Chamber of Commerce of the U.S. v. Becerra

Decision Date06 February 2020
Docket NumberNo. 2:19-cv-02456-KJM-DB,2:19-cv-02456-KJM-DB
Citation438 F.Supp.3d 1078
CourtU.S. District Court — Eastern District of California
Parties CHAMBER OF COMMERCE OF the UNITED STATES of America, et al., Plaintiffs, v. Xavier BECERRA, in his official capacity as the Attorney General of the State of California, et al., Defendants.

Andrew J. Pincus, PHV, Pro Hac Vice, Archis A. Parasharami, Mayer Brown LLP, Maurice Baskin, PHV, Pro Hac Vice, Littler Mendelson, P.C., Washington, DC, Bruce J. Sarchet, Littler Mendelson, Sacramento, CA, Donald M. Falk, Mayer Brown, LLP, Palo Alto, CA for Plaintiffs.

Chad A. Stegeman, California Department of Justice, San Francisco, CA, for Defendants.

ORDER

Kimberly J. Mueller, CHIEF UNITED STATES DISTRICT JUDGE

The Federal Arbitration Act ("FAA") provides that arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The U.S. Supreme Court has interpreted this provision expansively, observing that it reflects "a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). This case raises the question whether the FAA preempts a new law passed by the California Legislature and signed into law by the Governor in late 2019.

Specifically, on October 10, 2019, California Governor Gavin Newsom signed into law California Assembly Bill 51 ("AB 51"), which prohibits California employers from requiring prospective and current employees to "waive any right, forum, or procedure" for a violation of the California Fair Employment and Housing Act ("FEHA") or the California Labor Code. Cal. Lab. Code § 432.6(a). AB 51 was set to take effect January 1, 2020; however, on December 29, 2019, this court temporarily restrained state officials from enforcing the law pending a full preliminary injunction hearing. Temporary Restraining Order ("TRO"), ECF No. 24. In so doing, the court explained that AB 51 "raise[s] serious questions regarding whether the challenged statute is preempted by the [FAA] as construed by the United States Supreme Court." Id. at 1.

On January 10, 2020, the court heard oral argument on plaintiffs' motion to preliminarily enjoin AB 51 from taking effect. Mot. for Prelim. Inj. ("MPI"), ECF No. 5. During argument, the defendants raised for the first time a question regarding the court's jurisdiction to issue an injunction, and the court then allowed supplemental briefing on jurisdiction. See Defs.' Supp. Br., ECF No. 37; Pls.' Supp. Br., ECF No. 40.

Having carefully considered all of the parties' briefs, the arguments at hearing and the applicable law, the court finds it has jurisdiction over this case and GRANTS plaintiffs' motion for a preliminary injunction for the reasons set forth below.

I. BACKGROUND
A. Parties

The plaintiffs in this action are the Chamber of Commerce of the United States of America ("U.S. Chamber"), California Chamber of Commerce ("CalChamber"), National Retail Federation ("NRF"), California Retailers Association ("CRA"), National Association of Security Companies ("NASCO"), Home Care Association of America ("HCAOA") and the California Association for Health Services At Home ("CAHSAH"). Compl., ECF No. 1, at 1.

The U.S. Chamber "is the world's largest business federation, representing approximately 300,000 direct members and indirectly representing an underlying membership of more than three million U.S. businesses and professional organizations" across the United States. Id. ¶ 16. Many U.S. Chamber members are California businesses that require arbitration agreements as a condition of employment or require those who wish to avoid arbitration to affirmatively opt out. Id. The U.S. Chamber asserts standing in this matter because it "seeks to vindicate its own interests as well as the interests of [its] members ...." Id. The U.S. Chamber alleges this action aligns with their mission, which is "to foster economic growth throughout the country, including in California." Id.

The CalChamber is a not-for-profit organization, consisting of more than 14,000 California private sector employees, "that seeks to transform California's business landscape through advocacy." Id. ¶ 17. Its members rely on arbitration agreements as a condition of employment or require their employees to affirmatively opt out of arbitration if they wish to do so. Id. The CalChamber asserts standing in this matter through the vindication of its interests and the interests of its members and because this suit is "germane to [its] mission to foster economic growth and a thriving business community in California." Id.

The NRF is the world's largest retail trade association consisting of discount and department stores, home goods and specialty stores, grocers, wholesalers, chain restaurants and internet retailers, with many of its members either headquartered or located in California. Id. ¶ 18. The CRA "works on behalf of California's retail industry" and "is the only statewide trade association representing all segments of the retail industry[.]" Id. ¶ 19. NASCO is the largest contract security association in the county and represents tens of thousands of "highly trained security officers servicing the public and private sector" in California. Id. ¶ 20. HCAOA is the leading trade association in the home care industry and "advocate[s] for its members, for caregivers, and for seniors in California and across America." Id. ¶ 21. Finally, "CAHSAH is a California non-profit mutual benefit corporation whose mission is to promote quality home care and enhance the effectiveness of its members." Id. ¶ 22. Each of these remaining plaintiffs asserts standing in this action on grounds that each respective organization seeks to vindicate its interests and the interests of its members, as all rely on arbitration agreements as a condition of employment and seek to protect and foster economic growth in California related to their field of interest.

The defendants in this action are Xavier Becerra, Attorney General of California, Lilia Garcia Brower, California Labor Commissioner, Julie A. Su, Secretary of the California Labor and Workforce Development Agency, and Kevin Kish, Director of the California Department of Fair Employment and Housing. All are sued in their official capacity only. Id. ¶¶ 23–26.

B. Procedural History

On December 9, 2019, plaintiffs filed a complaint asking the court to declare AB 51 preempted by the FAA, to preliminarily and permanently enjoin defendants from enforcing AB 51 and to enter judgment in plaintiffs' favor and award plaintiffs' attorneys' fees and costs. Compl. at 22 (prayer for relief). That same day, plaintiffs also filed the motion for preliminary injunction at issue here, seeking to preliminarily enjoin defendants from enforcing AB 51 pending final determination of the merits of plaintiffs' claims. See generally MPI. In compliance with the Local Rules of this court, plaintiffs noticed the motion for January 10, 2020.

One week later, on December 16, 2019, having not obtained defendants' agreement to voluntarily refrain from enforcing AB 51 for even a short period of time, plaintiffs moved the court to temporarily restrain AB 51 from taking effect on January 1, 2020, pending resolution of the preliminary injunction motion. See Mot. for TRO, ECF No. 8. Defendants opposed the TRO motion, ECF No. 14, and, on December 23, 2019, the court held a telephonic hearing on that motion, ECF No. 22. See also Dec. 23 Hr'g Tr., ECF No. 28. On December 30, 2019, the court granted plaintiffs' motion for a temporary restraining order and found that despite plaintiffs' delay in seeking immediate intervention, plaintiffs nonetheless had carried their burden at this early stage of the litigation by raising serious questions going to the merits of the dispute and showing the balance of hardship tipped in their favor. TRO at 1.

On December 27, 2019, in accordance with the parties' stipulated briefing schedule, defendants lodged their opposition to plaintiffs' motion for preliminary injunction. Opp'n, ECF No. 23. On January 3, 2020, plaintiffs replied. Reply, ECF No. 29.

On January 10, 2020, the court heard oral argument on the motion. Counsel Donald Falk, Archis Parasharami and Bruce Sarchet appeared on behalf of plaintiffs; counsel Chad Stegeman appeared on behalf of defendants. The court submitted the matter and then granted the motion by minute order issued on January 31, 2020. See ECF No. 44. This order confirms the minute order, with explanation.

II. FEDERAL ARBITRATION ACT ("FAA")

"The FAA was enacted in 1925 in response to widespread judicial hostility to arbitration agreements." AT & T Mobility LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). The "primary substantive provision of the Act" is found in section 2. Id. (quoting Moses H. Cone , 460 U.S. at 24, 103 S.Ct. 927 ). That section provides:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. The Supreme Court has "described this provision as reflecting both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract." Id. (internal quotation marks and citations omitted); see also Ferguson v. Corinthian Colleges, Inc. , 733 F.3d 928, 932 (9th Cir. 2013) ("[The FAA] reflects an ‘emphatic federal policy’ in...

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