The opinion
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
D. BRUNNER, JR., Case No. 19-cv-04808-VC
Plaintiff,
ORDER GRANTING MOTION TO
v. COMPEL ARBITRATION
LYFT, INC., Re: Dkt. No. 19
Defendant.
In February 2019, Donald Brunner, Jr. filed an arbitral claim with, and paid filing fees to,
the American Arbitration Association. He raised claims based on Lyft’s alleged misclassification
of him as an independent contractor. So did 106 other drivers that are represented by the same
law firms. The AAA split those claimants into five groups; Brunner was placed in Group 3. Lyft,
the drivers, and the AAA began to hammer out a schedule for each group. But by August 2019,
Lyft still hadn’t paid its filing fees for Group 3 despite multiple reminders from the AAA. Lyft
instead requested additional confirmation from the AAA as to which group each invoice related,
purportedly to head off the possibility of duplicative payments. The AAA at one point told Lyft
that the Group 3 fees had been paid; reversing course a week later, the AAA reported that the
fees in fact had not been paid. Lyft and the AAA eventually reached an understanding on the
outstanding fees; on August 21, 2019, the AAA sent a renewed invoice for Group 3, which Lyft
promptly paid. Bertoldi Decl. ¶ 150, Dkt. No. 19-7.
Seven days before that renewed invoice was sent, Brunner withdrew his arbitral claim
and filed this action on behalf of a putative class. He resists a return to arbitration on the grounds
that Lyft (i) defaulted in arbitration, (ii) materially breached the arbitration agreement, and
(iii) waived its arbitral rights. Because Lyft did none of those things, its motion to compel
arbitration on an individual basis is granted.
1. Under the Federal Arbitration Act, the term “default” refers to “the alleged failure,
neglect, or refusal of another to arbitrate under a written agreement for arbitration.” 9 U.S.C. § 4.
Section 4’s typical remedy when a party defaults is a court order “directing the parties to proceed
to arbitration in accordance with the terms of the agreement.” But following “a prior default in
arbitration,” the proper remedy may be to provide a judicial forum for the claims. Sink v. Aden
Enterprises, Inc., 352 F.3d 1197, 1201 (9th Cir. 2003). A party’s premature termination of the
first round of arbitration doesn’t give that party the power to force a second round and thereby
“indefinitely postpone litigation.” Id.
Lyft did not default in arbitration. The lead Ninth Circuit case on this subject involved
both the cancellation of a scheduled arbitration and a formal order of default entered by the
arbitrator. Id. at 1199; see also Pre-Paid Legal Services, Inc. v. Cahill, 786 F.3d 1287, 1293
(10th Cir. 2015). Here, in contrast, Brunner withdrew from arbitration before the AAA invoked
its own suspension or termination procedures. See McLellan v. Fitbit, Inc., 2018 WL 3549042, at
*5 (N.D. Cal. July 24, 2018). The AAA also issued an updated invoice for the filing fees—
presumably because it saw fit to clarify which fees Lyft still owed—and the arbitration of the
Group 3 claims is proceeding. Indeed, the only party in this case who defaulted under section 4 is
Brunner, who left the arbitral forum to press these claims in court.
That is not to say that a formal order of default is necessary. See Pre-Paid Legal, 786
F.3d at 1295–96. But the arbitrator—or, in this case, the AAA itself—is well positioned to
decide in the first instance whether the non-payment of fees justifies the termination of arbitral
proceedings. When the arbitration is kept on track, district courts should be hesitant to derail
proceedings on the basis of innuendo and supposition.
2. Unlike default, the concept of material breach draws its force from contract law.
Material breach is a defense to the enforcement of an arbitration agreement under 9 U.S.C. § 2.
Except when superseded by the FAA, the parties’ arbitration agreement is governed by
California law. See Terms of Service § 21. Material breach is a question of fact that turns in part
on whether the contractual counterparty was harmed by the breach. See Boston LLC v. Juarez,
245 Cal. App. 4th 75, 87 (2016). The Ninth Circuit has interpreted California contract law to
provide that a party materially breaches an arbitration agreement when it “refuse[s] to participate
in the arbitration process at all.” Brown v. Dillard’s, Inc., 430 F.3d 1004, 1010 (9th Cir. 2005).
Lyft did not materially breach the arbitration agreement. To begin with, the AAA’s
reissuance of an invoice strongly suggests that Lyft did not breach its obligation to pay filing
fees. And even if the failure to pay the first invoice technically breached the agreement, Lyft
presented unrebutted evidence that the arbitration of Brunner’s claims was not delayed by the
late payment. Consider the pace at which Group 2 proceeded: Lyft paid the filing fees for Group
2 in a timely fashion, but none of the Group 2 preliminary conferences took place by the time
Brunner withdrew his claim and the Group 2 arbitration hearings are scheduled for March 2020.
Group 3, as its number suggests, trails the administration of Group 2. So even if Lyft paid the
filing fees right away, the AAA would still be months away from arbitrating the Group 3 claims.
Brunner thus did not suffer delay from the alleged breach.
3. Like material breach, waiver also sounds in generally applicable principles of contract
law. See Newirth by and through Newirth v. Aegis Senior Communities, LLC, 931 F.3d 935, 940
(9th Cir. 2019). Waiver is generally defined as the intentional relinquishment or abandonment of
a known right. In this context, Brunner must establish: “(1) knowledge of an existing right to
compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party
opposing arbitration resulting from such inconsistent acts.” Martin v. Yasuda, 829 F.3d 1118,
1124 (9th Cir. 2016). The Ninth Circuit imposes “a heavy burden of proof” on any party
asserting waiver. Newirth, 931 F.3d at 940. Lyft does not contest its knowledge of an existing
right to arbitrate these claims, but Brunner has failed to demonstrate either an act inconsistent
with that right or prejudice.
Lyft has not acted inconsistently with its right to arbitrate Brunner’s claims. The “refusal
to arbitrate after being served with” an arbitral demand would satisfy this element. Brown, 430
F.3d at 1012. But Lyft submitted to arbitration, has been actively cooperating with the AAA, and
never rejected its obligation to pay filing fees. See Willick v. Napoli Bern Ripka & Associates,
LLP, 2015 WL 1276549, at *4 (C.D. Cal. Aug. 20, 2015). By all appearances, the failure to pay
the fees for Brunner’s case was the result of genuine administrative confusion. See, e.g., Dkt. No.
19-19. Nor has Brunner been prejudiced by the delay. Under some circumstances, prejudice from
delay can justify the heavy medicine of waiver. See Brown, 430 F.3d at 1012-13. As explained
above, however, the six-month delay between Brunner’s filing and withdrawal of his arbitral
claim 1s attributable to the AAA’s administrative timeline for the 107 claims pending against
Lyft, not to Lyft’s late payment of the fees for Group 3.
Brunner’s claims are dismissed without prejudice. See Johnmohammadi v. Bloomingdale’s
Inc., 755 F.3d 1072, 1073-74 (9th Cir. 2014).
IT IS SO ORDERED.
Dated: November 14, 2019 Koo.
VINCE CHHABRIA
United States District Judge