Ridgeway v. Nabors Completion & Prod. Servs. Co.

139 F.Supp.3d 1084

Brandyn Ridgeway and Tim Smith on behalf of themselves and all others similarly situated and the general public, Plaintiff,

v.Nabors Completion & Production Services Co., a Delaware corporation; City of Long Beach, a California municipality; Tidelands Oil Production Company, a Texas General Partnership, Defendants.

Case No. CV 15-03436 DDP (VBKx)

United States District Court, C.D. California.

Signed October 13, 2015

Judith L. Camilleri, Richard E. Donahoo, Sarah Louise Kokonas, Donahoo and Associates, Tustin, CA, for Plaintiff.

Kimberly Ann Chase, Matthew E. Costello, Tamara I. Devitt, Haynes and Bonne LLP, Costa Mesa, CA, Alexander R. Stevens, Haynes and Boone LLP, Dallas, TX, Douglas A. Wickham, Heather Shook, Littler Mendelson PC, Los Angeles, CA, R. Brian Dixon, Littler Mendelson, San Francisco, CA, for Defendants.

ORDER DENYING DEFENDANTS' MOTIONS TO COMPEL ARBITRATION AND DISMISS OR STAY

DEAN D. PREGERSON, United States District Judge

Presently before the Court are Defendants' Motions to Compel Arbitration. (Dkt. Nos. 26, 28.) Having considered the parties' submissions and heard oral argument, the Court adopts the following order.

I. BACKGROUND

Plaintiffs Brandyn Ridgeway ("Ridgeway") and Tim Smith ("Smith"; collectively, "Plaintiffs") brought this class action wage and hour employment dispute against their former employer, Defendant Nabors Completion and Production Services, Co. ("Nabors"), as well as unknown Doe defendants. (First Am. Compl. ¶ 1-2 ("FAC").) Plaintiffs allege Nabors failed to pay prevailing wages on public works, violated California Labor Code sections 203 and 226(a), and violated California Business & Professions Code section 17200. (Id. at 11-17.) Plaintiffs have also alleged a declaratory relief cause of action against Nabors and Defendants City of Long Beach ("Long Beach") and Tidelands Oil Production Company ("Tidelands"), asking the court to find that the work Plaintiffs did for Nabors was "public work" because Nabors was a subcontractor of Tidelands, who had contract with Long Beach. (Id. at 14-15.)

Plaintiffs each signed an Application for Employment ("Application") that stated "I acknowledge that a copy of the Company's Dispute Resolution Program was available for my review at the location where I submitted this application ... if I refuse to sign below ... my application will not be considered for employment." (Decl. Michelle Martinez ISO Def. [Nabors] Mot. Compel Arbitration, Dismiss Class & Representative Action Claims, & Stay Proceedings ("Martinez Decl.") Ex. A, B.)

In addition, Plaintiffs each signed an Employee Acknowledgment ("Acknowledgment") that states "I have received a copy of the Nabors Dispute Resolution Program .... By my signature below, I acknowledge and understand that I am required to adhere to the Dispute Resolution Program and its requirement for submission of disputes to a process that may include mediation and/or arbitration." (Id. )

Ridgeway signed the Application in April 2011 and the Acknowledgment in May 2011. (Decl. Pl. Brandyn Ridgeway ("Ridgeway Decl.") Exs. A, B.) When Ridgeway signed the Application, he did not read the document and he understood that his signature was required to be considered for employment. (Ridgeway Decl. ¶ 16.) Nabors required Ridgeway to sign a "pile of documents," including the Acknowledgment, during safety training as a condition of employment. (Id. ¶¶ 12-13.) Ridgeway did not review the documents and to his knowledge was not provided with a copy of Nabors's Dispute Resolution Program ("arbitration agreement") either when he signed the Acknowledgment or later during his employment. (Id. ¶¶ 16-18; see also Martinez Decl. Ex. C (arbitration agreement).)

Smith signed the Application in January 2012 and the Acknowledgment in February 2012. (Decl. Pl. Tim Smith ("Smith Decl.") Exs. A, B.) Nabors required Smith to sign the "several page" Application during a meeting with Nabors's Human Resources as a condition of employment. (Smith Decl. ¶¶ 9-13.) When Smith signed the Application, he did not read the documents and he understood that his signature was required to be considered for employment. (Id. ¶ 14.) Smith believes he signed the Acknowledgment during a safety training when he was presented with a "number of additional documents to sign" during class. (Id. ¶¶ 16, 18.) To his knowledge, Smith never received a copy of the arbitration agreement either when he signed the Acknowledgment or later during his employment. (Id. ¶ 18.)

The arbitration agreement is divided into two parts. First is an introductory section titled "The Nabors Dispute Resolution Program" and second is a description of the rules of arbitration titled "Nabors Dispute Resolution Rules." (Martinez Decl. Ex. C.)

Defendants have filed motions to compel arbitration and to dismiss or stay Plaintiffs' claims.

II. LEGAL STANDARD

Under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. , a written agreement requiring controversies between the contracting parties to be settled by arbitration is "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. A party to an arbitration agreement may petition a district court with jurisdiction over the dispute for an order directing that arbitration proceed as provided for in the agreement. Id. § 4.

The FAA reflects a "liberal federal policy favoring arbitration agreements" and creates a "body of federal substantive law of arbitrability." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The FAA therefore preempts state laws that "stand as an obstacle to the accomplishment of the FAA's objectives." AT & T Mobility LLC v. Concepcion , 563 U.S. 333, 131 S.Ct. 1740, 1748, 179 L.Ed.2d 742 (2011). This includes "defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue," as well as state rules that act to fundamentally change the nature of the arbitration agreed to by the parties. Id. at 1746, 1750 (California rule allowing consumers to invoke class arbitration post hoc was neither "consensual" nor the kind of arbitration envisioned by the FAA).

On the other hand, "[t]he principal purpose of the FAA is to ensure that private arbitration agreements are enforced according to their terms." Id. at 1748 (emphasis added) (internal quotation marks and brackets omitted). Moreover, parties to an arbitration agreement typically cannot bind non-parties to arbitrate. See E.E.O.C. v. Waffle House, Inc. , 534 U.S. 279, 293–94, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002). Thus, an individual cannot contract away the government's right to enforce its laws, even if the government seeks to recover "victim-specific" remedies such as punitive damages. Id. at 294–95, 122 S.Ct. 754.

III. DISCUSSION

The main thrust of this contested motion to compel arbitration is Plaintiffs' argument that the arbitration agreement is unenforceable because it is unconscionable. Plaintiffs also raise evidentiary objections to the proffered arbitration agreement in Exhibit C of the Martinez declaration. (Pls. Opp'n to Nabors at 1, 5-7; Pls. Opp'n to Tidelands/Long Beach at 2, 9-11.) In addition, Defendants Tidelands and Long Beach argue that they can enforce the arbitration agreement despite being nonsignatories to that agreement. (Def. Tidelands/Long Beach Mot. Compel Arbitration at 12-17; Tidelands/Long Beach Reply at 3-4.) Because the question of unconscionability determines the ultimate outcome here, the Court assumes for the sake of argument that Defendants Tidelands and Long Beach can enforce the arbitration agreement and that the agreement provided in Exhibit C is properly before the Court.

A. Unconscionability of the Arbitration Contract

The FAA as well as federal and California case law recognize the standard contract defense of unconscionability is applicable to arbitration agreements. See 9 U.S.C. § 2 (where "savings clause" states that arbitration agreements are to be enforced according to their terms "save upon such grounds as exist at law or in equity for the revocation of any contract"); Chavarria v. Ralphs Grocery Co. , 733 F.3d 916, 921 (9th Cir.2013) (finding employment arbitration agreement unconscionable); Armendariz v. Found. Health Psychcare Servs., Inc. , 24 Cal.4th 83, 114–21, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000) (same). Plaintiffs here allege that the arbitration agreement is unconscionable and thus unenforceable. (Pls. Opp'n to Nabors at 10-19; Pls. Opp'n to Tidelands/Long Beach at 13-23.)

In California, unconscionability has two elements: procedural unconscionablility and substantive unconscionablility. Armendariz , 24 Cal.4th at 114, 99 Cal.Rptr.2d 745, 6 P.3d 669. Both elements must be present for a contract to be unconscionable, but the elements need not be present to the same degree—there is a sliding scale between the two where more of one can make up for less of the other. Id.

1. Procedural Unconscionability

Here, Plaintiffs argue that there is procedural unconscionability because they did not receive a copy of the arbitration agreement but were required to sign acknowledgments of receiving and agreeing to the arbitration agreement as a condition for employment. (Pls. Opp'n to Nabors at 11; Pls. Opp'n to Tidelands/Long Beach at 14.) Further, they argue that there was no opportunity to negotiate the terms of the contract. (Id. )

Defendants argue that there is no procedural unconscionability because employers can require adhesive arbitration agreements to be included in employment contracts, as was done here, and because Plaintiffs signed acknowledgments stating that they did receive copies of the arbitration agreement. (Def. Nabors Reply at 15; Defs. Tidelands/Long Beach Mot. Compel Arbitration at 19; Defs. Tidelands/Long Beach Reply at 6-7.)

Procedural unconscionability "concerns the manner in which the contract was negotiated and...