Bennett v. Anheuser-Busch Commercial Stratefy, LLC ( 2024 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 CORNELIUS OMAR BENNETT, No. 2:22-cv-01239-MCE-KJN 12 Plaintiff, 13 v. MEMORANDUM AND ORDER 14 ANHEUSER-BUSCH COMMERCIAL STRATEFY, LLC, a Delaware Limited 15 Liability Company, et al., 16 Defendants. 17 18 Through this putative action, Plaintiff Cornelius Omar Bennett (“Plaintiff”), 19 individually and on behalf of himself and all others similarly situated, seeks to recover 20 from Defendants Anheuser-Busch Commercial Stratefy, LLC, and Anheuser-Busch, 21 LLC, (collectively, “Defendants” or “AB”) for various purported wage and hour violations. 22 Presently before the Court is Defendants’ Motion to Compel Individual Arbitration. ECF 23 No. 17. For the following reasons, that Motion is GRANTED.1 24 /// 25 /// 26 /// 27 1 Because oral argument would not have been of material assistance, the Court ordered this 28 matter submitted on the briefs. E.D. Local Rule 230(g). 1 BACKGROUND2 2 3 Defendants are a wholesale distributor of beer, ale, porter, and other malt 4 beverages around the world. They have branches in many states, including California. 5 Plaintiff worked with Defendants from approximately November 16, 2020, until 6 approximately May 13, 2021, totaling 178 days. A few weeks prior to starting with 7 Defendants, Plaintiff electronically signed an agreement to be bound by Defendants’ 8 “Dispute Resolution Program” (“DRP”). Decl. of Marjorie Yocum, ECF No. 17-6, Ex. 2. 9 That DRP stated, in pertinent part, that the employee and Defendants “[were] agreeing 10 as a condition of your employment to submit all covered claims to the . . . DRP . . . , to 11 waive all rights to a trial before a jury on such claims, and to accept an arbitrator’s 12 decision as the final, binding and exclusive determination of all covered claims.” Id., 13 ECF No. 17-7, Ex. 3, at 1. “The DRP applies to all salaried and non-union hourly 14 employees of Anheuser-Busch Companies, Inc., or any of its U.S. subsidiaries 15 (“Employee”).” Id. at 2. “Covered claims are claims relating to or arising out of the 16 employment relationship that: A. the Company may have against an Employee, and/or 17 B. the Employee may have against the Company and/or any individual employee who is 18 acting within the scope of his or her employment with the Company, where the 19 Employee alleges unlawful termination and/or unlawful or illegal conduct on the part of 20 the Company.” Id. at 5. It also provides that: 21 The Arbitrator shall have exclusive authority to resolve any dispute relating to the applicability, enforceability, or formation 22 of the DRP, including any claim that all or part of the DRP is invalid or unenforceable. 23 Id. at 16. 24 25 /// 26 /// 27 2 Unless otherwise indicated, the following facts are taken, primarily verbatim, from the parties’ 28 briefs. 1 For his part, however, Plaintiff avers that: 2 When I applied for a position with AB, I was required to complete an online onboarding process prior to my start date. 3 In order to complete my onboarding, I was required to click a “Submit” button at the bottom of a webpage. 4 This page displayed a list of document titles. I do not recall 5 whether one of those list items referenced AB’s Dispute Resolution policy (“DRP”). I do not recall any hyperlink on this 6 page that linked to the DRP or any other documents. I was unable to view any of these documents through this web page 7 at the time I accessed it. 8 I was not given a copy of the DRP before clicking “Submit” or at any time during the onboarding process, nor was I given any 9 instructions on how to access the DRP, or any other opportunity to review the terms of the DRP. I was also not 10 given an opportunity to negotiate any of the terms of the DRP, or any other terms of my employment. 11 After clicking the “Submit” button, my electronic signature was 12 applied to the listed documents. I did not understand that by clicking the “Submit” button that my signature would be added 13 to these documents, and I did not intend to agree to the terms of these documents, including the DRP, when I clicked the 14 “Submit” button. 15 After clicking the “Submit” button, I was able to review only the final signature page of the listed documents, which had been 16 populated with my digital signature. I was unable to review any other portion of these documents before or after clicking the 17 “Submit” button. I clicked the “Submit” button because it was my understanding that doing so was necessary to move to the 18 next step in the onboarding process. I did not understand that I was being asked to agree to give up important rights by 19 clicking the “Submit” button. 20 I contacted HR via telephone and email to inquire about various issues with the onboarding process. One of the issues 21 I contacted HR about was my inability to access the documents which had been populated with my electronic 22 signature after I clicked the “Submit” button. I was told by HR that it was not an issue and I would have an opportunity to 23 review and sign the documents when I arrived to start my employment with AB. I was never given this opportunity. 24 I was never provided a copy of the DRP, nor was I told how to 25 access the DRP, before or during my employment with AB. In fact, I do not recall ever seeing the DRP until AB’s counsel 26 provided it to me through my counsel in connection with AB’s filing its first motion to compel arbitration, which I understand 27 was filed on September 27, 2022. 28 1 Pl.’s Decl., ECF No. 21-1, ¶¶ 4-10. 2 Defendants, on the other hand, provide evidence that the DRP Acknowledgment 3 page contained the words “Dispute Resolution Program (‘DRP’)” in blue, bold letters, and 4 that was in actuality a hyperlink to the DRP itself. Decl. of Allison Russell, ECF No. 23-1, 5 ¶¶ 7-9. Plaintiff also purportedly had access to all policies and procedures, including the 6 DRP, throughout his employment with Defendants. Id., ¶ 11. For example, Plaintiff 7 could purportedly access the DRP through Defendants’ intranet page. Id., ¶¶ 11-12. 8 In addition, Plaintiff avers that “[u]pon starting [his] job with [Defendants], it was 9 [his] understanding that paying dues to, and becoming a member of the Teamsters Local 10 Union 896 was a requirement of the job.” Pl.’s Decl., ECF No. 21-1, ¶ 11. He 11 purportedly believed “at the time [he] was hired that only Union members were allowed 12 to work on the property.” Id. He further contends that: 13 I recall signing my Union application and authorization to deduct Union dues from my paychecks during my new hire 14 orientation on my first day of work in November 2020. It was my understanding that Union dues were to be deducted from 15 my paychecks from the start of my employment. I am not aware of any reason why they were not. 16 Id., ¶12. 17 18 It is undisputed, however, that no union application is in the record other than one 19 signed on February 17, 2021, when Plaintiff submitted an “Application for Membership 20 and Dues Deduction Authorization,” to the Teamsters Local Union No. 896 (“Union”). 21 Id., ¶¶ 15-16, Ex. 3. In addition, on March 5, 2021, Defendants deducted Plaintiff’s 22 Union dues for the first time. 23 On May 3, 2022, Plaintiff initiated this putative class action in Solano County 24 Superior Court, bringing various wage and hour claims, including challenges to 25 Defendants’ failure to provide meal and rest breaks. Defendants thereafter removed the 26 case to this Court and filed the instant Motion. 27 /// 28 /// 1 ANALYSIS 2 3 Defendants ask the Court to compel Plaintiff to individually arbitrate his claims 4 pursuant to the terms of the DRP and to stay this action pending completion of those 5 proceedings. In opposition, Plaintiff argues that there is no valid agreement to arbitrate 6 because, as a union member, Plaintiff is not a covered employee. In addition, Plaintiff 7 contends that there was no meeting of the minds because Plaintiff was not able to 8 access the DRP either electronically or in hard copy when he started employment with 9 Defendants and because they could not have reached an agreement when the DRP 10 does not apply to union employees. Finally, Plaintiff contends that the DRP is 11 unconscionable, in part because it purports to delegate the issue of arbitrability to the 12 arbitrator. 13 In Reply, Defendants argue that the delegation clause is valid and that issues of 14 applicability, formation, and enforceability of the DRP should be decided by the arbitrator 15 as opposed to by the Court. Based on the delegation clause, the Court concludes that 16 this case should proceed to arbitration. 17 The Federal Arbitration Act (“FAA”) provides that “[a] written provision in . . . a 18 contract evidencing a transaction involving commerce to settle by arbitration a 19 controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and 20 enforceable, save upon such grounds as exist at law or in equity for the revocation of 21 any contract.” 9 U.S.C. § 2. Under the FAA, a party may seek a court order compelling 22 arbitration where another party refuses to arbitrate. Id. § 4. Valid arbitration agreements 23 must be “rigorously enforce[d].” Perry v. Thomas, 482 U.S. 483, 490 (1987) (internal 24 quotation marks and citation omitted). To that end, the FAA “leaves no place for the 25 exercise of discretion by a district court, but instead mandates that district courts shall 26 direct the parties to proceed to arbitration on issues as to which an arbitration agreement 27 has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). 28 /// 1 “Section 2 [of the FAA] is a congressional declaration of a liberal federal policy 2 favoring arbitration agreements, notwithstanding any state or substantive or procedural 3 policies to the contrary.” Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 4 460 U.S. 1, 24 (1983). However, “the FAA’s ‘policy favoring arbitration’ does not 5 authorize federal courts to invent special, arbitration-preferring procedural rules.” 6 Morgan v. Sundance, Inc., 596 U.S. 411, 418 (2022) (quoting Moses H. Cone, 460 U.S. 7 at 24). This policy “is merely an acknowledgement of the FAA’s commitment to overrule 8 the judiciary’s longstanding refusal to enforce agreements to arbitrate and to place such 9 agreements upon the same footing as other contracts.” Granite Rock Co. v. Int’l Broth. 10 of Teamsters, 561 U.S. 287, 302 (2010) (citation and internal quotation marks omitted). 11 In other words, “[t]he policy is to make arbitration agreements as enforceable as other 12 contracts, but not more so.” Morgan, 596 U.S. at 418 (citation and internal quotation 13 marks omitted); see also Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24–25 14 (1991) (stating that the FAA’s “purpose was . . . to place arbitration agreements upon the 15 same footing as other contracts,” and recognizing a “liberal federal policy favoring 16 arbitration agreements”). “[A] court must hold a party to its arbitration contract just as the 17 court would to any other kind. But a court may not devise novel rules to favor arbitration 18 over litigation.” Morgan, 596 U.S. at 418. 19 Generally, in deciding whether a dispute is subject to an arbitration agreement, a 20 Court must answer two questions: (1) “whether a valid agreement to arbitrate exists,” 21 and, if so, (2) “whether the agreement encompasses the dispute at issue.” Chiron 22 Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). If a party 23 seeking arbitration establishes these two factors, the Court must compel arbitration. 24 9 U.S.C. § 4; Chiron, 207 F.3d at 1130. Accordingly, the Court’s role “is strictly limited to 25 determining arbitrability and enforcing agreements to arbitrate, leaving the merits of the 26 claim and any defenses to the arbitrator.” Republic of Nicaragua v. Standard Fruit Co., 27 937 F.2d 469, 478 (9th Cir. 1991). 28 /// 1 In some cases like this one, however, the relevant agreement contains a 2 “delegation clause.” Specifically here, the DRP purports to delegate to the arbitrator 3 “exclusive authority to resolve any dispute relating to the applicability, enforceability, or 4 formation of the DRP, including any claim that all or part of the DRP is invalid or 5 unenforceable.” ECF No. 17-7, Ex. 3. 6 “It is well-established that some ‘gateway’ issues pertaining to an arbitration 7 agreement, such as issues of validity and arbitrability, can be delegated to an arbitrator 8 by agreement.” Ahlstrom v. DHI Mortg. Co., Ltd., L.P., 21 F.4th 631, 634 (9th Cir. 2021). 9 However, “a court should order arbitration only if it is convinced an agreement has been 10 formed.” Id. at 635. “[P]arties cannot delegate issues of formation to the arbitrator.” Id. 11 “An agreement to arbitrate a gateway issue is simply an additional, antecedent 12 agreement the party seeking arbitration asks the federal court to enforce, and the FAA 13 operates on this additional arbitration agreement just as it does on any other.” Rent-A- 14 Center, W., Inc. v. Jackson, 561 U.S. 63, 70, (2010). 15 Accordingly, to determine which forum has jurisdiction to evaluate these “gateway 16 issues,” the Court must first determine if an agreement to arbitrate and an agreement to 17 delegate gateway issues exist.3 “If the parties did form an agreement to arbitrate (and 18 agreed to delegate questions of arbitrability), the Court must send any disputes between 19 [them] to [the arbitrator].” Massel v. Successfulmatch.com, ___ F. Supp. 3d ____, 2024 20 WL 802194, at *4 (N.D. Cal. 2024). “But if the parties never formed such an agreement, 21 [the Plaintiff’s] claims cannot be compelled to arbitration and are properly before this 22 Court.” Id. 23 /// 24 /// 25 /// 26 /// 27 3 In this case, Plaintiff’s challenges to both formation of the DRP and formation of the delegation 28 clause are the same so the Court will address those arguments simultaneously. 1 One caveat is that, if an agreement is found to exist, parties can still challenge the 2 validity and enforceability of the delegation provision in court prior to being compelled to 3 arbitration. See Goceri v. Amazon.com, Inc., ___ F.Supp.3d ____, 2024 WL 1007868, 4 at *2 (N.D. Cal. 2024). “To challenge the validity or enforceability of a delegation 5 provision, ‘a party resisting arbitration must mention that it is challenging the delegation 6 provision and make specific arguments.’” Id. (quoting Bielski v. Coinbase, Inc., 87 F.4th 7 1003, 1009 (9th Cir. 2023)). “If there is no delegation provision (or if one is successfully 8 challenged), the Court must resolve the gateway questions.” Id. 9 A. The parties formed an agreement to arbitrate that included a delegation provision. 10 In determining the existence of an agreement to arbitrate, the district court looks 11 to “general state-law principles of contract interpretation, while giving due regard to the 12 federal policy in favor of arbitration.” Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 13 1049 (9th Cir. 1996). Plaintiff contends that Defendants failed to establish the existence 14 of a valid arbitration agreement between them. The Court disagrees. 15 Defendants provided evidence that Plaintiff electronically acknowledged his 16 assent to the DRP prior to commencing his employment. Yocum Decl., ECF No. 17-2, 17 ¶¶ 5, 6, Ex. 2-3. Prior to signing that acknowledgment Plaintiff had access to a hyperlink 18 taking him directly to the applicable DRP. Russell Decl., ECF No. 23-1, ¶¶ 7-8. In 19 addition, the DRP was available to Plaintiff on Defendants’ intranet page throughout his 20 employment. Id., ¶¶ 11-12. In opposition, Plaintiff contends that he did not recall 21 whether any documents provided to him during onboarding included the DRP, and he 22 did not remember seeing any hyperlink. Bennett Decl., ECF No. 21-1, ¶¶ 5-6. He also 23 indicated that he was never given a copy of the DRP and that he did not understand that 24 clicking “submit” would sign various documents for him. Id., ¶¶ 7-8. Plaintiff’s testimony 25 as to his recollection and understanding is belied by the objective evidence indicating 26 that he specifically signed the DRP acknowledgment form containing a hyperlink to the 27 document at issue. 28 1 The Court thus concludes that the parties agreed to the terms of the DRP and that an 2 agreement to arbitrate, including an agreement to abide by the delegation clause 3 contained therein, was formed.4 4 B. The delegation clause is not unconscionable. 5 Plaintiff contends that the DRP and the delegation clause are unconscionable 6 because “the delegation provision (1) is not within the adhering party’s reasonable 7 expectations since arbitrators are not normally expected to determine their own 8 jurisdiction, and (2) the delegation clause creates a conflict of interest for the arbitrator 9 because (a) an arbitrator who finds an arbitration agreement unconscionable would not 10 only have nothing further to arbitrate…and (b) could also reasonably expect to obtain 11 less business in the future, at least from the provider in question.” Pl.’s Opp. ECF No. 12 21, at 19-20 (quoting Chin v. Advanced Fresh Concepts Franchise Corp., 194 Cal. App. 13 4th 704, 710-11 (2011) (internal quotation marks omitted)). 14 Plaintiff’s arguments are unpersuasive because the challenges he raises simply 15 go to the inherent features of delegation clauses and were already rejected in Malone v. 16 Superior Court, 226 Cal. App. 5th 1551 (2014). Indeed, that court evaluated whether the 17 following arguments gave rise to substantive unconscionability: 18 (1) a delegation clause is outside the reasonable expectation of the parties; (2) delegation clauses are not bilateral; and (3) 19 the arbitrator has a self-interest in finding the agreement arbitrable--both so that the arbitrator can be compensated for 20 arbitrating the dispute on the merits, and so that the arbitrator will be considered for further arbitration assignments. 21 22 /// 23 /// 24 /// 25 /// 26 /// 27 4 Whether or not Plaintiff was a union member throughout his employment with Defendants goes to whether his claims are covered, not whether an agreement was formed. If the arbitration provision 28 stands, as discussed below, what claims are covered is an issue for resolution by the arbitrator. 1 | Id. at 1564. It concluded that: 2 [T]hese three grounds do not lead to the conclusion that the delegation clause in the instant matter is unconscionable. 3 Taken in reverse order, the third ground (the arbitrator's financial self-interest) is preempted by the FAA; the second 4 ground (the delegation clause lacks bilaterality) is simply inapplicable to the delegation clause in the instant case; and 5 the first ground (the delegation clause is outside the reasonable expectation of the parties), standing alone, is not 6 sufficient to render the clause unconscionable. 7 | Id. Because Plaintiff here also raises only the first and third grounds to challenge 8 | application of the instant delegation provision, his arguments are squarely foreclosed. 9 | Id. The delegation provision is enforceable, and the parties must abide by its terms. 10 Defendants’ Motion to Compel is thus GRANTED. Because the Court concludes 11 | the delegation clause is valid, it does not reach questions such as what claims may be 12 || covered by the DRP and whether the class waiver applies and is valid here. It stays this 13 | action pending resolution of the arbitration proceedings, at which point, the Court can 14 | determine whether there is anything further to adjudicate in this forum. 15 16 CONCLUSION 17 18 Defendants’ Motion to Compel (ECF No. 17) is GRANTED, and this action is 19 | hereby STAYED pending resolution of the parties’ arbitration proceedings. Not later 20 | than sixty (60) days following the date this Memorandum and Order is electronically filed, 21 | and every sixty (60) days thereafter, the parties are directed to file a Joint Status Report 22 | advising the Court as to the status of those proceedings. 23 IT |S SO ORDERED. 24 | Dated: March 21, 2024 25 AK _ LCs □ 26 MORRISON C. ENGLA JR) SENIOR UNITED STATES D Xr T JUDGE 27 28 10