Sprunk v. Prisma LLC

• Decision Date: 23 August 2017
• Docket Number: B268755
• Citation: Sprunk v. Prisma LLC, 222 Cal.Rptr.3d 339, 14 Cal.App.5th 785 (Cal. App. 2017)
• Court: California Court of Appeals
• Parties: Maria Elena SPRUNK et al., Plaintiffs and Respondents, v. PRISMA LLC, Defendant and Appellant.

14 Cal.App.5th 785

222 Cal.Rptr.3d 339

Maria Elena SPRUNK et al., Plaintiffs and Respondents,

v.PRISMA LLC, Defendant and Appellant.

B268755

Court of Appeal, Second District, Division 1, California.

Filed August 23, 2017

Markun Zusman Freniere & Compton and Daria Dub Carlson, Pacific Palisades, for Defendant and Appellant.

Knapp, Petersen & Clarke, André E. Jardini, Gwen Freeman and K.L. Myles, Glendale, for Plaintiff and Respondent.

LUI, J.

The primary issue presented in this appeal is whether a defendant in a putative class action can waive its right to compel arbitration against absent class members by deciding not to seek arbitration against the named plaintiff.In deciding that issue, we must also consider the scope of the "futility" rule, which excuses a party in some circumstances from seeking to enforce an arbitration right when the state of the law at the time would make the effort futile.

We agree with the trial court that, under the circumstances of this case, defendant and appellantPrisma LLC, doing business as Plan B Club (Plan B) waived its right to seek arbitration by filing and then withdrawing a motion to compel arbitration against the named plaintiff, Maria Elena Sprunk, and then waiting until after a class had been certified to seek arbitration against class members.We therefore affirm the trial court's denial of Plan B's motion to compel arbitration.

BACKGROUND

Sprunk is the named plaintiff in a wage and hour class action that the trial court certified on April 24, 2015.Plan B owns and operates a bar and restaurant in Los Angeles in which exotic (i.e., bikini-clad) dancers perform.Sprunk and the other class members are dancers who performed at Plan B.

Sprunk alleges that the dancers were misclassified as independent contractors rather than employees, and that they were consequently denied various benefits that the law requires for employees, such as minimum wages, meal periods, and reimbursement of expenses.Sprunk also alleges that Plan B misappropriated tips.

Sprunk and all other class members signed contracts containing an arbitration clause.There were two versions of the arbitration clause.One version, which was in effect prior to July 2011, did not specifically address class arbitration.¹The other version, which Plan B claimed was in effect beginning in July 2011, contained an express waiver.²Sprunk signed the first version of the agreement.

1.Proceedings in the Trial Court

Sprunk filed her complaint on October 7, 2011.On November 28, 2011, Plan B sent an arbitration demand.Plan B's demand letter stated that "new case law has issued which permits demanding and requiring arbitration of individual claims despite class allegations," citing AT&T Mobility LLC v. Concepcion(2011)563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742( Concepcion )andStolt-Nielsen S. A. v. AnimalFeeds Int'l Corp.(2010)559 U.S. 662, 130 S.Ct. 1758, 176 L.Ed.2d 605( Stolt-Nielsen ).

The parties filed a joint initial status report on December 30, 2011, in which Plan B stated that it "wishes to file a motion to compel arbitration at the earliest available opportunity."Sprunk stated that she intended to oppose the arbitration motion, but agreed that Plan B's "contemplated motion to compel arbitration is an issue that should be resolved before discovery on the merits, or discovery with respect to class certification issues, is commenced."

On January 25, 2012, Plan B filed a "Petition to Compel Individual Arbitration and Stay Superior Court Proceedings."The petition sought arbitration of Sprunk's individual claims only.

Sprunk filed an opposition to the petition on February 15, 2012, in which she argued, among other things, that the "extremely broad" arbitration clause that Sprunk signed permitted arbitration of class claims.For that reason, Sprunk claimed that the court must decide "whether or not to order arbitration of all individual and class claims," or alternatively should deny Plan B's motion on the ground that it sought to limit the arbitration only to individual claims.Sprunk also argued that, to the extent the arbitration agreement is "construed as a class action waiver," Plan B could not compel arbitration because such a waiver would interfere with the right of employees to engage in collective action under federal law.In support of that argument Sprunk cited a January 3, 2012 decision by the National Labor Relations Board(Board).( In re D. R. Horton, Inc.(2012)357 NLRB 2277( Horton I ), revd. in part sub nom.D.R. Horton, Inc. v. N.L.R.B.(5th Cir.2013)737 F.3d 344( Horton II ).)

On September 6, 2012, Plan B filed a notice withdrawing its motion for arbitration.Plan B filed an answer the same day.The answer included several affirmative defenses based upon the arbitration agreements.Plan B also filed a cross-complaint, which it amended on November 14, 2002.

The cross-complaint named Sprunk and 500 fictional "Roe"cross-defendants, whom Plan B described as "professional entertainers who performed under contract as exotic dancers" at Plan B's premises during the class period.Plan B alleged that it was entitled to a "setoff" in the form of the dance fees that the cross-defendants earned in the event that the cross-defendants were adjudicated to be employees.Plan B based the allegation on a provision in the cross-defendants' contracts stating that "[i]f Plan B were an ‘employer’ all dance fees would be its sole property," and that Plan B would pay the cross-defendants only "the legal minimum wage and any other benefits required by law."

On December 19, 2012, Sprunk filed a demurrer and a motion to strike in response to the cross-complaint.Before those motions could be heard, Plan B dismissed the cross-complaint without prejudice.

The parties proceeded with discovery.Sprunk served interrogatories and deposed four Plan B witnesses.Plan B served a document request on Sprunk and took her deposition.Plan B responded to Sprunk's interrogatories on February 20, 2013, again identifying the arbitration agreements as an affirmative defense.

Sprunk filed her class certification motion on September 19, 2014.In opposing class certification, Plan B argued that a class action was not superior to other forms of litigation because the class members had signed arbitration agreements.Citing several federal district court decisions, Plan B asserted that it "could not have previously moved for individual arbitration of the claims of the unnamed class members" because the putative class members were not parties to the action prior to the time the court certified the class.In her reply, Sprunk argued that Plan B had waived the right to arbitrate by actively litigating the case.

The trial court granted class certification in a written order filed on April 24, 2015.The court rejected Plan B's arbitration argument.The court found that Plan B's delay in seeking arbitration—during which it took advantage of "the court's processes"—meant that Plan B had "waived its right to arbitrate at least as to Plaintiff's claims."

Following the court's ruling, the parties filed a joint status conference report in which Plan B stated that it intended to file a motion to compel individual arbitration"of the claims of Plaintiff and the Class Members."The court set a date for the motion to compel arbitration.

2.Plan B's Motion to Compel Arbitration Against Class Members

On August 12, 2015, Plan B filed two separate motions to compel arbitration directed to the class members who signed the two different versions of the arbitration agreement.In the motions Plan B again argued that it had not waived the right to compel arbitration against the unnamed class members because they were not parties until a class had been certified.

Plan B also argued that withdrawing its original motion to compel arbitration against Sprunk did not cause an unreasonable delay.Plan B claimed that it withdrew that motion because it feared that, under the state of the law at the time, the court might order classwide arbitration, which Plan B did not want.Plan B argued that it "had no certainty" that the court would order only individual arbitration because the law at the time made class arbitration possible even if an arbitration agreement contained a class action waiver.In particular, Plan B relied on the holding in Gentry v. Superior Court(2007)42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556( Gentry ) that a class arbitration waiver in an employment arbitration agreement is invalid if class arbitration would provide a significantly more effective means of vindicating the unwaivable rights of employees than individual arbitration.( 42 Cal.4th at p. 450, 64 Cal.Rptr.3d 773, 165 P.3d 556.)Plan B claimed that Gentry's status was uncertain until our Supreme Court decided Iskanian v. CLS Transportation Los Angeles , LLC(2014)59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129( Iskanian ).³

Sprunk opposed the motions on several grounds, including: (1) Plan B had waived its right to arbitrate; (2) the arbitration agreements were unconscionable; and (3) Plan B failed to provide sufficient evidence that the class members actually signed arbitration agreements.

The trial court heard the motions on October 15, 2015.The court rejected the argument that the arbitration agreements were unconscionable.However, the court ruled that Plan B had waived its right to compel arbitration based upon its delay in seeking arbitration of Sprunk's individual claims.The court concluded that the delay was both unreasonable and prejudicial.

The trial court considered and rejected Plan B's justifications for its delay in moving to compel arbitration.The court agreed with Plan B that, prior to certification, Plan B could not have compelled absent class members to arbitrate.However, the court concluded that Plan B had unreasonably delayed in seeking arbitration of Sprunk's claims.The court noted that Plan B "could have gone through with [its] motion with Ms. Sprunk" but instead...