Buchsbaum v. Dig. Intelligence Sys.

BERNARDO BUCHSBAUM, individually and on behalf ofall others similar situated, Plaintiff, v. DIGITAL INTELLIGENCE SYSTEMS, LLC, Defendant.

Case No. 20-cv-00706-BAS-AGS

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

December 2, 2020

ORDER:

(1) GRANTING DEFENDANT'S MOTION TO COMPEL ARBITRATION (ECF No. 18);

(2) STAYING CASE; AND

(3) ADMINISTRATIVELY CLOSING ACTION

Presently before the Court is Defendant Digital Intelligence Systems, LLC's motion to compel arbitration. (ECF No. 18.) Plaintiff Bernardo Buchsbaum opposes. (ECF No. 23.) The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the following reasons, the Court GRANTS Defendant's motion to compel arbitration.

I. BACKGROUND

Defendant "provides temporary staffing and Information Technology ('IT') consulting services to companies." (Compl. ¶ 2, ECF No. 1-7.) Plaintiff worked for Defendant as a Technical Recruiter "from approximately August 2018 until June 2019" as "an hourly, non-exempt employee." (Id. ¶ 13; see also Buchsbaum Decl. ¶ 2, ECF No. 23-2.) In doing so, Plaintiff supported one of Defendant's clients, T-Mobile USA, Inc. (See Compl. ¶¶ 15, 22(b).) As a condition of his employment with Defendant, Plaintiff signed an Employee Arbitration Agreement on August 13, 2018. (Buchsbaum Decl. ¶¶ 3-4.) The Arbitration Agreement provides:

Employee agrees that any controversy or claim arising out of, or relating to, Employee's employment relationship with [Defendant] or the termination of that relationship, must be submitted for non-binding mediation before a third-party neutral and, if necessary, for final and binding resolution by a private and impartial arbitrator, to be jointly selected by Employee and [Defendant].

(Arbitration Agreement § 1, Duckwitz Decl. ¶ 2, Ex. 1, ECF No. 18-1.) Further, the Arbitration Agreement contains a class action waiver:

Any claim must be brought in the respective party's individual capacity, and not as a plaintiff or class member in any purported class, collective, representative, multiple plaintiffs, or similar proceeding ("Class Action"). The parties expressly waive any ability to maintain any Class Action in any forum . . . . The parties understand that they are waiving their right to litigate through a court to have a judge or jury decide their case, and to be a party to a class, collective, or representative action.

(Id. § 3.)

On March 4, 2020, Plaintiff filed this action in San Diego County Superior Court. (Compl. 1.) He brings various putative class claims against Defendant for wage and hour violations under California state law, including claims regarding overtime compensation and meal and rest breaks.¹ (Id. ¶¶ 31-75.) Defendant answered the Complaint on April 9, 2020. (Answer, ECF No. 1-3.) The Answer does not mention arbitration. (See id. ¶¶ 1-17.)

On April 13, 2020, Defendant removed this action under the Class Action Fairness Act. (Notice of Removal ¶ 4.) Like its Answer, Defendant's Notice of Removal does not mention arbitration. (See id. ¶¶ 1-10.)

On June 8, 2020, Defendant filed this motion raising arbitration for the first time. (Mot., ECF No. 18.) In a declaration accompanying the motion, Defendant's counsel states she received Plaintiff's personnel records from Defendant around May 14, 2020. (Kearns Decl. ¶ 2, ECF No. 18-2.) Before then, counsel believed Plaintiff had signed an arbitration agreement with T-Mobile, but not Defendant. (Id.) Defendant's counsel thus first confirmed Plaintiff had electronically signed the Arbitration Agreement and then brought this motion after conferring with Plaintiff's counsel. (Id. ¶ 3.) The motion is fully briefed. (Opp'n, ECF No. 23; Reply, ECF No. 24.)

II. LEGAL STANDARD

The Federal Arbitration Act ("FAA") makes agreements to arbitrate "valid, irrevocable, and enforceable." 9 U.S.C. § 2. The FAA permits a "party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States District Court . . . for an order directing that . . . arbitration proceed in the manner provided for in [the arbitration] agreement." Id. § 4. Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration. Id. "A party seeking to compel arbitration has the burden under the FAA to show (1) the existence of a valid, written agreement to arbitrate; and, if it exists, (2) that the agreement to arbitrate encompasses the dispute at issue." Ashbey v. Archstone Prop. Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015).

III. ANALYSIS

There is no question in this case that an agreement to arbitrate exists. And the Arbitration Agreement's broad terms encompass Plaintiff's wage and hour claims. (Arbitration Agreement §§ 1, 3.) Plaintiff, rather, contests enforcement of the Arbitration Agreement on two grounds. First, Plaintiff argues Defendant waived its right to seek arbitration. (Opp'n 10:5-12:28.) Second, Plaintiff argues the Arbitration Agreement is unconscionable. (Id. 13:1-21:4.) The Court will consider each ground in turn.

A. Waiver

Plaintiff argues Defendant waived its right to seek arbitration because Defendant delayed in bringing this motion, acted inconsistently with its right to arbitration, and prejudiced Plaintiff through its lackadaisical conduct. (Opp'n 10:19-12:28.) A party seeking to prove waiver must demonstrate: "(1) knowledge of an existing right to compel arbitration; (2) intentional acts inconsistent with that existing right; and (3) prejudice to the person opposing arbitration from such inconsistent acts." Newirth by & through Newirth v. Aegis Senior Comtys., LLC, 931 F.3d 935, 940 (9th Cir. 2019) (citing Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)). Because waiver of a contractual right to arbitration is not favored, "any party arguing waiver of arbitration bears a heavy burden of proof." Fisher, 791 F.2d at 694.

Plaintiff demonstrates the first requirement for waiver but not the other two. On the first requirement, the Court agrees that Defendant had knowledge of the right to arbitrate. Defendant drafted the Arbitration Agreement. And the agreement was kept in Defendant's personnel records where it was retrieved by Defendant's Human Resources Director. (Duckwitz Decl. ¶¶ 2-3.) Therefore, although Defendant's counsel may have been unaware of the Arbitration Agreement for several months, Defendant itself had "knowledge of an existing right to compel arbitration." See Newirth, 931 F.3d at 940.

Advancing to the second requirement, Plaintiff does not show Defendant took "intentional acts inconsistent with" its existing right to arbitrate. See Newirth, 931 F.3d at 940. "There is no concrete test to determine whether a party has engaged in acts that are inconsistent with its right to arbitrate." Martin v. Yasuda, 829 F.3d 1118, 1125 (9th Cir. 2016). Instead, courts consider whether the totality of the defendant's actions "indicate a conscious decision . . . to seek judicial judgment on the merits of [the] arbitrable claims, which would be inconsistent with a right to arbitrate." Id. In other words, "a party acts inconsistently with exercising the right to arbitrate when it (1) makes an intentional decision not to move to compel arbitration and (2) actively litigates the merits of a case fora prolonged period of time in order to take advantage of being in court." Newirth, 931 F.3d 935 at 941.

Considering the case law, this second element is not met. Defendant moved to compel arbitration a little over three months after Plaintiff filed this action in state court. This delay does not support a finding of waiver. See, e.g., Chartwell Staffing Servs. Inc. v. Atl. Sols. Grp. Inc., No. 8:19-cv-00642-JLS-JDE, 2020 WL 620294, at *9 (C.D. Cal. Jan. 9, 2020) (finding a three-month delay in filing a motion to compel arbitration "wholly insufficient to support a finding of waiver" and noting that when finding waiver, "the Ninth Circuit identified delays ranging from nine to eighteen months" (citing Kelly v. Pub. Util. Dist. No. 2 of Grant Cty., 552 F. App'x 663, 664 (9th Cir. 2014))).²

That said, Plaintiff points to Defendant's failure to mention arbitration in its Answer and Notice of Removal. (Opp'n 11:8-19.) Plaintiff states Defendant similarly did not raise the prospect of arbitration at the parties' Rule 26(f) conference. (Id. 11:20-12:4.) This conduct favors Plaintiff's waiver claim, but it is not enough. Plaintiff bears a "heavy burden" in demonstrating waiver, and the totality of Defendant's actions do not rise to a "conscious decision . . . to seek judicial judgment on the merits of [the] arbitrable claims." See Martin, 829 F.3d at 1124-25. Although Defendant may have failed to plead its right to arbitrate, Defendant has not pursued a decision on the merits in this case before moving to compel arbitration. See id. at 1125-26 (collecting cases). Nor has there been any meaningful litigation or significant discovery. (See ECF Nos. 1 to 17.) Therefore, Plaintiff does not show the second element for waiver is satisfied. Cf. Martin, 829 F.3d at 1126 (upholding a waiver determination where defendants "spent seventeen months litigating the case," including by "filing a motion to dismiss on a key merits issue" and engaging in discovery).

In the same vein, Plaintiff does not satisfy the final waiver element: prejudice. "To prove prejudice, plaintiffs must show more than 'self-inflicted' wounds that they incurred as a direct result of suing in [] court contrary to the provisions of an arbitration agreement." See Martin, 829 F.3d at 1126. Indeed, prejudice results only "[w]hen a party has expended considerable time and money due to the opposing party's failure to timely move for arbitration and is then deprived of the benefits for which it has paid by a belated motion to compel." Id. at 1127.

Plaintiff argues...