United States District Court, N.D. California
ORDER DENYING MOTION TO COMPEL ARBITRATION OR IN THE
ALTERNATIVE TO TRANSFER ACTION PURSUANT TO SECTION 1404(A);
SETTING CASE MANAGEMENT CONFERENCE DKT. NO. 55
Yvonne
Gonzalez Rogers, United States District Court Judge.
Plaintiffs
Youxiang Eileen Wang and Dalton Chen bring the action herein
on behalf of themselves and a proposed class alleging claims
for: fraud; conspiracy; endless chain scheme in violation of
California Penal Code section 327 and Civil Code section
1689.2; violation of California's Unfair Competition Law,
Business & Professions Code section 17200; and violation
of New Jersey Consumer Fraud Act, Statutes Ann. 56:8-3 et
seq. Plaintiffs filed their First Amended Complaint on
April 30, 2019. (Dkt. No. 43.)
Defendants
Premier Financial Alliance, Inc. (“PFA”), David
Carroll, Jack Wu, Lan Zhang, Bill Hong, Rex Wu, AJW
Production, LLC, and The Consortium Group, LLC, move to
compel arbitration of all claims against PFA or, in the
alternative, to transfer the action to the Northern District
of Georgia, Atlanta Division, pursuant to 28 U.S.C. §
1404(a). (Dkt. No. 55.) Defendants contend that plaintiffs,
as PFA Associates, had to agree affirmatively to the terms of
PFA's Associate Marketing Agreement (“AMA”)
which includes provisions for mandatory arbitration of
disputes, a Georgia choice of law clause, and a consent to
venue and jurisdiction in Georgia.
The
Court having thoroughly reviewed the briefing, admissible
evidence, and other papers filed in support of and in
opposition to the motion, having heard oral argument on
August 20, 2019, and for the reasons stated herein,
Orders that the motion to compel arbitration
is Denied and the motion to transfer venue
is likewise Denied for the reasons stated
herein.
II.
Motion To Compel Arbitration
A.
Legal Framework
Under
the Federal Arbitration Act (the “FAA”), a
district court may stay judicial proceedings and compel
arbitration of claims covered by a written and enforceable
arbitration agreement. 9 U.S.C. § 3. A party may bring a
motion in the district court to compel arbitration. 9 U.S.C.
§ 4. In ruling on the motion, the Court's role is
typically limited to determining whether: (i) an agreement
exists between the parties to arbitrate; (ii) the claims at
issue fall within the scope of the agreement; and (iii) the
agreement is valid and enforceable. Lifescan, Inc. v.
Premier Dibetic Servs., Inc., 363 F.3d 1010, 1012 (9th
Cir. 2004).
Arbitration
is a matter of contract and the existence of a contract must
be established before arbitration is ordered. AT&T
Tech., Inc. v. Commc'n Workers of Am., 475 U.S. 643,
648 (1986); accord Sanford v. MemberWorks, Inc., 483
F.3d 956, 962 (9th Cir. 2007) (“Issues regarding the
validity or enforcement of a putative
contract mandating arbitration should be referred to an
arbitrator, but challenges to the existence of a
contract as a whole must be determined by the court prior to
ordering arbitration.”) (emphasis in original). While
the federal policy strongly favoring arbitration requires
that doubts concerning the scope of arbitrable
issues be resolved in favor of arbitration, such policy does
not apply to questions of whether a particular party is
bound by an arbitration agreement, which is a matter
of contract law. Rajagopalan v. NoteWorld, LLC, 718
F.3d 844, 846-47 (9th Cir. 2013) (citing cases).
B.
Background
PFA
contends that all associates, including plaintiffs Wang and
Chen, are required to complete an online application and must
consent to the terms of the AMA. More specifically, PFA
submits the declaration of Kelly Martin, PFA's office
manager, who avers that PFA applicants must scroll through
the entire AMA, click a checkbox next to the statement
“I accept the terms and conditions, ” and
electronically sign their name at the end of the AMA.
(Declaration of Kelly Martin, Dkt. No. 55-1, at ¶¶
4-6, 15-17 and Exh. A at 8.) By clicking this check box and
electronically signing their names, applicants affirmatively
consent to the terms and conditions set forth in the AMA.
(Id. at ¶¶ 15-16.)
Martin
avers that Exhibit A to her declaration is a compilation of
screenshots of the version of PFA's website that was in
use continuously between 2017 and 2019, when plaintiffs
herein joined PFA, and thus shows the application process PFA
associates were required to complete. (Id.
¶¶ 5, 7, 15-17.) The first part of the application
process is a series of blank boxes to be filled with the
associate's personal and contact information as well as
the “upline” referring/recruiting associate's
PFA identification number. (Id. Exh. A at 1-2.) At
the end of this series of blank boxes is a clickable button
reading “continue.” (Id.)
The
second part of the application process is the “Premier
Financial Alliance, Inc. Associate Marketing Agreement”
which includes 14 sections covering the terms of the
AMA.[1]
Section 2, the portion upon which defendants rely to compel
arbitration here, provides:
2. Covenants of the Associate
The Associate agrees not to represent himself as an employee,
owner, partner or agent of PFA. The Associate agrees not to
present himself to third parties as one who has the authority
to make or execute contracts, agreements, covenants or
obligations on behalf of PFA. The Associate agrees to be
appointed and coded under PFA's contracts with its
affiliated insurance companies. The Associate agrees to
comply with all local, state, federal and international
statutes, laws, ordinances and regulations in conducting his
business under this Agreement. The Associate agrees that he
will not represent PFA membership as a business opportunity
nor will he represent that PFA members will be compensated
based on the number of persons they recruit to join PFA. The
Associate agrees to be solely responsible for payment of all
federal, state and local taxes based on business, sales or
income obtained under this agreement. (This includes, but is
not limited to, income taxes, payroll taxes, self-employment
taxes, unemployment taxes, sales taxes, franchise taxes,
intangible taxes and personal property taxes.) The Associate
agrees not to institute any legal proceedings against PFA;
but, instead, shall submit any and all disputes with PFA, its
officers, directors, employees and associates to binding
arbitration pursuant to the rules of the American Arbitration
Association. The Associate agrees to comply with all
policies, procedures, rules, regulations and guidelines of
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