Wang v. Life Insurance Company of Southwest

          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 ...