Opinion
2:19-cv-00902 WBS DMC
10-12-2021
LIONEL HARPER, DANIEL SINCLAIR, HASSAN TURNER, LUIS VAZQUEZ, and PEDRO ABASCAL, individually and on behalf of all others similarly situated and all aggrieved employees, Plaintiffs, v. CHARTER COMMUNICATIONS, LLC, Defendant.
ORDER RE: DEFENDANT'S MOTIONS TO COMPEL ARBITRATION
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE.
Plaintiffs Lionel Harper, Daniel Sinclair, Hassan Turner, Luis Vazquez, and Pedro Abascal (“plaintiffs”) brought this putative class action against their former employer, Charter Communications, alleging various violations of the California Labor Code. Among other things, plaintiffs allege that Charter misclassified them and other California employees as “outside salespersons, ” failed to pay them overtime wages, failed to provide meal periods or rest breaks (or premium wages in lieu thereof), and provided inaccurate wage statements. (See generally Second Amended Complaint (“SAC”) (Docket No. 147).) Charter now moves to (1) compel arbitration of plaintiff Harper's claims and stay the action and (2) compel arbitration of plaintiff Turner, Vazquez, and Abascal's claims and dismiss them from the case. (Mots. to Compel Arbitration (Docket Nos. 162, 165).)
The parties have requested that the court take judicial notice of two filings in Harper's related FEHA case, other documents filed in this litigation, the American Arbitration Association's rules and procedures, and two unpublished Los Angeles Superior Court decisions addressing Charter's motions to compel arbitration in other cases. (See Docket Nos. 171, 184, 185.) Plaintiffs object to Charter's request as to the Los Angeles Superior Court decisions. (See Docket No. 191.) Because the court does not find these materials relevant to this matter or helpful in deciding any of the issues currently before the court, however, the court declines to take judicial notice of these materials.
I. Facts & Procedural History
Much of this case's factual background is set forth in the court's accompanying Order Re: Plaintiffs' Motion to Modify the Scheduling Order and for Leave to File a Third Amended Complaint. Accordingly, the court will not repeat it here except where relevant to the instant motions.
A. Plaintiff Harper
Plaintiff Harper worked for Charter from September 2017 to March 2018. (SAC at ¶ 5 (Docket No. 147).) Upon hire, Harper signed an agreement to arbitrate “any and all claims, disputes, and/or controversies between [Harper] and Charter arising from or related to [Harper's] employment with Charter, ” designating JAMS as the arbitration provider and stating that JAMS rules, procedures, and policies would govern arbitrations under that agreement (the “JAMS Agreement”). (Order re Mot. to Compel Arb. at 2 (Docket No. 24).) The JAMS Agreement included a waiver of representative, collective, and class actions (the “Waiver”) and a severance and so-called “poison pill” provision. (Id. at 2.) The severance provision stated that if any part of the agreement was found to be void or unenforceable, that part would be severed and the remainder enforced. (Id. at 2-3.) It went on to state one exception (the “poison pill”): that if a dispute involved a representative, collective, or class action claim, and the Waiver were found to be invalid or unenforceable, “then th[e] entire Agreement . . . shall be null and void and the dispute will not be arbitrable.” (Id. at 3.)
In October 2017, while Harper was still employed by Charter, Charter adopted a new arbitration agreement requiring arbitration of claims via “Solution Channel, ” Charter's employment-based legal dispute resolution program, which provided for arbitration under the rules of the American Arbitration Association (the “Solution Channel Agreement”). (Id. at 3.) When announcing the change, Charter notified employees that they would be bound by the Solution Channel Agreement unless they opted out within thirty days. (Id.) Harper did not do so. (Id.)
In November 2018, Harper filed a Demand for Arbitration and Request for Rulings as to Inarbitrability with JAMS, seeking a ruling on whether his employment-related grievances against Charter could be arbitrated under the JAMS Agreement. (Id. at 5- 6.) Charter consented to and participated in the ensuing arbitration process with JAMS, and in April 2019 an arbitrator issued an award finding that Harper's wage-and-hour claims were inarbitrable and dismissing the arbitration. (Id. at 6; see Mot. to Confirm Arb. Award, Ex. 16 (“Order of Dismissal”), at 157-66 (Docket No. 9-1).)
Specifically, the arbitrator determined that because pre-dispute waivers of representative claims brought under PAGA are unenforceable under California law, the JAMS Agreement Waiver could not be enforced. (Order of Dismissal at 159-61 (Docket No. 9-1) (citing Iskanian v. CLS Transp. L.A. LLC, 59 Cal.4th 348, 384 (2014)).) The arbitrator accordingly determined that this activated the poison pill, nullifying the entire agreement. (Id. at 163-65.) The arbitrator rejected Charter's argument that the poison pill be limited so as to nullify the agreement only as to the representative, collective, or class action claim at issue as contrary to the JAMS Agreement's plain text, which included no such limitation. (Id.)
In May 2019, after Harper had initiated this action in state court, Charter sought to enforce the Solution Channel Agreement against Harper, who refused. (Order re Mot. to Compel Arb. at 6-7 (Docket No. 24).) In August 2019, this court confirmed and entered judgment pursuant to the JAMS arbitration award. (Id. at 19.) Further, the court found that there had been a novation as a result of Charter's acquiescence to arbitration under the JAMS Agreement rather than the Solution Channel Agreement, held that any rights Charter had as against Harper under the Solution Channel Agreement with respect to his wage-and-hour claims were thus “dead and extinguished, ” and denied a motion by Charter to compel arbitration under the Solution Channel Agreement. (Id. at 18-20.)
In late 2019, the court also adjudicated a separate, related action between Harper and Charter brought under California's Fair Employment and Housing Act (“FEHA”). See Harper v. Charter Comms., LLC, 2:19-cv-01749 WBS DMC, 2019 WL 6918280 (E.D. Cal. Dec. 18, 2019). There, Harper had also sought to arbitrate his FEHA claims under the JAMS agreement, but this time Charter did not participate. Id. at *2. The court held that because “Charter did not engage with [Harper's] FEHA claims” in the manner it had with his wage-and-hour claims, there had been no novation of arbitration agreements with respect to the FEHA claims. Id. at *3. After determining that the Solution Channel Agreement applied to Harper's FEHA claims and was valid, the court granted a motion by Charter to compel arbitration of those claims under that agreement. Id. at *3-6.
In May 2021, Harper again sought employment with Charter via an online application. (Fries Decl. at ¶ 16, Ex. D (Docket No. 162-1).) When proceeding through Charter's online application, applicants are presented with a webpage featuring information about Charter's Solution Channel Agreement, with links to the agreement itself and to Solution Channel Program Guidelines, both of which applicants may save and print. (Id. at ¶¶ 7-10.) To proceed with their application, applicants are required to affirmatively agree to be bound by the Solution Channel Agreement by clicking an “I Agree” button. (Id. at ¶ 11.) They are informed that if they do not agree, they will be removed from consideration for employment; their application is not submitted, and they are given the option to begin the application process again. (Id. at ¶¶ 12-13.) On May 23, 2021, Harper consented to the Solution Channel Agreement and submitted an online application to Charter. (Id. at ¶ 16, Ex. D.)
B. Plaintiffs Turner, Vazquez, and Abascal
In addition to consenting to the Solution Channel Agreement in order to complete Charter's online application, individuals who accept offers of employment from Charter are again required to consent to the same agreement, or else they cannot become a Charter employee. (Fries Decl. re Turner at ¶¶ 9-18 (Docket No. 165-2).) Plaintiff Turner submitted an online application on May 23, 2018, consenting to the Solution Channel Agreement, and subsequently completed Charter's employee onboarding process, consenting to the agreement again. (Id. at ¶¶ 8, 19, Exs. A & B.) Plaintiff Vazquez did the same, submitting his application on October 9, 2019. (Fries Decl. re Vazquez at ¶¶ 8, 19, Exs. A & B.) Plaintiff Abascal did as well, submitting his application on November 5, 2019. (Fries Decl. re Abascal at ¶¶ 8, 19, Exs. A & B.)
C. The Solution Channel Agreement
The Solution Channel Agreement contains several provisions currently at issue. It requires parties to the agreement to resolve “all disputes, claims and controversies that could be asserted in court or before an administrative agency for which you or Charter have an alleged cause of action related to pre-employment, employment, employment termination or post-employment-related claims, ” including wage-and-hour-related claims, through binding arbitration. (Fries Aff., Ex. C (“Solution Channel Agreement”), at §§ A, B(1) (Docket No. 165-2).)
The agreement specifically excludes certain claims from arbitration, including “[a]ny claims that have already been filed in federal or state court at the time you execute this Agreement, provided that such claims were not previously subject to any arbitration agreement.” (Id. at § C(14).) It also includes a merger clause, providing that the Solution Channel Agreement represents the complete agreement between parties on the resolution of covered disputes, but noting that “this Agreement will not apply to the resolution of any charges, complaints, or lawsuits that have been filed with an administrative agency or court before the Effective Date of this Agreement.” (Id. at § P.) Finally, like the JAMS Agreement, the Solution Channel Agreement includes a waiver of representative, class, or collective action claims. (Id. at § D.)
II. Analysis
The Federal Arbitration Act (“FAA”) provides that a written provision in a “contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be 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. Because arbitration is a matter of contract, “the central . . . purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms.” Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 682 (2010) (internal quotations omitted); see also Perry v. Thomas, 482 U.S. 483, 490 (1987) (under the FAA, arbitration agreements “must be rigorously enforced”) (internal quotations omitted, alterations adopted).
The FAA “leaves no place for the exercise of discretion by a district court, but instead 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). Accordingly, “the FAA limits courts' involvement to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (internal quotations omitted).
“[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is a construction of the contract language itself or an allegation of waiver, delay, or like defense to arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983); see Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1259 (9th Cir. 2017) (same). Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration. See Cohen v. Wedbush, Noble Cooke, Inc., 841 F.2d 282, 285 (9th Cir. 1988).
The primary exception to courts' obligation to enforce arbitration agreements under the FAA comes from the Act's “saving clause, ” which “allows courts to refuse to enforce arbitration agreements ‘upon such grounds as exist at law or in equity for the revocation of any contract.'” Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1622 (2018) (quoting 9 U.S.C. § 2). Such “generally applicable contract defenses” most frequently include “fraud, duress, or unconscionability, ” but do not include “defenses that apply only to arbitration.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (internal quotations omitted).
A. Applicability of the Solution Channel Agreement
Charter seeks to compel plaintiffs Harper, Turner, Vazquez, and Abascal to submit their California Labor Code and Unfair Competition Law (“UCL”) claims to arbitration on an individual basis. (See Mot. to Compel Arb. re Harper at 1 (Docket No. 162); Mot. to Compel Arb. re Turner, Vazquez, & Abascal at 1 (Docket No. 165).) Plaintiffs contend that to do so, Charter must prove that (1) a valid agreement to arbitrate exists and (2) the agreement encompasses the claims Charter seeks to arbitrate. (See Opp. to Mot. to Compel Arb. at 16-17 (citing Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)) (Docket No. 172); Opp. to Mot. to Compel Arb. at 14 (same) (Docket No. 173).)
Turner, Vazquez, and Abascal acknowledge that they each executed the Solution Channel Agreement both when applying for employment with Charter and when accepting their jobs, (see Opp. to Mot. to Compel Arb. at 9-11 (Docket No. 173)), and Harper acknowledges that he did when re-applying for employment with Charter in May 2021, (see Opp. to Mot. to Compel Arb. at 14 (Docket No. 172)). On this basis, plaintiffs concede that a valid agreement to arbitrate exists. (See id. at 17; Opp. to Mot. to Compel Arb. at 14 (Docket No. 173).) Accordingly, the question becomes whether the agreement applies to plaintiffs' Labor Code and UCL claims, of which Charter seeks to compel arbitration.
Although at oral argument the parties briefly discussed whether questions of arbitrability should themselves be submitted to an arbitrator, neither party raised this issue in their briefing. Accordingly, this court will decide whether plaintiffs' claims are arbitrable rather than submit the issue to the arbitrator. See also Momot v. Mastro, 652 F.3d 982, 987 (9th Cir. 2011) (gateway issues of arbitrability are presumptively reserved for the court).
The Solution Channel Agreement provides that “[y]ou and Charter mutually agree that . . . any dispute arising out of or relating to your pre-employment application and/or employment with Charter or the termination of that relationship, except as specifically excluded below, must be resolved through binding arbitration.” (Solution Channel Agreement at § A (Docket No. 165-2).) This is followed by a section titled “Covered Claims, ” (id. at § B), which specifies that such disputes include “wage and hour-based claims including claims for unpaid wages, commissions, or other compensations or penalties (including meal and rest break claims, claims for inaccurate wage statements, [and] claims for reimbursement of expenses), ” (id. at § B(1)). The parties do not dispute that the claims of which Charter seeks to compel arbitration clearly fall into this category.
However, that section is followed by another, titled “Excluded Claims, ” which lists a variety of claims to which the “Covered Claims” section does not apply. (See id. at § C.) Notably for purposes of the instant motions, these include “[a]ny claims that have already been filed in federal or state court at the time you execute this Agreement, provided that such claims were not previously subject to any arbitration agreement.” (Id. at § C(14).) The aforementioned merger clause, which appears later in the agreement, also provides that “this Agreement will not apply to the resolution of any charges, complaints, or lawsuits that have been filed with an administrative agency or court before the Effective Date of this Agreement.” (Id. at § P.)
Plaintiffs argue that these two provisions operate to exclude plaintiffs Vazquez and Abascal's claims from mandatory arbitration under the agreement. Specifically, they argue that because plaintiff Harper had already filed this action by the time Vazquez and Abascal executed the agreement, their claims qualify as having “already been filed in . . . court” and having “been filed with a[ ] . . . court before the Effective Date of th[e] Agreement” under these provisions. (See Opp. to Mot. to Compel Arb. at 15-19 (Docket No. 173).)
Plaintiffs do not make this argument with respect to plaintiff Turner, as he had already executed the agreement when this litigation began, and therefore they concede that sections C(14) and P do not apply to him. (See Opp. to Mot. to Compel Arb. at 17 n.6 (Docket No. 173).)
They argue the same as to Harper, given that he executed the operative agreement in May 2021, after bringing this action, and contend that his claims “were not previously subject to any agreement” pursuant to section C(14) because the agreements he previously signed were no longer in effect by May 2021. (See Opp. to Mot. to Compel Arb. at 16-22 (Docket No. 172).) In light of the differing arguments put forward with respect to Harper and to the other plaintiffs for whom Charter seeks to compel arbitration, the court will address the two groups separately.
1. Plaintiffs Turner, Vazquez, and Abascal
Charter argues that Vazquez and Abascal improperly seek to avoid arbitration by, in essence, piggybacking off of Harper's already-filed claims, which they did not join until well after executing the agreement. (See Def.'s Reply at 5-10 (Docket No. 182).) It contends that because section C creates exceptions to section B's requirement that various claims be arbitrated, the two sections must be read together, and that because section B by its terms applies to “claims . . . for which you or Charter have an alleged cause of action, ” the exclusion contained in section C(14) is properly read to exclude only already-filed claims between the signing party and Charter, rather than any already-filed claims to which Charter is a party. (Solution Channel Agreement at § B(1) (emphasis added) (Docket No. 165-2); see Id. at 5-6.) The court agrees.
Because, as a general matter, contract interpretation is a matter of state law, the court looks to California law in construing these provisions. See DIRECTV, Inc. v. Imburgia, 577 U.S. 47, 54 (2015) (citing Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989)). Three provisions of the California Civil Code, governing the interpretation of contracts, are relevant here. First, “[t]he language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” Cal. Civ. Code § 1638. Second, “[a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” Id. at § 1636. Third, “[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” Id. at § 1641.
Under these provisions, it is clear that section C(14) of the agreement cannot be read to prevent arbitration of Vazquez and Abascal's claims by virtue of Harper's previously filed claim. Because section C specifically lists exclusions to section B, the two must be read together. See also id. Per section B's clear language, claims covered under that section - and thus excluded under section C - are those between “You” (i.e., the individual signatory) “and Charter.” This clearly signifies an intention to require arbitration of claims - and thus, under section C, exclude from arbitration - only claims that might arise as between the signatory and Charter. See Id. at §§ 1636, 1638. To allow signatories to avoid arbitration of otherwise-covered claims by joining suits filed by individuals not party to the contract would plainly frustrate this intention.
For similar reasons, section P likewise does not exclude Vazquez and Abascal's claims from arbitration. As noted above, the Solution Channel Agreement's core provisions specify that it applies to disputes between “You and Charter.” Although section P does not directly incorporate this language in the manner that section C does, to apply it in plaintiffs' preferred manner would run counter to the contract's central purpose, which is to require arbitration of disputes. See id. at § 1636. And to the extent that this omission creates a conflict between sections P and C(14), “in a contract, when a general and particular provision are inconsistent, the latter is paramount to the former, ” meaning that “a particular intent will control a general one that is inconsistent with it.” Karpinski v. Smitty's Bar, Inc., 246 Cal.App.4th 456, 464 (1st Dist. 2016) (internal quotation marks and citation omitted).
For these reasons, together with the FAA's mandate that any doubts as to an arbitration agreement's applicability be resolved in favor of arbitration, see Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25; Poublon, 846 F.3d at 1259, the court concludes that the Solution Channel Agreement applies to compel arbitration of Vazquez and Abascal's claims. Plaintiffs do not contest that the agreement applies to Turner's claims, and sections C(14) and P clearly do not exclude them, as this action had not yet been filed at the time he executed the agreement. Accordingly, the court concludes that the Solution Channel Agreement applies to Turner's claims as well.
2. Plaintiff Harper
Plaintiffs also contend that section P of the agreement excludes Harper's claims from its coverage. (See Opp. to Mot. to Compel Arb. at 18-19 (Docket No. 172).) They further argue that, because this court confirmed the JAMS arbitrator's award finding that the JAMS agreement was “null and void, ” and because it subsequently held that Charter's acquiescence to the JAMS arbitration effected a novation of Harper's first Solution Channel contract - rendering it “dead and extinguished” - Harper's claims do not qualify as “previously subject to any arbitration agreement” under section C(14). (See id. at 20-22.) Accordingly, they argue that section C(14) excludes Harper's claims from coverage under the agreement as well. (See id.)
As noted above, section C(14) provides that the agreement excludes “[a]ny claims that have already been filed in federal or state court at the time you execute this Agreement, provided that such claims were not previously subject to any arbitration agreement.” (Solution Channel Agreement at § C(14) (Docket No. 165-2).) Thus, because it is undisputed that Harper's claims had already been filed in court when he executed the agreement, (see Opp. to Mot. to Compel Arb. at 20 (Docket No. 172)), the only question is whether those claims “were . . . previously subject to any arbitration agreement, ” (Solution Channel Agreement at § C(14) (Docket No. 165-2)). The court concludes that they were.
While Harper was employed by Charter, he consented to the JAMS Agreement, and later to the Solution Channel Agreement. Plaintiffs argue that the JAMS arbitrator's determination that the JAMS Agreement was invalid means that Harper's claims were never “subject to” that agreement, contending that claims are only “subject to” an arbitration agreement if they are validly required to be arbitrated under that agreement. (See Opp. to Mot. to Compel Arb. at 20 (Docket No. 172).)
The court assumes, for these purposes, that plaintiffs' construction of “subject to” is correct, such that Harper's claims were not “previously subject to” the JAMS Agreement. Even so, it is clear that they were nonetheless “previously subject to” the Solution Channel Agreement. Although this court determined that there was a subsequent novation, extinguishing that agreement, the fact remains that for a period of time -- beginning when Harper first executed the Solution Channel Agreement and ending with Charter's acquiescence to the JAMS arbitration -- Charter could have asserted the Solution Channel Agreement against Harper with respect to any wage-and-hour claims he had. Under the plain meaning of “previous” -- earlier in time -- Harper's claims, at the time he executed the Solution Channel Agreement in May 2021, were “previously subject to” the earlier-signed copy of the same agreement. As such, Harper's claims are not excluded from arbitration under section C(14).
Plaintiffs contend that to find that Harper's claims were previously subject to the initial Solution Channel Agreement, the court would need to reconsider whether that agreement was extinguished by the previously mentioned novation, which they argue the court is precluded from doing under the law of the case doctrine. (See Opp. to Mot. to Compel Arb. at 21 (Docket No. 172).) However, plaintiffs are mistaken in their logic, as finding that an applicable agreement had terminated is not the same as concluding that it was never applicable in the first place. Although the court did the former, it did not do the latter.
To the extent that Harper challenges Charter's ability to compel him to arbitrate his individual claims arising out of his prior employment because his latest execution of the Solution Channel Agreement occurred when he applied for another position, (see id. at 14), at least one other district court in California has already held that the Solution Channel Agreement applies in such circumstances. In Durruthy v. Charter Communications, LLC, like in this case, the plaintiff was hired by Charter, was later terminated, subsequently reapplied for employment, and in doing so executed the agreement, which Charter then sought to enforce against her. Durruthy, 20-CV-1374-W-MSB, 2020 WL 6871048, at *1 (S.D. Cal. Nov. 23, 2020). As the court in the Southern District of California observed:
The Agreement covers “any dispute arising out of or relating to [an applicant's] preemployment application and/or employment with Charter or the termination of that relationship . . . .” The Agreement does not limit its application to future employment, nor does it exclude claims from prior employment periods. Therefore, an objective reading supports that “employment” reasonably means any employment period between the two parties of the agreement. . . . . Plaintiff's alleged lack of consent to arbitrate claims from her prior employment period with Defendant are absent from the Agreement, and “unexpressed subjective intentions are irrelevant . . . .”Id. at *4-5 (quoting Martinez v. BaronHR, Inc., 51 Cal.App. 5th 962, 970 (2020)) (alterations in original). This court agrees with the Durruthy court's analysis of this issue.
This court's agreement with the Durruthy court's evaluation of the Solution Channel Agreement, however, does not extend to its unconscionability analysis.
For the foregoing reasons, the court concludes that the Solution Channel Agreement applies to Harper's claims.
. Unconscionability
Plaintiffs also argue that the Solution Channel Agreement is unconscionable. (See id. at 22-38; Opp. to Mot. to Compel Arb. at 19-34 (Docket No. 173).) If true, this would mean that the contract was not validly entered into in the first instance, allowing the court to invalidate the agreement pursuant to the FAA's saving clause. See Concepcion, 563 U.S. at 339.
“Unconscionability under California law has ‘both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.'” Kilgore v. KeyBank, Nat'l Ass'n, 673 F.3d 947, 963 (9th Cir. 2012) (quoting Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 99 (2000)). While courts “use a ‘sliding scale' in analyzing these two elements . . . . [n]o matter how heavily one side of the scale tips . . ., both procedural and substantive unconscionability are required for a court to hold an arbitration agreement unenforceable.” Id. (citing Armendariz, 24 Cal.4th at 99).
This court previously assessed whether the Solution Channel Agreement is unconscionable in the related action between plaintiff Harper and Charter. See Harper v. Charter Comms., LLC, 2:19-cv-01749 WBS DMC, 2019 WL 6918280, at *5-6 (E.D. Cal. Dec. 18, 2019). There, the court determined that the agreement was not procedurally unconscionable, relying in large part on the fact that when Harper was first confronted with the Solution Channel Agreement, it was via an email notifying employees of their ability to opt out of the agreement within thirty days. Id. at *1, 5 (citing Kilgore v. KeyBank, Nat'l Ass'n, 718 F.3d 1052, 1058-59 (9th Cir. 2013) (en banc) (deeming an arbitration agreement not procedurally unconscionable because it noted the option to opt out within sixty days of signing)). Here, on the other hand, there is no indication that plaintiffs were given the same option to opt out; indeed, they assert that they received none, (see Opp. to Mot. to Compel Arb. at 24 (Docket No. 172); Opp. to Mot. to Compel Arb. at 21 (Docket No. 173)), which Charter does not contest, (see Def.'s Reply at 15-17 (Docket No. 182); Def.'s Reply at 16-18 (Docket No. 183)).
The Ninth Circuit has previously held that an arbitration agreement was procedurally unconscionable where it was presented to employees “on an adhere-or-reject basis, ” with no opportunity to opt out. See Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1172 (9th Cir. 2003); see also Steele v. Am. Mortg. Mgmt. Servs., 2:12-cv-00085 WBS JFM, 2012 WL 5349511, at *4-5 (E.D. Cal. Oct. 26, 2012) (holding pre-employment arbitration agreement procedurally unconscionable because it did not contain an opt-out clause). Conversely, it has also held that an arbitration agreement that included an opt-out provision was not procedurally unconscionable. See Mohamed v. Uber Techs., Inc., 848 F.3d 1201, 1211 (9th Cir. 2016).
Thus, an arbitration agreement that individuals are required to sign as a condition of employment, with no ability to opt out, is procedurally unconscionable, though Ninth Circuit precedent also establishes that this form of procedural unconscionability is “low” on California's sliding scale analysis. See Poublon, 846 F.3d at 1261. In such a situation, if “there is no other indication of oppression or surprise, then the agreement will be enforceable unless the degree of substantive unconscionability is high.” Id.
Regardless of the particular degree of procedural unconscionability present here, however, in order for their unconscionability defense to succeed, plaintiffs must also show that the agreement is substantively unconscionable. See Kilgore, 673 F.3d at 963. And as this court previously held in the related action between Harper and Charter, in which Charter sought to enforce the Solution Channel Agreement against him with respect to claims not present in the current litigation, the agreement is not substantively unconscionable. See Harper, 2019 WL 6918280, at *5-6. Because the agreement at issue in this litigation is the same as the one upon which the court ruled in the separate litigation, and plaintiffs do not allege that it has changed, the court again concludes that the Solution Channel Agreement is not substantively unconscionable.
Specifically, the court determined that (1) the Solution Channel review process was not one-sided, as Harper contended, but rather its requirements applied equally to employees and to Charter; (2) the agreement did not enable Charter to conclusively decide whether a claim is arbitrable, instead providing claimants the ability to proceed with arbitration on this and other issues; and (3) a provision of the agreement requiring “each party [to] bear its own attorney's fees regardless of the action brought, ” although unenforceable under California law, could be severed pursuant to the agreement's severability clause in light of the court's determination that the agreement was “not otherwise permeated by unconscionability.” See Harper, 2019 WL 6918280, at *5-6 (citing Serpa v. Cal. Sur. Investigations, Inc., 215 Cal.App.4th 695, 709-10 (2d Dist. 2013)).
Moreover, the Solution Channel Agreement is dated September 25, 2017 - well before plaintiffs Turner, Vazquez, and Abascal first applied for employment with Charter - further indicating that it had not changed between when plaintiff Harper first signed it and when they did. (See Solution Channel Agreement (Docket No. 165-2); supra Section II.B.) Although plaintiff Harper refers to the Solution Channel Agreement to which he consented the first time as the “Old S.C. Agreement” and the one to which he consented when re-applying as the “New S.C. Agreement, ” his bases for these differences in nomenclature are that the former was included in an email informing him that he could opt out, whereas the latter was not - not that the agreement itself had changed. (See Opp. to Mot. to Compel Arb. at 9 n.1 (Docket No. 172).)
Because the Solution Channel Agreement is not substantively unconscionable, plaintiffs' unconscionability defense must fail.
C. California Labor Code Section 432.6
Finally, in supplemental briefing, plaintiffs argue that the Ninth Circuit's recent decision in Chamber of Commerce of the United States v. Bonta, - F.4th -, 2021 WL 4187860 (9th Cir. Sept. 15, 2021), precludes enforcement of the Solution Channel Agreement against Harper. (See Not. of Supp. Auth. at 2 (Docket No. 196).) That decision upheld part of California Labor Code section 432.6, which prohibits employers from “requir[ing] any applicant for employment or any employee to waive any right, forum, or procedure” established under the Labor Code or California Fair Employment and Housing Act as a condition of employment, on the basis that it was not preempted by the FAA. See id. at *4-10; Cal. Lab. Code § 432.6(a).
Because section 432.6 came into effect after Turner, Vazquez, and Abascal executed the Solution Channel Agreement, but before Harper did in May 2021, plaintiffs only contend that the Ninth Circuit's decision applies to Harper. (See Not. of Supp. Auth. at 2 n.1 (Docket No. 196).)
Plaintiffs contend that under Chamber of Commerce, Charter's use of the Solution Channel Agreement violates section 432.6 because Harper's consent to the agreement was a mandatory condition for consideration of his application and for any subsequent employment, with no ability to opt out. (See Not. of Supp. Auth. at 2 (Docket No. 196).) Per Chamber of Commerce's clear language, however, whether this requirement violated section 432.6 has no effect on the court's present decision to enforce the Solution Channel Agreement: “§ 432.6 does not make invalid or unenforceable any agreement to arbitrate, even if such agreement is consummated in violation of the statute.” 2021 WL 4187860, at *7 (emphasis added); see also 2021 WL 4187860, at *6
(“§ 432.6 cannot be used to invalidate, revoke, or fail to enforce an arbitration agreement . . . .”).
The most that Chamber of Commerce does to aid employees who seek to challenge arbitration agreements is to simply reaffirm the applicability of the FAA's saving clause to arbitration agreements under section 432.6. See id. at *6 (citing Cal. Lab. Code § 432.6(f) (“Nothing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the [FAA].”)) (other citations omitted). In doing so, the Ninth Circuit observed, in dicta:
[A]n employee may attempt to void an arbitration agreement that he was compelled to enter as a condition of employment on the basis that it was not voluntary. If a court were to find that such a lack of voluntariness is a generally applicable contract defense that does not specifically target agreements to arbitrate, the arbitration agreement may be voided in accordance with saving clause jurisprudence.Id. at *9. However, here the court has addressed Harper's “generally applicable contract defense[s]” and determined that they do not apply here. Chamber of Commerce thus has no impact on this decision.
For the foregoing reasons, the court will grant Charter's motions to compel arbitration of plaintiffs Harper, Turner, Vazquez, and Abascal's individual claims.
D. Motions to Dismiss or Stay Judicial Proceedings
In its motion to compel arbitration of Harper's Labor Code and UCL claims, Charter requests that, should the court grant that motion, the court stay this case -- including Harper's PAGA claim -- pending arbitration of the other claims. (See Mot. to Compel Arb. re Harper at 23-24 (Docket No. 162).) Charter suggests that although it has not sought arbitration of the PAGA claim, staying proceedings as to the PAGA claim would avoid conflicting rulings between this court as to the PAGA claim and the arbitrator as to the other claims. (See id. at 24.) Plaintiffs oppose this request, pointing out that because this court will not be bound by any rulings the arbitrator might make, staying Harper's PAGA claim would not in fact avoid conflicting rulings. (See Opp. to Mot. to Compel Arb. at 38-39 (Docket No. 172).) They further argue that proceedings as to the PAGA claim should not be stayed because of the distinct nature of a PAGA claim, which belongs to the state rather than to Harper. (See id. at 39.)
Further, in its motion to compel arbitration of Turner, Vazquez, and Abascal's claims, Charter also requests that, should the court grant that motion, the court dismiss those plaintiffs from the case. (See Mot. to Compel Arb. re Turner, Vazquez, & Abascal at 20-21 (Docket No. 165).) Plaintiffs oppose this request and instead request that the court stay proceedings as to these plaintiffs pending arbitration of their individual claims. (See Opp. to Mot. to Compel Arb. at 35 (Docket No. 173).) In response to the court's questioning at oral argument, counsel for plaintiffs indicated that they preferred a stay of plaintiff Sinclair's individual claims pending arbitration of the other plaintiffs' individual claims.
The FAA provides that, where a suit presents “issue[s] referable to arbitration under an agreement in writing for such arbitration, ” the court “shall on application of one of the parties stay the trial of the action until such arbitration has been had.” 9 U.S.C. § 3. Further, the Supreme Court has stated that “[i]n some cases, it may be advisable to stay litigation among the nonarbitrating parties pending the outcome of the arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n.23 (1983).
Because plaintiffs have requested a stay of Turner, Vazquez, and Abascal's individual claims, the court will stay those claims pending arbitration. Additionally, because Charter has requested that the court otherwise stay this case pending arbitration of Harper's individual claims, because plaintiffs' counsel supported a stay of Sinclair's individual claims at oral argument, and because the court agrees that a stay of Sinclair's claims pending arbitration is “advisable, ” the court will stay Sinclair's individual claims pending arbitration as well.
However, because a stay would impede vindication of California's interests in enforcing the Labor Code through representative PAGA actions, discussed above, and because the PAGA claim represents a distinct “action” in this case, the court will not stay Harper's PAGA claim. See Jarboe v. Hanlees Auto Grp., 53 Cal.App. 5th 539, 557 (1st Dist. 2020) (“Because a PAGA claim is representative and does not belong to an employee individually, an employer should not be able dictate how and where the representative action proceeds.”).
IT IS THEREFORE ORDERED that Charter's Motions to Compel Arbitration (Docket Nos. 162, 165) be, and the same hereby are, GRANTED.
IT IS FURTHER ORDERED that, as to the claims presented in Counts One through Nine of the Second Amended Complaint only, this action is STAYED pending arbitration of plaintiff Harper, Turner, Vazquez, and Abascal's individual claims.