1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 BRIAN PITMAN, individually, and on Case No. 1:20-cv-001259-NONE-BAM behalf of all employees similarly situated., 12 Plaintiff, 13 FINDINGS AND RECOMMENDATIONS v. REGARDING DEFENDANTS’ MOTION TO 14 COMPEL ARBITRATION AND MACY’S WEST STORES, INC., an Ohio PLAINTIFF’S MOTION FOR LEAVE TO 15 Corporation; MACY’S INC., an unknown AMEND THE COMPLAINT entity, and DOES 1 through 100, inclusive, 16 Defendants. 17
18 I. INTRODUCTION 19 On January 7, 2021, Defendants Macy’s West Stores, Inc., and Macy’s Inc., (collectively 20 “Defendants”) filed a Motion to Compel Arbitration. (Doc. No. 13.) On March 12, 2021, Plaintiff 21 Brian Pitman (“Plaintiff”) filed an opposition to the Motion to Compel Arbitration. (Doc. No. 14.) 22 On April 26, 2021, Defendants filed their reply to the motion. (Doc. No. 16.) On April 27, 2021, 23 Plaintiff filed a Motion to Amend the notice of removal. (Doc. No. 17.) On May 18, 2021, the 24 Defendants filed their opposition to the Motion to Amend. (Doc. No. 19.) On May 25, 2021, 25 Plaintiff filed his reply to the motion. (Doc. No. 20.) On May 27, 2021, both the motion to 26 compel arbitration and the motion to amend the notice of removal were referred to Magistrate 27 Judge McAuliffe. 28 1 The motion to compel arbitration and the motion to amend involve intertwined issues. 2 Therefore, in the interest of judicial economy, the Court will handle both motions in this order. 3 Having considered the moving, opposition, reply papers, and the entire file, the Court 4 recommends Defendants’ motion to compel arbitration be GRANTED and Plaintiff’s motion to 5 amend the notice of removal be DENIED as moot. 6 II. BACKGROUND 7 Plaintiff alleges the following facts. Plaintiff is a former employee of Defendants Macy’s 8 West Stores, Inc., and Macy’s Inc. Plaintiff began his employment with Defendant on September 9 5, 2017. Plaintiff alleges that he and all putative class members were misclassified as exempt 10 employees within the meaning of the California Labor Code and the implementing rules and 11 regulations of IWC California Wage Orders. (Doc. No. 1 at 28.) This case was removed to this 12 Court on September 3, 2020. (Doc. No. 1.) 13 On January 7, 2021, Defendants filed the present motion to compel arbitration of Plaintiff’s claims on an individual basis pursuant to the “Solutions InSTORE Program,” 14 Defendants’ dispute resolution program. Defendants assert that, upon hire, Plaintiff was provided 15 with various materials, including the Plan Document1, which contained an arbitration agreement. 16 (Doc. No. 13-2 at 29.) The arbitration agreement provides that “all employment-related legal 17 disputes, controversies, or claims arising out of, or relating to, employment or cessation of 18 employment, whether arising under federal, state, or local decisional or statutory law [] are 19 covered claims and shall be settled exclusively by final and binding arbitration.” (Doc. No. 13-2 20 at 35.) As further set forth in the Plan Document, arbitration is not a mandatory condition of 21 employment. An employee may decline to participate in the arbitration agreement, provided the 22 employee completes an Early Dispute Resolution Program Election form within thirty days of 23 employment. See Declaration of Cynthia Ripak (“Ripak Decl.,”) Doc. 13-2 at ¶¶ 9, 10 (If the 24 employee does not submit the Election Form within the prescribed time period, the employee 25 26 27 1 The Plan Document is a brochure that contains the arbitration agreement and describes the Four 28 Step dispute program. (Doc. No. 13-2, Exh. B.) 1 agrees to arbitration as a term and condition of continued employment), and Exh. B at 28.2 2 Defendants allege that Plaintiff did not opt-out of the arbitration agreement within thirty days of 3 employment. Ripak Decl. at ¶¶ 25-28. 4 Despite allegedly acknowledging review of the Plan Document and failing to file an opt- 5 out form, Plaintiff initiated the instant action in Fresno County Superior Court on June 4, 2020. 6 Plaintiff asserts the following claims against Defendants: (1) failure to pay wages, including 7 overtime; (2) failure to provide meal periods or compensation in lieu thereof; (3) failure to 8 provide rest periods or compensation in lieu thereof; (4) failure to timely pay wages due at 9 termination; (5) failure to furnish accurate itemized wage statements; (6) failure to pay wages due 10 and payable twice monthly; (7) failure to reimburse employees for required expenses; and (8) 11 violations of the unfair competition law. (Doc. No. 1 at 26.) Defendants removed the case to this 12 Court on September 3, 2020. The instant motions followed. 13 III. LEGAL STANDARD FOR A MOTION TO COMPEL ARBITRATION The Federal Arbitration Act (“FAA”) permits a party “aggrieved by the alleged failure, 14 neglect, or refusal of another to arbitrate under a written agreement for arbitration” to petition a 15 district court for an order compelling arbitration. 9 U.S.C. § 4. The FAA created a “strong federal 16 policy favoring arbitral dispute resolution,” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 720 (9th 17 Cir. 1999), and courts have been directed to resolve “any doubts concerning the scope of 18 arbitrable issues . . . in favor of arbitration,” Moses H. Cone Mem’l Hosp. v. Mercury Const. 19 Corp., 460 U.S. 1, 24-25 (1983). As a result, the party seeking to avoid arbitration under the FAA 20 bears the burden of proving that the claims are unsuitable for arbitration. Green Tree Fin. Corp.- 21 Alabama v. Randolph, 531 U.S. 79, 91-92 (2000). When deciding whether to compel arbitration, 22 23 2 See Doc. No. 13-2 Exh. B at p. 51, “I have received a copy of the Solutions InSTORE brochure and Plan 24 Document and acknowledge that I have been instructed to review this material carefully. I understand that I have thirty (30) days from my date of hire to review this information and postmark by election form to the 25 office of Solutions InSTORE if I wish to opt out of Step 4, the final step of the Company’s early dispute resolution program, Solutions InSTORE, which is final and binding arbitration. I understand I will be 26 automatically enrolled in the program and subject to final and binding arbitration from my date of hire unless, within thirty (30) days of my date of hire, I take the steps required to opt out of Step 4 - Arbitration” Plaintiff 27 signed the New Hire Acknowledgement form, which meant he had received the Plan Document and Brochure (which included an Election Form), understood that he had thirty (30) days to decide whether to opt out of Step 28 4-Arbitration. 1 the court’s sole role is “determining whether a valid arbitration agreement exists and, if so, 2 whether the agreement encompasses the dispute at issue.” Lifescan, Inc. v. Premier Diabetic 3 Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). Arbitration agreements are to be placed on an 4 “equal footing with other contracts.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 5 (2011). Thus, written arbitration agreements are “valid, irrevocable, and enforceable, save upon 6 such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. “Under 7 the FAA, general state contract law applies to determine whether an agreement to arbitrate is 8 valid and enforceable.” See e.g., Raymundo v. ACS State & Local Sols., Inc., 2013 U.S. Dist. 9 LEXIS 70141, 2013 WL 2153691, at *2 (N.D. Cal. May 16, 2013). 10 When evaluating a motion to compel arbitration, courts treat the facts as they would when 11 ruling on a motion for summary judgment, construing all facts and reasonable inferences that can 12 be drawn from those facts in a light most favorable to the non-moving party. See Chavez v. Bank 13 of Am., 2011 U.S. Dist. LEXIS 116630, 2011 WL 4712204, at * 3 (N.D. Cal. Oct. 7, 2011). IV. ANALYSIS OF DEFENDANTS’ MOTION TO COMPEL ARBITRATION 14 Defendants move to compel arbitration on the grounds that Plaintiff agreed to arbitration 15 when he signed the New Hire Acknowledgement, the application disclosure statement, and failed 16 to return the opt-out form. Plaintiff responds that Defendants breached the arbitration agreement 17 by not paying the fees to initiate arbitration within 30 days of Plaintiff’s demand for arbitration, 18 therefore waiving their right to compel. 19 A. The Parties Entered into an Enforceable Arbitration Agreement 20 1. Admissible Evidence 21 Defendant’s motion includes declarations by Cynthia Ripak, Senior Manager of the Office 22 of Solutions InSTORE for Macy’s Inc., Barry Sherrick, Manager of Software Engineering, and 23 Michelle Cantor, Senior Manager of Recruitment Operations. See Ripak Decl. Doc. 13-1; See 24 Declaration of Barry Sherrick (“Sherrick Decl.,”), Doc. 13-3; See Declaration of Michelle Cantor 25 (“Cantor Decl.,”) Doc. 13-5. Plaintiff objects to many of the statements in these declarations 26 arguing that the declarants were not present when Plaintiff was conducting his new hire 27 onboarding. He argues that their statements lack foundation and authentication, are speculative, 28 1 and amount to inadmissible hearsay, and include testimony for which the declarants lack personal 2 knowledge. (Doc. Nos. 14-3, 14-5, and 14-6.) 3 “On a motion to compel arbitration, the court applies a standard similar to the summary 4 judgment standard applied under Rule 56 of the Federal Rules of Civil Procedure.” Alvarez v. T- 5 Mobile USA, Inc., No. CIV. 2:10-2373 WBS GGH, 2011 U.S. Dist. LEXIS 146757, at *8, 2011 6 WL 6702424 (E.D. Cal. Dec. 21, 2011). Under Rule 56, “[a] party may object that the material 7 cited to support or dispute a fact cannot be presented in a form that would be admissible in 8 evidence.” Fed. R. Civ. P. 56(c)(2) (emphasis added). Consequently, the focus of an objection at 9 the summary judgment stage is not “the admissibility of the evidence’s form” but on the 10 “admissibility of its contents.” Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003). In 11 consideration of the applicable standard, “objections to evidence on the ground that it is 12 irrelevant, speculative, and/or argumentative, or that it constitutes an improper legal conclusion 13 are all duplicative of the summary judgment standard itself” and are unnecessary. Burch v. Regents of the Univ. of Cal., 433 F. Supp. 2d 1110, 1119 (E.D. Cal. June 5, 2006). “Instead of 14 challenging the admissibility of this evidence, lawyers should challenge its sufficiency.” Id. 15 Moreover, objections to documentary evidence “on the basis of a failure to comply with 16 the technicalities of authentication requirements or the best evidence rule are . . . inappropriate” 17 so long as such documents could be properly authenticated at trial. Alvarez, 2011 WL 6702424 at 18 *10-11. 19 The Court has reviewed Plaintiff’s objections and finds them superfluous to the legal 20 standard for the reasons explained. Accordingly, they are each overruled. 21 2. Agreement to Arbitrate 22 The first task of a Court asked to compel arbitration of a dispute is to determine whether 23 the parties agreed to arbitrate the dispute. Van Ness Townhouses v. Mar Indus. Corp., 862 F.2d 24 754, 756 (9th Cir. 1988). Whether the parties in this case entered into an arbitration agreement 25 will be determined under California contract law. See Circuit City Stores, Inc. v. Najd, 294 F.3d 26 1104, 1108 (9th Cir. 2002). Under California contract law, a valid contract exists only if the 27 parties consent. United States ex rel. Oliver v. Parsons Co., 195 F.3d 457, 462 (9th Cir. 1999). 28 1 The petitioning party bears the initial burden of proving by a preponderance of evidence: (1) the 2 existence of a valid arbitration agreement and (2) that the dispute is covered by the agreement. 3 See Engalla v. Permanente Med. Grp., Inc., 15 Cal.4th 951, 972, 64 Cal. Rptr. 2d 843, 938 P.2d 4 903 (1997). “[T]he trial court sits as a trier of fact, weighing all the affidavits, declarations, and 5 other documentary evidence, as well as oral testimony received at the Court’s discretion, to reach 6 a final determination.” Id. at 972. 7 Plaintiff does not challenge the validity of the arbitration agreement. Plaintiff makes no 8 argument that the arbitration agreement was a invalid contract when the parties entered the 9 agreement. (See Doc. No 14.) In fact, Plaintiff alleges that he has already demanded arbitration, 10 acknowledging the agreement to arbitrate. (Doc. No. 14 at 5.) Instead of arguing the validity of 11 the contract at its inception, Plaintiff argues that Defendants breached the arbitration agreement 12 and therefore waived their right to compel arbitration. (Doc. No. 14.) 13 3. Waiver Like other contractual rights, the right to arbitration may be waived. United States v. Park 14 Place Assocs., 563 F.3d 907, 921 (9th Cir. 2009). The Ninth Circuit has emphasized that waiver 15 of the right to arbitration is disfavored because the right is contractual. Park Place Assocs., 563 16 F.3d at 921. Therefore, the party seeking to prove waiver of the right bears a heavy burden of 17 proof. Id. (citing Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1025 (11th Cir. 18 1982)). It is for the Court, not the arbitrator, to determine whether an issue is arbitrable. Oracle 19 America, Inc., v. Myriad Group A.G., 724 F.3d 1069, 1073 (9th Cir. 2013). It is for the Court to 20 decide on defenses to the enforceability of agreements, including waiver. Cox v. Ocean View, 533 21 F.3d 1114, 1120 (9th Cir. 2008). To demonstrate waiver, the arguing party must show: “(1) 22 knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; 23 and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Id. 24 (quoting Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)). 25 /// 26 /// 27 /// 28 1 i. Knowledge of the right to arbitration 2 Plaintiff argues that Defendants had knowledge of the right to compel arbitration because 3 they drafted the agreement. (Doc. No 14 at 6.) Defendants do not dispute that they had knowledge 4 of the right to arbitration. 5 ii. Inconsistent action with the right to arbitration 6 Plaintiff next argues that Defendants acted inconsistently with the right to compel 7 arbitration by denying Plaintiff’s demand for arbitration and failing to pay the arbitration fees 8 within 30 days of the demand. (Doc. No. 14 at 7-8.) Defendants argue that they have not acted 9 inconsistently with the desire to arbitrate the issues, as they have not engaged in extensive 10 litigation. (Doc. No. 16 at 7.) Notwithstanding, Defendants counter that Plaintiff never made a 11 demand for arbitration or initiated arbitration with the American Arbitration Association 12 (“AAA”), as required. (Id.) Specifically, Defendants contend that on October 4, 2019, Plaintiff 13 submitted to the Defendants an “advance notice of intent to file a demand for arbitration.” However, Plaintiff did not send the demand for arbitration along with a filing fee to the AAA as 14 required. (Id.) 15 Courts have held that a party’s active litigation of a lawsuit for a substantial period before 16 moving to compel arbitration is indisputably inconsistent with the right to arbitrate. Madrid v. 17 Lazer Spot Inc., 2020 WL 4274218 at *23-24 (E.D. Cal. July 24, 2020) (finding party seeking to 18 compel arbitration acted inconsistent with the right to arbitrate when he did not seek to enforce 19 the right until the parties completed non-expert discovery); Morgan Stanley & Co., LLC v. Couch, 20 134 F.Supp. 3d 1223-24 (E.D. Cal. September 24, 2015) (finding party seeking to compel 21 arbitration acted inconsistent with that right when he exploited the benefits of pretrial discovery 22 and motion practice that were only available in the judicial forum); Van Ness Townhouses v. Mar 23 Industries Corp., 862 F.2d 754, 758 (9th Cir. 1988) (finding party seeking arbitration acted 24 inconsistent with that right when he actively litigated the case for two years). 25 The parties have not engaged in extensive litigation in this case. First, Defendants in this 26 action have conducted only limited discovery and motion practice. Specifically, the parties have 27 only engaged in limited discovery pertaining to the instant motion to compel arbitration, which is 28 1 the only motion practice the parties have engaged in during this case. On December 9, 2020, the 2 Court opened discovery as to the motion to compel arbitration only, stating specifically that all 3 “[d]iscovery unrelated to the Motion to Compel Arbitration will not be conducted until the 4 Motion has been resolved.” (Doc. No. 10.) Thus, the parties have not conducted extensive 5 discovery or engaged in extensive motion practice. Further, this matter was initiated on June 4, 6 2020, in state court and was removed on September 3, 2020. (Doc. No. 1.) As such, this matter 7 has only been pending for approximately one year. During this time, only the two instant motions 8 have been filed. There has not been a substantial amount of litigation or delay. Defendants have 9 not acted inconsistent with the right to arbitration. 10 Second, Defendants allege that Plaintiff never filed his demand for arbitration with the 11 AAA, which would initiate the arbitration process. (Doc. No. 16 at 1.) Ms. Ripak, Senior 12 Manager of the Office of Solutions InSTORE for Macy’s Inc., attested that she is responsible for 13 handling invoices submitted to Macy’s Inc., from AAA. Ripak Decl. ¶ 5. Ms. Ripak also attested that she has “never seen, located, or otherwise became aware of any emails, other 14 correspondence, or other documents sent by AAA to Macy’s office of Solutions InSTORE related 15 either to Brian Pitman or any demand for arbitration filed by or on behalf of Brian Pitman.” Ripak 16 Decl. at ¶ 6. Additionally, Plaintiff has not presented support that he did, in fact, file the demand 17 for arbitration. The Court finds Ms. Ripak’s declaration credible. 18 Plaintiff was aware that to initiate arbitration he must file his demand for arbitration with 19 the AAA and pay the required fee. The letter submitted from Plaintiff to Macy’s Inc., on October 20 4, 2019, states, “[Plaintiff] will wait to file the demand for arbitration until 15 days after Macy’s 21 receipt of this letter.” (Doc. No. 14-1, Exh. 3.) The letter also acknowledges that the attached 22 demand for arbitration was sent as an advance notice of the intent to file a demand for arbitration 23 pursuant to article 6.b of Macy’s Plan Document (the arbitration agreement), which requires such 24 advance notice for those who did not participate in steps 1-3 of Solutions InSTORE early dispute 25 resolutions. (Id.) The Demand for arbitration attached to the letter also describes the process of 26 initiating a claim stating, “[t]o begin proceedings, please send a copy of this Demand and the 27 Arbitration Agreement, along with any filing fee as provided for in the rules, to: American 28 1 Arbitration Association…” (Id.) (emphasis in original). Plaintiff signed the demand on August 2 29, 2019. (Id.) Plaintiff’s signature on the document just below the notice of how to begin 3 proceedings demonstrates his awareness of the requirements to initiate arbitration. There has been 4 no showing that Plaintiff in fact filed the demand. Therefore, Defendants did not waive their right 5 to arbitration based on failing to initiate arbitration. 6 iii. Prejudice to the party opposing arbitration 7 Plaintiff alleges that an order compelling arbitration would result in prejudice to the 8 Plaintiff as he has incurred costs that would not have been incurred if arbitration was initiated 9 earlier. (Doc. No. 14 at 8.) Plaintiff also alleges that Defendants have benefited from Plaintiff’s 10 initial disclosures which would not have been obtained in arbitration. (Id.) Defendants counter 11 that Plaintiff’s “self-inflicted wounds” do not amount to prejudice. (Doc. No. 16 at 6-7.) 12 Generally, courts find that there has been prejudice where there have been delays in 13 pursuing arbitration. Madrid, 2020 WL 4274218 at *27. For example, courts have found that delays of approximately one year can constitute prejudice. Id.; accord Morgan Stanley, 134 14 F.Supp. 3d at 1231; Steiner v. Horizon Moving Sys., 2008 WL 4822774 at *8-10 (C.D. Cal. 15 October 30, 2008) (finding prejudice where delay was one year since action was initiated and 16 Plaintiff was denied remand before seeking arbitration). The Ninth Circuit has found that “courts 17 are reluctant to find prejudice to the plaintiff who has chosen to litigate, simply because the 18 defendant litigated briefly (e.g., by filing a motion to dismiss or requesting limited discovery) 19 before moving to compel arbitration.” Brown v. Dillard’s Inc., 430 F.3d 1004, 1012 (9th Cir. 20 2005). Prejudice may be found where the parties engaged in extensive discovery. Madrid, 2020 21 WL 4274218 at *27 (quoting Morvant v. P.F. Chang’s China Bistro, Inc., 870 F.Supp.2d 831, 22 847 (N.D. Cal. 2021)). 23 Plaintiff’s argument that the additional costs incurred from having to litigate the matter is 24 unpersuasive. Costs of litigation alone are not sufficient to establish prejudice. United Computer 25 Sys. v. AT&T Info. Sys., 298 F.3d 756, 765 (9th Cir. 2002) (finding cost of litigation alone was not 26 sufficient to establish prejudice). Additionally, the parties have not engaged in extensive 27 discovery. The parties have only engaged in discovery specific to the motion to compel and 28 1 Plaintiff’s initial disclosures. Plaintiff’s argument that Defendants have benefited from the initial 2 disclosures is also unpersuasive as initial disclosures are considered extensive discovery. Plaintiff 3 has failed to establish prejudice. 4 B. Plaintiff’s Claims are Within the Scope of the Agreement. 5 Plaintiff does not argue that all his claims are outside of the scope of the agreement. 6 Rather, Plaintiff argues that only the Fair Labor Standards Act (“FLSA”) claims he intends to add 7 to the amended complaint, and the injunctive relief sought on behalf of the public are beyond the 8 scope of the agreement. (Doc. No. 14 at 10, 12.) Defendants argue that both the FLSA claim, and 9 the injunctive relief claim are within the scope of the agreement and therefore subject to 10 arbitration. (Doc. No. 16 at 7, 9.) Alternatively, Defendants request a stay of proceedings pending 11 arbitration of the arbitrable claims before the Court determines the remaining claims if they are 12 found to be outside the scope of the agreement. (Doc. No. 13 at 17.) 13 The arbitration agreement provides that “all employment-related legal disputes, controversies, or claims arising out of, or relating to, employment or cessation of employment, 14 whether arising under federal, state, or local decisional or statutory law [] are covered claims and 15 shall be settled exclusively by final and binding arbitration.” (Doc. No. 13-2 at 35.) The language 16 of the arbitration agreement is broad and includes all employment related disputes. 17 1. The Anticipated FLSA Claims in Plaintiff’s First Amended Complaint are Subject 18 to Arbitration. 19 Plaintiff argues that the FLSA claim he intends to include in a proposed First Amended 20 Complaint would not be subject to arbitration. (Doc. No. 14 at 10.) Plaintiff relies on Albertson’s, 21 Inc. v. Commercial Workers Union, 157 F.3d 758 (9th Cir. 1998), that his proposed FLSA claim is 22 a statutory claim which creates an independent right to pursue the claim in court. (Id.) 23 The Albertson Court held that employees covered by a collective bargaining agreement 24 were entitled to take their FLSA claims to court regardless of whether those claims were covered 25 by grievance-arbitration procedures. 157 F.3d at 761-62. The Albertson Court made clear, 26 however, that there is a distinction between cases where the arbitration agreement is based in a 27 collective bargaining agreement and cases where the arbitration agreement is based on individual 28 1 claims. Id. at 760-761. As Defendants argue, the Albertson Court distinguished the line of cases 2 that involved individual arbitration agreements, namely Kuehner v. Dickinson & Co., 84 F.3d 316 3 (9th Cir. 1996), and Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). Kuehner, 4 Gilmer, and their progeny, found that “Congress had not restricted the enforceability of contracts 5 to arbitrate FLSA claims.” Albertson, 157 F.3d at 762 (“the employee's individual agreement to 6 arbitrate all disputes was enforceable with respect to disputes over claims covered by the FLSA.) 7 Defendants argue that Plaintiff’s reliance on Albertson is misplaced. The Court agrees that 8 individual claims under the FLSA are subject to arbitration. Plaintiff is not covered by any 9 collective bargaining agreement. Rather, the arbitration agreement covers all individual claims 10 Plaintiff may have against Defendants. The Albertson Court distinguished the difference between 11 collective bargaining agreements with a grievance-arbitration procedure and an individual 12 arbitration agreement. The Albertson Court, by distinguishing the different forms of agreements, 13 demonstrated its interest in protecting individual rights that might otherwise be diminished in a collective action. Here, Plaintiff’s individual rights will not be diminished by pursuing his FLSA 14 claim through arbitration. 15 Further, the FLSA claim Plaintiff intends to include is a claim for failure to pay wages 16 under the FLSA. Plaintiff alleges that “in the performance of their duties for Defendants, 17 members of the FLSA collective employees often did work off the clock and over forty (40) 18 hours per week and did not receive minimum wages and overtime compensation for the work, 19 labor and services.” (Doc. No. 14-1, Exh. 8 at 26.) Under the arbitration agreement, all of 20 Plaintiff’s employment related claims, including those under federal statutory law would be 21 subject to arbitration. Because Plaintiff is not part of a collective bargaining agreement, Albertson 22 does not apply. Rather, Kuehner, Gilmer, and their progeny apply, which hold that the FLSA does 23 not negate the enforceability of an arbitration agreement on an individual basis. The FLSA claims 24 Plaintiff intends to include in his amended complaint would therefore be subject to the arbitration 25 agreement on an individual basis. 26 /// 27 /// 28 1 2. Plaintiff’s Request for Injunctive Relief. 2 Plaintiff argues that if the Court grants the motion to compel arbitration, claims that are 3 beyond the scope of the agreement would remain; namely Plaintiff’s request for injunctive relief 4 on behalf of the public. (Doc. No. 14 at 12.) Defendants argue that the request for stay was only 5 an alternative argument if the Court did not find all claims arbitrable. (Doc. No. 16 at 9.) 6 Defendants further argue that Plaintiff’s request for injunctive relief is within the scope of 7 arbitration. (Id. at 10.) 8 Plaintiff is seeking injunctive relief as to the eighth cause of action: violations of the 9 unfair competition law (“UCL”). (Doc. No. 1, Exh. A.) In claim eight, Plaintiff alleges that 10 Defendant failure to adequately compensate Plaintiff, and the alleged class members, constituted 11 false, fraudulent, unlawful, unfair, and deceptive business practices. (Doc. No. 1 at Exh. A. at 21.) 12 Plaintiff therefore requests the Court issue a “preliminary and permanent injunction prohibiting 13 Defendants from engaging in the unfair, unlawful, and/or fraudulent practices alleged in the complaint.” (Id.) 14 Defendants specifically argue that (1) the scope of the agreement is broad and includes the 15 requested relief, and (2) Plaintiff is seeking private injunctive relief not public relief and therefore 16 the issue is arbitrable. (Doc. No. 16 at 10.) Defendants argue the scope of the agreement is broad 17 and includes all employment related disputes arising out of decisional or statutory law. Plaintiff’s 18 eighth cause of action would certainly fall within this scope as Plaintiff is alleging Defendants 19 failed to properly compensate and/or provide rest periods for employees. (See Doc. No. 1, Exh. A 20 at 21.) 21 The California Supreme Court has found that agreement to arbitrate claims for public 22 injunctive relief under the UCL are not enforceable in California. Olosoni v. HRD Tax Grp., 2019 23 WL 7576680 at *7 (N.D. Cal. November 5, 2019) (citing McGill v. Citibank, N.A., 2 Cal. 5th 945, 24 (2017)). Such claims are unenforceable where the arbitration agreement prohibits the ability of 25 the plaintiff to seek public injunctive relief. See McGill, 2 Cal. 5th at 956 (finding that the 26 arbitration agreement precluded plaintiff from seeking public injunctive relief in any forum which 27 cause the agreement to be unenforceable). Injunctive relief is public where the injunctive relief 28 1 has the “primary purposed and effect of prohibiting unlawful acts that threaten future injury to the 2 general public.” Olosoni, 2019 WL 7576680 at *8 (quoting Blair v. Rent-A-Center, Inc., 928 F.3d 3 819, 822 (9th Cir. 2019)). Injunctions that directly eliminate the use of deceptive practices, but do 4 not otherwise benefit the plaintiff, who has already been injured by such practice and is aware of 5 the practices, is a public injunction. Blair, 928 F.3d at 824. Whereas, private injunctions resolve 6 private disputes between parties and rectify individual wrongs even if they benefit the public. Id. 7 Here, neither party argues that the arbitration agreement prevents Plaintiff from seeking 8 injunctive relief in arbitration. Indeed, the agreement at issue states that, “the arbitrator shall have 9 the same power and authority as would a judge to grant any relief…that a court could grant.” 10 (Doc. No. 13-2 Exh. A.) The agreement here does not prevent Plaintiff from seeking his requested 11 relief, unlike McGill, where the arbitration agreement was found to be invalid because it 12 prevented the plaintiff from obtaining public injunctive relief from both the courts and through 13 arbitration. See McGill, 2 Cal. 5th 945 (finding that the arbitration agreement included a waiver of 14 plaintiff’s right to seek public injunctive relief in court and arbitration); See also Blair, 928 F.3d 15 819 (finding McGill did not apply because the arbitration agreement did not waive the right to 16 seek the requested relief). As the arbitration agreement, here, does not prevent the requested relief 17 and the claim itself is within the scope of the agreement, the eighth cause of action and its 18 requested relief are arbitrable. 19 C. Plaintiff’s Request for Stay Pending Congressional Action on H.R. 963 20 Plaintiff next requests that the Court stay these proceedings to determine if the U.S. House 21 of Representatives will pass H.R. 963 (the Forced Arbitration Injustice Act). (Doc. No. 14 at 11.) 22 Defendants argue first that the bill is not law and therefore unenforceable, and second, that even if 23 the bill was enacted it would not apply to Plaintiff’s claims retroactively. (Doc. No. 16 at 8-9.) 24 This Court must abide by federal law and cannot make decisions based on pending 25 legislation which may or may not be passed into law. Current federal law and the law in effect 26 when the parties entered the agreement strongly favors arbitration and the enforcement of such 27 agreements. The Court will not recommend a stay of proceedings based on pending legislation. 28 /// 1 D. Plaintiff’s Request for Sanctions 2 Plaintiff requests that Defendants be subjected to both monetary and evidentiary sanctions 3 based on Plaintiff’s allegations that Defendants have breached the arbitration agreement pursuant 4 to California Code of Civil Procedure § 1281.99(a). (Doc. No. 14 at 12.) Plaintiff also seeks 5 evidentiary sanctions against Defendants for failing to pay the arbitration fees within 30 days of 6 Plaintiff’s demand for arbitration pursuant to California Code of Civil Procedure § 1281.97. (Id.) 7 California Code of Civil Procedure § 1281.97 states: 8 “In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules 9 of the arbitration administrator, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or 10 costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of 11 the arbitration agreement, is in default of the arbitration, and 12 waives its right to compel arbitration.”
13 California Code of Civil Procedure § 1281.99(a) states: 14 “The court shall impose a monetary sanction against a drafting 15 party that materially breaches an arbitration agreement pursuant to subdivision (a) of Section 1281.97 or subdivision (a) of Section 16 1281.98, by ordering the drafting party to pay the reasonable expenses, including attorney’s fees and costs, incurred by the 17 employee or consumer as a result of the material breach.” 18 19 As detailed above, Defendants did not breach the arbitration agreement. Rather, Plaintiff 20 failed to properly file his demand for arbitration with the AAA and pay the required filing fee that 21 would have initiated the arbitration proceedings. Since there was no breach of the arbitration 22 agreement by Defendants, sanctions under §1281.99 would not be appropriate. 23 V. Defendant’s Request to Dismiss Action, or in the Alternative to Stay Action. Defendants request that matter be dismissed because all of Plaintiff’s claims are subject to 24 arbitration. (Doc. No. 13-1 at 24.) Alternatively, Defendants request the matter be stayed if the 25 Court finds that not all of Plaintiff’s claims are subject to arbitration. (Id.) Where a motion to 26 compel arbitration is granted, 9 U.S.C. § 3 provides that a court shall stay an action pending 27 completion of arbitration. Johnmohammadi v. Bloomingdale’s, Inc., 755 F.3d 1073-74 (9th Cir. 28 1 2014). The Ninth Circuit has held that “notwithstanding the language of § 3, a district court may 2 either stay the action or dismiss it outright when [] the court determines that all the claims raised 3 in the action are subject to arbitration.” Johnmohammadi, 755 F.3d at 1074 (citing Sparling v. 4 Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988)). Here, all of Plaintiff’s claims are 5 subject to arbitration, including the FLSA claim in the proposed amended complaint. Therefore, 6 the Court has discretion to either stay this case under 9 U.S.C. § 3 or dismiss the action in its 7 entirety. The Court recommends that the action be dismissed as all of Plaintiff’s claims are 8 subject to arbitration. 9 V. Plaintiff’s Motion for Leave to Amend the Complaint is Moot. 10 On April 27, 2021, Plaintiff filed a Motion to File an Amended complaint. (Doc. No. 17.) 11 On May 18, 2021, the Defendants filed their opposition to the Motion to Amend. (Doc. No. 19.) 12 On May 25, 2021, Plaintiff filed his reply to the motion. (Doc. No. 20.) 13 Plaintiff’s motion to amend the complaint shows he intends to add one additional cause of action to the complaint. Plaintiff wishes to add the FLSA claim as his ninth cause of action. 14 However, as discussed above, the FLSA claim would also be subject to arbitration under the 15 arbitration agreement. 16 The Court is recommending that the Motion to Compel be granted as there is a valid, 17 enforceable arbitration agreement and all claims (including the FLSA claim) are within the scope 18 of the arbitration agreement. Therefore, Plaintiff’s motion to amend the complaint is moot, and as 19 such should be DENIED. 20 21 VI. CONCLUSION AND RECOMMENDATION 22 Based on the foregoing, IT IS HEREBY RECOMMENDED: 23 1. Defendant’s motion to compel arbitration (Doc. No. 13.) be GRANTED; 24 2. Plaintiff’s motion to amend the complaint (Doc. No. 17.) be DENIED as moot; 25 3. Plaintiff’s request for sanctions (Doc. No. 14 at 12.) be DENIED; 26 4. Defendant’s request that this matter be dismissed (Doc. No. 13-1 at 18.) be 27 GRANTED; 28 5. Defendant is to pay the required arbitration fees within fourteen (14) days of adoption 1 of these Findings and Recommendations. Proof that the filing fee has been paid shall be filed 2 within thirty (30) days of adoption of these Findings and Recommendations; and 3 6. The Court retain jurisdiction over this matter until Defendants submit proof that the 4 arbitration filing fee has been paid. 5 These Findings and Recommendations will be submitted to the United States District 6 Judge assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(l). Within 7 fourteen (14) days after being served with these Findings and Recommendations, the parties may 8 file written objections with the Court. The document should be captioned “Objections to 9 Magistrate Judge’s Findings and Recommendations.” The parties are advised that failure to file 10 objections within the specified time may result in the waiver of the “right to challenge the 11 magistrate’s factual findings” on appeal. Wilkerson v. Wheeler, 772 F.3d 834, 839 (9th Cir. 2014) 12 (citing Baxter v. Sullivan, 923 F.2d 1391, 1394 (9th Cir. 1991)). 13 IT IS SO ORDERED. 14
15 Dated: July 1, 2021 /s/ Barbara A. McAuliffe _ UNITED STATES MAGISTRATE JUDGE 16
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