S&D Carwash Management, LLC v. Crum ( 2020 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 9 S&D CARWASH MANAGEMENT, LLC, No. 2:20-cv-00689-JAM-CKD a Limited Liability Company, 10 Petitioner, 11 ORDER DENYING PETITIONER’S v. MOTION TO STAY AND MOTION TO SET 12 ASIDE TYLER CRUM, an individual, 13 and on behalf of all persons similarly situated, and DOES 14 1 through 100, inclusive, 15 Respondent. 16 17 S&D Carwash Management, LLC operates “Quick Quack Car Wash” 18 carwashes in several states, including California. Petition to 19 Set Aside (“Petition”) at ¶ 1, ECF No. 1. Tyler Crum, a former 20 Quick Quack Car Wash employee, brought several state law claims 21 against S&D Carwash in Sacramento County Superior Court— 22 individually and as a putative class representative. Petition 23 ¶ 11. S&D Carwash filed a petition to compel arbitration of 24 Crum’s individual claims shortly thereafter. Petition ¶ 15. The 25 state court denied the petition without prejudice, finding that 26 the parties’ arbitration agreement designated questions of 27 arbitrability to an arbitrator. Petition ¶ 16. An arbitrator 28 then found the agreement compelled arbitration of Crum’s 1 individual, class, and PAGA claims. Petition ¶ 18. 2 Arguing the arbitrator improperly authorized class 3 arbitration, S&D Carwash filed a petition to set aside the 4 decision with this Court. It also filed a motion to stay 5 arbitration pending the Court’s ruling and an ex parte 6 application to shorten the briefing schedule on both pending 7 requests. ECF No. 5. The Court denied the request for an 8 expedited decision and set a briefing schedule for the remaining 9 motions. April 8, 2020 Min. Order, ECF No. 11. Crum opposed 10 both motions, ECF Nos. 14-15. Having read and considered the 11 parties’ arguments, the Court DENIES S&D Carwash’s petition to 12 set aside the arbitrator’s decision. Consequently, the Court 13 also DENIES S&D Carwash’s motion to stay as MOOT.1 14 15 I. OPINION 16 A. Request for Judicial Notice 17 S&D Carwash requests judicial notice of (1) Crum’s 18 complaint in Sacramento County Superior Court; (2) the 19 Sacramento County Superior court ruling on S&D Carwash’s 20 petition to compel arbitration; and (3) Honorable Jack Komar’s 21 (ret.) decision on S&D Carwash’s petition to compel arbitration. 22 See S&D Carwash’s Request for Judicial Notice (“RJN), ECF No. 1- 23 1. A court may take judicial notice of “of court filings and 24 other matters of public record,” Reyn’s Pasta Bella, LLC v. Visa 25 USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006); see also Fed. 26 R. Evid. 201(c). The documents referenced are matters of public 27 1 This motion was determined to be suitable for decision without 28 oral argument. E.D. Cal. L.R. 230(g). 1 record and therefore proper subjects of judicial notice. The 2 Court grants S&D Carwash’s request. 3 B. Jurisdiction and Abstention 4 “It is well settled that federal courts must have an 5 independent basis for federal jurisdiction to hear claims under 6 the FAA . . . and that 9 U.S.C. § 10 does not provide it.” 7 Luong v. Circuit City Stores, Inc., 368 F.3d 1109, (9th Cir. 8 2004). Nor does Section 10 of the FAA “create federal question 9 jurisdiction.” Carter v. Health Net of California, Inc., 374 10 F.3d 830, 833 (9th Cir. 2004). A federal district court does, 11 however, have federal question jurisdiction when a party 12 petitioning for judicial review alleges an arbitrator manifestly 13 disregarded federal law. Id. at 836. S&D Carwash alleges its 14 arbitrator manifestly disregarded Lamps Plus v. Varela, 139 S. 15 Ct. 1406 (2019) in finding that the parties’ arbitration 16 agreement unambiguously authorized class arbitration. Petition 17 ¶¶ 20-30. Jurisdiction is therefore proper. 18 Crum contends the Court must nonetheless abstain from 19 exercising its jurisdiction under the Colorado River abstention 20 doctrine. Opp’n at 14 (citing Colorado River Water Conservation 21 District v. United States, 424 U.S. 800, 818 (1976)), ECF No. 22 15. The Court disagrees. Federal courts “have a ‘virtually 23 unflagging obligation . . . to exercise the jurisdiction given 24 them,’ including in cases involving parallel state litigation.” 25 Seneca Ins. Co. v. Strange Land, Inc., 862 F.3d 835, 841 (9th 26 Cir. 2017) (quoting Colo. River, 424 U.S. at 817). “Abdication 27 of the obligation to decide cases can be justified . . . only in 28 [] exceptional circumstances.” Id. 1 Courts balance eight factors to determine whether 2 exceptional circumstances exist: (1) which court first assumed 3 jurisdiction over any property at stake; (2) the inconvenience 4 of the federal forum; (3) the desire to avoid piecemeal 5 litigation; (4) the order in which the forums obtained 6 jurisdiction; (5) whether federal law or state law provides the 7 rule of decision on the merits; (6) whether the state court 8 proceedings can adequately protect the rights of the federal 9 litigants; (7) the desire to avoid forum shopping; and (8) 10 whether the state court proceedings will resolve all issues 11 before the federal court. Id. at 841-42. “Any doubt as to 12 whether a factor exists should be resolved against a stay [or 13 dismissal].” Id. at 842 (quoting Travelers Indem. Co. v. 14 Madonna, 914 F.2d 1364, 1369 (9th Cir. 1990)). While the 15 second, third, fourth, and seventh Colorado River factors weigh 16 in Crum’s favor, these considerations are not so weighty that 17 they prevail against “the balance heavily weighted in favor of 18 [exercising] jurisdiction.” See id. at 841-42. Colorado River 19 abstention is not warranted here. 20 C. Judicial Review 21 Crum argues that, even if the Court has jurisdiction over 22 S&D Carwash’s petition, judicial review is premature. Opp’n to 23 Petition (“Opp’n”) at 4-10. The Court again disagrees. Neither 24 the JAMS Policy on Employment Arbitration Minimum Standards, the 25 FAA, nor Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) 26 bar judicial review. First, as S&D Carwash argues, the parties’ 27 arbitration agreement explicitly states, “[t]he arbitrator shall 28 conduct the arbitration in accordance with the procedures set 1 forth in the most recent version of the National Rules for the 2 Resolution of Employment Disputes of the American Arbitration 3 Association.” Reply at 3-4 (citing Ex. A to Petition). The AAA 4 Rules, not the JAMS Rule govern the arbitration below. 5 Moreover, the FAA does not bar judicial review. A party 6 may seek judicial review of an arbitrator’s finding that decides 7 class claims are arbitrable. Stolt-Nielson S.A. v. AnimalFeeds 8 Int’l Corp., 559 U.S. 662, 670 n.2 (2010). Oxford Health, 569 9 U.S. at 571 did not, as Crum argues, change this. Reviewing 10 different facts, Oxford Health and Stolt-Nielson reached 11 different conclusions about whether an arbitrator had exceeded 12 his authority by permitting class arbitration. See Stolt- 13 Nielson, 559 U.S. at 684; Oxford Health, 569 U.S. at 570-72. 14 Oxford Health did not, however, purport to limit the 15 availability of judicial review in this context. Far from 16 finding that the district court erred by reviewing the 17 arbitrator’s interlocutory ruling, Oxford Health upheld the 18 district court’s ruling in full. 569 U.S. at 568. The Court 19 finds judicial review is likewise permissible here. 20 D. Motion to Set Aside 21 Albeit permissible, judicial review of an arbitrator’s 22 decision is extremely limited. The FAA provides four grounds 23 upon which a court can vacate an arbitration award: (1) where 24 the award was procured by corruption, fraud, or undue means; (2) 25 where an arbitrator evidenced partiality or corruption; (3) 26 where the arbitrators were guilty of misconduct; and (4) where 27 the arbitrators exceeded their power. 9 U.S.C. § 10(a). 28 Additionally, the Ninth Circuit recognizes a fifth “non- 1 statutory escape valve from an arbitral award”: an arbitrator’s 2 manifest disregard of the law. Luong, 368 F.3d at 1112. 3 Here, S&D Carwash contends the arbitrator manifestly 4 disregarded Lamps Plus v. Varela, 139 S. Ct. 1406 (2019). 5 Petition ¶¶ 20-30. To vacate an arbitral decision on this 6 ground, “it must be clear from the record that [the] 7 arbitrator[] recognized applicable law and then ignored it.” 8 Langstein v. Certain Underwriters at Lloyd’s, London, 607 F.3d 9 634, 641 (9th Cir 2010). S&D Carwash has not met this high bar. 10 Lamps Plus held that an ambiguous arbitration agreement cannot 11 “provide the necessary ‘contractual basis’ for compelling class 12 arbitration.” 139 S. Ct. at 1415. Crum and S&D Carwash both 13 agree that the arbitrator recognized Lamps Plus was the 14 applicable law and discussed Lamps Plus at length. Opp’n at 10; 15 Reply at 6. The parties diverge at S&D Carwash’s conclusion 16 that arbitrator “ignore[d] the totality of [Lamps Plus] in his 17 actual reasoning.” Id. 18 The Court disagrees with S&D Carwash’s assessment of the 19 arbitrator’s ruling. The text of the parties’ arbitration 20 clause is not, as Petitioner insists, “essentially the same” as 21 the text of the Lamps Plus agreement. Reply at 7. To the 22 contrary, the agreement here expressly provides that “any and 23 all claims” arising out of Crum’s employment “including . . . 24 class action[s] shall be submitted to final and binding 25 arbitration.” Ex. A to RJN. Although the agreement later 26 prohibits Crum from participating in “a class action lawsuit for 27 claims arising out of [his] employment” it says nothing of 28 participating in class arbitration. See id. Interpreting the WAG 2 VIMY EAINIT □□ INES RAVUUEEOTIL AO FON Ve AY 1 plain meaning of this text, the arbitrator found the agreement 2 | unambiguously authorized class arbitration. Ex. C to RJN. The 3 arbitrator’s written ruling reflects an appreciation for anda 4 good-faith application of Lamps Post. Id. This Court lacks any 5 | basis for finding this decision manifestly disregarded the law. 6 E. Waiver 7 Finally, Crum argues S&D Carwash waived its contractual 8 arbitration rights by seeking judicial review. Opp’n at 14-15. 9 | A party may waive its right to compel arbitration if it (1) is 10 aware of its right to compel arbitration, (2) acts inconsistently 11 with that right, and (3) prejudices the opposing party as a 12 result. Bower v. Inter-Con Security Systems, Inc., 232 Cal. App. 13 4th 1035, 1043 (2013). Those elements are not present here. 14 The FAA authorizes limited judicial review of arbitral decisions. 15 | A party’s decision to avail itself of that review is consistent 16 | with, not contrary to, the party’s right to arbitrate disputes. 17 The Court finds S&D Carwash did not waive its right to arbitrate. 18 19 Il. ORDER 20 For the reasons set forth above, the Court DENIES S&D 21 Carwash’s petition to set aside. Having ruled upon this 22 petition, the Court DENIES S&D Carwash’s motion to stay 23 arbitration pending the Court’s decision as MOOT. 24 IT IS SO ORDERED. 25 Dated: May 18, 2020 26 he Me 27 teiren staves odermacr 7008 28