Hayford v. Santander Consumer USA Incorporated

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Terri Hayford, No. CV-20-01808-PHX-JJT 10 Plaintiff, ORDER 11 v. 12 Santander Consumer USA Incorporated, 13 Defendant. [14] 15 At issue is Defendant’s Motion to Compel Arbitration and Stay Proceedings 16 (Doc. 9, Mot.). The Court has reviewed the Motion, Plaintiff’s Response, (Doc. 19, Resp.), 17 and Defendant’s Reply, (Doc. 20, Reply), and finds this matter appropriate for decision 18 without oral argument. See LRCiv 7.2(f). For the following reasons, the Court grants 19 Defendant’s Motion. 20 I. FACTUAL BACKGROUND 21 Plaintiff Terri Hayford1 filed a Complaint on behalf of herself and a similarly 22 situated class of employees against Defendant Santander Consumer USA, Inc. (Doc. 1, 23 Compl.) Individually and on behalf of a class of Santander’s employees, Hayford alleges 24 that Santander violated the Fair Labor Standards Act (“FLSA”) by failing to pay overtime 25 wages. (Compl. ¶ 1.) [26] 27 1 Subsequent to the filing of Hayford’s Complaint, Erica Palfrey consented to join the action as a Co-Plaintiff. (Doc. 8, Notice Filing Consent Erica Palfrey.) For convenience, 28 the Court refers mostly to Plaintiff Hayford in this Order. Except as noted, the same facts and analyses apply to Plaintiff Palfrey. 1 Hayford worked for a Santander call center in Mesa, Arizona, from approximately 2 April 10, 2017, to October 31, 2019. (Compl. ¶ 16; Mot. Ex. A ¶ 3.) New hires at Santander 3 are required to review and acknowledge receipt and understanding of Santander company 4 policies, including Santander’s Arbitration Policy, (see Mot. Ex. B), as part of a new hire 5 orientation. (Mot. Ex. A ¶ 5.) To review and acknowledge the policies, new employees are 6 required to log in to Santander’s training portal using their individual unique usernames 7 and confidential, self-created passwords. (Mot. Ex. A ¶ 6.) Once logged in, new employees 8 must open each policy individually to review it. (Mot. Ex. A ¶ 7.) When they close a policy, 9 a separate button appears that employees must click to acknowledge they have reviewed 10 the policy. (Mot. Ex. A ¶ 7.) Employees must complete this process of review and 11 acknowledgment during their new hire orientation. (Mot. Ex. A ¶ 7.) Santander’s human 12 resources department tracks the new employees’ progress and follows up with employees 13 who do not acknowledge reviewing each policy, including the Arbitration Policy, to ensure 14 completion of the acknowledgment process. (Mot. Ex. A ¶ 7.) 15 During Hayford’s employment, Santander used software to electronically track and 16 manage employees’ completion of their training and acknowledgment of Santander’s 17 policies and procedures. (Mot. Ex. A ¶ 9.) The software reports that Hayford acknowledged 18 review of Santander’s Arbitration Policy on April 18, 2017.2 (Mot. Ex. A ¶ 10; Ex. C.) 19 Hayford admits that Santander required her to electronically review several 20 documents as part of the hiring process and confirm she had reviewed them. (Reply Ex. A 21 ¶ 3.) However, Hayford avers that the documents she reviewed during hiring or at any other 22 time during her employment did not include an arbitration agreement; that Santander never 23 provided her with a written or electronic copy of an arbitration agreement; and that she has 24 never seen the document titled “Arbitration Policy” that Santander contends applies to her 25 FLSA claim for unpaid wages. (Resp. Ex. A ¶ 4.) [27] 28 2 The same software reports that Plaintiff Palfrey acknowledged review of Santander’s Arbitration Policy on January 9, 2018. (Mot. Ex. B ¶ 10; Ex. D.) 1 The Arbitration Policy reads in part as follows: 2 The Company and the Associate agree to submit to binding arbitration any dispute, claim, or controversy that may arise between Associate and the 3 Company arising out of or in connection with the Company’s business, the Associate’s employment with the Company, or the termination of 4 Associate’s employment with the Company. 5 This Arbitration Policy is intended to broadly cover the entire relationship between Associate and Company and includes, without limitation . . . any 6 dispute claim or controversy relating to . . . any claim arising under any . . . federal statute . . ., including but not limited to the Fair Labor Standards Act, 7 . . . . 8 Associate acknowledges and confirms and understands that this Arbitration Policy is a condition of continued employment with the Company and that 9 by continuing employment after being presented with this Arbitration Policy, the Associate is subject to such Policy. [10] The Company and Associate further acknowledge that this Arbitration Policy 11 is supported by consideration, including the mutual requirement to arbitrate disputes and the continuing employment of the Associate. [12] 13 (Mot. Ex. B.) 14 Santander argues that Hayford is compelled to arbitrate her employment-related 15 claims against Santander on an individual basis because she entered into a valid agreement 16 with Santander to arbitrate all employment-related claims (Mot. at 4–7); the claims in her 17 Complaint fall within the scope of that agreement (Mot. at 8–10); and the question of the 18 individualized arbitrability of Hayford’s claim is reserved for the Court where the 19 Arbitration Policy is silent on the issue (Mot. at 9–10). Santander further argues that 20 Hayford waived any objection to enforcement of the Arbitration Policy by twice initiating 21 arbitration against Santander for employment-related claims. (Mot. at 10–11.) 22 In her Response, Hayford counters that she should not be compelled to arbitrate her 23 claims because she never agreed through the Arbitration Policy or otherwise to arbitrate 24 any legal disputes with Santander. (Resp. at 5–6.) She argues in the alternative that the 25 Arbitration Policy cannot be enforced because it is both procedurally and substantively 26 unconscionable. (Resp. at 6–11.) Finally, she asserts that she did not waive her right to 27 pursue claims in court by filing her previous demands for arbitration. (Resp. at 11.) [28] 1 In its Reply, Santander contends that Hayford’s averments are insufficient to call 2 into question the existence of a valid arbitration agreement between them. (Reply at 2–5.) 3 Santander denies the Arbitration Policy is either procedurally or substantively 4 unconscionable, (Reply at 5–9), and reasserts that Hayford’s twice initiating arbitral 5 proceedings against Santander constitutes a waiver of her ability to challenge the 6 enforceability of the arbitration agreement, (Reply at 10). 7 II. LEGAL STANDARD 8 The Arbitration Policy at issue is governed by the Federal Arbitration Act (“FAA”). 9 The Supreme Court has recognized the FAA as a “liberal federal policy favoring arbitration 10 agreements, notwithstanding any state substantive or procedural policies to the contrary.” 11 Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). “[C]ourts 12 must place arbitration agreements on an equal footing with other contracts . . . and enforce 13 them according to their terms.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333 , 339 14 (2011) (internal citations omitted). 15 To resolve a motion to compel arbitration under the FAA, 9 U.S.C. § 1 et seq., a 16 district court must determine (1) whether the parties entered into a valid agreement to 17 arbitrate, and (2) whether the arbitration agreement encompasses the dispute at issue. 18 Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). If both 19 elements are met, the FAA requires the court to enforce the arbitration agreement. Id. “A 20 motion to compel arbitration is decided according to the standard used by district courts in 21 resolving summary judgment motions pursuant to Rule 56, Fed. R. Civ. P.” Coup v. 22 Scottsdale Plaza Resort, LLC, 823 F. Supp. 2d 931, 939 (D. Ariz. 2011). That is, “[i]f there 23 is doubt as to whether such an agreement exists, the matter, upon a proper and timely 24 demand, should be submitted to a jury. Only where there is no genuine issue of fact 25 concerning the formation of the agreement should the court decide as a matter of law that 26 the parties did or did not enter into such an agreement.” Three Valleys Mun. Water Dist. v. 27 E.F. Hutton & Co., Inc., 925 F.2d, 1136, 1141 (9th Cir. 1991). [28] 1 District courts apply state law principles governing the formation of contracts to 2 determine whether a valid arbitration agreement exists. First Options of Chicago, Inc. v. 3 Kaplan, 514 U.S. 938, 944 (1995). Where, as here, the Court has jurisdiction over a civil 4 action under 28 U.S.C. § 1331 (federal question), federal common law choice-of-law rules 5 apply to determine under which state’s law the formation of the alleged arbitration 6 agreement is to be analyzed. Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 7 2006). Federal common law follows the approach outlined in the Restatement (Second) of 8 Conflict of Laws, id., which provides that, absent an effective choice by the parties, “the 9 rights and duties of the parties with respect to an issue in contract are determined by the 10 local law of the state which, with respect to that issue, has the most significant relationship 11 to the transaction and the parties,” Restatement (Second) of Conflict of Laws § 188(1) 12 (Am. L. Inst. 1971). The Court agrees with Santander’s analysis that Arizona law governs 13 the formation of the alleged arbitration agreement, (Mot. at 4–5), and the Court views the 14 absence of a challenge to that analysis by Hayford as consent to that conclusion. 15 III. ANALYSIS 16 A. Existence of Arbitration Agreement 17 The formation of an enforceable contract under Arizona law requires “an offer, an 18 acceptance, consideration, and sufficient specification of terms so that the obligations 19 involved can be ascertained.” Rogus v. Lords, 804 P.2d 133, 135 (Ariz. Ct. App. 1991). 20 The FAA requires that an agreement to arbitrate be in writing, but “a party’s signature is 21 not necessary to bind him to arbitration if he was aware of the provision and it was in 22 writing.” Pinto v. USAA Ins. Agency Inc. of Tex., 275 F. Supp. 3d 1165 , 1168–69 (D. Ariz. 23 2017). A mutual promise between employer and employed to arbitrate or continued 24 employment alone may be sufficient consideration to support an arbitration agreement. 25 Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1108 (9th Cir. 2002) (mutual promise to 26 arbitrate as consideration); Coup, 823 F. Supp. 2d at 943–44 (citing Mattison v. Johnston, [27] 730 P.2d 286 , 288–90 (Ariz. Ct. App. 1986)) (continued employment of at-will employee 28 as consideration). 1 Santander provides specific evidence of the existence of an arbitration agreement 2 between Santander and Hayford in the form of the Arbitration Policy. The evidence is well3 founded by the declaration of a human resources employee with personal knowledge of 4 Santander’s new-hire practices and training software. The evidence shows that the written 5 Arbitration Policy was electronically provided to Hayford at the beginning of her 6 employment, that she accepted it by acknowledging it electronically and continuing 7 employment at Santander for over two years,3 and that Santander provided sufficient 8 consideration by both also binding itself to arbitration and prolonging Hayford’s 9 employment. The Court finds this evidence persuasive, particularly given that Hayford 10 could only access the Arbitration Policy and acknowledge it on the training system by using 11 a unique user ID and a confidential password that she generated. Moreover, the terms of 12 the arbitration agreement are sufficiently clear and specific. (Mot. Ex. B.) 13 Hayford’s general denials of having agreed to or received the Arbitration Policy or 14 any arbitration agreement between her and Santander are insufficient to place the material 15 fact of the existence of or the parties’ entry into the Arbitration Policy in dispute. Hayford 16 does not challenge the personal knowledge of the foundation witness for Santander’s 17 Exhibits to its Motion. She does not question the accuracy of the reports evidencing her 18 receipt and acknowledgment of the Arbitration Policy. She does not challenge the security 19 of the training system or her user-created password. In short, her affidavit fails to designate 20 specific facts showing that there is a genuine issue. 21 “If a party could get out of a contract by arguing that he did not recall making it, 22 contracts would be meaningless.” Blau v. AT&T Mobility, No. C 11-00541 CRB, 2012 WL 23 10546, at *4 (N.D. Cal. Jan. 3, 2012). Apart from a general denial, Hayford has failed to 24 present any specific facts to show she did not receive or acknowledge the Arbitration Policy 25 as against the evidence Santander presented, and Hayford thus fails to raise a genuine issue 26 of material fact on the issue of the existence of or parties’ entry into the Arbitration Policy [27] 28 3 The dates and length of Palfrey’s employment differ, but the Santander-averred facts relative to Palfrey are otherwise similar to those relative to Hayford. 1 that would preclude the Court’s determination of Hayford’s being subject to the agreement 2 as a matter of law. See Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993). 3 B. Enforcement of Arbitration Agreement 4 Hayford next argues that the Arbitration Policy cannot be enforced because it is both 5 procedurally and substantively unconscionable. (Resp. at 6–11.) Unconscionability is a 6 generally recognized contract defense that may invalidate arbitration agreements under the 7 FAA. Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681 , 687–88 (1996). Arizona 8 recognizes both types of unconscionability alleged by Hayford: procedural, which arises 9 in the bargaining process at the time of contract formation, and substantive, where the 10 contract terms are per se unconscionable. Nickerson v. Green Valley Recreation, Inc., [11] 265 P.3d 1108, 1117 (Ariz. Ct. App. 2011). “The determination of whether a contract is 12 unconscionable is to be made by the trial court as a matter of law.” Id. 13 Hayford argues that the Arbitration Policy is procedurally unconscionable because 14 she did not have the opportunity to negotiate its terms; it was presented to her on a “take it 15 or leave it” basis; her employment was conditioned on it; and she was never provided with 16 a copy of the rules of the American Arbitration Association (“AAA”) or informed that she 17 should review them. (Mot. at 9.) 18 Hayford asks the Court to find the arbitration agreement was a contract of adhesion 19 by applying California law, which is inappropriate where Arizona law applies. Hayford 20 does not examine the applicable factors under Arizona law, and on its own examination 21 the Court does not find they point to procedural unconscionability. Importantly, the 22 evidence does not support a conclusion that Hayford was unfairly surprised by the 23 Arbitration Policy. See Maxwell v. Fidelity Fin. Servs., 907 P.2d 51 , 57–58 (Ariz. 1995). 24 When Hayford began her employment, Santander required her to review and acknowledge 25 the Arbitration Policy, which is a separate document labelled “Arbitration Policy” in large, 26 bold print. (Mot. Ex. B.) This does not rise to the level of procedural unconscionablility 27 under Arizona law. See Duenas v. Life Care Ctrs. of Am., Inc., 336 P.3d 763 , 768–69 (Ariz. 28 2014). Moreover, the fact that Hayford states Santander did not give her a copy of the AAA 1 rules does not make a procedurally proper arbitration agreement a procedurally 2 unconscionable one. See Russ v. United Servs. Auto. Ass’n, No. CV-16-02787-PGR, 2017 3 WL 1953458 , at *4 (D. Ariz. May 11, 2017) (collecting cases). 4 Likewise, the grounds upon which Hayford asks the Court to find substantive 5 unconscionability of the Arbitration Policy do not apply with sufficient force to invalidate 6 it. (See Resp. at 9–11.) First, Hayford provides no evidence that participating in an 7 arbitration in Dallas, Texas—as the Arbitration Policy provides—would be oppressive by 8 creating an undue financial and logistical burden on her.4 As Santander points out in its 9 Reply, in Arizona, forum selection clauses are enforced unless the party claiming 10 unfairness or oppression meets the applicable burden of proof, and “[m]ere physical 11 inconvenience and increased costs are not enough to defeat a forum selection clause.” 12 Benson v. Casa De Capri Enters. LLC, No. CV-18-00006-PHX-DWL, 2019 WL 3430159 , 13 at *8–9 (D. Ariz. July 30, 2019) (quoting Bennett v. Appaloosa Horse Club, 35 P.3d 426 , 14 431 (Ariz. Ct. App. 2001)). And, as Santander also points out, the AAA rules provide for 15 alternative means to attend conferences and make evidentiary presentations, which reduce 16 the costs of out-of-state arbitration. (Reply at 8.) 17 Second, the Court disagrees that the terms of the Arbitration Policy conflict with the 18 FLSA by allowing Santander to recover costs not otherwise recoverable. The Arbitration 19 Policy states, “[t]he party that substantially prevails in the arbitration shall be entitled to 20 recover from the other party all arbitration fees and reasonable attorney’s fees incurred by 21 the party, as provided for by law”—not in instances when the law does not so provide. 22 (Mot. Ex. B (emphasis added).) For all these reasons, the Court declines to invalidate the 23 delegation provision on unconscionability grounds. 24 C. Waiver by Hayford 25 The Court finds that an enforceable arbitration agreement exists between Santander 26 and Hayford, as well as Santander and Palfrey, and that Plaintiffs’ FLSA claims fall within [27] 4 If anything, the record shows Hayford is able and willing to participate in arbitration 28 proceedings outside Arizona, as she herself initiated arbitration against Santander in Chicago, Illinois. 1 || its scope—a proposition Plaintiffs do not dispute. As a result, the Court need not address 2|| Santander’s argument that Hayford waived any objection to enforcement of the Arbitration || Policy for twice seeking arbitration of her claim prior to initiating the instant action. 4 D. Stay 5 Under 9 U.S.C. § 3 , the Court must stay rather than terminate proceedings pending || arbitration upon a party’s stay request if the Court determines that the issues involved are subject to arbitration under a written arbitration agreement, as is the case here. 8 || Accordingly, the Court will stay this proceeding pending the results of the arbitration. 9 IT IS THEREFORE ORDERED granting Defendant’s Motion to Compel || Arbitration and Stay Proceedings (Doc. 9). Under the parties’ valid arbitration agreements, Plaintiffs are compelled to individually arbitrate their claims. 12 IT IS FURTHER ORDERED staying these proceedings pending the results of the 13 || arbitrations. The parties shall file a joint status report within one week of the arbitrator’s □□ decisions or by February 11, 2022, whichever is sooner. 15 Dated this 11th day of August, 2021. CN 16 “wok: 17 □□□ hlee— Unifga StatesDistrict Judge [28] -9-