The opinion of the court was delivered by: Hayes, Judge:
The matters before the Court are (1) the Motion for an Order Directing Arbitration and Dismissing, or in the Alternative, Staying the Action ("Motion for an Order Directing Arbitration"), filed by Defendants (ECF No. 34); and (2) the Request for Full Discovery and a Jury Trial as to Disputed Issues of Fact in Motion to Compel Arbitration ("Request for Full Discovery and a Jury Trial"), filed by Plaintiff (ECF No. 43-1).
On August 9, 2010, Plaintiff initiated this action by filing a Complaint in this Court. (ECF No. 1).
On November 30, 2010, Plaintiff filed the Third Amended Complaint, which is the operative pleading. (ECF No. 14). Plaintiff, who was employed by Defendants as an "Account Manager," alleges that Defendants improperly classified him (and other individuals employed by Defendants in California) as an exempt employee from overtime wages, and therefore failed to pay him overtime compensation although he "regularly worked more than eight (8) hours in a workday, forty (40) hours a workweek, and/or seven (7) consecutive days." Id. ¶ 4. Plaintiff alleges the following claims, on behalf of himself and all others similarly situated: (1) Unfair Competition in Violation of Cal. Bus. & Prof. Code §§ 17200, et seq.; (2) Failure to Pay Overtime Compensation in Violation of California Labor Code §§ 510, 515.5, 551, 552, 1194 & 1198, et seq.; (3) Failure to Provide Accurate Itemized Statements in Violation of California Labor Code § 226; (4) Failure to Pay Overtime Compensation in Violation of 29 U.S.C. §§ 201, et seq.; and (5) Labor Code Private Attorney General Act, California Labor Code §§ 2698, et seq. Plaintiff alleges a class and collective action.
On May 19, 2011, Defendants filed the Motion for an Order Directing Arbitration. (ECF No. 34). Defendants move for an order directing the parties to arbitration pursuant to an agreement which Defendants contend requires Plaintiff to submit all employment-related disputes to binding arbitration, and requires the parties to arbitrate all disputes on an individual and not a class or collective basis.
On June 20, 2011, Plaintiff filed an opposition to the Motion for an Order Directing Arbitration, and a Request for Full Discovery and a Jury Trial. (ECF Nos. 43 & 43-1).
On June 27, 2011, Defendants filed a reply in support of the Motion for an Order Directing Arbitration, and an opposition to the Request for Full Discovery and a Jury Trial. (ECF Nos. 45 & 46).
On June 29, 2011 and July 5, 2011, Plaintiff filed a reply to Defendants' opposition to the Request for Full Discovery and a Jury Trial, and a response to the evidence submitted by Defendants in their reply in support of the Motion for an Order Directing Arbitration. (ECF Nos. 47 & 49).
On July 12, 2011, Defendants filed a reply to Plaintiff's response. (ECF No. 50).
On July 15, 2011, Plaintiff filed a Notice of Statement of Recent Authority Relevant to Defendants' Motion for an Order Directing Arbitration. (ECF No. 52).
On July 15, 2011, Defendants filed a Notice of Statement of Recent Authority Relevant to Defendants' Motion for an Order Directing Arbitration. (ECF No. 54).
On August 31, 2011, Plaintiff filed a second Notice of Statement of Recent Authority Relevant to Defendants' Motion for an Order Directing Arbitration. (ECF No. 55).
Plaintiff began working for Defendants on October 1, 2007. (Arnold Decl. ¶ 2, ECF No. 34-2).
On December 13, 2007, Plaintiff met with his supervisor, Barry Cohen, for approximately ten minutes and discussed the Defendants' "Bonus Incentive Agreement." (Grabowski Dep. at 25, ECF No. 45-1). At the end of the meeting, Plaintiff and Cohen each signed the Bonus Incentive Agreement. (Turai Decl., Ex. C at 51, ECF No. 45-1). The Bonus Incentive Agreement provides that, "[i]n consideration for Your continued employment, Your eligibility for a bonus incentive, and the mutual promises set forth in this Agreement, You and the Company hereby agree" to the terms set forth in the Bonus Incentive Agreement. Id. at 47. The Bonus Incentive Agreement sets forth the terms of Plaintiff's compensation and eligibility for "a bonus based upon the annual Gross Net Earnings of the San Diego office." Id. The Bonus Incentive Agreement contains a "Dispute Resolution" provision which states:
You and the Company agree that, except as provided below, all Claims the Company might bring against You and all claims You might bring against the Company and/or any of its officers, directors, or employees shall be deemed waived unless submitted to mediation, then, if mediation is unsuccessful, to final and binding arbitration in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association, modified as follows: (1) any mediation or arbitration shall be governed by the Company's Employment Dispute Mediation/Arbitration Procedure, which is available on the Company Intranet; (2) dispositive motions shall be permissible and not disfavored in any arbitration, and the standard for deciding such motions shall be the same as under Rule 56 of Federal Rules of Civil Procedure, and (3) except as mutually agreed at the time between You and the Company, neither You nor the Company may bring any Claim combined with or on behalf of any other person or entity, whether on a collective, representative, or class action basis or any other basis.
Id. The Dispute Resolution provision defines "Claims" to include: "all claims directly or indirectly related to Your recruitment, employment, compensation or benefits ... or termination of employment by the Company, including, but not limited to, alleged violations of ... the Fair Labor Standards Act..., and any and all claims under federal, state, local laws or regulations (including all such laws and regulations pertaining to employment or prohibiting discrimination)." Id. at 48. The Dispute Resolution Provision concludes with the following statements:
YOU MAY WISH TO CONSULT AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT. HOWEVER, YOU WILL NOT BE ELIGIBLE TO RECEIVE ANY BONUS PAYMENTS OR ADVANCES UNTIL THIS AGREEMENT IS SIGNED AND RETURNED BY YOU. PLEASE READ THESE PROVISIONS CAREFULLY. BY SIGNING BELOW, YOU ARE ATTESTING THAT YOU HAVE READ AND UNDERSTOOD THIS DOCUMENT, AND ARE KNOWINGLY AND VOLUNTARILY AGREEING TO ITS TERMS.
The Effective Date of this Agreement is January 01, 2008.
On December 17, 2008, Plaintiff and Cohen each signed a second Bonus Incentive Agreement, which contained the same terms as the December 13, 2007 Bonus Incentive Agreement, except it provided that "[t]he Effective Date of this Agreement is January 01, 2009." (Turai Decl., Ex. D at 54, ECF No. 45-1).
On December 21, 2009, Plaintiff and Cohen each signed a third Bonus Incentive Agreement, which contained the same terms as the prior two Bonus Incentive Agreements, except it provided that "[t]he Effective Date of this Agreement is January 01, 2010." (Turai Decl., Ex. E at 58, ECF No. 45-1).
In February of 2010, Plaintiff resigned from his employment with Defendants. (Grabowski Dep. at 18, ECF No. 45-1).
III. Contentions of the Parties
The issue in this petition is simple: plaintiff ... repeatedly entered into a clear and unambiguous agreement with his former employer to arbitrate all claims arising out of his employment on an individual basis. Notwithstanding this agreement, plaintiff brought a class and collective action alleging five employment-related causes of action in the United States District Court for the Southern District of California. Defendants ... did not move to compel arbitration at the outset of the litigation because plaintiff's agreement to arbitrate was unenforceable under then-current California law.
On April 27, 2011, the United States Supreme Court overturned the entire landscape of existing California law pertaining to arbitration agreements when it issued its decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011)....
In light of AT&T, the Court must now enforce plaintiff's previously unenforceable agreement requiring plaintiff to arbitrate any claims relating to his employment on an individual, and not a class, basis. Accordingly, Defendants seek an order compelling plaintiff's claims to arbitration and dismissing the action, or in the alternative, staying the instant proceedings until the arbitration is completed. Because the arbitration provisions executed by plaintiff are valid and enforceable agreements, this petition should be granted in its entirety. (ECF No. 34-1 at 2).
Defendant's arbitration provision violates Section 7 of the National Labor Relations Act by denying employees the right to bring collective, class or representative actions. The arbitration provision is also unlawful and constitutes a criminal misdemeanor under California Labor Code Section 206.5 because Plaintiff was required to sign the agreement and release his right to bring a collective, class or representative action in order to avoid forfeiture of earned wages. The arbitration agreement is also unenforceable because it was signed under duress because Plaintiff was required to sign it to avoid forfeiture of earned bonus wages. The arbitration provision is unconscionable under Cal. Civil Code § 1670.5. Concepcion v. AT&T Mobility LLC, __U.S.__,131 S. Ct. 1740 (2011) is inapplicable to the facts of this case and Defendants have waived any right to seek arbitration by litigating this action in Court for 9 months before bringing this motion. For all these reasons, Defendant's motion to compel must be denied. (ECF No. 43 at 10 (citations omitted)).
Plaintiff contends that Defendants have "waived the right to seek to compel arbitration." (ECF No. 43 at 36).
In determining whether arbitration has been waived pursuant to California law, a court may consider the following factors:
(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.
Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1124 (9th Cir. 2008) (quoting St. Agnes Med. Ctr. v. PacifiCare of Cal., 31 Cal. 4th 1187, 1196 (2003)). The waiver inquiry "must be conducted in light of the strong federal policy favoring enforcement of arbitration agreements."
Id. at 1125 (quoting Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)). "Because waiver of the right to arbitration is disfavored, any party arguing waiver of arbitration bears a heavy burden of proof." Fisher, 791 F.2d at 694 (quotation omitted); see also Sobremonte v. Superior Court, 61 Cal. App. 4th 980, 991 (1998) ("Since arbitration is a strongly favored means of resolving disputes, courts must closely scrutinize any claims of waiver. A party claiming that the right to arbitrate has been waived has a heavy burden of proof.") (quotation omitted).
The Court of Appeals for the Ninth Circuit has held that a party does not act inconsistently with the right to arbitrate by failing to seek to enforce an arbitration agreement that would be unenforceable under then-existing law. See Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185, 1187 (9th Cir. 1986) ("It is undisputed that defendants did not seek arbitration until after the close of discovery, nine months after their answer was filed....
[T]here could be no waiver here because there was no existing right to arbitration.... Defendants actively pursued their right to arbitrate as soon as they believed, in good faith, that they had such a right."); Fisher v. A.G. Becker Paribas, Inc., 791 F.2d 691, 697 (9th Cir. 1986) ("Until the Supreme Court's decision in Byrd, the arbitration agreement in this case was unenforceable. Therefore, the Fishers have failed to demonstrate that Becker acted inconsistently with a known existing right to compel arbitration."). In this case, Defendants reasonably could have believed that, prior to AT&T Mobility, LLC v. Concepcion, --- U.S. ---, 131 S. Ct. 1740 (2011), California courts would have found the arbitration agreement to be unenforceable, particularly with regard to Plaintiff's claims pursuant to California's Private Attorney General Act, as discussed below. Less than a month after Conception was decided, Defendants filed the Motion for an Order Directing Arbitration. Accordingly, Plaintiff has failed to show that Defendants acted inconsistently with a known right to arbitrate. See Fisher, 791 F.2d at 697.
The eight-month delay between Defendants' initial Answer and the Motion for an Order Directing Arbitration is less than the three-year delay in Fisher and the nine-month delay in Letizia. No dispositive motions have been filed, no motion for class certification has been filed, and no trial date has been set. The Court finds that the second and third waiver factors (i.e., "whether the litigation machinery has been substantially invoked" and "whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay") do not favor a finding of waiver. Cox, 533 F.3d at 1124 (quotation omitted). Defendants did not file a counterclaim, and there is no showing that Defendants obtained discovery which would not have been available in arbitration. Cf. id. (fourth and fifth waiver factors). Plaintiff contends that he has been prejudiced because "[m]ore hundred of hours of legal work and research has been expended by Plaintiff's attorneys to litigate the action for the last eight months, including responding to Defendant's discovery, appearing for deposition, conducting multiple depositions, filing motions, working out Rule 26 reports and schedules, along with working out a schedule [for] class certification and performing all of the work necessary to move for class certification." (ECF No. 43 at 39). The Court finds that Plaintiff has failed to establish that "the delay [in moving to compel arbitration] affected, misled, or prejudiced" Plaintiff within the meaning of the relevant caselaw. Cox, 533 F.3d at 1124; cf. Fisher, 791 F.2d at 698 ("[T]he [plaintiff]s make the surprising contention that they have been prejudiced because they 'willingly incurred the substantial expense involved in this litigation in order to benefit from a full jury trial.' This wound was self-inflicted. The [plaintiff]s were parties to an agreement making arbitration of disputes mandatory. They violated that agreement by including their arbitrable claims in this action. Any extra expense incurred as a result of the [plaintiffs]' deliberate choice of an improper forum, in contravention of their contract, cannot be charged to [defendant].").
After considering the relevant factors, the Court finds that Defendants have not waived the right to compel arbitration.
B. Federal Arbitration Act
The Federal Arbitration Act ("FAA") "was enacted ... in response to widespread judicial hostility to arbitration agreements." Concepcion, 131 S. Ct. at 1745 (citation omitted). Section 2 of the FAA states: "A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has described Section 2 "as reflecting both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract." Concepcion, 131 S. Ct. at 1745 (quotations omitted). "In line with these principles, courts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms." Id. at 1745-46 (citations omitted).
"The final phrase of § 2 ... permits arbitration agreements to be declared unenforceable 'upon such grounds as exist at law or in equity for the revocation of any contract.' This saving clause permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." Id. at 1746 (quotation omitted). "When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA." Id. at 1747 (citation omitted). "But the inquiry becomes more complex when a doctrine normally thought to be generally applicable, such as duress or ... unconscionability, is alleged to have been applied in a fashion that disfavors arbitration." Id. (citation omitted). "[A] court may not rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what the state legislature cannot." Id. (quotation omitted).
"Because the FAA mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed, the FAA limits courts' involvement to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (emphasis in original; quotation omitted). "If the response is affirmative on both counts, then the [FAA] requires the court to enforce the arbitration agreement in accordance with its terms." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).
The FAA states that "[i]f the making of the arbitration agreement ... be in issue, the [district] court shall proceed summarily to the trial thereof." 9 U.S.C. § 4. "[T]o put such matters in issue, it is not sufficient for the party opposing arbitration to utter general denials of the facts on which the right to arbitration depends. If the party seeking arbitration has substantiated the entitlement by a showing of evidentiary facts, the party opposing may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to be tried." Oppenheimer & Co., Inc. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995) (citations omitted). "[T]he party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration." Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 91-92 (2000).
In this case, it is undisputed that the parties' arbitration agreement encompasses the dispute at issue. Plaintiff contends that the arbitration provisions in the Bonus Incentive Agreements are not valid and enforceable for the following reasons: (1) "the arbitration provision violates Section 7 of the [National Labor Relations Act]"; (2) "the arbitration provision violates [California Labor Code] § 206.5"; (3) "the arbitration provision is unenforceable because it was obtained ...