LAUREL BEELER, Magistrate Judge.
These two actions — Hughes v. S.A.W. Entertainment, Ltd. and Pera v. S.A.W. Entertainment, Ltd. — are putative class- and collective-action wage-and-hour labor disputes brought by exotic dancers suing the companies that managed and operated the nightclubs where they worked. In Hughes, named plaintiffs Nicole Hughes, Angelynn Hermes, Penny Nunez, and Diana Tejada and opt-in plaintiffs Poohrawn Mehraban
In August 2018, the court granted a motion by the defendants to compel arbitration and ordered Mses. Hughes, Hermes, Nunez, Pera, Murphy, and Marchand (the "Round 1 Plaintiffs") to submit all claims other than PAGA claims to binding arbitration. Hughes v. S.A.W. Entm't, Ltd., No. 16-cv-03371-LB, 2018 WL 4109100, at *5 (N.D. Cal. Aug. 29, 2018) (Hughes II). The court further stayed each plaintiff's PAGA claims (if any) while her arbitration was pending. Id. The court did not expressly address in that order whether Mses. Tejada, Mehraban, Vidal, or Zoumer (the "Round 2 Plaintiffs") had to submit their claims to arbitration.
Ms. Hughes (and Ms. Mehraban) offered to submit to arbitration their claims alleging unlawful retaliation. Ms. Hughes and Ms. Mehraban refused to submit their other claims to arbitration, and the other plaintiffs did not submit any claims to arbitration. Instead, Mses. Pera, Nunez, Murphy, Mehraban, Hermes, and Vidal (the "Intervenors") moved to intervene as plaintiffs in a separate collective and class action against S.A.W. Entertainment, Gold Club, and other defendants that was pending (at the time) in the California Superior Court for San Diego County: Roe v. Deja Vu Services, Inc., No. 37-2018-00028044-CU-OE-CTL (Cal. Super. Ct. San Diego Cty. filed May 31, 2018) (State Roe).
The parties have filed a number of motions and cross-motions here. First, the defendants move for enforcement of the court's August 2018 arbitration order and ask the court to hold the Round 1 Plaintiffs in contempt for violating the court's order by filing new litigation complaints against S.A.W. Entertainment and Gold Club in State Roe.
The court held a hearing on the parties' motions and cross-motions and now orders the following. The court grants the defendants' motion to enforce the August 2018 arbitration order against the Round 1 Plaintiffs (but denies the motion to hold them in contempt or impose sanctions). The court denies the plaintiffs' motion for reconsideration of the August 2018 arbitration order. The court grants all pending motions to compel arbitration except that it denies the motion to compel with respect to the claims Ms. Tejada brings in this action arising after January 31, 2017 (the "Post-January-2017 Claims"). The court orders the plaintiffs to submit all claims other than PAGA claims and Ms. Tejada's Post-January-2017 Claims to binding arbitration. The court stays each plaintiff's PAGA claim (if any) while that respective plaintiff's arbitration is pending. The court administratively terminates the defendants' motion to dismiss without prejudice with respect to each plaintiff while that respective plaintiff's arbitration is pending.
As the parties and the court discussed at the hearing, the parties will brief (1) the next steps for Ms. Tejada's Post-January-2017 Claims, including whether they should be stayed pending the arbitration of her claims arising on or before January 31, 2017 (the "Pre-January-2017 Claims"), and (2) whether the court should authorize issuance of an FLSA notice.
The wage-and-hours claims at issue have a long history, spanning multiple separate class and collective actions filed in several federal and state courts.
In August 2014, a former exotic dancer filed a putative class and collective action against SFBSC Management before the undersigned: Roe v. SFBSC Management., LLC, No. 3:14-cv-03616-LB (N.D. Cal. filed Aug. 8, 2014) (Federal Roe).
In December 2014, SFBSC Management moved to compel Jane Roes 1 and 2 to submit their claims to binding arbitration based on "performer contracts" that included mandatory-arbitration provisions that Jane Roes 1 and 2 had signed with S.A.W. Entertainment and Gold Club, which operated the nightclubs where they worked.
In March 2015, the court denied SFBSC Management's motion to compel arbitration. Roe v. SFBSC Mgmt., LLC, No. 14-cv-03616-LB, 2015 WL 930683 (N.D. Cal. Mar. 2, 2015) (Federal Roe II). The court held that the arbitration provisions were unenforceable as unconscionable. Id. at *5, *12. The court held that "there [was] at least mild procedural unconscionability" in light of the fact that Jane Roes 1 and 2 "ha[d] submitted declarations in which they allege that, when they signed their contracts, they were `mostly naked,' were told that the contracts were `time-sensitive,' were `rushed' into signing them, and were told that they could not bring the contracts home to review." Id. at *7-8 (emphasis in original).
SFBSC Management appealed the court's Federal Roe denial of arbitration to the Ninth Circuit.
While the appeal was pending, the Federal Roe parties engaged in several rounds of mediation with Circuit Mediator Peter Sherwood, including two in-person mediation conferences.
In July 2016, the Ninth Circuit affirmed, on alternate grounds, the court's holding that the arbitration provisions were unenforceable. Roe v. SFBSC Mgmt., LLC, 656 F. App'x 828 (9th Cir. 2016) (Federal Roe IV). The Ninth Circuit did not reach the question of whether the arbitration provisions were unconscionable. Instead, the Ninth Circuit held that SFBSC Management — a nonsignatory to Jane Roes 1 and 2's performer contracts with S.A.W. Entertainment and Gold Club — "had failed to establish that it has standing to enforce the arbitration clause[.]" Id. at 829. SFBSC Management argued that it had standing to enforce the arbitration provisions because it had an agent-principal, or alternatively a principal-agent, relationship with S.A.W. Entertainment and Gold Club. Id. at 830.
Following the Ninth Circuit's decision, the Federal Roe parties engaged in a third in-person mediation conference with Mr. Sherwood in October 2016 and continued to work with Mr. Sherwood for several weeks thereafter.
In March 2017, Jane Roes 1 and 2 filed the Federal Roe parties' written class-settlement agreement and a motion for preliminary approval of the settlement.
Two weeks later, Nicole Hughes, Angelynn Hermes, Penny Nunez, Elana Pera, Sarah Murphy, Poohrawn Mehraban, Gypsy Vidal, and Tiffany Zoumer (and another dancer named Devon Locke, who is not a plaintiff here) filed an objection to the proposed settlement.
In April 2017, the court held a hearing with the Federal Roe parties and objectors.
Mses. Hughes, Hermes, Nunez, Pera, Vidal, and Zoumer, along with Diana Tejada, opted out of the Federal Roe class.
In July 2017, Mses. Murphy, Mehraban, and Locke filed objections to the proposed Federal Roe settlement.
In September 2017, the court held an additional hearing with the Federal Roe parties and objectors.
In October 2017, Mses. Murphy, Mehraban, and Locke filed an appeal of the court's order approving the Federal Roe settlement. That appeal remains pending before the Ninth Circuit.
In June 2016, plaintiff Nicole Hughes filed the Hughes action against S.A.W. Entertainment.
Following various procedural issues involving the interplay of the Hughes and Pera actions with the Federal Roe action, in October and November 2017, the defendants moved to compel the Hughes and Pera plaintiffs to submit their claims to arbitration.
In August 2018,
The court next held that the arbitration provisions were not unconscionable, citing Poublon v. C.H. Robinson Co., 846 F.3d 1251 (9th Cir. 2017) and Mohamed v. Uber Technologies, Inc., 848 F.3d 1201 (9th Cir. 2016). Hughes II, 2018 WL 4109100, at *3-5. Among other things, the court noted that it had held the Federal Roe arbitration provisions were unconscionable in part because they required the plaintiffs to pay half of all arbitration costs and fees and subjected them to a potential fee-shifting claim if they were to lose their arbitrations. Id. at *4 (citing Federal Roe I, 2015 WL 930683, at *11). In Hughes and Pera, by contrast, the defendants committed to paying all arbitration costs and fees and forgoing any claim against the plaintiffs for costs or attorney's fees. Id. The court observed that the Ninth Circuit had indicated in Mohamed (a decision issued after the court's original Federal Roe arbitration decision) that an employer may take an arbitration agreement that was unconscionable as drafted because it requires an employee to bear half the cost of arbitration and render it non-unconscionable by agreeing later to bear the full cost of arbitration — which is what the defendants did here. Id. (citing Mohamed, 848 F.3d at 1212).
The court ordered that named plaintiffs Nicole Hughes, Angelynn Hermes, Penny Nunez, Elana Pera, and Sarah Murphy and opt-in plaintiff Dora Marchand had to submit all claims other than PAGA claims to arbitration. Id. at *5. The court stayed each plaintiff's PAGA claims (if any) while that plaintiff's arbitration remained pending. Id. Because all named plaintiffs had to submit all claims other than PAGA claims to arbitration, leaving no named plaintiffs to actively pursue the litigation, the court terminated without deciding the defendants' motions to dismiss. The court extended the plaintiffs 21 days to file a motion to amend their complaint to add a new named plaintiff or plaintiffs who had not signed an arbitration agreement with the defendants. Id.
The court did not expressly address whether then-opt-in plaintiff Diana Tejada or opt-in plaintiffs Poohrawn Mehraban, Gypsy Vidal, or Tiffany Zoumer had to submit their claims to arbitration. See id.
In November 2018, the Hughes plaintiffs filed a Third Amended Complaint.
In May 2018, four exotic dancers filed a putative class and collective action against numerous defendants, including S.A.W. Entertainment and Gold Club (but not SFBSC Management), before the California Superior Court for San Diego County: Roe v. Deja Vu Services, Inc., No. 37-2018-00028044-CU-OE-CTL (Cal. Super. Ct. San Diego Cty. filed May 31, 2018).
In October 2018, the State Roe plaintiffs announced that they had reached a class settlement and filed a motion for preliminary approval of the settlement.
In November 2018, Elana Pera, Penny Nunez, Sarah Murphy, Poohrawn Mehraban, Nicole Hughes, Angelynn Hermes, and Gypsy Vidal moved to intervene in State Roe.
The Superior Court denied without prejudice the State Roe plaintiffs' motion for preliminary approval of the parties' settlement.
Following the Superior Court's leave to intervene, in December 2018, the Intervenors (i.e., Mses. Pera, Nunez, Murphy, Mehraban, Hughes, Hermes, and Vidal) filed a complaint in intervention against S.A.W. Entertainment, Gold Club, and SFBSC Management.
After the Superior Court's denial of the motion for preliminary approval of the settlement, the original State Roe plaintiffs opposed the State Roe defendants' October 2018 motion to compel arbitration.
The Superior Court denied the State Roe defendants' motion to compel arbitration, writing
The Superior Court did not address expressly whether it was holding that the State Roe defendants waived their right to arbitration with respect to the original State Roe plaintiffs, the Intervenors, or both.
Ten days after the Superior Court issued its order denying the motion to compel arbitration, SFBSC Management — which had been newly named as a defendant only in the complaint in intervention — filed a notice of removal and removed State Roe to the U.S. District Court for the Southern District of California.
Following removal, the original State Roe defendants and SFBSC Management filed a motion for reconsideration of the Superior Court's decision denying the original State Roe defendants' motion to compel arbitration.
On April 29, 2019, the Southern District denied the Intervenors' motion to remand and, on its own initiative, issued an order for the parties to show cause why State Roe (now squarely a federal action) should not be transferred to this court. Roe v. D[e]ja Vu Servs., Inc., No. 19cv0196 DMS (KSC), 2019 WL 1895575 (S.D. Cal. Apr. 29, 2019). The State Roe parties' deadline to file their responses is May 10, 2019.
The record is unclear about whether the parties had any discussions about arbitration between August 2018, when the court issued its arbitration order, and December 2018.
On December 17, 2018, counsel for the plaintiffs filed arbitration demands with the American Arbitration Association ("AAA"), but only with respect to Nicole Hughes and Poohrawn Mehraban (and not the other Round 1 Plaintiffs subject to the court's August 2018 arbitration order) and only with respect to their individual claims for unlawful retaliation (and not their other claims).
On December 23, 2018, counsel for the defendants responded:
On January 17, 2019, counsel for the defendants wrote:
On January 24, 2019, counsel for the plaintiffs wrote:
On February 5, 2019, JAMS emailed counsel for the plaintiffs an invoice for the arbitration filing fee.
On February 14, 2019, JAMS emailed counsel for both the plaintiffs and the defendants, writing "Please advise if an agreement has been reached regarding the Respondent paying the arbitration fees required to move the arbitration forward."
On February 20, 2019, counsel for the defendants wrote to counsel for the plaintiffs:
On February 21, 2019, counsel for the plaintiffs wrote:
On February 28, 2019, JAMS emailed counsel for both the plaintiffs and the defendants, writing "Please advise if an agreement has been reached regarding the Respondent paying the arbitration fees required to move the arbitration forward. I look forward to hearing from you shortly."
On March 14, 2019, JAMS emailed counsel for both the plaintiffs and defendants, writing "We will be unable to proceed with the administration of this case until the Filing Fee has been received. Please advise as to when we can expect to receive same."
Counsel for the defendants responded to JAMS, copying counsel for the plaintiffs:
Counsel for the plaintiffs responded to JAMS, copying counsel for the defendants:
On March 26, 2019, counsel for the defendants wrote to counsel for the plaintiffs, copying JAMS:
Counsel for the plaintiffs responded:
On March 27, 2019, the defendants paid JAMS the arbitration filing fee.
"Absent a stay, `all orders and judgments of courts must be complied with promptly.'" Donovan v. Mazzola, 716 F.2d 1226, 1240 (9th Cir. 1984) (quoting Maness v. Meyers, 419 U.S. 449, 458 (1975)). "Disregard of [a court] order would undermine the court's ability to control its docket . . . and reward the indolent and the cavalier." Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 610 (9th Cir. 1992).
If parties believe that a court order should be modified or vacated based on new factual developments or an intervening change in the law, the proper avenue is for them to move the issuing court to stay or reconsider its order (or to appeal the order and move the appellate court for a stay pending the appeal). Cf. Kraft v. Oldcastle Precast, Inc., No. 18-cv-03036-LB, 2018 WL 3777563, at *3 (N.D. Cal. Aug. 9, 2018) ("`Unless a stay or reversal is obtained, a party must comply with a court order, even if he believes that the order is erroneous or contrary to law.'") (internal brackets omitted) (quoting Guardian Life Ins. Co. of Am. v. Andraos, No. CV 07-5732 SJO (FMOx), 2009 WL 10675048, at *3 (C.D. Cal. Feb. 10, 2009)); see also In re Republic of Ecuador, No. C-10-80225 MISC CRB (EMC), 2011 WL 736868, at *4 (N.D. Cal. Feb. 22, 2011) ("[An a]rgument that `a party itself may stay an order merely by filing a motion for reconsideration is plainly frivolous. A court's order remains in force until it is vacated or stayed, and a party disregards such an order at its peril.'") (internal ellipsis omitted) (quoting New Pac. Overseas Grp. (USA) Inc. v. Excal Int'l Dev. Corp., No. 99 Civ. 2436 DLC, 2000 WL 377513, at *7 (S.D.N.Y. Apr. 12, 2000)).
In August 2018, this court ordered the Round 1 Plaintiffs — Nicole Hughes, Angelynn Hermes, Penny Nunez, Elana Pera, Sarah Murphy, and Dora Marchand — to submit all claims other than PAGA claims to binding arbitration. Hughes II, 2018 WL 4109100, at *5. Absent this court's (or the Ninth Circuit's) staying or vacating that order, the Round 1 Plaintiffs must comply with it.
The plaintiffs make several arguments why they should not be compelled to submit their claims to arbitration. None excuses their failure to comply with the court's August 2018
arbitration order. First, the plaintiffs claim that they were "dragged into [State Roe] by Defendants in order to protect their rights and prevent a release of their claims[.]"
Second, the plaintiffs contend that the court's August 2018 arbitration order, which held that the defendants did not waive their right to arbitration through their conduct in Hughes, Pera, and Federal Roe, was superseded by the Superior Court's subsequent order that the defendants waived arbitration by their conduct in State Roe, and that the subsequent Superior Court order binds this court.
In sum, as the court ordered previously, the Round 1 Plaintiffs — Mses. Hughes, Hermes, Nunez, Pera, Murphy, and Marchand — must submit all claims other than PAGA claims to arbitration.
"A motion for reconsideration should not be granted, absent highly unusual circumstances, unless the district court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law." Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009) (internal brackets omitted) (quoting 389 Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999)). "A motion for reconsideration `may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation.'" Id. (quoting Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000)).
The plaintiffs contend that the Superior Court's order — that the defendants waived arbitration by their conduct in State Roe — is a new development that warrants this court's reconsidering its August 2018 arbitration order. The court disagrees.
The plaintiffs first argue that the Superior Court's decision is binding on this court under the doctrine of collateral estoppel.
Whether the Superior Court held that the defendants waived their right to arbitration with respect to any parties other than the original State Roe plaintiffs is at best conjecture. The briefing before the Superior Court's order involved only the original State Roe plaintiffs, not the Intervenors or any other parties. The State Roe defendants' motion to compel arbitration was directed only at Jane Roes 1-4, and only Jane Roes 1-4 opposed the motion.
Moreover, the plaintiffs' argument — that the defendants waived their right to arbitrate with respect to the Hughes and Pera plaintiffs by their conduct in State Roe — is not persuasive. "`Waiver of a contractual right to arbitration is not favored,' and, therefore, `any party arguing waiver of arbitration bears a heavy burden of proof.'" Richards v. Ernst & Young, LLP, 744 F.3d 1072, 1074 (9th Cir. 2013) (quoting Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)); accord St. Agnes, 31 Cal. 4th at 1195 (same). "Specifically, `a party seeking to prove waiver of a right to arbitration must demonstrate: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.'" Richards, 744 F.3d at 1074 (quoting Fisher, 791 F.2d at 691); accord St. Agnes, 31 Cal. 4th at 1196 (taking into account similar factors). As courts have held, a defendant's attempt to settle a case with a plaintiff is not inconsistent with that defendant's right to arbitrate a separate case, even if the settlement is on a class basis (and overlaps the case that the defendant seeks to arbitrate).
The Central District of California addressed this situation in Bischoff v. DirecTV, Inc., 180 F.Supp.2d 1097 (C.D. Cal. 2002). There, defendant DirecTV had been sued in a separate class action (Brauer v. DirecTV, Inc.), initially moved to compel the Brauer plaintiff to submit his claims to arbitration, and then withdrew its motion and agreed to a class settlement. Id. at 1112. The Bischoff plaintiffs brought their own class action and claimed that DirecTV had waived its right to compel them into arbitration, arguing that "DirecTV's desire to waive its right to arbitration in Brauer is an act that is `overwhelmingly inconsistent with the assertion of that same right in this case.'" Id. at 1113. The Central District rejected that argument, holding that "to hold that defendant can no longer assert its right to compel arbitration simply because it did not assert that right in another case is absurd." Id. Other courts have agreed and have observed that "for policy reasons, courts generally do not interpret a party's efforts to settle a case as waiving its right to compel arbitration. . . . To hold that a defendant waives its right to compel arbitration in one case by entering a judicial settlement in another case would create a disincentive to settle for any defendant facing multiple suits. Such an outcome is to be avoided." Lawrence, 343 F. Supp. 2d at 1113 (defendant did not waive its right to arbitrate against plaintiffs by entering into a class settlement in a separate case, even where the class settlement overlapped plaintiffs' claims) (citing Bischoff, 180 F.Supp.2d 1097, and other cases); accord, e.g., Carbajal v. Household Bank, FSB, No. 00 C 0626, 2003 WL 22159473, at *11 (N.D. Ill. Sept. 18, 2003) (Carbajal I) (defendants did not waive their right to arbitrate against plaintiff by trying to enter a class settlement in separate cases, even where the class settlement overlapped plaintiff's claims), aff'd sub nom. Carbajal v. H & R Block Tax Servs., Inc., 372 F.3d 903, 905 (7th Cir. 2004) (Carbajal II) (affirming that defendants' efforts to include plaintiff in the "master" class settlement did not waive the defendants' right to arbitrate).
This court similarly held in its August 2018 arbitration order that the defendants' efforts to settle Federal Roe on a class basis did not waive their right to arbitrate with respect to the Hughes and Pera plaintiffs. Hughes I, 2017 WL 6450485, at *4 (citing Lawrence, 343 F. Supp. 2d at 1113; Bischoff, 180 F. Supp. 2d at 1113); Hughes II, 2018 WL 4109100, at *2 (citing Hughes I, 2017 WL 6450485, at *4). The plaintiffs do not identify any intervening change in the controlling law that warrants reconsideration on this issue.
The plaintiffs argue that the "Defendants' conduct [in State Roe] went far beyond the steps that a settling defendant would normally take" and thus the defendants should be deemed to have waived their right to arbitration.
The plaintiffs also argue that the defendants waived arbitration because they refused to pay the arbitration fee.
The court denies the plaintiffs' motion for reconsideration.
Poohrawn Mehraban, Gypsy Vidal, and Tiffany Zoumer all signed "performer contracts" with S.A.W. Entertainment, and Ms. Mehraban signed a "performer contract" with Gold Club.
The court previously rejected the plaintiffs' argument that the defendants waived arbitration by their conduct in Hughes and Pera and that the arbitration agreements are unconscionable. Hughes II, 2017 WL 6450485, at *2 & n.7 (defendants' representations and conduct in Hughes and Pera did not waive right to arbitration) (citing Hughes I, 2017 WL 6450845, at *4-6); id. at *2-5 (arbitration provisions were not unenforceable as unconscionable). That holding applies here.
The court grants the defendants' motions to compel Mses. Mehraban, Vidal, and Zoumer to submit their claims against S.A.W. Entertainment and Gold Club to arbitration.
The analysis is somewhat different with respect to Diana Tejada. Until January 2017, Ms. Tejada signed annual "performer contracts" with S.A.W. Entertainment that provided that the parties would resolve all disputes through arbitration.
In January 2017, Ms. Tejada and S.A.W. Entertainment entered into a new performer contract. The contract stated:
Both S.A.W. Entertainment and Ms. Tejada signed the overall contract.
The parties offer competing arguments about how Ms. Tejada's performer contracts and arbitration provisions should be construed, both with respect to claims arising before the termination of her pre-2017 performer contracts (i.e., January 31, 2017) and claims arising after.
Ms. Tejada's claims arising on or before January 31, 2017 are subject to her pre-2017 performer contracts, which contain arbitration provisions, and thus are subject to arbitration for the same reasons as the other plaintiffs' claims.
Contrary to Ms. Tejada's arguments, the arbitration provisions in her pre-2017 performer contracts survive those contracts' termination dates and continue to apply to any claims that arose under those contracts, i.e., claims that arose on or before January 31, 2017. Cf. Homestake Lead Co. of Mo. v. Doe Run Res. Corp., 282 F.Supp.2d 1131, 1140 (N.D. Cal. 2003) ("[P]arties' duties under an arbitration clause survive contract termination when the dispute is over an obligation arguably created by the expired contract.") (citing John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 554-55 (1964)). Ms. Tejada argues that her 2017 performer contract supersedes her prior performer contracts, but this argument is unavailing. "`[W]here the dispute is over a provision of the expired agreement, the presumptions favoring arbitrability must be negated expressly or by clear implication.'" Id. (quoting Nolde Bros., Inc. v. Local. No. 358, Bakery & Confectionary Workers Union, 430 U.S. 243, 255 (1977)). Ms. Tejada's 2017 performer contract does not expressly or by clear implication negate any of her prior performer contracts' arbitration provisions.
The court grants the defendants' motions to compel Ms. Tejada to submit her Pre-January-2017 Claims to arbitration.
The defendants have not identified a contract in which Ms. Tejada agreed to arbitrate claims arising after January 31, 2017.
"`Arbitration is a matter of contract,' and there is `a liberal federal policy favoring arbitration agreements.'" Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 739 (9th Cir. 2014) (quoting Rent-a-Ctr., West, Inc. v. Jackson, 561 U.S. 63, 67 (2010); Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). But "[courts] do not apply the so called `presumption in favor of arbitrability' in every case." Id. at 742. "Where the arbitrability of a dispute is contested, [courts] must decide whether the parties are contesting the existence or the scope of an arbitration agreement." Id. (emphasis in original). "If the parties contest the existence of an arbitration agreement, the presumption in favor of arbitrability does not apply." Id. (emphasis in original). "The presumption in favor of arbitrability applies only where the scope of the agreement is ambiguous as to the dispute at hand, and [courts] adhere to the presumption and order arbitration only where the presumption is not rebutted." Id. (emphasis in original) (citing cases). Where a party contests the existence of an arbitration agreement, "[courts] use general state-law principles of contract interpretation to decide whether a contractual obligation to arbitrate exists." Id. at 743 (citing Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1044 (9th Cir. 2009)).
Under California law, "[t]he terms of an offer must be `met exactly, precisely and unequivocally for its acceptance to result in the formation of a binding contract[.]'" Marcus & Millichap Real Estate Inv. Brokerage Co. v. Hock Inv. Co., 68 Cal.App.4th 83, 89 (1998) (quoting Panagotacos v. Bank of Am., 60 Cal.App.4th 851, 856 (1998)). This precept applies to arbitration provisions within contracts. See id. The California Court of Appeal's decision in Marcus & Millichap is illustrative. That case centered on a real-estate contract that contained an arbitration provision that stated that the buyer, the seller, and the real-estate agent (representing both the buyer and the seller) agreed to submit all controversies regarding the sale to arbitration. Id. at 86. The arbitration provision was accompanied with a notice that required the parties to sign their initials next to the arbitration provision to agree to it. Id. The buyers initialed the provision, but the sellers did not. Id. After a dispute arose, the real-estate agent moved to compel arbitration. Id. Both the buyers and the sellers (except two sellers, who had cross-claims filed against them by the other sellers) opposed arbitration on the ground that the sellers had not agreed to the arbitration provision. Id. at 86-87. The court held that by not initialing the arbitration provision, the sellers had not "met exactly, precisely and unequivocally" the offer to arbitrate with an acceptance, and thus no contractual agreement to arbitrate between the parties existed. Id. at 89, 91 ("Since the sellers did not assent to this provision[,] the parties did not agree to binding arbitration.").
The Court of Appeal's analysis in Marcus & Millichap applies here. Ms. Tejada's 2017 performer contract expressly offered arbitration as an "
The defendants argue that Ms. Tejada's failure to sign either the boxes accepting or rejecting arbitration was mere silence, and that silence should not be construed as a rejection. It is true that Ms. Tejada did not sign the box rejecting arbitration either. But as the parties seeking to compel arbitration, it is the defendants' burden to prove the existence of an agreement between the parties to arbitrate in the first instance. Norcia v. Samsung Telecommc'ns Am., LLC, 845 F.3d 1279, 1283 (9th Cir. 2017). Ms. Tejada's unchecked 2017 performer contract is not an agreement to arbitrate, and the defendants identify no other agreement to arbitrate that covers claims Ms. Tejada's Post-January-2017 Claims.
The defendants argue that by signing the 2017 performer contract, Ms. Tejada agreed to all its terms, including its arbitration provision. This argument fails for at least two reasons. First, where an employer's contract calls for a separate signature agreeing to an arbitration provision in addition to a signature for the contract as a whole, the arbitration provision is severable, and the employee's signing the contract as a whole does not evince an agreement to arbitrate if the employee did not separately sign the arbitration provision. Romo v. Y-3 Holdings, Inc., 87 Cal.App.4th 1153, 1157, 1159 (2001) (rejecting employer's argument that employee's signature at the end of employee handbook "bound her to `all matters included within the employee handbook,'" including the handbook's arbitration provision, where the handbook called for a separate signature next to the arbitration provision, and the employee did not provide that separate signature). The 2017 performer contract called for Ms. Tejada to separately sign her initials if she agreed to arbitrate. Her signature at the end of the contract as a whole does not evince an agreement to arbitrate in the absence of her separately signed initials next to the arbitration provision. Second, even if Ms. Tejada's signature at the end of the could be construed as accepting all provisions in the contract, the provisions do not say the parties will arbitrate all disputes — they say, "IF YOU AGREE TO ARBITRATION," the parties will arbitrate all disputes.
The defendants also argue that Ms. Tejada's performer contracts from 2011 to 2016, which contained arbitration provisions, evince a "course of dealing" and that an agreement to arbitrate in the 2017 performer contract can be inferred from that course of dealing. The 2017 performer contract is not a continuation of a course of dealing. Instead, it represents an affirmative break from the parties' prior dealings. In contrast to the 2014, 2015, and 2016 performer contracts, where the arbitration provision was a set term of the contract, the 2017 contract gave Ms. Tejada an option of accepting or rejecting the arbitration provision and called for her to separately sign her initials if she wanted to arbitrate. Where, as here, the contract "did not purport unilaterally to impose an arbitration agreement on its employees[, and] instead, it urged employees to agree to submit to arbitration," Ms. Tejada's election not to initial the arbitration agreement evinces an intent not to be bound by it. Cf. Gorlach v. Sports Club Co., 209 Cal.App.4th 1497, 1511 (2012).
Finally, the defendants contend that the arbitration provisions in Ms. Tejada's 2011 to 2016 performer contracts extend to cover claims arising after her 2016 performer contract expired. The defendants argue that if an arbitration provision "fixes no temporal boundaries to its application to such disputes," then it is "all-encompassing."
The court denies the defendants' motions to compel Ms. Tejada to submit her Post-January-2017 Claims to arbitration.
SFBSC Management is not a signatory to the plaintiffs' performer contracts or arbitration provisions. The defendants nonetheless contend that SFBSC Management has standing to enforce the arbitration provisions (1) under the doctrine of equitable estoppel and (2) as S.A.W. Entertainment's and Gold Club's agent.
"`The United States Supreme Court has held that a litigant who is not a party to an arbitration agreement may invoke arbitration under the [Federal Arbitration Act] if the relevant state contract law allows the litigant to enforce the agreement.'" Murphy v. DirecTV, Inc., 724 F.3d 1218, 1229 (9th Cir. 2013) (quoting Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128 (9th Cir. 2013)). Under California law, the doctrine of equitable estoppel may allow a nonsignatory to an arbitration agreement to nonetheless enforce the agreement under two circumstances.
First, a nonsignatory may invoke equitable estoppel "`when a signatory must rely on the terms of the written agreement in asserting its claims against the nonsignatory or the claims are intimately founded in and intertwined with the underlying contract[.]'" Id. (quoting Kramer, 705 F.3d at 1128). "`This requirement comports with, and indeed derives from, the very purposes of the doctrine: to prevent a party from using the terms or obligations of an agreement as the basis for his claims against a nonsignatory, while at the same time refusing to arbitrate with the nonsignatory under another clause of that same agreement.'" Id. at 1230 (quoting Goldman, 173 Cal.App.4th 209, 221 (2009)).
Second, a nonsignatory may invoke equitable estoppel "`when the signatory alleges substantially interdependent and concerted misconduct by the nonsignatory and another signatory and `the allegations of interdependent misconduct are founded in or intimately connected with the obligations of the underlying agreement.'" Id. at 1229 (quoting Goldman, 173 Cal. App. 4th at 219-20). Under this second prong, "the doctrine of equitable estoppel may apply in certain cases where a signatory to an arbitration agreement attempts to evade arbitration by suing nonsignatory defendants for `claims that are based on the same facts and are inherently inseparable from arbitrable claims against signatory defendants.'" Id. at 1231 (quoting Metalclad Corp. v. Ventana Envtl. Organizational P'ship, 109 Cal.App.4th 1705, 1713 (2003)). "`Mere allegations of collusive behavior between signatories and nonsignatories to a contract are not enough to compel arbitration between parties who have not agreed to arbitrate: those allegations of collusive behavior must also establish that the plaintiff's claims against the nonsignatory are intimately founded in and intertwined with the obligations imposed by the contract containing the arbitration clause.'" Id. (internal brackets omitted) (quoting Goldman, 173 Cal. App. 4th at 223). "`It is the relationship of the claims, not merely the collusive behavior of the signatory and nonsignatory parties, that is key.'" Id. (emphasis in original) (quoting Goldman, 173 Cal. App. 4th at 223).
The California Court of Appeal recently held in Garcia v. Pexco, LLC, 11 Cal. App. 5th 782 (2017), that when a plaintiff brought the same wage-and-hour claims against a direct employer that signed an arbitration agreement and an ancillary employer that did not, the ancillary employer could invoke equitable estoppel to compel arbitration. The plaintiff in that case was hired by a temporary-staffing agency, Real Time Staffing Services, LLC, and signed an arbitration agreement with Real Time. Id. at 784. Real Time assigned the plaintiff to work for another company, Pexco, LLC (one of Real Time's clients). Id. The plaintiff did not sign an arbitration agreement with Pexco, and Pexco was not a signatory to the original arbitration agreement with Real Time. Id. The plaintiff later sued both Real Time and Pexco for violations of the California Labor Code and unfair business practices relating to payment of his wages. Id. at 785. Real Time and Pexco moved to compel the plaintiff to submit his claims to arbitration. Id. The plaintiff did not challenge Real Time's arbitration demand but did challenge Pexco's, arguing that Pexco was not a signatory to the arbitration agreement and thus could not enforce it.
The Court of Appeal rejected the plaintiff's argument and ordered him to submit his claims against Pexco to arbitration. It held that the plaintiff's claims against Pexco were "intimately founded in and intertwined with his employment relationship with Real Time, which is governed by the employment agreement compelling arbitration." Id. at 787. The plaintiff argued that he was "not seeking to enforce the terms and conditions of his employment contract containing the arbitration clause" and thus should not be estopped by the contract. Id. at 786. He argued that he "rather only asserts causes of action based on the Labor Code" and that the contract should not estop him with respect to "claims [that] are based upon statutory violations, do not sound in contract, and cannot be deemed part of the arbitration agreement." Id. The court rejected this argument, holding that "a claim `arising out of' a contract does not itself need to be contractual," that "[e]ven though [the plaintiff]'s claims are styled as Labor Code violations, the arbitration agreement applies," and that "[b]ecause the arbitration agreement controls [the plaintiff]'s employment, he is equitably estopped from refusing to arbitrate his claims with Pexco." Id. at 786, 788 (citing cases).
The court noted that "[the plaintiff]'s claims against Pexco are rooted in his employment relationship with Real Time" and that "[the plaintiff] does not distinguish between Real Time and Pexco in any way. All of [the plaintiff]'s claims are based on the same facts alleged against Real Time." Id. at 787-88. The court held that "[the plaintiff] cannot attempt to link Pexco to Real Time to hold it liable for alleged wage and hour claims, while at the same time arguing the arbitration provision only applies to Real Time and not Pexco." Id. at 788. The court explained that "[o]n these facts, it is inequitable for the arbitration about [the plaintiff]'s assignment to Pexco to proceed with Real Time, while preventing Pexco from participating." Id. at 787.
The reasoning in Garcia controls here. The plaintiffs' claims against SFBSC Management are founded in and intertwined with their relationships with S.A.W. Entertainment and Gold Club. The plaintiffs do not distinguish between SFBSC Management, on the one hand, and S.A.W. Entertainment or Gold Club, on the other. All claims against SFBSC Management are based on the same facts alleged against S.A.W. Entertainment or Gold Club.
The plaintiffs argue that Garcia is an "outlier" case and should not be followed.
The plaintiffs cite Shoals v. Owens & Minor Distribution, Inc., No. 2:18-cv-2355 WBS EFB, 2018 WL 5761764 (E.D. Cal. Oct. 31, 2018), a case that expressed skepticism about Garcia. Id. at *8. Shoals is inapposite here. In that case, a plaintiff signed an employment agreement that contained an arbitration provision with a staffing agency, Staffmark Investment, LLC. Id. at *1. Staffmark assigned the plaintiff to work as a truck driver for an employer, Owens & Minor Distribution, Inc., that was not a signatory to the arbitration provision. Id. The plaintiff's supervisor at Owens & Minor allegedly subjected him to racial comments, and Owens & Minor allegedly retaliated against him by subjecting him to continued discrimination and harassment leading to his constructive termination. Id. After the plaintiff was terminated, Staffmark allegedly retaliated against him by failing to give him work with other companies. Id. The plaintiff sued Owens & Minor, the Owens & Minor supervisor, and Staffmark for racial discrimination, retaliation, and related claims. Id. at *2. The defendants moved to compel arbitration. Id. The court granted Staffmark's motion to compel arbitration but denied Owens & Minor's and the supervisor's. Id. at *11. In rejecting Owens & Minor's equitable-estoppel arguments, the court distinguished Garcia by noting that, "[u]nlike in Garcia, however, plaintiff relies on different facts for different defendants." Id. at *9. "Against Owens & Minor, plaintiff contends that it discriminated and retaliated against him by refusing to hire him based on his race and by failing to investigate his complaints of racial discrimination," whereas "plaintiff alleges that Staffmark Investment discriminated and retaliated against him by failing to give him other work after he refused to work at Owens & Minor." Id. "Even though plaintiff alleges the same causes of action against Owens & Minor as he does against Staffmark Investment, plaintiff has a distinct factual basis for each claim as to each defendant." Id.
As the Ninth Circuit wrote (quoting the California Court of Appeal), the "relationship of the claims" is "key" in determining whether equitable estoppel applies. Murphy, 724 F.3d at 1231 (emphasis in original) (quoting Goldman, 173 Cal. App. 4th at 223). Unlike the plaintiff in Shoals, the plaintiffs here do not have factual bases for their claims against SFBSC Management that are distinct from the bases for their claims against S.A.W. Entertainment and Gold Club. This case thus is less a situation analogous to Shoals and more a situation "where a signatory to an arbitration agreement attempts to evade arbitration by suing nonsignatory defendants for `claims that are based on the same facts and are inherently inseparable from arbitrable claims against signatory defendants.'" Cf. id. (quoting Metalclad, 109 Cal. App. 4th at 1713); accord Garcia, 11 Cal. App. 5th at 786-88. In the latter case, equitable estoppel applies.
The plaintiffs' claims against SFBSC Management are identical to their claims against S.A.W. Entertainment and Gold Club. Thus, SFBSC Management may, under the doctrine of equitable estoppel, enforce the arbitration provisions in the performer contracts that the plaintiffs signed with S.A.W. Entertainment and Gold Club. The court grants the defendants' motions to compel the plaintiffs to submit their claims (other than Ms. Tejada's Post-January-2017 Claims) against SFBSC Management to arbitration.
The court stays each plaintiff's PAGA claims (if any) while that plaintiff's arbitration is pending. Cf. Aviles v. Quik Pick Express, LLC, 703 F. App'x 631, 632 (9th Cir. 2017) ("[T]he district court should stay [plaintiff]'s PAGA claims during the pendency of the arbitration."). The court declines to address the defendants' motion to dismiss the PAGA claims, as time-barred under the statute of limitations or for deficient notice, while the stay is pending. Cf. Nguyen v. Impac Mortg., No. SA CV 17-0723-DOC (KESx), 2018 WL 5880825, at *11 (C.D. Cal. Aug. 23, 2018) (refusing to grant defendants exception to stay pending arbitration to move to dismiss PAGA claims under the statute of limitations "because the purpose[] of the stay is to promote judicial economy") (citing Shepardson v. Adecco USA, Inc., No. 15-CV-05102-EMC, 2016 WL 1322994, at *6 (N.D. Cal. Apr. 5, 2016)).
The court grants the defendants' motion to enforce its August 2018 arbitration order against the Round 1 Plaintiffs (but denies the motion to hold them in contempt or impose sanctions). The court denies the plaintiffs' motion for reconsideration of the August 2018 arbitration order. The court grants all pending motions to compel arbitration except that it denies the motion to compel with respect to Ms. Tejada's Post-January-2017 Claims. In sum, the court orders Nicole Hughes, Angelynn Hermes, Penny Nunez, Diana Tejada, Poohrawn Mehraban, Dora Marchand, Elana Pera, Sarah Murphy, Gypsy Vidal, and Tiffany Zoumer to submit all claims other than PAGA claims and Ms. Tejada's Post-January-2017 Claims to binding arbitration.
The court stays each plaintiff's PAGA claim (if any) while that respective plaintiff's arbitration is pending.
The court administratively terminates the defendants' motion to dismiss without prejudice with respect to each plaintiff while that respective plaintiff's arbitration is pending. (The defendants may renew their motion to dismiss, when appropriate, by filing a one-page notice on the docket.)
As the parties and the court discussed at the hearing, the parties will brief (1) the next steps for Ms. Tejada's Post-January-2017 Claims, including whether they should be stayed pending the arbitration of her Pre-January-2017 Claims, and (2) whether the court should authorize issuance of an FLSA notice.
The court recognizes that the Superior Court allowed these plaintiffs to intervene in State Roe in an "exercise[ of] discretion." State Roe Order Granting Pera et al. Mot. to Intervene — No. 3:19-cv-00196-DMS-KSC (S.D. Cal.), ECF No. 1-47 at 3. The Superior Court did not hold that these plaintiffs were "dragged" into State Roe or were somehow compelled to intervene. See id. The Superior Court also held that nothing in its order granting intervention "precludes defendants from seeking an order from the federal court enjoining this court from proceeding further." Id. at 4.
