UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
October 11, 2011
The opinion of the court was delivered by: Lucy H. Koh United States District Judge
ORDER DENYING PETITION TO COMPEL RESPONDENT BRYAN IVERSEN'S INDIVIDUAL CLAIMS TO ARBITRATION
United States District Court For the Northern District of California
Petitioner Yahoo! Inc. ("Yahoo") petitions the Court pursuant to 9 U.S.C. § 4 of the Federal Arbitration Act ("FAA") seeking to compel individual rather than class arbitration of Respondent 18 Bryan Iversen's ("Iversen") employment-related claims. Pursuant to Civil Local Rule 7-1(b), the 19 Court finds this matter appropriate for resolution without oral argument and hereby VACATES the 20 hearing and case management conference scheduled for October 13, 2011. Having considered the 21 submissions of the parties, and for good cause shown, the Court hereby DENIES the petition.
This action arises from an employment dispute. Upon commencing employment with Yahoo, Iversen signed an arbitration agreement on September 17, 2007, in which he agreed as 25 follows:
I acknowledge and confirm the mutual agreement that Yahoo! Inc. ("Yahoo!") and I will resolve any employment-related disputes or controversies against Yahoo!, its affiliates, or any officer, director, employee, or agent of Yahoo! or its affiliates, including but not limited to claims related to harassment, discrimination, wrongful termination, retaliation, defamation, and compensation (including equity compensation), by binding arbitration under the then current American Arbitration Association ("AAA") National Rules for the Resolution of Employment Disputes ("Rules") and as provided by the Federal Arbitration Act.
Frick Decl. ¶ 6, ECF No. 5; Ex. to Frick Decl. at 2. 4 5 behalf of a class under the Private Attorneys General Act, Cal. Lab. Code § 2698 et seq., alleging: (1) unpaid overtime; (2) failure to provide itemized wage statements; (3) failure to provide 7 compensation upon termination; (4) unfair business practices under California Business &
On June 23, 2011, Iversen filed a demand for arbitration with the AAA asserting claims on Professions Code § 17200 et seq.; (5) break violations; (6) failure to keep records; (7) illegal 9 deductions; and (8) minimum wage violations. See Ensign Decl. Ex. B, ECF No. 4-2. Yahoo 10 asserts that the arbitration agreement does not permit arbitration of class claims and therefore brings this petition seeking to compel Iversen to arbitrate his claims individually. Iversen contends that the arbitration agreement allows class arbitration and furthermore requires that any questions 13 of arbitrability be determined by the arbitrator, not the Court.
The FAA applies to any contract affecting interstate commerce, including employment 16 agreements. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001). Enacted for the 17 purpose of making valid and enforceable written agreements to arbitrate disputes, the FAA 18 embodies "the basic precept that arbitration 'is a matter of consent, not coercion.'" Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1773 (2010) (quoting Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)). In accordance with 21 this principle, the Supreme Court has held that parties may agree to limit the issues subject to 22 arbitration, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985); to 23 arbitrate according to specific rules, Volt, 489 U.S. at 479; and to limit with whom a party will 24 arbitrate its disputes, Stolt-Nielsen, 130 S. Ct. at 1773. Section 4 of the FAA ensures that "'private 25 agreements to arbitrate are enforced according to their terms,'" Stolt-Nielsen, 130 S. Ct. at 1773 (quoting Volt, 489 U.S. at 479), by expressly authorizing a party to an arbitration agreement to petition a United States district court for an order directing that "arbitration proceed in the manner 2 provided for in such agreement," 9 U.S.C. § 4.
4 upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.
Arbitration is a matter of contract, and the FAA places arbitration agreements "on an equal footing 6 with other contracts." Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772, 2776 (2010). The 7 interpretation of an arbitration agreement is therefore generally a matter of state law, Arthur 8
Under the FAA, arbitration agreements "shall be valid, irrevocable, and enforceable save Andersen LLP v. Carlisle, 129 S. Ct. 1896, 1901-02 (2009), unless application of state-law rules 9 would "stand as an obstacle to the accomplishment of the FAA's objectives," AT&T Mobility LLC Iversen's claims, were he pursuing them solely on his own behalf, fall within the scope of the 14 agreement. Rather, the questions before the Court are the same ones that confronted the Supreme Court in Green Tree Financial Corporation v. Bazzle, 539 U.S. 444 (2003) (plurality): (1) whether 16 the arbitrability of class claims under the parties' contract should be determined by the court or the 17 arbitrator, and (2) what standard the appropriate decision maker should apply in determining 18 whether the contract allows class arbitration. See Stolt-Nielsen, 130 S. Ct. at 1771 (discussing Bazzle). The Court discusses each in turn.
v. Concepcion, 131 S. Ct. 1740, 1748 (2011).
Neither party disputes that there is a valid and enforceable arbitration agreement or that A.Whether the Arbitrator or the Court Should Decide the Arbitrability of Class
Believing this case to be squarely controlled by Stolt-Nielsen, Yahoo insists there is no open matter of contract interpretation and that referral to an arbitrator to decide the arbitrability of class claims would therefore be both unnecessary and improper. Contrary to Yahoo's belief, Stolt- Nielsen provides little, if any, guidance to the dispute at hand. Stolt-Nielsen held that "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." 130 S. Ct. at 1775 (emphasis in original). The Supreme Court took pains to underscore that the parties in Stolt-Nielsen "selected a panel or 2 arbitrators and stipulated that the arbitration clause was 'silent' with respect to class arbitration." 3
Id. at 1766; accord id. at 1775 (noting that "the parties concurred that they had reached 'no 4 agreement' on [the arbitrability of class-wide claims]"); id. at 1776 (again noting parties' 5 stipulation); id. at 1776 n.10 (same). Because the parties in Stolt-Nielsen stipulated that they had 6 reached no agreement on the arbitrability of class-wide claims, the Supreme Court had "no 7 occasion to decide what contractual basis may support a finding that the parties agreed to authorize 8 class-action arbitration," id. at 1776 n.10, nor to decide the threshold question of whether the court 9 or the arbitrator should decide arbitrability.
Had Yahoo and Iversen stipulated that there was no agreement on the issue of class arbitration, as did the parties in Stolt-Nielsen, then Stolt-Nielsen would indisputably control. See id. at 1776. The parties, however, have made no such stipulation. Indeed, whether the arbitration 13 agreement between Yahoo and Iversen is "silent" on the availability of class arbitration is precisely 14 what lies at the heart of this dispute.
16 arbitration by providing that arbitration will be conducted "under the then current American 17Arbitration Association [(AAA)] National Rules for the Resolution of Employment Disputes," 18 which as of October 8, 2003 includes the AAA Supplementary Rules for Class Arbitration ("AAA 19 "shall apply to any dispute arising out of an agreement that provides for arbitration pursuant to any 21 of the rules of the American Arbitration Association ('AAA') where a party submits a dispute to 22 arbitration on behalf of or against a class or purported class, and shall supplement any other 23 applicable AAA rules." Id. The current dispute clearly arises out of an agreement that provides for 24 arbitration pursuant to AAA rules, and Iversen has submitted a dispute to arbitration on behalf of a 25 class. As such, Iversen argues that the terms of the contract clearly incorporate the AAA 26
Supplementary Rules, reflecting the parties' intent to authorize class-wide arbitration of claims. Iversen contends that the arbitration agreement is not "silent" but rather permits class Supplementary Rules"). See Opp'n Br., Ex. A at 1. The AAA Supplementary Rules state that they 2 agreement is "silent" regarding class arbitration because it "makes no reference to class 3 arbitration." Br. at 2. Although Yahoo believes the agreement's lack of reference to class 4 arbitration is dispositive under Stolt-Nielsen, the Supreme Court explained that it used the term "'silent' in the sense that [the parties] had not reached any agreement on the issue of class 6 arbitration," Stolt-Nielsen, 130 S. Ct. at 1768, "not simply . . . that the clause made no express 7 reference to class arbitration," id. at 1766. As another court in this district recently explained,
Yahoo disagrees with Iversen's interpretation of the contract, asserting that the arbitration "[t]he Supreme Court has never held that a class arbitration clause must explicitly mention that the 9 parties agree to class arbitration in order for a decisionmaker to conclude that the parties consented 10 to class arbitration. . . . [T]he failure to mention class arbitration in the arbitration clause itself does (Illston, J.) (quoting Stolt-Nielsen, 130 S. Ct. at 1768) (emphasis added).
15 authorizes class-wide arbitration of Iversen's claims. Consequently, the Court must consider the 16 threshold question the Stolt-Nielsen Court was able to bypass: whether the arbitrability of class 17 claims should be determined by the court or the arbitrator. 18
19 definitively when the availability of class-wide arbitration might be a question for a court and when 20 it might be a question for an arbitrator." Vazquez,2011 WL 2565574 at *3. Although four justices 21 in Bazzle opined that this question is a matter of arbitration procedure and therefore one for the 22 arbitrator, see 539 U.S. at 452-53; see also id. at 455 (Stevens, J., concurring in judgment but 23 agreeing only that the question is "[a]rguably" for the arbitrator), the Supreme Court clarified in 24 130 S. Ct. at 1772 (declining to answer the question because the parties had already agreed to refer 26 the matter to an arbitration panel).
not necessarily equate with the 'silence' discussed in Stolt-Nielsen." Vazquez v. ServiceMaster Global Holding Inc., 2011 WL 2565574 at *3 n.1, No. 09-cv-05148-SI (N.D. Cal. June 29, 2011)
The Court therefore finds a genuine dispute between the parties as to whether their contract
As Judge Illston noted, "[n]either the Supreme Court nor the Ninth Circuit has explained
Stolt-Nielsen that "Bazzle did not yield a majority decision" and that the question remains open, 2 what questions are for the Court and what questions are for the arbitrator. It is well established that 3 parties may be compelled to arbitrate only those disputes they have agreed to arbitrate, including 4 the issue of arbitrability itself. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995).
It follows that, "[j]ust as the arbitrability of the merits of a dispute depends upon whether the 6 parties agreed to arbitrate that dispute, so the question 'who has the primary power to decide 7 arbitrability' turns upon what the parties agreed about that matter." Id. (internal citations omitted). 8
In the absence of any controlling authority, the Court turns to more general law regarding When Courts decide whether the parties agreed to arbitrate arbitrability, "Courts should not 9 assume that the parties agreed to arbitrate arbitrability unless there is 'clear and unmistakable' 10 evidence that they did so." Id. at 944; accord Gilbert Street Developers, LLC v. La Quinta Homes, LLC, 174 Cal. App. 4th 1185, 1190 (2009). Incorporation of the AAA rules by reference constitutes "clear and unmistakable" evidence that the parties intended to submit the question of 13 arbitrability to the arbitrator, so long as what is being incorporated actually exists at the time of 14 incorporation such that "the parties can know exactly what they are incorporating." Gilbert Street App. 4th 1110 (2006); Dream Theater, Inc. v. Dream Theater, 124 Cal. App. 4th 547 (2004). 18 incorporated by reference the AAA Rules, including the Supplementary Rules, effective October 8,
2003. The Supplementary Rules provide, in relevant part, that "[u]pon appointment, the arbitrator 20 shall determine as a threshold matter, in a reasoned, partial final award on the construction of the 21 arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on 22 behalf of or against a class (the "Clause Construction Award")." Opp'n Br., Ex. A at 1. The Court 23 agrees with Iversen that the incorporation by reference of the AAA Supplementary Rules as they 24 existed at the time Yahoo and Iversen entered into their contract constitutes a "clear and 25 unmistakab[le]" agreement to have the arbitrator decide questions regarding the arbitrability of 26 class-wide claims. Accordingly, the Court DENIES Yahoo's petition to compel Iversen to arbitrate 27 his claims individually
Developers, 174 Cal. App. 4th at 1194; see also Rodriguez v. Am. Technologies, Inc., 136 Cal. Here, Iversen and Yahoo's arbitration agreement, entered into in September 2007, 3 arbitrator to decide, it is unnecessary at this time to consider the merits of whether the arbitration 4 agreement allows Iversen to pursue his claims on a class-wide basis. Nonetheless, it may prove 5 useful at this time for the Court to address some of Yahoo's arguments on the subject, particularly 6 because this matter may find its way back to the Court at a later date. See AAA Supplementary 7
Rules, Opp'n Br., Ex. A at 2 (permitting the parties to "move a court of competent jurisdiction to 8 confirm or to vacate the Clause Construction Award" issued by the arbitrator).
the issue of arbitrability because, under Stolt-Nielsen and Concepcion, class arbitration is
B.Whether Class Arbitration is Available
In light of the Court's holding that the arbitrability of Iversen's claims is a matter for the Yahoo appears to argue that it does not matter whether the Court or the arbitrator decides prohibited "unless the arbitration agreement expressly allows for them," Reply Br. at 3, and here, the agreement contains no such express allowance. Once again, Yahoo misconstrues the cases on 13 which it relies. As previously noted, the Stolt-Nielsen Court refrained from deciding "what 14 contractual basis may support a finding that the parties agreed to authorize class-action arbitration."
Stolt-Nielsen, 130 S. Ct. at 1776 n.10. The Concepcion Court later reiterated that Stolt-Nielsen 16 held only that an arbitration panel exceeded its power under the FAA by imposing class procedures "based on policy judgments rather than the arbitration agreement itself or some background 18 principle of contract law that would affect its interpretation." Concepcion, 131 S. Ct. at 1750 (discussing Stolt-Nielsen) (emphasis added). In other words, Stolt-Nielsen did not disturb the 20 longstanding principle that interpretation of an arbitration agreement is generally a matter of state 21 law, see Arthur Andersen, 129 S. Ct. at 1901-02, and that state law generally permits a 22 decisionmaker to "look beyond the four corners of the contract where appropriate," Vazquez, 2011 23
Nor does the Supreme Court's recent decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), support Yahoo's position that an express authorization of class arbitration is 26 required in order to find that the parties consented to such a procedure. The arbitration agreement 27 at issue in Concepcion contained an express disclaimer of class arbitration, requiring that all claims be brought in the parties' "individual capacity, and not as a plaintiff or class member in any 2 purported class or representative proceeding." Concepcion, 131 S. Ct. at 1744. AT&T sought to 3 compel individual arbitration of plaintiff's class claims, but the district court and Ninth Circuit 4 found the arbitration provision unconscionable under California law as announced in Discover 5
Supreme Court reversed, holding that "[r]equiring the availability of classwide arbitration" in the 7 face of an express disclaimer against class arbitration "interferes" with the FAA's "principal 8 purpose," which is to "'ensure that private arbitration agreements are enforced according to their 9 terms.'" Id. at 1748 (quoting Volt, 489 U.S. at 478).
Bank v. Superior Court, 36 Cal. 4th 148 (2005), and therefore unenforceable. Id. at 1745. The 6 No such express disclaimer exists in Yahoo and Iversen's arbitration agreement. Thus, nothing in Concepcion forecloses a decisionmaker, whether it be the arbitrator or the subsequent reviewing court, from finding that the parties consented to submit class claims to arbitration even 13 in the absence of any explicit discussion of class arbitration within the four corners of the 14 agreement itself. Cf. Underwood v. Palms Place, LLC, 2011 WL 1790463, No. 2:09-cv-00700-15 RLH (D. Nev. May 10, 2011) (holding that arbitrator did not exceed his scope of authority because 16 the AAA rules allow arbitrator to determine whether the agreements permit class proceedings); 17
Mass. Jan. 18, 2011) (upholding an arbitrator's Clause Construction Award upon finding the 19 arbitration agreement sufficiently broad to allow class claims under a reasonable interpretation).
To the contrary, the backbone principle of both Stolt-Nielsen and Concepcion is that courts and 21 arbitrators are to "'give effect to the contractual rights and expectations of the parties.'" Stolt-22 Nielsen, 130 S. Ct. at 1773-74 (quoting Volt, 489 U.S. at 479). To refuse arbitration of class claims 23 where the parties to an agreement intended to allow such a procedure, as determined in accordance 24 with general principles of contract interpretation, would fly equally in the face of the FAA's 25 purpose. 26
Smith & Wollensky Rest. Group, Inc. v. Passow, 2011 WL 148302, No.
CIV.A. 10-11498-EFH (D.
For the foregoing reasons, the Court DENIES the petition to compel
Respondent to arbitrate
his employment-related claims individually.
IT IS SO ORDERED.
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