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BUCKLEY v. GALLO SALES CO.

November 6, 1996

JERRY BUCKLEY, Plaintiff,
v.
GALLO SALES COMPANY, Defendant.



The opinion of the court was delivered by: HENDERSON

 This matter came on for oral argument before the Court on October 28, 1996, upon defendant's "12(b) motion to stay court proceedings pending arbitration of plaintiff's first cause of action and to dismiss plaintiff's second cause of action." For the reasons discussed below, this Court hereby DENIES defendant's motion.

 FACTUAL BACKGROUND

 In November 1976, plaintiff, Jerry Buckley, was hired by the defendant, Gallo Sales Company, as a delivery truck driver. Plaintiff's employment was governed by the collective bargaining agreement (CBA) between Gallo and the Brotherhood of Teamsters and Auto Truck Drivers Local 85. The CBA provided for a detailed grievance and arbitration procedure applicable to all disagreements between Gallo and covered employees, including those involving suspensions and discharges.

 During the period from 1993 to 1996, plaintiff sustained several work-related injuries which forced him to leave work on disability. In January 1996, plaintiff received clearance to return to work and requested reasonable accommodation by defendant, but was informed that he could not work until his back was stronger. On March 8, plaintiff was terminated from his employment. Several grievances were filed on plaintiff's behalf by the union. The union took each of the grievances through the first two steps of the CBA's grievance procedure, but none was ever finally resolved. Plaintiff subsequently filed a charge with the EEOC and received a notice of right to sue. On July 1, plaintiff filed a complaint against Gallo Sales alleging violations of the Americans with Disabilities Act (ADA) and the California Fair Employment and Housing Act (FEHA).

 LEGAL STANDARD

 1. Defendant's 12(b) Motion to Stay Court Proceedings Pending Arbitration of Plaintiff's First Cause of Action.

 The present issue has been raised as a "12(b) Motion to Stay Proceedings." This Court has construed this to be a 12(b)(1) Motion to Dismiss or in the Alternative to Stay Proceedings.

 a. Preclusion of Statutory Remedy

 Defendant's assertions first raise the question of whether the arbitration requirement in the CBA precludes the pursuit of any related federal statutory remedies. If the arbitration agreement at issue here prevents the plaintiff from seeking a federal statutory remedy, this Court would have no basis for jurisdiction, which is founded upon plaintiff's federal question claim under the ADA. Consequently this argument is best presented as a 12(b)(1) motion for lack of subject matter jurisdiction.

 Dismissal is appropriate under Rule 12(b)(1) when the district court lacks subject matter jurisdiction over the claim. Fed. R. Civ. P. 12(b)(1). Federal subject matter jurisdiction must exist at the time the action is commenced. Morongo Band of Mission Indians v. Calif. State Board of Equalization, 858 F.2d 1376 (9th Cir. 1988). A 12(b)(1) motion may either attack the sufficiency of the pleadings to establish federal jurisdiction, or allege an actual lack of jurisdiction which exists despite the formal sufficiency of the complaint. Thornhill Publishing Co. v. General Tel. & Electronics, 594 F.2d 730, 733 (9th Cir. 1979); Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987).

 Subject matter jurisdiction is a threshold issue which goes to the power of the court to hear the case. Therefore, a 12(b)(1) motion must be decided before other motions, as they will become moot if dismissal is granted. Wright & Miller, Federal Practice and Procedure: Civil § 1350. Because the court's power to hear the case is at stake, it is not limited to the allegations in the complaint but may also consider extrinsic evidence and, if that evidence is in dispute, it may weigh the evidence in order to satisfy itself that it has jurisdiction over the case. Roberts, 812 F.2d at 1177. However, if the jurisdictional issue is dependent upon the resolution of a factual dispute going to the merits of the case, the court may not decide those factual issues on a motion to dismiss. Id.

 Although lack of subject matter jurisdiction is an affirmative defense, the burden of proof in a 12(b)(1) motion is on the party asserting jurisdiction. Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989). Therefore, although the complaint is to be construed liberally, argumentative inferences favorable to the pleader will not be drawn, and the court will presume a lack of jurisdiction until the pleader proves otherwise. Wright & Miller at § 1350; Stock West at 1225.

 An action should be dismissed for lack of subject matter jurisdiction only if it is clear that the jurisdictional deficiency cannot be cured by amendment. May Dept. Store v. Graphic Process Co., 637 F.2d 1211, 1216 (9th Cir. 1980). Whether a district court possessed subject matter jurisdiction is a question of law reviewed de novo by the Court of Appeals. Owner-Operators Ind. Drivers Ass'n v. Skinner, 931 F.2d 582, 584 (9th Cir. 1991); Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 496 U.S. 937, 110 S. Ct. 3217, 110 L. Ed. 2d 664 (1990).

 b. Exhaustion of Arbitration Remedy

 Defendant's second argument states that the plaintiff must exhaust his potential arbitration remedies before proceeding to federal court. This argument forms the basis for defendant's claim that this court should stay proceedings pending arbitration. The defendant asserts that federal courts have created an exhaustion requirement when persons enter into contracts that require arbitration of claims.

 "Where there is no explicit statutory requirement of administrative remedies, the application of exhaustion rules is a matter committed to the discretion of the district court." *fn1" Morrison-Knudsen Co., Inc. v. CHG Intern., Inc., 811 F.2d 1209, 1223 (9th Cir. 1987), See, Brown v. Rison 895 F.2d 533, 535 (9th Cir. 1990). A judicially-created exhaustion doctrine "furnishes the district court with a method to exercise comity toward administrative agencies and to promote efficient use of judicial resources while protecting the rights of parties who have come before the court seeking relief." Morrison-Knudsen, at 1223.

 In exercising its discretion over whether to apply a non-statutory exhaustion requirement the court employs a "balancing analysis which considers both the interests of the agency in applying its expertise, correcting its own errors, making a proper record, enjoying the appropriate independence of decision and maintaining an administrative process free from deliberate flouting and the interests of private parties in finding adequate redress for their grievances." Montgomery v. Rumsfeld, 572 F.2d 250, 253 (9th Cir. 1978). Once the court exercises its discretion, it may allow the action to proceed immediately, it may dismiss the action pending exhaustion of administrative remedies, or it may stay its own proceedings pending administrative review. Rodrigues v. Donovan, 769 F.2d 1344, 1348 (9th Cir. 1985).

 2. Defendant's Motion to Dismiss Plaintiff's Second Cause of Action.

 Dismissal is appropriate under Rule 12(b)(6) when plaintiff's complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The Court must accept as true the factual allegations of the complaint and indulge all reasonable inferences to be drawn from them, construing the complaint in the light most favorable to the plaintiff. NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986); Dodd v. Spokane County, 393 F.2d 330, 334 (9th Cir. 1968). Unless the Court converts the Rule 12(b)(6) motion into a summary judgment motion, the Court may not consider material outside of the complaint. Powe v. Chicago, 664 F.2d 639, 642 (7th Cir. 1981). The Court must construe the complaint liberally, and dismissal should not be granted unless "it appears to a certainty that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Intake Water Co. v. Yellowstone River Compact Comm'n, 769 F.2d 568, 569 (9th Cir. 1985).

 Rule 12(b)(6) dismissals are reviewed de novo by the appellate court, Lindley v. General Electric Co., 780 F.2d 797, 799 n. 4 (9th Cir. 1986), and are appropriate only in "extraordinary" cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). Denial of a motion to dismiss is not a final judgement and is not generally appealable. Chelsea Neighborhood Ass'n v. United States Postal Service, 516 F.2d 378, 390 (2d Cir. 1976).

 DISCUSSION

 1. MOTION TO DISMISS OR, IN THE ALTERNATIVE, STAY ARBITRATION PROCEEDINGS

 A. Effect of Mandatory Arbitration Agreement

 This Court is first presented with the question of whether a collective bargaining agreement that mandates arbitration of certain claims by an employee precludes the pursuit of ...


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