Opinion
No. C-05-04867 RMW Re Docket No. 298
10-19-2011
DAVID HO et al., Plaintiffs, v. ERNST & YOUNG LLP, Defendant.
ORDER DENYING MOTION FOR LEAVE
TO MOVE FOR RECONSIDERATION
On September 20, 2011, the court denied defendant Ernst & Young, LLP's motion to dismiss or stay proceedings. Dkt. No. 297. On September 23, 2011, defendant filed a motion for leave to move for reconsideration of the court's ruling that it had waived its right to compel plaintiff Michelle Richards ("Richards") to arbitrate her claims. Dkt. No. 298. Having considered the papers submitted by defendant, and for the reasons set forth below, the court denies the motion for leave.
On June 24, 2011, defendant moved to dismiss the present action, or in the alternative to stay and compel arbitration, on the grounds that plaintiffs' wage and hour claims are subject to binding arbitration. Dkt. No. 288. The court denied defendant's motion, finding that defendant had waived the right to compel arbitration. Dkt. No. 297. The court found that defendant's failure to assert the binding arbitration clause earlier in the case was inconsistent with its right to arbitration. In doing so, the court rejected defendant's argument that it did not seek to compel arbitration earlier because such motion would have been futile in light of California law.
Defendant argues the court's reasoning does not apply to plaintiff Richards because Richards' case was not filed until after the California supreme court's decision in Gentry v. Superior Court, 42 Cal.4th 443 (2007), on which defendant relied to argue that a motion to compel arbitration would be futile. However, this court fully considered both the timing of Richards' lawsuit and the impact of Gentry in its previous order. The order specifically acknowledged defendant's argument that Richards did not file her action until after Gentry issued. Dkt. No. 297 at 8:13-15. The court found, however, that defendant's failure to enforce the arbitration provision against plaintiff David Ho "renders its assertion that it refrained from raising an arbitration defense solely because California law would have rendered such a defense futile less credible." Id. at 8:15-20. In other words, the court discounted the argument that Gentry affected defendant's conduct, which in turn lessens the importance of Gentry's timing in the waiver analysis.
Moreover, this court found that, even after Gentry issued, it could not conclude that defendant's moving to compel arbitration would have been futile as a matter of law. As stated in the order, "E&Y had at least a colorable argument that the parties' choice of law ought to be honored, particularly before Gentry was decided." Id. at 9:3-4. Defendant argues this means the court focused on the period before Gentry and found California law would have governed the parties' agreement after Gentry. To the contrary, the court's language indicates that its reasoning applies both before and after Gentry was decided, albeit with more strength before. Notably, defendant's futility argument required a two-step determination: first, that California law would apply in spite of the New York choice-of-law provision, and second, that Gentry would then apply to render the arbitration provision unconscionable. The court found the outcome of such determination was sufficiently uncertain that it could not conclude it would have been futile for defendant to assert the arbitration provision.
The court's findings that defendant's futility rationale was not wholly credible and that Gentry did not conclusively establish that seeking arbitration would be futile do not depend on the fact that Richards did not file her suit until after Gentry was decided. Those findings led to the court's conclusion that defendant's failure to assert arbitration earlier against Richards was inconsistent with an existing right to compel arbitration. Thus, defendant has not presented a basis for reconsideration.
ORDER
For the foregoing reasons, the court denies defendant's motion for leave to move for reconsideration.
RONALD M. WHYTE
United States District Judge