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Arredondo v. Southwestern & Pacific Specialty Finance, Inc.

United States District Court, E.D. California

September 22, 2019

ALICIA ARREDONDO, individually and acting in the interest of other current and former employees, Plaintiff,
v.
SOUTHWESTERN & PACIFIC SPECIALTY FINANCE, INC., CHECK ‘N GO OF CALIFORNIA, INC., and DOES 1 through 20, inclusive, Defendants.

          ORDER DENYING DEFENDANT’S MOTION TO COMPEL ARBITRATION AND TO STAY THIS ACTION (Doc. No. 19)

         This matter is before the court on defendant Southwestern & Pacific Specialty Finance, Inc.’s (“Southwestern”) August 2, 2019, motion to compel arbitration and to stay this action. A hearing on the motion was held on September 4, 2019. Attorney Joseph D. Sutton appeared on behalf of plaintiff Alicia Arredondo, and attorney Jennifer G. Redmond appeared on behalf of defendant. Having considered the parties’ briefing and heard from counsel, and for the reasons set forth below, defendant’s motions will be denied.

         PROCEDURAL BACKGROUND

         Plaintiff’s action was originally filed on November 14, 2018, in Stanislaus County Superior Court as a class action, alleging violations of California’s Labor Code and Unfair Competition Laws. (Doc. No. 1, Ex. 1 (“Compl.”) at ¶¶ 1–2.). Plaintiff later amended her complaint to add a cause of action under California’s Private Attorney General Act (“PAGA”). (Doc. No. 15 (“FAC”) at ¶¶ 102–109.) Defendant removed the action to this federal court on December 21, 2018, and proceeded in litigation for approximately eight months based on the apparent belief that plaintiff had validly opted out of a May 2014 Dispute Resolution Agreement which included an arbitration provision (the “2014 DRA”) on the basis of a written notification it had received from plaintiff. (Doc. No. 19-1 at 12.)

         After discovering that plaintiff had signed an earlier, 2012 Dispute Resolution Agreement (“2012 DRA”), defendant asked plaintiff to stipulate to arbitration on July 17, 2019. (Doc. No. 19-2 at ¶ 8.) After plaintiff refused, defendant moved to compel arbitration on August 2, 2019. (Doc. No. 19-1.) Plaintiff opposed, arguing that (1) the 2012 DRA had been superseded by the 2014 DRA that she had signed and shortly thereafter opted out of as permitted, and (2) even in the event the 2012 DRA was binding, defendant waived its right to invoke arbitration by engaging in eight months of class action litigation in this court. (Doc. No. 21 at 5.)

         FACTUAL BACKGROUND

         As alleged in the first amended complaint, plaintiff was a non-exempt, hourly worker within the meaning of California Labor Code § 500 et seq, employed by defendant as a Store Manager at various locations in California from April 16, 2008 through November 2018. (FAC at ¶ 12.) Defendant operates “Check-N-Go” stores which offer “payday loans, installment loans, check cashing services, money orders, and other financial services to the public.”[1] (Id. at ¶ 10.)

         According to the FAC, defendant failed to provide plaintiff with (1) pay for all hours worked, (2) pay for all overtime worked, (3) proper meal and rest breaks, (4) complete and accurate wage statements, (5) all pay owed at the time of termination, and (6) failed to maintain complete and accurate payroll records regarding her employment. (Id. at ¶¶ 13–35.) Plaintiff alleges that these failures were the result of a “uniform policy and systematic scheme of wage abuse against [defendant’s] hourly-paid or non-exempt employees within the State of California.” (Id. at ¶ 21.)

         Based on these allegations, plaintiff asserts a total of seven causes of action under California law. (Id. at ¶¶ 50–109.) Defendant has moved to compel arbitration on six of those claims and to stay the non-arbitrable PAGA claim pending resolution of the arbitration proceedings. (Doc. No. 19.)

         Defendant’s motion to compel arbitration relies on the 2012 DRA signed by plaintiff, which requires that “any claim . . . that arises from or relates to [her] employment with [defendant]” be subject to a dispute resolution mechanism that allows for mandatory arbitration. (Doc. No. 19-3, Ex. A § 2.2.) Defendant did not attempt to compel arbitration until the filing of this motion because it did not discover the existence of the 2012 DRA until July 2019. Prior to that, defendant “was under the impression that Plaintiff had opted out of arbitration based on the existence . . . of a written notice from Plaintiff, indicating she wished to opt out of [the 2014 DRA].” (Doc. No. 19-1 at 12.) Before the filing of this motion to compel, the parties had engaged in eight months of litigation, consisting mainly of discovery.[2] (Docs. No. 19-1 at 21–22; 21 at 13.)

         Plaintiff does not dispute that she signed the 2012 DRA, (Doc. No. 21 at 5), nor does she contest that the arbitration agreements in question are subject to the Federal Arbitration Act (“FAA”). Rather, plaintiff argues that the 2012 DRA was superseded by the 2014 DRA as a matter of contract law, and that because she opted out of the latter, she is no longer obligated to arbitrate her claims against the defendant employer. (Doc. No. 21 at 5.)

         According to plaintiff, she signed the 2014 DRA after defendant informed her in May 2014 that she had twenty-four hours to sign a new arbitration agreement in order to remain in her job. (Doc. No. 21-3 at ¶ 4.) The day after signing the agreement, plaintiff was informed by defendant that she had the option to out of the arbitration agreement. (Id. at ¶ 6.) Plaintiff responded the same day she was so notified by mailing her written opt-out notification to defendant’s headquarters. (Id.)

         Although it is undisputed that defendant received plaintiff’s opt-out, (Doc. No. 19-3, Ex. B), defendant does contend “that Plaintiff did not sign an arbitration agreement in May 2014 and that the only operative arbitration agreement is the 2012 DRA.” (Doc. No. 22 at 5.) According to defendant, “[b]ecause the May 2014 agreement was never accepted, Plaintiff’s opt-out is clearly in error and has no effect . . . [and] even if there were a binding 2014 arbitration agreement, Plaintiff opted out of it and therefore no agreement exists.” (Id.)

         LEGAL STANDARDS

         A written provision in any contract evidencing a transaction involving commerce to settle a dispute by arbitration is subject to the Federal Arbitration Act (“FAA”). 9 U.S.C. § 2. The FAA confers on the parties involved the right to obtain an order directing that arbitration proceed in the manner provided for in a contract between them. 9 U.S.C. § 4. In deciding a motion to compel arbitration, the “court’s role under the Act . . . is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000); see also Boardman v. Pacific Seafood Group, 822 F.3d 1011, 1017 (9th Cir. 2016).

         There is an “emphatic federal policy in favor of arbitral dispute resolution.” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, 473 U.S. 614, 631 (1985). As such, “‘any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.’” Id. at 626 (quoting Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24–25 (1983)). “Because waiver of the right to arbitration is disfavored, ‘any party arguing waiver of arbitration bears a heavy burden of proof.’” Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986) (quoting Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1025 (11th Cir. 1982)); see also Martin v. Yasuda, 829 F.3d 1118, 1124 (9th Cir. 2016).

         In contrast, an arbitration agreement may “be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability, ’ though 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. 333, 339 (2011) (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). In deciding whether parties agreed to arbitrate, courts “apply ordinary state law contract principles that govern the formation of contracts to decide whether an agreement to arbitrate exists.” Norcia v. Samsung Telecomm. Am., LLC, 845 F.3d 1279, 1283 (9th Cir. 2017), cert. denied, __ U.S.__, 138 S.Ct. 203 (2017) (citation and internal quotations omitted). However, courts may not apply traditional contractual defenses, like duress and unconscionability, in a broader or more stringent manner to invalidate arbitration agreements and thereby undermine FAA’s purpose to “ensur[e] that private arbitration agreements are enforced according to their terms.” Concepcion, 563 U.S. at 344 (quoting Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 478 (1989)).

         Under California law, the “party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal.4th 223, 236 (2012); see also Knutson v. Sirius XM Radio Inc., 771 F.3d 559, 565 (9th Cir. 2014) (noting that “the burden . . . [is] by a preponderance of the evidence”). In determining whether an agreement to arbitrate exists, “[t]he trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a ...


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