1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8
10 GEORGE STICKLES and MICHELE RHODES, 11 No. C 20-09220 WHA Plaintiffs, 12
v.
13 ORDER RE MOTION TO ATRIA SENIOR LIVING, INC., and CLARIFY OR MODIFY 14 ATRIA MANAGEMENT CLASS DEFINITION OR COMPANY, LLC, COMPEL ARBITRATIONS 15 AND VACATING HEARING Defendants.
17 INTRODUCTION 18 In this wage-and-hour class action, defendants move to clarify or modify the class 19 definition, or to compel arbitrations in the alternative. For the reasons that follow, defendants’ 20 motion is DENIED. 21 STATEMENT 22 The facts underlying this action are described more fully in our prior order (Dkt. No. 23 107). In short, plaintiffs George Stickles and Michele Rhodes worked as “Community Sales 24 Directors” (CSDs) for defendants, Atria Senior Living, Inc., and Atria Management Company, 25 LLC. This action concerns whether defendants improperly classified CSDs as exempt outside 26 salespersons such that CSDs were not entitled to overtime and meal and rest break rules under 27 California law. 1 Our prior order certified a class of CSDs who did not sign arbitration agreements and 2 whom defendants classified as exempt outside salespersons from April 9, 2018, through 3 September 29, 2019. The class was certified solely to the issue of whether defendants properly 4 classified CSDs as exempt outside salespersons (Dkt. No. 40). The parties each moved for 5 summary judgment on that issue, and the motions were fully briefed as of February 2022 (Dkt. 6 No. 72). Defendants then moved to compel arbitration of plaintiff Rhodes’ California Private 7 Attorneys General Act claim, which motion was fully briefed as of April 2022 (Dkt. No. 88). 8 The parties subsequently entered settlement discussions and moved for approval of a proposed 9 class settlement, which was rejected in June 2022. Outstanding motions were stayed pending 10 settlement. 11 In a status report dated June 21, 2022, defendants raised for the first time they had 12 “discovered that, due to a clerical mistake, . . . a group of employees who had been subject to 13 arbitration agreements had erroneously been included in the Class” (Dkt. No. 100 at 1). The 14 agreements in question were not produced during discovery, and consisted of arbitration 15 agreements sent on one occasion in March 2019 to then-existing employees by email, 16 informing them that they would be subject to the agreement if they remained employed by 17 defendants 30 days afterwards (Dkt. No. 100 at 2). An order resumed the litigation schedule 18 due to the parties’ inability to settle on July 26, 2022. That order explicitly explained that the 19 class members defendants claimed to have been erroneously included “are still members of the 20 class,” and that it “would take substantial motion practice to compel them to arbitrate” (Dkt. 21 No. 102). The outstanding motions for summary judgment were then rescheduled for a 22 hearing, and a summary judgment hearing was held on November 16, 2022. Our resultant 23 order granted summary judgment in favor of plaintiffs on classification, determining that CSDs 24 are not exempt outside salespersons (Dkt. No. 107). 25 Defendants now move to excise those class members they claimed were erroneously 26 included in the class. This order follows full briefing and finds the motion suitable for 27 disposition on the papers under Civil Local Rule 7-1(b). 1 ANALYSIS 2 The Supreme Court’s recent decision Morgan v. Sundance clarified that courts may not 3 condition a waiver of the right to arbitrate upon a showing of prejudice to the non-moving 4 party. 142 S. Ct. 1708, 1712–13 (2022). In light of that decision, the Ninth Circuit then held 5 that “the test for waiver of the right to compel arbitration consists of two elements: (1) 6 knowledge of an existing right to compel arbitration; and (2) intentional acts inconsistent with 7 that existing right.” Hill v. Xerox Bus. Servs., LLC, 2023 WL 1490808, at *9 (9th Cir. Feb. 3, 8 2023). District courts may determine whether a defendant has waived the right to enforce an 9 arbitration agreement by litigation conduct, and such determination is “presumptively for a 10 court and not an arbitrator to decide.” Martin v. Yasuda, 829 F.3d 1118, 1122–23 (9th Cir. 11 2016) (citation omitted). 12 This is not a close case. Defendants have been on notice since July 2022 that their 13 apparent revelation of emailed, unsigned arbitration agreements did not alter the defined class, 14 and that motion practice would be required to compel arbitration. Nevertheless, defendants 15 waited until after our summary judgment practice and resolution (which they lost) to try to 16 narrow the class definition and to compel arbitration. This behavior is inconsistent with 17 defendants’ alleged right to compel arbitration. Morgan, 142 S. Ct. at 1714. Defendants may 18 not wait to see how the judicial winds blow before reversing course towards arbitration. 19 Defendants argue that no inconsistent actions were taken because they made no 20 “affirmative steps” in litigating this action before our summary judgment order issued (Reply 21 10–11). Leaving aside defendants’ appearance at the summary judgment hearing to argue 22 those motions, the standard for waiver is not quite so literal. The Ninth Circuit has rejected 23 precisely this type of waiver analysis based on specific actions: “we have never held that a 24 party can act inconsistent with its arbitration rights only if the relevant actions are themselves 25 express denials of the right to arbitrate.” Hill, 2023 WL 1490808, at *12. Instead, the inquiry 26 is an “implicit waiver analysis, . . . evaluating a party’s actions and asking whether those 27 actions, even if seemingly commonplace and not an express disavowal of arbitral forums, 1 To that end, “extended silence” and “much-delayed demand for arbitration” have been 2 considered inconsistent behavior with respect to a party’s arbitration rights. Ibid. (citing Van 3 Ness Townhouses v. Mar Indus. Corp., 862 F.2d 754, 759 (9th Cir. 1988)); see also Krinsk v. 4 SunTrust Banks, Inc., 654 F.3d 1194, 1203 (11th Cir. 2011) (explaining how “defendant’s lack 5 of diligence in seeking arbitration” is a basis for waiver); Sharif v. Wellness Int’l Network, Ltd., 6 376 F.3d 720, 726 (7th Cir. 2004) (“Although several factors may be considered in 7 determining waiver, diligence or the lack thereof should weigh heavily in the decision — ‘did 8 that party do all it could reasonably have been expected to do to make the earliest feasible 9 determination of whether to proceed judicially or by arbitration?’” (citation omitted)). 10 Furthermore, the fact that defendants waited until after the outcome of summary 11 judgment indicates waiver. If defendants had won their summary judgment motion, the idea of 12 arbitration would have sunk without trace, for “it would have struck an arrow through the heart 13 of all class members’ claims,” a strategic outcome that “is difficult to understate.” Hill, 2023 14 WL 1490808, at *15. So defendants waited to see the outcome and availed themselves of a 15 potential favorable judicial ruling. This was inconsistent with asserting the right to arbitrate. 16 Defendants’ reliance on Conde v. Open Door Mktg., LLC is inapposite (Reply 7–9). 17 Conde involved parties subject to arbitration agreements that had improperly opted-in to a 18 class defined as those who did not sign such agreements, because they had been erroneously 19 sent class notice unbeknownst to the defendant. As such, Conde distinguished itself from cases 20 where “defendants . . .
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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8
10 GEORGE STICKLES and MICHELE RHODES, 11 No. C 20-09220 WHA Plaintiffs, 12
v.
13 ORDER RE MOTION TO ATRIA SENIOR LIVING, INC., and CLARIFY OR MODIFY 14 ATRIA MANAGEMENT CLASS DEFINITION OR COMPANY, LLC, COMPEL ARBITRATIONS 15 AND VACATING HEARING Defendants.
17 INTRODUCTION 18 In this wage-and-hour class action, defendants move to clarify or modify the class 19 definition, or to compel arbitrations in the alternative. For the reasons that follow, defendants’ 20 motion is DENIED. 21 STATEMENT 22 The facts underlying this action are described more fully in our prior order (Dkt. No. 23 107). In short, plaintiffs George Stickles and Michele Rhodes worked as “Community Sales 24 Directors” (CSDs) for defendants, Atria Senior Living, Inc., and Atria Management Company, 25 LLC. This action concerns whether defendants improperly classified CSDs as exempt outside 26 salespersons such that CSDs were not entitled to overtime and meal and rest break rules under 27 California law. 1 Our prior order certified a class of CSDs who did not sign arbitration agreements and 2 whom defendants classified as exempt outside salespersons from April 9, 2018, through 3 September 29, 2019. The class was certified solely to the issue of whether defendants properly 4 classified CSDs as exempt outside salespersons (Dkt. No. 40). The parties each moved for 5 summary judgment on that issue, and the motions were fully briefed as of February 2022 (Dkt. 6 No. 72). Defendants then moved to compel arbitration of plaintiff Rhodes’ California Private 7 Attorneys General Act claim, which motion was fully briefed as of April 2022 (Dkt. No. 88). 8 The parties subsequently entered settlement discussions and moved for approval of a proposed 9 class settlement, which was rejected in June 2022. Outstanding motions were stayed pending 10 settlement. 11 In a status report dated June 21, 2022, defendants raised for the first time they had 12 “discovered that, due to a clerical mistake, . . . a group of employees who had been subject to 13 arbitration agreements had erroneously been included in the Class” (Dkt. No. 100 at 1). The 14 agreements in question were not produced during discovery, and consisted of arbitration 15 agreements sent on one occasion in March 2019 to then-existing employees by email, 16 informing them that they would be subject to the agreement if they remained employed by 17 defendants 30 days afterwards (Dkt. No. 100 at 2). An order resumed the litigation schedule 18 due to the parties’ inability to settle on July 26, 2022. That order explicitly explained that the 19 class members defendants claimed to have been erroneously included “are still members of the 20 class,” and that it “would take substantial motion practice to compel them to arbitrate” (Dkt. 21 No. 102). The outstanding motions for summary judgment were then rescheduled for a 22 hearing, and a summary judgment hearing was held on November 16, 2022. Our resultant 23 order granted summary judgment in favor of plaintiffs on classification, determining that CSDs 24 are not exempt outside salespersons (Dkt. No. 107). 25 Defendants now move to excise those class members they claimed were erroneously 26 included in the class. This order follows full briefing and finds the motion suitable for 27 disposition on the papers under Civil Local Rule 7-1(b). 1 ANALYSIS 2 The Supreme Court’s recent decision Morgan v. Sundance clarified that courts may not 3 condition a waiver of the right to arbitrate upon a showing of prejudice to the non-moving 4 party. 142 S. Ct. 1708, 1712–13 (2022). In light of that decision, the Ninth Circuit then held 5 that “the test for waiver of the right to compel arbitration consists of two elements: (1) 6 knowledge of an existing right to compel arbitration; and (2) intentional acts inconsistent with 7 that existing right.” Hill v. Xerox Bus. Servs., LLC, 2023 WL 1490808, at *9 (9th Cir. Feb. 3, 8 2023). District courts may determine whether a defendant has waived the right to enforce an 9 arbitration agreement by litigation conduct, and such determination is “presumptively for a 10 court and not an arbitrator to decide.” Martin v. Yasuda, 829 F.3d 1118, 1122–23 (9th Cir. 11 2016) (citation omitted). 12 This is not a close case. Defendants have been on notice since July 2022 that their 13 apparent revelation of emailed, unsigned arbitration agreements did not alter the defined class, 14 and that motion practice would be required to compel arbitration. Nevertheless, defendants 15 waited until after our summary judgment practice and resolution (which they lost) to try to 16 narrow the class definition and to compel arbitration. This behavior is inconsistent with 17 defendants’ alleged right to compel arbitration. Morgan, 142 S. Ct. at 1714. Defendants may 18 not wait to see how the judicial winds blow before reversing course towards arbitration. 19 Defendants argue that no inconsistent actions were taken because they made no 20 “affirmative steps” in litigating this action before our summary judgment order issued (Reply 21 10–11). Leaving aside defendants’ appearance at the summary judgment hearing to argue 22 those motions, the standard for waiver is not quite so literal. The Ninth Circuit has rejected 23 precisely this type of waiver analysis based on specific actions: “we have never held that a 24 party can act inconsistent with its arbitration rights only if the relevant actions are themselves 25 express denials of the right to arbitrate.” Hill, 2023 WL 1490808, at *12. Instead, the inquiry 26 is an “implicit waiver analysis, . . . evaluating a party’s actions and asking whether those 27 actions, even if seemingly commonplace and not an express disavowal of arbitral forums, 1 To that end, “extended silence” and “much-delayed demand for arbitration” have been 2 considered inconsistent behavior with respect to a party’s arbitration rights. Ibid. (citing Van 3 Ness Townhouses v. Mar Indus. Corp., 862 F.2d 754, 759 (9th Cir. 1988)); see also Krinsk v. 4 SunTrust Banks, Inc., 654 F.3d 1194, 1203 (11th Cir. 2011) (explaining how “defendant’s lack 5 of diligence in seeking arbitration” is a basis for waiver); Sharif v. Wellness Int’l Network, Ltd., 6 376 F.3d 720, 726 (7th Cir. 2004) (“Although several factors may be considered in 7 determining waiver, diligence or the lack thereof should weigh heavily in the decision — ‘did 8 that party do all it could reasonably have been expected to do to make the earliest feasible 9 determination of whether to proceed judicially or by arbitration?’” (citation omitted)). 10 Furthermore, the fact that defendants waited until after the outcome of summary 11 judgment indicates waiver. If defendants had won their summary judgment motion, the idea of 12 arbitration would have sunk without trace, for “it would have struck an arrow through the heart 13 of all class members’ claims,” a strategic outcome that “is difficult to understate.” Hill, 2023 14 WL 1490808, at *15. So defendants waited to see the outcome and availed themselves of a 15 potential favorable judicial ruling. This was inconsistent with asserting the right to arbitrate. 16 Defendants’ reliance on Conde v. Open Door Mktg., LLC is inapposite (Reply 7–9). 17 Conde involved parties subject to arbitration agreements that had improperly opted-in to a 18 class defined as those who did not sign such agreements, because they had been erroneously 19 sent class notice unbeknownst to the defendant. As such, Conde distinguished itself from cases 20 where “defendants . . . had reason to know that at least some of the putative class members had 21 signed an arbitration agreement.” No. 15-CV-04080, 2017 WL 5172271, at *16 (N.D. Cal. 22 Nov. 8, 2017) (Judge Kandis A. Westmore). That is exactly the situation here, and why Conde 23 is distinguishable. Rather, cases like Hill finding waiver are more similar:
24 In a joint status report to the district court, [defendant] raised the issue of putative class members who had signed the [arbitration 25 agreement] and explained that . . . “[a] certified class cannot include class members who entered into arbitration agreements.” 26 . . . But [defendant] never filed such a motion [regarding class certification issues], nor did it ask the district court to remove the 27 [arbitration] signatories from the certified class. 1 Defendants attempt to argue around the issue by saying even if the right to compel 2 arbitration is waived, defendants can nevertheless seek to modify the class definition (Reply 5— 3 6). Indeed, defendants characterize their motion as primarily focused on clarifying the class 4 definition by shearing over half its members, as “it may not even be appropriate to determine, 5 on a collective basis, whether they should be compelled to arbitration” (Reply 7). Surely the 6 inability to commit to arbitration at this penultimate hour indicates waiver. In any event, 7 defendants’ arguments supporting modification of the class are all premised on class members 8 being bound by arbitration. Because this order finds that the right to compel arbitration has 9 been waived, there is no reason to disturb the current class definition. There is no dispute that 10 the emailed arbitration agreements in question were not signed, so as a factual matter the class 11 definition remains accurate. 12 Given the foregoing, this order need not reach the credibility of defendants’ claimed 5 13 oversight, however confounding it may be that defendants fully briefed prior motions to certify 14 the class and also to compel arbitration without a real understanding as to which of its own 3 15 employees were subject to arbitration. Plaintiffs have also prophylactically briefed and filed a 16 motion to intervene regarding standing, but defendants do not contest the issue and neither 3 17 party raises a question of standing, so the motion to intervene is unnecessary. CONCLUSION 19 For the foregoing reasons, defendants’ motion to clarify or modify the class definition, or 20 to compel arbitrations in the alternative is DENIED. Plaintiffs’ motion to intervene is DENIED 21 AS Moot. The hearing for this motion is VACATED, for this is not a close case. Trial remains 22 set for APRIL 24, 2023, at 7:30 A.M. The final pretrial conference remains set for APRIL 19, 23 2023, at 2:00 P.M. 24 IT IS SO ORDERED. 25 26 Dated: February 16, 2023. 27 ( i ~ j beep 28 WILLIAM ALSUP UNITED STATES DISTRICT JUDGE