Accentcare, Inc. et al v. Echevarria et al

Northern District of California, cand-4:2015-cv-01078

ORDER by Judge Jeffrey S. White DENYING {{27}} Motion to Compel Individual Arbitration. Signed by Judge Jeffrey S. White on 6/1/15. Modified on 6/2/2015

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 ACCENTCARE INC., et al., 10 Petitioners, No. C 15-01078 JSW 11 v. United States District Court For the Northern District of California 12 DEANNE ECHEVARRIA, et al., ORDER REGARDING MOTION TO COMPEL INDIVIDUAL 13 Respondents. ARBITRATION / 14 15 Now before the Court is the motion to compel individual arbitration filed by Petitioners 16 AccentCare, Inc. and AccentCare of California, Inc. (collectively, "Petitioners"). The Court 17 finds this matter suitable for disposition without oral argument and VACATES the hearing set 18 for June 5, 2015. See N.D. Cal. Civ. L.R. 7-1(b). Having carefully reviewed the parties' papers 19 and considering their arguments and the relevant authority, the Court denies Petitioners' motion 20 for the reasons set forth below. 21 BACKGROUND 22 On March 5, 2015, Respondents Deanne Eschevarria and Robin Gail Hayes (collectively 23 "Respondents") filed a demand for class arbitration. (Ex. E to Mot. to Compel.) Respondents 24 do not currently have a pending claim under California's Private Attorney General Act 25 ("PAGA"), California Labor Code §§ 2698, et seq. Although they did represent that they 26 intended to file a PAGA claim in state court, Respondents have not yet decided whether or not 27 they will file one in state court. (See Mot. to Dismiss at 8, n.6.) Petitioners contend that only 28 individual arbitration proceedings, as opposed to class-wide, are authorized by the relevant 1 arbitration agreement. To enforce their understanding of the arbitration agreement, Petitioners 2 filed their petition to compel individual arbitration. 3 The arbitration agreements that Respondents signed provide: "[t]o the fullest extent 4 allowed by law, any controversy, claim or dispute between Employee and the Company. . . 5 relating to or arising out of Employee's employment or the cessation of that employment. . . 6 will be submitted to final and binding arbitration. . . in accordance with the American 7 Arbitration Association ("AAA") National Rules for the Resolution of Employment Disputes as 8 the exclusive remedy for such controversy, claim or dispute." (Exs. A & B to the Petition, ¶ 2.) 9 The arbitration agreements further provide that agreement "is to be construed as broadly as is 10 permissible under applicable law." (Id.) 11 The Court shall address additional facts as necessary to its analysis in the remainder of United States District Court For the Northern District of California 12 this Order. 13 ANALYSIS 14 A. Legal Standards Applicable to Motions to Compel Arbitration. 15 Pursuant to the Federal Arbitration Act ("FAA"), arbitration agreements "shall be valid, 16 irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the 17 revocation of any contract." 9 U.S.C. § 2. Once the Court has determined that an arbitration 18 agreement involves a transaction involving interstate commerce, thereby falling under the FAA, 19 the Court's only role is to determine whether a valid arbitration agreement exists and whether 20 the scope of the parties' dispute falls within that agreement. 9 U.S.C. § 4; Chiron Corp. v. 21 Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000); United Computer Systems v. 22 AT&T Corp., 298 F.3d 756, 766 (9th Cir. 2002) ("Under § 4 of the FAA, a district court must 23 issue an order compelling arbitration if the following two-pronged test is satisfied: (1) a valid 24 agreement to arbitrate exists; and (2) that agreement encompasses the dispute at issue."). 25 The FAA represents the "liberal federal policy favoring arbitration agreements" and 26 "any doubts concerning the scope of arbitrable issues should be resolved in favor of 27 arbitration." Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 28 (1983). Under the FAA, "once [the Court] is satisfied that an agreement for arbitration has been 2 1 made and has not been honored," and the dispute falls within the scope of that agreement, the 2 Court must order arbitration. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 3 400 (1967). The "central purpose of the [FAA is] to ensure that private agreements to arbitrate 4 are enforced according to their terms." Mastrobuono v. Shearson Lehman Hutton, Inc., 514 5 U.S. 52, 53-54 (1995). The "preeminent concern of Congress in passing the [FAA] was to 6 enforce private agreements into which parties had entered, a concern which requires that 7 [courts] rigorously enforce agreements to arbitrate." Mitsubishi Motors Corp. v. Soler 8 Chrysler-Plymouth, Inc. 473 U.S. 614, 925-26 (1985) (internal quotations omitted). 9 Although the Court can initially determine whether a valid agreement exists, disputes 10 over the meaning of specific terms are matters for the arbitrator to decide. Howsam v. Dean 11 Witter Reynolds, Inc., 537 U.S. 79, 84 (2002); Prima Paint, 388 U.S. at 403-04 (holding that "a United States District Court For the Northern District of California 12 federal court may consider only issues relating to the making and performance of the agreement 13 to arbitrate"). 14 B. Petitioners' Motion to Compel. 15 The parties in this case do not dispute that there are valid arbitration agreements or that 16 the Respondents' individual claims fall within the scope of these arbitration agreements. 17 Rather, the parties dispute whether the arbitration may proceed on a class-wide basis and 18 whether the Court or the arbitrator shall make this determination. "Neither the Supreme Court 19 nor the Ninth Circuit has explained definitively when the availability of class-wide arbitration 20 might be a question for a court and when it might be a question for an arbitrator." Vazquez v. 21 ServiceMaster Global Holding Inc., 2011 WL 2565574, *3 (N.D. Cal. June 29, 2011). A 22 plurality in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-53 (2003) opined that this 23 question is a matter of contract interpretation and arbitration procedure and, thus, is one for the 24 arbitrator. See also id. at 455 (Stevens, J., concurring in judgment but agreeing only that the 25 question is "[a]rguably" for the arbitrator). The Supreme Court clarified in Stolt–Nielsen S.A. v. 26 AnimalFeeds Int'l Corp., 599 U.S. 662, 679 (2010) that "Bazzle did not yield a majority 27 decision" and that the question of whether the Court or the arbitrator should make this 28 determination remains open. 3 1 In contrast to matters of contract interpretation and arbitration procedure, questions of 2 arbitrability are presumably determined by the court. "Just as the arbitrability of the merits of a 3 dispute depends upon whether the parties agreed to arbitrate that dispute, so the question 'who 4 has the primary power to decide arbitrability' turns upon what the parties agreed about that 5 matter." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995) (emphasis in 6 original) (internal citations omitted). Absent "clear and unmistakable evidence" that the parties 7 intended to arbitrate arbitrability, the Court should not presume that intention. Id. at 944 8 (internal quotation marks and brackets omitted). Moreover, if an arbitration agreement is silent 9 or ambiguous about who should decide arbitrability, the question should be put to the court 10 because to do otherwise "might too often force unwilling parties to arbitrate a matter they 11 reasonably would have thought a judge, not an arbitrator, would decide." Id. at 945. United States District Court For the Northern District of California 12 However, the Court need not determine whether the availability of class-wide arbitration 13 is a matter of contract interpretation and arbitration procedure or is a question of arbitrability. 14 Even if it is a question of arbitrability, the Court finds that there is clear and unmistakable 15 evidence that the parties intended arbitrability to be determined by the arbitrator. See First 16 Options of Chicago, 514 U.S. at 944-45. 17 Respondents argue that the incorporation of the AAA rules into the arbitration 18 agreements provides clear and unmistakable evidence of the parties' intent to submit the 19 question of arbitrability to the arbitrator. Although the issue is not entirely settled in the Ninth 20 Circuit, "[v]irtually every circuit to have considered the issue has determined that incorporation 21 of the American Arbitration Association's (AAA) arbitration rules constitutes clear and 22 unmistakable evidence that the parties agreed to arbitrate arbitrability." Oracle Amer., Inc. v. 23 Myriad Group A.G., 724 F.3d 1069, 1074 (9th Cir. 2013) (citing cases). As another court in 24 this District recently noted "the overwhelming consensus of other circuits, as well as the vast 25 majority of decisions in this district, support [the] claim that, in the context of this case, 26 incorporation of the AAA Rules effectively delegates jurisdictional questions, including 27 arbitrability and validity, to the arbitrator." Zenelaj v. Handybook, Inc., --- F. Supp. 3d ---, 28 2015 WL 971320, *3 (N.D. Cal. March 3, 2015). 4 1 In Oracle, the Ninth Circuit found that there was "no reason to deviate from the 2 prevailing view that incorporation of. . . arbitration rules is clear and unmistakable evidence 3 that the parties agreed the arbitrator would decide arbitrability." Oracle, 724 F.3d at 1074-75. 4 The court, thus, held that "as long as an arbitration agreement is between sophisticated parties 5 to commercial contracts, those parties shall be expected to understand that incorporation of the. 6. . rules delegates questions of arbitrability to the arbitrator." Id. at 1075. The court 7 "express[ed] no view as to the effect of incorporating arbitration rules into consumer contracts." 8 Id. at 1075 n.2. As noted by the court in Zenelaj, nearly every decision in the Northern District 9 of California subsequent to Oracle has not limited its holding to "sophisticated parties." 2015 10 WL 971320 at *3 (citing In re Cathode Ray Tube (CRT) Antitrust Litig., 2014 WL 7206620, *4 11 (N.D. Cal. Dec. 18, 2014) (finding delegation of arbitrability in the context of antitrust United States District Court For the Northern District of California 12 litigation); Bernal v. Sw. & Pac. Specialty Fin., Inc., 2014 WL 1868787, *4 (N.D. Cal. May 7, 13 2014) (same, in online loan agreement); Crook v. Wyndham Vacation Ownership, Inc., *4, *6 14 (N.D. Cal. Nov. 8, 2013) (same, in time share agreement); but see Tompkins v. 23andMe, Inc., 15 2014 WL 2903752, *12-13 (N.D. Cal. June 25, 2014) (finding incorporation was insufficient to 16 establish delegation for consumers where the arbitration agreement created "multiple 17 ambiguities" about which rules ultimately applied and where consumer were purported to be 18 bound by the arbitration agreement even if they never read the terms of service or clicked to 19 accept them); Moody v. Metal Supermarket Franchising Amer. Inc., 2014 WL 988811, *3 (N.D. 20 Cal Mar. 10, 2015). District courts outside of the Northern District but within the Ninth Circuit 21 have also held subsequent to Oracle that the incorporation of AAA rules constitutes clear and 22 unmistakable evidence of intent, regardless of the sophistication of the parties. See Marriott 23 Ownership Resorts, Inc. v. Flynn, 2014 WL 7076827, *8 (D. Haw. Dec. 11 2014); Mendoza v. 24 Microsoft Inc., 2014 WL 4540225, *4 (W.D. Wash. Sept. 11, 2014); Walsh v. Microsoft Corp., 25 2014 WL 4168479, *4 (W.D. Wash. Aug. 20, 2014). 26 To the extent the effectiveness of delegating arbitrability through incorporation of AAA 27 rules is limited to "sophisiticated parties," such a limitation would not assist Petitioners. The 28 Court notes that Petitioners are the companies that employed Respondents and drafted the 5 1 arbitration agreements at issue. Petitioners are not uninformed, unsophisticated consumers. 2 Therefore, the Court finds no reason to diverge from the prevailing view that the question of 3 arbitrability may be, and was, delegated to the arbitrator by the incorporation of the AAA rules. 4 Accordingly, the Court finds that the arbitrator, not the Court, shall determine whether the 5 arbitration agreements allow for class-wide arbitration and, thus, denies the motion to compel 6 individual arbitration.1 7 CONCLUSION 8 For the foregoing reasons, the Court DENIES Petitioners' motion to compel individual 9 arbitration. 10 IT IS SO ORDERED. 11 United States District Court For the Northern District of California 12 Dated: June 1, 2015 JEFFREY S. WHITE 13 UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 1 Petitioners also move to compel individual arbitration of Respondents' claims under 28 PAGA. However, Respondents do not have any pending PAGA claims. Therefore, any ruling on this issue would be an improper advisory opinion. 6