WILLIAM H. ORRICK, District Judge.
This is a putative class action arising from the sale of vacation timeshares by defendants Wyndham Vacation Resorts, Inc. and Wyndham Worldwide Corporation (collectively, "Wyndham") to plaintiffs Thomas and Donna Crook.
Plaintiffs are senior citizens who purchased vacation timeshares from Wyndham. Between 2001 and 2011, they entered eleven timeshare agreements with Wyndham. They entered the most recent of these agreements on February 23, 2011 ("February 2011 Agreement"). The February 2011 Agreement contains a dispute resolution clause that applies to "any dispute between the parties arising out of this Agreement." Feb. 2011 Agmt. ¶ 18 (Dkt. No. 15-1). "Agreement" is defined as "[t]his Purchase and Sale Agreement and Escrow Instructions for Vacation Ownership." Id. ¶ 1. The dispute resolution clause provides that the dispute resolution process "shall be conducted in accordance with procedures that are equivalent in substance to the Commercial Arbitration Rules of the American Arbitration Association." Id. ¶ 18(d).
On November 16, 2012, plaintiffs filed a putative class action complaint in the Superior Court of California for the County of San Francisco, alleging the following causes of action against Wyndham and two of its employees: (i) elder financial abuse in violation of Cal. Welf. & Inst. Code § 15610.30; (ii) common law fraud; (iii) age discrimination in violation of California's Unruh Civil Rights Act, Cal. Civ. Code § 51 et seq.; (iv) violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200 et seq.; (v) violation of California's Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code § 17500 et seq.; and (vi) common law fraudulent misrepresentation. Compl. ¶¶ 41-81 (Dkt. No. 1).
Wyndham removed the case to federal court on August 7, 2013 under the Class Action Fairness Act ("CAFA"). Notice of Removal ¶¶ 9-20 (Dkt. No. 1). Shortly thereafter, Wyndham moved to compel arbitration and to stay all other proceedings pending arbitration. Dkt. No. 15 ("Mot. to Compel"). I granted the motion on November 4, 2013 and issued an amended order on November 8, 2013. Dkt. Nos. 26-27 ("Order Compelling Arbitration"). On July 10, 2014, the Ninth Circuit dismissed plaintiffs' appeal for lack of jurisdiction. Dkt. No. 36.
Plaintiffs filed their arbitration demand with the American Arbitration Association ("AAA") on February 27, 2015. Morency Apr. 29, 2015 Decl. Exs. 1A-1B (Dkt. No. 47-1). On March 11, 2015, plaintiffs sent a letter to the AAA requesting that the arbitration include class relief. Id. at Ex. 2. Wyndham responded that it did not consent to class treatment and that it would "present this gateway issue to the Court" if the parties could not resolve the matter in mediation. Id. at Ex. 3.
Wyndham filed this motion on April 29, 2015. It seeks an order (1) compelling arbitration of plaintiffs' claims; (2) declaring that class arbitration is not available; and (3) staying the case pending arbitration. Mot. at 1. Following oral argument on June 3, 2015, I issued an order requesting supplemental briefing on "whether the parties clearly and unmistakably agreed that an arbitrator would decide whether class arbitration is available" under the February 2011 Agreement. Dkt. No. 51. The parties submitted their supplemental briefs on June 26, 2015. Dkt. Nos. 52-53.
The parties agree that the FAA governs this motion. Under 9 U.S.C. § 2, the "primary substantive provision" of the FAA, Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983), a written agreement to arbitrate "in any maritime transaction or a contract evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract," 9 U.S.C. § 2. This provision reflects "both a liberal federal policy favoring arbitration, and the fundamental principle that arbitration is a matter of contract." AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1745 (2011) (internal quotation marks and citations omitted). "Because arbitration is fundamentally a matter of contract, the central or primary purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms." Momot v. Mastro, 652 F.3d 982, 986 (9th Cir. 2011) (internal quotation marks omitted).
On a motion to compel arbitration, the court's role under the FAA is "limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). If the court is "satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4.
A threshold issue here is whether I may grant the relief that Wyndham seeks — that is, whether I may determine whether class arbitration is available under the February 2011 Agreement, or whether that is a question that must be decided by the arbitrator. "The [FAA] establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses, 460 U.S. at 24-25. Nevertheless, "so-called `question[s] of arbitrability' [—] which include certain gateway matters, such as whether parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a [particular] controversy — are presumptively for courts to decide." Oxford Health Plans LLC v. Sutter, 133 S.Ct. 2064, 2068 n.2 (2013) (some internal quotation marks omitted); see also Momot, 652 F.3d at 987 (issues that "contracting parties would likely have expected a court to have decided" are "gateway questions of arbitrability" to be determined by the court, not the arbitrator). This rule flows from the "principle that a party can be forced to arbitrate only those issues it specifically has agreed to submit to arbitration." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995).
"Although gateway issues of arbitrability presumptively are reserved for the court, the parties may agree to delegate them to the arbitrator." Momot, 652 F.3d at 987. Generally, "[w]hen deciding whether the parties agreed to arbitrate a certain matter . . ., courts . . . should apply ordinary state law principles that govern the formation of contracts." First Options, 514 U.S. at 944. Because gateway issues presumptively are for courts to decide, however, courts "apply a more rigorous standard in determining whether the parties have agreed to arbitrate [such] question[s]." Momot, 652 F.3d at 987. "Courts should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so." First Options, 514 U.S. at 944 (internal quotations marks and alterations omitted); accord Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 69 n.1 (2010).
The disputed issue in this case is the availability of class arbitration. The Supreme Court "has not yet decided whether the availability of class arbitration is a question of arbitrability." Oxford, 133 S. Ct. at 2068 n.2; see also Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 678-80 (2010) (noting that "no single rationale commanded a majority" in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), and that "only a plurality" found that the availability of class arbitration should be determined by the arbitrator). The Ninth Circuit has not issued a published opinion deciding the issue either.
A number of district courts have held the same. See, e.g., Chesapeake Appalachia, LLC v. Suppa, No. 14-cv-00159, 2015 WL 966326, at *8 (N.D.W. Va. Mar. 4, 2015); Chesapeake Appalachia, L.L.C. v. Scout Petroleum, LLC, No. 14-cv-00620, 2014 WL 7335045, at *14 (M.D. Pa. Dec. 19, 2014); Chico v. Hilton Worldwide, Inc., No. 14-cv-05750, 2014 WL 5088240, at *11 (C.D. Cal. Oct. 7, 2014) (relying on Opalinski and Reed Elsevier and holding that "because the parties did not clearly and unmistakably provide otherwise, the Court, rather than the arbitrator, must decide whether the Arbitration Agreements authorize class arbitration"); Torres v. CleanNet, U.S.A., Inc., No. 14-cv-02818, 2015 WL 500163, at *10 (E.D. Pa. Feb. 5, 2015); Chassen v. Fid. Nat. Fin., Inc., No. 09-cv-00291, 2014 WL 202763, at *6 (D.N.J. Jan. 17, 2014).
Resolving the instant motion does not require me to decide whether the availability of class arbitration is a gateway issue, because here, the parties clearly and unmistakably agreed to submit that question to the arbitrator. See AccentCare Inc. v. Echevarria, No. 15-cv-01078-JSW, 2015 WL 3465761, at *3 (N.D. Cal. June 1, 2015) (declining to address whether the availability of class arbitration is a question of arbitrability where there was "clear and unmistakable evidence that the parties intended arbitrability to be determined by the arbitrator"); Marriott Ownership Resorts, Inc. v. Flynn, No. 14-cv-00372, 2014 WL 7076827, at *12 (D. Haw. Dec. 11, 2014) (same).
Wyndham does not dispute that by agreeing that their dispute resolution process would be "conducted in accordance with procedures that are equivalent in substance to the Commercial Arbitration Rules of the American Arbitration Association," Feb. 2011 Agmt. ¶ 18(d), the parties incorporated the AAA Commercial Arbitration Rules ("Commercial Rules"), as well as the AAA Supplementary Procedures for the Resolution of the Consumer-Related Disputes ("Consumer Procedures"), into the February 2011 Agreement. See Mot. at 10-12; Reply at 3-4 (Dkt. No. 49); see also Defendants' Reply in Support of Motion to Compel Arbitration at 4 (Dkt. No. 17) ("Reply ISO Mot. to Compel"). Several courts have held that where the parties incorporate the Commercial Rules into their arbitration agreement, they clearly and unmistakably agree to submit the availability of class arbitration to the arbitrator. See Reed v. Florida Metro. Univ., Inc., 681 F.3d 630, 635-36 (5th Cir. 2012) abrogated on other grounds by Oxford, 133 S.Ct. 2064; Marriott, 2014 WL 7076827, at *12-15; Bergman v. Spruce Peak Realty, LLC, No. 11-cv-00127, 2011 WL 5523329, at *4 (D. Vt. Nov. 14, 2011).
These courts have reasoned that an agreement to the Commercial Rules "also includes an agreement to the AAA Supplementary Rules for Class Arbitrations." Marriott, 2014 WL 7076827, at *12; see also Reed, 681 F.3d at 635 ("[T]he parties' agreement to the [Commercial Rules] also constitutes consent to the Supplementary Rules."); Bergman, 2011 WL 5523329, at *3. Rule 3 of the AAA Supplementary Rules for Class Arbitrations ("Supplementary Rules") provides for "construction of the arbitration clause" as follows:
AAA Supp. R. 3 (effective Oct. 8, 2003) (Morency Apr. 29, 2015 Decl. Ex. 4, Dkt. No. 47-1). Reed, Marriot, and Bergman, as well as numerous other courts, have held that in light of this language — which authorizes the arbitrator to determine "whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class" — a party that agrees to the Supplementary Rules clearly and unmistakably agrees to delegate the availability of class arbitration to the arbitrator. See Reed, 681 F.3d at 635-36 ("The parties' consent to the Supplementary Rules . . . constitutes a clear agreement to allow the arbitrator to decide whether [their] agreement provides for class arbitration."); Marriott, 2014 WL 7076827, at *12-15 ("[I]ncorporation of the Supplementary Rules constitutes clear and unmistakable evidence of an intent to have an arbitrator address the question of class arbitrability."); Bergman, 2011 WL 5523329, at *3-5 (relying on Supplementary Rule 3 in holding that "whether there is a contractual basis for concluding that the defendants agreed to submit to class arbitration is an issue that must be referred to the arbitrator"); see also Chesapeake Appalachia, LLC v. Burkett, No. 13-cv-03073, 2014 WL 5312829, at *4-8 (M.D. Pa. Oct. 17, 2014) (relying in part on Supplementary Rule 3 in holding that "incorporation of the AAA rules into the lease at issue . . . vested the arbitrators with the authority in this case to decide issues of arbitrability, including the issue of `who decides' class arbitrability."); Price v. NCR Corp., 908 F.Supp.2d 935, 945 (N.D. Ill. 2012) (by incorporating the Supplementary Rules into their agreement, "the parties agreed that an arbitrator, and not this Court, would determine whether the agreement authorizes class arbitration"); S. Commc'ns Servs., Inc. v. Thomas, 829 F.Supp.2d 1324, 1337-38 (N.D. Ga. 2011) (incorporation of the Supplementary Rules "gave the arbitrator the power to decide whether the Arbitration Clause implicitly authorized class proceedings"); Yahoo! Inc. v. Iversen, 836 F.Supp.2d 1007, 1012 (N.D. Cal. 2011) (Koh, J.) ("[T]he incorporation by reference of the AAA Supplementary Rules . . . constitutes a clear and unmistakable agreement to have the arbitrator decide questions regarding the arbitrability of classwide claims.") (internal quotation marks and alterations omitted).
In its supplemental brief, Wyndham takes issue with the notion that an agreement to the Commercial Rules constitutes an agreement to the Supplementary Rules. See Dkt. No. 52 at 2-6. Wyndham emphasizes that many of the decisions that have relied on the Supplementary Rules in holding that the parties clearly and unmistakably agreed to delegate the availability of class arbitration to the arbitrator involved arbitration provisions that incorporated either the "AAA rules" without specifying which AAA rules, or the AAA Employment Arbitration Rules ("Employment Rules").
However, the reference in the Employment Rules to the Supplementary Rules consists only of a one-sentence section titled, "For Disputes Proceeding Under the Supplementary Rules for Class Action Arbitration (`Supplementary Rules')," which states in whole, "The AAA's Administered Fee Schedule, as listed in Section 11 of the [Supplementary Rules], shall apply to disputes proceedings under the Supplementary Rules." AAA Emp. R. at p. 40. I am not convinced that this passing reference — which says nothing about "incorporation" or the like of the Supplementary Rules — is enough to support the conclusion that agreement to the Employment Rules is equivalent to agreement to the Supplementary Rules, while agreement to the Commercial Rules is not.
Further, under Rule 1(a) of the Commercial Rules, contracting parties are "deemed to have made [the Commercial Rules] a part of their arbitration agreement whenever they have provided . . . for arbitration by the AAA of a domestic commercial dispute without specifying particular rules." AAA Comm. R. 1(a) (effective June 1, 2009) (Morency June 26, 2015 Decl. Ex. 1, Dkt. No. 52-1); see also AAA Comm. R. 1(a) (effective Oct. 1, 2013) (Morency June 26, 2015 Decl. Ex. 2, Dkt. No. 52-1) (same). In other words, an agreement to arbitrate a domestic commercial dispute pursuant to the "AAA rules" without specifying which AAA rules is an agreement to the Commercial Rules. This greatly diminishes any distinction between this case and those holding that an agreement to arbitrate under unspecified "AAA rules" constitutes an agreement to arbitrate under the Supplementary Rules and, hence, an agreement to delegate the question of the availability of class arbitration. See Burkett, 2014 WL 5312829, at *4-8 (agreement to arbitrate "in accordance with the rules of the [AAA]"); Price, 908 F. Supp. 2d at 945 (agreement to arbitrate "under the [AAA] rules").
Wyndham's position is further undermined by Rule 1(a) of the Supplementary Rules, which strongly indicates that those rules do apply here. Rule 1(a) describes the "applicability" of the Supplementary Rules as follows:
AAA Supp. R. 1(a). In its briefing on its motion to compel arbitration, Wyndham relied on a similar applicability provision from the Consumer Procedures in arguing that those procedures were incorporated into the parties' arbitration agreement by merit of their agreement to the Commercial Rules. See Reply ISO Mot. to Compel at 4, 4 n.2.
Wyndham also cites to several cases which, according to Wyndham, demonstrate that "[c]ourts have repeatedly rejected the contention that . . . a reference to the . . . Commercial Rules [like the one in dispute resolution clause of the February 2011 Agreement] is sufficient . . . to establish a `clear and unmistakable' delegation to an arbitrator of the gateway question of class arbitration." Dkt. No. 52 at 5. However, not one of the cases cited by Wyndham in support of this claim actually addresses this issue.
In Reed Elsevier, the Sixth Circuit held that the parties did not clearly and unmistakably agree to arbitrate the availability of class arbitration — despite the fact that the arbitration provision incorporated the Commercial Rules — on the ground that the provision did "not mention classwide arbitration at all." 734 F.3d at 599. But in making that determination, the court does not appear to have considered whether the parties' incorporation of the Commercial and Supplementary Rules constituted a clear and unmistakable agreement to delegate the availability of class arbitration to the arbitrator. See id. at 599-600. The court merely observed that the arbitration clause "does not mention classwide arbitration at all," and that this "silen[ce]" on the issue of classwide arbitration "is not enough to wrest that decision from the courts." Id. (citing Stolt-Nielsen, 559 U.S. at 684-85).
In Tompkins v. 23andMe, Inc., No. 13-cv-05682-LHK, 2014 WL 2903752 (N.D. Cal. June 25, 2014), the arbitration provision did not expressly incorporate the Commercial Rules, instead providing that any disputes "shall be resolved by final and binding arbitration under the rules and auspices of the [AAA]." Id. at *2. Judge Koh rejected the defendant's contention that the parties had agreed to delegate unconscionability and other gateway issues to the arbitrator.
Here, in contrast, the parties agreed not to the AAA rules in general, but to the Commercial Rules in specific. Moreover, I have already determined, at Wyndham's urging, that Rule 7(a) does apply here and does require that "the scope of the arbitration clause . . . be decided by the arbitrator." Order Compelling Arbitration at 8-9 (rejecting plaintiffs' contention that their claims were beyond the scope of the dispute resolution clause and holding that, under Rule 7(a), "interpretation of the scope of the [clause] must be submitted to arbitration").
As noted in footnote 2 above, the Ninth Circuit in Eshagh held that the district court did not err in striking class claims in the process of compelling arbitration, reasoning that "[i]ssues that contracting parties would likely have expected a court to have decided are considered gateway questions of arbitrability for courts, and not arbitrators, to decide." 588 F. Appx. at 704 (internal quotation marks omitted). Wyndham is correct that the arbitration provision in that case provided for arbitration "in accordance with the Commercial Arbitration Rules then in force of the [AAA]." Eshagh v. Terminix Int'l Co. L.P., No. 11-cv-00222, 2012 WL 1669416, at *3 (E.D. Cal. May 11, 2012). But Wyndham fails to note that neither the underlying district court order not the Ninth Circuit opinion addresses whether the parties clearly and unmistakably agreed to arbitrate the availability of class arbitration.
Finally, in Moody v. Metal Supermarket Franchising Am. Inc., No. 13-cv-05098-PJH, 2014 WL 988811 (N.D. Cal. Mar. 10, 2014), the court considered an arbitration clause providing for arbitration "in accordance with the then current commercial arbitration rules of the AAA." Id. at *3. The court found that this "general reference" to the Commercial Rules did not provide clear and unmistakable evidence of an agreement to delegate arbitrability. Id. But the case was not a putative class action, and the court's opinion does not address the availability of class arbitration or the applicability of the Supplementary Rules. Moreover, the case is at odds with the Ninth Circuit's recognition in Oracle that "[v]irtually every circuit to have considered the issue has determined that incorporation of the [AAA rules] constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability." 724 F.3d at 1074. Nearly every decision in this district since Oracle — including the Order Compelling Arbitration in this case — has found that the incorporation of the Commercial Rules or other AAA rules is sufficient to establish the delegation of gateway issues. See, e.g., Order Compelling Arbitration at 8-9; Zenelaj v. Handybook Inc., No. 14-cv-05449-TEH, 2015 WL 971320, at *3-5 (N.D. Cal. Mar. 3, 2015) (declining to follow Moody and finding clear and unmistakable agreement to arbitrate arbitrability based on incorporation of Commercial Rules); In re: Cathode Ray Tube (CRT) Antitrust Litig., No. 14-cv-02510, 2014 WL 7206620, at *4 (N.D. Cal. Dec. 18, 2014) (finding clear and unmistakable agreement to arbitrate arbitrability based on incorporation of "the rules of procedure of the AAA"); Bernal v. Sw. & Pac. Specialty Fin., Inc., No. 12-cv-05797-SBA, 2014 WL 1868787, at *4 (N.D. Cal. May 7, 2014) (same, based on incorporation of Commercial Rules and Consumer Procedures); but see Tompkins, 2014 WL 2903752 at *10-13.
For the foregoing reasons, Wyndham's motion is DENIED. It is up to the arbitrator to decide whether class arbitration is available under the February 2011 Agreement. This case remains STAYED pending arbitration. The parties shall submit a joint case management statement 180 days from the date of this order, and every 180 days thereafter, apprising the Court of the status of their arbitration.
