Rocio Duarte v. JPMorgan Chase Bank, National Association et al, No. 2:2021cv01907 - Document 23 (C.D. Cal. 2021)
Court Description: ORDER GRANTING DEFENDANTS' MOTION TO COMPEL ARBITRATION 18 by Judge Otis D. Wright, II: Chase's Motion to Compel Arbitration is GRANTED. The Court SEVERS the waiver of PAGA claims from the Arbitration Agreement and enforces the remainde r of the Agreement by ORDERING this matter to arbitration. All dates and deadlines are hereby VACATED, and this action is DISMISSED WITHOUT PREJUDICE. The Clerk of the Court shall close this case. (Made JS-6. Case Terminated.) (lc) Modified on 11/15/2021 (lc).
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Rocio Duarte v. JPMorgan Chase Bank, National Association et al Doc. 23 1 O 2 JS-6 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 12 ROCIO DUARTE, an individual and on behalf of all others similarly situated, 13 15 16 17 ORDER GRANTING DEFENDANTS’ MOTION TO COMPEL ARBITRATION [18] Plaintiffs, v. 14 Case 2:21-cv-01907-ODW (AFMx) JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a federally chartered bank, 18 Defendant. 19 20 I. INTRODUCTION 21 Plaintiff Rocio Duarte is suing her former employer, Defendant JPMorgan Chase 22 Bank, National Association (“Chase”) for violations of various provisions of the 23 wage-and-hour provisions of the California Labor Code. Before the Court is Chase’s 24 Motion to Compel Arbitration. (Mot. Compel Arbitration (“Mot.”), ECF No. 18.) For 25 the reasons that follow, Chase’s Motion is GRANTED.1 26 27 28 1 After carefully considering the papers filed in connection with the Motions, the Court deems the matters appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. Dockets.Justia.com II. 1 BACKGROUND 2 Chase is a federally chartered bank with its main office in Columbus, Ohio. 3 (Notice of Removal Ex. D (“Articles of Association”), ECF No. 1-4.) On August 14, 4 2019, by way of an offer letter signed by Chase’s CEO, Chase extended to Duarte an 5 offer to work as an associate banker at one of its California locations. (Decl. of Charles 6 Van Valkenburg (“Van Valkenburg Decl.”) ¶ 5, Ex. A (“Offer Letter”), ECF No. 18- 7 3.) 8 The second page of the Offer Letter contained a section titled “Terms & 9 Conditions” which stated that the offer was “subject to all the terms, conditions and 10 attachments included in this document, the Binding Arbitration Agreement and all 11 Chase policies and procedures.” (Id. at 4.) Included with the Offer Letter was an 12 appendix approximately nine pages long. (See id. at 5–14.) Approximately five of 13 those pages were devoted to the terms of an arbitration agreement headlined with the 14 words “Binding Arbitration Agreement” in bold font. (See id. at 7–12.) The Binding 15 Arbitration Agreement (“Agreement”) purported to bind both Chase and Duarte to final 16 arbitration for “all legally protected employment-related claims” including “violations 17 of . . . common law, federal, state, or local statute, ordinance, regulation or public 18 policy.” (Id. at 8.) It also stated that arbitration would be governed by the Employment 19 Arbitration Rules of the AAA (“AAA Rules”). (See id. at 9.) The Agreement did not 20 include a copy of the AAA Rules, but it did provide the website where the AAA Rules 21 are located. (See id.) 22 The Offer Letter anticipated an August 28, 2019 start date and stated, “If you do 23 not accept the offer within a reasonable timeframe from the date of delivery, we will 24 consider it withdrawn.” (Id. at 3.) 25 Duarte electronically signed the Offer Letter on August 14, 2019, the same day 26 she received it. (See id. at 15.) Two weeks later, on August 28, 2019, she began 27 working for Chase. (Van Valkenburg Decl. ¶ 4.) Her employment with Chase ended 28 sometime in late 2020. (Notice of Removal Ex. A (“Compl.”) ¶ 9, ECF No. 1-1.) 2 1 Duarte now asserts nine causes of action against Chase under the California 2 Labor Code and California Business and Professions Code for: (1) failure to pay wages 3 for all hours worked, (2) failure to pay overtime wages, (3) failure to provide meal 4 periods, (4) failure to provide rest periods, (5) failure to furnish accurate itemized wage 5 statements, (6) failure to pay wages due upon separation of employment, (7) failure to 6 provide paid sick time, (8) failure to maintain accurate records concerning shift times 7 and meal times, and (9) engaging in unfair competition. (See id. ¶¶ 18–60.) In response, 8 Chase moves to compel arbitration pursuant to its rights under the Agreement. (See 9 Mot.) The Motion is fully briefed. (Opp’n, ECF No. 19; Reply, ECF No. 20.) III. 10 LEGAL STANDARD 11 The Federal Arbitration Act (“FAA”) governs a contract dispute relating to an 12 arbitration provision if the contract affects interstate commerce. Allied-Bruce Terminix 13 Companies, Inc. v. Dobson, 513 U.S. 265, 273–74 (1995). When it applies, the FAA 14 restricts a court’s inquiry into compelling arbitration to two threshold questions: 15 (1) whether there was an agreement to arbitrate between the parties; and (2) whether the 16 agreement covers the dispute. Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 17 (9th Cir. 2008) (citation omitted). If the answer to both questions is yes, the FAA 18 requires the Court to enforce the arbitration agreement according to its terms. See 19 Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719–20 (9th Cir. 1999). However, the FAA 20 includes a “savings clause” that allows for the invalidation of an arbitration agreement 21 “upon such grounds as exist at law or in equity for the revocation of any contract.” This 22 “permits agreements to arbitrate to be invalidated by generally applicable contract 23 defenses, such as fraud, duress, or unconscionability, but not by defenses that apply 24 only to arbitration or that derive their meaning from the fact that an agreement to 25 arbitrate is at issue.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) 26 (quotation marks omitted). 27 28 3 IV. 1 DISCUSSION 2 As a preliminary matter, Chase asks the Court to take judicial notice of a state 3 court order compelling arbitration in an unrelated case, (ECF No. 18-4), and Duarte 4 asks the Court to take judicial notice of a Statement of Information Chase filed with the 5 California Secretary of State, (ECF No. 19-1). The Court does not find it necessary to 6 rely on these documents to resolve the instant Motion and accordingly does not take 7 judicial notice of them. 8 Substantively, Duarte makes two arguments opposing Chase’s Motion to Compel 9 Arbitration. (See Opp’n.) First, Duarte argues that California law applies and does not 10 recognize agreements mandating arbitration for wage-and-hour claims. (See id. at 11 9–12.) Second, Duarte argues that the Agreement is unconscionable and therefore 12 unenforceable. (See id. at 12–26.) Duarte is incorrect on both counts. 13 A. Validity of the Agreement 14 Duarte does not challenge the validity of the Agreement on contract formation 15 grounds. Both parties agree that Chase presented the Offer Letter containing the 16 Agreement to Duarte, Duarte signed it, and Chase thereafter employed her. (See Motion 17 1; Opp’n 7–8.) Nor does Duarte challenge the applicability of the Agreement, which 18 purports to cover “all legally protected employment-related claims,” to all her claims in 19 the current dispute. (See generally Opp’n.) Instead, Duarte argues that California law 20 invalidates the Agreement. (See id. at 9–10.) This argument fails because the FAA 21 governs the Agreement, and the FAA preempts the California law Duarte relies on. 22 1. The FAA Governs the Agreement 23 Section 2 of the FAA “makes enforceable a written arbitration provision in ‘a 24 contract evidencing a transaction involving commerce.’” Allied-Bruce, 513 U.S. at 268. 25 (quoting 9 U.S.C. § 2). The Supreme Court has interpreted the broad language of the 26 FAA as signaling Congress’ intent “to provide for the enforcement of arbitration 27 agreements within the full reach of the Commerce Clause.” Perry v. Thomas, 482 U.S. 28 483, 490 (1987). Therefore, an arbitration agreement is no less enforceable than any 4 1 other contractual clause as long as the contract it is a part of “affect[s] commerce.” 2 Allied-Bruce, 513 U.S. at 273–74. 3 Chase states that it operates more than four thousand branches in thirty-eight 4 states, (Mot. 5), and Duarte does not dispute this general claim. Rather, Duarte asserts 5 that Chase must prove that her employment affected interstate commerce and has failed 6 to do so. (See Opp’n 11–12.) 7 The clear inference from evidence on the record is that Duarte’s employment did, 8 in fact, affect interstate commerce. Chase asserts that banking associates like Duarte 9 regularly interact with accounts and customer information generated outside of 10 California. (See Reply 3.) The evidence confirms Duarte worked in California as an 11 associate banker for a federally chartered national bank whose main office is in Ohio. 12 (See Articles of Association 1; Offer Letter 132 (listing, in statutorily required pay 13 information notice, Chase’s “Entity Type” as “National Banking Association”).) 14 Especially in the absence of evidence to the contrary, it takes no speculation to conclude 15 that, during her employment, Duarte, like other bank associates, interacted with 16 customers and accounts outside of California. See Maxum Founds., Inc. v. Salus Corp., 17 779 F.2d 974, 978 n.4 (4th Cir. 1985) (refusing, where party seeking arbitration under 18 FAA asserts contract affects interstate commerce and party opposing arbitration “does 19 not come forward with evidence to rebut” that assertion, to “read into the Act a 20 requirement of further proof” by party invoking FAA). 21 Duarte primarily relies on Hoover v. Am. Income Life Ins. Co., 206 Cal. App. 4th 22 1193 (2012) for her assertion that the FAA does not govern the Agreement. As a 23 preliminary matter, Hoover is a California case, and its interpretation of the reach of the 24 FAA is not binding upon the Court. Wyant v. City of Lynnwood, 621 F. Supp. 2d 1108, 25 1113 (W.D. Wash. 2008) (“When a state court interprets federal law, its decision does 26 not bind a federal court.”). Moreover, Hoover is distinguishable. In Hoover, the facts 27 28 2 In this Order, the Court cites to specific pages of the Offer Letter using the page numbers as printed at the bottom of the Exhibit. 5 1 established only that the defendant employer was based in Texas and that the plaintiff 2 employee worked in California. 206 Cal. App. 4th at 1207. In deciding that the FAA 3 did not govern their employment agreement, the California Court of Appeal noted that 4 the defendant employer “did not work in other states or engage in multimillion dollar 5 loan activity that affected interstate commerce” and was “not . . . a national stock 6 brokerage firm or . . . a member of a national stock exchange.” Id. at 1207, 1208. The 7 evidence therefore did not indicate that the defendant was engaged in substantial 8 interstate commerce. Id. Chase, by contrast, is a national bank, and the parties do not 9 dispute that Chase is engaged in substantial interstate commerce or that the work of 10 bankers who interface with Chase accounts and customers does not affect interstate 11 commerce. 12 Moreover, to the extent Hoover, a state appellate-level case, suggests the 13 relationship between a single employee and his or her employer must have “a specific 14 effect or bearing on interstate commerce in a substantial way,” id. (quotation marks, 15 brackets, and citation omitted), the Court disagrees. The Supreme Court has taken an 16 expansive view of the Commerce Clause, stating that “Congress’ Commerce Clause 17 power may be exercised in individual cases without showing any specific effect upon 18 interstate commerce if in the aggregate the economic activity in question would 19 represent a general practice subject to federal control.” Citizens Bank v. Alafabco, Inc., 20 539 U.S. 52, 57 (2003) (quotation marks, ellipsis, and citation omitted). Courts in other 21 jurisdictions have therefore concluded that as long as an employer’s “overall 22 employment practices affect commerce, the Commerce Clause requirement is satisfied” 23 with respect to the FAA’s application to an individual employment contract. Caley v. 24 Gulfstream Aerospace Corp., 428 F.3d 1359, 1370 (11th Cir. 2005); see also Chambers 25 v. Groome Transp. of Ala., 41 F. Supp. 3d 1327, 1342 (M.D. Ala. 2014) (ruling FAA 26 covered employment contract even when employees’ responsibilities were confined to 27 intra-state shuttle bus services, where employees did not counter employer’s assertion 28 that its “general practice of employment” involved interstate commerce). 6 1 Other courts have gone further, holding that “the relationship between an 2 employer who is regularly engaged in activities related to interstate commerce and its 3 employees is affected by interstate commerce as a matter of law and implicates 4 commerce clause issues.” In re Big 8 Food Stores, Ltd., 166 S.W.3d 869, 880 (Tex. 5 App. 2005). Still others, including the Ninth Circuit in an unpublished opinion, have 6 suggested that an employment contract between an employee and an out-of-state 7 employer, by itself, constitutes a transaction involving interstate commerce. See Wulfe 8 v. Valero Ref. Co.-Cal., 641 F. App’x 758, 760 (9th Cir. 2016) (“[Plaintiff] and 9 [defendant’s] employment relationship undoubtedly involves interstate commerce: 10 [plaintiff], a citizen of California, was employed by [defendant], a citizen of Texas, as 11 an oil refinery operator at one of [defendant’s] California facilities.”); State ex rel. Alst 12 v. Harrell, 528 S.W.3d 442, 446 (Mo. Ct. App. 2017) (“Because [employees] are 13 residents of Missouri, and [employer] is a New York corporation registered to do 14 business in Missouri, the [arbitration agreement] involves interstate commerce and is 15 subject to the FAA.”). 16 Here, the Court finds it sufficient that Chase is a federally chartered bank that is 17 headquartered out-of-state and is engaged in interstate commerce, and that Duarte was 18 employed in-state in a position that typically involves executing transactions across 19 state lines, retrieving and managing out-of-state records, and interacting with out-of- 20 state clients, with no evidence to the contrary. Duarte’s employment affected interstate 21 commerce, and accordingly, the FAA governs the operative Agreement. 22 2. The FAA Preempts California Labor Code Section 229 23 Duarte argues California Labor Code section 229 prevents the Court from 24 compelling arbitration of her claims. (See id. at 9–10.) 25 “[a]ctions . . . for the collection of due and unpaid wages claimed by an individual may 26 be maintained without regard to the existence of any private agreement to arbitrate.” 27 This argument is mooted because, when it applies, “the Federal Arbitration Act 28 preempts § 229 of the California Labor Code.” Perry v. Thomas, 482 U.S. 483, 492 7 Section 229 states that 1 (1987). Because the Federal Arbitration Act governs the Agreement in this case, Labor 2 Code section 229 is preempted and has no effect. 3 B. Unconscionability 4 Duarte argues that the Agreement is unenforceable because it is unconscionable. 5 (Opp’n 12–26.) Pursuant to the FAA’s savings clause, courts use state law to analyze 6 generally applicable contract defenses such as unconscionability. 7 Concepcion, 563 U.S. at 339. 9 U.S.C. § 2; 8 Under California law, unconscionability has a procedural component and a 9 substantive component. Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal. 10 4th 83, 114 (2000). Procedural unconscionability “addresses the circumstances of 11 contract negotiation and formation, focusing on oppression or surprise due to unequal 12 bargaining power.” Pinnacle Museum Tower Ass’n v. Pinnacle Mkt. Dec., LLC, 55 Cal. 13 4th 223, 246 (2012). Substantive unconscionability focuses on whether the contract’s 14 terms are “overly harsh” or “one-sided.” Sanchez v. Valencia Holding Co., 61 Cal. 4th 15 899, 910 (2015). 16 “Both procedural and substantive unconscionability must be shown for the 17 defense to be established, but ‘they need not be present in the same degree.’” OTO, 18 L.L.C. v. Kho, 8 Cal. 5th 111, 125 (2019) (quoting Armendariz, 24 Cal. 4th at 114). 19 “Instead, they are evaluated on a ‘sliding scale’” under which the more procedural 20 unconscionability there is, the less substantive unconscionability is required, and vice- 21 versa. Id. “The ultimate issue in every case is whether the terms of the contract are 22 sufficiently unfair, in view of all relevant circumstances, that a court should withhold 23 enforcement.” Sanchez, 61 Cal. 4th at 912. “The burden of proving unconscionability 24 rests upon the party asserting it.” Kho, 8 Cal. 5th at 125 (citing Sanchez, 61 Cal. 4th 25 at 911). 26 1. Procedural Unconscionability 27 Procedural unconscionability analysis “begins with an inquiry into whether the 28 contract is one of adhesion.” Armendariz, 24 Cal. 4th at 113. “An adhesive contract is 8 1 standardized, generally on a preprinted form, and offered by the party with superior 2 bargaining power ‘on a take-it-or-leave-it basis.’” Kho, 8 Cal. 5th at 126. Although not 3 dispositive, “the adhesive nature of the contract is sufficient to establish some degree 4 of procedural unconscionability.” Sanchez, 61 Cal. 4th at 915. 5 Here, Duarte’s employment contract, like most employment contracts, was 6 adhesive. Chase suggests that Duarte may have been able to negotiate the contract, (see 7 Reply 6), but the Offer Letter suggests otherwise. (See Offer Letter 3 (indicating, on 8 first page, that “[i]f you do not accept the offer within a reasonable timeframe from the 9 date of delivery, we will consider it withdrawn”).) The offer presented Duarte with 10 only two options: accept within a reasonable time, or forfeit the offer. As such, the 11 employment contract was one of adhesion, and the circumstances surrounding Duarte’s 12 acceptance of the contract support a degree of procedural unconscionability. 13 In addition to the adhesive nature of a contract, two more factors may support 14 procedural unconscionability: oppression and surprise. Pinnacle, 55 Cal. 4th at 246. 15 “Oppression occurs where a contract involves a lack of negotiation and meaningful 16 choice, surprise where the allegedly unconscionable provision is hidden within a prolix 17 printed form.” Id. 18 When considering oppression, courts consider “(1) the amount of time the party 19 is given to consider the proposed contract; (2) the amount and type of pressure exerted 20 on the party to sign the proposed contract; (3) the length of the proposed contract and 21 the length and complexity of the challenged provision; (4) the education and experience 22 of the party; and (5) whether the party’s review of the proposed contract was aided by 23 an attorney.” Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc., 232 Cal. App. 24 4th 1332, 1348 (2015) (footnote omitted). Here, Chase gave Duarte a “reasonable 25 timeframe” to accept the offer. (See Offer Letter 3.) Although Duarte accepted the 26 offer the same day she received it, she was not required to do so, and Duarte has 27 presented no other evidence showing that the timeframe afforded her was not 28 reasonable. (See id.) Moreover, because the Offer Letter was mailed to her, Duarte 9 1 could consider the offer in private and without pressure. Indeed, the record lacks 2 indication that any Chase employee pressured Duarte to sign the Offer Letter. Duarte 3 complains that she is not a lawyer, and that she was not aided by a lawyer, but nothing 4 suggests Duarte was prevented from seeking the advice of counsel if she desired. 5 6 After considering the circumstances of the offer, the Court does not find that the manner in which Chase presented the Agreement to be oppressive. 7 Duarte additionally argues that surprise resulted because the Agreement 8 incorporated the AAA Rules but Chase failed to provide her with a copy of the Rules. 9 (Opp’n 19–21.) This argument lacks merit. The failure to attach a copy of arbitration 10 rules does not, by itself, support a finding of surprise, especially when, as here, the rules 11 are readily available via a website referenced in the arbitration agreement. See Lane, 12 224 Cal. App. 4th at 691 (“There could be no surprise, as the arbitration rules referenced 13 in the agreement were easily accessible to the parties—the AAA rules are available on 14 the Internet.”); Peng v. First Republic Bank, 219 Cal. App. 4th 1462, 1472 (2013) 15 (“[T]he failure to attach the AAA rules, standing alone, is insufficient grounds to 16 support a finding of procedural unconscionability.”). Nor is this case like those where 17 California courts have found surprise when a party incorporates a set of rules to hide an 18 unfair provision. See Harper v. Ultimo, 113 Cal. App. 4th 1402, 1405–06 (2003) 19 (finding procedural unconscionability in the incorporation of the Better Business 20 Bureau arbitration rules, which precluded the award of tort damages and punitive 21 damages and thus resulted in a “nasty shock”). Here, Duarte does not allege unfairness 22 in the AAA Rules. 23 In sum, although Duarte has demonstrated some procedural unconscionability 24 stemming from the adhesive nature of the employment contract containing the 25 Agreement, she has failed to otherwise demonstrate oppression or surprise. Therefore, 26 27 28 10 1 Duarte must establish a high degree of substantive unconscionability to avoid 2 arbitration. 3 2. Substantive Unconscionability 4 California law provides that, to avoid a finding of substantive unconscionability, 5 an employment arbitration agreement must: “(1) provide[] for neutral arbitrators, 6 (2) provide[] for more than minimal discovery, (3) require[] a written award, 7 (4) provide[] for all of the types of relief that would otherwise be available in court, and 8 (5) . . . not require employees to pay either unreasonable costs or any arbitrators’ fees 9 or expenses as a condition of access to the arbitration forum.”3 Armendariz, 24 Cal. 4th 10 at 102 (quotation marks and citation omitted). Duarte does not contend that the 11 Agreement violates the first four of these requirements. Rather, she argues that the 12 Agreement violates the fifth requirement by only offering to pay for “ordinary and 13 reasonable administrative expenses of the arbitration” and not all costs uniquely 14 associated with arbitration. (See Opp’n 10; Offer Letter 10.) 15 The Court finds this argument unconvincing. In addition to offering to pay for 16 ordinary and reasonable costs of arbitration, the Agreement also states: “Nothing in this 17 Agreement is intended or should be construed to require employees to bear any type of 18 expense that they would not otherwise bear if the Parties were to litigate a Covered 19 Claim in a court of law.” (Offer Letter 11.) Because Duarte has failed to point to any 20 cost unique to arbitration that would arguably fall outside of this provision, she has 21 failed to meet her burden of showing substantive unconscionability on this basis. See 22 Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 92 (2000) (“[A] party seek[ing] 23 to invalidate an arbitration agreement on the ground that arbitration would be 24 prohibitively expensive . . . bears the burden of showing the likelihood of incurring such 25 costs.”). 26 3 27 28 “In the wake of Concepcion, California courts . . . have found that Armendariz is still good law, relying on the Supreme Court’s affirmation of the principle that the savings clause of the FAA permits application of state law contract defenses such as unconscionability in the context of arbitration agreements.” Castillo v. CleanNet USA, Inc., 358 F. Supp. 3d 912, 937 (N.D. Cal. 2018). 11 1 Aside from the five requirements in Armendariz, Duarte argues the Agreement is 2 unconscionable because it allows Chase to unilaterally modify the Agreement without 3 also giving Duarte this right. (Opp’n 22–23.) This Court joins the courts that have 4 found that recent California Court of Appeal decisions upholding unilateral 5 employment contract modification provisions render obsolete prior law on this issue, 6 including Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1179 (9th Cir. 2003). 7 Borgarding v. JPMorgan Chase Bank, No. 16-CV-02485-FMO (RAOx), 2016 WL 8 8904413, at *8–9 (C.D. Cal. Oct. 31, 2016) (“Ingle’s holding on unilateral modification 9 provisions no longer accurately describes California law.”); see also Ridgeway v. 10 Nabors Completion & Prod. Servs. Co., 725 F. App’x 472, 474 (9th Cir. 2018) (finding 11 portion of arbitration agreement allowing employer to unilaterally modify agreement 12 “not unconscionable because there is an implied covenant of good faith and fair 13 dealing”); Ashbey v. Archstone Prop. Mgmt., Inc., 612 F. App’x 430, 432 (9th Cir. 14 2015) (same). Thus, the modification provision on page 12 of the Agreement reserving 15 to Chase the “right to amend, modify or discontinue this Agreement at any time in its 16 sole discretion to the extent permitted by applicable law” is not unconscionable. 17 Duarte credibly argues that one provision in the Agreement is unenforceable. 18 The challenged provision states that the parties “waive any right with respect to any 19 Covered Claims to submit, initiate, or participate in a representative capacity or as a 20 plaintiff, claimant or member in a class action, collective action, or other representative 21 or joint action, regardless of whether the action is filed in arbitration or in court.” (Offer 22 Letter 9.) This provision is unenforceable because controlling case law precludes Chase 23 from enforcing the waiver of claims under the Private Attorney Generals Act 24 (“PAGA”), a type of representative action. See Sakkab v. Luxottica Retail N. Am., Inc., 25 803 F.3d 425, 440 (9th Cir. 2015) (ruling that FAA does not preempt California rule 26 barring waiver of representative claims under PAGA). 27 Agreement’s representative claim waiver prevents Duarte from asserting PAGA claims, 28 it is unenforceable. 12 Thus, to the extent the 1 3. Severability 2 The remaining issue is whether the Court should sever the PAGA waiver rather 3 than refuse to enforce the remainder of the Agreement. In determining whether to sever 4 an unenforceable provision or to invalidate the entire contract, courts “look to the 5 various purposes of the contract.” Armendariz, 24 Cal. 4th at 124. “If the central 6 purpose of the contract is tainted with illegality, then the contract as a whole cannot be 7 enforced. Id. “If,” on the other hand, “the illegality is collateral to the main purpose of 8 the contract, and the illegal provision can be extirpated from the contract by means of 9 severance or restriction, then such severance and restriction are appropriate.” Id. The 10 two main reasons for severing rather than voiding an entire contract are (1) “to prevent 11 parties from gaining undeserved benefit or suffering undeserved detriment as a result 12 of voiding the entire agreement” and (2) to “conserve a contractual relationship if to do 13 so would not be condoning an illegal scheme.” Id. at 123–24. 14 Here, the PAGA waiver is collateral to the main purpose of the contract. It can 15 be severed and disregarded without loss of the essence of either the arbitration clause 16 or the Agreement as a whole. Moreover, its presence does not render illegal the basic 17 purpose of the employment contract or the arbitration clause. That Chase is not seeking 18 to enforce it supports this conclusion. Because the PAGA waiver can be severed 19 without affecting the central purpose of the Agreement, the Court severs the PAGA 20 waiver and enforces the remainder of the Agreement. 21 C. Dismiss or Stay 22 Lastly, the Court considers whether to stay the action or dismiss the case without 23 prejudice. In the Ninth Circuit, a district court has discretion to dismiss a party’s 24 complaint where it finds that an arbitration clause covers all of the party’s claims. See, 25 e.g., Johnmohammadi v. Bloomingdale’s, Inc., 755 F.3d 1072, 1074 (9th Cir. 2014) 26 (affirming dismissal of action without prejudice where “all of the claims raised in the 27 action [we]re subject to arbitration” (citing Sparling v. Hoffman Constr. Co., 864 F.2d 28 13 1 635, 638 (9th Cir. 1988))). Here, because all of Duarte’s claims are subject to 2 arbitration, the Court in its discretion DISMISSES this action without prejudice. V. 3 CONCLUSION 4 Chase’s Motion to Compel Arbitration is GRANTED. (ECF No. 18.) The Court 5 SEVERS the waiver of PAGA claims from the Arbitration Agreement and enforces the 6 remainder of the Agreement by ORDERING this matter to arbitration. All dates and 7 deadlines are hereby VACATED, and this action is DISMISSED WITHOUT 8 PREJUDICE. The Clerk of the Court shall close this case. 9 10 IT IS SO ORDERED. 11 12 November 15, 2021 13 14 15 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 14
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