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Thomas Saincome, Individually andon v. Truly Nolen of America

August 3, 2011

THOMAS SAINCOME, INDIVIDUALLY ANDON BEHALF OF OTHER PERSONS SIMILARLY SITUATED,
PLAINTIFF,
v.
TRULY NOLEN OF AMERICA, INC., AN ARIZONA CORPORATION; AND DOES 1 THROUGH 10, DEFENDANTS.



The opinion of the court was delivered by: Hon. Jeffrey T.Miller United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART COMPEL ARBITRATION DEFENDANT'S MOTION TO Doc. No. 5

Plaintiff Thomas Saincome brings the instant class action against his employer, Defendant Truly Nolen of America, Inc., alleging a policy and practice of failure to pay overtime in violation of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. Defendant now brings a motion to compel arbitration and stay the current action pursuant to the Federal Arbitration Act ("FAA").

Pursuant to CivLR 7.1(d)(1), the court determines this matter is appropriate for resolution without oral argument. For the reasons set forth below, the court GRANTS IN PART and DENIES IN PART Defendant's motion.

I. BACKGROUND*fn1

Plaintiff is an individual who has worked for Defendant since January 2009, most

recently as a pest control technician in San Diego, California. Defendant is a major provider of pest control services throughout the United States, owning and operating over eighty locations throughout the country with over a thousand employees. According to Plaintiff, Defendant has a policy and practice of failing to include earned commissions and bonuses when calculating its employees' regular rate of pay. As a result, Plaintiff and other employees routinely receive less overtime pay than they are entitled to under the FLSA, which requires that employees be compensated at one-and-a-half-times their regular rate for any hours worked beyond the standard forty-hour work week.

Plaintiff filed the instant action on April 19, 2011, seeking damages and restitution on behalf of himself and a class of similarly situated current and former employees. The suit was brought as a collective action under 29 U.S.C. § 216(b). Defendant now moves to compel arbitration of this dispute, pursuant to an arbitration agreement signed by Plaintiff at the outset of his employment with Defendant. Defendant further seeks a declaration prohibiting Plaintiff from pursuing his arbitration on a class-wide basis, as well as an award of attorneys' fees incurred in bringing this motion to compel enforcement of the parties' agreement. Plaintiff opposes Defendant's motion.

II. LEGAL STANDARD

The Federal Arbitration Act was enacted by Congress for the purpose of "revers[ing] the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). To that end, arbitration provisions falling within the FAA's purview are generally deemed "valid, irrevocable, and enforceable." 9 U.S.C. § 2. The Act is regarded as "manifest[ing] a 'liberal federal policy favoring arbitration agreements,'" Gilmer, 500 U.S. at 25 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), and is to be "rigorously enforce[d]," Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985).

However, § 2 of the FAA also "permits arbitration agreements to be declared unenforceable 'upon such grounds as exist at law or in equity for the revocation of any contract.'" AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1746 (2011) (quoting 9 U.S.C. § 2). In other words, "agreements to arbitrate [may] be invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability.'" Id. However, to the extent that a defense singles out arbitration agreements for special treatment, it is considered preempted by the FAA. Id. "To evaluate the validity of an arbitration agreement, federal courts 'should apply ordinary state-law principles that govern the formation of contracts.'" Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).

III. DISCUSSION

It is undisputed that Plaintiff met with a representative of Defendant on or around December 31, 2008 to complete certain required new-hire paperwork, including a document entitled "Agreement to Binding Arbitration" (the "Agreement"). The Agreement and the accompanying signature pages were the last three pages of a ten-page document titled "The 'RESOLVE' Program," which described Defendant's mandatory conflict resolution program.*fn2 The Agreement states in pertinent part:

Any controversy, claim or dispute between a partner and Truly Nolen of America (hereafter "TNA") based upon or arising out of at-will employment, contract, tort, fraud, statute, misrepresentation, and claims of harassment or discrimination, including but not limited to race, color, sex, religion, national origin, disability, sexual orientation, marital status or age will be resolved by Binding Arbitration administered by the American Arbitration Association (hereafter known as "AAA") . . . . The Arbitrator may grant any remedy or relief that the Arbitrator deems just and equitable, including any remedy that would have been available if the matter had been heard in court. . . .

The only legal claims between the partner and Truly Nolen of America which are not included within this Agreement for Arbitration are claims for worker's compensation, unemployment compensation benefits and/or claims for benefits under TNA's benefit plan if the plan is with an independent provider which does not provide for arbitration of such disputes. . . .

It is also undisputed that Plaintiff signed a copy of the Agreement before beginning his employment with Defendant.

Defendant argues, and Plaintiff does not contest, that the current dispute between the parties falls squarely within the scope of the Agreement. However, Plaintiff claims that the Agreement itself is unenforceable for several reasons. First, Plaintiff argues that he cannot have consented to the Agreement because he was unaware of the contents of the paperwork that he signed on December 31, 2008. Second, Plaintiff contends that the actual terms of the Agreement are unconscionable, and therefore cannot be enforced. Finally, Plaintiff claims that the Agreement is unenforceable as the product of undue influence. Each of these arguments is addressed in turn below before turning to the issues of collective action and attorneys' fees.

A. Enforceability of Arbitration Agreement

1) Lack of mutual consent

Prior to 2009, Plaintiff was employed by Dannex Pest Control ("Dannex"), a company that was acquired by Defendant in 2008. According to Plaintiff, following the acquisition, he was ordered to report to Defendant's office on December 31, 2008. Upon arriving, he found members of Defendant's and Dannex's management teams as well as other pest control technicians "chaotically scrambl[ing] to complete paperwork." Plaintiff was directed to meet with Justin Mitchell, one of Defendant's Branch Managers, in order to complete his new-hire paperwork. Plaintiff claims that Mr. Mitchell then "went through the packets [of paperwork], hunted the signature pages, ripped out each page with a signature line, and handed them to Plaintiff, who dutifully signed them." Plaintiff claims that he then returned the signed pages to Mr. Mitchell; however, he did not receive copies of the papers he had signed, nor was he given a copy of the AAA rules or the RESOLVE Program packet. Based on this series of events, Plaintiff claims that he cannot have assented to arbitrate all his disputes with Defendant because Plaintiff was unaware of the contents of the Agreement at the time that he signed it.

Under California law, "ordinarily one who signs an instrument which on its face is a contract is deemed to assent to all its terms. A party cannot avoid the terms of a contract on the ground that he or she failed to read it before signing." Metters v. Ralphs Grocery Co., 161 Cal. App. 4th 696, 701 (2008) (quoting Marin Storage v. Marin Storage & Trucking, Inc. v. Benco Contracting & Eng'g, Inc., 89 Cal. App. 4th 1042, 1049 (2001)). However, an exception to this general rule exists where "the one who signs the instrument is unaware of the contractual provisions," such as "when the writing does not appear to be a contract and the terms are not called to the attention of the recipient." Id. at 701. Here, Plaintiff clearly was or should have been aware that the documents he was given to sign were agreements that were part of the terms of his employment with Defendant. Although Plaintiff claims that the documents were not explained to him, there is no evidence that their terms were affirmatively misrepresented to him, or that the fact that he was signing a contractual agreement was disguised or hidden from Plaintiff. Indeed, the signature page itself is entitled "Acceptance of Binding Arbitration," and contains a warning to "Please Read Carefully: Acceptance of this Policy Affects your Legal Rights." Compare Metters, 161 Cal. App. 4th at 703 (citing a California case finding enforceable an agreement to arbitrate that "appear[ed] on the signature page of [the] form under the bold face heading warning applicants that they must read the paragraphs on that page 'Very Carefully'"), with id. at 702-03 (finding arbitration agreement invalid where the plaintiff signed a document labeled "Notice of Dispute & Request for Resolution" and the plaintiff's signature appeared next to the statement, "I hereby submit this dispute for informal resolution directly by the Company's management"), and id. at 702 (describing another California case in which the court found an arbitration provision unenforceable "because it was buried in small print on the reverse side of a form on which a carpet manufacturer acknowledged receipt of yarn shipments from the yarn distributor"). Even if it is true that Plaintiff was rushed through the signing process and was not given a copy of the documents he signed-a fact that Defendant disputes-there is also no evidence that Plaintiff asked for and was denied either additional time to read the Agreement or a copy of the terms to take with him. Therefore, there is insufficient justification for invalidating the Agreement on these grounds.

2) Unconscionability

Plaintiff also argues that the Agreement is unconscionable and therefore unenforceable. As discussed above, the doctrine of unconscionability has been recognized as a generally valid reason for refusing to enforce an arbitration agreement under the FAA. The question is thus whether this particular Agreement is unconscionable under California law.

CAL. CIV. CODE § 1670.5(a) permits a court to refuse to enforce all or part of a contract where the court "finds the contract or any clause of the contract to have been unconscionable at the time it was made." "Unconscionability refers to an 'absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.'" Ingle, 328 F.3d at 1170 (quoting A&M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 486 (1982)). In California, unconscionability has been interpreted to have both a procedural and a substantive element, both of which must be present in order for the doctrine to apply. Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal. 4th 83, 114 (2000). The procedural element "focus[es] on 'oppression' or 'surprise' due to unequal bargaining ...


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