Fischer v. Kelly Services Global, LLC ( 2024 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 YURI FISCHER, an individual, on behalf Case No.: 23-CV-1197 JLS (JLB) of himself and on behalf of all persons 12 similarly situated, ORDER (1) DENYING PLAINTIFF’S 13 MOTION TO REMAND TO STATE Plaintiff, COURT AND (2) GRANTING 14 v. DEFENDANT’S MOTION TO 15 COMPEL ARBITRATION KELLY SERVICES GLOBAL, LLC, a 16 Limited Liability Company; and DOES 1 (ECF Nos. 13, 14) through 50, inclusive, 17 Defendants. 18 19 Presently before the Court are Plaintiff Yuri Fischer’s Motion to Remand Case to 20 State Court (“Remand Mot.,” ECF No. 13) and Memorandum of Points and Authorities in 21 support thereof (“Remand Mem.,” ECF No. 13-1). Defendant Kelly Services Global, LLC, 22 filed a Response in Opposition to the Remand Motion (“Opp’n to Remand,” ECF No. 16), 23 to which Plaintiff filed a Reply (“Remand Reply,” ECF No. 17). Also before the Court are 24 Defendant’s Motion to Compel Arbitration and to Dismiss or, in the Alternative, to Stay 25 Proceedings (“Arb. Mot.,” ECF No. 14) and Request for Judicial Notice (“RJN,” ECF 26 No. 14-4) in support thereof. Plaintiff filed an Opposition to the Arbitration Motion 27 (“Opp’n to Arb.,” ECF No. 15) and Objections to Defendant’s RJN (“RJN Objs.,” ECF 28 No. 15-3). Defendant then submitted a Reply (“Arb. Reply,” ECF No. 18). The Parties 1 also filed Supplemental Briefs (“Def.’s Suppl. Br.,” ECF No. 25; “Pl.’s Suppl. Br.,” ECF 2 No. 26) to support their respective positions regarding the Arbitration Motion. Having 3 carefully considered the Parties’ arguments and the law, the Court DENIES Plaintiff’s 4 Remand Motion and GRANTS Defendant’s Arbitration Motion. 5 BACKGROUND 6 Defendant, a temporary staffing company, hired Plaintiff in June of 2021. See ECF 7 No. 1-3 (“Compl.”) ¶¶ 2–3. Plaintiff completed his initial employment paperwork online 8 through Defendant’s standard “eRegistration” process. See Galasso Decl. Supp. Arb. Mot. 9 (“Galasso Decl.”) ¶¶ 3–6, 17, ECF No. 14-1. As part of the onboarding process, Plaintiff 10 encountered several forms, including a “Dispute Resolution and Mutual Agreement to 11 Binding Arbitration” (the “Agreement” or “Arbitration Agreement”). See id. ¶ 6. The 12 company does not require California employees, like Plaintiff, to sign the Agreement as a 13 prerequisite to employment. Id. ¶ 20. Plaintiff nevertheless signed the Agreement on 14 June 2, 2021. See id. ¶ 19; Opp’n to Arb. at 4. 15 Under the terms of the Arbitration Agreement, the Parties “agree[d] to use binding 16 arbitration” for “any ‘Covered Claims’” that might arise between them. 17 Galasso Decl. Ex. B. § 1 (“Agreement”), ECF No. 14-3. So-called “Covered Claims” 18 “include[d] all common-law and statutory claims relating to [Plaintiff’s] employment.” 19 Id. § 2. The Agreement excluded, however, “unfair competition claims.” Id. § 3. 20 The Agreement also included a section titled “Arbitration Rules.” Id. § 4. That 21 provision specified that the “Agreement shall be governed by the Federal Arbitration Act” 22 (“FAA”) and, for California employees, the California Arbitration Act (“CAA”). Id. The 23 Agreement also stated that “[t]he employment dispute resolution rules of the American 24 Arbitration Association (“AAA”) effective at the time of [a dispute’s] filing will apply” in 25 arbitration. Id. A copy of said rules was to be “available at all times on MyKelly.com or 26 upon request from [a] Kelly Representative.” Id. 27 Plaintiff stopped working for Defendant in June of 2022. Compl. ¶ 3. Then, on 28 January 31, 2023, Plaintiff filed a representative action in California Superior Court against 1 Defendant for violations of California’s Private Attorneys General Act of 2004 (“PAGA”). 2 See generally RJN Ex. C, ECF No. 14-5. The complaint in that case (the “PAGA Action”) 3 alleged that Defendant had, among other things, required Plaintiff to work off the clock 4 and to skip mandated meal breaks. Id. ¶¶ 1, 11. The state court stayed the PAGA Action 5 pending the completion of arbitration proceedings after determining that the Agreement 6 applied and was enforceable against Plaintiff. See generally RJN Ex. D, ECF No 14-6. 7 A few months later, Plaintiff initiated this putative class action in state court. 8 Plaintiff’s Complaint raised a single unfair competition claim in violation of California 9 Business and Professional Code §§ 17200, et. seq. Compl. at 1. Much like in his PAGA 10 Action, that lone claim incorporated allegations of several different labor law violations, 11 including, inter alia, the alleged failure to pay employees for all time worked and the failure 12 to provide off-duty meal breaks and rest periods. See id. ¶¶ 8–10. 13 On June 28, 2023, Defendant removed this case to federal court. In its Notice of 14 Removal (“NOR,” ECF No. 1), Defendant contended that removal was proper under the 15 Class Action Fairness Act (“CAFA”). See NOR at 2. To support that argument, Defendant 16 asserted that the putative class included more than 100 members, that the Parties were 17 minimally diverse, and that the Complaint’s claims put more than $5,000,000 in 18 controversy. See id. ¶¶ 9–23. Specifically, Defendant estimated that the total liability in 19 this case could exceed $23,000,000 based on the language of the Complaint. See id. ¶ 55. 20 Plaintiff’s Remand Motion and Defendant’s Arbitration Motion followed. 21 PLAINTIFF’S MOTION TO REMAND 22 I. Legal Standard 23 Generally, defendants may remove to federal court “any civil action brought in a 24 State court of which the district courts of the United States have original jurisdiction.” 25 28 U.S.C. § 1441(a). “The propriety of removal thus depends on whether the case 26 originally could have been filed in federal court.” City of Chicago v. Int’l Coll. of Surgeons, 27 522 U.S. 156, 163 (1997) (citation omitted). “The party seeking the federal forum bears 28 the burden of establishing that the statutory requirements of federal jurisdiction have been 1 met.” Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975, 978 (9th Cir. 2013) (citing 2 Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 399 (9th Cir. 2010)). 3 CAFA gives federal courts jurisdiction over class actions wherein (1) the class has 4 100 or more members, (2) the parties are minimally diverse, and (3) the amount-in- 5 controversy exceeds $5,000,000. 28 U.S.C. §§ 1332(d)(2), (d)(5)(B); see also Standard 6 Fire Ins. Co. v. Knowles, 568 U.S. 588, 592 (2013). While courts typically “strictly 7 construe the removal statute against removal jurisdiction,” Gaus v. Miles, Inc., 8 980 F.2d 564, 566 (9th Cir. 1992), “no antiremoval presumption attends cases invoking 9 CAFA,” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89 (2014). 10 To satisfy CAFA’s amount-in-controversy requirement, “a removing party must 11 initially file a notice of removal that includes ‘a plausible allegation that the amount in 12 controversy exceeds the jurisdictional threshold.’” LaCross v. Knight Transp. Inc., 13 775 F.3d 1200, 1202 (9th Cir. 2015) (quoting Dart Cherokee, 574 U.S. at 89). At that 14 point, the “notice of removal ‘need not contain evidentiary submissions.’” Arias v. 15 Residence Inn by Marriott, 936 F.3d 920, 922 (9th Cir. 2019) (quoting Dart Cherokee, 16 574 U.S. at 84). 17 When a plaintiff contests the defendant’s calculations, “both sides submit proof and 18 the court decides, by a preponderance of the evidence, whether the amount-in-controversy 19 requirement has been satisfied.” Dart Cherokee, 574 U.S. at 88. “The preponderance of 20 the evidence standard, in practical terms, requires the defendant to provide persuasive 21 evidence that ‘the potential damages could exceed the jurisdictional amount,’ as opposed 22 to requiring ‘a prospective assessment of defendant’s liability’ to any degree of certainty.” 23 Richards v. Now, LLC, No. 218CV10152SVWMRW, 2019 WL 2026895, at *5 (C.D. Cal. 24 May 8, 2019) (citations omitted) (quoting Lewis, 627 F.3d at 397, 400). 25 Generally, an amount-in-controversy inquiry begins with the complaint, Greene v. 26 Harley-Davidson, Inc., 965 F.3d 767, 771 (9th Cir. 2020), but parties also provide 27 “affidavits or declarations, or other ‘summary-judgment-type evidence,’” Ibarra v. 28 Manheim Invs., Inc., 775 F.3d 1193, 1197 (9th Cir. 2015) (quoting Singer v. State Farm 1 Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997)). A defendant’s “damages 2 assessment” may rely on “a chain of reasoning that includes assumptions” if such 3 assumptions have “some reasonable ground underlying them.” Id. at 1199. Once a plaintiff 4 has challenged removal, defendants must establish that their assumptions are reasonable, 5 not merely plausible. See Arias, 936 F.3d at 927. 6 In short, “CAFA’s requirements are to be tested by consideration of real evidence 7 and the reality of what is at stake in the litigation, using reasonable assumptions underlying 8 the defendant’s theory of damages exposure.” Ibarra, 775 F.3d at 1198. Courts “weigh 9 the reasonableness of the removing party’s assumptions” and should “not supply further 10 assumptions of [their] own.” Harris v. KM Indus., Inc., 980 F.3d 694, 701 (9th Cir. 2020). 11 And though both parties may offer evidence, the burden of proof ultimately rests on the 12 removing defendant. “[I]f the evidence submitted by both sides is balanced, in equipoise, 13 the scales tip against federal-court jurisdiction.” Ibarra, 775 F.3d at 1199. 14 II. Analysis 15 The sole dispute between the Parties is whether CAFA’s $5,000,000 amount-in- 16 controversy requirement is met, as neither side disputes that the proposed class consists of 17 more than 100 individuals or that the Parties are diverse. Some figures are, however, not 18 contested. Defendant presents evidence to establish that the putative class consists of 19 33,055 current and former California employees who worked a total of 673,579 weeks 20 during the relevant time period.1 See Ministrelli Decl. Supp. NOR ¶ 8 (“Ministrelli Decl.”), 21 ECF No. 1-8. Defendant also showed that those individuals earned an average hourly wage 22 of $22.38 per hour, or $33.57 per hour if working overtime. Id. ¶ 9. 23 To estimate the amount in controversy, Defendant separates the Complaint’s 24 allegations into four categories, including claims for: (1) minimum wage and overtime 25 violations; (2) unpaid meal breaks; (3) unpaid rest periods; and (4) unreimbursed business 26 expenses. The Court will focus on the unpaid meal break and rest period claims, as they 27 28 1 prove sufficient on their own to establish jurisdiction under CAFA. 2 A. Defendant’s Initial Estimates 3 In California, employers must give their workers certain breaks. Specifically, an 4 employer must provide employees with a 30-minute meal break if the employee works 5 more than five hours per day, or two such breaks if the employee works more than ten 6 hours. Cal. Lab. Code § 512(a). An employer must also permit employees to take one 7 10-minute rest period for every four hours worked. See Brinker Rest. Corp. v. Sup. Ct., 8 273 P.3d 513, 528 (Cal. 2012). 9 Fines for noncompliance can add up quickly. Employers must pay a premium of 10 “one additional hour of pay at the employee’s regular rate of compensation for each 11 workday” in which a meal break or rest period is not provided. Cal. Lab. Code § 226.7(c). 12 Section 226.7 has been interpreted to allow for “up to two premium payments per 13 workday—one for failure to provide one or more meal periods, and another for failure to 14 provide one or more rest periods.” United Parcel Serv. Wage & Hour Cases, 15 125 Cal. Rptr. 3d 384, 393 (Ct. App. 2011). 16 Regarding meal premiums, the Complaint alleges that Plaintiff and putative class 17 members were “from time to time unable to take” required meal breaks. Compl. ¶ 11. 18 Plaintiff further alleges that Defendant “engaged in the practice of rounding the meal period 19 times to avoid paying penalties.” Id. From those allegations, Defendant assumes each 20 putative class member could be entitled to one hour of premium pay for every two weeks 21 worked, NOR ¶ 42, meaning each employee worked more than five hours in a single shift 22 without a meal break at least once every two weeks. Based on that assumption, Plaintiff’s 23 unpaid meal premiums claim puts $7,537,349.01 in controversy.2 24 Defendant’s analyzes Plaintiff’s rest period claim in a similar fashion. The 25 Complaint alleges that Plaintiff and putative class members were “required from time to 26 time to work in excess of four (4) hours without being provided . . . rest periods” and were 27 28 1 “from time to time” denied additional rest periods for longer shifts. Compl. ¶ 12. 2 Assuming again that each putative class member could be “entitled to one hour of premium 3 pay per two-week period,” Defendant contends that Plaintiff’s rest period claim puts 4 another $7,537,349.01 at stake.3 5 B. Plaintiff’s Challenges 6 Plaintiff argues that Defendant’s math is “based entirely on erroneous, unsupported, 7 and unreasonable assumptions.” Remand Mem. at 9. Specifically, Plaintiff contends that 8 Defendant provided no evidence to support the assumption of one missed meal break and 9 one missed rest period for every two weeks worked—which Plaintiff repeatedly 10 characterizes as a “100% violation rate.” Id. at 12–13. Plaintiff’s argument is two-fold:4 11 the Court should disregard Defendant’s estimates because (1) the Complaint’s “from time 12 to time” language cannot support a “100%” violation rate; and (2) Defendant fails to 13 present evidence “regarding which class members worked shifts entitling them to meal and 14 rest periods.” Id. The Court addresses each argument in turn. 15 1. Violation Rates 16 Plaintiff’s argument betrays an apparent misunderstanding of the concept of 17 violation rates. Plaintiff suggests that Defendant is using a 100% rate because Defendant 18 assumes all class members experienced meal break or rest period violations. But violation 19 rates measure the percentage of shifts in which putative class members experience a 20 violation. Put another way, “[a] 100% violation rate calculation assumes violations 21 occurring in every identified shift for each class member.” Holcomb v. Weiser Sec. Servs., 22 Inc., 424 F. Supp. 3d 840, 845 n.2 (C.D. Cal. 2019) (emphasis added). Here, Defendant 23 assumes one violation every two workweeks, not every shift, per employee. 24 25 3 $7,537,349.01 = $22.38 per rest period violation x (673,579 total work weeks ÷ 2). NOR ¶ 47. 26 4 Plaintiff introduces no evidence of his own to support these contentions, nor was he required to do so. 27 See Harris, 980 F.3d at 700 (explaining plaintiffs “need only challenge the truth of the defendant’s 28 jurisdictional allegations by making a reasoned argument as to why any assumptions on which they are 1 That said, Plaintiff’s point is not wholly without merit. Defendant expresses its 2 violation rates in terms of workweeks but provides no evidence regarding how many shifts 3 employees worked per week. The Court thus cannot determine what violation rate 4 Defendant is using. For example, if class members worked an average of two shifts per 5 week, then Defendant would be assuming a 25% violation rate (one violation per the four 6 shifts worked over a two-week period). But if each employee worked five shifts per week, 7 the violation rate would be only 10% (one violation per ten shifts worked every two weeks). 8 Still, Plaintiff’s argument only takes him so far. Presumably, each putative class 9 member worked at least one shift per week (otherwise one could hardly call it a 10 “workweek”). Defendant thus assumes a violation rate of at most 50%—one violation 11 every two shifts. The Court also notes that Defendant’s meal break and rest period 12 calculations each exceed CAFA’s $5,000,000 threshold on their own. So, if one assumes 13 employees experienced one meal break and one rest period violation every four weeks— 14 meaning a maximum violation rate of 25%—the amount of controversy still far surpasses 15 $5,000,000.5 And assuming such a violation rate would be reasonable given the 16 Complaint’s “pattern and practice” and “from time to time” allegations. See Arias, 17 936 F.3d at 927 (stating defendant’s “plausible” assumptions “may prove to be reasonable 18 in light of the allegations in the complaint” (emphasis added)); Avila v. Rue21, Inc., 19 432 F. Supp. 3d 1175, 1189 (E.D. Cal. 2020) (“District courts have found . . . violation 20 rates of 25% to 60% can be reasonably assumed as a matter of law based on ‘pattern and 21 practice’ or ‘policy and practice’ allegation[s].” (citations omitted)). 22 In any event, Defendant provides an alternative rest-period calculation that relies on 23 a higher and more concrete violation rate. Rest periods are “time[s] during which an 24 employee is relieved from all work-related duties and free from employer control.” 25 Augustus v. ABM Sec. Servs., Inc., 385 P.3d 823, 828 (Cal. 2016). So, per the Complaint, 26 27 28 5 $7,537,349.01 = ($22.38 for one meal break violation + $22.38 for one rest period violation) x 1 employers must relinquish “control over the locations where employees may take their rest 2 period[s]” and cannot “prohibit an employee from taking a brief walk.” Compl. ¶ 12. 3 Plaintiff alleges, however, that Defendant prohibits employees from “leav[ing] the work 4 premises during their rest period[s].” Id. Defendant infers from those allegations that 5 “none of the rest breaks” provided “were in fact duty-free.” Opp’n to Remand at 14. 6 Assuming each putative class member “worked only one rest break-eligible shifts 7 [sic] . . . per work week” and never received a duty-free break—i.e., a 100% violation 8 rate—the amount in controversy for unpaid rest period premiums comes to 9 $15,074,698.02.6 Id. 10 The Court finds an assumed 100% violation rate reasonable in this context. The 11 Complaint alleges that Defendant “unlawful[ly]” imposes a “rule” preventing employees 12 from taking “unconstrained walks” during their rest periods. Compl. ¶ 12. The Complaint 13 does not qualify that allegation with the “from time to time” language used elsewhere. 14 When not accompanied by “qualifying words such as ‘sometimes’ or ‘often,’” allegations 15 connoting a uniform practice can give rise to the reasonable assumption of a 100% 16 violation rate. Zepeda v. Mastec Network Sols., LLC, No. 18CV00749VAPSHKX, 17 2018 WL 3222749, at *5 (C.D. Cal. June 29, 2018). Indeed, courts encountering claims 18 like Plaintiff’s have credited 100% violation rate assumptions. See, e.g., Herrera v. 19 Signature Flight Support LLC, No. 222CV03082SSSAGRX, 2022 WL 4225376, at *4 20 (C.D. Cal. Sept. 13, 2022) (finding 100% violation rate supported by allegation that class 21 members “remained under defendants’ control during any rest period, rendering said rest 22 periods on duty” (emphases and citation omitted)). 23 2. Evidence of Shift Length 24 Whether Defendant produced sufficient evidence to support the assumption that each 25 workweek included at least one rest-period or meal-break-eligible shift is a closer question. 26 This issue arises because California law mandates breaks only when employees work shifts 27 28 1 of a certain length, so some “courts have refused to credit calculations that assume 2 violations without considering whether the shifts in question necessarily permitted meal 3 and rest breaks.” Alvarez v. Off. Depot, Inc., No. CV177220PSGAFMX, 4 2017 WL 5952181, at *4 (C.D. Cal. Nov. 30, 2017) (citations omitted). 5 On this point, Defendant’s evidence does not overwhelm. Defendant establishes that 6 Plaintiff worked for Defendant for 47 weeks, completing four to five shifts per week. 7 Suppl. Ministrelli Decl. Supp. Opp’n to Arb. ¶ 4 (“Suppl. Ministrelli Decl.”), ECF 8 No. 16-1. Of those shifts, almost all—215—were sufficiently lengthy (four hours or more) 9 to require a rest period. Id. Slightly fewer—209—were at least five hours long, and thus 10 necessitated a meal break. Id. Due to the typicality requirement of class actions, “[i]t is 11 reasonable to assume that, as the class representative, [Plaintiff’s] claims are ‘typical of the 12 class.’” Shachno v. Marriott Int’l, Inc., No. 22-CV-1215 TWR (JLB), 2023 WL 316367, 13 at *6 (S.D. Cal. Jan. 19, 2023) (citation omitted). But “typical” does not mean “identical,” 14 so typicality generally “provides no grounds from which to extrapolate the amount in 15 controversy.” Reyes v. Vitas Healthcare Corp. of Cal., No. 22-CV-01724-WHO, 16 2022 WL 1774128, at *3 (N.D. Cal. June 1, 2022). 17 In some cases, however, the failure to establish the length of its employees’ shifts is 18 not dispositive. “While it may be improper for [Defendant] to assume” that “violations 19 occurred . . . some arbitrary percentage of shifts, it is not improper for [Defendant] to 20 assume that every class member was harmed by [its] allegedly unlawful conduct.” Chan 21 v. Panera, LLC, No. 223CV04194JLSAFM, 2023 WL 6367677, at *3 (C.D. Cal. 22 Sept. 28, 2023). And when a putative class has many members, their hypothetical damages 23 add up. Of course, a defendant cannot simply assert a large putative class to satisfy CAFA; 24 grounded, reasonable assumptions are mandatory. See Ibarra, 775 F.3d at 1197–98. But 25 “the Court is not required to check its common sense at the door when it considers the 26 evidence in support of jurisdiction under CAFA.” Chan, 2023 WL 6367677, at *4. 27 Evidence that may be found lacking in one case could suffice in another based on other 28 factors, such as the proposed class’s size and the complaint’s allegations. See id.; see also 1 Ogaz v. Honeywell Int’l, Inc., No. EDCV21739JFWKKX, 2021 WL 2822401, at *5 2 (C.D. Cal. July 7, 2021) (finding CAFA satisfied given “the size of the alleged class,” “the 3 number of claims alleged,” and “Defendant’s estimates”). 4 Here, the size of the potential class—which Defendant does provide evidence for— 5 is relatively large: 33,055 individuals. Ministrelli Decl. ¶ 8. In fact, this group is larger 6 than those considered by other courts adopting similar reasoning. See Chan, 7 2023 WL 6367677, at *4 (discussing class of 17,070); Ogaz, 2021 WL 2822401, at *3 8 (evaluating 3,748-member class). Further, those 33,055 employees worked a combined 9 673,579 weeks. Ministrelli Decl. ¶ 8. 10 With these figures in mind, the Court revisits Defendant’s calculations. The Court 11 has concluded that a 100% violation rate can be reasonably inferred from the Complaint’s 12 rest-period allegations. See supra Section II.B.1. CAFA is thus satisfied if one assumes 13 that each class member worked a single four-hour shift every three workweeks.7 Said 14 assumption is reasonable considering (1) the claims and allegations in the Complaint, and 15 (2) evidence regarding the number of class members and how many weeks they worked. 16 Consequently, Defendant can fulfill its CAFA burden with its alternative rest-period 17 estimate alone. That conclusion is only strengthened by Defendant’s initial meal-break 18 estimates; if just one third of the identified workweeks featured a lone missed meal break 19 or noncompliant rest-period, CAFA’s threshold is similarly met. And notably, these totals 20 do not consider the Complaints remaining allegations, of which there are many.8 21 For the foregoing reasons, Defendant has met its burden to demonstrate an amount 22 in controversy above $5,000,000 by a preponderance of the evidence. Plaintiff’s Remand 23 Motion is therefore DENIED. 24 / / / 25 26 7 $5,024,899.34 = $22.38 average hourly rate x (673,579 workweeks ÷ 3). 27 8 As the Court finds the amount in controversy met by Plaintiff’s rest-period and meal-break claims, the 28 Court need not address the Complaint’s remaining allegations. See Jauregui v. Roadrunner Transp. 1 DEFENDANT’S REQUEST FOR JUDICIAL NOTICE 2 In support of its Arbitration Motion, Defendant asks the Court to take judicial notice 3 of three sets of documents. Under Federal Rule of Evidence 201(b), “[t]he court may 4 judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally 5 known within the trial court’s territorial jurisdiction; or (2) can be accurately and readily 6 determined from sources whose accuracy cannot reasonably be questioned.” 7 “Accordingly, ‘[a] court may take judicial notice of matters of public record . . . .’” Khoja 8 v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) (first alteration in 9 original) (quoting Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001)). “But a 10 court cannot take judicial notice of disputed facts contained in such public records.” Id. 11 I. RJN Exhibits C through E: Records from Plaintiff’s PAGA Action 12 Defendant’s first set of records are three documents from Plaintiff’s PAGA Action: 13 the initial complaint, RJN Ex. C, ECF No. 14-5; a June 15, 2023 court order, RJN Ex. D, 14 ECF No. 14-6; and Plaintiff’s declaration supporting his opposition to a motion to compel 15 arbitration, RJN Ex. E, ECF No. 14-7. Of those records, Plaintiff objects only to the 16 judicial notice of Exhibit D, though he does not dispute its authenticity. See RJN Objs. 17 at 2–3. 18 The Court will overrule Plaintiff’s objection and GRANT Defendant’s RJN as to 19 Exhibits C, D, and E, because “court filings and orders from other proceedings are proper 20 subjects of judicial notice.” Sierra v. Costco Wholesale Corp., 630 F. Supp. 3d 1199, 1208 21 (N.D. Cal. 2022). In so doing, the Court takes “notice only of the authenticity and existence 22 of” each “order or pleading.” Eidson v. Medtronic, Inc., 981 F. Supp. 2d 868, 878 23 (N.D. Cal. 2013). Conversely, the Court does not take “notice of any of these documents 24 to establish the truth of the underlying factual contention or the accuracy of the legal 25 conclusions set forth therein.” Pac. Marine Ctr., Inc. v. Philadelphia Indem. Ins. Co., 26 No. 113CV00992DADSKO, 2016 WL 8730668, at *4 (E.D. Cal. Mar. 18, 2016). 27 / / / 28 / / / 1 II. Exhibit F: the AAA Rules 2 Next, Defendant seeks notice of the AAA’s “Employment Arbitration Rules and 3 Mediation Procedures” as amended and effective on January 1, 2023. See RJN Ex. F 4 (the “AAA Rules”), ECF No. 14-8. Plaintiff raises no objection. “The rules of the [AAA] 5 are the proper subject of judicial notice because they can be readily . . . determined from a 6 source whose accuracy cannot reasonably be disputed.” Hong Kong Cont’l Trade Co. Ltd. 7 v. Nat. Balance Pet Foods, Inc., No. LACV2200571JAKAFMX, 2023 WL 2664246, at *3 8 (C.D. Cal. Mar. 28, 2023). The Court will thus take judicial notice of the AAA Rules. 9 III. Exhibits G through P: State and Federal Trial Court Orders 10 Defendant’s remaining ten submissions are orders entered in federal district and 11 California state court cases involving Defendant. See RJN Exs. G–P. In its Arbitration 12 Motion, Defendant cites these cases to show that other courts have enforced arbitration 13 agreements used by Defendant. See Arb. Mot. at 16–17. Plaintiff objects to only the 14 California state trial court orders—RJN Exhibits H, I, L, O, and P—on the grounds that 15 they lack precedential value9 and are thus irrelevant. RJN Objs. at 2–9. 16 This request suggests Defendant misunderstands the nature of judicial notice. See 17 Lucero v. Wong, No. C 10-1339 SI PR, 2011 WL 5834963, at *5 (N.D. Cal. Nov. 21, 2011) 18 (“To use the judicial notice process to have the court consider other cases as legal authority 19 is misguided . . . .”). Rule 201 covers “adjudicative”—not “legislative”—facts, the latter 20 being facts “relevan[t] to legal reasoning and the lawmaking process, whether in the 21 formulation of a legal principle or ruling by a judge or court or in the enactment of a 22 legislative body.” Fed. R. Evid. 201 advisory committee’s note to subdivision (a) for 1972 23 24 25 9 Plaintiff makes the same point in his Opposition to Arbitration, calling the state court orders “[u]ncitable.” Opp’n to Arb. at 22. Plaintiff forgets he is now litigating in federal court. See Rios v. Cnty. 26 of Sacramento, 562 F. Supp. 3d 999, 1021 n.3 (E.D. Cal. 2021) (“Although the California Rules of Court would prohibit [a] citation [to an] unpublished decision in a state court, those rules do not apply in federal 27 courts . . . .”). The Court may thus “consider unpublished state court decisions” as persuasive authority, 28 “even though such opinions have no precedential value.” Emps. Ins. of Wausau v. Granite State Ins. Co., 1 proposed rules. Defendant does not need to request judicial notice for the Court to consider 2 legal authority. See Lemieux v. Cwalt, Inc., No. CV 15-77-BU-JCL, 2017 WL 365481, 3 at *1 (D. Mont. Jan. 25, 2017). 4 Accordingly, the Court DENIES Defendant’s RJN as to Exhibits G through P. See 5 Nguyen v. Cavalry Portfolio Servs., LLC, No. 15-CV-0063-CAB-BLM, 6 2015 WL 12672149, at *2 (S.D. Cal. Feb. 20, 2015) (“[A]lthough the Court considered the 7 legal authority lodged by Defendant . . . , the requests for judicial notice of such authority 8 are denied as unnecessary.”). 9 DEFENDANT’S MOTION TO COMPEL ARBITRATION 10 I. Legal Standard 11 The FAA governs the enforceability of arbitration agreements in contracts. See 12 9 U.S.C. § 1, et seq.; Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24–26 (1991). 13 If a suit is proceeding in federal court, the party seeking arbitration may move the district 14 court to compel the resisting party to submit to arbitration pursuant to their private 15 agreement. 9 U.S.C. § 4. The FAA reflects both a “liberal federal policy favoring 16 arbitration agreements” and the “fundamental principle that arbitration is a matter of 17 contract.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (first quoting 18 Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); and then 19 quoting Rent-A-Ctr., West, Inc. v. Jackson, 561 U.S. 63, 67 (2010)). 20 In deciding whether to compel arbitration, courts must generally “determine two 21 ‘gateway’ issues: (1) whether there is an agreement to arbitrate between the parties; and 22 (2) whether the agreement covers the dispute.” Brennan v. Opus Bank, 796 F.3d 1125, 23 1130 (9th Cir. 2015) (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 24 (2002)). Courts generally resolve those issues by “apply[ing] ordinary state-law principles 25 that govern the formation of contracts.” First Options of Chicago, Inc. v. Kaplan, 26 514 U.S. 938, 944 (1995); see also 9 U.S.C. § 2. If the answer to both questions is yes, a 27 court must enforce the agreement and compel arbitration. See, e.g., Lifescan, Inc. v. 28 Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). Doubts regarding the 1 scope of an agreement must be resolved in favor of arbitration. See Mastrobuono v. 2 Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995). 3 The above gateway issues are “presumptively reserved for the court.” Portland Gen. 4 Elec. Co. v. Liberty Mut. Ins. Co., 862 F.3d 981, 985 (9th Cir. 2017), as amended 5 (Aug. 28, 2017). Indeed, the first question—whether an agreement exists—is non- 6 delegable and must be decided in district court. See Ahlstrom v. DHI Mortg. Co., Ltd., 7 L.P., 21 F.4th 631, 635 (9th Cir. 2021) (“[P]arties cannot delegate issues of formation to 8 the arbitrator.”). But other gateway questions, “such as issues of validity and arbitrability, 9 can be delegated to an arbitrator,” id. at 634, if there is “clear and unmistakable evidence” 10 that the parties agreed to such a delegation, Portland Gen. Elec., 862 F.3d at 985. 11 II. Analysis 12 Neither party disputes that an agreement to arbitrate exists between them, see Arb. 13 Mot. at 8–9; Opp’n to Arb. at 4, which settles the first gateway question. The Parties 14 instead argue over two issues: (1) whether the Parties agreed to arbitrate questions of 15 arbitrability, and (2) whether the Agreement is unconscionable. The Court addresses each 16 question in turn. 17 A. Delegation of Arbitrability 18 Plaintiff argues that the Agreement does not cover his unfair competition law 19 (“UCL”) claim. However, the Court cannot consider that argument if the Parties clearly 20 and unmistakably delegated arbitrability issues—including questions of which claims the 21 Agreement covers—to the arbitrator. See Henry Schein, Inc. v. Archer & White Sales, Inc., 22 139 S. Ct. 524, 528 (2019) (“When the parties’ contract delegates the arbitrability question 23 to an arbitrator, the courts must respect the parties’ decision . . . .”). Clear and 24 unmistakable evidence “might include . . . a course of conduct demonstrating assent” or 25 “an express agreement.” Momot v. Mastro, 652 F.3d 982, 988 (9th Cir. 2011) (alteration 26 in original) (quoting Rent-A-Ctr., 561 U.S. at 79–80 (Stevens, J., dissenting)). 27 Defendant contends that the Parties expressly agreed to a delegation by 28 incorporating by reference the AAA Rules, Rule 6(a) of which gives an arbitrator “the 1 power to rule on his or her own jurisdiction.” AAA Rules at 12. Notably, the Ninth Circuit 2 held in Brennan that “incorporation of the AAA rules constitutes clear and unmistakable 3 evidence that contracting parties agreed to arbitrate arbitrability.” 796 F.3d at 1130. But 4 Brennan’s holding was limited to its facts: an agreement between “sophisticated” parties. 5 See id. at 1131. Accordingly, the Court must first ask whether Brennan applies in the face 6 of Plaintiff’s undisputed contention that he is an “unsophisticated” party. After concluding 7 that the answer is yes, the Court turns to Plaintiff’s remaining arguments against arbitration. 8 1. Applicable Legal Framework 9 District courts have split over whether Brennan impacts cases involving 10 unsophisticated parties, see, e.g., Greenberg v. Amazon.com, Inc., No. 20-CV-02782-JSW, 11 2021 WL 7448530, at *6 (N.D. Cal. May 7, 2021) (describing the split in authority), and 12 reports of an established majority approach may be greatly exaggerated.10 The Parties 13 make no effort to persuade the Court to choose one position over the other. Plaintiff simply 14 cites cases holding incorporation of the AAA Rules is insufficient where one party is 15 unsophisticated. See Meadows v. Dickey’s Barbecue Rests. Inc., 144 F. Supp. 3d 1069, 16 1078–79 (N.D. Cal. 2015); Ingalls, 2016 WL 6679561, at *3–4. And Defendant relies on 17 authority going the other way. See Bazine v. Kelly Servs. Glob., LLC, No. 22-CV-07170- 18 BLF, 2023 WL 4138252, at *5–6 (N.D. Cal. June 21, 2023). 19 / / / 20 21 10 Compare, e.g., Maybaum v. Target Corp., No. 222CV00687MCSJEM, 2022 WL 1321246, at *5 22 (C.D. Cal. May 3, 2022) (“[T]he majority of courts have concluded that Brennan applies equally to sophisticated and unsophisticated parties.”), and Cordas v. Uber Techs., Inc., 228 F. Supp. 3d 985, 992 23 (N.D. Cal. 2017) (stating “the clear weight of authority supports the conclusion” that incorporation of 24 AAA rules “provide[s] clear and unmistakable evidence of the parties’ intent to delegate . . . arbitrability” regardless of the sophistication of the parties), with Eiess v. USAA Fed. Sav. Bank, 404 F. Supp. 3d 1240, 25 1253 (N.D. Cal. 2019) (“[T]he majority of the lower courts in the Ninth Circuit have ‘held that incorporation of the AAA rules was insufficient to establish delegation in consumer contracts involving 26 at least one unsophisticated party.’” (quoting Ingalls v. Spotify USA, Inc., No. C 16-03533 WHA, 2016 WL 6679561, at *4 (N.D. Cal. Nov. 14, 2016))), and Magill v. Wells Fargo Bank, N.A., No. 4:21- 27 CV-01877 YGR, 2021 WL 6199649, at *5 (N.D. Cal. June 25, 2021) (“Where at least one party is 28 unsophisticated, judges in this district routinely find that the incorporation of the AAA rules is insufficient 1 Lacking binding precedent or guidance from the Parties, the Court returns to first 2 principles. When the FAA covers an agreement, “federal law governs the arbitrability 3 question by default.” Brennan, 796 F.3d at 1129. And under federal arbitrability law, 4 courts determine whether parties agreed to arbitrate a claim by (1) “apply[ing] ordinary 5 state-law principles” governing contract formation; and (2) resolving ambiguities in favor 6 arbitration. First Options, 514 U.S. at 944–45. Said presumption favoring arbitration 7 arises from the FAA’s “permissive policies” regarding arbitration and the assumption that 8 “when the parties have a contract that provides for arbitration of some issues,” they “likely 9 gave at least some thought to the scope of arbitration.” Id. at 945. In other words, the very 10 existence of an arbitration agreement suggests the parties intended to arbitrate their 11 disputes. But the same does not hold true for the question of who should decide 12 arbitrability—a “rather arcane” issue parties might easily overlook. See id. So, when 13 deciding whether a party agreed to arbitrate arbitrability, the presumption cuts the other 14 way and clear and unmistakable evidence is necessary. 15 Though it represents a “heightened standard,” Rent-A-Ctr., 561 U.S. at 69 n.1, 16 satisfying the clear-and-unmistakable-evidence requirement is no Herculean task. The rule 17 demands only that an agreement unambiguously state “who (primarily) should decide 18 arbitrability.” First Options, 514 U.S. at 944. Much like other questions arising from the 19 FAA, that analysis focuses on “the parties’ manifestation of intent.” Rent-A-Ctr., 561 U.S. 20 at 69 n.1 (emphasis omitted); see also Momot, 652 F.3d at 986 (explaining that in 21 interpreting an arbitration agreement covered by the FAA, “as with any other contract, the 22 parties’ intentions control” (quoting Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, 23 Inc., 473 U.S. 614, 626 (1985))). 24 Further, while federal arbitrability law sets a different standard when it comes to the 25 delegation of arbitrability issues, state-law principles remain relevant. “An agreement to 26 arbitrate a gateway issue”—like arbitrability—is “simply an additional, antecedent 27 agreement . . . , and the FAA operates on this . . . agreement just as it does on any other.” 28 Rent-A-Ctr., 561 U.S. at 70. So, as with other applications of the FAA, “state law is not 1 entirely displaced.” Ticknor v. Choice Hotels Int’l, Inc., 265 F.3d 931, 936 (9th Cir. 2001). 2 Consequently, in determining the parties’ intent, courts employ state-law principles of 3 contract formation as required and modified by federal arbitrability presumptions and 4 precedent. See First Options, 514 U.S. at 944–45; Cooper v. Agrify Corp., No. C21- 5 0061RSL-JRC, 2022 WL 2374587, at *3 (W.D. Wash. June 2, 2022) (applying 6 “Washington’s ordinary principles of contract formation” to “the issue of mutual assent” 7 pursuant to “the precepts and presumptions of federal arbitration law”). 8 In sum, the Court must decide whether the parties unambiguously decided who 9 should answer arbitrability questions. The Court’s analysis is guided by federal 10 arbitrability case law and informed by state-law contract principles. If the Court finds that 11 the Agreement is “silent or ambiguous” on the question of who decides arbitrability, the 12 Court must address the remaining gateway issues. Otherwise, those questions are for the 13 arbitrator. 14 2. Analysis 15 In California,11 “[a] contract must be so interpreted as to give effect to the mutual 16 intention of the parties as it existed at the time of contracting.” Johnson v. Walmart Inc., 17 57 F.4th 677, 682 (9th Cir. 2023) (alteration in original) (quoting Cal. Civ. Code § 1636). 18 “[T]he best indicator of the parties’ intent in a written contract is the words they chose for 19 the agreement.” Nelson v. Dual Diagnosis Treatment Ctr., Inc., 292 Cal. Rptr. 3d 740, 749 20 (Ct. App. 2022). Said words are typically interpreted “by application of the plain meaning 21 rule” and are “given their usual and ordinary meaning.” Johnson, 57 F.4th at 682 (citing 22 Valencia v. Smyth, 110 Cal. Rptr. 3d 180, 197 (Ct. App. 2010)). If after that analysis “a 23 contract is capable of two different reasonable interpretations, the contract is ambiguous.” 24 Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1285 (9th Cir. 2009) (quoting 25 Oceanside 84, Ltd. v. Fid. Fed. Bank, 66 Cal. Rptr. 2d 487, 492 (Ct. App. 1997)). 26 27 28 11 Though the Agreement states that disputes shall be governed by Michigan law, Agreement § 5, the 1 As the language at issue here enters the contract by way of incorporation, if at all, 2 the Court must determine whether the AAA Rules are “part” of the Agreement before 3 interpreting the Parties’ chosen wording. 4 a. Incorporation by Reference 5 Documents incorporated by reference into a contract are considered part of the 6 agreement. See Republic Bank v. Marine Nat. Bank, 53 Cal. Rptr. 2d 90, 90 (Ct. App. 7 1996) (“The phrase ‘incorporation by reference’ makes the document referred to part of 8 the contract as if it were recited verbatim.”). Generally, a document may be “incorporated 9 by reference in a contract so long as (1) the reference is clear and unequivocal, (2) the 10 reference is called to the attention of the other party and he consents thereto, and (3) the 11 terms of the incorporated document are known or easily available to the contracting 12 parties.” DVD Copy Control Assn., Inc. v. Kaleidescape, Inc., 97 Cal. Rptr. 3d 856, 870 13 (Ct. App. 2009). 14 With the above principles in mind, the Court finds that § 4 of the Agreement 15 incorporates the AAA Rules by reference. Under that provision, “[t]he employment 16 dispute resolution rules of the [AAA] effective at the time of filing will apply.” 17 Agreement § 4. While a “mere reference to the AAA” would not be enough, Shivkov v. 18 Artex Risk Sols., Inc., 974 F.3d 1051, 1068 (9th Cir. 2020), identifying the AAA’s rules 19 and clarifying that they will apply to disputes arising from the contract is sufficient, see 20 Brennan, 796 F.3d at 1128–30 (finding rules incorporated where contract specified that 21 claims “shall be settled by binding arbitration in accordance with the Rules of the [AAA]”); 22 see also Galilea, LLC v. AGCS Marine Ins. Co., 879 F.3d 1052, 1062 (9th Cir. 2018) 23 (accepting similar provision). 24 Disagreeing, Plaintiff first notes that available documents on the “AAA’s 25 Employment Arbitration” website include “Employment Arbitration Rules & Mediation 26 Procedures,” “Employment Arbitration Rules Fee Schedule,” and “Employment 27 Arbitration Rules Demand for Arbitration Form.” Herman Decl. Supp. Opp’n to Arb. 28 (“Herman Decl.”) Ex. 1, ECF No. 15-1. Plaintiff argues that one cannot “know what rules 1 are purportedly incorporated by reference if they are not even labeled correctly.” Opp’n to 2 Arb. at 13. But only one of the listed documents refers clearly to rules and procedures.12 3 Moreover, the Agreement does not refer employees to the AAA’s website but instead to 4 “MyKelly.com” or a “Kelly Representative.” Agreement § 4. 5 Plaintiff’s citation to Chango Coffee, Inc. v. Applied Underwriters, Inc., 6 217 Cal. Rptr. 3d 924 (Ct. App. 2017), aids him not. Per Plaintiff, that case illustrates the 7 difficulty of determining which of “two documents” with “similar names” was “meant to 8 be incorporated.” Opp’n to Arb. at 13. He neglects to mention that Chango Coffee merely 9 notes the “two document” issue in its “Facts and Procedural Background Section”; the 10 opinion itself addresses an unrelated jurisdictional issue. See 217 Cal. Rptr. 3d at 926, 928. 11 Nor does Plaintiff acknowledge that the trial court did find that a specific document had 12 been incorporated. See id. at 926. 13 Next, Plaintiff points out that the AAA Rules are not attached to the Agreement but 14 are “only accessible by link.” Opp’n to Arb. at 13. But courts analyze the accessibility of 15 incorporated documents when discussing unconscionability, not incorporation. See 16 Baltazar v. Forever 21, Inc., 367 P.3d 6, 13 (Cal. 2016) (“[C]ourts will more closely 17 scrutinize the substantive unconscionability of terms that were . . . incorporate[ed] . . . 18 rather than . . . attach[ed] . . . .”); Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1262 19 (9th Cir. 2017) (applying Baltazar). Harper v. Ultimo, which Plaintiff relies on, follows 20 the same trend. See 7 Cal. Rptr. 3d 418, 422–23 (Ct. App. 2003) (finding incorporation of 21 unattached rules relevant to procedural unconscionability). Nor is Plaintiff helped by 22 McKee v. Audible, Inc., which focused on the vagueness of a reference to external 23 documents and not on whether said documents were attached to the agreement. See 24 No. CV 17-1941-GW(EX), 2017 WL 4685039, at *10 (C.D. Cal. July 17, 2017) 25 (explaining that “terms found here” does not clearly reference the “terms contained in all 26 27 28 12 One does not need legal training to surmise that a “Fee Schedule” is typically a list of fees, or to guess 1 seven of the agreements listed” on a hyperlinked page). 2 Finally, Plaintiff claims the Agreement could not have incorporated the version of 3 the AAA Rules at issue as they did not exist at the time the Agreement was signed.13 See 4 Opp’n to Arb. at 13. The Court is not persuaded. The Agreement incorporates the version 5 of the AAA Rules that is “effective at the time of [a dispute’s] filing.” Agreement § 4. 6 Courts applying federal arbitrability law have found similar language sufficient to 7 incorporate future versions of the AAA’s rules.14 Meanwhile, Plaintiff’s authorities are 8 distinguishable as they discuss incorporation by reference in contexts not relevant here. 9 See In re Wunderle’s Est., 181 P.2d 874, 878–79 (Cal. 1947) (determining whether a 10 document was incorporated into a holographic will); People v. Egan, 190 Cal. Rptr. 546, 11 549 (Ct. App. 1983) (analyzing incorporation in the context of a search warrant). 12 b. The Delegation Provision 13 Having found that the Agreement incorporates the AAA Rules, the Court turns to 14 the purported delegation provision therein. Per AAA Rule 6(a), “[t]he arbitrator shall have 15 the power to rule on his or her own jurisdiction, including any objections with respect to 16 the existence, scope or validity of the arbitration agreement.” AAA Rules at 12. As its 17 text is part of the Agreement by way of its incorporation, see Republic Bank, 18 53 Cal. Rptr. 2d at 90, the Court looks to the plain meaning of Rule 6(a) and asks whether 19 it unambiguously states “who (primarily) should decide arbitrability,” First Options, 20 514 U.S. at 944. The inescapable answer is yes: “the arbitrator” decides. See Momot, 21 652 F.3d at 988 (“[T]his language, delegating to the arbitrators the authority to determine 22 23 13 The Parties executed the Agreement in June of 2021, while the AAA Rules submitted by Defendant 24 were not revised until January of 2023. See Opp’n to Arb. at 13. 25 14 See Bazine, 2023 WL 4138252, at *5; McKellar v. Mithril Cap. Mgmt. LLC, No. 19-CV-07314-CRB, 2020 WL 1233855, at *4 (N.D. Cal. Mar. 13, 2020) (“[W]hen an agreement incorporates AAA rules which 26 provide for application of the most up-to-date version of the rules, that agreement incorporates the current version of the rules.”); Marriott Ownership Resorts, Inc. v. Flynn, No. CIV. 14-00372 JMS, 27 2014 WL 7076827, at *14 (D. Haw. Dec. 11, 2014) (applying 2014 AAA Rules to agreements from 1999 28 and 2001 because the parties agreed “to be bound by the AAA rules, as amended, ‘in the form obtaining 1 ‘the validity or application of any of the provisions of’ the arbitration clause, constitutes 2 ‘an agreement to arbitrate threshold issues . . . .’” (quoting Rent-A-Ctr., 561 U.S. at 68)). 3 The Court hesitates, however, to end its inquiry there. Plaintiff asks how he could 4 “express ‘clear and unmistakable’ intent to bind himself to a set of rules that did not yet 5 exist.” Opp’n to Arb. at 13. The argument is reasonable. The clear-and-unmistakable test 6 exists to prevent parties from being forced to arbitrate arbitrability absent evidence they 7 “gave at least some thought” to the “significance of having arbitrators decide the scope of 8 their own powers.” First Options, 514 U.S. at 945. Arguably, then, incorporation alone 9 cannot be dispositive. If the version of the AAA’s rules in existence when the Agreement 10 was executed contained no delegation clause for the Parties to consider, incorporating said 11 rules would say little about whether the Parties contemplated the significance of such a 12 provision at the time. Put another way, the incorporation of the AAA Rules can provide 13 clear and unmistakable evidence of an intended delegation only if the Rules contained a 14 delegation provision when the Agreement was signed—June 2, 2021. Galasso Decl. ¶ 19. 15 Though Plaintiff’s point is well taken, it ultimately does not alter the Court’s 16 conclusion. AAA Rule 6(a) has remained unchanged since at least 2009. See Am. Arb. 17 Ass’n, Employment Arbitration Rules and Mediation Procedures 12 (2009),15 18 https://www.adr.org/sites/default/files/Employment%20Arbitration%20Rules%20and%2 19 0Mediation%20Procedures%20Nov%2001%2C%202009.pdf (“The arbitrator shall have 20 the power to rule on his or her own jurisdiction, including any objections with respect to 21 the existence, scope or validity of the arbitration agreement.”); see also Maguire Ins. 22 Agency, Inc. v. Amynta Agency, Inc., 652 F. Supp. 3d 1313, 1321 (W.D. Wash. 2023) 23 (quoting the 2009 version of AAA Rule 6(a)). Consequently, the AAA Rules contained a 24 delegation provision for the Parties to consider when they entered into the Agreement. 25 26 15 The Court may take judicial notice pursuant to Federal Rule of Evidence 201(b) of facts “that are capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be 27 questioned,” including rules taken from the AAA’s website. Jackson v. Tic–The Indus. Co., No. 1:13- 28 CV-02088-AWI, 2014 WL 1232215, at *8 n.2 (E.D. Cal. Mar. 24, 2014) (citing United States v. Bernal- 1 Plaintiff’s remaining counterarguments fare no better. Plaintiff cites Beco v. Fast 2 Auto Loans, Inc. for the proposition that AAA Rule 6 only “permits”—but does not 3 require—an arbitrator to rule on their own jurisdiction once an action is “already in 4 arbitration.” Opp’n to Arb. at 12 (citing 302 Cal. Rptr. 3d 168 (Ct. App. 2022)). But Beco 5 draws its reasoning from a California state-court case that predates several binding federal 6 arbitrability decisions. See 302 Cal. Rptr 3d at 178 (quoting at length and relying 7 extensively on Ajamian v. CantorCO2e, L.P., 137 Cal. Rptr. 3d 773 (Ct. App. 2012)). 8 Indeed, Ajamian predates Brennan, which found a similarly worded delegation provision 9 to clearly delegate arbitrability issues. See 796 F.3d at 1128. Further, Beco bases its ruling 10 in part on the fact that the contract before it was an employment agreement, 11 302 Cal. Rptr. 3d at 178, a factor the Ninth Circuit has found to be of little consequence, 12 see Brennan, 796 F.3d at 1131. 13 Finally, Plaintiff contends that the AAA Rules apply only “if this matter is sent to 14 arbitration,” but this action “should never” reach arbitration because his UCL claim is 15 expressly excluded from the Agreement. Opp’n to Arb. at 10. However, if an arbitration 16 agreement “contain[s] an enforceable delegation clause, all arguments going to the scope 17 or enforceability of the arbitration provision are for the arbitrator to decide.” Caremark, 18 LLC v. Chickasaw Nation, 43 F.4th 1021, 1030 (9th Cir. 2022). Such scope issues include 19 whether Plaintiff’s claim is covered by the Agreement. See, e.g., S.S. ex rel. Stern v. 20 Peloton Interactive, Inc., 566 F. Supp. 3d 1019, 1043–44 (S.D. Cal. 2021) (“Mr. Stern and 21 Peloton agreed to arbitrate gateway issues, including whether Mr. Stern’s claims fall within 22 the scope of the Arbitration Provision.”). Perez v. Discover Bank does not help Plaintiff; 23 there, the court found that a plaintiff’s claims were not covered by an arbitration agreement 24 because no such agreement existed. 74 F.4th 1003, 1011 (9th Cir. 2023). 25 For the reasons above, the Court holds that the Agreement clearly and unmistakably 26 delegates arbitrability issues to the arbitrator.16 27 28 1 B. Unconscionability 2 Plaintiff also seeks to defeat Defendant’s Arbitration Motion on unconscionability 3 grounds. Under § 2 of the FAA, arbitration agreements can “be invalidated by generally 4 applicable contract defenses, such as fraud, duress, or unconscionability.” Lim v. TForce 5 Logistics, LLC, 8 F.4th 992, 999 (9th Cir. 2021) (quoting Poublon, 846 F.3d at 1259). In 6 California, “unconscionability has both a procedural and a substantive element, the former 7 focusing on oppression or surprise due to unequal bargaining power, the latter on overly 8 harsh or one-sided results.” Mohamed v. Uber Techs., Inc., 848 F.3d 1201, 1210 (9th Cir. 9 2016) (internal quotation marks omitted) (quoting Armendariz v. Found. Health Psychcare 10 Servs., Inc., 6 P.3d 669, 690 (Cal. 2000)). Plaintiff, as the party opposing arbitration, must 11 demonstrate both forms of unconscionability, though they “need not be present in the same 12 degree.” Lim, 8 F.4th at 1000 (quoting Poublon, 846 F.3d at 1260)). 13 Before it can contemplate the merits of Plaintiff’s unconscionability argument, the 14 Court must determine whether it can entertain that argument at all. As the Parties delegated 15 arbitrability issues, questions regarding the unconscionability of the Agreement as a whole 16 fall to the arbitrator, not the Court. See Rent-A-Ctr., 561 U.S. at 70–71. On the other hand, 17 the Court must decide “whether the particular agreement to delegate arbitrability—the 18 Delegation Provision—is itself unconscionable” if Plaintiff poses that question. Brennan, 19 796 F.3d at 1132; see also Saperstein v. Thomas P. Gohagan & Co., 476 F. Supp. 3d 965, 20 974 (N.D. Cal. 2020) (“[I]f a party challenges specifically the enforceability of the 21 22 surprising. The Ninth Circuit went out of its way to avoid “foreclose[ing] the possibility that [Brennan’s] 23 rule could also apply to unsophisticated parties.” 796 F.3d at 1130. The court also noted that “the vast 24 majority of the circuits” in agreement with Brennan did not “explicitly limit[]” their “holding[s] to sophisticated parties.” Id. at 1130–31. Further, state contract principles and federal arbitrability law both 25 focus on giving effect to parties’ intentions, which are best surmised from plain contractual language. Meanwhile, whether a party can avoid the enforcement of an unambiguous provision due to their lack of 26 sophistication seems like a question of fairness more appropriately considered in an unconscionability inquiry. See Razzaghi v. UnitedHealth Grp., No. SACV1801223AGJDEX, 2018 WL 7824552, at *2 27 (C.D. Cal. Sept. 17, 2018); see also Esquer v. Educ. Mgmt. Corp., 292 F. Supp. 3d 1005, 1012 n.2 28 (S.D. Cal. 2017) (stating that an inquiry into a party’s sophistication “may be better suited to a court’s 1 delegation clause, the district court must consider the challenge, but if a party challenges 2 the . . . arbitration agreement as a whole, the challenge is for the arbitrator.”). 3 To challenge the delegation’s validity, Plaintiff must both mention the delegation 4 provision and make arguments specific to it. See Rent-A-Ctr., 561 U.S. at 72–74.17 The 5 bare assertion that a delegation clause is unconscionable does not suffice. See Zeevi v. 6 Citibank, N.A., No. 219CV02206GMNBNW, 2021 WL 621423, at *3 (D. Nev. 7 Feb. 16, 2021) (finding challenge was only to entire agreement where plaintiff “d[id] not 8 specifically challenge the delegation clause beyond the unsubstantiated claim that it is 9 unconscionable”). Plaintiff may “cite[] provisions outside of the delegation clause” in 10 making his unconscionability argument if he also “explain[s] how those provisions make 11 the fact of an arbitrator deciding arbitrability unconscionable.” Holley-Gallegly v. TA 12 Operating, LLC, 74 F.4th 997, 1002 (9th Cir. 2023) (emphasis omitted). 13 Here, the bulk of Plaintiff’s procedural unconscionability arguments are aimed 14 squarely at the Agreement as a whole.18 And while Plaintiff attacks the fairness of 15 incorporating the AAA Rules, he does so only to bolster his argument that the entire 16 Agreement is unconscionable.19 Challenging the incorporation of the AAA Rules without 17 discussing the delegation provision contained therein does not satisfy Rent-A-Center’s 18 requirements. See Mercado v. Sally Beauty Supply LLC, No. 215CV02316KJMCKD, 19 2016 WL 3361883, at *4 (E.D. Cal. June 16, 2016) (holding plaintiff failed to “challenge 20 the delegation provision in particular” because she “d[id] not argue the provision 21 22 17 After briefing on the Arbitration Motion was complete, the Ninth Circuit confirmed this reading of Rent-A-Center. See Bielski v. Coinbase, Inc., 87 F.4th 1003, 1009–10 (9th Cir. 2023) (“[A] party resisting 23 arbitration must mention that it is challenging the delegation provision and make specific arguments 24 attacking the provision in its opposition to a motion to compel arbitration.”). 25 18 See, e.g., Opp’n to Arb at 15 (“The Arbitration Agreement is Procedurally Unfair.”); id. at 16 (“The Agreement itself is a contract of adhesion.”). 26 19 See Opp’n to Arb. at 17 (asserting that because “Defendant failed to attach the [AAA] Rules,” the 27 “Agreement is procedurally unconscionable”); id. at 19 (“[I]f the AAA’s Rules are incorporated . . . , then 28 there are . . . pages of detailed convoluted rules which Plaintiff did not see . . . . Therefore, the Agreement 1 incorporating the AAA rules is unconscionable as applied to the delegation provision or 2 argue the specific delegation provision violates her due process rights” (emphasis added)). 3 Plaintiff’s substantive unconscionability arguments trod the same path. Plaintiff first 4 argues that the Agreement is substantively unconscionable in light of its choice-of-law 5 clause, the statute of limitations it imposes, and the one-sided nature of the claims that— 6 under Defendant’s interpretation—it covers. See Opp’n to Arb. at 19–20. At no point does 7 Plaintiff “explain how those provisions make the fact of an arbitrator deciding arbitrability 8 unconscionable.” Holley-Gallegly, 74 F.4th at 1002. As Plaintiff does not aim his 9 arguments at the delegation provision, the Court cannot consider them. See Mohamed, 10 848 F.3d at 1210 (“When considering an unconscionability challenge to a delegation 11 provision, the court must consider only arguments ‘specific to the delegation provision.’” 12 (quoting Rent-A-Ctr., 561 U.S. at 73)). 13 Only one of Plaintiff’s unconscionability arguments directly targets the delegation 14 provision. Plaintiff contends that the delegation clause was “buried” within the AAA 15 Rules. Opp’n to Arb. at 21. The presence of difficult-to-find terms can establish a degree 16 of procedural unconscionability. See Baltazar, 367 P.3d at 12–13; Lim, 8 F.4th at 1001. 17 And California courts may “more closely scrutinize the substantive unconscionability of 18 terms that were ‘artfully hidden’ by the simple expedient of incorporating them by 19 reference.” Baltazar, 367 P.3d at 13 (quoting Harper, 7 Cal. Rptr. 3d at 422). Here, 20 Plaintiff argues, it would be substantively unconscionable to deprive him of the opportunity 21 to have “the Court decide gateway issues of arbitrability” based on an obscure contractual 22 clause that was not attached to the Agreement. Opp’n to Arb. at 21. 23 Though specific to the delegation provision, Plaintiff’s final unconscionability 24 argument still fails. The “threshold inquiry in California’s unconscionability analysis” is 25 whether the arbitration agreement at issue is “adhesive.”20 Mohamed, 848 F.3d at 1211 26 27 28 20 An “adhesive” agreement is a “standardized contract, which, imposed and drafted by the party of 1 (quotation marks omitted) (quoting Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1281 2 (9th Cir. 2006)). Plaintiff does not contend that the delegation provision was adhesive, so 3 his argument fails at the first step. See Zeevi, 2021 WL 621423, at *3 (declining to 4 consider argument in part as plaintiff “fail[ed] to explain the significance of an alleged 5 contract of adhesion with particular respect to the delegation clause”). Additionally, 6 Plaintiff must establish some degree of procedural and substantive unconscionability to 7 prevail. But here, he neglects the latter by not explaining why the delegation provision is 8 “overly harsh, unduly oppressive, or unfairly one-sided.” Lim, 8 F.4th at 1002; see also 9 A.C. ex rel. Carbajal v. Nintendo of Am. Inc., No. C20-1694 TSZ, 2021 WL 1840835, at *3 10 (W.D. Wash. Apr. 29, 2021) (rejecting substantive unconscionability argument where 11 plaintiff claimed AAA’s delegation provision “put him at a disadvantage” but “d[id] not 12 explain how those rules disadvantage[d] him”). 13 Plaintiff has not sufficiently challenged the validity of the delegation provision— 14 which was incorporated by reference into the Parties’ Agreement and unambiguously 15 delegates arbitrability issues to the arbitrator—and Court must enforce the Agreement 16 accordingly. See Rent-A-Ctr., 561 U.S. at 72–74; Henry Schein, 139 S. Ct. at 527–28; 17 Brennan, 796 F.3d at 1133–34. Defendant’s Arbitration Motion is GRANTED. 18 C. Impact on Plaintiff’s Complaint 19 The Court must still decide what happens to Plaintiff’s Complaint. The Parties 20 advocate for different next steps. Defendant asks the Court to dismiss the Complaint. Arb. 21 Mot. at 20–21. Countering, Plaintiff contends that Defendant, in arguing that the Court 22 “has the jurisdiction to dismiss claims under the Agreement,” has “implicitly conceded” 23 that the Court ought to rule on gateway issues of arbitrability. Opp’n to Arb. at 24. Plaintiff 24 seems to assume that the Court cannot dismiss the Complaint unless the Court first 25 determines that the Agreement covers his UCL claims. See id. Notably, Plaintiff does not 26 27 28 contract or reject it.” Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d 669, 689 (Cal. 2000) 1 opine on what action the Court should take if it were to decide—as the Court does here— 2 to grant Defendant’s Arbitration Motion.21 3 To the extent Plaintiff contends that Defendant cannot simultaneously argue that 4 dismissal is appropriate and that the Court lacks the power to decide arbitrability issues, he 5 is mistaken. In the Ninth Circuit, a district court has the discretion to stay or dismiss claims 6 subject to a valid arbitration agreement. See Johnmohammadi v. Bloomingdale’s, Inc., 7 755 F.3d 1072, 1073–74 (9th Cir. 2014). Defendant’s arguments are thus not in conflict, 8 though there is a “preference for staying an action pending arbitration rather than 9 dismissing it.” MediVas, LLC v. Marubeni Corp., 741 F.3d 4, 9 (9th Cir. 2014). 10 That said, Plaintiff’s broader argument regarding the as-yet unanswered arbitrability 11 questions has merit. The Court decides in this Order only that the Parties agreed to delegate 12 questions of arbitrability, not that Plaintiff’s UCL claims are in fact arbitrable. The 13 arbitrator will therefore need to decide such questions as whether Plaintiff’s claims are 14 covered by the Agreement and whether the Agreement as a whole is unconscionable. 15 “Because it is not certain that [Plaintiff’s] claims will remain in arbitration, outright 16 dismissal is not appropriate.” Ramirez v. Elec. Arts Inc., No. 20-CV-05672-BLF, 17 2021 WL 843184, at *5 (N.D. Cal. Mar. 5, 2021). The Court will thus stay this action 18 pending the completion of arbitration. 19 CONCLUSION 20 For the foregoing reasons, the Court DENIES Plaintiff’s Remand Motion (ECF 21 No. 13), GRANTS Defendant’s Arbitration Motion (ECF No. 14), and STAYS this action 22 pending the completion of arbitration proceedings pursuant to 9 U.S.C. § 3. The Parties 23 / / / 24 / / / 25 26 21 Plaintiff’s Opposition to Arbitration does include section titled “Plaintiff’s Motion Should Not Be Stayed.” Opp’n to Arb. at 24. There, Plaintiff appears to argue that the present action should not be stayed 27 pending the individual arbitration ordered in his state-court PAGA action. See id. The Court does not 28 read Plaintiff to be asking the Court to dismiss his Complaint—rather than stay it—in light of the Court’s 1 || SHALL FILE a joint status update on the arbitration proceedings every 120 days, starting 2 the date of this Order, and within 14 days of the proceedings’ completion. 3 IT IS SO ORDERED. 4 ||Dated: January 30, 2024 tt 5 ja Janis L. Sammartino ‘ United States District Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28