Lang v. Skytap, Inc.

• Decision Date: 24 October 2018
• Docket Number: Case No. 4:18-cv-01292-KAW
• Citation: 347 F.Supp.3d 420
• Court: U.S. District Court — Northern District of California
• Parties: Rudolf LANG, Plaintiff, v. SKYTAP, INC., et al., Defendants.

347 F.Supp.3d 420

Rudolf LANG, Plaintiff,

v.SKYTAP, INC., et al., Defendants.

Case No. 4:18-cv-01292-KAW

United States District Court, N.D. California.

Signed October 24, 2018

Bruce MacMartin Towner, Towner Law Offices, San Francisco, CA, for Plaintiff.

Amelia Louise Sanchez-Moran, Spencer James Davidson, Denise Marie Trani-Morris, Jackson Lewis P.C., San Francisco, CA, for Defendants.

ORDER GRANTING MOTION TO COMPEL ARBITRATION

Re: Dkt. No. 20

KANDIS A. WESTMORE, United States Magistrate Judge

Plaintiff Rudolf Lang filed this action against Defendants Skytap, Inc. and Thor Culverhouse, alleging ten causes of action surrounding the termination of Plaintiff's employment with Defendants. (Defs.' Not. of Removal, Ex. A ("Compl."), Dkt. No. 1.) Pending before the Court is Defendants' motion to compel arbitration. (Defs.' Mot. to Compel, Dkt No. 20.) The Court deems the matter suitable for disposition without hearing pursuant to Civil Local Rule 7-1(b). Having considered the papers filed by the parties and the relevant legal authority, the Court GRANTS Defendants' motion to compel arbitration.

I. BACKGROUND

Plaintiff entered into an employment agreement with Defendants on December 2, 2013. (Domanico Decl., Ex. 1 ("Emp't Agree't") at 3, Dkt. No. 22-1.) The employment agreement signed by both parties contained an agreement to arbitrate all claims between the parties. (Id. ) The arbitration agreement provides, in relevant part:

[A]ny dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance, or breach of this agreement, will be settled by arbitration to be held in King County, Washington, in accordance with the Employment Dispute Resolution Rules then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in a dispute or controversy. The decision of the arbitrator will be final, conclusive, and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. The company and I will each pay one-half of the costs and expenses of the arbitration, and each of us will separately pay our counsel fees and expenses.

(Emp't Agree't at 3.) The arbitration agreement provides that both parties agree to arbitrate all claims, including claims for wrongful termination, breach of contract, breach of the covenant of good faith and fair dealing, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent or intentional interference with contract, and claims for any other violation of federal, state, or municipal statute. (Id. ) Both Plaintiff and Defendants may seek equitable relief as necessary from a court of competent jurisdiction. (Id. ) The Agreement also contains a severability clause, stating that, "if one or more of the provisions in this Agreement is deemed void by law, then the remaining provisions will continue in full force and effect." (Id. ) Additionally, the offer letter from Defendants to Plaintiff asserts that the arbitration agreement in the employment agreement is a term of Plaintiff's employment. (Domanico Decl., Ex. 2 ("Offer Ltr.") at 5, Dkt. No. 22-2.)

Plaintiff filed this action in Contra Costa County Superior Court on October 6, 2017. (Compl.) Plaintiff asserted claims for: (1) wrongful termination; (2) breach of employment contract; (3) breach of the covenant of good faith and fair dealing; (4) promissory estoppel; (5) failure to pay all wages; (6) intentional interference with contract; (7) intentional misrepresentation; (8) "promise without intent to perform;" (9) intentional infliction of emotional distress; and (10) declaratory relief. (Id. at 1.) On February 27, 2018, Defendants removed the action to this Court. (Defs'. Notice of Removal, Dkt. No. 1.)

Defendants filed the instant motion to compel arbitration on August 6, 2018. (Defs.' Mot. to Compel.) Plaintiff filed his opposition on August 20, 2018. (Plf.'s Opp'n, Dkt. No. 26.) Defendants filed their reply brief on August 27, 2018. (Defs.' Reply, Dkt. No. 28.)

II. LEGAL STANDARD

Under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. , arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of a contract." 9 U.S.C. § 2. "Once the Court has determined that an arbitration agreement relates to a transaction involving interstate commerce, thereby falling under the FAA, the court's only role is to determine whether a valid arbitration agreement exists and whether the scope of the dispute falls within that agreement." Ramirez v. Cintas Corp. , No. C 04-281-JSW, 2005 WL 2894628, at *3 (N.D. Cal. Nov. 2, 2005) (citing 9 U.S.C. § 4 ; Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir. 2000) ).

III. DISCUSSION

This arbitration agreement relates to interstate commerce. Defendant Skytap is a private Washington state company offering a cloud computing service, and in so doing, has employees in twenty-eight states and major facilities in four states. (Colish Decl., at ¶¶ 2-5, Dkt. No. 21.) Therefore, the FAA governs this arbitration agreement¹ , and as such, is only unenforceable under state contract law.

In opposing Defendants' motion to compel arbitration, Plaintiff argues that the arbitration agreement is unconscionable, and that no one provision can be severed so as to make the agreement conscionable. (Plf.'s Opp'n at 1, 8-9.) Under California law, the party opposing arbitration bears the burden of proving that the arbitration provision is unenforceable.

Sonic-Calabasas A, Inc. v. Moreno , 57 Cal. 4th 1109, 1149, 163 Cal.Rptr.3d 269, 311 P.3d 184 (2013). The arbitration agreement must be both procedurally and substantively unconscionable at the time it was made to be unenforceable. See Sanchez v. Valencia Holding Co., LLC , 61 Cal. 4th 899, 910, 190 Cal.Rptr.3d 812, 353 P.3d 741 (2015) ; Armendariz v. Foundation Health Psychcare Services, Inc. , 24 Cal. 4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000). The arbitration agreement, however, does not need to be equally procedurally and substantively unconscionable—"the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." Id. The Ninth Circuit has recently and routinely applied and upheld this unconscionability analysis. See Poublon v. C.H. Robinson Co. , 846 F.3d 1251, 1260 (9th Cir. 2017) ; Mohamed v. Uber Techs., Inc. , 848 F.3d 1201, 1211 (9th Cir. 2016).

A. Procedural Unconscionability

Procedural unconscionability "addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. Pinnacle Museum Tower Ass'n. v. Pinnacle Market Development , 55 Cal. 4th 223, 246, 145 Cal.Rptr.3d 514, 282 P.3d 1217 (2012). To establish procedural unconscionability, Plaintiff must demonstrate that he was surprised by some aspect of the agreement, or that his consent to its terms was obtained under coercion or duress. Sanchez v. Carmax Auto Superstores Ca., LLC , 224 Cal. App. 4th 398, 402-03, 168 Cal.Rptr.3d 473 (2014) ; Serpa v. Cal. Surety Investigations, Inc. , 215 Cal. App. 4th 695, 704, 155 Cal.Rptr.3d 506 (2013).

i. Adhesion Contract

Plaintiff contends that because the contract was one of adhesion, it is procedurally unconscionable. (Plf.'s Opp'n at 2-3.) Defendants do not dispute this. (Defs.' Reply at 2-3.) An arbitration agreement, however, is "not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis." Lagatree v. Luce, Forward, Hamilton & Scripps , 74 Cal. App. 4th 1105, 1127, 88 Cal.Rptr.2d 664 (1999). Though there is a degree of procedural unconscionability when dealing with an adhesion contract due to the naturally oppressive character of adhesion contracts and the lack of a meaningful choice on the part of the employee, adhesion contracts are not per se unenforceable. See Dotson v. Amgen, Inc. , 181 Cal. App. 4th 975, 981, 104 Cal.Rptr.3d 341 (2010) ; Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. , 232 Cal. App. 4th 1332, 1347-48, 182 Cal.Rptr.3d 235 (2015). "Only when [the agreement's] provisions are unfair does it become unenforceable." Dotson , 181 Cal. App. 4th at 975, 104 Cal.Rptr.3d 341. Thus, even where an adhesion contract is at issue, the court must still find a high degree of substantive unconscionability, in addition to the existing minimal procedural unconscionability due to the adhesiveness of the contract. Id. at 982, 104 Cal.Rptr.3d 341.

The arbitration agreement in question is a standard adhesion contract. It was presented to Plaintiff on a take it or leave it basis, and as a condition of his employment with Defendants. (Dominico Decl. at ¶¶ 6-7.) On the other hand, Plaintiff does not claim to have been surprised by the agreement, nor does he claim to have been "lied to, placed under duress, or otherwise manipulated into signing the arbitration agreement." Baltazar v. Forever 21, Inc. , 62 Cal. 4th 1237, 1245, 200 Cal.Rptr.3d 7, 367 P.3d 6 (2016) (finding minimal procedural unconscionability where the arbitration agreement was a contract of adhesion but there was no surprise or duress toward plaintiff). On this basis, there is minimal procedural unconscionability.

ii. American Arbitration Association Rules

Plaintiff also argues that there is additional procedural unconscionability because the agreement "does not provide the rules governing the arbitration or even a means of accessing those rules," relying on Trivedi v. Curexo Technology Corporation , 189 Cal. App. 4th 387, 116 Cal.Rptr.3d 804 (2010). (Plf.'s Opp'n at 3.) The Court disagrees. When rules governing the arbitration are incorporated by reference, procedural unconscionability only exists when those rules are not explicitly stated in the...