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Smith v. Medidata Solutions, Inc.

United States District Court, S.D. California

March 30, 2018

KEVIN SMITH, Plaintiff,
v.
MEDIDATA SOLUTIONS, INC., Defendant.

          ORDER GRATING TO DEFENDANT'S MOTION TO COMPEL ARBITRATION AND STAYING PLAINTIFF'S THE PAGA CLAIM PENDING ARBITRATION

          HON. M. JAMES LORENZ UNITED STATES DISTRICT JUDGE.

         In this action for wrongful termination, fraud and violation of California wages and hour laws, Defendant Medidata Solutions, Inc. filed a motion to compel arbitration. Plaintiff filed an opposition, and Defendant replied. The Court decides the matter on the papers submitted and without oral argument. See Civ. L. R. 7.1(d.1). For the reasons stated below, Defendant's motion is granted. Plaintiff's causes of action numbered one through twelve are dismissed; however, Plaintiff may reassert them in arbitration. Plaintiff's thirteenth cause of action under the Private Attorney General Act is stayed pending arbitration.

         According to the second amended complaint, Plaintiff was employed by Defendant as a senior director of sales. Plaintiff's compensation consisted of base salary plus commissions, bonuses, benefits, and other compensation. Plaintiff claims that he and others were not paid all commissions owed, and that Defendant had a practice of terminating employees to avoid paying large commissions. After complaining to Defendant about its practices regarding payment of commissions, Plaintiff was terminated. It is undisputed that when he was hired, Plaintiff signed an agreement with an arbitration provision.

         Plaintiff filed an action in this Court. In his second amended complaint, he alleges numerous California Labor Code violations, wrongful termination, promissory estoppel, fraud, unjust enrichment, violation of the California Unfair Competition Law (Cal. Bus. & Prof. Code § 17200 et seq.), and receiving stolen property in violation of California Penal Code § 496(a). Plaintiff also seeks penalties on behalf of himself and other aggrieved employees and on behalf of the California Labor Workforce Development Agency ("LWDA") for the Labor Code violations, including failure to timely pay all wages due, unlawful deduction (undisclosed payment using a lower pay scale than designated by statute or contract), violations relating to commissions, unlawful retaliation, failure to pay all wages due upon termination, and failure to provide accurate itemized wage statements). The Court has diversity jurisdiction under 28 U.S.C. § 1332.

         Defendant filed the pending motion to compel arbitration of Plaintiff's individual claims. Defendant concedes that Plaintiff's PAGA claim is not subject to arbitration. (Mot. at 1 n.1 (citing Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 440 (9th Cir. 2015).) See Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348, 386-88 (2014) (no Federal Arbitration Act preemption when an aggrieved employee brings a PAGA claim as an agent of a state agency, "where any resulting judgment is binding on the state and any monetary penalties largely go to state coffers."). Defendant argues that Plaintiff's remaining claims are covered by the arbitration clause included in the Employee Confidentiality, Invention Assignment and Non-Competition Agreement which Plaintiff signed when he was hired. (Decl. of Jessica Micciche Ex. A ("Agreement").) Plaintiff opposes, arguing that the arbitration clause is unenforceable.

         Arbitration clauses are governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq. ("FAA") and California contract law. "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." Kilgore v. KeyBank N.A., 718 F.3d 1052, 1058 (9th Cir. 2013) (emphasis in original) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)). "As federal substantive law, the FAA preempts contrary state law." Mortensen v. Bresnan Comm'cns, LLC, 722 F.3d 1151, 1158 (9th Cir. 2013). However, the FAA does not require enforcement of arbitration agreements that may be invalidated on "such grounds as exist at law or in equity for the revocation any contract." 9 U.S.C. § 2. "This saving clause permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability . . .." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (internal quotation marks and citation omitted). The burden of proving that the arbitration agreement cannot be enforced is on the party resisting arbitration. Green Tree Fin. Corp. - Ala. v. Randolph, 531 U.S. 79, 92 (2000).

         Initially, Plaintiff contends that the arbitration clause is unenforceable for failure of consideration because Defendant failed to pay him in full. This argument is undermined by the Agreement itself, which expressly addresses the issue of consideration:

c. Consideration. I UNDERSTAND THAT EACH PARTY'S
PROMISE TO RESOLVE CLAIMS BY ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, RATHER THAN THROUGH THE COURTS, IS CONSIDERATION FOR OTHER PARTY'S LIKE PROMISE. I FURTHER UNDERSTAND THAT I AM OFFERED EMPLOYMENT IN CONSIDERATION OF MY PROMISE TO ARBITRATE CLAIMS.

(Agreement § 11.c. (emphasis in original).) It is undisputed that Plaintiff signed the Agreement and that he was offered, and accepted, employment with Defendant. Plaintiff's argument that the arbitration clause is unenforceable for failure of consideration is therefore rejected.

         Next, Plaintiff argues that his claims do not fall within the scope of the Agreement's forum selection clause. This argument is inapposite. Defendant's motion is not seeking to enforce the forum selection clause, but the arbitration clause. In this regard, the arbitration clause provides:

a. Arbitration. . . . [¶] THIS ARBITRATION CLAUSE . . .
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS IF THE EMPLOYER/EMPLOYEE RELATIONSHIP . . ., INCLUDING, BUT NOT ...

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