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Schwendeman v. Health Carousel, LLC

United States District Court, N.D. California, San Jose Division

November 20, 2019

CONNIE SCHWENDEMAN, Plaintiff,
v.
HEALTH CAROUSEL, LLC and HEALTH CAROUSEL TRAVEL NETWORK, LLC, Defendants.

          ORDER GRANTING DEFENDANTS' MOTION TO COMPEL ARBITRATION; AND STAYING ACTION [RE: ECF 19]

          BETH LAB SON FREEMAN UNITED STATES DISTRICT JUDGE.

         Plaintiff Connie Schwendeman asserts a single claim under California's Private Attorneys General Act (“PAGA”) against her former employers, Defendants Health Carousel, LLC and Health Carousel Travel Network, LLC (collectively, “Health Carousel”). Health Carousel has filed a motion to compel arbitration and dismiss the action.

         Having considered the parties' briefs and supplemental briefs, the relevant legal authorities, and the oral argument of counsel, the Court GRANTS the motion to compel arbitration. However, the Court STAYS the action pending completion of arbitration rather than dismissing it as requested by Health Carousel.

         I. INTRODUCTION

         Health Carousel provides healthcare staffing for temporary assignments at medical facilities across the United States. Dalton Decl. ¶ 1-2, ECF 19-1. Schwendeman, a registered nurse, began working for Health Carousel in 2017, when she was placed at Lucile Packard Children's Hospital Stanford in Palo Alto, California. Id. ¶ 3. Schwendeman was employed by Health Carousel “in Palo Alto, California from August 2017 to February 2018.” FAC ¶ 4, ECF 17. Prior to starting employment, Schwendeman was provided with Health Carousel's standard new-hire paperwork via an online portal. Id. ¶ 4. The new-hire paperwork included a “Mutual Agreement to Arbitrate Claims” (“Agreement”), a five-page stand-alone document that requires binding arbitration of certain disputes and waives the right to bring class or collective claims. Id. ¶ 4 & Exh. 1 (Agreement). Execution of the Agreement is optional for Health Carousel employees pursuant to a section titled “An Employee's Right to Opt Out Of Arbitration, ” which states “Arbitration is not a mandatory condition of employment at the Company, and therefore you may submit a statement notifying the Company that you wish to opt out and not be subject to this Agreement.” Agreement at 4. The same section of the Agreement states that “[a]n employee's decision to be bound or not bound by this Agreement is completely voluntary.” Id. Schwendeman electronically signed the Agreement on July 6, 2017 and she never opted out of the Agreement. Id. ¶ 4 & Exh 1 (Agreement).

         Schwendeman filed the complaint in this action on December 19, 2018, asserting putative class and collective claims under California law and the Fair Labor Standards Act. See Compl., ECF 1. On January 8, 2019, Health Carousel's counsel advised Schwendeman's counsel that the parties had signed the Agreement. See Joint Stipulation at 2, ECF 15. The parties thereafter stipulated to dismissal of all class and collective claims without prejudice, and to amendment of the complaint to add a PAGA claim. See Id. Schwendeman filed the operative first amended complaint (“FAC”) on March 11, 2019, asserting a single claim under PAGA. See FAC, ECF 17.

         Schwendeman alleges that Health Carousel engages in numerous practices that violate the California Labor Code. For example, she alleges that Health Carousel provides its traveling employees with stipends for housing, meals, and incidentals, but does not include the value of those stipends in the regular rate of pay when calculating overtime and double time. See FAC ¶¶ 11-17. She also alleges that Health Carousel does not include certain non-discretionary bonus remuneration in the regular rate of pay when calculating overtime and double time, and that wage statements inaccurately show overtime and double time as paid at the base hourly rate. See FAC ¶¶ 19-20. Schwendeman seeks recovery of civil penalties for these Labor Code violations on behalf of herself and other aggrieved employees under PAGA. See FAC ¶ 39.

         The FAC's prayer indicates that the civil penalties sought under PAGA include “the underpaid wages recoverable through Labor Code section 558 and the penalties imposed by Labor Code section 203 recoverable through Labor Code section 1197.1, as well as the amounts recoverable pursuant to Labor Code section 2699(f).” FAC at 7 (Prayer). On September 12, 2019, the California Supreme Court held that “unpaid wages are not recoverable as civil penalties under the PAGA.” ZB, N.A. v. Superior Court of San Diego Cty., 8 Cal. 5th 175');">8 Cal. 5th 175, 193 (2019). The parties thereafter stipulated that “Plaintiff's prayer for ‘unpaid wages recoverable through Labor Code section 558 and the penalties imposed by Labor Code section 203 recoverable through Labor Code section 1197.1' is stricken from the First Amended Complaint.” Joint Stipulation and Order at 3, ECF 29. As a result, the FAC's prayer for civil penalties is limited to those available under California Labor Code § 2699(f).

         Health Carousel contends that the PAGA claim is subject to binding arbitration under the Agreement, and it moves to compel arbitration and dismiss this action. In the course of briefing and arguing the motion to compel, a dispute arose as to which aspects of the motion to compel properly are presented to the Court and which are reserved for the arbitrator. The Agreement delegates to the arbitrator “exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement.” Dalton Decl. Exh. 1 (Agreement) at 1. While the parties agree that certain arguments presented in the briefing fall within this delegation clause, Schwendeman asserts that Health Carousel has waived the right to have the arbitrator resolve those arguments. Health Carousel denies that it has waived its right to enforce the delegation clause. At the Court's requested, the parties submitted supplemental briefing on the waiver issue.

         II. LEGAL STANDARD

         The Federal Arbitration Act (“FAA”) applies to arbitration agreements affecting interstate commerce. 9 U.S.C. §§ 1 et seq. When it applies, the FAA preempts state law rules that conflict with its provisions, as well as “state-law rules that stand as an obstacle to the accomplishment of the FAA's objectives.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341-43 (2011). Under the FAA, contractual arbitration agreements “must be enforced ‘save upon such grounds as exist at law or in equity for the revocation of any contract.'” Newton v. Am. Debt Servs., Inc., 549 Fed. App'x. 692, 693 (9th Cir. 2013) (quoting 9 U.S.C. § 2).

         “Generally, in deciding whether to compel arbitration, a court must determine two ‘gateway' issues: (1) whether there is an agreement to arbitrate between the parties; and (2) whether the agreement covers the dispute.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). “If the response is affirmative on both counts, then the Act requires the court to enforce the arbitration agreement in accordance with its terms.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).

         Although these gateway issues generally are for the court to decide, they “can be expressly delegated to the arbitrator where the parties clearly and unmistakably provide otherwise.” Brennan, 796 F.3d at 1130. For example, the Supreme Court has “recognized that parties can agree to arbitrate ‘gateway' questions of ‘arbitrability,' such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.” Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 68-69 (2010). “When the parties' contract delegates the arbitrability question to an arbitrator, a court may not override the contract.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 529 (2019). “In those circumstances, a court possesses no power to decide the arbitrability issue.” Id. “That is true even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.” Id.

         However, “[t]he right to arbitration, like other contractual rights, can be waived.” Martin v. Yasuda, 829 F.3d 1118, 1124 (9th Cir. 2016). “A determination of whether the right to compel arbitration has been waived must be conducted in light of the strong federal policy favoring enforcement of arbitration agreements.” Id. (internal quotation marks and citation omitted). “Because waiver of the right to arbitration is disfavored, any party arguing waiver of arbitration bears a heavy burden of proof.” Id. (internal quotation marks and citation omitted). “As such, a party seeking to prove waiver of a right to arbitration must demonstrate: (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.” Id. (internal quotation marks, citation, and alteration omitted).

         III. DISCUSSION

         A. Agreement

         The Agreement provides for arbitration of “all claims or controversies, past, present or future, including without limitation, claims arising out of or related to my application for employment, assignment/employment, and/or the termination of my assignment/employment that the Company may have against me or that I may have against the Company. . . .” Agreement at 1. The Agreement specifies that it encompasses “claims for wages or other compensation due . . . and claims for violation of any federal, state or other governmental law, statute, regulation, or ordinance, except claims excluded in the subsection of this Agreement entitled ‘Claims Not Covered By The Agreement.” Id. The subsection “Claims Not Covered By The Agreement” excludes certain types of claims, including claims for workers' compensation benefits, state disability insurance benefits, and unemployment compensation, as well as claims brought in small claims court. Id. The Agreement also waives the right to assert a class or collective action. Id. at 2. The Agreement does not waive the right to assert a representative PAGA claim. See generally Agreement.

         The Agreement contains a delegation clause stating in relevant part that: “The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any ...


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