in their notice of removal and in their opposition 26 to plaintiff’s motion to remand. (Doc. No. 16 at 14.) In arguing that defendant Woodmansee was 27 a “sham defendant,” defendants did not seek to dismiss him as a named defendant based on the 28 merits of plaintiff’s claims against him. Rather, defendants argued that Woodmansee should be 1 disregarded for the purposes of establishing diversity jurisdiction. (Doc. Nos. 1 at 9; 9 at 25.) 2 Additionally, plaintiff takes issue with the fact that defendants removed this case from 3 state court to federal court and opposed plaintiff’s motion to remand. (Doc. No. 16 at 13.) The 4 court concludes that these actions did not demonstrate a decision to take advantage of the judicial 5 forum. See Morvant v. P.F. Chang’s China Bistro, Inc., 870 F. Supp. 2d 831, 846 (N.D. Cal. 6 2012) (holding that “removal prior to compelling arbitration is neither uncommon nor 7 inconsistent with the right to arbitrate”); Armstrong v. Michaels Stores, Inc., No. 17-cv-06540- 8 LHK, 2018 WL 6505997, at *10 (N.D. Cal. Dec. 11, 2018), aff’d, 59 F.4th 1011 (9th Cir. 2023) 9 (“[C]ourts have consistently rejected the argument that a party waived the right to compel 10 arbitration by removing a case to federal court.”) (collecting cases). A further problem with 11 plaintiff’s position in this regard is that defendants removed the case on the basis of CAFA (Doc. 12 No. 1 at 4), which the court has previously concluded was proper (Doc. No. 22), and thus 13 plaintiff’s action could not have been heard in state court. See Armstrong, 2018 WL 6505997, at 14 *10 (concluding that a defendant’s removal of an action based on CAFA cannot constitute waiver 15 of the right to arbitrate and explaining that “class actions that involve an amount in controversy 16 that exceeds $5 million cannot remain in state court because such a class action is subject to the 17 original jurisdiction of the district courts of the United States”). 18 The court is also not persuaded by plaintiff’s argument that the fact that the parties 19 stipulated to stay the Rule 26(f) deadlines indicates defendants’ intent to take advantage of being 20 in court. (Doc. No. 16 at 13). If anything, defendants’ decision to stipulate to the stay of 21 discovery supports the view that they did not seek to take advantage of federal discovery 22 procedures that are not available in arbitration. Cf. Irwin v. UBS Painewebber, Inc., 324 F. Supp. 23 2d 1103, 1110 (C.D. Cal. 2004) (“One of the ways in which a party may act inconsistent with the 24 right to arbitrate is by taking advantage of judicial discovery procedures not available in 25 arbitration.”) (citing St. Agnes Med. Ctr. v. PacifiCare of Cal., 31 Cal. 4th 1187, 1196 (2003)). 26 Having considered the totality of defendants’ actions taken in this case, the court readily 27 finds that plaintiff has not established that defendants’ intentional acts were inconsistent with 28 ///// 1 exercising their right to compel arbitration. Accordingly, the court finds that defendants did not 2 waive their right to compel arbitration in this case. 3 B. Whether a Valid Arbitration Agreement Exists 4 As noted above, defendants bear the burden of establishing that a valid arbitration 5 agreement exists between them and plaintiff by a preponderance of the evidence. See Knutson, 6 771 F.3d at 565. In deciding whether parties have agreed to arbitrate, courts “should apply 7 ordinary state-law principles that govern the formation of contracts.” First Options of Chicago, 8 Inc. v. Kaplan, 514 U.S. 938, 944 (1995); see also Nguyen v. Barnes & Noble Inc., 763 F.3d 9 1171, 1175 (9th Cir. 2014) (same). “It is undisputed that under California law, mutual assent is a 10 required element of contract formation.” Knutson, 771 F.3d at 565. “‘Mutual assent may be 11 manifested by written or spoken words, or by conduct,’ and acceptance of contract terms may be 12 implied through action or inaction.” Id. (internal citations omitted). “Thus, ‘an offeree, knowing 13 that an offer has been made to him but not knowing all of its terms, may be held to have accepted, 14 by his conduct, whatever terms the offer contains.’” Id. (quoting Windsor Mills, Inc. v. Collins & 15 Aikman Corp., 25 Cal. App. 3d 987, 991 (1972)). “Courts must determine whether the outward 16 manifestations of consent would lead a reasonable person to believe the offeree has assented to 17 the agreement.” Id. However, “[a]n offeree, regardless of apparent manifestation of his consent, 18 is not bound by inconspicuous contractual provisions of which he was unaware, contained in a 19 document whose contractual nature is not obvious.” Id. at 566 (quoting Windsor Mills, 25 Cal. 20 App. 3d at 993). 21 In their pending motion, defendants argue that plaintiff is required to arbitrate his claims 22 pursuant to the two-page arbitration Agreement that he signed, a copy of which defendants filed 23 with the court as an exhibit to the declaration of Megan Trittin, a senior human resources 24 information systems analyst for defendant Ace. (Doc. Nos. 14 at 15; 14-2 at ¶ 1; 14-2 at 7–8.) In 25 her declaration, Ms. Trittin states that in May 2019, defendant Ace distributed its arbitration 26 agreement, entitled “ARBITRATION,” to its employees, including Dhaliwal, and that plaintiff 27 accessed and reviewed the Agreement using an electronic human resources management system 28 called Workday and thereafter signed the Agreement through DocuSign on May 15, 2019. (Doc. 1 No. 14-2 at ¶¶ 7, 13.) Ms. Trittin also explains that for plaintiff to have viewed and signed the 2 Agreement, he was required to log into his Workday account using his unique password, which 3 neither Workday nor Ace were capable of knowing. (Id. at ¶¶ 8–9.) Indeed, a review of the 4 Agreement reveals that it bears plaintiff’s name, his electronic signature, and the date May 15, 5 2019. (Id. at 7–8.) 6 In his opposition to the pending motion, plaintiff challenges the validity of the Agreement, 7 stating that he does not “recall ever signing an arbitration agreement for [d]efendants, either on 8 paper or electronically, at any point during [his] employment with [d]efendants.” (Doc. No. 16-1 9 at ¶ 5.) However, “nothing in the law requires a party to remember having contracted for the 10 agreement to be valid.” Pinto v. Squaw Valley Resort, LLC, No. 17-cv-02281-MCE-CKD, 2018 11 WL 5630702, at *2 (E.D. Cal. Oct. 31, 2018). The fact that a person “does not remember signing 12 [an] Arbitration Agreement . . . is not sufficient” to challenge the existence of an agreement. 13 Garcia v. NRI USA, LLC, No. 2:17-cv-08355-ODW-GJS, 2018 WL 3702293 (C.D. Cal. Aug. 1, 14 2018); see also Chalian v. CVS Pharm., Inc., No. 16-cv-08979-AB-AGR, 2017 WL 6940520, at 15 *2 (C.D. Cal. Oct. 17, 2017) (finding that the electronic signature on an agreement made it 16 enforceable despite plaintiff’s statement that she did not recall signing the agreement). 17 Plaintiff also posits that there is no valid agreement to arbitrate because he did not know 18 the meaning of the term “arbitration” until his counsel explained it to him while preparing his 19 opposition to the pending motion. (Doc. No. 16 at 17.) Plaintiff’s position in this regard is 20 equally unpersuasive. Plaintiff’s “proffered subjective intent . . . is not enough to rebut the 21 evidence of [his] electronic signature as an objective manifestation of assent to the terms of the 22 Arbitration Agreement.” Castillo v. Cava Mezze Grill, LLC, No. 18-cv-7994-MWF-MAA, 2018 23 WL 7501263, at *4 (C.D. Cal. Dec. 21, 2018); see also Trevino v. Acosta, Inc., No. 17-cv-06529- 24 NC, 2018 WL 3537885, at *7 (N.D. Cal. July 23, 2018) (“[T]he Court cannot invalidate the terms 25 of the signed arbitration agreement merely because Trevino did not understand the agreement or 26 chose not to read it.”). 27 Accordingly, the court finds that defendants have met their burden of establishing that a 28 valid, written agreement to arbitrate exists between the parties. 1 C. Whether the Agreement Encompasses the Dispute 2 The court must now determine whether the Agreement encompasses the dispute at issue. 3 The Agreement is between plaintiff and Ace and, amongst others, Ace’s “officers, directors, 4 employees, agents, [and] representatives.” (Doc. No. 14-2 at 7.) Thus, the Agreement is between 5 plaintiff and defendant Ace and between plaintiff and defendant Woodmansee, who was a district 6 manager at Ace. As noted above, the Agreement covers the following claims: 7 all past, present, future disputes and claims related to your employment with . . . or termination of employment from the 8 Company . . . disputes and claims including, but not limited to . . . minimum wage; off the clock work; overtime; bonuses; meal/rest 9 periods; wage statements; reimbursement; penalties; benefits; violation of any federal, state or other government constitution, 10 statute, ordinance or regulation, including but not limited to . . . the California Labor Code . . . the California Wage Orders, and/or the 11 California Private Attorneys General Act . . . . 12 (Doc. No. 14-2 at 7.) All of plaintiff’s claims asserted in this action relate to his employment 13 with defendants and are thus encompassed by the Agreement. 14 Because there is a valid agreement to arbitrate between the parties and the claims raised in 15 plaintiff’s FAC fall within the scope of the parties’ Agreement, the court must compel arbitration 16 of plaintiff’s claims, unless the Agreement is unenforceable. 17 D. Whether the Agreement is Enforceable 18 Next, the court analyzes whether the Agreement is valid and enforceable under 9 U.S.C. 19 § 2. Plaintiff attempts to defeat the pending motion by arguing that the Agreement is 20 procedurally and substantively unconscionable. (Doc. No. 16 at 19–21.) Specifically, plaintiff 21 contends that: (1) the Agreement is a “contract of adhesion” and there is a “clear showing of 22 surprise” and therefore it is procedurally unconscionable (id. at 19); and (2) “the presence of a 23 representative action waiver [in the Agreement] has an obvious disparate, non-mutual impact on 24 employees and their rights and thus bespeaks substantive unconscionability” (id. at 21). 25 1. Procedural Unconscionability 26 “Unconscionability analysis begins with an inquiry into whether the contract is one of 27 adhesion.” Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal. 4th 83, 113 (2000). 28 “The term contract of adhesion signifies a standardized contract, which, imposed and drafted by 1 the party of superior bargaining strength, relegates to the subscribing party only the opportunity to 2 adhere to the contract or reject it.” Id. 3 “The procedural element of unconscionability focuses on ‘oppression or surprise due to 4 unequal bargaining power.’” Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1260 (9th Cir. 2017) 5 (quoting Pinnacle Museum Tower Ass’n v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal. 4th 223, 246 6 (2012)); see also Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 922 (9th Cir. 2013) 7 (“Procedural unconscionability concerns the manner in which the contract was negotiated and the 8 respective circumstances of the parties at that time, focusing on the level of oppression and 9 surprise involved in the agreement.”). “Oppression addresses the weaker party’s absence of 10 choice and unequal bargaining power that results in ‘no real negotiation,’” while “[s]urprise 11 involves the extent to which the contract clearly discloses its terms as well as the reasonable 12 expectations of the weaker party.” Chavarria, 733 F.3d at 922 (citations omitted). 13 In his opposition to the pending motion, plaintiff argues that the Agreement is 14 procedurally unconscionable because it is a contract of adhesion presented to plaintiff as a 15 condition of continuing his employment. (Doc. No. 16 at 19.) Indeed, a review of the Agreement 16 reflects that it provides that Ace “maintains a policy of arbitration as a condition of employment.” 17 (Doc. No. 14-2 at 7.) This indicates some degree of procedural unconscionability. See Lim v. 18 TForce Logistics, LLC, 8 F.4th 992, 1000–01 (9th Cir. 2021) (determining that the plaintiff’s 19 belief that he had to sign the contract to continue his employment indicated some degree of 20 procedural unconscionability, but noting that “a contract of adhesion is not ‘per se 21 unconscionable.’”) (citation omitted). However, it does not follow that the Agreement is 22 procedurally unconscionable to such an extent as to be unenforceable. See id.; see also 23 Grabrowski v. Robinson, 817 F. Supp. 2d 1159, 1172 (S.D. Cal. 2011) (“In light of the Supreme 24 Court’s decision in Concepcion, however, the Court does not find that the adhesive nature of the 25 agreement weighs strongly in favor of procedural unconscionability.”); Mance v. Mercedes-Benz, 26 901 F. Supp. 2d 1147, 1161–62 (N.D. Cal. 2012) (“[W]hile the contract was adhesive, this fact, 27 alone and after Concepcion, does not render the arbitration provision procedurally 28 unconscionable.”) (collecting cases); Gutierrez v. FriendFinder Networks Inc., No. 18-cv-05918- 1 BLF, 2019 WL 1974900, at *10 (N.D. Cal. May 3, 2019) (“[T]he Ninth Circuit has made clear 2 that ‘the adhesive nature of a contract, without more, would give rise to a low degree of 3 procedural unconscionability at most.’”) (quoting Poublon, 846 F.3d at 1261–62). 4 Plaintiff further argues that there is a showing of surprise because the Agreement states 5 that JAMS Employment Rules will apply to arbitrations pursuant to the Agreement, but the 6 applicable JAMS Employment Rules were not attached to the Agreement. (Doc. No. 16 at 20.) 7 This argument is unavailing, however, because the California Supreme Court has held that an 8 employer’s “failure to attach the [arbitration rules] . . . does not affect” a court’s 9 unconscionability analysis where the unconscionability challenge does not concern any element 10 of the rules. Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237, 1246 (2016). Here, plaintiff does not 11 contend that the JAMS Employment Rules themselves are unconscionable. Thus, the mere fact 12 that the JAMS Employment Rules were not provided to plaintiff is irrelevant and does not render 13 the Agreement procedurally unconscionable. See id. Additionally, the Agreement at issue was 14 clearly labeled “ARBITRATION,” was only two pages long, and stated in fully capitalized text 15 that “by signing this agreement, you acknowledge that you have received and read this 16 agreement, understand its terms, and have voluntarily decided to accept the terms of the 17 agreement by accepting or continuing employment with the company.” (See Doc. No. 14 at 7–8.) 18 Under these circumstances, the court cannot agree that defendants subjected plaintiff to any 19 surprise that would warrant a finding of procedural unconscionability. 20 Accordingly, the court finds that the adhesive nature of the Agreement “demonstrates only 21 a slight degree of procedural unconscionability.” Gutierrez, 2019 WL 1974900, at *10. 22 1. Substantive Unconscionability 23 Having found that the Agreement is only minimally procedurally unconscionable, the 24 court must find that the Agreement is substantively unconscionable to a much greater degree in 25 order to conclude that it, as a whole, is unconscionable. Armendariz, 24 Cal. 4th at 114. 26 Plaintiff argues that the Agreement is substantively unconscionable because it includes a 27 waiver of the employee’s right to bring a representative action, including a representative action 28 under PAGA. (Doc. No. 16 at 21.) Specifically, the Agreement requires the “[p]arties to arbitrate 1 all claims,” and it defines “claims” to include PAGA actions. (Doc. No. 14-2 at 7.) The 2 Agreement further provides that “[t]he Parties agree that each may file claims against the other 3 only in their individual capacities, and may not file claims as plaintiff and/or participate as a class 4 member in any future class, collective, and/or group action against the other.” (Id. at 8.) 5 Similarly, the Agreement provides that “[t]he Parties agree that each may file claims against the 6 other only in their individual capacities, and may not file claims as plaintiff and/or participate as a 7 representative in any future representative action against the other.” (Id.) According to plaintiff, 8 these provisions constitute a wholesale PAGA waiver, which plaintiff contends is substantively 9 unconscionable, because it “is clearly unlawful and beyond the pale of any legitimate bargain.” 10 (Doc. No. 16 at 22.) However, as defendants emphasize in their pending motion (Doc. No. 14 at 11 22–24), the inclusion of the PAGA waiver does not render the Agreement substantively 12 unconscionable because the PAGA waiver is consistent with the Supreme Court’s holding in 13 Viking River Cruises, Inc. v. Moriana, __U.S.__, 142 S. Ct. 1906 (2022) and therefore is 14 consistent with the applicable law. 15 In their pending motion, defendants argue that the Supreme Court’s decision in Viking 16 River Cruises confirms that plaintiff must be compelled to arbitrate his individual PAGA claim 17 and plaintiff’s remaining non-individual PAGA claims must be dismissed for lack of statutory 18 standing. (Doc. No. 14 at 22–24.) In Viking River Cruises, the Supreme Court considered 19 whether the FAA preempted the California Supreme Court’s interpretation of PAGA in Iskanian 20 v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014). Viking River Cruises, 142 S. 21 Ct. at 1924–25. The Iskanian rule had two parts. The United States Supreme Court held that the 22 first Iskanian rule prohibiting wholesale waivers of PAGA was not preempted. Id. However, the 23 Supreme Court held that the second Iskanian rule, which prohibited parties from dividing PAGA 24 actions into individual and non-individual claims and sending the individual claims to arbitration, 25 was preempted. Id. at 1924. The Court went on to hold that, “as [the Court] see[s] it, PAGA 26 provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an 27 individual claim has been committed to a separate proceeding.” Id. at 1925. Thus, once a 28 plaintiff is compelled to arbitrate the plaintiff’s individual PAGA claim, the plaintiff “is no 1 different from a member of the general public,” and lacks statutory standing to maintain non- 2 individual claims; as a result, “the correct course is to dismiss [the] remaining claims.” Id. 3 Here, because the parties’ Agreement requires the parties to arbitrate PAGA claims “only 4 in their individual capacities” (Doc. No. 14-2 at 8), plaintiff’s characterization of that PAGA 5 waiver as being a “wholesale” waiver would appear to be inaccurate. Rather, the Agreement 6 provides that non-individual PAGA claims are waived, i.e., an employee cannot bring a 7 representative PAGA action against the employer, but individual PAGA claims may be brought. 8 The fact that such individual PAGA claims must be submitted to arbitration pursuant to the 9 Agreement does not amount to a wholesale PAGA waiver as plaintiff suggests in his opposition 10 to the pending motion. Contrary to plaintiff’s characterization, there is no wholesale PAGA 11 waiver in the Agreement and the representative action waiver provision is not unlawful. See 12 Valencia v. Mattress Firm, Inc., No. 22-cv-06875-WHA, 2023 WL 2062951, at *3 (N.D. Cal. 13 Feb. 16, 2023) (finding that because the plaintiff was permitted to raise her individual portion of 14 the PAGA claim in arbitration under the arbitration agreement, the agreement did not operate as a 15 wholesale waiver); Martinez-Gonzalez v. Elkhorn Packing Co., LLC, No. 18-cv-05226-EMC, 16 2022 WL 10585178, at *11 (N.D. Cal. Oct. 18, 2022) (same); Shams v. Revature LLC, No. 22-cv- 17 01745-NC, 2022 WL 3453068, at *2 (N.D. Cal. Aug. 17, 2022) (same); Johnson v. Lowe’s Home 18 Ctrs., LLC, No. 2:21-cv-00087-TLN-JDP, 2022 WL 4387796, at *3 (E.D. Cal. Sept. 22, 2022) 19 (same). 20 Although the parties do not address it, the final issue the court must consider is whether to 21 dismiss the non-individual PAGA claims or instead enter a stay pending the California Supreme 22 Court’s decision in Adolph v. Uber Technologies, Inc., No. G059860, 2022 WL 1073583 (Cal. Ct. 23 App., Apr. 11, 2022), review granted (Cal. July 20, 2022) (No. S274671), 2 a case which “will 24 provide important guidance with respect to how the representative PAGA claims should be 25
2 The California Supreme Court’s docket in the Adolph appeal reflects that just last week the 26 Clerk of the Supreme Court sent an oral argument letter advising counsel that “the court could set 27 this case for argument within the next few months.” Adolph v. Uber Technologies, Inc., No. S274671, Oral Argument Letter (Cal. Mar. 9, 2023). 28 1 handled.” Dominguez v. Sonesta Int’l Hotels Corp., No. 22-cv-03027-JCS, 2023 WL 25707, at 2 *8 n.2 (N.D. Cal. Jan. 3, 2023). California district court have taken different approaches in 3 addressing this issue. Compare Martinez-Gonzalez, 2022 WL 10585178, at *12 (staying the non- 4 individual PAGA claims pending the California Supreme Court’s decision in Adolph), and 5 Dominguez, 2023 WL 25707, at *8 (same), with Johnson, 2022 WL 4387796, at *4 (dismissing 6 the non-individual PAGA claims), and Rivas v. Coverall N. Am., Inc., No. 18-cv-1007-JGB-KK, 7 2022 WL 17960776, at *4 (C.D. Cal. Nov. 28, 2022) (same). This court finds the decisions in 8 Martinez-Gonzalez and Dominguez to be persuasive. See Martinez-Gonzalez, 2022 WL 9 10585178, at *12 (in staying the non-individual PAGA claims, relying on Justice Sotomayor’s 10 concurrence in Viking River Cruises where she noted that if the United States Supreme Court’s 11 “understanding of state law is wrong, California courts, in an appropriate case, will have the last 12 word”) (quoting Viking River Cruises, 142 S. Ct. at 1925) (Sotomayor, J., concurring); 13 Dominguez, 2023 WL 25707, at *8 (relying on the reasoning in the decision in Martinez- 14 Gonzalez to find that a stay of the plaintiff’s non-individual PAGA claim was appropriate). 15 In sum, the court concludes that in this case the parties’ Agreement is enforceable. The 16 court will therefore grant defendants’ motion to compel arbitration of plaintiff’s individual claims 17 and will dismiss plaintiff’s individual and class claims.3 However, the court will stay the non- 18 individual PAGA claims pending the California Supreme Court’s decision in Adolph. 19 CONCLUSION 20 For the reasons set forth above, 21 1. Defendants’ motion (Doc. No. 14) is granted in part and denied in part as follows: 22 a. Defendants’ motion to compel arbitration of plaintiff’s individual claims is 23 granted; 24 ///// 25
3 In the pending motion, defendants also moved to strike plaintiff’s class claims. (Doc. No. 14 at 26 24.) The court need not address defendants’ arguments in this regard, however, because 27 defendants’ motion to strike will be denied as having been rendered moot by this order. Nonetheless, the court does note that “motions to strike class allegations are disfavored.” Olney 28 v. Job.com, Inc., No. 1:12-cv-01724-LJO, 2013 WL 5476813, at *3 (E.D. Cal. Sept. 30, 2013). 1 b. Defendants’ motion to dismiss plaintiff’s individual and putative class 2 claims is granted; 3 C. Defendants’ motion to dismiss plaintiffs non-individual PAGA claims is 4 denied, and those claims are instead stayed pending the California Supreme 5 Court’s decision in Adolph v. Uber Technologies, Inc. (No. 8274671); and 6 d. Defendants’ motion to strike plaintiffs class claims is denied as having 7 been rendered moot by this order; 8 2. This case is stayed pending the California Supreme Court’s issuance of a decision 9 in Adolph v. Uber Technologies, Inc. (No. S274671); and 10 3. Accordingly, the parties are directed to file a joint status report within fourteen 11 (14) days of the California Supreme Court’s issuance of a decision in Adolph v. 12 Uber Technologies, Inc. (No. 8274671). In the joint status report, the parties shall 13 state their respective positions as to how plaintiff's non-individual PAGA claims 14 should proceed. 15 16 IT IS SO ORDERED.
7 | Dated: _March 16, 2023 Dal A. 2, eel UNITED STATES DISTRICY JUDGE 18 19 20 21 22 23 24 25 26 27 28 15