conversion, unfair business practices, unjust enrichment,
accounting, and quantum meruit.
Over the course of their relationship, PPC had Bosinger sign
approximately fifteen new or amended sales representative
agreements. A review of the pleadings indicates that the last,
and perhaps last two, of these agreements contained an
arbitration clause, requiring that "[a]ny dispute, controversy,
or claim arising out of or relating to this Agreement or the
relationship between the parties shall be settled by binding
arbitration in accordance with the rules of the American
Arbitration Association ("AAA")." (Emphasis added.) Defendant PPC
argues that the clause mandates that this Court dismiss, or, at
minimum, stay this litigation until the parties have taken their
dispute to arbitration.
In his Complaint, Bosinger claims that his signature on the
agreement at issue was the result of coercion from PPC. In
particular, Plaintiff notes: "The agreements or amendments were
usually forced upon K-TRONICS weeks before a substantial client
contracted with PPC." (Compl. ¶ 11.) Plaintiff also disputes the
applicability of this arbitration agreement on the basis that the
agreement(s) are illusory and void on their face because PPC
could avoid paying commissions by the simple means of designating
an account a "house account." (Compl. ¶ 14.)
The Court first considers its jurisdiction. This case was
removed to federal court by Defendant on the grounds of diversity
jurisdiction. See 28 U.S.C. § 1332, 1441. However, the
Complaint does not allege a specific amount in controversy. Thus,
the Court must first consider whether the amount in controversy
requirement contained in Section 1332 is met.
The party seeking to invoke the jurisdiction of the federal
courts has the burden of proving the existence of jurisdiction,
see NcNutt v. General Motors Acceptance Corp., 298 U.S. 178,
189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936), and the burden of proof
in removal cases is on the defendant. See Wilson v. Republic
Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144
(1921); Gaus v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir.
1992) (per curiam) ("[T]he defendant bears the burden of actually
proving the facts to support jurisdiction, including the
jurisdictional amount."). The removal statute is strictly
construed against removal jurisdiction. See Boggs v. Lewis,
863 F.2d 662, 663 (9th Cir. 1988). "[I]n cases where a plaintiff's
state court complaint does not specify a particular amount of
damages, the removing defendant bears the burden of establishing,
by a preponderance of the evidence, that the amount in
controversy exceeds [$75,000]." Sanchez v. Monumental Life Ins.
Co., 102 F.3d 398, 404 (9th Cir. 1996). The burden is one of
"actually proving the facts to support jurisdiction." Gaus, 980
F.2d at 567.
Defendant asserts only that "Plaintiff is seeking damages in
excess of the amount of $75,000, exclusive of interest and costs.
Although no dollar amount appears on the face of the Complaint,
plaintiff has indicated in writing that he values his claim
against defendant at almost $2,000,000.00." (Notice of Removal, ¶
6(b).) Without submitting an affidavit or documents to support
that allegation, the allegation verges on the conclusory.
In the situation where a defendant does not meet its burden of
proof, a federal court has several options. It may either: "(1)
look to the petition for removal, (2) make an independent
appraisal of the amount of the claim, or suggest that the
defendant is free to do so, or (3) remand the action." Chapman
v. Powermatic, Inc., 969 F.2d 160, 163 n. 6 (5th Cir. 1992).
Ninth Circuit case law suggests that a district court may follow
either options (2) or (3). In Gaus, involving the same basic
fact pattern in the instant matter, the court enunciated a
standard that imposed a strict requirement on a defendant to
prove that the amount in controversy was satisfied. With a
plaintiff not alleging an amount of damages in his or her
complaint, the defendant must actually prove the facts
supporting the jurisdictional basis for removal. Id. at 567.
Simple allegations — i.e., "the amount in controversy exceeds
$75,000" — are insufficient; instead, the underlying facts
supporting removal must be stated in the removal notice itself.
Id. With only a conclusory statement regarding amount before
it, the Gaus court vacated defendants' judgment and remanded
the matter to the district court with instructions to remand the
case to the state court.
This case is not Gaus. Here, as noted, Defendant does point
to — though does not provide — specific evidence upon which bases
its conclusion that the amount in controversy exceeds $75,000.
The better practice would be to submit an affidavit or
documentary evidence of this belief with the notice of removal.
However, as such evidence may not always be available to a
removing defendant, to require such proof might defeat removal in
an instance where a plaintiff declined to plead a specific amount
of damages and a defendant could not readily ascertain the
approximate amount of damages a plaintiff seeks within thirty
days. Moreover, while it is for the Court to decide its own
jurisdiction, the Court finds in Plaintiff's silence implicit
support for Defendant's allegation as to the amount in
Finally, the Court finds that this case was properly removed
based on its review of Plaintiff's Complaint, one of the options
stated above. See Sanchez, 102 F.3d at 404-406 (reviewing
allegations in complaint and assessing damages available under
state law). Plaintiff pleads both tort and contract damages. The
Complaint alleges sales "resulting in millions of dollars of
business to PPC." Plaintiff does not provide his commission
percentage. However, even the most modest of commissions on sales
of this volume would give the Plaintiff substantial contract
damages. Tort damages might be higher. The Court also notes that
Plaintiff seeks punitive damages for his tort claims. If the
allegations as presented prove true, damages may easily exceed
the jurisdictional requirement.
Based on the above reasoning, the Court finds it has
jurisdiction in this matter.
A. Standard of Law
This case is governed by the Federal Arbitration Act (FAA),
see 9 U.S.C. § 2, which empowers federal courts to stay actions
subject to an arbitration agreement and to order a refusing party
to abide by the procedures in the agreement. See 9 U.S.C. § 3,
4; see also Gilmer v. Interstate/Johnson Lane Corp.,
500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). The language of
Section 3 is mandatory:
If any suit or proceeding be brought in any of the
courts of the United States upon an issue referable
to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such
suit or proceeding is referable to arbitration under
such an agreement, shall on application of one of the
parties stay the trial of the action until such
arbitration has been had in accordance with the terms
of the agreement. . . .
See also Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218,
105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) (requiring rigorous
enforcement of agreements to arbitrate). Dismissal of a case
involving a broad arbitration agreement may also be appropriate
in certain instances. See Sparling v. Hoffman Constr. Co.,
864 F.2d 635, 638 (9th Cir. 1988); Alford v. Dean Witter Reynolds,
Inc., 975 F.2d 1161, 1164 (5th Cir. 1992).
The Supreme Court has set forth a two-step analysis that courts
should consider when deciding whether to enforce an arbitration
agreement. "The first task of
a court asked to compel arbitration of a dispute is to determine
whether the parties agreed to arbitrate that dispute."
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).*fn1 A
court should make this decision by "applying the `federal
substantive law of arbitrability, applicable to any arbitration
agreement within the coverage of the [Federal Arbitration] Act.'"
Id. (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 14, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983));
Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 79
L.Ed.2d 1 (1984); Bayma v. Smith Barney, Harris Upham and Co.,
Inc., 784 F.2d 1023, 1025 (9th Cir. 1986).*fn2 When deciding
whether the parties agreed to arbitrate a certain matter courts
generally should apply ordinary state-law principles that govern
the formation of contracts. See First Options of Chicago, Inc.
v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985
(1995). A court "will not ordinarily except a controversy from
coverage of a valid arbitration clause unless it may be said with
positive assurance that the arbitration clause is not susceptible
of an interpretation that covers the asserted dispute." Marchese
v. Shearson Hayden Stone, Inc., 734 F.2d 414, 419 (9th Cir.
1984) (quotation omitted). A court must also take into account
the strong federal policy favoring enforcement of agreements to
arbitrate, resolving any doubts concerning the scope of
arbitrable issues in favor of arbitration. Shearson/American
Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96
L.Ed.2d 185 (1987). See also Southland Corp., 465 U.S. at 7,
104 S.Ct. 852 (expressing policy reasons for preferring
arbitration); Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
388 U.S. 395, 404, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (noting
congressional purpose to avoid delay and expense of litigation
behind the Federal Arbitration Act).
1. The Arbitration Clause
To determine if Plaintiff may be compelled to arbitrate his
claims against Defendant PPC, the first question that must be
addressed is whether, by signing the Agreement, Plaintiff
consented to and is bound by the arbitration clause contained in
paragraph 5 of the form. Plaintiff does not dispute that he
signed the Agreement at issue. Instead, he claims that he did not
knowingly waive his right to a jury trial. However, the case law
cited by Plaintiff is unavailing to his position. Plaintiff
contends that the Supreme Court has recently decided "that
agreements to arbitrate must meet strict contractual scrutiny.
The waiver of one's right to litigate disputes in a public forum
must be `clear and unmistakable.'" (quoting Wright v. Universal
Maritime Servs., 525 U.S. 70, 119 S.Ct. 391, 396, 142 L.Ed.2d
361 (1998)). Plaintiff misreads Wright and the law of
arbitrability pertinent to this dispute. First, in Wright,
while the Court reiterated the presumption of arbitrability under
the FAA, it declined to apply the FAA to the case. Id. at 395
n. 1. Second, Wright involved arbitrability under a collective
bargaining agreement, and thus did not involve a statute at issue
in the instant matter. Last, and most important, the "clear and
unmistakable" waiver language in Wright referred not to an
agreement to arbitrate generally, but an agreement to allow an
arbitrator — at possible expense of one's day in court — to
interpret the meaning of a federal statute. Indeed, the Wright
Court noted that the "clear and unmistakable" standard was not
applicable with an individual's waiver of his or her own rights.
Id. at 397. Wright being not applicable, and no "clear and
unmistakable" waiver being required, the Court finds that
Plaintiff properly waived his right to a judicial forum upon
signing the Agreement.
Moreover, the Court finds much of Plaintiff's protestations
regarding waiver unconvincing. Plaintiff argues:
The circumstances in which the Sales Representative
Agreement was presented do not lead to the conclusion
that Bosinger consented to arbitration. He did not
prepare the agreement. Phillips was the exclusive
drafter. No discussions took place concerning the
provisions of the agreement. The arbitration clause
was not discussed in any way. Bosinger was not made
aware of the consequences of the arbitration
provision (i.e. that he gave up his 7th Amendment
right to a trial by jury of any dispute that he may
have with Phillips). The agreement was the last in a
long line of agreements that Phillips had Bosinger
sign. (Opp'n., p. 4-5.)
On their face, these reasons are not sufficient to deny
enforceability of the arbitration provision. Lacking in
Plaintiff's Declaration are statements that he did not read or
sign the agreement, or was not allowed to so do. That Plaintiff
somehow was unaware of the consequences of his arbitration
agreement is not relevant. See Cohen v. Wedbush, Noble, Cooke,
Inc., 841 F.2d 282, 287 (9th Cir. 1988). Unless he requests the
Court to imply something akin to incapacity, the Court presumes
his competence and his ability to inform himself prior to
signature of the ramifications stemming from his contract.
Plaintiff's better argument is his quasi-duress claim.
Bosinger was in a very tenuous position when the
contract was presented. He had been actively pursuing
the business of Qualcomm and Next Level Systems. Each
company was interested in purchasing a large volume
of Phillips products and services. If Bosinger could
solidify a contract, both Phillips and Bosinger stood
to be compensated handsomely. Therefore, Bosinger
could not afford to begin a dispute with Phillips
concerning the Sales Representative Agreement. He
simply could not risk losing his income if Phillips
decided to terminate his services. (Opp'n, p. 5.)
Combined with the allegation in his Complaint that Plaintiff was
presented for his signature a new Agreement — often cutting his
commissions — shortly before close of a sale, see Compl. ¶ 11,
the Court must evaluate whether he freely entered into this