Michelle Richards v. Ernst & Young, LLP

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MICHELLE RICHARDS, on behalf of No. 11-17530

herself and others similarly situated

and on behalf of the general public, D.C. No.

Plaintiff-Appellee, 5:05-cv-04867-

RMW

v.

ORDER AND

ERNST & YOUNG, LLP, AMENDED

Defendant-Appellant. OPINION

Appeal from the United States District Court

for the Northern District of California

Jeremy D. Fogel, District Judge, Presiding

Argued and Submitted

June 14, 2013—San Francisco, California

Filed August 21, 2013

Amended December 9, 2013

Before: Mary M. Schroeder, Kenneth F. Ripple,*

and Consuelo M. Callahan, Circuit Judges.

Order;

Per Curiam Opinion

*

The Honorable Kenneth F. Ripple, Senior Circuit Judge for the U.S.

Court of Appeals for the Seventh Circuit, sitting by designation.

2 RICHARDS V. ERNST & YOUNG, LLP

SUMMARY**

Arbitration

The panel reversed the district court’s denial of Ernst &

Young, LLP’s motion to compel arbitration of state wage and

hour claims asserted by the former employee plaintiff.

The district court determined that Ernst & Young had

waived its right to arbitration by failing to assert that right as

a defense in an action brought by two former employees,

whose action had been consolidated with that of the plaintiff.

The panel reversed the district court’s judgment because the

plaintiff had not established any prejudice as a result of Ernst

& Yong’s alleged delay in asserting its arbitral rights.

COUNSEL

Rex S. Heinke, Gregory William Knopp, and Katharine Jane

Galston, Akin Gump Strauss Hauer & Feld LLP, Los

Angeles, California, for Defendant-Appellant.

Max Folkenflik, Folkenflik & McGerity, New York, New

York; H. Tim Hoffman, Arthur William Lazear, and Ross L.

Libenson, for Plaintiffs-Appellees.

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

RICHARDS V. ERNST & YOUNG, LLP 3

ORDER

The opinion filed on August 21, 2013, is hereby amended

for the purposes of clarification. A copy of the amended

opinion will be filed concurrently with this order. As the

amendments are not substantive, the Plaintiff-Appellee’s

Petition for Panel Rehearing and/or Rehearing En Banc is not

affected and remains pending before the court.

OPINION

PER CURIAM:

Defendant Ernst & Young, LLP appeals the district

court’s denial of its motion to compel arbitration of state

wage and hour claims asserted by its former employee,

Michelle Richards.1 The defendant filed the motion after the

Supreme Court’s decision in AT&T Mobility LLC v.

Concepcion, 131 S. Ct. 1740 (2011). The district court

determined that Ernst & Young had waived its right to

arbitration by failing to assert that right as a defense in an

action brought by two other former employees, David Ho and

Sarah Fernandez, whose action had been consolidated with

that of Ms. Richards. Because Ms. Richards has not

established any prejudice as a result of Ernst & Young’s

alleged delay in asserting its arbitral rights, we reverse the

judgment of the district court.2

1

The district court’s jurisdiction was based on 28 U.S.C. § 1332.

2

Our jurisdiction is based on 9 U.S.C. § 16(a)(1)(B).

4 RICHARDS V. ERNST & YOUNG, LLP

“Waiver of a contractual right to arbitration is not

favored,” and, therefore, “any party arguing waiver of

arbitration bears a heavy burden of proof.” Fisher v. A.G.

Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)

(quotation marks omitted). Specifically, “[a] party seeking to

prove waiver of a right to arbitration must demonstrate:

(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.” Id. “Where, as here, the concern is

whether the undisputed facts of defendant’s pretrial

participation in the litigation satisfy the standard for waiver,

the question of waiver of arbitration is one of law which we

review de novo.” Id. at 693.

Ms. Richards argues that she was prejudiced because

there was litigation on the merits, and, as a result, some of her

claims were dismissed. We cannot accept this argument.

One of Ms. Richards’ claims—Ernst & Young’s failure to

provide meal and rest breaks—was dismissed without

prejudice, which is not a decision on the merits. See Oscar v.

Alaska Dep’t of Educ. & Early Dev., 541 F.3d 978, 981 (9th

Cir. 2008). The other claim on which the district court

ruled—Ms. Richards’s claim for injunctive relief—was

resolved by the district court on the basis of standing: Ms.

Richards, as a former employee, could not benefit from

prospective relief and therefore did not have standing to

assert that claim. We previously have observed that “[t]he

jurisdictional question of standing precedes, and does not

require, analysis of the merits.” Equity Lifestyle Props., Inc.

v. Cnty. of San Luis Obispo, 548 F.3d 1184, 1189 n.10 (9th

Cir. 2008).

RICHARDS V. ERNST & YOUNG, LLP 5

Ms. Richards also maintains that she was prejudiced

because Ernst & Young conducted discovery that caused her

to incur expenses during the years of litigation prior to the

motion to compel. Ms. Richards does not contend, however,

that Ernst & Young used discovery “to gain information

about the other side’s case that could not have been gained in

arbitration.” Saint Agnes Med. Ctr. v. PacifiCare of Cal.,

31 Cal. 4th 1187, 1204, 8 Cal. Rptr. 3d 517, 530, 82 P.3d 727,

738 (Cal. 2003) (noting that courts have found prejudice in

such circumstances). Moreover, in Fisher, we rejected the

notion that “self-inflicted” expenses could be evidence of

prejudice. 791 F.2d at 698. Like the plaintiffs in Fisher, Ms.

Richards was a “part[y] to an agreement making arbitration

of disputes mandatory,” and therefore “[a]ny extra expense

incurred as a result of [Ms. Richards’s] deliberate choice of

an improper forum, in contravention of their contract, cannot

be charged to” Ernst & Young. Id.

Alternatively, Ms. Richards urges that we may rely on the

decision of the National Labor Relations Board (“NLRB”)

decision in D.R. Horton, 357 N.L.R.B. No. 184, 2012 WL

36274 (Jan. 3, 2012), to affirm the district court’s judgment.

We decline to do so. Ms. Richards failed to raise the

argument that her arbitration agreement with Ernst & Young

was unenforceable under the National Labor Relations Act

(“NLRA”) until after the parties had briefed, and the district

court had denied, Ernst & Young’s motion to compel. “We

apply a ‘general rule’ against entertaining arguments on

appeal that were not presented or developed before the

6 RICHARDS V. ERNST & YOUNG, LLP

district court.” Peterson v. Highland Music, Inc.,140 F.3d

1313, 1321 (9th Cir. 1998).3

3

Without deciding the issue, we also note that the two courts of appeals,

and the overwhelming majority of the district courts, to have considered

the issue have determined that they should not defer to the NLRB’s

decision in D.R. Horton on the ground that it conflicts with the explicit

pronouncements of the Supreme Court concerning the policies

undergirding the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16. See,

e.g., Sutherland v. Ernst & Young, LLP, 726 F.3d 290, 297 n.8 (2d Cir.

2013) (declining to follow D.R. Horton or to grant the NLRB’s decision

any deference); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir.

2013) (“[G]iven the absence of any ‘contrary congressional command’

from the FLSA that a right to engage in class actions overrides the

mandate of the FAA in favor of arbitration, we reject Owen’s invitation

to follow the NLRB’s rationale in D.R. Horton . . . .” (quoting

CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012)); Delock

v. Securitas Sec. Servs. USA, Inc., 883 F. Supp. 2d 784, 789 (E.D. Ark.

2012) (“The Court declines to endorse, however, the Board’s application

of the Federal Arbitration Act or its reading of the precedent applying that

Act. The NLRA, as interpreted in Horton, conflicts with the FAA, as

interpreted by the Supreme Court.”); Morvant v. P.F. Chang’s China

Bistro, Inc., 870 F. Supp. 2d 831, 845 (N.D. Cal. 2012) (noting that the

Supreme Court had “held that courts are required to enforce agreements

to arbitrate according to their terms, unless the FAA’s mandate has been

overridden by a contrary congressional command,” but concluding that

“Congress did not expressly provide that it was overriding any provision

in the FAA when it enacted the NLRA or the Norris-LaGuardia Act”

(internal quotation marks omitted)); Jasso v. Money Mart Express, Inc.,

879 F. Supp. 2d 1038, 1049 (N.D. Cal. 2012) (“Because Congress did not

expressly provide that it was overriding any provision in the FAA, the

Court cannot read such a provision into the NLRA and is constrained by

[AT&T Mobility LLC v.] Concepcion[, 131 S. Ct. 1740 (2011),] to enforce

the instant agreement according to its terms.”); LaVoice v. UBS Fin.

Servs., Inc., No. 11 Civ. 2308 (BSJ) (JLC), 2012 WL 124590, at *6

(S.D.N.Y. Jan. 13, 2012) (holding that “this Court must read AT & T

Mobility as standing against any argument that an absolute right to

collective action is consistent with the FAA’s ‘overarching purpose’ of

‘ensur[ing] the enforcement of arbitration agreements according to their

terms so as to facilitate streamlined proceedings’” and that, “[t]o the

RICHARDS V. ERNST & YOUNG, LLP 7

REVERSED.4

extent that LaVoice relies on . . . the recent decision of the [NLRB] in

D.R. Horton, Inc. . . . , as authority to support a conflicting reading of

AT&T Mobility, this Court declines to follow th[at] decision[]” (quoting

AT&T Mobility, 131 S. Ct. at 1748)). But see Brown v. Citicorp Credit

Servs., No. 1:12-cv-00062-BLW, 2013 WL 645942, at *3 (D. Idaho Feb.

21, 2013) (deferring to NLRB’s decision in D.R. Horton under Chevron,

U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), as

“rational and consistent” with the NLRA, but failing to consider

countervailing policies or deference with respect to the FAA); Herrington

v. Waterstone Mortg. Corp., No. 11-cv-779-bbc, 2012 WL 1242318, at *6

(W.D. Wis. Mar. 16, 2012) (finding “the Board’s interpretation of the

NLRA in D.R. Horton[] is reasonably defensible” and, therefore,

“applying it . . . to invalidate the collective action waiver in the arbitration

agreement” (internal quotation marks omitted)).

4

Because the district court should have compelled arbitration, and

because the arbitration agreement between Ernst & Young and Ms.

Richards precludes class arbitration, we also vacate the district court’s

order certifying a class of litigants with Ms. Richards as its representative.