The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge
ORDER (1) DENYING DEFENDANTS' MOTION TO COMPEL ARBITRATION AND (2) GRANTING DEFENDANTS' MOTION TO STAY PROCEEDINGS [Docket No. 60]
This case comes before the Court on Defendants' motion to compel arbitration and stay proceedings. Plaintiff filed an opposition to the motion, and Defendants filed a reply. After thoroughly considering the parties' briefs, evidence and the relevant legal authority, the Court denies Defendants' motion to compel and grants Defendants' motion to stay.
On July 23, 2008, Plaintiff purchased a cellular phone from a Verizon Wireless store in Sherman Oaks, California. (FAC ¶ 34.) The full retail price of the phone was $279.99, but Plaintiff paid a sale price of $99.99. (Id. ¶¶ 34-36.) Plaintiff alleges that at the time of purchase, a Verizon salesperson told her that Verizon was required by law to charge her sales tax on the full retail price of the phone as opposed to the sale price. (Id. ¶ 35.) As so calculated, the sales tax amounted to $23.10. (Id.) Plaintiff alleges she asked a sales manager why Verizon calculated sales tax on the full retail price of the phone as opposed to the sale price. (Id. ¶ 36.) The manager responded that "Verizon was required by California state law to charge consumers the bundled sales tax." (Id.) Plaintiff alleges that in deciding to purchase the phone from Verizon, she relied on the statements of the Verizon employees that California law required her to pay the sales tax. (Id. ¶ 44.) Plaintiff also alleges she relied on these representations in deciding to purchase another phone from Verizon in January 2009. (Id. ¶¶ 45-46.)
In conjunction with these purchases, Plaintiff entered into a two-year wireless service agreement with Verizon (the "Agreement"). (Id.) The Agreement contains a section entitled, "Dispute Resolution and Mandatory Arbitration," in which the parties "agree to settle disputes (except certain small claims) only by arbitration" (the "Arbitration Clause"). (Decl. of Ana Diaz in Supp. of Mot., Ex. 3 at 20.)
Relying on the Arbitration Clause, Defendants move to compel arbitration of Plaintiff's claims. They also move to stay this case pending a decision by the Supreme Court in AT&T Mobility LLC v. Concepcion, ___ U.S. ___, 130 S.Ct. 3322 (2010) ("Concepcion"). Plaintiff asserts the Arbitration Clause is invalid pursuant to Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009), the decision on which the Supreme Court granted certiorari in Concepcion. Even assuming the Arbitration Clause is valid, Plaintiff argues the present dispute does not fall within the scope of the Arbitration Clause. She also contends her request for injunctive relief is not subject to arbitration, and that Defendants have waived their right to arbitrate. Plaintiff also opposes Defendants' motion to stay.
Although Defendants have styled their motion as one to compel arbitration, they concede that under "existing Ninth Circuit precedent, ... the parties' arbitration agreement in this case likely would be deemed unconscionable under California law." (Mot. at 6.) Rather than seriously moving to compel arbitration, Defendants appear to be seeking "to preserve their rights to compel" arbitration should the Supreme Court reverse the Ninth Circuit's decision in Laster. (Id. at 1.) Based on this approach, and the current law of the Ninth Circuit, Defendants' motion to compel arbitration is denied.
Whether the motion should be denied with or without prejudice, however, depends on the issue of waiver. Plaintiff argues Defendants have waived their right to compel arbitration in light of the actions they have taken thus far in this case. Defendants dispute this argument.
"Waiver of a contractual right to arbitration is not favored." Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986) (citations omitted). "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." Id.
Plaintiff argues she meets each of these requirements. First, she asserts Defendants had knowledge of their right to compel arbitration because they wrote the Agreement and the Agreement was attached to the Complaint. Defendants do not dispute that they were aware of their right to compel arbitration, but they do dispute when they became aware of that right. Under these circumstances, Plaintiff has shown that Defendants knew of their right to compel arbitration.
Second, Plaintiff contends Defendants acted inconsistent with their right to compel arbitration by engaging in litigation, specifically, removing the case from state court to federal court and filing a motion to dismiss. However, at the time Defendants took those actions, they arguably had no right to compel arbitration. Absent that right, there was no potential for inconsistency, ...