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Mercado v. Sally Beauty Supply LLC

United States District Court, E.D. California

June 16, 2016



         Plaintiff Monica Mercado filed this action against defendants Sally Beauty Supply LLC (“SBS”) and Sally Beauty Holdings, Inc., asserting various state law claims for wrongful termination, violations of the California Labor Code, and unfair competition. This matter is before the court on defendants’ motion to compel arbitration and stay the case under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 3, 4. ECF No. 4. Plaintiff opposes the motion. ECF No. 6. The court submitted the matter as provided by Local Rule 230(g). As explained below, the court GRANTS defendants’ motion.

         I. BACKGROUND

         A. Statutory Background

         Section 2 of the FAA provides that written arbitration agreements “evidencing a transaction involving commerce . . . 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 thereby places arbitration agreements on an equal footing with other contracts, and requires courts to enforce them according to their terms.” Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67- 68 (2010) (internal citations omitted). Section 4 of the FAA allows a party “aggrieved” by the failure of another party “to arbitrate under a written agreement for arbitration” to petition a federal court for an order compelling arbitration in accordance with the terms of the agreement. 9 U.S.C. § 4. The court “shall” order arbitration “upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue.” Id. Under § 3, a party may apply to a federal court for a stay of the trial of an action “upon any issue referable to arbitration under an agreement in writing for such arbitration.” Id. § 3.

         B. Procedural Background

         On September 14, 2015, Ms. Mercado filed a complaint against her former employer, defendant SBS, in the San Joaquin County Superior Court of California, asserting claims for wrongful termination in violation of public policy, failure to pay meal and rest period compensation, failure to pay timely earned wages, failure to pay wages due at the time of separation from employment, failure to provide accurate wage statements, and unfair competition. ECF No. 1-1. On October 13, 2015, plaintiff amended her complaint to include defendant Sally Beauty Holdings, Inc. ECF No. 1-4. On November 6, 2015, defendants removed the matter to this court based on diversity of citizenship. ECF No. 1. Plaintiff has rejected defendants’ request to arbitrate her claims. Holmes Decl. ¶¶ 4-9, ECF No. 4-4.

         On February 17, 2016, defendants moved to compel arbitration and stay the case under the FAA. ECF No. 4 (“Mot.”). In support of its motion, defendants submitted a copy of the Mutual Agreement to Arbitrate Claims, Barnes Decl. Ex. A, ECF No. 4-3 (“Agreement”), and a copy of an informational handout summarizing the Agreement, id. Ex. B, ECF No. 4-3, which defendants provided to employees. Barnes Decl. ¶¶ 3-4, ECF No. 4-2. Plaintiff opposed the motion, ECF No. 6 (“Opp’n”), and defendants replied, ECF No. 9 (“Reply”).

         C. Arbitration Agreement

         Ms. Mercado signed the Agreement on October 14, 2013 as a term and condition of her continued employment with SBS. Barnes Decl. ¶¶ 3-4. The paragraph titled “Introduction” states in bold face type, “All disputes covered by this Agreement between me and the Company shall be decided by an arbitrator through arbitration and not by way of court or jury trial.” Agreement at 1. An acknowledgment at the end of the Agreement, above the signature line, states in bold, uppercase type face, “BY SIGNING BELOW, I ACKNOWLEDGE THAT . . . THE COMPANY AND I ARE GIVING UP OUR RIGHTS TO A JURY TRIAL AND THAT PURSUANT TO THE TERMS OF THIS AGREEMENT, WE ARE AGREEING TO ARBITRATED DISPUTES COVERED BY THIS AGREEMENT.” Id. at 4.

         The Agreement provides that it is governed by the FAA and evidences a commercial transaction. Id. at 1, 3. The section titled “Disputes Covered by the Agreement” provides that Ms. Mercado and defendants mutually consent and agree to arbitrate all “past, present or future” disputes arising out of Ms. Mercado’s employment with SBS. Id. at 1. The section further provides that the arbitrator shall decide “any claim or controversy regarding the Agreement or any portion of the Agreement or its interpretation, enforceability, applicability, unconscionability, arbitrability, or formation, or whether the Agreement or any portion of the Agreement is void or voidable . . . .” Id. (“delegation provision”).

         The section titled “Procedures and Rules” states that the arbitration proceedings “shall be in accordance with the then current Employment Arbitration Rules of the AAA (‘AAA Rules’), ” “except as provided in this Agreement.” Id. at 3. The section titled “Discovery and Subpoenas” gives each party the right to depose one individual and any expert designated by the other side, to propound document production requests, and to subpoena witnesses and documents, including documents from third parties that are relevant to the case. Id. It also allows additional discovery by mutual agreement or where the arbitrator so orders it. Id. The section titled “Confidentiality” requires Ms. Mercado and SBS to maintain the confidentiality of the arbitration proceedings, “except: (i) to the extent agreed upon otherwise, (ii) as may be otherwise appropriate in response to a governmental agency or legal process, (iii) as is necessary to enforce, correct, modify, or vacate the Arbitrator’s award, or (iv) if the law provides to the contrary.” Id. at 4.


         A. Applicable Law

         The court first addresses the applicable law. As reviewed above, the FAA applies to any written arbitration agreement “evidencing a transaction involving commerce.” 9 U.S.C. § 2. The Supreme Court has interpreted the term “involving commerce” broadly, to encompass a full exercise of Congress’s commerce power. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 277 (1995); Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 58 (2003) (upholding Allied-Bruce Terminix). For any arbitration agreement covered by the FAA, the court applies the federal substantive law of arbitrability “absent clear and unmistakable evidence that the parties agreed to apply non-federal arbitrability law.” Brennan v. Opus Bank, 796 F.3d 1125, 1129 (9th ...

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