Whitney v. Suburban Propane, L.P. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 LINNEA WHITNEY, on behalf of No. 2:22-cv-00633 WBS AC herself and others similarly 13 situated, 14 Plaintiff, ORDER RE: DEFENDANT’S MOTION TO COMPEL ARBITRATION 15 v. 16 SUBURBAN PROPANE, L.P., 17 Defendant. 18 19 ----oo0oo---- 20 Plaintiff Linnea Whitney brought this putative class 21 action against defendant Suburban Propane based on allegations 22 that defendant routinely overcharged plaintiff and members of the 23 putative class for propane defendant supplied. Specifically, the 24 Complaint alleges (1) breach of contract and the implied covenant 25 of good faith and fair dealing; (2) an alternative claim for 26 unjust enrichment/quasi-contract; (3) violation of California’s 27 Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code 28 § 1788 et seq.; (4) violation of California’s Unfair Competition 1 Law, Cal. Bus. & Prof. Code § 17200 et seq; and (5) negligent 2 infliction of emotional distress. (Compl. (Docket No. 1).) 3 Defendant now moves to compel plaintiff to arbitrate her claims 4 and seeks dismissal of the action. (Mot. (Docket No. 11-1).) 5 I. Facts & Procedural History1 6 Plaintiff is a former resident of Siskiyou County who 7 has maintained an account with defendant for delivery of propane 8 gas to her now-former residence in the County since December of 9 2019. (Compl. at ¶¶ 5, 20.) Many County residents rely on 10 defendant and other propane suppliers for fuel to heat their 11 homes during the winter and for other purposes. (Id. at ¶ 12.) 12 Defendant delivers propane to customers on a monthly basis. (Id. 13 at ¶ 14.) To determine the amount of gas used by a customer, and 14 thus the amount the customer should be billed, a representative 15 of defendant reads the gas meter at a customer’s home or 16 business, which displays the amount of gas used in a given 17 period. (Id. at ¶ 15.) Plaintiff’s service agreement with 18 defendant (the “Contract”) established this procedure for 19 ascertaining payments owed to defendant. (See id. at ¶ 20; 20 Compl., Ex. A (Docket No. 1-1).) 21 “From at least 2020 onward,” however, plaintiff alleges 22 that defendant erroneously billed her and members of the putative 23 class for amounts of gas they did not actually consume. (Compl. 24 at ¶ 16.) For example, plaintiff alleges that defendant charged 25 her over $4,000 for a two-month usage period, billing her for an 26 amount of gas that a residential customer typically uses over the 27 1 All facts recited herein are as alleged in the 28 Complaint, except as otherwise noted. 1 course of two years, which would have been “virtually impossible” 2 for her to do in two months. (Id. at ¶¶ 18-19, 21.) Several 3 months later, defendant issued plaintiff a second bill, this time 4 for over $7,000, based on consumption of an even larger amount of 5 gas. (Id. at ¶ 29.) Plaintiff alleges defendant has repeatedly 6 refused to correct these erroneous bills and has since issued an 7 outstanding balance statement of $9,999.99, which plaintiff 8 alleges is likewise untethered to any actual gas consumption. 9 (See id. at ¶¶ 24-33.) She further alleges that other customers 10 have been subject to similar practices and that they, like her, 11 have been unable to close their accounts with defendant or 12 recover security deposits paid to defendant pending satisfaction 13 of their erroneous billing statements. (Id. at ¶¶ 32-41.) 14 The Contract includes an arbitration agreement (the 15 “Agreement”). (See Compl., Ex. A, at 4.) The Agreement provides 16 that “Customer and Suburban agree that . . . they each are 17 waiving the right to a trial by judge or jury or to participate 18 in a class action with respect to any Dispute.” (Id.) “Dispute” 19 is defined so as to “be broadly interpreted to include, without 20 limitation, any and all claim(s) arising out of or relating in 21 any way to any aspect of the relationship between Suburban and 22 Customer, whether based in contract, tort, statute, fraud, 23 misrepresentation or any other legal theory.” (Id.) The 24 Agreement exempts four categories of claims from this definition, 25 including claims by the customer for physical injury to the 26 customer or their property, and claims by Suburban for payment of 27 amounts allegedly owed to it under the Contract. (Id.) 28 Pursuant to the Agreement, if a Dispute is not resolved 1 informally between the parties, either party may commence an 2 arbitration proceeding. The Agreement includes a clause 3 providing that arbitrations “will be governed by the Commercial 4 Dispute Resolution Procedures and the Supplementary Procedures 5 for Consumer Related Disputes (collectively, ‘AAA Rules’) of the 6 American Arbitration Association” (“AAA”) and noting that “[t]he 7 AAA Rules are available online at www.adr.org” (the 8 “Incorporation Clause”). The Agreement further provides that 9 “[a]ll issues that relate to the Dispute are for the arbitrator 10 to decide” (the “Delegation Clause”). 11 II. Legal Standard 12 The Federal Arbitration Act (“FAA”) provides that a 13 written provision in a “contract evidencing a transaction 14 involving commerce to settle by arbitration a controversy 15 thereafter arising out of such contract . . . shall be valid, 16 irrevocable, and enforceable, save upon such grounds as exist at 17 law or in equity for the revocation of any contract.” 9 U.S.C. 18 § 2. Because arbitration is a matter of contract, “the central 19 . . . purpose of the FAA is to ensure that private agreements to 20 arbitrate are enforced according to their terms.” Stolt-Nielsen 21 S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682 (2010) 22 (internal quotation marks omitted); see also Perry v. Thomas, 482 23 U.S. 483, 490 (1987) (under the FAA, arbitration agreements “must 24 be rigorously enforced”) (internal quotation marks omitted, 25 alterations adopted). 26 The FAA “leaves no place for the exercise of discretion 27 by a district court, but instead mandates that district courts 28 shall direct the parties to proceed to arbitration on issues as 1 to which an arbitration agreement has been signed.” Dean Witter 2 Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). “[A]s a matter 3 of federal law, any doubts concerning the scope of arbitrable 4 issues should be resolved in favor of arbitration, whether the 5 problem at hand is a construction of the contract language itself 6 or an allegation of waiver, delay, or like defense to 7 arbitrability.” Moses H. Cone Mem’l Hosp. v. Mercury Const. 8 Corp., 460 U.S. 1, 24–25 (1983); see Poublon v. C.H. Robinson 9 Co., 846 F.3d 1251, 1259 (9th Cir. 2017) (same). 10 Upon a showing that a party has failed to comply with a 11 valid arbitration agreement, the district court must issue an 12 order compelling arbitration. See Cohen v. Wedbush, Noble Cooke, 13 Inc., 841 F.2d 282, 285 (9th Cir. 1988). “[T]he FAA limits 14 courts’ involvement to determining (1) whether a valid agreement 15 to arbitrate exists and, if it does, (2) whether the agreement 16 encompasses the dispute at issue.” Cox v. Ocean View Hotel 17 Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (internal quotation 18 marks omitted). However, “[a]lthough gateway issues of 19 arbitrability presumptively are reserved for the court, the 20 parties may agree to delegate them to the arbitrator.” Momot v. 21 Mastro, 652 F.3d 982, 987 (9th Cir. 2011) (citing Rent-A-Center, 22 W., Inc. v. Jackson, 561 U.S. 63, 68-70 (2010)). Courts may 23 “assume that the parties agreed to arbitrate arbitrability” only 24 if “there is clear and unmistakable evidence that they did so.” 25 Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 26 531 (2019) (quoting First Options of Chi., Inc. v. Kaplan, 514 27 U.S. 938, 944 (1995)). 28 An “express agreement” to arbitrate arbitrability, 1 evinced by a contract’s “language[ ] delegating to the 2 arbitrators the authority to determine the validity or 3 application of any of the provisions of the arbitration clause,” 4 constitutes clear and unmistakable evidence. Momot, 652 F.3d at 5 988 (citations omitted). Where such evidence exists, unless a 6 party opposing enforcement of the agreement “challenge[s] the 7 delegation provision specifically, [courts] must treat it as 8 valid . . . , leaving any challenge to the validity of the 9 Agreement as a whole for the arbitrator.” Rent-A-Center, 561 10 U.S. at 72. 11 III. Analysis 12 Defendant seeks to compel arbitration not only of the 13 underlying billing dispute between it and plaintiff, but also of 14 whether that dispute is validly subject to arbitration under the 15 Agreement. (See Mot.) Plaintiff argues that she cannot be 16 compelled to arbitrate either issue because, as a threshold 17 matter, the Agreement -- and thus the Delegation Clause, which 18 defendant contends delegates arbitrability issues to the 19 arbitrator -- is unenforceable as unconscionable and as lacking 20 mutuality. (See Opp. at 15-19 (Docket No. 14).) Thus, according 21 to plaintiff, the Agreement is exempt from the FAA’s general 22 requirement that arbitration agreements be enforced according to 23 their terms. (Id. at 15-16); see 9 U.S.C. § 2. 24 A. The Court Cannot Consider Plaintiff’s Contract Defenses 25 As explained below, in this case, whether the Agreement 26 is unconscionable and lacks mutuality is a question for the 27 arbitrator to decide. Ordinarily, under the FAA, courts may 28 “refuse to enforce arbitration agreements ‘upon such grounds as 1 exist at law or in equity for the revocation of any contract.’” 2 Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1622 (2018) (quoting 9 3 U.S.C. § 2). Such “generally applicable contract defenses” 4 include “unconscionability,” AT&T Mobility LLC v. Concepcion, 563 5 U.S. 333, 339 (2011) (quoting Doctor’s Assocs., Inc. v. 6 Casarotto, 517 U.S. 681, 687 (1996)), and “lack of . . . mutual 7 assent,” Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1108 8 (9th Cir. 2002) (citing Doctor’s Assocs., 517 U.S. at 687); see 9 Nygaard v. Prop. Damage Appraisers, Inc., 779 F. App’x 474, 476 10 (9th Cir. 2019) (same). 11 As the Supreme Court has explained, however, where an 12 arbitration agreement purports to delegate questions regarding 13 the validity and enforceability of the agreement to an 14 arbitrator, courts “must treat” such delegation as valid unless 15 the party opposing arbitration “challenge[s] the delegation 16 provision specifically,” Rent-A-Center, 561 U.S. at 72, based on 17 “generally applicable contract defenses,” Concepcion, 563 U.S. at 18 339. See Brennan v. Opus Bank, 796 F.3d 1125, 1133 (9th Cir. 19 2015) (party challenging arbitration agreement on 20 unconscionability grounds must also do so specifically with 21 respect to delegation provision to resist enforcement thereof) 22 (citing Rent-A-Center, 561 U.S. at 73-75). Here, plaintiff has 23 argued that the Delegation Clause does not actually delegate 24 arbitrability to the arbitrator. (Opp. at 10-15.) Although she 25 also argues that the Agreement as a whole is unconscionable and 26 lacks mutuality, she does not specifically challenge the 27 28 1 Delegation Clause on these grounds. (See id. at 16-22.)2 The 2 court therefore “must” treat the Delegation Clause as valid. See 3 Rent-A-Center, 561 U.S. at 72. Accordingly, whether the 4 Agreement itself, which is to be evaluated separately from the 5 Delegation Clause, see Brennan, 796 F.3d at 1133; (Hori Decl., 6 Ex. 2, at 14), is enforceable -- including on grounds of 7 unconscionability and lack of mutuality -- is a question for the 8 arbitrator to decide, assuming that the relevant clauses in the 9 Agreement in fact delegate arbitrability issues to the 10 arbitrator. The court will therefore turn to this question next. 11 B. The Agreement Delegates Arbitrability to the Arbitrator 12 As noted, defendant argues that the Agreement delegates 13 “gateway issues of arbitrability,” Momot, 652 F.3d at 987, to the 14 arbitrator, including the validity of the Agreement itself. (See 15 Mot. at 11-12.) It contends that the Agreement’s Delegation 16 Clause, which states that “[a]ll issues that relate to the 17 Dispute are for the arbitrator to decide,” (Compl., Ex. A, at 4), 18 “clearly and unmistakably delegates arbitrability issues to the 19 arbitrator.” (Mot. at 12.) 20 The court agrees. In Momot, the Ninth Circuit 21 evaluated a clause in an arbitration agreement providing: 22 If a dispute arises out of or relates to this Agreement, the relationships that result from this 23 Agreement, the breach of this Agreement or the validity or application of any of the provisions of 24 this Section [ ], and, if the dispute cannot be settled through negotiation, the dispute shall be 25 26 2 Although plaintiff states that she “clearly and unequivocally contests the delegation provision,” (Opp. at 13 27 n.1), she offers no argument as to why the provision itself -- as distinct from the overall Agreement -- is unconscionable or lacks 28 mutuality. See Brennan, 796 F.3d at 1133. 1 resolved exclusively by binding arbitration. 2 652 F.3d at 988. The court held that the clause, which specified 3 that “the validity or application” of the agreement was to be 4 resolved through arbitration, constituted a clear and 5 unmistakable agreement to delegate issues of arbitrability. Id. 6 Although here the Agreement does not contain identical 7 language, its Delegation Clause sweeps even more broadly than the 8 one the Ninth Circuit addressed in Momot, as it designates for 9 arbitration “[a]ll issues that relate to the Dispute.” (Compl., 10 Ex. A, at 4 (emphasis added).) Under a plain reading of the 11 Delegation Clause, the manner in which a Dispute is to be 12 resolved -- i.e., whether by a court or by an arbitrator, and the 13 subsidiary question of whether an agreement purporting to require 14 the latter is valid and enforceable -- is clearly an “issue[ ] 15 that relate[s] to the Dispute.” This conclusion receives further 16 support when read in the context of the Agreement as a whole, 17 which specifies that the term “Dispute,” as used throughout the 18 Agreement, “shall be broadly interpreted.” (Id.) 19 As noted, the Agreement’s Incorporation Clause also 20 incorporates by reference “the Commercial Dispute Resolution 21 Procedures and the Supplementary Procedures for Consumer Related 22 Disputes (collectively, ‘AAA Rules’) of the American Arbitration 23 Association” and includes a link to access those rules online. 24 Defendant contends these rules further establish that the parties 25 delegated threshold questions of arbitrability to the arbitrator. 26 (See Mot. at 12-13.) Although the parties dispute the substance 27 of the second set of AAA Rules identified in the Incorporation 28 Clause, given that the AAA has evidently updated and changed the 1 name of those rules, (see Opp. at 11-12); Reply at 10-11 (Docket 2 No. 16)), no such dispute exists as to the first set of rules, 3 the Commercial Dispute Resolution Procedures. 4 Those rules provide, in a section titled 5 “Jurisdiction,” that “[t]he arbitrator shall have the power to 6 rule on his or her own jurisdiction, including any objections 7 with respect to the existence, scope, or validity of the 8 arbitration agreement or to the arbitrability of any claim or 9 counterclaim.” (Decl. of Lucas Hori (“Hori Decl.”), Ex. 2, at 14 10 (Docket No. 12-2).) They further provide that “[t]he arbitrator 11 shall have the power to determine the existence or validity of a 12 contract of which an arbitration clause forms a part,” noting 13 that the “arbitration clause shall be treated as an agreement 14 independent of the other terms of the contract.” (Id.) Although 15 the court has concluded that the language of the Agreement’s 16 Delegation Clause is sufficient to clearly and unmistakably 17 delegate threshold issues of arbitrability to the arbitrator, 18 these provisions of the AAA Commercial Dispute Resolution 19 Procedures provide additional support for this conclusion, as 20 they specify that questions regarding the “validity of the 21 arbitration agreement” or “arbitrability of any claim” are for 22 the arbitrator to decide. 23 Because plaintiff has not specifically challenged the 24 Delegation Clause “upon such grounds as exist at law or in equity 25 for the revocation of any contract,” and because the court 26 concludes that the Delegation and Incorporation Clauses validly 27 delegate arbitrability issues to the arbitrator, the court will 28 order the parties to arbitrate their dispute -- including gateway 1 issues of arbitrability, unconscionability, and lack of mutuality 2 -- in accordance with their agreement to do so. See Stolt- 3 Nielsen, 559 U.S. at 682; Dean Witter Reynolds, 470 U.S. at 218; 4 Momot, 652 F.3d at 987-88. The court will not, however, dismiss 5 the action as defendant requests. (See Mot. at 17; Reply at 27.) 6 Although not briefed by the parties, at oral argument counsel for 7 plaintiff requested a stay, rather than dismissal, a request the 8 court must honor. See 9 U.S.C. § 3 (where the court is 9 “satisfied that the issue involved in [a] suit or proceeding is 10 referable to arbitration under [an arbitration] agreement,” it 11 “shall on application of one of the parties stay the trial of the 12 action until such arbitration has been had in accordance with the 13 terms of the agreement”). Accordingly, the court will stay the 14 action pending arbitration. See id. 15 IT IS THEREFORE ORDERED that defendant’s Motion to 16 Compel Arbitration (Docket No. 11-1) be, and the same hereby is, 17 GRANTED. IT IS FURTHER ORDERED that judicial proceedings are 18 STAYED pending arbitration.3 19 The Clerk shall close this file administratively, 20 subject to it being reopened upon the application of either party 21 22 3 The parties’ respective requests for judicial notice (Docket Nos. 13, 15) are DENIED. The documents for which 23 defendant seeks notice -- two sets of AAA rules -- are attached to defendant’s motion; because the court is not limited only to 24 consideration of the pleadings on a motion to compel arbitration, the court may consider these exhibits without formally taking 25 judicial notice of them. Additionally, because the court concludes that the Agreement delegates arbitrability issues based 26 on the language of its Delegation Clause, with additional support 27 from the incorporated Commercial Dispute Resolution Procedures, notice of additional AAA rules is unnecessary to the resolution 28 of the instant motion. ee EIR EIR IDE IE SIE III ROI SIE EI ES OO 1 after arbitration has been fully completed. 2 Dated: July 14, 2022 hebben (bh. WILLIAM B. SHUBB 4 UNITED STATES DISTRICT JUDGE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12