Tovar v. GC Servs. Ltd. P'ship

ORDER ON DEFENDANT'S MOTION TO COMPEL ARBITRATION

[Doc. No. 8]

Hon. Cathy Ann Bencivengo, United States District Judge

This matter comes before the Court on Defendant GC Services Limited Partnership's (“Defendant”) motion for an order compelling arbitration and dismissing or staying this action. [Doc. No. 8.] The motion has been fully briefed and the Court deems it suitable for determination on the papers submitted and without oral argument. See CivLR 7.1(d)(1). For the reasons set forth below, the motion to compel arbitration is GRANTED.

I. Background

Plaintiff Sheila Tovar (“Plaintiff”) was employed by Defendant in California as an hourly non-exempt employee from about August 3, 2015 until April 28, 2021. [Doc. No. 1-2 ¶ 4.] Plaintiff claims that during her employment, Defendant failed to pay her all wages and provide all meal and rest periods required under California law. [Id. ¶¶ 13-33.]

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Plaintiff also alleges that Defendant failed to indemnify her for losses and expenditures incurred as part of her employment. [Id. ¶¶ 34-39.] Finally, Plaintiff claims that Defendant failed to timely pay her earned wages both during and after her employment and failed to provide her with accurate wage statements. [Id. ¶¶ 40-46.]

In her declaration, Plaintiff attests that while at work on December 15, 2015, her manager required her to log onto a platform called Peoplesoft and sign a document titled “Mutual Agreement for Dispute Resolution” (the “Agreement”) by the end of the day. [Doc. No. 11 ¶ 4.] Plaintiff contends that she felt pressured to sign the document and return to work as quickly as possible, so she electronically signed after briefly reviewing it but not fully understanding its terms. [Id.] Plaintiff claims she was again presented with the same, albeit slightly modified, document in September 2020 and instructed by her manager to electronically sign it under similar circumstances. [Id. ¶ 6.] Plaintiff electronically signed the second version of the Agreement on September 25, 2020. [Id. ¶ 5.]

On July 1, 2021, Plaintiff filed a putative class action complaint against Defendant in state court alleging various violations of California's Labor Code and Unfair Competition Law. [Doc. No. 1-2.] Defendant removed the matter to this Court on September 10, 2021 based on diversity jurisdiction under the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332(d)(2), (d)(5)(B). [Doc. No. 1.]

On October 18, 2021, Defendant filed a motion to compel arbitration on an individual basis and dismiss Plaintiff's class action complaint, or alternatively stay the action pending arbitration. [Doc. No. 8.] Defendant contends that the Agreement, signed by Plaintiff on December 15, 2015 and (as modified) on September 25, 2020 [Doc. No. 8-1 at 9-10, 13-15], encompasses the present dispute and therefore, the parties should be compelled to arbitration. Defendant also contends that the Agreement delegates threshold questions of arbitrability to an arbitrator. [Doc. No. 8 at 10-11.] Thus, Defendant argues that the arbitrator should determine whether Plaintiff's claims are subject to arbitration in the first instance. [Id.] The motion is now fully briefed and ripe for resolution.

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II. Legal Standard

The Federal Arbitration Act (“FAA”) governs the enforceability of arbitration agreements in contracts involving commerce. See 9 U.S.C. § 1 et seq. The FAA makes such written arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. “Because arbitration is fundamentally a matter of contract, the central or primary purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms.” Momot v. Mastro, 652 F.3d 982, 986 (9th Cir. 2011) (internal quotation marks and citation omitted).

Under the FAA, an aggrieved party to a written arbitration agreement “may petition any United States district court . . . for an order directing that such arbitration proceed in the manner provided for in [the arbitration] agreement.” 9 U.S.C. § 4. “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). Upon such a showing, the FAA “mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). The scope of an arbitration clause must be interpreted liberally, and “as a matter of federal law, any doubts concerning the scope of arbitrable disputes should be resolved in favor of arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Accordingly, a motion to compel arbitration “should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960).

III. Analysis

Defendant contends that the present dispute is encompassed by the Agreement

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between the parties, which Plaintiff signed on December 15, 2015 and again (as a slightly modified version) on September 25, 2020. [Doc. No. 8-1 at 9-10, 13-15.] The September 2020 version of the Agreement states in relevant part:

1(A). Disputes Must be Arbitrated. [A]ll disputes, claims, or complaints that involve legally protected rights ("Claims") that you have now or may have in the future against the Company, or that the Company has now or at any time in the future may have against you, arising out of and/or directly or indirectly related to your application for employment with the Company, and/or your employment with the Company, and/or the terms and conditions of your employment with the Company, and/or the termination of your employment with the Company (collectively "Covered Claims") are subject to arbitration pursuant to the terms of this Agreement and will be resolved by arbitration and NOT by a court or jury. Covered Claims include, but are not limited to, any dispute about the formation, scope, interpretation, applicability, validity existence, enforcement, or extent of arbitrability of or under this Agreement, claims relating to breach of contract tort claims, wrongful discharge claims, discrimination and/or harassment claims, retaliation claims, claims for overtime wages, leaves, paid time off, sick days, compensation, penalties or restitution, claims under the Fair Labor Standards Act ("FLSA"), Title VII of the Civil Rights Act of 1964 ("Title VII"), the Age Discrimination in Employment Act ("ADEA"), the Worker Adjustment and Retraining Notification Act ("WARN"), the Equal Pay Act ("EPA"), the Americans With Disabilities Act ("ADA"), the Family and Medical Leave Act ("FMLA"), the Uniformed Services Employment and Reemployment Rights Act ("USERRA"), and any other claim under any federal, state, or local statute, constitution, regulation, rule, ordinance, or common law. THE PARTIES HEREBY FOREVER WAIVE AND GIVE UP THE RIGHT TO HAVE A JUDGE OR A JURY DECIDE ANY COVERED CLAIMS. This Agreement to arbitrate applies to all Covered Claims, including any Covered Claims based on, arising out of, or which arose out of or in any way relate to acts and omissions that occurred before you and the Company entered into this Agreement.

[Id. at 13.] Defendant contends that the Court should enforce the Agreement, including

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the “delegation provision” delegating the determination of arbitrability to an arbitrator, and compel Plaintiff to individually arbitrate her claims. Plaintiff counters that the Agreement, including the delegation provision, is unconscionable under California law and therefore unenforceable.

A. Threshold Question of Arbitrability

“The question of whether the parties have submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability,' is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (emphasis in original) (internal quotations omitted). Defendant contends that Paragraph 1(A) above contains a “clear and unmistakable delegation clause that requires an arbitrator to decide the threshold issue of the enforceability of the [Agreement] and to ultimately decide any disputes Plaintiff raises regarding enforceability.” [Doc. No. 8 at 11.] Specifically, Defendant relies on the language stating that “Covered Claims” subject to arbitration include “any dispute about the formation, scope, interpretation, applicability, validity, existence, enforcement, or extent of arbitrability of or under this Agreement.” [Doc. No. 8-1 at 13.] Plaintiff argues that the delegation clause is procedurally and substantively unconscionable under California law and thus is not enforceable.

To successfully challenge a delegation clause, a party must challenge the specific language delegating the arbitrability question to an arbitrator, rather than the entire arbitration agreement. See Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 72 (2010); see also Brice v. Haynes Invs., LLC, 13 F.4th 823, 827 (9th Cir. 2021) (“Where a delegation provision exists, courts first must focus on the enforceability of that specific provision, not the...