Yeomans v. World Fin. Grp. Ins. Agency, Inc., Case No. 19-cv-00792-EMC
| Decision Date | 11 September 2020 |
| Docket Number | Case No. 19-cv-00792-EMC |
| Parties | Tricia YEOMANS, et al., Plaintiffs, v. WORLD FINANCIAL GROUP INSURANCE AGENCY, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Adam Tamburelli, Karen I. Gold, Stanley D. Saltzman, Stanley Donald Saltzman, Marlin and Saltzman, LLP, Agoura Hills, CA, Christina Marie Lucio, Farnaes and Lucio, APC, San Diego, CA, for Plaintiff Tricia Yeomans.
Adam Tamburelli, Karen I. Gold, Stanley D. Saltzman, Stanley Donald Saltzman, Marlin and Saltzman, LLP, Agoura Hills, CA, David Rosenberg, Chad F. Edwards, Rosenberg Shpall and Zeigen, APLC, Christina Marie Lucio, Farnaes and Lucio, APC, San Diego, CA, for Plaintiffs Ismail Chraibi, Robert Jenkins, Dorothy Jenkins.
David Rosenberg, Chad F. Edwards, Rosenberg Shpall and Zeigen, APLC, Christina Marie Lucio, Farnaes and Lucio, APC, San Diego, CA, Karen I. Gold, Adam Tamburelli, Stanley Donald Saltzman, Marlin Saltzman, LLP, Agoura Hills, CA, for Plaintiffs Fatemeh Abtahi, Cameron Bradford.
Christina Marie Lucio, Farnaes and Lucio, APC, San Diego, CA, Karen I. Gold, Stanley D. Saltzman, Adam Tamburelli, Stanley Donald Saltzman, Marlin Saltzman, LLP, Agoura Hills, CA, for Plaintiff Adrian Rodriguez.
Spencer C. Skeen, Marlene Moffitt, Cameron O'Brien Flynn, Timothy Lloyd Johnson, Jesse Carter Ferrantella, Ogletree Deakins Nash Smoak Stewart PC, San Diego, CA, for Defendants.
ORDER DENYING DEFENDANTS’ MOTION TO COMPEL ARBITRATION
Plaintiffs1 filed a putative class action lawsuit against Defendants World Financial Group Insurance Agency Inc. and World Financial Group Inc. (collectively, "Defendants"), alleging, inter alia , violations of the California Labor Code, the California Business and Professional Code, and California Wage Orders based on Defendants’ purported misclassification of Plaintiffs as independent contractors, as opposed to employees. Defendants have now filed a Motion to Compel Arbitration, Dismiss Class Claims, and Stay Case. See Docket No. 73 ("Mot.").
Plaintiffs allege the following. Defendants represent themselves as a financial- and insurance-products marketing company; they recruit individuals as "Associates" and purport to give people the tools "to build and operate their own financial services business." First Amended Complaint ("FAC") ¶ 1, Docket No. 23. However, Plaintiffs assert that "Defendants conduct their business by way of a massive pyramid scheme," wherein recruiting new Associates is one of the "main factors involved in achieving promotions." Id. ¶ 2. Once someone is an Associate, Defendants pressure that person to "purchase Defendants’ financial and insurance products" and to "sell financial and insurance products to the new Associates." Id. ¶ 3.
Central to Plaintiffs’ case is their allegation that "Defendants have unlawfully misclassified Associates as ‘independent contractors’ rather than as employees" in order to further increase company profits. Id. ¶ 4. Specifically, each Associate is "required to sign identical, non-negotiable Associate Membership Agreements (‘AMAs’)," which "set forth uniform rules and policies promulgated by Defendants, which subject Associates to strict control." Id. ¶ 5. "Plaintiffs and Class Members signed the AMAs." Id. Plaintiffs also contend that "Defendants completely control the overall operation of the business" and "retain the exclusive authority to hire and fire every Associate." Id. ¶¶ 6, 7. Furthermore, because of this classification, Associates earn only commissions, not minimum wage, and they bear the burden of business costs, which Defendants might otherwise bear. Id. ¶¶ 8, 9. In addition, Associates are improperly deprived of the protection of workers’ compensation, the benefits of overtime pay, and meal and rest breaks. Id. ¶¶ 9, 10.
The arbitration provision at issue here is contained in the AMA. See Docket No. 73-5 (sample Associate Membership Agreement; the "AMA"). Some of the relevant terms are contained in the AMA itself, while others are explained in greater detail in a glossary appended to the AMA.
The body text of AMA's arbitration provision provides: "The Parties agree that, except as specifically provided to the contrary in this Agreement, any Grievance shall be resolved exclusively by Good Faith Arbitration." Id. at 4, art V. It also sets forth that Defendants, although not Associates, can seek some forms of "extraordinary relief" through the courts. Id. , art VI ( ). It also provides the awarding of attorneys’ fees for the party that prevails in arbitration. Id. at 5, art IX, ¶ J ().
Finally, the text of the AMA also contains a severability provision, which reads: "If any part, section, clause, paragraph, term or provision of this Agreement shall be found to be void or unenforceable by any court or arbitration of competent jurisdiction, such finding shall have no effect upon any other part, section, clause, paragraph, term or provision of this Agreement." Id. , ¶ H.
As noted above, many of the details related to arbitration are actually set forth in the "Glossary and Explanation of Terms" that is appended to the AMA, and not in the body of the AMA itself. That Glossary explains that the term "Good Faith Arbitration" generally means:
All Grievances shall be resolved by Good Faith Arbitration in accordance with the Rules, except that, or in addition to such Rules: i) in order to assure neutrality and impartiality of the arbitrator(s), and to preserve the confidentiality of proprietary information, the arbitrator(s) shall not be any present or past owner, officer, director, employee, consultant, associate, agent, registered representative, attorney or other representative of any insurance company, insurance broker or insurance agency, securities broker, securities dealer or mortgage company, investment advisor, or of any affiliate of any of them; ii) the Parties may be entitled to such discovery and protective orders as provided herein; iii) the locale where the arbitration shall be held is the principal head office of WFG in Duluth, Georgia or, if that location is not convenient for all Parties, they shall try to devise a way so that it is convenient, or if that location cannot be made convenient, at such other place as the Parties may agree, or, if they cannot agree, then as may be set by the Rules, as the case may be: iv) a transcript shall be made on the proceeding; and v) the arbitrator's(s’) award shall state their findings of fact and conclusions of law.
Glossary and Explanation of Terms ("Glossary") at ¶ I, § 1, Docket No. 73-5. The glossary also defines the term "grievance" broadly, as "[a]ny controversy, claim or dispute arising out of or relating to this Agreement, between the Associate, on the one part, and WFG and/or any of the Corporate People, or any of them, on the other part." Glossary at 3, ¶ J. The "Rules" of arbitration are not spelled out in the body of the text quoted above. Instead, one has to find the term "Rules" contained further back in the Glossary. There, the Glossary defines Rules as, "Where required to be applied, the Commercial Arbitration Rules of the American Arbitration Association, as in effect at the time of the occurrence of any Grievance." Id. at 3, ¶ S.
In addition, the Glossary contains a provision entitled "Waiver of Litigation," which reads as follows:
The Parties acknowledge and agree that, except as specifically provided to the contrary in this Agreement, this Section I is and shall be the Parties’ exclusive remedy for any Grievance arising out of or relating to this Agreement, or the breach thereof. It is the intent of the Parties that, except as specifically provided to the contrary in this Agreement, to the fullest extent allowed by law all Grievances, including any claims or defense (whether created or governed by federal, state or local law, rule or regulation) shall be resolved in an arbitral rather than a judicial forum. It is understood by the Parties that it is to their mutual benefit to submit Grievances that they are unable to resolve themselves for resolution by a neutral referee in an arbitral rather than a judicial forum. Those Parties recognize that by choosing Good Faith Arbitration as the mechanism for resolving Grievances, each Party expects to ensure a more expeditious and economical resolution of their Grievances than is available in most cases in a judicial forum. Accordingly, except as specifically provided to the contrary in this Agreement, the Parties expressly waive the right to litigate in a judicial forum all Grievances and waive the right to trial by jury. The Parties further agree that the findings of fact issued by the arbitrator(s), as reviewed, if applicable, shall be binding on them in any subsequent arbitration, litigation or other proceeding.
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