Wyndham Vacation Resorts, Inc. et al v. Garcia, No. 3:2015cv01540 - Document 41 (N.D. Cal. 2016)

Court Description: ORDER DENYING 33 MOTION TO VACATE CLAUSE CONSTRUCTION AWARD by Hon. William H. Orrick. (jmdS, COURT STAFF) (Filed on 8/30/2016)
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1 UNITED STATES DISTRICT COURT 2 NORTHERN DISTRICT OF CALIFORNIA 3 4 WYNDHAM VACATION RESORTS, INC., et al., 5 Plaintiffs, v. 6 7 MICHELLE GARCIA, Case No. 15-cv-01540-WHO ORDER DENYING MOTION TO VACATE CLAUSE CONSTRUCTION AWARD Re: Dkt. No. 33 Defendant. 8 9 INTRODUCTION Plaintiff Michelle Garcia moves under 9 U.S.C § 10(a)(4) to vacate an arbitrator’s decision 10 United States District Court Northern District of California 11 finding that class arbitration is not available under her arbitration agreement with defendants 12 Wyndham Vacation Resorts, Inc., Wyndham Vacation Ownership, Inc., and Wyndham 13 Worldwide, Corp. (collectively, “Wyndham”). Because Garcia has not established that the 14 arbitrator “exceeded [his] powers,” 9 U.S.C. § 10(a)(4), the motion is DENIED. 15 BACKGROUND 16 The relevant background here involves both this case and the related case, Crook v. 17 Wyndham Vacation Ownership, Inc., No. 13-cv-03669-WHO (N.D. Cal filed Aug. 7, 2013). On November 16, 2012, Thomas and Donna Crook filed a putative class action in state 18 19 court against Wyndham Vacation Resorts, Inc. and Wyndham Worldwide Corporation1 alleging a 20 number of state law causes of action, including elder financial abuse, intentional 21 misrepresentation, and violations of California’s Unfair Competition Law (“UCL”) and Consumer 22 Legal Remedies Act (“CLRA”). Crook, No. 13-cv-03669, Dkt. No. 1. Wyndham removed the 23 case to federal court under the Class Action Fairness Act (“CAFA”) and moved to compel 24 arbitration pursuant to the dispute resolution clause in the parties’ most recent timeshare 25 1 26 27 28 The Crooks incorrectly sued Wyndham Vacation Resorts, Inc. as “Wyndham Vacation Ownership, Inc.” and Wyndham Worldwide Corporation as “Wyndham Worldwide.” See Crook, No. 13-cv-03669, Dkt. No. 1 at 12 of 76; id. at Dkt. No. 15 at 3; id. at Dkt. No. 27 at 1 n.1; id. at Dkt. No. 55 at 1 n.1. As stated above, the Wyndham entities in this case are Wyndham Vacation Resorts, Inc., Wyndham Vacation Ownership, Inc., and Wyndham Worldwide Corporation. For ease of reference, I use “Wyndham” in this Order to refer to all Wyndham entities. 1 agreement. Id. at Dkt. Nos. 1, 15. I granted the motion on November 4, 2013 and issued an 2 amended order on November 8, 2013. Id. at Dkt. Nos. 26, 27 (“Order Compelling Arbitration”). When the Crooks filed their arbitration demand with the American Arbitration Association 3 4 (“AAA”), they requested that the arbitration include class relief. Id. at Dkt. Nos. 47-1, 47-2. 5 Wyndham refused to consent to class treatment and filed a motion for clarification in this Court 6 seeking an order compelling arbitration of the Crooks’ claims and declaring that class arbitration 7 was not available under the parties’ arbitration agreement. Id. at Dkt. No. 47. I denied the motion 8 on the ground that the parties had agreed to submit the question of the availability of class 9 arbitration to the arbitrator, meaning that it was for the arbitrator, not me, to decide that issue. Id. 10 at Dkt. No. 55 (“Order Denying Motion for Clarification”). Garcia also entered a timeshare agreement with Wyndham. See, e.g., Compl. ¶ 10 (Dkt. United States District Court Northern District of California 11 12 No. 1). The dispute resolution clause in her timeshare agreement is identical to the dispute 13 resolution clause in the Crooks’ timeshare agreement. Compare Garcia, No. 15-cv-01540, Dkt. 14 No. 1-1 at 4 of 8, with Crook, No. 13-cv-03669, Dkt. No. 15-1 at 10 of 40. She and the Crooks are 15 both represented by the Figari Law Firm.2 16 In or around February 2015, Garcia filed an arbitration demand with the AAA asserting 17 claims on behalf of herself and a national class and California subclass of timeshare purchasers 18 whose “use years” were “improperly and illegally changed by [Wyndham].” Compl. ¶ 12; 19 Consumer Class Action Demand for Arbitration ¶ 14 (Dkt. No. 1-2). Wyndham responded by 20 filing this action, seeking declaratory relief that Garcia is “precluded by law from pursuing her 21 claims in arbitration on behalf of any purported class” and an injunction prohibiting Garcia from 22 pursuing her class claims in arbitration. Compl. ¶¶ 3-4. Garcia filed an answer and “cross- 23 complaint” on May 5, 2015. Dkt. Nos. 12, 14. In her “cross-complaint,” she asserted the same 24 individual claims, class claims, and class definitions as in her AAA arbitration demand. Compare 25 Dkt. No. 12 with Consumer Class Action Demand for Arbitration. On May 26, 2015, Wyndham 26 filed a motion to compel arbitration. Dkt. No. 15. The motion sought an order (1) compelling 27 2 28 Crook was dismissed with prejudice on April 12, 2016 pursuant to stipulation by the parties. Crook, No. 13-cv-03669, Dkt. No. 60. 2 1 Garcia to arbitrate her individual claims and (2) precluding her from pursuing her class claims in 2 arbitration. Id. 3 The case was transferred to me on August 11, 2015. Dkt. No. 24. On August 14, 2015, I 4 held a telephone conference with the parties to discuss whether the reasoning in the Order 5 Compelling Arbitration and Order Denying Motion for Clarification in Crook applied equally to 6 the circumstances of this case and effectively decided Wyndham’s motion to compel arbitration. 7 Dkt. No. 25. I gave the parties leave to submit supplemental briefs on the issue, which they did. 8 Dkt. Nos. 26, 27. On September 24, 2016, I issued an order granting Wyndham’s motion to 9 compel arbitration to the extent that it sought it to compel Garcia to arbitrate the claims asserted in her cross-complaint, but denying the motion to the extent that it sought to preclude Garcia from 11 United States District Court Northern District of California 10 pursuing in arbitration her class claims. Dkt. No. 31 (“Prior Order”). I held that, “as in Crook, it 12 will be up to the arbitrator to decide whether class arbitration is available under the parties’ 13 arbitration agreement.” Prior Order at 4. 14 The parties proceeded to arbitration. On June 10, 2016, following extensive briefing and 15 oral argument, the Arbitrator issued a 20-page “Reasoned Partial Award on the Construction of the 16 Arbitration Clause” finding that “this arbitration may not proceed as an arbitration on behalf of the 17 class identified in [Garcia’s] demand for arbitration.” Figari Decl. Ex. 9 at 19-20 (Dkt. No. 33-1) 18 (“Clause Construction Award”). 19 Garcia filed the instant motion on July 13, 2016. Dkt. No. 33 (“Mot.”). She asks that I 20 vacate the Clause Construction Award and issue an order “permitting her [UCL] claims to proceed 21 on a representative basis in arbitration [and] permitting the balance of [her] claims to proceed on a 22 classwide basis in arbitration.” Mot. at 1, 16. Wyndham opposes the motion. Dkt. No. 37 23 (“Oppo.”). LEGAL STANDARD 24 25 26 27 The Federal Arbitration Act (“FAA”) allows a court to vacate an arbitration award on four enumerated grounds: (1) where the award was procured by corruption, fraud, or undue means; 28 3 (2) where there was evident partiality or corruption in the arbitrators, or either of them; 1 2 (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or 3 4 5 7 9 U.S.C. § 10(a). These limited, exclusive grounds for vacating an arbitration award “are designed 8 to preserve due process but not to permit unnecessary public intrusion into private arbitration 9 procedures.” U.S. Life Ins. Co. v. Superior Nat. Ins. Co., 591 F.3d 1167, 1173 (9th Cir. 2010) 10 (internal quotation marks omitted). The burden is on the party seeking to vacate the arbitration 11 United States District Court Northern District of California 6 (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. award to establish that one of these grounds justifies vacating it. Id. DISCUSSION 12 Garcia contends that the Arbitrator “exceeded [his] powers.” 9 U.S.C. § 10(a)(4).3 An 13 14 arbitrator exceeds his powers within the meaning of section 10(a)(4) “not when [he] merely 15 interpret[s] or appl[ies] the governing law incorrectly, but when the award is completely irrational 16 or exhibits a manifest disregard of law.” Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 17 341 F.3d 987, 997 (9th Cir. 2003) (internal quotation marks omitted). “An award is completely irrational only where [it] fails to draw its essence from the 18 19 agreement.” Lagstein v. Certain Underwriters at Lloyd’s, London, 607 F.3d 634, 642 (9th Cir. 20 2010) (internal quotation marks omitted). “An arbitration award draws its essence from the 21 agreement if the award is derived from the agreement, viewed in light of the agreement’s language 22 and context, as well as other indications of the parties’ intentions.” Id. “Under this standard of 23 review, [the court] do[es] not decide the rightness or wrongness of the [arbitrator’s] contract 24 interpretation, only whether [his] decision ‘draws its essence’ from the contract.” Bosack v. 25 Soward, 586 F.3d 1096, 1106 (9th Cir. 2009); see also Oxford Health Plans LLC v. Sutter, 133 S. 26 Ct. 2064, 2068 (2013) (“It is not enough to show that the arbitrator committed an error – or even a 27 3 28 Garcia does not dispute that none of the first three grounds set out in section 10(a) applies here. See, e.g., Reply at 2-3 (Dkt. No. 39). 4 1 serious error. Because the parties bargained for the arbitrator’s construction of their agreement, an 2 arbitral decision even arguably construing or applying the contract must stand.”) (internal 3 quotation marks, citations, and alterations omitted). 4 To show that an arbitration award exhibits a manifest disregard of the law, a party must 5 show “something more than just an error in the law or a failure on the part of the arbitrators to 6 understand or apply the law. It must be clear from the record that the arbitrators recognized the 7 applicable law and then ignored it.” Collins v. D.R. Horton, Inc., 505 F.3d 874, 879-80 (9th Cir. 8 2007) (internal quotation marks omitted). “Moreover, . . . the governing law alleged to have been 9 ignored . . . must be well defined, explicit, and clearly applicable.” Id. (internal quotation marks and emphasis omitted); accord Matthews v. Nat’l Football League Mgmt. Council, 688 F.3d 1107, 11 United States District Court Northern District of California 10 1116-17 (9th Cir. 2012). 12 Garcia has not shown that the Clause Construction Award is completely irrational or that it 13 exhibits a manifest disregard of the law. The Arbitrator begins his analysis in the Clause 14 Construction Award by examining in detail the language of the parties’ arbitration agreement and 15 finding that it does not “reveal any expectation of the parties . . . that class action arbitration was 16 an option being given to [Garcia].” Clause Construction Award at 15. Garcia offers no 17 explanation of how the Arbitrator’s analysis fails to qualify as “arguably construing or applying 18 the contract.” Oxford, 133 S. Ct. at 2068. Indeed, she identifies nothing about the language of the 19 arbitration agreement that supports her view that it authorizes class arbitration, except to 20 repeatedly emphasize that it does not include an explicit waiver of class arbitration. See, e.g., Mot. 21 at 1, 4, 5, 6, 7, 11, 16. That argument runs squarely into the Supreme Court’s holding in Stolt- 22 Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), that “a party may not be compelled 23 under the FAA to submit to class arbitration unless there is a contractual basis for concluding that 24 the party agreed to do so.” Id. at 684 (emphasis omitted); see also Reed Elsevier, Inc. ex rel. 25 LexisNexis Div. v. Crockett, 734 F.3d 594, 600 (6th Cir. 2013). The Arbitrator did not act 26 irrationally, or in manifest disregard of the law, in rejecting this same argument in the Clause 27 Construction Award. See Clause Construction Award at 15 (finding that Garcia’s reliance on the 28 5 1 absence of a class arbitration waiver is “specifically at odds with . . . Stolt-Nielsen”).4 Garcia’s other arguments for vacating the Clause Construction Award are based on 2 3 (1) Wyndham’s removal of Crook under CAFA, which Garcia contends should now result in 4 judicial estoppel precluding Wyndham from disputing the availability of class arbitration in this 5 case, Mot. at 14-15; and (2) her UCL claims, which she contends “must be permitted to proceed 6 on a representative basis in arbitration,” id. at 9-11. Garcia also made these arguments to the 7 Arbitrator, who rejected them as unsupported by any authority cited by Garcia and insufficient to 8 justify class arbitration in the absence of any contractual basis for class treatment. Clause 9 Construction Award at 16-19. In her motion to vacate, Garcia again fails to present any convincing authority to support 10 United States District Court Northern District of California 11 either of these arguments. The doctrine of judicial estoppel “is not reducible to an exhaustive 12 formula” but generally bars a party from asserting a certain position where “(1) the party’s current 13 position is clearly inconsistent with its earlier position, (2) the party was successful in persuading 14 a court to accept its earlier position, and (3) the party would derive an unfair advantage or impose 15 an unfair detriment on the opposing party if not estopped.” Williams v. Boeing Co., 517 F.3d 16 1120, 1134 (9th Cir. 2008) (internal quotation marks omitted). Garcia cites no case to support her 17 contention that the removal of Crook under CAFA should result in judicial estoppel here.5 Cf. 18 Morvant v. P.F. Chang’s China Bistro, Inc., 870 F. Supp. 2d 831, 846 (N.D. Cal. 2012) (rejecting 19 argument that defendant’s removal of the case under CAFA resulted in waiver of defendant’s right 20 to compel arbitration; noting that invoking CAFA jurisdiction “does not serve as an admission of 21 [the] allegations [in the complaint]”). With respect to her UCL claims, Garcia relies on cases recognizing that the public policy 22 23 24 25 26 27 4 Garcia also argues that because the AAA Commercial Rules (which are incorporated into the parties’ arbitration agreement) reference “large, complex commercial disputes” involving claims of $500,000 or more, the parties effectively agreed to class arbitration by agreeing to arbitrate under the AAA Commercial Rules. Mot. at 15-16. The Arbitrator did not act irrationally, or in manifest disregard of the law, in rejecting this argument either. See Clause Construction Award at 17-18. 5 28 The basis for subject matter jurisdiction in this case is diversity jurisdiction under 28 U.S.C. § 1332(a), not CAFA. See Compl. ¶ 7. 6 1 of California prohibits pre-dispute arbitration agreements that require signatories to waive the right 2 to bring a representative action under the Private Attorneys General Act (“PAGA”). See Mot. at 3 9-11 (citing, e.g., Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348, 382-84 (2014); 4 Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 430-31 (9th Cir. 2015); Hernandez v. DMSI 5 Staffing, LLC., 79 F. Supp. 3d 1054, 1061-62 (N.D. Cal. 2015)); see also Reply at 1-6.6 Garcia 6 cites no case that has held the same with respect to UCL claims, and I am not aware of any. 7 Meanwhile, the cases the parties do cite weigh against Garcia’s position. In Arias v. Superior 8 Court, 46 Cal.4th 969 (2009), the California Supreme Court distinguished between representative 9 PAGA actions versus representative UCL actions, holding that while the former did not have to comply with class action certification requirements, the latter still did. Id. at 975-76, 988. And in 11 United States District Court Northern District of California 10 Iskanian v. CLS Transp. Los Angeles, LLC, where the California Supreme Court held that the 12 plaintiff’s right to bring a representative PAGA action could not be barred by the terms of the 13 parties’ pre-dispute arbitration agreement, it simultaneously held that the plaintiff’s UCL claims 14 would have to proceed in bilateral arbitration. See 59 Cal.4th at 361, 391. “[T]he task of an arbitrator is to interpret and enforce a contract, not to make public 15 16 policy.” Stolt-Nielsen, 559 U.S. at 672. The Arbitrator here did not exceed his powers by ruling 17 that Garcia’s UCL claims would have to be addressed through bilateral arbitration along with the 18 rest of her claims against Wyndham. See Matthews, 688 F.3d at 1116 (“For an award to be in 19 manifest disregard of the law, the governing law alleged to have been ignored . . . must be well 20 defined, explicit, and clearly applicable.”) (internal quotation marks and alterations omitted). CONCLUSION 21 22 Garcia’s motion to vacate is DENIED. 23 IT IS SO ORDERED. 24 Dated: August 30, 2016 ______________________________________ WILLIAM H. ORRICK United States District Judge 25 26 27 6 28 This is the only argument Garcia addresses in her reply brief; she does not defend any of her other arguments in support of vacating the Clause Construction Award. See Reply at 1-6. 7