Ortiz v. Hobby Lobby Stores, Inc., No. 2:13–cv–01619.

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
Writing for the CourtTROY L. NUNLEY, District Judge.
Citation52 F.Supp.3d 1070
PartiesMaribel ORTIZ, on behalf of herself, all others similarly situated, and the general public, Plaintiff, v. HOBBY LOBBY STORES, INC., an Oklahoma corporation; and Does 1 through 50 inclusive, Defendants.
Docket NumberNo. 2:13–cv–01619.
Decision Date30 September 2014

52 F.Supp.3d 1070

Maribel ORTIZ, on behalf of herself, all others similarly situated, and the general public, Plaintiff
v.
HOBBY LOBBY STORES, INC., an Oklahoma corporation; and Does 1 through 50 inclusive, Defendants.

No. 2:13–cv–01619.

United States District Court, E.D. California.

Signed Sept. 30, 2014.
Filed Oct. 1, 2014.


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Chaim Shaun Setareh, Law Offices of Shaun Setareh, Beverly Hills, CA,

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Heather Davis, Protection Law Group, LLP, El Segundo, CA, for Plaintiff.

Cheryl Denise Orr, Drinker Biddle & Reath LLP, San Francisco, CA, for Defendants.

ORDER

TROY L. NUNLEY, District Judge.

This matter is before the Court pursuant to Defendant Hobby Lobby Stores, Inc.'s (“Defendant”) Motion to Dismiss Plaintiff's Complaint or, in the alternative, Compel Arbitration and Stay all Proceedings. (Mot. to Dismiss, ECF No. 6.) Plaintiff Maribel Ortiz (“Plaintiff”) has filed an opposition to Defendant's motion. (Pl.'s Opp'n to Def.'s Mot. to Dismiss, ECF No. 14.) The Court has carefully considered the arguments raised in Defendant's Motion and Reply as well as Plaintiff's Opposition. For the reasons set forth below, the Court DISMISSES without prejudice Plaintiff's claims so that they may be addressed in arbitration, as required by the parties' Mutual Arbitration Agreement (“Arbitration Agreement”).

I. BACKGROUND

Plaintiff Ortiz brings this putative class action against her previous employer Defendant Hobby Lobby Stores, Inc., on behalf of herself, all others similarly situated, and the general public. (Compl., ECF No. 1 at ¶ 1.) Plaintiff worked as a retail employee for Defendant from November 2010 to January 2013. (ECF No. 14 at 6.) Plaintiff alleges that Defendant has failed to pay her and all other similarly situated individuals for all vested vacation pay, failed to pay at least minimum wages for all hours worked, failed to provide accurate written wage statements, and failed to timely pay them all of the owed final wages following separation of employment. (ECF No. 1 at ¶ 1.) Based on violations of the Fair Labor Standards Act (“FLSA”), the Labor Code, and the Business and Professions Code, Plaintiff seeks recovery as part of a class action under Rule 23 of the Federal Rules of Civil Procedure. (ECF No. 1.) Additionally, Plaintiff seeks to collect civil penalties as part of a representative action for Defendant's violations of the California Private Attorney General Act (“PAGA”). (ECF No. 1 at ¶ 1.)

Defendant contends that Plaintiff's Complaint fails to state a claim upon which relief can be granted because all of Plaintiff's claims are subject to arbitration under the parties' Arbitration Agreement. (ECF No. 6 at 16–17.) Thus, Defendant moves this Court to dismiss Plaintiff's complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 6 at 16–17.) Alternatively, Defendant requests the Court to issue an order compelling Plaintiff to submit her claims to arbitration on an individual basis as well as requests a stay of all proceedings pending resolution of the arbitration, pursuant to 9 U.S.C. §§ 3, 4 (2006). (ECF No. 6 at 16–17.)

II. STANDARD OF LAW

“[T]he federal law of arbitrability under the Federal Arbitration Act (“FAA”) governs the allocation of authority between courts and arbitrators.” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir.2008). There is an “emphatic federal policy in favor of arbitral dispute resolution.” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). As such, “any 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.”Id. at 626, 105 S.Ct. 3346 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr.

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Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ). “Because waiver of the right to arbitration is disfavored, ‘any party arguing waiver of arbitration bears a heavy burden of proof.’ ” Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir.1986) (quoting Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1025 (11th Cir.1982) ).

Generally, in deciding whether a dispute is subject to an arbitration agreement, the Court must determine: “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000). As such, the Court's role “is limited to determining arbitrability and enforcing agreements to arbitrate, leaving the merits of the claim and any defenses to the arbitrator.” Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 479 (9th Cir.1991).

“In determining the existence of an agreement to arbitrate, the district court looks to ‘general state-law principles of contract interpretation, while giving due regard to the federal policy in favor of arbitration.’ ” Botorff v. Amerco, No. 2:12–cv–01286, 2012 WL 6628952, at *3 (E.D.Cal. Dec. 19, 2012) (citing Wagner v. Stratton, 83 F.3d 1046, 1049 (9th Cir.1996) ). An arbitration agreement may only “be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 1748, 179 L.Ed.2d 742 (2011) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) ). Therefore, courts may not apply traditional contractual defenses like duress and unconscionability, in a broader or more stringent manner to invalidate arbitration agreements and thereby undermine FAA's purpose to “ensur[e] that private arbitration agreements are enforced according to their terms.” Id. at 1748 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ).

If a court “... determines that an arbitration clause is enforceable, it has the discretion to either stay the case pending arbitration, or to dismiss the case if all of the alleged claims are subject to arbitration.” Delgadillo v. James McKaone Enters., Inc., No. 1:12–cv–1149, 2012 WL 4027019, at *3 (E.D.Cal. Sept. 12, 2012). The plain language of the FAA provides that the Court should “stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement....” 9 U.S.C. § 3. However, 9 U.S.C. § 3 gives a court authority, upon application by one of the parties, to grant a stay pending arbitration, but does not preclude summary judgment when all claims are barred by an arbitration clause. Thus, the provision does not limit the court's authority to grant dismissal in the case.” Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir.1988).

III. ANALYSIS

Through its motion, Defendant seeks to dismiss Plaintiff's Complaint for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 6 at 16–17.) Alternatively, Defendant requests the Court to issue an order compelling Plaintiff to submit her claims to arbitration on an individual basis and to stay all proceedings pending resolution of the arbitration, pursuant to 9 U.S.C. §§ 3, 4. (ECF No. 6 at 16–17.)

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Defendant argues that Plaintiff's Complaint should be dismissed because the parties executed an arbitration agreement, thereby agreeing to arbitrate employment-related disputes.1 (ECF No. 6.) Plaintiff disputes that a valid arbitration agreement exists. (ECF No. 14.) Therefore, as a threshold issue, the Court will address Plaintiff's arguments to determine whether a valid arbitration agreement exists.

A. Existence of a Valid Arbitration Agreement

In deciding whether to compel arbitration, the Court must determine: “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000). In making this determination, the Court “should apply ordinary state-law principles that govern the formation of contracts.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir.2003). Under California law, a valid contract requires: (1) parties capable of contracting; (2) mutual consent; (3) a lawful object; and (4) sufficient cause or consideration. Cal. Civ.Code § 1550. An arbitration agreement cannot be invalidated for unconscionability absent a showing of both procedural and substantive unconscionability. Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000). The procedural element focuses on oppression or surprise due to unequal bargaining power; the substantive element focuses on overly harsh or one-sided results. Kilgore v. KeyBank, Nat'l...

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