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Cunningham v. Leslie's Poolmart, Inc.

United States District Court, Ninth Circuit

June 25, 2013

KEITH CUNNINGHAM,
v.
LESLIE'S POOLMART, INC. ET AL.

CIVIL MINUTES - GENERAL

CHRISTINA A. SNYDER, District Judge.

Proceedings: (IN CHAMBERS): DEFENDANT'S MOTION TO COMPEL ARBITRATION (Docket #6, filed April 1, 2013)

I. INTRODUCTION

Plaintiff filed this putative class action in Los Angeles County Superior Court on February 13, 2013. Defendant Leslie's Poolmart, Inc. ("Leslie's) removed the case to this Court on March 25, 2013. Plaintiff's complaint asserts claims under California and federal employment laws, and claims under California's Unfair Competition Law ("UCL"), California Business and Professions Code § 17200, et seq.

On April 1, 2013, defendant filed a motion to compel arbitration of plaintiff's claims. Plaintiff filed an opposition on April 22, 2013, and defendant filed a reply on April 29, 2013. After considering the parties' arguments, the Court finds and concludes as follows.

II. BACKGROUND

This case arises out of plaintiff's employment with Leslie's. Plaintiff worked at Leslie's as a retail employee from September 2011 through September 2012, and was compensated through an hourly wage and a monthly non-discretionary performance bonus. In his complaint, plaintiff alleges that Leslie's compensation policy is unlawful because it calculates overtime payments only using an employee's hourly rate, and disregards the employee's performance bonus.

Plaintiff alleges that although it is clear as both a matter of fact and law that defendant's compensation practice is unlawful, defendant has been able to avoid liability for its unlawful policy because its employment contracts contain a mandatory arbitration clause that thwarts effective enforcement. This clause provides that:

The Company and I mutually consent to the resolution by arbitration of all claims or controversies ("claims"), past, present or future, whether or not arising out of my employment (or its termination), that the Company may have against me or that I may have against any of the following (1) the Company, (2) its officers, directors, employees or agents in their capacity as such or otherwise, (3) the Company's parent, subsidiary and affiliated entities, (4) the Company's benefit plans or the plans' sponsors, fiduciaries, administrators, affiliates and agents, and/or (5) all successors and assigns of any of them.
The only claims that are arbitrable are those that, in the absence of this Agreement, would have been justiciable under applicable state or federal law. The claims covered by this Agreement include, but are not limited to: claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to, race, sex, sexual orientation, religion, national origin, age, marital status, physical or mental disability or handicap, or medical condition); claims for benefits (except claims under an employee benefit or pension plan that either (1) specifies that its claims procedure shall culminate in an arbitration procedure different from this one, or (2) is underwritten by a commercial insurer which decides claims); and claims for violation of any federal, state, or other governmental law, statue, regulation or ordinance, except claims excluded in the section of this Agreement entitled "Claims Not Covered By The Agreement."
Except as otherwise provided in this Agreement, both the Company and I agree that neither of us shall initiate or prosecute any lawsuit or administrative action (other than an administrative charge of discrimination to the Equal Employment Opportunity Commission, California Department of Fair Employment and Housing or similar fair employment practices agency, or an administrative charge within the jurisdiction of the National Labor Relations Board), in any way related to any claim covered by this Agreement.

Dkt. # 6, Ex. A ("arbitration agreement"). Plaintiff does not dispute whether he signed the arbitration agreement, but denies that he understood its significance. He claims that no one at Leslie's explained that he was giving up his right bring claims against Leslie's in court.

III. LEGAL STANDARD

The Federal Arbitration Act ("FAA") provides that "a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising... 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 FAA reflects a "liberal federal policy favoring arbitration agreements." Gilmer v. Interstate/Johnson Lane Corp. , 500 U.S. 20, 25 (1991) (quoting Moses H. Cone Mem. Hosp. v. Mecury Constr. Corp. , 460 U.S. 1, 24 (1983)).

The "first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate the dispute." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 626 (1985). The court must determine (1) whether there exists a valid agreement to arbitrate; and (2) if there is a valid agreement, whether the dispute falls within its terms. Chiron Corp. v. Ortho Diagnostic Sys. , 207 F.3d 1126, 1130 (9th Cir. 2000). When determining whether a valid and enforceable contract to arbitrate has been established for the purposes of the FAA, federal courts should apply "ordinary state-law principles that govern the formation of contracts to decide whether the parties agreed to arbitrate a certain matter." First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944 (1995); Circuit City Stores v. Adams , 279 F.3d 889, 892 (2002). "[A]greements to arbitrate [may] 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." AT&T Mobility LLC v. Concepcion , 563 U.S. ____, 131 S.Ct. 1740, 1746 (2011).

IV. ANALYSIS

Defendant argues that because plaintiff's claims concern "claims for wages or other compensation due, " they are squarely within the scope of the parties' arbitration agreement. Additionally, defendant contends that because the agreement only encompasses claims that "the Company may have against me or that I may have against [the Company], " it only allows plaintiff to pursue individual claims in arbitration, not class claims or representative claims pursuant to California's Private Attorney General Act ("PAGA"), California Labor Code § 2698 et seq. In response, plaintiff does not contest whether the arbitration agreement, as written, encompasses his claims. Instead, plaintiff argues that, to the extent the arbitration agreement requires plaintiff to give up his right to pursue a class claim or a representative PAGA claim, the agreement is unenforceable. Additionally, plaintiff argues that under the California Supreme Court's decision in Broughton ...


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