Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-00347/USCOURTS-cand-4_06-cv-00347-1/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1332 Diversity-Breach of Contract

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

AILEPATA LUAFAU, individually and on

behalf of all others similarly

situated,

Plaintiff,

v.

AFFILIATED COMPUTER SERVICES, INC.

AND ACS EDUCATION SERVICES, INC.,

Defendants.

 /

No. C 06-00347 CW

ORDER DENYING

PLAINTIFF'S

MOTION TO VACATE

THE ORDER TO STAY

LITIGATION AND TO

COMPEL

ARBITRATION

Plaintiff Ailepata Luafau has filed a Motion to Vacate this

Court's Order to Stay Litigation and to Compel Arbitration (Docket

No. 43). Defendants Affiliated Computer Services (ACS) and ACS

Education Services oppose this motion. Having considered all of

the papers filed by the parties, the Court DENIES Plaintiff's

motion.

Case 4:06-cv-00347-CW Document 49 Filed 09/12/06 Page 1 of 8
United States District Court

For the Northern District of California

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BACKGROUND

Plaintiff began working for Defendant ACS Education Services

on December 2, 2002. Defendant ACS Education Services processes

student college loans and has been doing so for over twenty years. 

Previously it was known as Academic Financial Services Association.

Its name was changed to ACS Education Services when Defendant ACS

acquired it in 2002. Both Defendant ACS and its subsidiary

Defendant ACS Education Services are Delaware corporations with

their principal places of business in Texas.

A week after Plaintiff was hired, she signed an Acceptance of,

and Agreement to, ACS' Dispute Resolution Plan. That contract

provides that the Dispute Resolution Plan (DRP) will be the

exclusive means for resolving any dispute or claim concerning the

terms and conditions of the signatory's employment with ACS. 

In January, 2006, Plaintiff, who now lives in Phoenix,

Arizona, filed this action in the Northern District of California. 

Plaintiff seeks to recover wages, penalty wages, punitive damages,

liquidated damages and civil penalties for all present and former

employees of Defendants based on Defendants' failure to pay wages

and provide breaks. 

In a May 15, 2006, order, this Court found that, under

California law, the Acceptance of, and Agreement to, ACS' Dispute

Resolution Plan is enforceable. (Order Granting Defendants' Motion

to Stay Litigation and to Compel Arbitration at 15.) This Court

therefore ordered that proceedings in this Court be stayed pending

arbitration and ordered Plaintiff to proceed with arbitration in

accordance with the terms of the DRP. (Id. at 16.) 

Case 4:06-cv-00347-CW Document 49 Filed 09/12/06 Page 2 of 8
United States District Court

For the Northern District of California

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Plaintiff filed and served her arbitration claim with the

American Arbitration Association (AAA) and Defendants' counsel on

May 30, 2006. (Plaintiff's Exh. I.) On June 9, 2006, the parties

agreed that Defendants would have until June 30, 2006, to file an

answering statement. (Plaintiff's Exh. G.) On June 22, 2006, AAA

faxed a letter to the parties stating that Defendants needed to pay

the fee to AAA. (Plaintiff's Exh. B.) On June 30, 2006,

Defendants faxed Plaintiff a copy of their answering statement and

submitted the claim to Judicial Arbitration and Mediation Services

(JAMS) but did not inform Plaintiff that they were filing with

JAMS. (Plaintiff's Exh. H and Defendants' Exh. 4.) Shortly

thereafter Defendants paid the full JAMS fee. (Defendants' Exh.

6.)

On July 17, 2006, Defendants notified AAA that they were

pursuing appointment of an arbitrator pursuant to the DRP, but did

not immediately inform Plaintiff of this. (Defendants' Exh. 11.) 

On July 18, Plaintiff's counsel via email asked Defendants why they

had not paid the fee to AAA and informed them that AAA would close

the case if they did not pay the fee by July 21, 2006. 

(Plaintiff's Exh. C.) In two reply emails, dated July 18 and 19,

Defendants' counsel explained that Plaintiff had not initiated the

arbitration in accordance with the DRP but that Defendants were

submitting the claim as required by the DRP and would have an

arbitration file open soon. (Plaintiff's Exhs. E and F.) 

Defendants did not specify in these emails that they had filed with

JAMS. (Id.) 

The portion of the DRP that sets forth the procedure to

Case 4:06-cv-00347-CW Document 49 Filed 09/12/06 Page 3 of 8
United States District Court

For the Northern District of California

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initiate arbitration provides:

3A. A party may initiate proceedings under these Rules at

any time, subject to any defenses . . . .

3B. Proceedings may be initiated by an Employee or

Applicant by serving a written request to initiate

proceedings on the Company's Dispute Resolution Plan

Administrator. The Company will promptly forward any

properly served request it has received to AAA or JAMS.

The portion of the DRP that provides for waiver of procedures

provides: "Any party who fails to object in writing, after

knowledge that any provision or requirements of these procedures

and Rules have not been complied with, shall be deemed to have

waived the right to object." DRP § 22.

LEGAL STANDARD

The Federal Arbitration Act (FAA) provides that if any suit or

proceeding is brought in a court of the United States upon any

issue referable to arbitration under a written agreement to

arbitrate, the court in which that suit is pending shall stay the

trial of the action until such arbitration has been had, provided

that the applicant for the stay is not in default in proceeding

with such arbitration. 9 U.S.C. § 3. A district court is

permitted to vacate a stay under 9 U.S.C. § 3 when a party defaults

in proceeding with arbitration following the stay of the district

court litigation. Sink v. Aden Enterprises, Inc., 352 F.3d 1197,

1199 (9th Cir. 2003). The FAA establishes that any doubts

concerning the scope of arbitrable issues, including allegations of

waiver, delay or like defenses, should be resolved in favor of

arbitration. Moses H. Cone Memorial Hosp. v. Mercury Const. Corp.,

460 U.S. 1, 24-25 (1983). Whether a party is in default in

proceeding with arbitration is a question of fact to be decided by

Case 4:06-cv-00347-CW Document 49 Filed 09/12/06 Page 4 of 8
United States District Court

For the Northern District of California

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the district court. Sink, 352 F.3d at 1199.

DISCUSSION

Plaintiff argues that Defendants are in default because, after

Plaintiff filed a claim with AAA, Defendants did not pay the filing

fee to AAA, causing AAA to close the proceeding. However,

Plaintiff's filing with AAA was not in accordance with the DRP. 

The DRP requires that an employee initiate arbitration by

submitting the claim to Defendants' DRP Administrator. Therefore,

Defendants were under no obligation to participate in the AAA

arbitration, and thus are not in default.

Plaintiff misinterprets the portion of the DRP that describes

when and how arbitration proceedings are to be initiated. Section

3A of the DRP describes when it is permissible to initiate an

arbitration. Thus, it provides the time frame, rather than the

procedure, for initiating arbitration. 

Section 3B of the DRP describes how an arbitration is to be

initiated. This section provides only one procedure for an

employee to follow to initiate arbitration, which is to serve a

written request to initiate arbitration on Defendants' DRP

Administrator. The fact that no other procedure is specified means

that no other procedure is permissible. Therefore, the only way

for an employee to comply with this provision is to serve a request

to initiate arbitration on the DRP Administrator. 

Plaintiff argues that initiation of arbitration by serving the

DRP Administrator is permissive because Section 3B uses the word

"may." The word "may" is permissive in this sentence in that it

provides the employee with the option to initiate arbitration. 

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United States District Court

For the Northern District of California

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Once an employee has chosen to initiate arbitration, however, the

only procedure for doing so under the DRP is to serve a request on

Defendants' DRP Administrator. Because she failed to serve her

request on the DRP Administrator, Plaintiff did not comply with the

DRP. 

On the other hand, Defendants initiated arbitration

proceedings in compliance with the DRP and this Court's order. 

Defendants initiated proceedings by forwarding the claim to their

DRP Administrator. This procedure is specifically described in

the DRP as the way in which a claim will be submitted to

arbitration. Additionally, the DRP provides that a "party" may

initiate proceedings at any time. Therefore, the DRP contemplates

that Defendants themselves, as well as Plaintiff, are permitted to

initiate proceedings. 

Plaintiff next argues that, under California law and the DRP,

Defendants waived their right to object to Plaintiff's improper

filing with AAA by failing to object immediately to the filing. 

Plaintiff relies on Intel Corp. v. Hartford Accident & Indem. Co.,

952 F.2d 1551, 1559 (9th Cir. 1991) for the proposition that, in

California, a party that acts in a manner inconsistent with the

right to arbitrate waives that right. 

However, Defendants objected in writing on July 18 and 19 in

emails to Plaintiff's counsel, as required by the DRP. Although

Defendants waited several weeks to make this written objection to

the AAA filing, the DRP does not provide a time period in which a

party must object before an objection is deemed waived. Therefore,

in light of the strong federal policy favoring arbitration, Moses

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United States District Court

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H. Cone Memorial Hosp., 460 U.S. at 24-25, the Court finds that

Defendants did not waive their right to object to Plaintiff's

filing with AAA.

Relying on Sink, 352 F.3d at 1199, Plaintiff further argues

that once a defendant has refused to pay arbitration fees and

thereby causes the arbitration to be closed, it may not pursue

another arbitration. In Sink, however, no arbitration proceeding

was pending when the plaintiff moved for an order vacating the stay

of litigation. Id. Additionally, the defendant in that case

agreed to pay arbitration fees to a specific arbitrator but failed

to do so before the due date, causing the only pending arbitration

proceeding to close. Id.

In contrast, Defendants did pay the JAMS fee as required by

the DRP, including Plaintiff's portion of the fee. Rather than

allowing the only pending arbitration to close, Defendants

initiated an arbitration proceeding and simultaneously filed their

answering statement. Defendants thereby ensured that the parties

could, and still can, pursue arbitration. Therefore, Sink is

distinguishable.

Plaintiff argues in her reply that Defendants submitted the

claim unlawfully and in violation of the DRP because they, rather

than Plaintiff, submitted the claim to JAMS. However, the DRP

provides that the DRP Administrator, not the employee, will submit

an employee's claim to an arbitrator, after receiving a request to

initiate proceedings. 

Finally, Plaintiff argues in her reply that Defendants have no

reason for filing with JAMS rather than proceeding with AAA. 

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United States District Court

For the Northern District of California

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However, Defendants are not obliged to provide a reason for their

choice of arbitrator. The DRP permits Defendants' DRP

Administrator to file with either AAA or JAMS. 

CONCLUSION

For the foregoing reasons, Plaintiff's Motion to Vacate the

Order to Stay Litigation and Compel Arbitration (Docket No. 43) is

DENIED. Plaintiff is ordered to proceed with arbitration with

JAMS, as initiated by Defendants. This case shall remain stayed,

pending arbitration. Arbitration shall proceed expeditiously. A

case management conference will be held on October 27, 2006, at

1:30 pm. If the arbitrator's award is made before the case

management conference, the parties shall notify the Court. 

IT IS SO ORDERED.

Dated: 9/12/06 

CLAUDIA WILKEN

United States District Judge

Case 4:06-cv-00347-CW Document 49 Filed 09/12/06 Page 8 of 8