“[A] compulsory predispute 26 arbitration agreement is not rendered unenforceable just because 27 it is required as a condition of employment or offered on a ‘take it or leave it’ basis.”
How later courts described this case
- “[A] compulsory predispute 26 arbitration agreement is not rendered unenforceable just because 27 it is required as a condition of employment or offered on a ‘take it or leave it’ basis.”
- “By 14 not opting out within the 30-day period, [employee] became bound 15 by the terms of the arbitration agreement.”
- “[i]f Ahmed had decided to opt-out of the arbitration program, he would have been allowed to keep 26 his job and not participate in the program.”
Written by the judges who cited it.
The opinion
1
2
3
4
5
6
7
8 UNITED STATES DISTRICT COURT
9 EASTERN DISTRICT OF CALIFORNIA
10 ----oo0oo----
11
12 LIONEL HARPER, No. 2:19-cv-01749 WBS DMC
13 Plaintiff,
14 v. ORDER RE: MOTION TO COMPEL
ARBITRATION AND DISMISS OR
15 CHARTER COMMUNICATIONS, LLC, STAY JUDICIAL PROCEEDINGS
CHARTER COMMUNICATIONS, INC.,
16 and DOES 1 through 25,
17 Defendants.
18
19 ----oo0oo----
20 Plaintiff Lionel Harper brought this action against
21 defendants Charter Communications, LLC and Charter
22 Communications, Inc. (collectively “Charter”), alleging, inter
23 alia, violation of California’s Fair Employment and Housing Act
24 (“FEHA”), Cal. Gov. Code § 12900 et seq. Before this court is
25 Charter’s motion to compel arbitration and dismiss or stay
26 judicial proceedings. (Mot. to Compel Arbitration (Docket No.
27 10).)
28 I. Facts & Procedural History
1 Plaintiff worked for Charter as a salesperson in
2 California from September 2017 to March 2018. (Compl. ¶ 9
3 (Docket No. 1).) Upon hire, plaintiff signed an agreement to
4 arbitrate “any and all claims, disputes, and/or controversies
5 between [plaintiff] and Charter arising from or related to
6 [plaintiff’s] employment with Charter” before a single arbitrator
7 from the Judicial Arbitration and Mediations Services, Inc.
8 (“JAMS Arbitration Agreement”). (Decl. of Chance Cassidy
9 (“Cassidy Decl.”), Ex. B (Docket No. 10-3); Decl. of Lionel
10 Harper (“Harper Decl.”) ¶ 2 (Docket No. 22-1).) According to the
11 agreement, JAMS Employment Arbitration Rules & Procedures and
12 JAMS Policy on Employment Arbitration Minimum Standards of
13 Procedural Fairness would govern the arbitration of any claims
14 between plaintiff and Charter. (Cassidy Decl., Ex. B.) Under
15 these rules, Charter would “bear all costs unique to arbitration,
16 except for the Case Initiation Fee, which would be split between
17 [plaintiff] and Charter.” (Cassidy Decl., Ex. B.) The agreement
18 provided the arbitrator’s decision would be “final and binding”
19 on both parties. (Cassidy Decl., Ex. B.)
20 On October 6, 2017, Charter adopted a new arbitration
21 agreement that required arbitration of claims via “Solution
22 Channel,” Charter’s employment-based legal dispute resolution
23 program. (See Decl. of John Fries (“Fries Decl.”), Ex. A (Docket
24 No. 10-2).) Unlike the JAMS Arbitration Agreement, the Solution
25 Channel Arbitration Agreement provided for arbitration under the
26 rules of the American Arbitration Association and instituted an
27 internal review process before claims proceeded to arbitration.
28 (See generally Fries Decl., Ex. C.) Charter announced this
1 change via e-mail to all active non-Union employees below the
2 level of Executive Vice President, plaintiff among them. (Fries
3 Decl. ¶ 5, Ex. E.) The Solution Channel announcement email
4 notified employees that “[b]y participating in Solution Channel,
5 [employees] and Charter both waive the right to initiate or
6 participate in court litigation.” (Fries Decl., Ex. A.)
7 Additionally, the announcement warned employees that they would
8 be enrolled into Solution Channel unless they “opt[ed] out of
9 participating in Solution Channel within the next 30 days.”
10 (Fries Decl., Ex. A.) The email directed employees interested in
11 opting out to go to Panorama, Charter’s intranet site, for more
12 information. (Fries Decl., Exs. A, B.) Plaintiff did not opt
13 out. (Fries Decl. ¶ 21.)
14 Around January 2018, Harper allegedly developed acute
15 pain in his lower back and was advised by a medical professional
16 to take several days off work. (Compl. ¶ 10.) Plaintiff
17 contends he continued to work from home during his leave. (Id. ¶
18 11.) On February 14, 2018, plaintiff’s manager placed plaintiff
19 on involuntarily unpaid leave. (Id. ¶ 12.) Representatives from
20 Charter’s third-party administrator and human resources
21 department contacted plaintiff, but plaintiff’s attempts to
22 respond allegedly went ignored. (Id. ¶¶ 12-13.) Charter
23 terminated plaintiff on March 12, 2018. (Id. ¶ 14.) Plaintiff
24 remained unemployed until March 2019, at which point he was able
25 to secure part-time work at a reduced hourly rate. (Id. ¶ 17.)
26 On November 19, 2018, plaintiff filed a Demand for
27 Arbitration against Charter alleging various wage and hour claims
28 pursuant to the JAMS Arbitration Agreement. (Decl. of Kathryn
1 McGuigan (“McGuigan Decl.”), Ex. 1 (Docket No. 10-1).) Although
2 plaintiff had been enrolled in the Solution Channel Arbitration
3 Agreement in October 2017, at all relevant times Charter relied
4 upon the JAMS Arbitration Agreement as binding on the parties.
5 Harper v. Charter Commc’ns, LLC, 2:19-cv-902-WBS-DMC, 2019 WL
6 3683706, at *8 (E.D. Cal. Aug. 6, 2019) (hereinafter Harper I).
7 Accordingly, the parties proceeded through the JAMS process, and
8 the JAMS arbitrator issued an Order Dismissing Arbitration after
9 finding she had no jurisdiction over the action on April 25,
10 2019. (McGuigan Decl., Ex. 2.)
11 Following the arbitrator’s order in his wage and hour
12 claim dispute, plaintiff filed a separate Demand for Arbitration
13 with JAMS alleging eight additional employment-related claims
14 against Charter, including (1) discrimination and wrongful
15 discharge under FEHA; (2) failure to make a reasonable
16 accommodation under FEHA; (3) failure to engage in a timely and
17 good faith interactive process under FEHA; (4) age discrimination
18 under FEHA; (5) retaliation under FEHA; (6) wrongful termination
19 in violation of public policy; (7) violation of Investigative
20 Consumer Reporting Agencies Act, Cal. Civ. Code § 1786; and (8)
21 violation of California’s Unfair Competition Law, Cal. Bus. &
22 Prof. Code § 17200, (collectively, “FEHA claims”) on April 30,
23 2019.1 (McGuigan Decl., Ex. 3.) Pursuant to the JAMS
24
1 Plaintiff complied with FEHA’s exhaustion requirements
25
by filing a complaint with California’s Department of Fair
Employment and Housing and obtaining a right to sue letter on
26
December 31, 2018. (Compl. ¶ 6; see also McGuigan Decl., Ex. 3
27 (incorporating plaintiff’s second Demand for Arbitration in full,
including a copy of the right to sue letter at Ex. 2).) Charter
28 accepted service of plaintiff’s right to sue on January 3, 2019.
1 Arbitration Agreement, plaintiff paid his share of the Case
2 Initiation Fee to bring his FEHA claims to arbitration. (Decl.
3 of Jamin Soderstrom (“Soderstrom Decl.”) ¶ 8 (Docket No. 22-2).)
4 Plaintiff and JAMS then asked Charter to pay its share of the
5 fees so arbitration could commence. (Soderstrom Decl. ¶ 9, Exs.
6 6-9.) Charter refused. (Id.)
7 After the JAMS arbitrator had rendered her decision as
8 to plaintiff’s wage and hour claims but before arbitration had
9 commenced over plaintiff’s FEHA claims, Charter attempted to
10 compel plaintiff to arbitrate his wage and hour claims under the
11 Solution Channel Arbitration Agreement. (McGuigan Decl., Exs. 4-
12 5.) Plaintiff refused, and instead moved to confirm the
13 arbitrator’s finding of non-arbitrability in this court. (See
14 Mot. to Confirm Arbitration Award and Enter Judgment in Harper v.
15 Charter Commc’ns, LLC, 2:19-cv-00902-WBS-DMC (Docket No. 9).)
16 This court affirmed the arbitrator’s finding that the wage and
17 hour claims were not arbitrable on August 6, 2019. See Harper I,
18 2019 WL 3683706, at *8.
19 However, plaintiff’s FEHA claims remained unresolved
20 before JAMS because Charter had still not paid its portion of the
21 filing fee. After this court’s confirmation of the arbitration
22 award, JAMS contacted the parties on August 7, 2019 and advised
23 them if JAMS did not receive the funds by August 15, plaintiff
24 would “ha[ve] the option to pay to proceed” on his FEHA claims.
25 (Soderstrom Decl. ¶ 9, Ex. 7.) On August 29, 2019, JAMS demanded
26 payment from Charter one final time, threatening to close the
27
(Id.)
28
1 case’s file on September 16, 2019 if it did not receive full
2 payment. (McGuigan Decl., Ex. 6.) Unable to pay the JAMS fees
3 on his own, plaintiff voluntarily withdrew his Demand for
4 Arbitration on his FEHA claims on September 4, 2019. (McGuigan
5 Decl., Ex. 7.) Plaintiff proceeded to file those claims before
6 this court. (See Compl.) Charter now seeks to compel plaintiff
7 to arbitrate his FEHA claims under the Solution Channel
8 Arbitration Agreement. (Docket No. 10.)
9 II. Motion to Compel Arbitration
10 A. Arbitration Agreement Applicable to FEHA Claims
11 In this court’s previous order regarding plaintiff’s
12 wage and hour claims against Charter, the court found the JAMS
13 Arbitration Agreement governed the dispute because the parties
14 agreed to its use. Harper I, 2019 WL 3683706, at *4. This
15 agreement effectively acted as a novation, replacing the parties’
16 obligations under the Solution Channel Arbitration Agreement with
17 those set forth under the JAMS Arbitration Agreement. Id. at *6-
18 8. Plaintiff contends that the JAMS Arbitration Agreement should
19 also govern the adjudication of his FEHA claims. (Soderstrom
20 Decl. ¶ 13-14.) The court disagrees.
21 Charter fully arbitrated plaintiff’s wage and hour
22 claim in accordance with the JAMS Arbitration Agreement, and at
23 all relevant times adhered to its terms to inform the resolution
24 of plaintiff’s claim. See Harper I, 2019 WL 3683706, at *4. But
25 here, Charter did not engage with plaintiff’s FEHA claims in a
26 similar way. An arbitrator did not render a decision; indeed,
27 arbitration had not yet commenced. Plaintiff claims he did not
28 bring his FEHA claims in conjunction with the wage and hour
1 action because the arbitrator said he could pursue the FEHA
2 claims in a separate arbitration and Charter did not object.
3 (Soderstrom Decl. ¶ 6.) But that does not change the fact that
4 these are two separate actions. The facts supporting the
5 novation this court found in the wage and hour action are wholly
6 absent here. Charter did not engage in any conduct that was
7 inconsistent with its right to arbitrate these claims under the
8 Solution Channel Arbitration Agreement, and plaintiff suffered no
9 prejudice from Charter’s purported conduct other than a few
10 months delay.2 Accordingly, the Solution Channel Arbitration
11 Agreement applies to plaintiff’s FEHA claims.
12 B. Validity of Solution Channel Arbitration Agreement
13 Charter contends this court is required to compel
14 plaintiff’s claims to arbitration because the Solution Channel
15 Arbitration Agreement’s terms are governed by the Federal
16 Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. (Fries Decl., Ex.
17 C at 5 ¶ R.) The FAA “limits courts’ involvement to ‘determining
18 (1) whether a valid agreement to arbitrate exists and, if it
19 does, (2) whether the agreement encompasses the dispute at
20 issue.’” Munro v. Univ. of S. Cal., 896 F.3d 1088, 1091 (9th
21
22 2 Plaintiff argues that he has been prejudiced insofar as
the adjudication of his claims has been delayed seven months and
23 he has incurred extraneous filing fees and attorney’s fees.
(Opp. to Mot to Compel Arbitration at 14; Soderstrom Decl. ¶ 16.)
24 In so doing, plaintiff relies on Brown v. Dillard’s, Inc., 430
F.3d 1004, 1012-13 (9th Cir. 2005). However, in Brown, Dillard’s
25
breached its arbitration agreement with its employee by refusing
to participate in the arbitration processes both parties had
26
consented to use. Id. at 1010. Here, while Charter refused to
27 participate in the outdated JAMS process, it is attempting to
arbitrate under the Solution Channel Agreement. Brown is
28 therefore inapposite.
1 Cir. 2018) (internal citations omitted). If the determination is
2 in the affirmative on both counts, the FAA “mandates that
3 district courts shall direct the parties to proceed to
4 arbitration on issues as to which an arbitration agreement has
5 been signed.” Id. (citing Chrion Corp. v. Ortho Diagnostic Sys.,
6 Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)). It is undisputed
7 that the Solution Channel Arbitration Agreement encompasses
8 plaintiff’s FEHA claims. (Fries Decl., Ex. C, 1 ¶ B(1).)
9 Consequently, the court must consider only whether a valid
10 agreement to arbitrate exists.
11 “The party seeking arbitration bears the burden of
12 proving the existence of a valid arbitration agreement by the
13 preponderance of the evidence, and a party opposing the petition
14 bears the burden of proving by a preponderance of the evidence
15 any fact necessary to its defense.” Bridge Fund Capital Corp. v.
16 Fastbucks Franchise Corp., 622 F.3d 996, 1005 (9th Cir. 2010)
17 (citation omitted). “Arbitration is a matter of contract.”
18 Knutson v. Sirius XM Radio Inc., 771 F.3d 559, 565 (9th Cir.
19 2014) (quoting AT&T Techs., Inc. v. Commc’ns Workers of Am., 475
20 U.S. 643, 648 (1986) (internal modifications omitted)). State
21 contract law determines whether the arbitration agreement is
22 valid. Id. In California, the essential elements of contract
23 are: (1) parties capable of contracting; (2) their consent; (3) a
24 lawful object; and (4) sufficient cause or consideration. Cal.
25 Civ. Code § 1150. Plaintiff argues defendants cannot compel
26 arbitration under the Solution Channel Arbitration Agreement
27 because plaintiff never consented to the agreement and the
28 agreement itself is unconscionable.
1 1. Adequate Notice/Consent
2 Plaintiff argues the Solution Channel Arbitration
3 Agreement is not valid because he did not have adequate notice of
4 the agreement, and therefore he could not consent to it. (Opp.
5 to Mot. to Compel Arbitration at 15-20 (Docket No. 22).)
6 However, it is undisputed that Charter sent, and plaintiff
7 received, information regarding the Solution Channel Arbitration
8 Agreement, which explicitly warned employees that their inaction
9 would result in enrollment in the program. (Fries Decl., Ex. A.)
10 The Ninth Circuit has found recipients of similar arbitration
11 agreements impliedly consented to be bound by them if they did
12 not opt out within the designated time. See Johnmohammadi v.
13 Bloomingdale’s, Inc., 755 F.3d 1072, 1074 (9th Cir. 2014) (“By
14 not opting out within the 30-day period, [employee] became bound
15 by the terms of the arbitration agreement.”); Circuit City
16 Stores, Inc. v. Ahmed, 283 F.3d 1198, 1200 (9th Cir. 2002)
17 (finding 30-day window to opt out of automatic enrollment in an
18 arbitration agreement was “meaningful”, “non-adhesive”, and
19 “lacked any other indicia of procedural unconscionability”).3
20 3 In both Johnmohammadi and Circuit City, the employees
received notice of their respective employer’s arbitration
21
agreements and were advised they would be automatically enrolled
22 in the program if they failed to opt out. See 775 F.3d at 1074;
283 F.3d at 1199. Both agreements were upheld because the terms
23 were clear and unambiguous, and neither employer conditioned the
employee’s continued employment on signing. See 775 F.3d at 1074
24 (“she made a fully informed and voluntary decision . . . no
threats of termination or retaliation were made to influence her
25
decision”); 283 F.3d at 1199 (“[i]f Ahmed had decided to opt-out
of the arbitration program, he would have been allowed to keep
26
his job and not participate in the program.”). Plaintiff asserts
27 the opt out right “is hardly meaningful when Charter still
requires mandatory individual arbitration” under the JAMS
28 agreement. (Soderstrom Decl. ¶ 17.) However, plaintiff
1 Indeed, other district courts have applied that same rationale to
2 this very policy. See, e.g., Prizler v. Charter Commc’ns, LLC,
3 No. 3:18-cv-1724-L-MSB, 2019 WL 2269974, at *3 (S.D. Cal. May 28,
4 2019). Accordingly, plaintiff’s arguments that he did not
5 consent to the Solution Channel Arbitration Agreement fail.
6 2. Unconscionability
7 Plaintiff also argues that the Solution Channel
8 Arbitration Agreement is unconscionable, and therefore
9 unenforceable. Under California law, the court must determine
10 unconscionability at the time the contract was formed. Sonic-
11 Calabasas A, Inc. v. Moreno, 57 Cal. 4th 1109, 1134 (2013). A
12 court will not enforce an otherwise valid contract if it is
13 unconscionable. Armendariz v. Found. Health Psychcare Servs.
14 Inc., 24 Cal. 4th 83, 114 (2000). However, “[t]he prevailing
15 view is that procedural and substantive unconscionability must
16 both be present in order for a court to exercise its discretion
17 to refuse to enforce a contract” because “[a]rbitration is
18 favored . . . as a means of resolving disputes.” Id. at 114-15.
19 Accordingly, courts require evidence of both types of
20 unconscionability to overcome the state’s policy in favor of
21 arbitrability. Id. These two elements need not both be present
22
consented to be bound by the JAMS agreement upon his hire.
23 Presenting arbitration agreements on a “take it or leave it
basis” is “not enough, by itself, to render the agreement
24 unenforceable.” Moreno v. Banamex USA, No. CV 14-3049 PSG
(PLAx), 2014 WL 12534772, at *5 (C.D. Cal. June 20, 2014) (citing
25
Lagatree v. Luce, Forward, Hamilton & Scripps LLP, 74 Cal. App.
4th 1105, 1127 (2d. Dist. 1999) (“[A] compulsory predispute
26
arbitration agreement is not rendered unenforceable just because
27 it is required as a condition of employment or offered on a ‘take
it or leave it’ basis.”)).
28
1 in the same degree. Instead, “the more substantively oppressive
2 the contract term, the less evidence of procedural
3 unconscionability is required to come to the conclusion that the
4 term is unenforceable.” Id.
5 i. Procedural Unconscionability
6 “The procedural element generally takes the form of an
7 adhesion contract, which imposed and drafted by the party of
8 superior bargaining strength, relegates to the subscribing party
9 only the opportunity to adhere to the contract or reject it.”
10 Fitz v. NCR Corp., 118 Cal. App. 4th 702, 713 (4th Dist. 2004).
11 While Charter had the superior bargaining power in this situation
12 because it drafted and imposed the Solution Channel Arbitration
13 Agreement, it was not procedurally unconscionable because
14 plaintiff had the opportunity to opt out. See Kilgore v.
15 KeyBank, Natl. Ass’n, 718 F.3d 1052, 1059 (9th Cir. 2013) (en
16 banc) (citing Circuit City, 283 F.3d at 1199-2000). In Kilgore,
17 the Ninth Circuit found an arbitration agreement binding former
18 students of a failed flight-training school was not procedurally
19 conscionable because the students were empowered to reject the
20 agreement within sixty days of signing and the arbitration clause
21 was “in its own section, clearly labeled, in boldface.” 718 F.3d
22 at 1058-59. Here, the changes to the arbitration agreement were
23 clearly denoted in Charter’s email to it employees, in its own
24 paragraph, and the time to opt out accompanied its announcement.
25 (See Fries Decl., Ex. A.) Accordingly, the agreement is not
26 procedurally unconscionable.
27 ii. Substantive Unconscionability
28 “The substantive element of unconscionability focuses
1 on the actual terms of the agreement and evaluates whether they
2 create overly harsh or one-sided results, that is, whether
3 contractual provisions reallocate risks in an objectively
4 unreasonable or unexpected manner.” Baker v. Osborne Dev. Corp,
5 159 Cal. App. 4th 884, 894 (4th Dist. 2008) (internal quotation
6 marks and citations omitted). Plaintiff claims the Solution
7 Channel Agreement has a “high degree of substantive
8 unconscionability” on multiple grounds. (Opp. to Mot. to Compel
9 Arbitration 26-33.) However, on the whole, plaintiff’s claims
10 lack merit.
11 Plaintiff most notably argues Solution Channel’s
12 internal review process is one-sided and permits Charter itself
13 to determine whether a claim is arbitrable. (Opp. to Mot. to
14 Compel Arbitration 26-29.) However, the internal review
15 mechanism specified in the Solution Channel Agreement applies
16 both to Charter and plaintiff. “Claimants” must first file their
17 claims with an internal review process before proceeding to
18 arbitration, and “claimants” include “current employee[s], former
19 employee[s], applicant[s] for employment, or Charter.” (Fries
20 Decl., Ex. C.) Both Charter and employees must “acknowledge and
21 attest to the accuracy of the information in the form and then
22 click Submit Claim” to initiate the process -- employees alone
23 are not held to submitting a sworn verification, as plaintiff
24 asserts. (Compare Fries Decl., Ex. C with Opp. to Mot. to Compel
25 Arbitration at 28.)
26 Furthermore, the Solution Channel Agreement does not
27 permit Charter to conclusively decide whether a claim is
28 arbitrable. Indeed, Solution Channel provides “[i]f [claimants]
1 are not satisfied with Charter’s decision following the internal
2 claim review” they can still “proceed with arbitration of [the]
3 claim,” at which point both parties will “jointly select an
4 arbitrator” from a list of five potential arbitrators selected by
5 the American Arbitration Association. (Fries Decl., Ex. C.)
6 Finally, the Solution Channel Agreement provides each
7 party will bear its own attorney’s fees regardless of the action
8 brought. (Fries Decl., Ex. C.) California courts have found
9 similar provisions unenforceable in FEHA cases. Serpa v.
10 California Surety Investigations, Inc., 215 Cal. App. 4th 695,
11 709-10 (2d Dist. 2013). However, this provision “does not
12 vitiate the underlying agreement to arbitrate . . . [because] the
13 arbitration agreement is not otherwise permeated by
14 unconscionability.” Id. Accordingly, the “the offending
15 provision, which is plainly collateral to the main purpose of the
16 contract,” can be severed in conformity with the agreement’s
17 severability clause. Id. The Solution Channel Arbitration
18 Agreement is not “permeated” by unconscionability and is
19 therefore enforceable. The court will grant defendant’s motion
20 to compel arbitration.
21 III. Motion to Dismiss or Stay Judicial Proceedings
22 Because the Solution Channel Arbitration Agreement is
23 enforceable and encompasses plaintiff’s claims, the court will
24 stay this action pending arbitration. See 9 U.S.C. § 3.
25 IT IS THEREFORE ORDERED that defendant’s Motion to
26 Compel (Docket No. 10) be, and the same hereby is, GRANTED. IT
27 IS FURTHER ORDERED that judicial proceedings are STAYED pending
28 arbitration.
1 Dated: December 18, 2019 ’ .
2 i Vin oh
3 UNITED STATES DISTRICT JUDGE
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
14