Lopez v. Kmart Corp., Case No. 15-cv-01089-JSC

• Decision Date: 04 May 2015
• Docket Number: Case No. 15-cv-01089-JSC
• Court: U.S. District Court — Northern District of California
• Parties: ADRIAN LOPEZ, Plaintiff, v. KMART CORPORATION, Defendant.

ADRIAN LOPEZ, Plaintiff, v. KMART CORPORATION, Defendant.

Case No. 15-cv-01089-JSC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

May 4, 2015

ORDER DENYING MOTION TO COMPEL ARBITRATION AND STAY ACTION

Re: Dkt. No. 6

In this putative class action, Plaintiff Adrian Lopez ("Plaintiff") contends that his employer, Kmart Corporation ("Kmart"), failed to provide accurate written wage statements as California Labor Code Section 226(a) requires and engaged in practices that constitute unfair competition under California Business & Professions Code Section 17200. (See Dkt. No. 1-1.) Now pending before the Court is Kmart's Motion to Compel Arbitration and Stay Action pursuant to an arbitration agreement under which participating employees and Kmart waived their right to pursue employment-related claims in court in favor of submitting such disputes to binding arbitration. (Dkt. No. 6 at 7.) After carefully considering the parties' arguments, and having had the benefit of oral argument on April 30, 3015, the Court DENIES Kmart's motion.

BACKGROUND

Beginning in April 2012, Kmart implemented an arbitration policy/agreement ("Agreement") under which participating employees and Kmart each waived the right to pursue employment-related claims in court, and instead agreed to submit such disputes to binding arbitration. (Dkt. No. 5-4 ¶ 5.) The Agreement contains an introduction, which states:

Under this Agreement, and subject to certain exceptions specified within this Agreement, all employment-related disputes between you ("Associate") and Company that are not resolved informally shall be resolved by binding arbitration in accordance with the terms set forth below. This Agreement applies equally to disputes related to Associate's employment raised by either Associate or by Company.

Accordingly, Associate should read this Agreement carefully, as it provides that virtually any dispute related to Associate's employment must be resolved only through binding arbitration. Arbitration replaces the right of both parties to go to court, including the right to have a jury decide the parties' claims. Also, this Agreement prohibits Associate and Company from filing, opting into, becoming a class member in, or recovering through a class action, collective action, representative action, or similar proceeding.

If Associate does not wish to be bound by the Agreement, Associate must opt out by following the steps outlined in this Agreement within 30 days of receipt of this Agreement. Failure to opt out within the 30-day period will demonstrate Associate's intention to be bound by this Agreement and Associate's agreement to arbitrate all disputes arising out of or related to Associate's employment as set forth below.

(Dkt. No. 5-5 at 2 (emphasis in original).) The Agreement further provides that, except as provided, "this Agreement applies, without limitations, to disputes regarding the employment relationship, trade secrets, unfair competition, compensation, pay, benefits, breaks and rest periods, termination, discrimination, or harassment and claims arising under" various federal statutes pertaining to employment claims "and any and all state statutes addressing the same or similar subject matters, and all other state or federal statutory and common law claims." (Id.)

Kmart employees, including Plaintiff, participate in online training and acknowledge their receipt of various employment policies using Kmart's "My Personal Information" ("MP I") portal and a training system known as "Learn Your Way." (Dkt. No. 5-4 ¶ 6.) Once employees log into the MPI portal using a unique identification name and password, they may print any documents or pages they view in the portal using Kmart-owned equipment and supplies and at no cost to the employee. (Id. ¶¶ 7-8.)

Employees are required to acknowledge receipt of certain policies in the MPI portal, including the Agreement. (Id. ¶ 9.) When employees click the link to acknowledge the Agreement, they arrive at a page with links to (1) a PDF of the Agreement; (2) a text file of theAgreement; (3) a link labeled "Opt Out form: Action is required to protect your legal rights to sue the Company in court and/or to participate in any way in a class action, collective action or representative action"; and, set slightly apart, a fourth link labeled "Acknowledge receipt of the Arbitration Policy/Agreement[.]" (Id. ¶ 10; see also Dkt. No. 5-6 at 3.) After reviewing the Agreement and Opt Out form, employees are asked to acknowledge their receipt of the Agreement by clicking on the "Acknowledge receipt" link. (Dkt. No. 5-4 ¶ 11; see Dkt. No. 5-6 at 4-5.) Upon clicking on the acknowledgement link, the employee receives the following message:

By clicking below, I acknowledge that I have reviewed and agreed to the terms and conditions set forth in the Arbitration Policy/Agreement. I also understand that I may change my mind and opt out of the Agreement within 30 days of today's date by returning the Arbitration Policy/Agreement within 30 days of today's date by returning the Arbitration Policy/Agreement Opt Out form located at the end of the Agreement.

(Dkt. No. 5-4 ¶ 12; see Dkt. No. 5-6 at 5.) To submit their acknowledgement, employees must click on the "Yes" button then click "Submit[.]" (Dkt. No. 5-4 ¶ 13; see Dkt. No. 5-6 at 5.) Once an employee does so, his human resources account profile is updated to reflect receipt and acknowledgement of the Agreement. (Dkt. No. 5-4 ¶ 14.)

If an employee wishes to opt out, he must either print the Opt Out form, or obtain a printed copy from Kmart, and submit a completed Opt Out form either via mail or fax to the address or number listed on the form. (Id. ¶ 16; see Dkt. No. 5-5 at 8.) When an employee opts out by complying with this procedure, his human resources account profile is updated to reflect that decision. (Dkt. No. 5-4 ¶ 17.)

Kmart hired Plaintiff as a cashier in its Concord store on April 16, 2013, when Plaintiff was 16 years old and a sophomore in high school. (Id. ¶ 18; Dkt. No. 10-1 ¶ 2.) Plaintiff did not begin working until mid-May, and is still a Kmart employee. (Dkt. No. 10-1 ¶¶ 2, 7.) Before he began work, Plaintiff received an email from Kmart notifying him that he needed to complete all online training requirements, including acknowledgement of the Agreement. (Id. ¶ 3.) Plaintiff completed the training at home on his laptop, including review of the Agreement. (Id. ¶ 4.) Plaintiff reports worrying that he had to review the training materials quickly or he might not beable to start work. (Id.) He notes that Kmart did not provide "guidance or actual training" about any of the forms, never requested his parents' consent, and never explained what an arbitration agreement was or that he could review the terms with an attorney. (Id. ¶¶ 3, 5.) In any event, Plaintiff acknowledged receipt of the Agreement on May 20, 2013. (Dkt. No. 5-4 ¶ 19-20; see also Dkt. No. 5-7.) Plaintiff did not opt out of the Agreement by submitting the Opt Out form within his 30-day window to do so, nor did he do so any time thereafter. (Dkt. No. 5-4 ¶¶ 21-22.)

On January 20, 2015, one month after his 18th birthday, Plaintiff filed a class action complaint in Contra Costa County Superior Court alleging violations of California wage and hour laws. (Dkt. No. 1-1; see also Dkt. No. 10-1 ¶ 7.) Kmart timely removed the action to federal court. (Dkt. No. 1.) On March 16, 20145, Kmart filed a motion to compel arbitration and to stay this action. (Dkt. No. 6.)

LEGAL STANDARD

The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 2-16, provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Under the FAA, "arbitration agreements [are] on an equal footing with other contracts," and therefore courts are required to enforce arbitration agreements according to their terms. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 66 (2010). "Like other contracts, however, they may be invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability.'" Id. (internal citations and quotations omitted).

The FAA espouses a general policy favoring arbitration agreements. AT&T Mobility v. Concepcion, — U.S. —, 131 S. Ct. 1740, 1745-46, (2011). Federal courts are required to rigorously enforce an agreement to arbitrate. See Hall Street Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008). The court must direct parties to proceed to arbitration should it determine: (1) that a valid arbitration agreement exists; and (2) that the agreement encompasses the dispute at issue. Kilgore v. KeyBank, Nat'l Ass'n, 718 F.3d 1052, 1058 (9th Cir. 2013); Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008); see also 9 U.S.C. § 4 ("If a court . . . [is] satisfied that the making of the agreement for arbitration or the failure to comply therewith is notin issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement."). The party seeking to compel arbitration bears the burden of proving the existence of a valid agreement by a preponderance of the evidence. See Bridge Fund Capital Corp. v. Fastbucks Franchise Corp. , 622 F.3d 996, 1005 (9th Cir. 2010). Courts shall 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, 476 (1989).

"If the response is affirmative on both counts, then the [FAA] requires the court to enforce the arbitration agreement in accordance with its terms." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000); see also Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 400 (1967) (noting that "[o]nce [the court] is satisfied that an agreement for arbitration has been made and has not been honored," and the dispute...