Martin v. Yasuda
| Citation | 829 F.3d 1118 |
| Decision Date | 21 July 2016 |
| Docket Number | No. 15-55696,15-55696 |
| Parties | Paige Martin, Sundae Worthy, Maria Ford, and Megan Tallerico, on behalf of themselves and classes of those similarly situated; Plaintiffs–Appellees, v. Gary Yasuda; Amarillo College of Hairdressing, Inc., DBA Milan Institute, DBA Milan Institute of Cosmetology, Defendants–Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
William M. Hensley (argued), Marc D. Alexander, and Jonathan M. Werner, Alvarado Smith, Santa Ana, California; Kirsten L. Clevenger, Matthew L. Hoppock, and Ronald L. Holt, Dunn & Davison LLC, Kansas City, Missouri; for Defendants–Appellants.
Chaya M. Mandelbaum (argued) and Michelle G. Lee, Rudy, Exelrod & Zieff, LLP, San Francisco, California; Dana Sniegocki and Leon Greenberg, Law Office of Leon Greenberg, Las Vegas, Nevada; Adetunji Olude and Bryan J. Schwartz, Bryan Schwartz Law, Oakland, California; for Plaintiffs–Appellees.
Before: Stephen Reinhardt and Kim McLane Wardlaw, Circuit Judges, and Mark W. Bennett,** Senior District Judge.
REINHARDT
, Circuit Judge:
Defendants Gary Yasuda and Amarillo College of Hairdressing appeal the district court's denial of their motion to compel arbitration. The district court found that the defendants waived their right to arbitration by their litigation conduct. We affirm.
Defendant Amarillo College of Hairdressing, Inc., doing business as “Milan Institute” and “Milan Institute of Cosmetology” (collectively “Milan”), is a group of nationally accredited private colleges offering career training in cosmetology. The plaintiffs are individuals who enrolled in a cosmetology program at Milan Institute. As part of their enrollment, each of the plaintiffs signed an Enrollment Agreement that contained a binding arbitration provision. The arbitration agreement provides, in relevant part:
[A]ny dispute arising from my enrollment at Milan Institute, no matter how described, pleaded or styled, shall be resolved by binding arbitration, under the substantive and procedural requirements of the Federal Arbitration Act, by a single arbitrator, conducted by the American Arbitration Association (AAA) at Milan Institute ... under its Commercial Rules. All determinations as to the scope, enforceability and effect of this arbitration agreement shall be decided by the arbitrator, and not by a court. The award rendered by the arbitrator may be entered in any court having jurisdiction.
In order to graduate from a cosmetology school, students must, among other things, complete 1600 hours of technical instruction and practical training. Cal. Code Regs. tit. 16, § 950.2(a)
. The students perform cosmetology, barbering, and manicure services for the college's paying clients. The students also clean, sweep, wash and fold laundry, set up and take down studios, clean pedicure bowls, sell retail products, schedule clients, and promote Milan's services. The services that students provide do not necessarily correspond to their education, and they are not paid for their work.
The plaintiffs filed a class action lawsuit on October 28, 2013 against the college and its owner and President, Gary Yasuda, alleging that the defendants violated state labor laws and the Fair Labor Standards Act (“FLSA”). Specifically, the plaintiffs contended, among other things, that Milan was an “employer” within the meaning of state law as well as the FLSA and thus, as uncompensated employees, they were entitled to minimum hourly wages, overtime wages, and unpaid premiums for missed meal and rest breaks. Over seventy individuals opted to join the action between October 2013 and March 2014.
On February 19, 2014, the defendants were served with a copy of the summons and complaint via substituted service and by mail. They disputed the appropriateness of the service of process. The parties then stipulated that the defendants were properly and timely served with the summons and complaint on March 10, 2014. The parties also agreed to extend the defendants' time to respond to June 9, 2014. The defendants' counsel subsequently filed a notice of appearance on March 17, 2014.
On May 16, 2014, the parties filed a Joint Stipulation to Extend Time to File Motion for FLSA Conditional Certification and Class Certification with the district court. They stated that they had “spent considerable time and effort analyzing the most resourceful and efficient manner with which to approach discovery and certification motions,” that it was in the “best interest of judicial resources, time and effort” to focus discovery on the issue whether the class members were Milan's employees under wage laws, and that they agreed to extend the deadline to file motions for class and conditional certification. The parties further agreed that there should be discovery and an opportunity for the court to resolve the question whether the plaintiffs were employees of Milan under wage laws before any effort to certify the class because the lawsuit presents “unique legal claims regarding whether or not the purported class members are employees of the defendants, covered by wage laws.” The district court subsequently granted the parties' Joint Stipulation Motion.
The plaintiffs filed their first amended complaint on June 6, 2014. It named additional plaintiffs and added additional state wage and hour claims. On June 23, 2014, the defendants moved to dismiss the plaintiffs' state law claims against all defendants and their FLSA claim against Yasuda pursuant to Federal Rule of Civil Procedure 12(b)(6)
.1 The defendants asserted that plaintiffs were students and not employees of Milan as a matter of law, and that the plaintiffs failed to plead Yasuda's individual liability. After briefing and oral argument on the issue, on July 30, 2014, the district court granted in part and denied in part the defendants' motion to dismiss. The court dismissed the causes of action against Yasuda with leave to amend, but denied the defendants' motion as to the plaintiffs' state law claims. As to the state law claims, the district court concluded after a detailed analysis that the California Legislature could have included students performing services at their school for the fee-paying public within the categories of individuals who may practice cosmetology without being paid. Because the Legislature did not do so, the district court declined to “usurp” the Legislature's role by rewriting the Cosmetology Act. The district court therefore held that the Cosmetology Act did not preclude the plaintiffs' arguments that they were employees under state wage laws and that the parties could proceed to discovery on the issue.
The plaintiffs then filed a second amended complaint on August 29, 2014, which pleaded additional facts as to Yasuda's individual liability. On September 19, 2014, the defendants filed their answer to the complaint. In addition to responding to all of the plaintiffs' causes of action, the defendants pled arbitration as one of their forty-three affirmative defenses. They, however, did not move to compel arbitration.
On November 28, 2014, the parties filed a Joint Rule 26(f) Report, which detailed the scope of discovery and contained proposed deadlines for the phases of discovery and motions. In a footnote, the defendants maintained that each plaintiff executed an arbitration agreement and that they were not waiving any rights as to those agreements. In the body of the report, the parties stated that they participated in a Rule 26(f) conference, exchanged initial disclosures pursuant to Rule 26(a)(1), and had already begun exchanging written discovery requests and noticing depositions to occur in early 2015. The parties agreed, subject to approval by the court, that the first eight months of discovery should focus on the “employee” issue so that the court could consider that issue on motions for summary judgment, if the parties chose to file such motions, followed by two months of expert discovery. They also planned to exchange discovery requests and to take and defend depositions of the parties to the case.
The district court held a scheduling conference on December 8, 2014, fourteen months after the plaintiffs filed the original complaint. During the proceeding, the court asked the defendants' counsel whether he intended to file a motion to compel arbitration. He responded, 2 The court then warned counsel about the possibility of waiver. The next day, the court issued a scheduling order setting the deadlines for different phases of discovery and motions.
Although the plaintiffs made written discovery requests of the defendants in November 2014, they agreed to extend the defendants' time to respond in December 2014 and January 2015. The defendants eventually produced the discovery responses on February 4, 2015. Subsequently, on February 20, 2015, the court issued a stipulated protective order in which the parties agreed to abide by certain procedures and guidelines during discovery. Then, on February 25 and 26, 2015, plaintiffs deposed Milan's Chief Financial Officer. It was on February 25, 2015 that defendants' counsel informed the plaintiffs' counsel of their intent to compel arbitration.
On March 20, 2015, almost seventeen months after the start of the case, the defendants actually moved to compel individual arbitration. In the motion, they argued, among other things, that the court must enforce the parties' arbitration agreements, that the agreements were valid and enforceable, and that they, the defendants, had not waived arbitration. The plaintiffs opposed the motion by arguing that the defendants had waived their right to compel arbitration and that the terms were unconscionable and...
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