Doe v. Steele

• Decision Date: 11 March 2021
• Docket Number: Case No. 20-cv-1818-MMA (MSB)
• Parties: JANE DOE, Plaintiff, v. CISSY STEELE, et al., Defendants.
• Court: U.S. District Court — Southern District of California

JANE DOE, Plaintiff, v. CISSY STEELE, et al., Defendants.

Case No. 20-cv-1818-MMA (MSB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

March 11, 2021

ORDER DENYING MOTION TO COMPEL ARBITRATION

[Doc. No. 25]

Jane Doe ("Plaintiff") brings this action against multiple Defendants alleging that she was targeted and groomed "for the sole purpose of sex trafficking her, in violation of the [Trafficking Victims Protection Reauthorization Act]." Doc. No. 12 ("FAC") ¶ 1. A group of Defendants—Diabolic Video Productions, Inc. ("Diabolic"); Black Ice LTD ("Black Ice"); Zero Tolerance Entertainment, Inc. ("Zero Tolerance"); and Third Degree Films ("Third Degree") (collectively, "Video Defendants")—now move to compel arbitration. See Doc. No. 25. Plaintiff filed an opposition to Video Defendants' motion, and Video Defendants replied. See Doc. Nos. 30, 33. The Court found the matter suitable for determination on the papers and without oral argument pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7.1.d.1. See Doc. No. 34. For the reasons set forth below, the Court DENIES Video Defendants' motion.

I. BACKGROUND

Plaintiff's action arises from sex trafficking allegations against one individual and several pornographic film studios and websites. See FAC ¶¶ 1-8, 20-31.

Representing herself as a talent agent and promising to make Plaintiff a model, Cissy Steele ("Steele") allegedly targeted and groomed Plaintiff for sex trafficking in California and Nevada. See id. ¶¶ 1, 2, 14. Plaintiff claims Steele "coerced and lured [Plaintiff] to move into her home" where Steele then used "psychological manipulation and coercion, intimidation tactics, threats, and physical violence to control, dominate and exploit [Plaintiff]." Id. ¶¶ 3, 4. Plaintiff further avers that Steele forced Plaintiff to engage in "commercial sex acts" and then forced Plaintiff to give the profits to her. Id. ¶ 5. Additionally, Plaintiff alleges that Steele forced her to perform in pornographic videos for adult film companies against her will. See id. ¶ 6. The film companies paid Steele directly and failed to pay Plaintiff for her involuntary work. Id. Additionally, Plaintiff alleges that the pornographic film studios and websites participated in Steele's sex trafficking venture because they knew, or should have known, Steele was trafficking Plaintiff and "knowingly benefited from her illegal venture by selling videos and posting videos through online websites that featured [Plaintiff] for profit." Id. ¶¶ 7-8.

Based on these allegations, Plaintiff has brought seven causes of action: (1) violation of the Trafficking Victims Protection Act ("TVPA"), 18 U.S.C. § 1591(a); (2) participation in a venture in violation of the TVPA, 18 U.S.C. § 1591(a); (3) financially benefiting from sex trafficking in violation of the TVPA, 18 U.S.C. § 1595; (4) conspiracy to commit violation of the TVPA, 18 U.S.C. § 1594; (5) violation of record keeping requirements, 18 U.S.C. § 2257; (6) preliminary and permanent injunction; and (7) violations of California Labor Code §§ 201, 226.8, 1194. Id. ¶¶ 136-88. Video Defendants now move to compel arbitration based upon written arbitration agreements between Plaintiff and Video Defendants. See Doc. No. 25.

II. LEGAL STANDARD

The Federal Arbitration Act ("FAA") permits "[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States district court . . . for an order directing that . . . arbitration proceed in the manner provided for in [the arbitration] agreement." 9 U.S.C. § 4. Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration. Id. The Supreme Court has stated that the FAA espouses a general policy favoring arbitration agreements. AT&T Mobility v. Concepcion, 563 U.S. 333, 339 (2011). Federal courts are required to rigorously enforce an agreement to arbitrate. See id.

In determining whether to compel a party to arbitration, the Court may not review the merits of the dispute; rather, the Court's role under the FAA is limited to determining "(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Kilgore v. KeyBank, Nat. Ass'n, 718 F.3d 1052, 1058 (9th Cir. 2013) (quoting Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)); see also 9 U.S.C. § 4. If the Court finds that the answers to both questions are "yes," then the Court must compel arbitration. Chiron Corp., Inc., 207 F.3d at 1130. A court's circumscribed role in making these inquiries "leav[es] the merits of the claim and any defenses to the arbitrator." Id. (quoting Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 478 (9th Cir. 1991)).

As to the first inquiry—whether the parties agreed to arbitrate—courts adopt a standard similar to summary judgment. See Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1141 (9th Cir. 1991); Lopez v. Terra's Kitchen, LLC, 331 F. Supp. 3d 1092, 1097 (S.D. Cal. 2018); Cordas v. Uber Techs., Inc., 228 F. Supp. 3d 985, 988 (N.D. Cal. 2017). Agreements to arbitrate 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. Courts must apply ordinary state law principles in determining whether to invalidate an agreement to arbitrate. Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 782 (9th Cir. 2002). As such, arbitration agreements may be"invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability.'" Concepcion, 563 U.S. at 339 (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). In assessing whether there is an agreement to arbitrate, the presumption and policy in favor of arbitration do not apply, and instead, the issue is determined through standard contract law principles. See Comer v. Micor, Inc., 436 F.3d 1098, 1104 n.11 (9th Cir. 2006); see also E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 293 (2002).

As to the second inquiry—whether the agreement encompasses the dispute at issue—courts resolve any "ambiguities as to the scope of the arbitration clause itself . . . in favor of arbitration." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76 (1989); see also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) ("[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability."). Moreover, "the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration." Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 91 (2000). Absent contractual ambiguity, "it is the language of the contract that defines the scope of disputes subject to arbitration." Waffle House, Inc., 534 U.S. at 289.

III. DISCUSSION

Video Defendants argue that arbitration is required because there is an arbitration agreement that encompasses the dispute at issue. See Doc. No. 25 at 2. Video Defendants request that the Court order the parties to arbitrate and stay this action pending the outcome of arbitration. See id. at 9. Plaintiff responds that the Court should not order arbitration because the agreements are unconscionable and the result of duress and undue influence. See Doc. No. 30 at 2. Plaintiff further argues that there would be conflicting rulings on common factual and legal issues if the Court were to compel arbitration. See id. at 2, 8.

A. Choice of Law

Because Plaintiff raises state law contract defenses, the Court first must assess what state law to apply. See Pokorny v. Quixtar, Inc., 601 F.3d 987, 994 (9th Cir. 2010) ("Before a federal court may apply state-law principles to determine the validity of an arbitration agreement, it must determine which state's laws to apply. It makes this determination using the choice-of-law rules of the forum state . . . ."). A federal court resolving a dispute involving nonfederal law applies the forum state's choice-of-law rules to decide the governing substantive law. See Fields v. Legacy Health Sys., 413 F.3d 943, 950 (9th Cir. 2005) (quoting Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002)) ("Federal courts sitting in diversity must apply 'the forum state's choice of law rules to determine the controlling substantive law.'"). Federal courts deciding nonfederal law in California apply California's choice-of-law rules. See Yeiser Research & Dev. LLC v. Teknor Apex Co., 281 F. Supp. 3d 1021, 1036 (S.D. Cal. 2017); Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148, 1151 (1992).

"When an agreement contains a choice of law provision, California courts apply the parties' choice of law unless the analytical approach articulated in § 187(2) of the Restatement (Second) of Conflict of Laws . . . dictates a different result." Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1002 (9th Cir. 2010) (quoting Hoffman v. Citibank (S.D.), N.A., 546 F.3d 1078, 1082 (9th Cir. 2008) (per curiam)). Under the Restatement approach, the court must first determine

(1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties' choice of law. If neither of these tests is met, that is the end of the inquiry, and the court need not enforce the parties' choice of law. If, however, either test is met, the court must next determine whether the chosen state's law is contrary to a fundamental policy of California. If there is no such conflict, the court shall enforce the parties' choice of law. If, however, there is a fundamental conflict with California

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