Bazine v. Kelly Services Global, LLC

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION [7] 8 SAMY BAZINE, on behalf of himself and Case No. 22-cv-07170-BLF all others similarly situated, [9] Plaintiff, ORDER GRANTING DEFENDANT’S 10 MOTION TO COMPEL v. ARBITRATION; AND STAYING 11 ACTION KELLY SERVICES GLOBAL, LLC; 12 KELLY SERVICES USA, LLC; and MEDI [Re: ECF 24] MALL, INC., [13] Defendants. [17] 18 Plaintiff Samy Bazine (“Bazine”) brings this putative class action against Defendants Kelly 19 Services Global, LLC and Kelly Services USA, LLC (collectively, “Kelly”), and Defendant Medi 20 Mall, Inc. (“Medi Mall”), asserting a single claim under California’s unfair competition law 21 (“UCL”), Cal. Bus. & Prof. Code § 17200 . The UCL claim is grounded in alleged violations of 22 California’s wage and hour laws by Kelly and Medi Mall (collectively, “Defendants”). 23 Kelly has filed a motion to compel arbitration and dismiss, or in the alternative, stay the 24 litigation pending completion of arbitration. See Mot., ECF 24. The motion is joined by Medi 25 Mall and opposed by Bazine. See Joinder, ECF 26; Opp. ECF 27. For the reasons discussed 26 below, the motion to compel arbitration is GRANTED and the action is STAYED pending 27 completion of arbitration. 1 I. BACKGROUND 2 Defendant Kelly is a Michigan-based temporary employment agency that operates 3 throughout the United States. See Stanton Decl. ¶¶ 4-5, ECF 24-1. Kelly uses an online 4 eRegistration process for onboarding Kelly temporary employee (“KTE”) applicants. See id. ¶ 5 . 5 “Kelly’s eRegistration process is a standardized process through which applicants complete an 6 employment application, releases for drug screening and reference checks, a ‘Dispute Resolution 7 and Mutual Agreement to Binding Arbitration’ form (‘Arbitration Agreement’), Form W-4, 8 Employee Handbook Acknowledgment, Kelly Handbook, Direct Deposit pay options, and other 9 hiring and onboarding forms.” Id. ¶ 6 . 10 Plaintiff Bazine, a California resident, completed Kelly’s eRegistration process twice, the 11 first time on October 10, 2018, and the second time on July 17, 2020. See id. Stanton Decl. ¶¶ 1612 26; Bazine Decl. ¶¶ 1, 6. During each registration, Bazine electronically signed a version of 13 Kelly’s Arbitration Agreement. See Stanton Decl. Exs. B (2020 Arbitration Agreement) & D 14 (2018 Arbitration Agreement). The two versions, referred to herein as the 2020 Arbitration 15 Agreement and the 2018 Arbitration Agreement, are substantially similar with one significant 16 difference, as highlighted below. 17 Both versions of the Arbitration Agreement contain the following language: 18 1. Agreement to Arbitrate. Kelly Services, Inc. and its subsidiaries (“Kelly” or “Kelly Services”) and I agree to use binding arbitration, instead of going to court, 19 for any “Covered Claims” that arise between me and Kelly Services, its related and affiliated companies, and/or any current or former employee of Kelly Services or 20 any related or affiliated company. I understand and agree that this Agreement is intended by the parties to be enforceable by me and Kelly, and the rights and 21 obligations under this Agreement directly apply to and benefit me and Kelly Services, Inc. and its subsidiaries, regardless of which of those entities signs this 22 Agreement. This Agreement will survive and apply to any and all periods of employment or re-employment with Kelly Services. [23] 24 2020 Arbitration Agreement ¶ 1; 2018 Arbitration Agreement ¶ 1. As relevant here, “Covered 25 Claims” that are subject to arbitration include “all common-law and statutory claims relating to my 26 employment, including, but not limited to, any claim for . . . unpaid wages. . . .” 2020 Arbitration 27 Agreement ¶ 2; 2018 Arbitration Agreement ¶ 2. “Covered Claims” do not include unfair 1 Both the 2020 Arbitration Agreement and the 2018 Arbitration Agreement provide that 2 “[t]he employment dispute resolution rules of the American Arbitration Association (‘AAA’) 3 effective at the time of filing will apply, a copy of which is available at all times on MyKelly.com 4 or upon request from your Kelly Representative.” 2020 Arbitration Agreement ¶ 4; 2018 5 Arbitration Agreement ¶ 4. Both versions state that the Arbitration Agreement will be governed 6 by the Federal Arbitration Act and, for California applicants and employees, by the California 7 Arbitration Act as well. 2020 Arbitration Agreement ¶ 4 & n.1; 2018 Arbitration Agreement ¶ 4 8 & n.1. Finally, both versions specify that any disputes related to Bazine’s employment 9 relationship with Kelly Services will be governed by Michigan law. 2020 Arbitration Agreement 10 ¶ 5; 2018 Arbitration Agreement ¶ 5. 11 There is one significant difference between the two versions of the Arbitration Agreement, 12 as the 2020 Arbitration Agreement contains the following language that is not included in the 13 2018 Arbitration Agreement: “This Agreement is not mandatory for people who reside or work in 14 California, and if I work or reside in California, I understand that the decision to sign this 15 Agreement to Arbitrate is entirely my own, and that neither my hiring nor continued employment 16 with Kelly is conditioned upon signing this Agreement to Arbitrate.” 2020 Arbitration Agreement 17 ¶ 1. 18 Bazine did not exercise his right to decline the 2020 Arbitration Agreement when he 19 registered with Kelly on July 17, 2020, and he signed the 2020 Arbitration Agreement as part of 20 that registration process. See Stanton Decl. ¶¶ 24-25. On July 29, 2020, Kelly placed Bazine in a 21 temporary position with Medi Mall. See id. ¶ 27 . Bazine’s assignment with Medi Mall began on 22 July 29, 2020, and he provided services to Medi Mall until his assignment ended on February 24, 23 2021. See id. 24 Bazine filed the complaint in this action in the Santa Clara County Superior Court on 25 October 6, 2022, asserting a single UCL claim against Kelly and Medi Mall. See Compl., ECF 226 1. Bazine alleges that Kelly and Medi Mall are liable under California’s UCL due to their 27 violations of California wage and hour laws governing minimum wages, overtime pay, meal and 1 representative for a putative class defined as “All persons employed by Defendants directly or 2 indirectly, whether through any staffing agencies and/or any other third parties in hourly or non3 exempt positions in California during the Relevant Time Period.” Id. ¶ 11 . Kelly, with the 4 consent of Medi Mall, removed the complaint to federal district court pursuant to the Class Action 5 Fairness Act (“CAFA”), 28 U.S.C. § 1332 (d)(2). See Not. of Removal, ECF 1. 6 II. LEGAL STANDARD 7 The Federal Arbitration Act (“FAA”) embodies a “national policy favoring arbitration and 8 a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or 9 procedural policies to the contrary.” AT&T Mobility, LLC v. Concepcion, 563 U.S. 333 , 345-46 10 (2011) (internal quotation marks and citations omitted). “The FAA, 9 U.S.C. § 1 et seq., requires 11 federal district courts to stay judicial proceedings and compel arbitration of claims covered by a 12 written and enforceable arbitration agreement.” Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 , 13 1175 (9th Cir. 2014). 14 “Generally, in deciding whether to compel arbitration, a court must determine two 15 ‘gateway’ issues: (1) whether there is an agreement to arbitrate between the parties; and (2) 16 whether the agreement covers the dispute.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 17 2015). The first of these issues is non-delegable and must be decided by the district court. See 18 Ahlstrom v. DHI Mortg. Co., Ltd., L.P., 21 F.4th 631, 635 (9th Cir. 2021) (“[P]arties cannot 19 delegate issues of formation to the arbitrator.”). However, “[i]t is well-established that some 20 ‘gateway’ issues pertaining to an arbitration agreement, such as issues of validity and arbitrability, 21 can be delegated to an arbitrator by agreement.” Id. at 634 . 22 “When the parties’ contract delegates the arbitrability question to an arbitrator, a court may 23 not override the contract.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 , 526 24 (2019). “[I]ncorporation of the AAA rules constitutes ‘clear and unmistakable’ evidence that the 25 parties intended to delegate the arbitrability question to an arbitrator.” Brennan, 796 F.3d at 1130 . 26 III. DISCUSSION 27 Applying the legal standards set forth above, the Court first must determine whether the 1 questions of validity and arbitrability have been delegated to the arbitrator. Third, if those 2 questions have not been delegated to the arbitrator, the Court must decide them. The Court makes 3 these determinations in turn, below. 4 A. Kelly and Bazine Entered into an Agreement to Arbitrate 5 In determining whether an arbitration agreement exists, a district court applies “ordinary 6 state-law principles that govern the formation of contracts.’” Reichert v. Rapid Invs., Inc., 56 7 F.4th 1220 , 1227 (9th Cir. 2022) (internal quotation marks and citation omitted). Both the 2018 8 Arbitration Agreement and the 2020 Arbitration Agreement state that any disputes related to 9 Bazine’s employment relationship with Kelly will be governed by Michigan law “regardless of 10 conflicts of law principles.” 2020 Arbitration Agreement ¶ 5; 2018 Arbitration Agreement ¶ 5. 11 Bazine challenges the Michigan choice of law provision, arguing among other things that it runs 12 afoul of California Labor Code § 925, which prohibits an employer from depriving a California 13 employee of the substantive protection of California law with respect to a controversy arising in 14 California. See Cal. Lab. Code § 925 (a)(2). Kelly concedes that the Michigan choice of law 15 provision cannot stand and thus is automatically severed under either version of the arbitration 16 agreement, providing that, “If any provision of this Agreement is determined to be unenforceable 17 or in conflict with a mandatory provision of applicable law, it shall be construed to incorporate 18 any mandatory provision and/or the unenforceable or conflicting provision shall be automatically 19 severed and the remainder of the Agreement shall not be affected.” 2020 Arbitration Agreement ¶ 20 16; 2018 Arbitration Agreement ¶ 16. The Court agrees with the parties that California law, rather 21 than Michigan law, applies. 22 “In California, [a] party petitioning the court to compel arbitration bears the burden of 23 proving by a preponderance of evidence the existence of an arbitration agreement.” Duval v. 24 Costco Wholesale Corp., No. 22-CV-02338-TSH, 2023 WL 3852694 , at *2 (N.D. Cal. June 5, 25 2023). A defendant may meet this burden by submitting a copy of the arbitration agreement 26 bearing the plaintiff’s electronic signature. See id. If the plaintiff challenges the validity of the 27 electronic signature, the defendant must establish by a preponderance of the evidence that the 1 and the 2020 Arbitration Agreement, bearing Bazine’s electronic signature. See Stanton Decl. 2 Exs. B (2020 Arbitration Agreement) & D (2018 Arbitration Agreement). Bazine does not 3 challenge the authenticity of his signature on those documents or otherwise dispute that he entered 4 into the arbitration agreements. 5 The parties disagree as to which of the two arbitration agreements signed by Bazine 6 governs the current dispute, the 2018 Arbitration Agreement or the 2020 Arbitration Agreement. 7 Kelly contends that the 2020 Arbitration Agreement governs because it was signed during 8 Bazine’s most recent registration with Kelly, pursuant to which he was placed with Medi Mall. 9 Bazine contends that the 2018 Arbitration Agreement governs, pointing to the following provision 10 of the 2018 Arbitration Agreement: 11 15. Modification and Revocation. This Agreement can be revoked or modified only by a writing signed by me and an authorized representative of Kelly Services, 12 referencing this Agreement and stating an intent to revoke or modify it. I understand that this Agreement shall survive the termination of my employment 13 and that, should Kelly Services rehire me at any time subsequent to any termination of my employment, this Agreement shall remain in full effect for subsequent 14 periods of employment. 15 2018 Arbitration Agreement ¶ 15. The 2020 Arbitration Agreement contains the same provision. 16 See 2020 Arbitration Agreement ¶ 15. 17 The two arbitration agreements are identical in several respects, but the 2020 Arbitration 18 Agreement provides that agreement to arbitration is optional for California residents while the 19 2018 Arbitration Agreement does not include such a provision. Compare 2020 Arbitration 20 Agreement ¶ 1 with 2018 Arbitration Agreement ¶ 1. “Where there is an inconsistency between 21 two agreements both of which are executed by all of the parties, the later contract supersedes the 22 former.” Frangipani v. Boecker, 64 Cal. App. 4th 860, 863 (1998). Accordingly, the Court 23 determines that the 2020 Arbitration Agreement supersedes the 2018 Arbitration Agreement. 24 Medi Mall is not a party to the 2020 Arbitration Agreement. However, a nonparty may 25 “possess the right to compel arbitration” when the nonparty is a third-party beneficiary of the 26 contract, a successor in interest to the contract, or an agent of a signatory. See Britton v. Co-op 27 Banking Grp., 4 F.3d 742, 745-47 (9th Cir. 1993). Here, Kelly asserts in the motion that Medi 1 beneficiary of the 2020 Arbitration Agreement and that the complaint alleges that the defendants 2 are agents of each other. See Mot. at 6. Bazine does not address that assertion in his opposition 3 and therefore appears to concede Medi Mall’s right to enforce the 2020 Arbitration Agreement. 4 See Sandoval v. Cnty. of Riverside, No. 5:22-cv-01319-MEMF (GJSx), 2023 WL 3821806 , at *5 5 (C.D. Cal. June 2, 2023) (“Sandoval fails to address this argument and, by his silence, appears to 6 concede it.”); Lansdown v. Bayview Loan Servicing, LLC, No. 22-CV-00763-TSH, 2023 WL 7 2934932, at *4 (N.D. Cal. Apr. 12, 2023) (“[A] failure to respond in an opposition to an argument 8 constitutes waiver or abandonment[.]”); Ramirez v. Ghilotti Bros. Inc., 941 F.Supp.2d 1197 , 1210 9 & n.7 (N.D. Cal. 2013) (collecting cases holding that a party concedes an argument by failing to 10 respond to it). 11 In light of the foregoing, the Court concludes that there is an agreement to arbitrate – the 12 2020 Arbitration Agreement – and that all Defendants properly may seek to compel arbitration 13 under that agreement. 14 B. The Question of Arbitrability is Delegated to the Arbitrator 15 Once the existence of an arbitration agreement has been determined, the next question is 16 whether the parties’ dispute falls within the scope of the agreement. Defendants contend that the 17 UCL claim falls with the scope of “Covered Claims” that must be arbitrated, while Bazine 18 contends that the UCL claim does not fall within the scope of arbitrable “Covered Claims” given 19 express contractual language excluding unfair competition claims from the definition of “Covered 20 Claims.” 21 The parties may delegate the arbitrability question to the arbitrator, and when they do so, 22 the Court lacks authority to decide arbitrability. See Henry Schein, 139 S. Ct. at 526 (“When the 23 parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the 24 contract.”). Defendants argue that the 2020 Arbitration Agreement delegates the question of 25 arbitrability to the arbitrator by means of the following language: “The employment dispute 26 resolution rules of the American Arbitration Association (‘AAA’) effective at the time of filing 27 will apply, a copy of which is available at all times on MyKelly.com or upon request from your 1 constitutes ‘clear and unmistakable’ evidence that the parties intended to delegate the arbitrability 2 question to an arbitrator.” Brennan, 796 F.3d at 1130 . Accordingly, the Court finds that it is for 3 the arbitrator to decide whether Bazine’s UCL claim is subject to arbitration under the 2020 4 Arbitration Agreement. 5 Bazine advances several reasons why, in his view, the contractual language recited above 6 does not adequately incorporate the AAA rules. First, he argues that the contractual language does 7 not satisfy the California requirements for incorporation set forth in Wolschlager v. Fid. Nat’l Title 8 Ins. Co., 111 Cal. App. 4th 784 (2003). Wolschlager states in relevant part as follows: “For the 9 terms of another document to be incorporated into the document executed by the parties the 10 reference must be clear and unequivocal, the reference must be called to the attention of the other 11 party and he must consent thereto, and the terms of the incorporated document must be known or 12 easily available to the contracting parties.” Id. at 790 . Bazine contends that the applicable AAA 13 rules were not “known or easily available” at the time the arbitration agreement was entered, 14 because the parties could not know what rules would be available when a demand for arbitration 15 was filed. The Court finds this argument to be unpersuasive. The 2020 Arbitration Agreement 16 clearly advises that it incorporates the AAA rules, and that Bazine could obtain a copy of the AAA 17 rules at any time on MyKelly.com or upon request from Kelly. Bazine presents no evidence that 18 the AAA rules have been modified in any material way that would affect the arbitrability question. 19 The Court finds that the 2020 Arbitration Agreement effectively incorporates the AAA rules. 20 Second, Bazine argues that the AAA rules are not adequately incorporated because the 21 arbitration agreement refers to the “employment dispute resolution rules of the American 22 Arbitration Association” when the rules actually are called the “Employment Arbitration Rules 23 and Mediation Procedures.” The governing cases use the common shortened title of “AAA rules” 24 when holding that incorporation is a sufficient delegation of arbitrability. See, e.g., G.G. v. Valve 25 Corp., 799 F. App’x 557 , 558 (9th Cir. 2020) (“[T]he teenagers clearly and unmistakably agreed 26 to arbitrate questions of arbitrability because the arbitration agreement incorporates AAA rules.’); 27 Brennan, 796 F.3d at 1130 (“[W]e hold that incorporation of the AAA rules constitutes clear and 1 that the AAA are adequately identified and incorporated into the 2020 Arbitration Agreement. 2 Third, Bazine argues that incorporation of the AAA rules is not sufficient to delegate the 3 arbitrability question where one party to the arbitration agreement is an unsophisticated litigant. 4 In Brennan, the Ninth Circuit addressed the issue of sophistication in dicta: 5 The issue of the sophistication of the parties was raised at oral argument. Our holding today should not be interpreted to require that the contracting parties be 6 sophisticated or that the contract be “commercial” before a court may conclude that incorporation of the AAA rules constitutes “clear and unmistakable” evidence of 7 the parties’ intent. Thus, our holding does not foreclose the possibility that this rule could also apply to unsophisticated parties or to consumer contracts. Indeed, the 8 vast majority of the circuits that hold that incorporation of the AAA rules constitutes clear and unmistakable evidence of the parties’ intent do so without 9 explicitly limiting that holding to sophisticated parties or to commercial contracts. 10 Brennan, 796 F.3d at 1130-31 . 11 In the wake of Brennan, district courts within the Ninth Circuit have split as to whether the 12 sophistication of the parties to the arbitration agreement matters. Bazine cites cases in which the 13 district courts declined to find that incorporation of the AAA rules constituted a clear and 14 unmistakable agreement to delegate the arbitrability question where one party to the contract was 15 unsophisticated. See, e.g., MacClelland v. Cellco P’ship, 609 F. Supp. 3d 1024 , 1031 (N.D. Cal. 16 2022) (collecting cases). Defendants cite cases going the other way, holding that incorporation of 17 the AAA rules was sufficient to delegate arbitrability regardless of the sophistication of the 18 parties. See, e.g., Patrick v. Running Warehouse, LLC, No. 2:21-cv-09978-ODW (JEMx), 2022 19 WL 10584136 , at *4 (C.D. Cal. Oct. 18, 2022) (collecting cases). This Court finds the cases cited 20 by Defendants to be more persuasive, and therefore concludes that the 2020 Arbitration 21 Agreement’s incorporation of the AAA rules is sufficient to delegate the arbitrability question to 22 the arbitrator, even accepting for purposes of this motion Bazine’s self-characterization as 23 “unsophisticated.” 24 Bazine asserts that Kelly is collaterally estopped from asserting that unfair competition 25 claims are excluded from the definition of “Covered Claims” subject to arbitration. That argument 26 properly should be raised before the arbitrator. Bazine also argues that the 2018 Arbitration 27 Agreement is procedurally and substantively unconscionable. As discussed above, the 2018 1 Bazine’s unconscionability arguments are immaterial. Moreover, where arbitrability has been 2 || delegated to the arbitrator, any challenge to the arbitration agreement based on unconscionability 3 is for the arbitrator to address, unless the unconscionability challenge is directed specifically to the 4 || delegation provision. See Brennan, 796 F.3d at 1133 ; Bell v. Redfin Corp., No. 20-CV-2264-AJB5 AGS, 2021 WL 5444791 , at *5 (S.D. Cal. Aug. 12, 2021). Bazine’s counsel stated at the hearing 6 || that the unconscionability challenge was directed to the arbitration agreement as a whole and not 7 specifically to the delegation provision. Thus, the challenge properly is directed to the arbitrator. 8 C. Conclusion 9 For the reasons discussed above, Defendants’ motion to compel arbitration is GRANTED. 10 || The Court elects to stay, rather than dismiss, the complaint pending arbitration. However, the 11 Court will direct the Clerk to administratively close the case. Either party may request that the 12 || case be reopened after arbitration, if appropriate. 5 13 IV. ORDER 14 (1) Defendants’ motion to compel arbitration is GRANTED. 3 15 (2) The parties SHALL commence arbitration within 60 days of the date of this order, 16 or show cause why they have not done so. 3 17 (3) The case is STAYED pending arbitration. 18 (4) The Clerk SHALL administratively close the case; and 19 (5) This order terminates ECF 24. [20] 21 Dated: June 21, 2023 BETH LABSON FREEMAN 23 United States District Judge