EDWARD M. CHEN, District Judge.
On June 9, 2015, this Court denied a motion to compel arbitration filed by Defendants Uber Technologies and Rasier LLC (collectively, Uber). See Mohamed v. Uber Techs., Inc., 109 F.Supp.3d 1185, 2015 WL 3749716 (N.D.Cal.2015).
The Court assumes familiarity with the procedural history of this case, particularly as described it its Order Denying Defendants' Motions to Compel Arbitration. Mohamed, 109 F.Supp.3d 1185, 2015 WL 3749716. For the purposes of this motion, however, it is important to keep in mind that there are essentially two separate versions of the arbitration clauses at issue; the arbitration clause contained in the 2013 Agreement between Uber and its drivers, and the arbitration clause in the 2014 Agreements between Uber and its drivers. Id. at 1191-92, 2015 WL 3749716 at *3. While the Court previously found that Plaintiff Mohamed could theoretically be bound to both the 2013 Agreement and 2014 Agreements, the Court held that "because the 2014 contracts expressly provide that they `replace and supersede all prior agreements' between the parties regarding the same subject matter, the Court determines that only the 2014 contracts could actually apply to Mohamed's claims." Id. (internal modifications and citations omitted). Accordingly, Uber's appeal of this Court's order denying arbitration in Mohamed targets only this Court's rulings with respect to the unenforceability of the arbitration provisions in the 2014 Agreements — the 2013 Agreement is not implicated by Uber's appeal in this case.
As the Court recognized in its earlier Order, "there are significant differences between the 2013 Agreement's arbitration provision and the ones contained in each of the 2014 contracts. . . ." Mohamed, 109 F.Supp.3d at 1193, 2015 WL 3749716, at *4. These differences are particularly relevant to the instant motion to stay because the Court finds that its holdings with respect to the 2014 Agreements raise two "serious" legal questions on appeal that are not material in Gillette: (1) whether the California Supreme Court's ruling in Iskanian v. CLS Transp. L.A., LLC, 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 (2014), that pre-dispute PAGA waivers are unenforceable as a matter of California law, is preempted by the Federal Arbitration Act (FAA); and (2) whether an arbitration provision that contains a conspicuous and meaningful opt-out provision may nevertheless be found at least somewhat procedurally unconscionable under California law, as articulated by the California Supreme Court in Gentry v. Superior Court, 42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556 (2007), leaving the door open to a general finding of unconscionability.
Whether to issue a stay pending appeal is "an exercise of judicial discretion. . . to be guided by sound legal principles." Nken v. Holder, 556 U.S. 418, 433-34, 129 S.Ct. 1749, 173 L.Ed.2d 550 (2009); see also Guifu Li v. A Perfect Franchise, Inc., No. 10-cv-1189-LHK, 2011 WL 2293221, at *2 (N.D.Cal. Jun. 8, 2011). In determining whether a stay should issue, the Court should consider four factors:
In re Carrier IQ Consumer Privacy Litig. (In re Carrier IQ), No. C-12-md-2330 EMC, 2014 WL 2922726, at *1 (N.D.Cal. Jun. 13, 2014) (citations omitted); see also Leiva-Perez v. Holder, 640 F.3d 962 (9th Cir.2011).
In order to satisfy the first factor, although the moving party need not show that "success on appeal is more likely than not," Guifu Li, 2011 WL 2293221, at *3 (citation omitted), it must make a "strong showing" on the merits. Morse v. Servicemaster Global Holdings, Inc., No. C10-628-SI, 2013 WL 123610, at *2 (N.D.Cal. Jan. 8, 2013) (citing Leiva-Perez, 640 F.3d at 964). Alternatively, the moving party can attempt to satisfy the first factor by showing that its appeal raises "serious legal questions," even if the moving party has only a minimal chance of prevailing on these questions. See In re Carrier IQ, 2014 WL 2922726, at *1 (recognizing that under Ninth Circuit law, the above factors "are considered on a continuum; thus, for example, a stay may be appropriate if the party moving for a stay demonstrates that serious legal questions are raised and the balance of hardships tips sharply in its favor") (citing Golden Gate Rest. Ass'n v. City and Cnty. of S.F., 512 F.3d 1112, 1115-16 (9th Cir. 2008)). Where only such a lesser showing is made, the appellant must further demonstrate that the balance of the hardships absent a stay tips "sharply" in its favor. See Morse, 2013 WL 123610, at *1-2 (explaining that a party seeking a stay pending appeal must either: (1) make a strong showing it is likely to succeed on the merits and show it will be irreparably harmed absent a stay, or (2) demonstrate that its appeal presents a serious question on the merits and the balance of hardships tilts sharply in its favor). "The party requesting the stay . . . bears the burden of showing that the case's circumstances justify favorable exercise of [the Court's] discretion."
The first factor this Court must evaluate is whether the moving party has made a sufficient showing that it is likely to succeed on the merits of its appeal. Alternatively, the moving party may make a lesser showing that its appeal presents "serious legal issues" or "substantial questions" that warrant a stay. Id. While the Ninth Circuit has not exhaustively explained or defined what makes a question "serious," see Morse, 2013 WL 123610, at *3, a number of the judges on this district have shed light on the issue. For instance, Judge
Uber's first argument is that it has a "fair probability of persuading the Ninth Circuit that the delegation provision[s] in the [2014] Agreements between Uber and Plaintiff[s] clearly and unmistakably delegate arbitrability issues to the arbitrator alone." Mot. at 3. Uber is mistaken. Uber claims that the Court erred by finding a conflict between the delegation language contained within the arbitration provisions themselves, and certain other conflicting language contained in separate sections of the Agreements. According to Uber, as long as the language of the arbitration provision itself "clearly and unmistakably" delegates arbitrability to an arbitrator, see First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), it is of no moment that another provision in the contract contradicts the delegation language in the arbitration provision.
Uber also argues that it is reasonably likely to succeed in convincing the Ninth Circuit that this Court erred in determining that its arbitration provisions are unconscionable as a matter of California law. Again, the Court finds that Uber has overestimated its likelihood of success.
Uber first argues that this Court erred by holding that the 2014 Agreements present at least some amount of procedural unconscionability under California law despite the fact that this Court concluded that the opt-out provisions in the 2014 Agreements are "visually conspicuous" and the "actual opt-out procedures . . . give[] drivers a reasonable means of opting out." Mohamed, 109 F.Supp.3d at 1211-12, 2015 WL 3749716, at *17 (internal modifications and citation omitted). According to Uber, this finding "should have resulted in a ruling that the Arbitration Agreements are not unconscionable" as a matter of California law. Mot. at 5. Specifically, Uber argues that this Court went astray by declining to follow three Ninth Circuit decisions which each hold that an arbitration provision cannot be procedurally unconscionable under California law if the signatory to the agreement had a "meaningful opportunity to opt out of the arbitration program." See Circuit City Stores, Inc. v. Ahmed, 283 F.3d 1198, 1200 (9th Cir.2002); Circuit City Stores, Inc. v. Najd, 294 F.3d 1104 (9th Cir.2002) (same); Kilgore v. KeyBank Nat'l Ass'n, 718 F.3d 1052 (9th Cir.2013) (en banc) (same). As this Court explained in its Order, however, the California Supreme Court "expressly rejected Ahmed and Najd," when "faced with the exact same issue [as] the Ninth Circuit."
Tellingly, Uber does not argue that this Court was mistaken in concluding that Ahmed, Najd, and Kilgore fail "to apply California law as announced by the California Supreme Court," nor does Uber quibble with this Court's conclusion that "the highest state court is the final authority on state law" and that Gentry is therefore binding on this Court. See Mohamed, 109 F.Supp.3d at 1212, 2015 WL 3749716, at *17. Indeed, Uber does not even mention
That being said, the Court believes that the propriety of its application of Gentry's procedural unconscionability rule at least presents a "serious issue" on appeal. For whatever reason, very few district courts in the Ninth Circuit have seemingly recognized that Gentry abrogated Ahmed and Najd,
Uber further argues that this "Court's ruling that the [2014] agreement is unconscionable conflicts with its own prior orders, in which the Court drafted, approved, and compelled Uber to issue the very agreement at issue." Mot. at 6 (emphases in original).
As for the Court's substantive unconscionability finding, Uber correctly argues that its appeal presents at least one additional serious legal issue — whether the California Supreme Court's ruling in Iskanian, that pre-dispute PAGA waivers are unenforceable as a matter of California law, is preempted by the FAA. See Iskanian, 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 (2014); see also Mot. at 7-8. As this Court recognized in its Order, there is currently no Ninth Circuit authority that resolves this issue, and the question is undoubtedly a "pressing legal issue" on which there has been significant disagreement at the district court level. See Mohamed, 109 F.Supp.3d at 1219-20, 2015 WL 3749716, at *23; see also Hernandez v. DMSI Staffing, LLC, 79 F.Supp.3d 1054, 1065-66, 2015 WL 458083, at *8 (N.D.Cal.2015) (collecting cases). Until the Ninth Circuit issues a ruling one way or another,
In contrast to Gillette, the low level of procedural unconscionability with respect to the 2014 Agreements puts a premium on the degree of substantive unconscionability under the sliding scale test. Thus, the Iskanian preemption question is far more material to the ultimate unconscionability analysis here than in Gillette, where the 2013 Agreement is infected with a substantial degree of procedural unconscionability. Because Uber's appeal in this case presents two substantial legal questions material to the outcome of the appeal, the Court now considers the remaining three factors for obtaining a stay.
Because Uber's appeal only demonstrates "serious questions," Uber must show that the balance of the hardships absent a stay tips sharply in its favor. See In re Carrier IQ, 2014 WL 2922726, at *1. Uber can meet this test, but only in part.
Uber identifies two types of irreparable harm it claims it will suffer if a stay is denied: (1) the loss of time and money associated with the ongoing litigation of this case pending appeal; and (2) the irrecoverable loss of the speed and efficiency of the arbitral forum. Mot. at 8. With respect to Uber's first claimed harm (i.e., ongoing litigation and discovery expense), Uber correctly acknowledges that nearly all courts "have concluded that incurring litigation expenses does not amount to an
Here, the 2014 Agreements both provide that "the Parties will have the right to conduct adequate civil discovery, bring dispositive motions, and present witnesses and evidence as needed to present their cases and defenses" in arbitration. See Docket No. 28-2, Ex. F (2014 Uber Agreement) at § 14.5; Ex. H (2014 Rasier Agreement) at 14. As Judge Koh has recognized under very similar circumstances, where the arbitration agreement "provides the parties `adequate opportunity to conduct discovery'" then "even if Defendants' appeal is successful, it appears that the discovery costs arising during the appeal are inevitable." Guifu Li, 2011 WL 2293221, at *4. Indeed, Judge Koh went so far as to find no irreparable harm where the Defendants in the case before her admittedly had "limited financial resources" to pay for litigation expenses and discovery. Id. By contrast here, Uber does not claim to have "limited financial resources," and Uber cannot seemingly deny that it will incur significant discovery costs "regardless of the outcome of this motion," because it will be required to respond to discovery requests in either arbitration or federal court litigation. Id.; see also Morse, 2013 WL 123610, at *4 (finding that defendants' litigation expenses pending appeal did not constitute irreparable harm because the "parties would have experienced lesser but still substantial burdens in the arbitration process defendants prefer"); R & L Ltd. Invs. Inc. v. Cabot Inv. Props., LLC, No. 09-1525, 2010 WL 3789401, at *2 (D.Ariz. Sept. 21, 2010) (finding no irreparable injury and denying motion to stay where "[c]ontrary to Defendants[`] assertion, if their appeal was successful, the parties would still be able to use the discovery in arbitration"); cf. Ward, 2014 WL 7273911, at *4 (finding irreparable harm where "[t]he contrast, in time and expense, between the arbitration process as described by Defendants and the process of litigation in federal court is substantial" because "[u]nlike in the cases cited by Plaintiff, the arbitration procedure proposed by Defendants . . . is a streamlined process . . . [with] no formal discovery, law and motion practice, or other pre-trial hearings").
Uber argues that irreparable harm should be found under Zaborowski v. MHN Gov't Servs., Inc., which held that "arbitration is unique" with respect to the irreparability of litigation costs because "[i]f a party must undergo the expense of trial before being able to appeal denial of a motion to compel arbitration, the anticipated advantages of arbitration—speed and economy—are lost." No. C-12-5109-SI, 2013 WL 1832638, at *2 (N.D.Cal. May 1, 2013) (emphasis added). This case is currently far from trial, however, and as noted above, the main cost Uber will likely face while this appeal is pending (i.e., discovery costs) would presumably be borne by Uber in any forum. See id. (refusing to stay portions of the case that would proceed regardless of ultimate forum).
In light of the above, the Court finds that allowing anything more than reasonable discovery
Plaintiffs argue that even if Uber will suffer some irreparable harm if this case continues pending appeal, Plaintiffs themselves will suffer significant harms which outweigh Uber's interest in a stay. See Docket No. 84 (Opposition) at 15. The Court disagrees.
First, Plaintiffs argue that any delay in the district court unfairly risks the loss of relevant evidence while the case remains stayed. Opp. at 15; see also Bradberry, 2007 WL 2221076, at *4 (finding that "the risk of lost evidence . . . and the delay in litigation constitute a substantial injury to Plaintiff" and therefore "weighs against granting a stay"). Any such risk is minimized here, however, because Plaintiffs will be permitted to continue with reasonable discovery. Moreover, the parties are all aware of their obligations to preserve evidence, including electronically stored information (ESI), pursuant to the Federal Rules of Civil Procedure and this Court's
The Court is similarly not persuaded by Plaintiffs' alternative argument that they will suffer irreparable harm if the Court grants a stay because such a stay will prevent non-parties from joining this lawsuit and vindicating their statutory rights against Uber. Opp. at 15. Specifically, Plaintiffs have expressed an intention to file an amended complaint "that adds new plaintiffs . . . none of [whom] are subject to [either] the 2013 or 2014 Agreements on which the motion to compel was based." Id. To the extent that these individuals are not currently plaintiffs in this lawsuit, any irreparable harm they might suffer from the entry of a stay is largely speculative. More importantly, however, Plaintiffs have not explained why these new plaintiffs cannot file their own separate action, or even possibly join the related Gillette action, which lawsuit presents similar claims to those being litigated in this case, and which case is not being stayed pending appeal. See Hrg. Tr. at 22:3-20. The Court simply does not find that a limited stay in this case, while allowing reasonable discovery to continue, will unduly burden or harm Plaintiffs.
Finally, the Court considers the public interest. Here, Plaintiffs argue that the public interest weighs against a stay because any delay will slow Plaintiffs' attempts to vindicate their important statutory rights. Opp. at 15-16. On the other hand, Uber argues the public interest favors a stay because a stay will vindicate the federal policy favoring arbitration. Mot. at 9-10. The Court concludes that both are valid interests, and that they largely are in equipoise for purposes of this motion. The public interest factor is neutral.
Uber's motion for a stay of this action pending appeal is
This order disposes of Docket No. 76.
IT IS SO ORDERED.