United States District Court, N.D. California
D. BRUNNER, JR., Plaintiff,
LYFT, INC., Defendant.
ORDER GRANTING MOTION TO COMPEL ARBITRATION RE: DKT.
CHHABRIA UNITED STATES DISTRICT JUDGE
February 2019, Donald Brunner, Jr. filed an arbitral claim
with, and paid filing fees to, the American Arbitration
Association. He raised claims based on Lyft's alleged
misclassification of him as an independent contractor. So did
106 other drivers that are represented by the same law firms.
The AAA split those claimants into five groups; Brunner was
placed in Group 3. Lyft, the drivers, and the AAA began to
hammer out a schedule for each group. But by August 2019,
Lyft still hadn't paid its filing fees for Group 3
despite multiple reminders from the AAA. Lyft instead
requested additional confirmation from the AAA as to which
group each invoice related, purportedly to head off the
possibility of duplicative payments. The AAA at one point
told Lyft that the Group 3 fees had been paid; reversing
course a week later, the AAA reported that the fees in fact
had not been paid. Lyft and the AAA eventually reached an
understanding on the outstanding fees; on August 21, 2019,
the AAA sent a renewed invoice for Group 3, which Lyft
promptly paid. Bertoldi Decl. ¶ 150, Dkt. No.
days before that renewed invoice was sent, Brunner withdrew
his arbitral claim and filed this action on behalf of a
putative class. He resists a return to arbitration on the
grounds that Lyft (i) defaulted in arbitration, (ii)
materially breached the arbitration agreement, and (iii)
waived its arbitral rights. Because Lyft did none of those
things, its motion to compel arbitration on an individual
basis is granted.
Under the Federal Arbitration Act, the term
“default” refers to “the alleged failure,
neglect, or refusal of another to arbitrate under a written
agreement for arbitration.” 9 U.S.C. § 4. Section
4's typical remedy when a party defaults is a court order
“directing the parties to proceed to arbitration in
accordance with the terms of the agreement.” But
following “a prior default in arbitration, ” the
proper remedy may be to provide a judicial forum for the
claims. Sink v. Aden Enterprises, Inc., 352 F.3d
1197, 1201 (9th Cir. 2003). A party's premature
termination of the first round of arbitration doesn't
give that party the power to force a second round and thereby
“indefinitely postpone litigation.” Id.
did not default in arbitration. The lead Ninth Circuit case
on this subject involved both the cancellation of a scheduled
arbitration and a formal order of default entered by the
arbitrator. Id. at 1199; see also Pre-Paid Legal
Services, Inc. v. Cahill, 786 F.3d 1287, 1293 (10th Cir.
2015). Here, in contrast, Brunner withdrew from arbitration
before the AAA invoked its own suspension or termination
procedures. See McLellan v. Fitbit, Inc., 2018 WL
3549042, at *5 (N.D. Cal. July 24, 2018). The AAA also issued
an updated invoice for the filing fees- presumably because it
saw fit to clarify which fees Lyft still owed-and the
arbitration of the Group 3 claims is proceeding. Indeed, the
only party in this case who defaulted under section 4 is
Brunner, who left the arbitral forum to press these claims in
not to say that a formal order of default is necessary.
See Pre-Paid Legal, 786 F.3d at 1295-96. But the
arbitrator-or, in this case, the AAA itself-is well
positioned to decide in the first instance whether the
non-payment of fees justifies the termination of arbitral
proceedings. When the arbitration is kept on track, district
courts should be hesitant to derail proceedings on the basis
of innuendo and supposition.
Unlike default, the concept of material breach draws its
force from contract law. Material breach is a defense to the
enforcement of an arbitration agreement under 9 U.S.C. §
2. Except when superseded by the FAA, the parties'
arbitration agreement is governed by California law.
See Terms of Service § 21. Material breach is a
question of fact that turns in part on whether the
contractual counterparty was harmed by the breach. See
Boston LLC v. Juarez, 245 Cal.App.4th 75, 87 (2016). The
Ninth Circuit has interpreted California contract law to
provide that a party materially breaches an arbitration
agreement when it “refuse[s] to participate in the
arbitration process at all.” Brown v.
Dillard's, Inc., 430 F.3d 1004, 1010 (9th Cir.
did not materially breach the arbitration agreement. To begin
with, the AAA's reissuance of an invoice strongly
suggests that Lyft did not breach its obligation to pay
filing fees. And even if the failure to pay the first invoice
technically breached the agreement, Lyft presented unrebutted
evidence that the arbitration of Brunner's claims was not
delayed by the late payment. Consider the pace at which Group
2 proceeded: Lyft paid the filing fees for Group 2 in a
timely fashion, but none of the Group 2 preliminary
conferences took place by the time Brunner withdrew his claim
and the Group 2 arbitration hearings are scheduled for March
2020. Group 3, as its number suggests, trails the
administration of Group 2. So even if Lyft paid the filing
fees right away, the AAA would still be months away from
arbitrating the Group 3 claims. Brunner thus did not suffer
delay from the alleged breach.
material breach, waiver also sounds in generally applicable
principles of contract law. See Newirth by and through
Newirth v. Aegis Senior Communities, LLC, 931 F.3d 935,
940 (9th Cir. 2019). Waiver is generally defined as the
intentional relinquishment or abandonment of a known right.
In this context, Brunner must establish: “(1) knowledge
of an existing right to compel arbitration; (2) acts
inconsistent with that existing right; and (3) prejudice to
the party opposing arbitration resulting from such
inconsistent acts.” Martin v. Yasuda, 829 F.3d
1118, 1124 (9th Cir. 2016). The Ninth Circuit imposes
“a heavy burden of proof” on any party asserting
waiver. Newirth, 931 F.3d at 940. Lyft does not
contest its knowledge of an existing right to arbitrate these
claims, but Brunner has failed to demonstrate either an act
inconsistent with that right or prejudice.
has not acted inconsistently with its right to arbitrate
Brunner's claims. The “refusal to arbitrate after
being served with” an arbitral demand would satisfy
this element. Brown, 430 F.3d at 1012. But Lyft
submitted to arbitration, has been actively cooperating with
the AAA, and never rejected its obligation to pay filing
fees. See Willick v. Napoli Bern Ripka & Associates,
LLP, 2015 WL 1276549, at *4 (CD. Cal. Aug. 20, 2015). By
all appearances, the failure to pay the fees for
Brunner's case was the result of genuine administrative
confusion. See, e.g., Dkt. No. 19-19. Nor has
Brunner been prejudiced by the delay. Under some
circumstances, prejudice from delay can justify the heavy
medicine of waiver. See Brown, 430 F.3d at 1012-13.
As explained above, however, the six-month delay between
Brunner's filing and withdrawal of his arbitral claim is
attributable to the AAA's administrative timeline for the
107 claims pending against Lyft, not to Lyft's late
payment of the fees for Group 3.
claims are dismissed without prejudice. See Johnmohammadi
v. Bloomingdale 's Inc., 755 F.3d 1072, 1073-74 (9th