Powers v. Northrup Grumman Corp.
| Decision Date | 29 October 2020 |
| Docket Number | Case No.: 20cv1506 DMS(MSB) |
| Parties | JAMIE POWERS, WILLIAM DILLARD, CORY JONES, JEFFERY KOUT, DOUGLAS MILLER, DAVID PERHAM, JOHN WILLIAMS, all individuals and ROES 1-50, Plaintiffs, v. NORTHRUP GRUMMAN CORPORATION, a multi-national entity, and DOES 1 through 50, inclusive Defendants. |
| Court | U.S. District Court — Southern District of California |
This case comes before the Court on Defendant's motion to compel arbitration or, in the alternative, to transfer venue. Plaintiffs filed an opposition and Defendant filed a reply. For the following reasons, the Court grants Defendant's motion to compel and dismisses this case, and denies as moot Defendant's motion to transfer venue.
Plaintiffs are former employees of Defendant who were employed in San Diego and deployed to the Middle East as part of the Battlefield Airborne Communications Node Program ("BACN") "in support of the Global Hawk UAV aircraft/BD-700/E-1 1A aircraft as contracted by the US Air Force." (Compl. ¶15.) Plaintiffs allege that during their deployments, their supervisors instructed them to flat bill twelve hours of work time and 1.5 hours of travel time per day regardless of the amount of work they actually performed. Plaintiffs allege they complained to their supervisors about this practice and the general overstaffing of the Program, but were told to continue billing as directed.
Plaintiffs allege the Air Force eventually learned of this billing practice and initiated an investigation through the United States Department of Justice ("DOJ"). (Id. ¶22.) As part of that investigation, Plaintiffs were interviewed by management and attorneys for Defendant and attorneys from the DOJ. (Id.) During those interviews, Plaintiffs reported Defendant's billing practice, their complaints about that practice, and Defendant's response to those complaints, which Plaintiffs allege was "to essentially 'sit down, shut up and color.'" (Id.) According to Plaintiffs, the DOJ ultimately concluded that Defendant had overbilled the Air Force by over $5 million in false labor charges as part of the BACN Program. (Id. ¶23.)
Plaintiffs allege the DOJ entered into a multi-million dollar civil settlement with Defendant to settle those charges. (Id.) As part of that settlement, the DOJ agreed not to bring criminal charges against Defendant, and Defendant was allowed to continue its participation in the BACN Program. (Id.) Plaintiffs also allege that as part of that settlement, Defendant agreed to retaliate against Plaintiffs and other employees for the billing practice even though they were simply following directions from their supervisors and provided truthful testimony to investigators. (Id.) Defendant carried out that part of the agreement by then terminating Plaintiffs' employment. (Id. ¶25.) Plaintiffs allege they were essentially "used as sacrificial lambs in Defendant's Civil Settlement with the USAF to allow Defendants to continue their lucrative BACN services contract with the USAF." (Id. ¶26.)
As a result of these events, Plaintiffs filed the present case against Defendant in San Diego Superior Court alleging claims for (1) wrongful termination in violation offundamental public policies, (2) violation of California Labor Code § 1102.5, (3) negligent hiring, supervision and retention, (4) unfair business practices in violation of California Business and Professions Code § 17200, (5) breach of fiduciary duty, (6) breach of the implied covenant of good faith and fair dealing, (7) breach of written employer policies, (8) intentional infliction of emotional distress, and (9) negligent infliction of emotional distress. Defendant then removed the case to this Court on the basis of diversity jurisdiction, and filed the present motion.
Defendant moves to compel arbitration of Plaintiffs' claims pursuant to International Assignment Agreements ("IAAs") and International Travel Agreements ("ITAs") each Plaintiff executed with Defendant as part of their employment. In the alternative, Defendant moves to transfer this case to the United States District Court for the Eastern District of Virginia. Plaintiffs respond that the arbitration provisions in the Agreements are unconscionable and unenforceable. They also argue the factors under 28 U.S.C. § 1404(a) weigh against transfer.1
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The FAA governs the enforcement of arbitration agreements involving interstate commerce. Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 232-33 (2013). "The overarching purpose of the FAA ... is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011). "The FAA 'leaves no place for the exercise of discretion by the district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.'" Kilgore v. KeyBank, Nat. Ass'n, 718 F.3d 1052, 1058 (9th Cir. 2013) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)) (emphasis in original). Accordingly, the Court's role under the FAA is to 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). If both factors are met, the Court must enforce the arbitration agreement according to its terms.
Arbitration is a matter of contract, and a party "cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Tracer Research Corp. v. Nat'l Envtl. Servs. Co., 42 F.3d 1292, 1294 (9th Cir. 1994) (citation omitted). A court must therefore determine whether there is an agreement to arbitrate before ordering arbitration. Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1048 (9th Cir. 1996). State law applies in determining which contracts are binding and enforceable under the FAA, if that law governs the validity, revocability, and enforceability of contracts generally. Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 630-31 (2009).
As set out above, the first issue under the FAA is whether there is a valid agreement to arbitrate. Plaintiffs do not dispute that they all signed IAAs or ITAs, or that each of the Agreements contains an arbitration provision. In the IAAs, that provision in found in Paragraph 11, which states: (Decl. of Nozomi Bullock in Supp. of Mot. ("Bullock Decl."), Ex. 4, ECF No. 5-1 at 38.) The provision in the ITAs is essentially identical, save for the location of the arbitration proceedings, which are to be conducted in McLean, Virginia rather than Falls Church. (Bullock Decl., Ex. 3, ECF No. 5-1 at 31.) On their face, these provisions demonstrate the existence of a valid agreement to arbitrate.
"Once it is established that a valid agreement to arbitrate exists, the burden shifts to the party seeking to avoid arbitration to show that the agreement should not be enforced." Yeomans v. World Fin. Grp. Ins. Agency, Inc., No. 19-CV-00792-EMC, 2020 WL 5500453, at *5 (N.D. Cal. Sept. 11, 2020) (citing Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 92 (2000)). Here, Plaintiffs argue the agreements should not be enforced because they are unconscionable.2
"Unconscionability has 'both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.'" Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1023 (9th Cir. 2016) (quoting Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899, 910 (2015)). "Both procedural and substantive unconscionability must be present in order for a clause to be unconscionable, but they need not necessarily be present to the same degree." Id. (citing Armendariz v. Found. Health Psychcare Services, 24 Cal.4th 83, 114 (2000)). Rather, a "sliding scale" approach is used "to determine unconscionability—greater substantive unconscionability may compensate for lesser procedural unconscionability." Chavarria v.Ralphs Grocery Co., 733 F.3d 916, 922 (9th Cir. 2013) (citing Armendariz, 24 Cal. 4th at 114).
As mentioned above, "[p]rocedural unconscionability concerns the manner in which the contract was negotiated and the respective circumstances of the parties at that time, focusing on the level of oppression and surprise involved in the agreement." Id. (citations omitted). "Oppression addresses the weaker party's absence of choice and unequal bargaining power that results in 'no real negotiation.'" Id. (quoting A & M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 186 Cal. Rptr. 114, 122 (1982)). "Surprise involves the extent to which the contract clearly discloses its terms as well as the reasonable expectations of the weaker party." Id. (citing Parada v. Super. Ct., 176 Cal. App. 4th 1554, 98 Cal. Rptr. 3d 743, 757 (2009)).
Here, Plaintiffs argue the agreements are procedurally unconscionable because they were required to sign the ITAs and IAAs as a condition of their employment. Defendant disputes this, asserting Plaintiffs were required to sign the Agreements as a condition of their overseas deployments only, not as a condition to employment generally. (Reply at 5.) Nevertheless, even assuming some part of Plaintiffs' employment was conditional on their assent to the Agreements, Defendant argues that does not render the...
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