Middleton v. Halliburton Energy Servs.

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ROBERT MIDDLETON, Plaintiff, v. HALLIBURTON ENERGY SERVICES, INC., and DOES 1-100, Defendants.

No. 1:19-cv-01747-ADA-CDB

United States District Court, E.D. California

January 20, 2023

ORDER DENYING MOTION TO COMPEL ARBITRATION

(ECF NO. 23)

This matter is before the Court on Defendant Halliburton Energy Services, Inc.'s motion to compel arbitration and dismiss with prejudice. (ECF No. 23.) For the reasons explained below, the Court denies Defendant's motion.

BACKGROUND

A. Procedural History

On December 16, 2019, Plaintiff Robert Middleton filed a Complaint under diversity jurisdiction in this Court against Defendant Halliburton Energy Services, Inc. and Does 1 to 100, inclusive, alleging six causes of action: (1) failure to pay overtime and double time wages (Cal. Lab. Code §§ 510, 1194); (2) failure to pay proper regular rate of pay;^[1] (3) failure to timely pay wages due at termination (Cal. Lab. Code §§ 201, 203); (4) failure to comply with itemized employee statement provisions (Cal. Lab. Code § 226) (5) failure to provide rest periods or compensation in lieu thereof (Cal. Lab. Code § 226.7); and (6) Violation of Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200-08). (ECF No. 1.) Plaintiff filed notice of these alleged violations with the California Labor Workforce Development Agency (LWDA) and the Department of Industrial Relations on December 16, 2019. (ECF No. 7 at 7.) Over 65 days passed from Plaintiff's notice, and Defendant did not cure the violations. (Id.) Plaintiff then filed his First Amended Complaint (FAC) on February 21, 2020, removing his former fifth cause of action and adding two new causes of action. (Id.) Plaintiffs new, seventh cause of action (Cause No. 7) seeks Private Attorney General (PAGA) penalties under California Labor Code Sections 2699 and 2699.3, and Plaintiff's new eighth cause of action seeks civil penalties and equitable relief for his formerly alleged causes of action pursuant to Section 558. (Id.) Plaintiff prays for attorneys fees and equitable relief. (Id. at 9.)

On March 27, 2020, the parties filed a Joint Stipulation for Arbitration and Stay of the Action (Stipulation). (ECF No. 10.) In the Stipulation, the parties agreed to “dismiss all pending claims except for Cause No. 7-‘Private Attorney General Penalties Under California Labor Code Section 2699'” so that the other claims could be arbitrated. (Id. at 2.) The Stipulation created “a mutual agreement mandating all claims, but for Cause No. 7, be resolved in arbitration.” (Id.) The parties stipulated that Plaintiff would “pursue his claims on an individual basis only in arbitration pursuant to the terms of the [Arbitrated Agreement,]” to a “stay of this action pending the outcome of arbitration[,]” and requested “the Court reserve jurisdiction of Cause No. 7.” (Id.) Finally, the parties stipulated Defendant would not provide a responsive pleading as Plaintiff's FAC was not served pursuant to Federal Rule of Civil Procedure 4. (Id.) This Court issued an Order giving effect to the Stipulation on March 31, 2020; staying the action, retaining jurisdiction over Cause No. 7; and directing the parties to notify the Court of the conclusion of arbitration within 30 days following the issuance of the arbitrator's decision. (ECF No. 11 at 2.)

The Court issued a Minute Order on February 12, 2021, nearly a year later, directing the parties to inform the Court of the status of the action due to the length of the stay. (ECF No. 12.) The Parties responded with a Joint Status Report, stating the arbitrator set a starting date for January 24, 2022, for a week of arbitration. (ECF No. 13.) The parties estimated the action would need to be stayed for only 90 days after arbitration concluded. (Id.)

The Court issued a second Minute Order, upon sua sponte review of the record, on August 8, 2022, directing the parties to inform the Court whether a further stay of the action was warranted and the length of any such continuance. (ECF No. 16.) The parties submitted a second Joint status Report stating arbitration had not concluded and three additional hearings were set for August 30, 31, and September 1, 2022. (ECF No. 17.) The parties did not anticipate an arbitration award prior to November 1, 2022. (Id.) Defendant substituted representation on August 23, 2022 (ECF No. 18), which the Court approved September 13, 2022 (ECF No. 21).

On November 10, 2022, Defendant filed this Motion to Compel. (ECF No. 23.) Defendant requests the Court split Cause No. 7 in two, compelling Plaintiff's individual PAGA action to arbitration and dismissing, or staying, Plaintiff's representative PAGA action. (Id.) Plaintiff opposed November 21, 2022. (ECF No. 26.) Defendant replied December 1, 2022. (ECF No. 27.) B. Factual Background

Plaintiff's FAC alleges the following: Defendant employed Plaintiff for over four years until December 5, 2019, as a non-exempt directional driller. (ECF No. 7 at 2.) Defendant misclassified him as exempt. (Id. at 6.) Defendant paid Plaintiff a normal salary, hourly wages, and daily flat sum encompassing his bonuses and car allowance; however, Defendant failed to calculate Plaintiff's daily bonus, car allowance, overtime, and vacation pay into his regular rate of pay. (Id. at 2.) Plaintiff regularly worked overtime and double time. (Id. at 3.) Plaintiff was not paid all due wages at his termination on December 5, 2019. (Id. at 4.) The paystubs Plaintiff received from Defendant failed to state the pay rate he received or was entitled to receive. (Id. at 5.) These practices allowed Defendant to save hundreds of thousands of dollars per year in labor costs and to underbid and undercut its competitors that complied with California law. (Id. at 6.) On behalf of similarly aggrieved employees and himself, Plaintiff alleges Defendant committed seven PAGA violations and seeks penalties. (Id. at 8.) Thirty to fifty employees would be encompassed in the statutory period and the seven alleged PAGA violations are worth approximately $1,400.00 in penalties per employee per pay period since 2018. (Id.)

C. The Arbitration Agreement

This motion relies on the parties' executed arbitration agreement. (ECF No. 23-4.) The Halliburton Dispute Resolution Plan (Agreement) mandates the parties “finally and conclusively resolve[] through arbitration” all “disputes”^[2] as defined. (Id. at 9.) The Agreement requires Defendant's employees to relinquish their legal right to bring any form of class action or representative action, stating, “Each Dispute shall be arbitrated on an individual basis. Neither the Company nor any Employee or Applicant may pursue any Dispute on a class action, collective action or consolidated basis or in a representative capacity on behalf of other persons or entities who are claimed to be similarly situated, or participate as a class member in such a proceeding unless all Parties to the Dispute consent in writing.” (Id. (emphasis added).) The Agreement states that it, “does not apply to claims . . . that, as a matter of law, cannot be arbitrated.” (Id.)

LEGAL STANDARDS

A. Motion to Compel Arbitration

The FAA governs arbitration agreements and affords parties the right to obtain an order directing arbitration proceed in the manner provided for in the agreement. 9 U.S.C. §§ 2, 4. The operative provision of the FAA states: “A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract or as otherwise provided in chapter 4.” 9 U.S.C. § 2. The Court has “described this provision as reflecting both a ‘liberal federal policy favoring arbitration,' [citation], and the ‘fundamental principle that arbitration is a matter of contract,' [citation]. . . The final phrase of § 2, however, permits arbitration agreements to be declared unenforceable ‘upon such grounds as exist at law or in equity for the revocation of any contract.' This saving clause permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,' but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011).

To decide a motion to compel arbitration, the Court must determine: “(1) whether a valid agreement to arbitrate exists [within the contract] and, if it does, (2) whether the agreement encompasses the dispute at issue.” Boardman v. Pacific Seafood Group, 822 F.3d 1011 1017 (9th Cir. 2016) (brackets in original)). “Arbitration is a matter of contract, and the FAA requires courts to honor parties' expectations.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 351 (2011). “[C]ourts must place arbitration agreements on an equal footing with other contracts, [citation], and enforce them according to their terms.” (Id. at 339.) Parties may use general contract defenses to invalidate an agreement to arbitrate. See id. The Court should order arbitration of a dispute only where satisfied neither the agreement's formation nor enforceability or applicability to the dispute is in issue. See Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 299-300 (2010). “Where a party contests either or both matters, ‘the court' must resolve the disagreement” (id.) because “‘[[a]] party cannot be required to submit to...