Martinez-Gonzalez v. Elkhorn Packing Co., LLC

• Court: District Court, N.D. California
• Decided: February 13, 2020
• Docket: 3:18-cv-05226
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 DARIO MARTINEZ-GONZALEZ, Case No. 18-cv-05226-EMC

8 Plaintiff, ORDER GRANTING IN PART 9 v. DEFENDANTS’ MOTION TO STAY PROCEEDINGS PENDING APPEAL 10 ELKHORN PACKING CO., LLC, et al., Docket No. 74 11 Defendants.

12 13 14 I. INTRODUCTION 15 Plaintiff Dario Martinez-Gonzalez worked for Defendants Elkhorn Packing Co. LLC and 16 D’Arrigo Bros. Co. as an agricultural laborer during the 2016 and 2017 lettuce seasons. In this 17 lawsuit he alleges that the companies failed to pay him appropriately, failed to provide adequate 18 meal or rest breaks, and breached the duty of care they owed to Plaintiff by providing food that 19 was unsafe to eat. See First Amended Complaint, Docket No. 13. He also asserts collective 20 claims under the Private Attorneys General Act and the Fair Labor Standards Act. Id. at ¶¶ 140– 21 49, 194–205. 22 In December 2018, Defendants moved to compel arbitration. See Docket No. 24. On 23 October 15 and 16, 2019, a bench trial was held to determine the enforceability of the Arbitration 24 Agreement. At the conclusion of that trial, the Court concluded that the Arbitration Agreement 25 executed between Dario Martinez-Gonzalez and Elkhorn Packing was the product of economic 26 duress and undue influence. As a result, the Court found that the Agreement was neither valid nor 27 enforceable and denied Defendants’ Motion to Compel Arbitration. See Docket No. 67. 1 Appeal, see Docket No. 74 (“Mot.”). 2 II. DISCUSSION 3 A. Legal Standard 4 While “[s]ome jurisdictions hold that the trial court must stay proceedings while a denial of 5 a motion to compel arbitration is appealed, . . . the Ninth Circuit has held that a district court has 6 discretion to decide whether to grant a stay.” Bradberry v. T-Mobile USA, Inc., No. C 06 6567 7 CW, 2007 WL 2221076, at *1 (N.D. Cal. Aug. 2, 2007) (internal citations omitted) (emphasis 8 added). In Britton v. Co-op Banking Grp., 916 F.2d 1405 (9th Cir. 1990), the Ninth Circuit 9 described the question whether to stay a case pending appeal of a denial of a motion to compel 10 arbitration as “a proper subject for the exercise of discretion by the trial court.”1 916 F.2d at 1412. 11 “Courts generally consider four factors when determining whether to grant a stay pending 12 the appeal of a civil order: (1) the likelihood of the moving party’s success on the merits; (2) 13 whether the moving party will be irreparably injured if a stay is not granted; (3) whether a stay 14 will substantially injure the opposing party; and (4) the public interest.” Merkin v. Vonage Am. 15 Inc., No. 213CV08026CASMRWX, 2014 WL 12701041, at *1 (C.D. Cal. Mar. 26, 2014) (citing 16 Hilton v. Braunskill, 481 U.S. 770, 776 (1987)); see also Leiva-Perez v. Holder, 640 F.3d 962, 964 17 (9th Cir. 2011) (discussing these same factors). 18

19 1 See also Wilson v. Huuuge, Inc., No. 3:18-CV-05276-RBL, 2019 WL 998319, at *2 n.1 (W.D. Wash. Mar. 1, 2019) (internal citations omitted) (“There is a circuit split regarding whether denials 20 of motions to compel arbitration automatically warrant a stay if the losing party appeals. Five circuits ruled . . . that a stay is mandatory, while three circuits have held the opposite. The Eighth 21 Circuit has yet to weigh in. The Seventh Circuit explained that ‘whether the litigation may go forward in the district court is precisely what the court of appeals must decide.’ The Supreme 22 Court has also observed that ‘[a] district court and a federal court of appeals should not attempt to assert jurisdiction over a case simultaneously.’ However, the Ninth Circuit has held that a stay is 23 not automatic.”).

24 Defendants cite Steiner v. Apple Computer, Inc., No. C–07–4486 SBA, 2008 WL 1925197, at *5 (N.D. Cal. Apr. 29, 2008), for the proposition that “almost every California district court to 25 recently consider whether to stay a matter, pending appeal of an order denying a motion to compel arbitration has issued a stay.” However, seven years after Steiner, this Court concluded that “it is 26 no longer accurate to say that most courts grant stays in these circumstances. In fact, according to this Court’s unofficial tally of decisions since Steiner, California district courts have denied stays 27 pending appeal of an order denying a motion to compel arbitration twelve times, while California 1 With respect to the first factor, a party “need not demonstrate that it is more likely than not 2 that they will win on the merits.” Leiva-Perez, 640 F.3d at 966. A stay may be issued if the 3 moving party establishes that “serious legal questions are raised.” Id. at 968. However, where a 4 party relies on the existence of “serious legal questions” (as opposed to a likelihood of success on 5 the merits), “the ‘balance of equities’ of the final three factors [must] strongly weigh in favor of 6 granting a stay.” Eberle v. Smith, No. 07-CV-0120 W WMC, 2008 WL 238450, at *2 (S.D. Cal. 7 Jan. 29, 2008); see also Echevarria v. Aerotek, Inc., No. 16-CV-04041-BLF, 2019 WL 3207812, 8 at *2 (N.D. Cal. July 16, 2019) (citing Leiva-Perez, 640 F.3d at 970) (“Where the movant has 9 made a lesser showing on the first factor – establishing serious legal questions rather than a strong 10 likelihood of success on the merits – the movant must show that the balance of hardships tips 11 sharply in its favor.”). 12 For a legal question to be “serious,” it must be a “question going to the merits so serious, 13 substantial, difficult and doubtful, as to make the issues ripe for litigation and deserving of more 14 deliberate investigation.” Guifu Li v. A Perfect Franchise, Inc., No. 5:10-CV-01189-LHK, 2011 15 WL 2293221, at *3 (N.D. Cal. June 8, 2011) (citing Walmer v. United States DOD, 52 F.3d 851, 16 854 (10th Cir. 1995)) (internal brackets omitted). “In the Ninth Circuit, serious legal questions 17 often concern constitutionality.” Id. When it comes to cases dealing with enforcement of 18 arbitration agreements, courts have also “found that a serious legal question was raised when the 19 Supreme Court had granted certiorari . . . [and when] the appeal asked the Ninth Circuit to resolve 20 a split in authority.” Id. (internal citations omitted); see also Morse v. Servicemaster Glob. 21 Holdings, Inc., No. C 08-03894, 2013 WL 123610, at *3 (N.D. Cal. Jan. 8, 2013) (discussing 22 cases that “raise[] genuine matters of first impression within the Ninth Circuit” as another 23 example). 24 B. Analysis 25 As this Court has discretion whether to stay this case pending appeal of its denial of a 26 motion to compel arbitration, Britton, 916 F.2d at 1412, it turns to the four factors discussed in 27 Leiva-Perez. The Court looks first to the moving party’s likelihood of success on the merits. 1 instead contend that their appeal raises “serious legal questions.” Defendants’ appeal does not do 2 so. 3 The bench trial herein involved the straightforward application of well-settled law to the 4 facts of this case, and the facts clearly established that the Arbitration Agreement was the product 5 of economic duress and undue influence. To the extent Defendant asks the Ninth Circuit to review 6 this Court’s “[v]arious legal conclusions premised on factual findings,” Defendants’ Reply in 7 Support of Motion to Stay (“Reply”) at 7, Docket No. 79, such a request does not raise serious 8 legal questions. Defendants also suggest that the contract formation defenses of economic duress 9 and undue influence required the Court to engage in unconscionability analysis and that this raises 10 serious legal questions, but Defendants conflate the distinct and separate doctrines of 11 unconscionability and duress. Their attempt to so manufacture a “serious legal question” fails. 12 Even if Defendants’ appeal did raise serious legal questions, the balance of hardships does 13 not tilt sharply in favor of Defendants. Leiva-Perez, 640 F.3d at 970. This is so particularly since 14 this Court is issuing a partial stay, at least initially, for a limited period. At this time, the stay does 15 not permit trial, dispositive motions, the certification of a class, or adjudication of this case on the 16 merits. The Court, for now, issues a partial stay which permits focused discovery designed to 17 allow Plaintiffs to secure and preserve the evidence needed to pursue Plaintiffs’ Private Attorney 18 General Act (“PAGA”) and Fair Labor Standards Act (“FLSA”) claims otherwise at risk due to 19 delay. The Court contemplates that such discovery might include the production of a list of 20 individuals that might be covered by the PAGA and FLSA claims, contact information for those 21 individuals, time and pay records related to those claims, and depositions of witnesses whose 22 testimony might be lost with the passage of time. 23 As the Court stays the filing of class certification and dispositive motions and trial, 24 Defendants’ “right” to arbitration will not, at this juncture, be jeopardized. Given the permitted 25 discovery focuses on preservation of evidence that could be lost if adjudication (by arbitration or 26 court) is delayed, and much of the permitted discovery would likely be obtained in either 27 1 arbitration or court given the unwaivable PAGA claim2, Defendants will not be unreasonably 2 prejudiced or burdened by the partial stay. 3 Conversely, Plaintiff contends that a full stay might inflict irreparable harm stemming from 4 the fact that “members of the collective will become harder to locate as time passes, preventing 5 Plaintiff from issuing effective notice” to potential members of the class, and that “many 6 supervisors and foreman with knowledge of Defendants’ employment practices may be long gone 7 as well.” Opp. at PDF Pages 11–12. As Plaintiffs note, “given the transient nature of the migrant 8 farmworker population, Defendant’s records of contact information for people who worked for 9 them in 2016 and 2017 will already be highly unreliable, and that level of unreliability will only 10 grow with the further passage of time.” Opp. at PDF Page 5. Potential class members are people 11 who move between the United States and other countries each year, live in multiple locations 12 throughout each calendar year, and may change phone numbers and addresses frequently. See 13 Ontiveros v. Zamora, No. CIV. S-08-567 LKK, 2013 WL 1785891, at *5 (E.D. Cal. Apr. 25, 14 2013) (“Courts that have addressed this issue are generally concerned with undue loss or 15 destruction of evidence stemming from a delay.”). 16 Lastly, the public interest does not tilt strongly in Defendants’ favor. There are competing 17 interests. While there is an interest under the Federal Arbitration Act in enforcing valid arbitration 18 agreements, “the existence of a federal policy favoring arbitration does not, by itself, require a 19 stay.” Jimenez v. Menzies Aviation Inc, No. 15-CV-02392-WHO, 2015 WL 5591722, at *4 (N.D. 20 Cal. Sept. 23, 2015). The Court “must consider other public policies at issue, such as California’s 21 interest in enforcing its wage and hour laws.” Id. at *4. 22 /// 23 /// 24 /// 25

26 2 See Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 436 (9th Cir. 2015) (“[T]he Iskanian rule prohibiting waiver of representative PAGA claims does not diminish parties’ freedom to 27 select informal arbitration procedures.”); Iskanian v. CLS Transportation Los Angeles, LLC, 59 1 As noted in the minute order, the parties are directed to meet and confer to establish a 2 || discovery plan for the next six months that focuses on preserving the relevant documents and 3 || testimony in this case. The Court also orders that the statute of limitations on the putative class 4 |} member’s FLSA claim be equitably tolled until further order of this Court. 5 This order disposes of Docket No. 74. 6 7 IT IS SO ORDERED. 8 9 Dated: February 13, 2020 10 Lx 11 : fr ED M. CHEN 12 United States District Judge

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