Simple Traditions, Inc. v. Paychex, Inc.

• Court: District Court, E.D. California
• Decided: April 18, 2025
• Docket: 2:24-cv-01335
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 SIMPLE TRADITIONS, INC. and No. 2:24-cv-01335-TLN-SCR NANCY LINN, 12 Plaintiffs, 13 ORDER v. 14 PAYCHEX, INC., 15 Defendant. 16 17 18 This matter is before the Court on Plaintiffs Simple Traditions, Inc. (“Simple Traditions”) 19 and Nancy Linn’s (“Linn”) (collectively, “Plaintiffs”) Motion for Reconsideration. (ECF No. 20 22.) Defendant Paychex, Inc. (“Defendant”) filed an opposition.1 (ECF No. 28.) Plaintiffs filed 21 a reply. (ECF No. 29.) For the reasons set forth below, the Court GRANTS in part and DENIES 22 in part Plaintiffs’ motion. 23 /// 24 ///

25 1 Plaintiffs note that Defendant filed its opposition late on January 16, 2025, without prior approval of the Court. (ECF No. 29 at 2.) The Court notes that it had to initially strike Plaintiffs’ 26 motion for failure to conform with Local Rule 130 and this Court’s page limits. (ECF No. 26.) 27 Counsel for both parties are advised to closely follow the Eastern District of California Local Rules and this Court’s standing order. In the interest of fairness, the Court exercises its discretion 28 and considers Defendant's late opposition. 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 The instant action arises out of Defendant’s alleged failure to file employer tax returns and 3 pay payroll taxes for Simple Traditions, a company Linn owns that provides low-cost funeral and 4 cremation services. (ECF No. 1.) The Court need not recount the factual and procedural 5 background of this case, as it is set forth in full in the Court’s December 3, 2024 Order granting 6 Defendant’s motion to compel arbitration. (ECF No. 20.) On December 30, 2024, Plaintiffs filed 7 the instant motion for reconsideration. (ECF No. 22.) 8 II. STANDARD OF LAW 9 The Court may grant reconsideration under either Federal Rule of Civil Procedure 10 (“Rule”) 59(e) or 60(b). See Schroeder v. McDonald, 55 F.3d 454, 458–59 (9th Cir. 1995). A 11 motion to alter or amend a judgment under Rule 59(e) must be filed no later than 28 days after the 12 entry of judgment. Fed. R. Civ. P. 59(e). Therefore, a “motion for reconsideration” is treated as a 13 motion to alter or amend judgment under Rule 59(e) if it is filed within twenty-eight days of entry 14 of judgment. Rishor v. Ferguson, 822 F.3d 482, 489–90 (9th Cir. 2016); see Am. Ironworks & 15 Erectors, Inc. v. N. Am. Const. Corp., 248 F.3d 892, 898–99 (9th Cir. 2001). Plaintiffs’ motion 16 was filed within twenty-eight days of entry of judgment and is therefore construed as a motion to 17 alter or amend the judgment under Rule 59(e). 18 Rule 59(e) does not list specific grounds for a motion to amend or alter, therefore the 19 district court enjoys considerable discretion in granting or denying the motion. Allstate Ins. Co. v. 20 Herron, 634 F.3d 1101, 1111 (9th Cir. 2011) (citing McDowell v. Calderon, 197 F.3d 1253, 1255 21 n.1 (9th Cir. 1999)). Nevertheless, a motion for reconsideration under Rule 59(e) “should not be 22 granted, absent highly unusual circumstances, unless the district court is presented with newly 23 discovered evidence, committed clear error, or if there is an intervening change in the controlling 24 law.” McDowell, 197 F.3d at 1255. Further, “[a] motion for reconsideration may not be used to 25 raise arguments or present evidence for the first time when they could reasonably have been 26 raised earlier in the litigation.” Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 27 F.3d 873, 880 (9th Cir. 2009) (emphasis in original). Courts may grant a Rule 59(e) motion on 28 four basic grounds: 1 (1) if such motion is necessary to correct manifest errors of law or fact upon which the judgment rests; (2) if such motion is necessary 2 to present newly discovered or previously unavailable evidence; (3) if such motion is necessary to prevent manifest injustice; or (4) if the 3 amendment is justified by an intervening change in controlling law. 4 Allstate Ins. Co., 634 F.3d at 1111. 5 III. ANALYSIS 6 Plaintiffs argue: (1) the Court committed an error of law and fact when it declined to sever 7 the requirement of using Rochester, New York as the arbitration venue and ignored Plaintiff’s 8 evidence to support a finding this provision is substantively unconscionable; (2) there are new 9 factual developments that render it financially impossible and inconvenient for Linn to attend 10 arbitration in Rochester, New York; (3) requiring Linn to travel to Rochester, New York to 11 arbitrate would be substantively unconscionable given her current medical condition; and (4) the 12 Court committed an error of law and fact when it declined to consider Plaintiffs’ challenge to the 13 limitations on liability provision. (ECF No. 27 at 3–8.) The Court will evaluate each of 14 Plaintiffs’ arguments in turn, considering the second and third arguments together because both 15 are about whether the arbitration venue provision is substantively unconscionable in light of new 16 evidence. 17 A. Whether the Court Committed an Error of Law and Fact when it Declined 18 to Sever the Requirement of Rochester, New York as the Arbitration 19 Venue 20 Plaintiffs first take issue with the Court’s conclusion that it did not find the requirement to 21 arbitrate in Rochester, New York substantively unconscionable. (ECF No. 27 at 3.) Plaintiffs 22 argue the Court ignored and did not mention Plaintiffs’ evidence, which Plaintiffs contend was 23 identical to the evidence presented in Silicon Valley Self Direct, LLC v. Paychex, Inc. (Silicon 24 Valley), No. 5:15-CV-01055-EJD, 2015 WL 4452373, at *7 (N.D. Cal. July 20, 2015). (Id. at 3– 25 4.) Plaintiffs note the Silicon Valley court found plaintiff had met its burden to establish the 26 forum selection clause was substantively unconscionable.2 (Id.) In opposition, Defendant notes 27 2 To the extent Plaintiffs argue the Court’s granting of judicial notice of unpublished 28 California cases is error under California Rules of Court Rule 8.1115(a) (ECF No. 27 at 4–5), the 1 Plaintiffs cite an unsigned declaration filed in support of the instant motion and argues the Court 2 should disregard it as it does not comply with 28 U.S.C. § 1746, is not evidence, and is 3 embellished from the prior version. (ECF No. 28 at 6.) Defendant maintains the Court noted the 4 absence of any financial records or estimate of arbitration costs to substantiate Plaintiffs’ claim of 5 financial distress. (Id.) 6 As an initial matter, Silicon Valley is not binding authority on this Court, as “[d]istrict 7 court opinions are relevant for their persuasive authority but they do not bind other district courts 8 within the same district” or a different district. City of Fresno v. United States, 709 F. Supp. 2d 9 888, 909 (E.D. Cal. 2010); Joe Hand Promotions Inc. v. Gonzalez, 423 F. Supp. 3d 779, 784 (D. 10 Ariz. 2019). While the Court acknowledges the evidence plaintiff presented in Silicon Valley is 11 analogous to the evidence Plaintiffs presented in the instant matter, the Court is ultimately bound 12 by precedent set in the Ninth Circuit case, Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1284 13 (9th Cir. 2006).3 As stated previously, in Nagrampa, the Ninth Circuit concluded that a forum 14 selection clause was substantively unconscionable, as the effect of requiring arbitration in Boston 15 was so “prohibitively costly” to plaintiff that it had the effect of precluding her from participating. 16 Id. at 1290, 1293. To reach this conclusion, the Ninth Circuit examined three bank statements for 17 an account held jointly by plaintiff and her husband and the average monthly deposits and the 18 average monthly withdrawals and debits. Id. The court concluded that payment of the initial 19 $6,500 arbitration filing fee alone, without even considering the additional costs to litigate in an 20 out-of-state forum, would result in the bank account being overdrawn by $388.23. Id. at 1290 21 fn.13. 22 /// 23 Court notes “those rules do not apply in federal courts, which may review and consider 24 unpublished appellate decisions for their persuasive, but not for their precedential, value.” Rios v. County of Sacramento, 562 F. Supp. 3d 999, 1021 n.3 (E.D. Cal. 2021) (citing Nunez by Nunez v. 25 City of San Diego, 114 F.3d 935, 942 n.4 (9th Cir. 1997); Inland Concrete Enters., Inc. v. Kraft, 318 F.R.D. 383, 405–06 (C.D. Cal. 2016)). 26

27 3 The Court also notes both the Nagrampa court and Silicon Valley court applied the standard set forth in the California Court of Appeal case, Bolter v. Superior Court, 87 Cal. App. 28 4th 900, 909–10 (2001). 1 Here, the Court explicitly acknowledged Plaintiffs’ arguments of severe financial hardship 2 on Linn and her business, postponement of funeral and cremation services, and emotional stress. 3 (ECF No. 20 at 9.) However, unlike the plaintiffs in Nagrampa, Plaintiffs did not submit any 4 financial records or provide any estimate or arbitration costs and fees for litigating in an out-of- 5 state forum. Using Nagrampa as controlling authority, the Court could not determine whether 6 proceeding in Rochester, New York would be “so gravely difficult and inconvenient” that 7 Plaintiffs would be deprived of their day in court. Nagrampa, 469 F.3d at 1287. Accordingly, 8 the Court properly concluded designation of Rochester, New York as the arbitration venue was 9 not substantively unconscionable and did not commit an error of law or fact when it declined to 10 sever the arbitration venue requirement. 11 B. Whether the Arbitration Provision is Substantively Unconscionable in 12 Light of New Evidence 13 Plaintiffs argue there are new factual developments that render it financially impossible 14 and inconvenient for Linn to attend an arbitration in Rochester, New York — namely, 15 Simple Traditions is experiencing significant staffing shortages and Linn is now experiencing 16 significant back pain from a spinal condition called spondylolisthesis. (ECF No. 27 at 5–6.) 17 Plaintiffs state Simple Traditions has only two very inexperienced staff members who were hired 18 in July 2024 and require extensive training and close daily supervision for six months. (Id. at 5.) 19 Plaintiffs contend that if Linn were required to travel to Rochester, New York for arbitration, she 20 would be forced to close her business as she is the only licensed funeral director on site and 21 cannot leave the new employees unsupervised for any period of time. (Id. at 5–6.) Plaintiffs 22 contend a shutdown would cause significant financial loss, while Linn estimates fees for counsel 23 familiar with New York law could cost a minimum of $12,000. (Id. at 6.) Plaintiffs also note 24 Linn’s spondylolisthesis makes it difficult for her to sit or stand comfortably for any prolonged 25 period of time and traveling back and forth from Sacramento, California to Rochester, New York 26 would cause her significant pain, suffering, and physical distress given the space constraints 27 inherent in travel. (Id.) 28 /// 1 In opposition, Defendant contends the purported six-month training period has already 2 expired and will be long expired by the time of arbitration. (ECF No. 28 at 7.) Defendant asserts 3 Plaintiffs fail to explain why they failed to present this evidence regarding arbitration costs, travel 4 costs, and costs to hire New York counsel earlier. (Id.) Defendant also notes that the only 5 supporting evidence for Linn’s physical condition is an unsigned declaration, which is not 6 evidence and cannot support Plaintiffs’ argument. (Id.) 7 In reply, Plaintiffs note that Linn through mistake, inadvertence, and excusable neglect did 8 not sign her declaration and has executed a corrected declaration wherein she states she received 9 notice from one of her two remaining employees that the employee will be leaving employment 10 with Simple Traditions on January 27, 2025. (ECF No. 29 at 5.) Plaintiffs contend that Linn 11 cannot travel to Rochester, New York for arbitration given that the remaining employee is in 12 training and there is an immediate need to hire another employee. (Id.) Plaintiffs also note Linn 13 was informed by the IRS in a recent telephone conversation that the penalties and interest levied 14 by the IRS now total $84,978.44. (Id.) 15 An agreement is substantively unconscionable if it is “unfairly one-sided.” Little v. Auto- 16 Stieger, Inc., 29 Cal. 4th 1064, 1071 (2003). “[I]f the ‘place and manner’ restrictions of a forum 17 selection provision are ‘unduly oppressive,’ . . . or have the effect of shielding the stronger party 18 from liability, then the forum selection provision is unconscionable[.]” Nagrampa, 469 F.3d at 19 1287 (citing Bolter v. Superior Court, 87 Cal. App. 4th 900, 909–10 (2001); Comb v. PayPal, 20 Inc., 218 F. Supp. 2d 1165, 1177 (N.D. Cal. 2002)). A party may set forth evidence to warrant 21 setting aside the forum selection provision in the following situations: “that the agreement was 22 affected by fraud, undue influence, or overweening bargaining power; that enforcement would be 23 unreasonable and unjust; or that proceedings in the contractual forum will be so gravely difficult 24 and inconvenient that the resisting party will for all practical purposes be deprived of his day in 25 court.” Id. (internal quotations and citations removed). 26 Here, the Court agrees with Defendant that Plaintiffs could have presented evidence 27 regarding arbitration costs, travel costs, and costs to hire New York counsel earlier. The Court 28 also notes that Plaintiffs still have not submitted evidence of bank accounts or financial 1 statements similar to the evidence presented by the plaintiff in Nagrampa to actually establish 2 that proceeding in Rochester, New York would be “so gravely difficult and inconvenient” that 3 Plaintiffs would be deprived of their day in court. Nagrampa, 469 F.3d at 1287. 4 However, with respect to new evidence, Linn avers in her corrected December 30, 2024 5 declaration that she currently has only “two staff members that are undergoing training,” she is 6 “the only licensed funeral director on site,” and her “California Funeral Director’s license 7 requires that given that both [her] new employees are in training [she] must be physically present 8 to supervise their actions.” (ECF No. 31 at 3.) Linn states that her absence to participate in 9 arbitration in Rochester, New York would necessitate the complete shutdown of her business for 10 the length of the arbitration at a significant financial loss that she cannot afford. (Id.) Linn 11 further avers in her declaration that her spondylolisthesis “renders long distance travel very 12 painful due to cramped travel conditions” and her physician Dr. Amit Banerjee, M.D. advised her 13 on December 5, 2024, “that fusion surgery is the best alternative.” (Id. at 4.) Linn states that she 14 cannot take time off for this surgery until her staffs’ training is complete and traveling to 15 Rochester, New York during that time would cause her “unimaginable pain and physical 16 distress.” (Id.) 17 The Court finds that ultimately this is a very close question — Plaintiffs could have 18 submitted bank documents or financial statements to back their assertion that Linn cannot afford a 19 shutdown of her business and Plaintiffs could have submitted medical records to substantiate 20 Linn’s claim of spondylolisthesis. However, the Court sees no reason not to believe Linn’s 21 assertions in her declaration and ultimately concludes that Simple Traditions’s staffing shortage, 22 in conjunction with Linn’s medical condition, establishes that designation of Rochester, New 23 York as the arbitration venue is substantively unconscionable. The Court will therefore sever this 24 provision from the Paychex Proprietor Services Agreement (the “Agreement”). 25 For these reasons, the Court GRANTS Plaintiffs’ motion to reconsider that the 26 requirement to arbitrate in Rochester, New York is substantively unconscionable. 27 /// 28 /// 1 C. Whether the Court Committed an Error of Law and Fact when it Declined 2 to Consider Plaintiffs’ Challenge to the Limitations on Liability Provision 3 Plaintiffs finally take issue with the Court’s refusal to evaluate Plaintiffs’ argument that 4 the limitations on liability restriction in the arbitration provision is substantively unconscionable. 5 (ECF No. 27 at 7.) In reaching this conclusion, the Court examined Plaintiffs’ arguments on the 6 limitations on liability provision and found Plaintiffs only discussed it briefly by stating that 7 Defendant does not mention negative precedents regarding the identical arbitration provisions in 8 Silicon Valley. (ECF No. 9 at 6.) Plaintiffs stated in a conclusory fashion that the Silicon Valley 9 court “refused to enforce the identical limitation on liability provision[,]” but otherwise did not 10 provide any substantive discussion on how the Silicon Valley court reached this decision or how 11 Silicon Valley might apply in the instant case. The Court therefore declined to consider this 12 argument. (ECF No. 20 at 8 n.3.) 13 Plaintiffs argue the Court committed “an error of law and fact” when it discussed 14 Plaintiffs’ argument on this issue in a footnote and declined to consider it. (Id. at 7–8.) In 15 opposition, Defendant asserts “[a] district court has discretion to refuse to consider points that are 16 not supported by reasoned argument and citation of authority,” and therefore the Court committed 17 no clear error. (ECF No. 28 at 7.) In reply, Plaintiffs contend the Court ignored their reliance on 18 the Silicon Valley case as authority. (ECF No. 29 at 3.) Plaintiffs also argue, for the first time, 19 that the enforcement of the limitations on liability provision renders it impossible to obtain any 20 damages for the negligence, breach of contract, or gross negligence claims, and it does not allow 21 equitable relief for continuing penalties and interest imposed by the Internal Revenue Service. 22 (Id. at 4.) 23 Plaintiffs cited to Silicon Valley in the opposition to the motion to compel arbitration, but 24 otherwise Plaintiffs’ brief was devoid of meaningful analysis on this issue. Further, Plaintiffs 25 improperly attempt to bolster their earlier arguments and raise new arguments that could have 26 been raised in their opposition to the motion to compel arbitration. See Marlyn Nutraceuticals, 27 Inc., 571 F.3d at 880 (“A motion for reconsideration may not be used to raise arguments or 28 present evidence for the first time when they could reasonably have been raised earlier in the 1 | litigation.”) (citation and internal quotation marks omitted) (emphasis in original); Garcia v. 2 | Biter, 195 F. Supp. 3d 1131, 1133 (E.D. Cal. 2016) (“A motion for reconsideration may not be 3 | used to get a second bite at the apple.” (citation and quotation marks omitted)). Plaintiffs also fail 4 | to adequately explain why they did not to raise these arguments in opposition to the motion to 5 | compel arbitration. 6 For these reasons, the Court DENIES Plaintiffs’ motion to reconsider as to the Court’s 7 | decision not to consider the limitations on liability argument. 8 IV. CONCLUSION 9 For the foregoing reasons, the Court GRANTS in part and DENIES in part Plaintiffs’ 10 | Motion for Reconsideration (ECF No. 22) as follows: 11 1. The Court GRANTS Plaintiffs’ motion to reconsider that the requirement to arbitrate 12 in Rochester, New York is substantively unconscionable; and 13 2. The Court DENIES Plaintiffs’ motion as to the Court’s decision not to consider the 14 limitations on liability argument. 15 || The provision of the Agreement that requires arbitration to occur in Rochester, New York is 16 || severed from the arbitration clause. The instant action remains DISMISSED with prejudice and 17 | the case shall remain closed.* 18 IT IS SO ORDERED. 19 | Date: April 17, 2025 Lal TROY L. NUWLEY 21 CHIEF UNITED STATES DISTRICT JUDGE 4 The Court acknowledges that Plaintiffs filed a Notice of Supplementary Authority on February 24, 2025, arguing that the Supreme Court in Smith v. Spizzirri, 601 U.S. 472 (2024) 23 || provides that “when a district court finds that a lawsuit involves an arbitrable dispute and a party requests a stay pending arbitration, the court lacks discretion to dismiss the case.” (ECF No. 34 at 24 | 2.) Defendant filed an objection to this notice, arguing that it violates Local Rule 230(m)(2) > because Smith was issued in May 2024 before Plaintiffs filed their reply on January 27, 2025, and 5 Plaintiffs make additional argument on the instant motion by arguing the opinion should be 26 || interpreted to apply to this case despite Plaintiffs’ failure to request a stay. (ECF No. 35 at 2.) Because Plaintiffs did not previously request a stay in this case (see ECF Nos. 9, 27, 29) and 27 || Smith was issued prior to the date Plaintiffs filed their reply, the Court finds Plaintiffs’ notice violates Local Rule 230(m)(2). See E.D. Cal. L.R. 232. Accordingly, Defendant’s objection is 28 | SUSTAINED.