Madrigal v. AT&T Wireless Services Inc et al, No. 1:2009cv00033 - Document 68 (E.D. Cal. 2010)
Court Description: MEMORANDUM DECISION AND ORDER on Plaintiff's 56 & 57 Motion for Reconsideration, signed by Judge Oliver W. Wanger on 12/20/2010. (Gaumnitz, R)
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Madrigal v. AT&T Wireless Services Inc et al Doc. 68 1 2 3 4 UNITED STATES DISTRICT COURT 5 EASTERN DISTRICT OF CALIFORNIA 6 7 8 ANAMIRIA MADGRIGAL, Plaintiff, 9 10 11 12 AT&T WIRELESS SERVICES, Inc., et al., Defendants. 14 I. INTRODUCTION. 15 17 18 On November 18, 2008, Anamiria Madgrigal (“Plaintiff”) filed an action in Fresno County Superior Court against AT&T Wireless and affiliated companies (“Defendants”). (Doc. 1). Defendants removed Plaintiff’s action to federal court on January 1, 2009. 19 20 21 22 23 24 25 26 27 MEMORANDUM DECISION AND ORDER ON PLAINTIFF’S MOTION FOR RECONSIDERATION (Docs. 56, 57) v. 13 16 1:09-cv-0033-OWW-MJS (Doc. 2). On August 17, 2009, the court issued a Memorandum Decision granting Defendant’s motion to compel arbitration. (Doc. 30). Plaintiff filed a motion for reconsideration of the Memorandum Decision on December 31, 2009; this motion was denied as moot on September 2, 2010 in light of the Supreme Court’s intervening decision in Rent-A-Center, W., Inc. v. Jackson, 130 S. Ct. 2772 (2010), and Plaintiff was directed to file a new motion to dismiss addressing that case. (Docs. 34, 54). /// 28 1 Dockets.Justia.com 1 Currently before the court is Plaintiff’s second motion for 2 reconsideration filed October 11, 2010. (Doc. 56). 3 filed opposition and to the motion and objections to Plaintiff’s 4 evidence on October 18, 2010. 5 reply and responses to Defendant’s objections on October 25, 2010. 6 (Docs. 61, 62). (Docs. 59, 60).1 Defendant Plaintiff filed a 7 The court heard Plaintiff’s motion for reconsideration on 8 November 8, 2010. At the hearing, the court requested supplemental 9 briefing regarding an argument orally offered by Plaintiff that was 10 not included in Plaintiff’s written motion. (Doc. 63). Plaintiff 11 filed her supplemental brief on November 15, 2010. 12 Defendant filed its supplemental brief on November 22, 2010. (Doc. 13 67). (Doc. 64). II. FACTUAL BACKGROUND. 14 15 On or about April 1, 2002, Plaintiff Anamiria Madrigal and 16 AT&T Wireless Services, Inc. entered into an Exclusive Dealer 17 Agreement ("Dealer Agreement"). (Doc. 13 at 3; Doc. 16 at 10). 18 terms 19 wireless products and services to customers of AT&T Wireless. (Doc. 20 13 at 3). Madrigal opened and operated several retail stores under 21 the name “Aztek Cellular.” (Doc. 13 at 3; Doc. 16 at 10). 22 “Atzek Cellular” incorporated, on August 8, 2002, Madrigal assigned 23 her rights under the Dealer Agreement to Atzek Cellular, Inc. 24 (Woosley Decl. ¶ 5, Ex. C). 25 two years with automatic one-year extensions if not terminated by of the Dealer Agreement authorized Madrigal to The market After The term of the Dealer Agreement was 26 27 28 1 As Plaintiff’s motion for reconsideration may be resolved without reference to the evidentiary materials submitted by Plaintiff, Defendant’s evidentiary objections are moot. 2 1 either party. (Doc. 13 at 4; Doc. 16 at 10). 2 was renewed in 2004 and 2005. (Doc. 13 at 4; Doc. 16 at 10). 3 During the term of the Dealer Agreement, Plaintiffs experienced 4 considerable financial success while operating nine retail stores. 5 (Doc. 13 at 4). 6 The Dealer Agreement In 2004, Cingular Wireless acquired AT&T Wireless after which 7 AT&T Wireless was renamed New Cingular Wireless Services, Inc. 8 (Doc. 13 at 2). 9 Cingular, Plaintiffs were offered “Special Promotional Incentives As part of the conversion from AT&T Wireless to 10 Funds” ("SPIFs"). (Doc. 13 at 5). 11 customers Plaintiff successfully transferred to Cingular and/or 12 sold additional data features, Plaintiff earned SPIFs (or 13 commissions) as incentive compensation. (Id.). 14 2005, Plaintiff calculated that she was owed more than $2,000,000 15 in unpaid and improperly calculated commissions. (Doc. 13 at 5; 16 Doc. 16 at 4-5). However, calculations of SPIFs were complicated 17 and Cingular contested the unpaid amount claimed by Plaintiff. 18 (Doc. 13 at 5). 19 (Doc. 13 at 5; Doc. 16 at 5). 20 alleged that Cingular’s calculations were erroneous. (Doc. 13 at 5; 21 Doc. 22 accounting reflecting their own calculations were in error.” (Doc. 23 13 at 5; Doc. 16 at 5). 24 $435,000, without providing supporting documentation. (Doc. 13 at 25 5; Doc. 16 at 5). 26 16 at 5). For former AT&T Wireless By the fall of Plaintiff was offered $475,000 in settlement. Plaintiff Plaintiff rejected the offer and maintains that Cingular “had no Cingular then reduced its offer to After Plaintiff refused to compromise, on December 24, 2005, 27 Defendants served Plaintiff with 28 termination of the Dealer Agreement. (Doc. 13 at 4; Doc. 16 at 10). 3 a 90-day written notice of 1 On or about April 1, 2006, the Dealer Agreement terminated. (Doc. 2 13 at 8; Doc. 16 at 10). 3 the disputed commissions for $149,275. (Doc. 13 at 5; Doc. 16 at 4 5). Plaintiff rejected the offer. Subsequently, Plaintiff, through 5 counsel, requested mediation or, in the alternative, arbitration of 6 the commission dispute. (Swingle Decl. Ex. A). 7 to mediate (Swingle Decl. Exs. B-C), but the mediation never 8 occurred. 9 arbitration of the commission claims. (Cornwell Decl. Exs. A-B). 10 A couple months later, Plaintiff filed a state-court complaint 11 asserting statutory claims arising from termination of the Dealer 12 Agreement. After Cingular made a final attempt to settle retaining new counsel, The parties agreed Plaintiff requested III. LEGAL STANDARD. 13 14 A motion for reconsideration is appropriate where the district 15 court (1) is presented with newly discovered evidence, (2) committed 16 clear error or the initial decision was manifestly unjust, or (3) 17 if there was an intervening change in controlling law. See School 18 Dist. No. 1J v. AC&S, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); 19 McDowell v. Cameron, 290 F.3d 1036, 1038 (9th Cir. 1999) (en banc). 20 A 21 previously raised, or which could have been raised in a previous 22 motion. See Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 23 1985). reconsideration motion not merely present arguments IV. DISCUSSION. 24 25 should A. Arguments Advanced in Plaintiff’s Motion for Reconsideration 26 Plaintiff contends that the order compelling arbitration should 27 be vacated in light of the Supreme Court’s intervening decision in 28 Rent-A-Center, W., Inc. v. Jackson, 4 130 S. Ct. 2772 (2010). 1 Plaintiff acknowledges that Jackson “turned on facts and issues not 2 applicable in Plaintiff’s case” but avers that Jackson “fully 3 supports 4 unconscionability in this case, not the arbitrator.” 5 Reconsideration at 2-3). 6 intact the general principal that it is for the Court (and not the 7 arbitrator) to determine unconscionablility issues absent a specific 8 contract provision to the contrary.” 9 no help to Plaintiff. the position that this Court should decide (Motion for Plaintiff contends that “Jackson left (Motion at 4). Jackson is of 10 Jackson reaffirmed the principle that parties can agree to 11 arbitrate “gateway” questions of “arbitrability,” such as whether 12 the parties have agreed to arbitrate, whether their agreement covers 13 a particular controversy, or wether the arbitration agreement is 14 valid. 15 delegating to the arbitrator authority to determine the validity of 16 an arbitration agreement bars a court from adjudicating a party’s 17 claim of unconscionability unless that claim is based on alleged 18 unconscionability of the delegation provision itself. 19 (“unless Jackson challenged the delegation provision specifically, 20 we must treat it as valid under § 2, and must enforce it under §§ 21 3 and 4, leaving any challenge to the validity of the Agreement as 22 a whole for the arbitrator”). 130 S.Ct. at 2777. Jackson also confirmed that a provision Id. at 2779 23 Here, the law of the case establishes that the parties’ 24 arbitration agreement delegated authority to determine the validity 25 of the agreement to the arbitrator. 26 provides: 27 28 The Memorandum Decision [T]he arbitration agreement specifies that “all claims” and “disputes” are subject to arbitration by the AAA, and it explicitly states that the “AAA commercial arbitration 5 1 rules” govern. Rule 7 is one of those rules. Consistent with the great weight of authority, by incorporating the language of Rule 7 of the AAA commercial arbitration rules into their arbitration agreement, the parties clearly and unmistakably expressed their intent to have the arbitrator decide disputes over the scope of the arbitration agreement.2 2 3 4 5 (Memorandum Decision at 11-12). The Memorandum Decision further 6 provides: 7 Plaintiff’s challenge to the validity of the arbitration agreement on unconscionability grounds cannot be judicially determined. The parties have clearly and unmistakably provided that arbitrator is empowered to determine the “validity of the arbitration agreement” 8 9 10 (Memorandum Decision at 13). 11 Plaintiff does not seek reconsideration of the holding that the 12 parties’ arbitration agreement delegates authority to determine the 13 validity of the agreement to the arbitrator, and nothing in Jackson 14 implicates the principals of contract interpretation on which that 15 holding is based. Nor does Plaintiff’s motion for reconsideration 16 contend that the delegation provision is itself unconscionable. 17 Rather, Plaintiff attempts to distinguish Jackson on the grounds 18 that (1) the Jackson arbitration agreement was a stand-alone 19 contract and thus objection to the validity of the agreement was 20 effectively a challenge to the whole contract, whereas here, 21 Plaintiff challenges specific provisions of the arbitration 22 agreement; and (2) the Jackson agreement included a specific 23 delegation provision, to the contrary, there is no express language 24 in the parties’ agreement delegating gateway issues to the 25 arbitrator. (Motion for Reconsideration at 3). Neither of 26 27 28 2 AAA Rule 7 provides: “the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.” (Doc. 19, De Liberty Decl. Ex. A). 6 1 Plaintiff’s arguments have merit. 2 As to Plaintiff’s first argument, Jackson did not turn on the 3 fact that the agreement was a “stand-alone” arbitration agreement: 4 To be sure this case differs from Prima Paint, Buckeye, and Preston, in that the arbitration provisions sought to be enforced in those cases were contained in contracts unrelated to arbitration -- contracts for consulting services, check-cashing services, and "personal management" or "talent agent" services. In this case, the underlying contract is itself an arbitration agreement. But that makes no difference. Application of the severability rule does not depend on the substance of the remainder of the contract. Section 2 operates on the specific "written provision" to "settle by arbitration a controversy" that the party seeks to enforce. Accordingly, unless Jackson challenged the delegation provision specifically, we must treat it as valid under § 2, and must enforce it under §§ 3 and 4, leaving any challenge to the validity of the Agreement as a whole for the arbitrator. 5 6 7 8 9 10 11 12 13 14 130 S.Ct. at 2779 (citations omitted, emphasis added). With respect 15 to Plaintiff’s second contention, nothing in Jackson suggests that 16 parties may not delegate gateway questions to an arbitrator by 17 incorporating the rules of an arbitral body into the arbitration 18 agreement. 19 places arbitration agreements on equal footing with other types 20 contracts and requires federal courts to enforce them according to 21 their terms. 22 reference extrinsic materials into their arbitration agreements. 23 See, e.g., Awuah v. Coverall N. Am., Inc., 554 F.3d 7, 11 (1st Cir. 24 2009) (holding that where contract provided “arbitration shall be 25 in 26 Arbitration 27 arbitration agreement). 28 /// To the contrary, Jackson emphasized that federal law Id. accordance As with any contract, parties may incorporate by with the Association," then current such rules 7 Rules were of the American incorporated into 1 None of the cases Plaintiff cites in the motion for 2 reconsideration support her contention that, despite the parties’ 3 delegation of “gateway” authority to the arbitrator, the court must 4 decide Plaintiff’s claims of unconscionability because they are 5 particularized claims. 6 Franchise Corp., 2010 U.S. App. LEXIS 19309 * 13 (9th Cir. 2010), 7 the Ninth Circuit found that because a party marshaled specific 8 challenges against an arbitration agreement, the district court 9 properly decided the issue of whether the agreement was valid. 10 However, there was no finding by the district court in Bridge Fund 11 that the parties had delegated authority to determine questions of 12 validity of the arbitration agreement to the arbitrator.3 Jackson 13 makes gateway 14 authority to the arbitrator, federal courts may not address a 15 challenge to the validity of the arbitration agreement unless the 16 challenge is specific to the delegation provision itself. 130 S.Ct. 17 at 2779. 18 clear that where In Bridge Fund Capital Corp. v. Fastbucks there has been delegation The two additional post-Jackson cases cited of by Plaintiff 19 expressly acknowledge Jackson’s limitation on judicial review of 20 arbitration agreements that include provisions delegating gateway 21 authority to the arbitrator. 22 App. LEXIS 16803 *6 (5th Cir. 2010), the Fifth Circuit Court of 23 Appeals noted that “the issue of arbitrability is for an arbitrator In Allen v. Regions Bank, 2010 U.S. 24 3 25 26 27 28 The arbitration agreement at issue in Bridge Fund provided that “any and all disputes between [the parties] and any claim by either party that cannot be amicably settled shall be determined solely and exclusively by arbitration under the rules of the American Arbitration Association." Id. at *2. The Bridge Fund Court was silent as to whether this provision was sufficient to effect delegation of gateway authority to the arbitrator, perhaps because neither the district court nor the parties discussed the issue. See Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 2008 U.S. Dist. LEXIS 83724 (E.D. Cal. 2008). 8 1 when the evidence clearly demonstrates that was the parties' 2 agreement.” 3 LEXIS 71730 * 13 (S.D. Cal. 2010) the district court cited Jackson 4 for the proposition that “in the absence of a provision in the 5 arbitration agreement stating otherwise, the question of whether a 6 particular dispute is arbitrable is to be decided by the courts, not 7 the arbitrator.” (emphasis added). 8 B. Plaintiff’s Supplemental Brief Similarly, in McKinley v. Bonilla, 2010 U.S. Dist. 9 During the November 8, 2010 hearing on Plaintiff’s motion for 10 reconsideration, counsel argued that the “fee-splitting” provision 11 contained within the parties’ arbitration agreement renders the 12 delegation provision unconscionable, and the court invited briefing 13 on the subject. 14 parties’ arbitration agreement provides: 15 16 The fee-splitting provision contained in the If an arbitration or court action is commenced by either party, the substantially prevailing party in that action is entitled to recover its out-of-pocket and court costs and reasonable attorneys’ fee [sic] incurred therein. 17 18 (Doc. 18, Ex. B at 12). 19 Plaintiff’s supplemental brief advances the same argument 20 Plaintiff advanced in her opposition to the motion to compel 21 arbitration and in her motion for reconsideration: that the fee- 22 splitting 23 unconscionable 24 Plaintiff’s supplemental brief does not address the issue Plaintiff 25 was directed to brief: whether the fee-splitting provision renders provision due renders the entire to high cost the 26 27 28 9 arbitration of AAA agreement arbitrations. 1 the delegation provision unconscionable.4 2 Brief at 1-4). 3 Whether the fee-splitting provision (See Plaintiff’s Sup. renders the entire 4 arbitration agreement unconscionable is for the arbitrator to 5 decide. 6 renders the entire arbitration agreement unconscionable is precisely 7 the type of general challenge that Jackson precludes where an 8 agreement contains a delegation provision. 9 explained: 10 Plaintiff’s contention that the fee-splitting provision As the High Court [Jackson] contended that the Agreement was both procedurally and substantively unconscionable. It was procedurally unconscionable, he argued, because it "was imposed as a condition of employment and was non-negotiable." But we need not consider that claim because none of Jackson's substantive unconscionability challenges was specific to the delegation provision. First, he argued that the Agreement's coverage was one sided in that it required arbitration of claims an employee was likely to bring...but did not require arbitration of claims Rent-A-Center was likely to bring ...This one-sided-coverage argument clearly did not go to the validity of the delegation provision. 11 12 13 14 15 16 17 Jackson's other two substantive unconscionability arguments assailed arbitration procedures called for by the contract -- the fee-splitting arrangement and the limitations on discovery -- procedures that were to be used during arbitration under both the agreement to arbitrate employment-related disputes and the delegation provision. It may be that had Jackson challenged the delegation provision by arguing that these common procedures as applied to the delegation provision rendered that provision unconscionable, the challenge should have been considered by the court. To make such a claim based on the discovery procedures, Jackson would have had to argue that the limitation upon the number of depositions causes the arbitration of his claim that the Agreement is unenforceable to be unconscionable... Likewise, the unfairness of the fee-splitting arrangement may be more difficult to establish for the arbitration of enforceability than for arbitration of more complex and 18 19 20 21 22 23 24 25 26 27 28 4 The supplemental brief was the second opportunity Plaintiff had to refine her attack on the arbitration agreement based on the Supreme Court’s holding in Jackson. (See Doc. 54). 10 1 2 3 4 fact-related aspects of the alleged employment discrimination. Jackson, however, did not make any arguments specific to the delegation provision; he argued that the fee-sharing and discovery procedures rendered the entire Agreement invalid. Jackson, 130 S.Ct. at 2780 (emphasis added, citations omitted). 5 Plaintiff’s supplemental brief offers two cases in support of 6 her contention that the fee-splitting provision contained in the 7 parties’ 8 agreement unconscionable: (1) Nagrampa v. MailCoups, Inc., 469 F.3d 9 1257 (9th Cir. 2006), and (2) AT&T Mobility II, LLC v. Pestano, 2008 arbitration agreement renders the entire arbitration 10 U.S. Dist. LEXIS 23135 (N.D. Cal. 2008). Neither case is relevant 11 to the issue the court permitted supplemental briefing on. 12 Nagrampa was decided before the Supreme Court’s decision in 13 Rent-A-Center and did not concern a challenge to a provision 14 delegating gateway authority to the arbitrator. 15 concerned a party’s challenge to the entire arbitration agreement. 16 As there was no finding by the district court in Nagrampa that the 17 parties’ arbitration agreement delegated authority to determine 18 threshold questions of arbitrability to the arbitrator, Nagrampa is 19 inapposite. 20 that a fee-splitting provision renders a delegation provision 21 unconscionable as a matter of law: 22 23 24 25 26 27 Rather, Nagrampa Further, Nagrampa in no way supports the proposition We reject Nagrampa's contentions that the fee-splitting provision and the "repeat player effect" render the arbitration provision substantively unconscionable. First, the fee-splitting provision is not per se substantively unconscionable under California law. See Cal.Civ. Proc. Code § 1284.2 (mandating default rule of arbitration that administrative costs be split equally and legal costs be borne individually). However, as discussed infra, to the extent the fee-splitting provision may impede Nagrampa from vindicating statutory rights, it would be unenforceable and illegal under California law as contrary to public policy. 28 11 1 469 F.3d at 1284-85 (emphasis added). 2 Like Negrampa, Pestano concerned a challenge to an entire 3 arbitration agreement, not a delegation provision. There was no 4 finding the 5 arbitration agreement delegated authority to determine threshold 6 questions of arbitrability to the arbitrator. 7 that 8 unconscionable,’” but found that the fee-splitting provision at 9 issue was unconscionable in and of itself: 10 a by the district “fee-splitting court provision in is Pestano ‘not that per parties’ Pestano recognized se substantively [T]he fee-splitting provision appears to create a backdoor and one-sided way around the arbitration agreement. This is troubling. Under the provision, if one party fails to pay its share of the fees, the other party can bring its claims in court. The provision seems designed to benefit AT&T -- chances are far greater that a small dealer will find itself unable to pay fees than a company like AT&T. Although facially neutral, the provision will likely lead to one-sided results, with the dealer more frequently being relegated to an inferior forum. In light of these factors, this order finds the fee-splitting provision to be unconscionable. 11 12 13 14 15 16 17 Pestano, 2008 U.S. Dist. LEXIS 23135 *16-17. 18 Plaintiff’s supplemental brief does not establish that, in 19 light of the fee-splitting provision, enforcement of the delegation 20 provision results in any inequity, or that application of the fee- 21 splitting provision to the delegation provision prevents Plaintiff 22 from 23 Plaintiff provides no evidence that the cost of submitting threshold 24 questions of arbitrability to the arbitrator is so high as to 25 impeded Plaintiff’s ability to challenge the arbitration agreement. 26 Plaintiff merely contends that the total cost of conducting the 27 entire arbitration, including resolution of the substantive merits 28 of the parties’ disputes, could exceed $60,000.00. challenging the validity 12 of the arbitration agreement. (Plaintiff’s 1 Sup. Brief at 4). 2 arbitrating Plaintiff’s claim of unconscionability.5 3 Nothing in the record reveals the cost of Plaintiff’s supplemental brief provides no evidence or legal 4 authority to support 5 provision 6 Plaintiff’s motion for reconsideration is DENIED. renders the proposition delegation that the provision fee-splitting unconscionable. ORDER 7 8 9 the For the reasons stated, Plaintiff’s motion for reconsideration is DENIED. 10 IT IS SO ORDERED. 11 Dated: hkh80h December 20, 2010 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 5 27 28 Pursuant to AAA Rule 7, an arbitration clause is treated as “an agreement independent of the other terms of the contract.” There is no apparent reason why Plaintiff cannot initiate an arbitration solely for the purpose of challenging the validity of the arbitration agreement. 13
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