Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_14-cv-05449/USCOURTS-cand-4_14-cv-05449-1/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-Petition for Removal

---

United States District Court 

Northern District of Californi

a

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

VILMA ZENELAJ, et al., 

Plaintiffs, 

v. 

HANDYBOOK INC., 

Defendant. 

Case No. 14-cv-05449-TEH 

ORDER GRANTING DEFENDANT’S 

MOTION TO COMPEL 

ARBITRATION 

 

This matter is before the Court on Defendant’s motion to compel the arbitration of 

Plaintiffs’ complaint. After carefully considering the arguments presented in the Parties’ 

written and oral submissions, Defendant’s motion to compel arbitration is hereby 

GRANTED, for the reasons set forth below. 

BACKGROUND 

Defendant Handybook is a technology company that offers an online platform 

through which customers in need of cleaning services can connect to independent cleaning 

professionals. Plaintiffs Vilma and Greta Zenelaj are independent cleaning professionals 

and users of this platform that have filed a class action lawsuit alleging that cleaners using 

the platform are misclassified as independent contractors, unlawfully denying them access 

to the employment benefits and protections required by California law. Oct. 30, 2014 

Compl. (Docket No. 1-1). As a result of this misclassification, Plaintiffs allege that 

Defendant failed to pay overtime and minimum wages, reimburse required business 

expenses, provide meal periods and rest periods, furnish accurate itemized wage 

statements, pay earned wages upon discharge, and remit gratuities. Plaintiffs additionally 

allege that Defendant engaged in unfair business practices. Finally, the Complaint seeks 

penalties under the Private Attorneys General Act (“PAGA”) for violations of the 

California Labor Code.

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 1 of 16
United States District Court 

Northern District of Californi

a

2 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

 On December 15, 2014, Defendant removed this action to federal court based on 

diversity jurisdiction. (Docket No. 1). On December 22, 2014, Defendant filed the present 

motion to compel arbitration of Plaintiffs’ claims. (Docket No. 8). Plaintiffs responded 

(Docket No. 16), and Defendant timely replied (Docket No. 17). On February 23, 2015, 

the Court heard oral argument on Defendant’s motion. 

LEGAL STANDARD 

The Federal Arbitration Act (“FAA”) applies to arbitration agreements in any 

contract affecting interstate commerce. See Circuit City Stores, Inc. v. Adams, 532 U.S. 

105, 119 (2001); 9 U.S.C. § 2. Section 4 of the FAA ensures that “private agreements to 

arbitrate are enforced according to their terms.” Volt Info. Scis., Inc. v. Bd. of Trs. of 

Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989). Accordingly, a party to an 

arbitration agreement can petition a United States District Court for an order directing that 

“arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. In 

addition, the FAA contains a mandatory stay provision. Id. § 3. 

Under the FAA, arbitration agreements “shall be valid, irrevocable, and enforceable 

save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 

U.S.C. § 2. “[T]he FAA’s purpose is to give preference (instead of mere equality) to 

arbitration provisions.” Mortensen v. Bresnan Communications, LLC, 722 F.3d 1151, 

1160 (9th Cir. 2013). Nonetheless, arbitration “is a matter of consent, not coercion.” Volt, 

489 U.S. at 479. In accordance with this principle, the Supreme Court has held that parties 

may agree to limit the issues subject to arbitration, and to arbitrate according to specific 

rules. Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 628 

(1985); Volt, 489 U.S. at 479. 

“[T]he party resisting arbitration bears the burden of proving that the claims at issue 

are unsuitable for arbitration.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 

(2000) (internal citations omitted). A court must defer to arbitration “unless it may be said 

with positive assurance that the arbitration clause is not susceptible of an interpretation that 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 2 of 16
United States District Court 

Northern District of Californi

a

3 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

covers the asserted dispute,” and “doubts should be resolved in favor of coverage.” AT&T 

Tech, Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986). 

DISCUSSION

Plaintiffs argue that the arbitration provision of the Parties’ Agreement is 

unconscionable and cannot be enforced. Opp’n at 9-23. Plaintiffs further argue that even 

if the arbitration provision is valid, their employment misclassification claims are not 

covered by the provision because they do not “relate to” the Agreement. Id. at 3-6. 

Conversely, Defendant contends that this Court cannot decide whether the 

arbitration provision in this case is unconscionable or applicable, because the arbitration 

provision delegates those threshold issues to an arbitrator. Mot. at 7. In light of prevailing 

case law, this Court is obligated to agree. Consequently, the Court need only determine 

whether Defendant’s assertion of arbitrability is “wholly groundless.” Qualcomm Inc. v. 

Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006) (applying Ninth Circuit law). The 

Court finds that it is not. However, the Court also finds that the Agreement’s waiver of 

Plaintiffs’ representative PAGA claims is invalid under state law, although an arbitrator 

must determine the proper forum in which those representative claims should proceed. 

I. The Scope, Validity, and Application of the Arbitration Provision Must Be 

Decided by the Arbitrator. 

Generally, in deciding whether to compel arbitration, a court must determine two 

“gateway” issues: (1) whether there is an agreement to arbitrate between the parties; and 

(2) whether the agreement covers the dispute. Howsam v. Dean Witters Reynolds, 537 

U.S. 79, 84 (2002). However, these gateway issues can be expressly delegated to the 

arbitrator where “the parties clearly and unmistakably provide otherwise.” AT&T, 475 

U.S. at 649 (emphasis added); see also First Options of Chicago, Inc. v. Kaplan, 514 U.S. 

938, 944 (1995) (“Courts should not assume that the parties agreed to arbitrate arbitrability 

unless there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.”). In cases where the 

parties “clearly and unmistakably intend to delegate the power to decide arbitrability to an 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 3 of 16
United States District Court 

Northern District of Californi

a

4 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

arbitrator,” a court’s inquiry is “limited ... [to] whether the assertion of arbitrability is 

‘wholly groundless.’” Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 

2006) (applying Ninth Circuit law). 

 Defendant contends that the Parties “clearly and unmistakably” agreed to allow an 

arbitrator to decide the arbitration provision’s validity, scope, and application, because the 

arbitration provision expressly incorporates the AAA Commercial Arbitration Rules.1

 

Mot. at 7. Within the AAA Rules, Rule 7(a) delegates all jurisdictional questions, 

including arbitrability and validity, to the arbitrator.2

 Plaintiffs respond that a mere 

reference to the AAA Rules does not constitute a “clear and unmistakable” agreement to 

arbitrate arbitrability in the context of this case. Opp’n at 7. Plaintiffs additionally argue 

that the Ninth Circuit decision on point limits delegation by incorporation to “sophisticated 

parties.” Id. 

The Court recognizes that the question of whether the incorporation of the AAA 

Rules is always “clear and unmistakable” evidence of the parties’ intent to arbitrate 

arbitrability is not a clearly settled question of law in the Ninth Circuit. Nonetheless, the 

overwhelming consensus of other circuits, as well as the vast majority of decisions in this 

district, support Defendant’s claim that, in the context of this case, incorporation of the 

AAA Rules effectively delegates jurisdictional questions, including arbitrability and 

validity, to the arbitrator. 

 In Oracle America, Inc. v. Myriad Group A.G., 724 F.3d 1069 (9th Cir. 2013), the 

Ninth Circuit determined that incorporation by reference to a set of rules analogous to the 

AAA Rules delegated jurisdictional questions to an arbitrator. Id. at 1073-75. 

Specifically, Oracle America held “that as long as an arbitration agreement is between 

 

1

 The Agreement provides, in relevant part: “The arbitration will be commenced and 

conducted under the Commercial Arbitration Rules (the ‘AAA Rules’) of the American 

Arbitration Association (‘AAA’) and, where appropriate, the AAA’s Supplementary 

Procedures for Consumer Related Disputes (‘AAA Consumer Rules’), both of which are 

available at the AAA website www.adr.org.” Ex. A to Dua Decl. at 5-6 (Docket No. 8-1). 2

 Rule 7(a) states: “The arbitrator shall have the power to rule on his or her own 

jurisdiction, including any objections with respect to the existence, scope, or validity of the 

arbitration agreement or to the arbitrability of any claim or counterclaim.” 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 4 of 16
United States District Court 

Northern District of Californi

a

5 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

sophisticated parties to commercial contracts, those parties shall be expected to understand 

that incorporation of the UNCITRAL rules delegates questions of arbitrability to the 

arbitrator.” Id. at 1075. Plaintiffs rely upon this language to argue that delegation of 

arbitrability through incorporation of the AAA Rules is only effective where the parties are 

sophisticated. Opp’n at 7. However, when read as a whole, Oracle America does not 

appear to foreclose a finding of clear and unmistakable delegation of arbitrability in other 

contexts. In fact, the reasoning provided by the court suggests just the opposite. 

In arriving at its narrowly worded holding, Oracle America notes: “Virtually every 

circuit to have considered the issue has determined that incorporation of the American 

Arbitration Association’s (AAA) arbitration rules constitutes clear and unmistakable 

evidence that the parties agreed to arbitrate arbitrability.” Id. at 1074 (citing Petrofac, Inc. 

v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012); Republic 

of Argentina v. BG Group PLC, 665 F.3d 1363, 1371 (D.C. Cir. 2012); Fallo v. High–Tech 

Inst., 559 F.3d 874, 878 (8th Cir. 2009); Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 

1373 (Fed. Cir. 2006); Terminix Int’l Co. v. Palmer Ranch LP, 432 F.3d 1327, 1332 (11th 

Cir. 2005); Contec Corp. v. Remote Solution Co., 398 F.3d 205, 208 (2d Cir. 2005)); see 

also Awuah v. Coverall N. Am., Inc., 554 F.3d 7, 10–12 (1st Cir. 2009) (finding same); but 

see Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 777 & n. 1, 780 (10th 

Cir. 1998)). Importantly, none of these cases limit themselves to sophisticated parties. 

Furthermore, before providing the narrow language of its holding, Oracle America

stated: “We see no reason to deviate from the prevailing view that incorporation of the 

UNCITRAL arbitration rules is clear and unmistakable evidence that the parties agreed the 

arbitrator would decide arbitrability.” Id. at 1074-75. It is therefore an appropriate 

interpretation of Oracle America that the Ninth Circuit issued a narrow holding limited to 

its facts - sophisticated parties to a commercial contract - but favorably acknowledged the 

“prevailing view” expressed in the cited cases, all of which found clear and unmistakable 

delegation of arbitrability regardless of the parties’ sophistication. 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 5 of 16
United States District Court 

Northern District of Californi

a

6 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

This understanding of Oracle America is additionally supported by nearly every 

subsequent decision in the Northern District of California, which has consistently found 

effective delegation of arbitrability regardless of the sophistication of the parties. See, e.g.,

In re: Cathode Ray Tube (CRT) Antitrust Litig., No. 3:14-CV-02510-SC, 2014 WL 

7206620, at *4 (N.D. Cal. Dec. 18, 2014) (finding delegation in the context of antitrust 

litigation); Bernal v. Sw. & Pac. Specialty Fin., Inc., No. 12–CV–05797–SBA, 2014 WL 

1868787, at *4 (N.D. Cal. May 7, 2014) (same, in online loan agreement); Crook v. 

Wyndham Vacation Ownership, Inc., No. 13–CV–03669–WHO, 2013 WL 6039399, at *4, 

16 (N.D. Cal. Nov. 8, 2013) (same, in time share agreement). Despite all being issued 

after Oracle America, none these cases applied a “sophisticated parties” limitation, and all 

of them found that a contract’s application of the AAA Rules “clearly and unmistakably” 

delegated questions of arbitrability to the arbitrator. 

 Moreover, these post-Oracle America decisions by the Northern District of 

California largely comport with the pre-Oracle America decisions in this district. See, e.g., 

Kimble v. Rhodes Coll., Inc., No. 10-5786-EMC, 2011 WL 2175249, at *2-4 (N.D. Cal. 

June 2, 2011) (finding that reference to the AAA Rules manifests “clear and unmistakable 

evidence of the parties’ agreement to arbitrate arbitrability”); Clarium Capital Mgmt. LLC 

v. Choudhury, No. 08–5157-SBA, 2009 WL 331588, at *5 (N.D. Cal. Feb. 11, 2009) 

(“When the arbitration agreement explicitly incorporate[s] rules that empower an arbitrator 

to decide issues of arbitrability, the incorporation serves as clear and unmistakable 

evidence of the parties’ intent to delegate such issues to an arbitrator.”); Visa USA, Inc. v. 

Maritz, Inc., No. 07–05585-JSW, 2008 WL 744832 (N.D. Cal. Mar. 18, 2008) (holding the 

same); Anderson v. Pitney Bowes, Inc., No. 04-4808-SBA, 2005 WL 1048700, at *2-4 

(N.D. Cal. May 4, 2005) (same). 

 This articulation of the rule is also found in a number of notable California state 

court cases. See, e.g., Rodriguez v. American Technologies, Inc., 136 Cal. App. 4th 1110, 

1123 (2006) (holding that although the scope of an arbitration clause generally is a 

question for the court, parties clearly and unmistakably agreed to have the arbitrator 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 6 of 16
United States District Court 

Northern District of Californi

a

7 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

determine the scope of the clause where the contract mandated arbitration in accordance 

with AAA Rules); Dream Theater, Inc. v. Dream Theater, 124 Cal. App. 4th 547, 550 

(2004) (same). 

Consequently, when viewed within the context of the decision’s reasoning, as well 

as the great weight of prevailing case law, it is likely that while Oracle America’s holding 

limited itself to sophisticated parties, it does not support Plaintiffs’ contention that only 

sophisticated parties can “clearly and unmistakably” delegate the issue of arbitrability by 

incorporating the AAA Rules. Put another way, Oracle America does not foreclose the 

possibility that unsophisticated parties can clearly and unmistakably delegate arbitrability 

to an arbitrator through the incorporation of the AAA Rules. 

However, this issue is not without argument to the contrary. In a recent decision in 

this district, Judge Lucy Koh wrote that Oracle America “expressly limited its holding” to 

(1) commercial contracts (2) that are between sophisticated parties. Tompkins v. 23andMe, 

Inc., No. 5:13-CV-05682-LHK, 2014 WL 2903752, at *11 (N.D. Cal. June 25, 2014). 

Although dicta, 3 Tompkins went on to explain: 

There is good reason not to extend this doctrine from 

commercial contracts between sophisticated parties . . . . 

Indeed, the Supreme Court held that by default, courts should 

decide arbitrability because the question of “who (primarily) 

should decide arbitrability” is “rather arcane,” and “[a] party 

often might not focus upon that question or upon the 

significance of having arbitrators decide the scope of their own 

powers.” The “clear and unmistakable” test thus established a 

“heightened standard” to evince delegation. 

Id. (internal citations omitted). Tompkins also noted that in at least one decision, a 

California Court of Appeal has expressed “strong doubts” about whether a “mere 

reference” to these rules provides adequate notice to an individual employee. Id. (citing 

Ajamian v. CantroCO2e, L.P., 203 Cal. App. 4th 771, 790 (2012)). 

 

3 Tompkins ultimately found a lack of “clear and unmistakable” evidence of the parties’ 

intent to delegate arbitrability because of the nature of the contract, not the sophistication 

of the parties. 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 7 of 16
United States District Court 

Northern District of Californi

a

8 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Additional support for this position is found in Moody v. Metal Supermarket 

Franchising Am., Inc., No. 13–CV–5098–PJH, 2014 WL 988811 (N.D. Cal. Mar. 10, 

2014). In that case, while the court did not cite Oracle America or even address the 

sophistication of the parties, it nonetheless refused to find the delegation of arbitrability in 

a series of franchise agreements because the “agreements themselves d[id] not quote this 

portion of Rule 7, nor d[id] they even refer specifically to Rule 7.” Id. at *10. Moody

determined that a reference to the “then current commercial arbitration rules of the AAA” 

was insufficient evidence of “clear and unmistakable” intent to delegate arbitrability, 

contrasting the contract’s language with an express delegation provision that directly 

quotes Rule 7. Id. at *11. 

 Despite the analysis provided in Tompkins and Moody, those cases are nonetheless 

at odds with the prevailing trend of case law as described above. Further, Tompkin’s 

discussion of the alleged “sophisticated parties” limitation was merely dicta, and Moody 

neither references Oracle America nor discusses sophistication. Consequently, regardless 

of their sophistication, the Court finds that the Parties in this case clearly and unmistakably 

delegated the question of arbitrability to the arbitrator when they expressly incorporated 

the AAA Rules into their Agreement. As a result, any questions regarding the arbitration 

provision’s validity, scope, or application to this dispute must be decided by the arbitrator. 

Should the Ninth Circuit clarify its decision in Oracle America and expressly limit 

delegation by incorporation to sophisticated parties, it is unclear whether this Court would 

decide the issue differently. Oracle America provided no guidance to the district courts on 

how to determine whether a party is sufficiently “sophisticated,” and similar discussions of 

sophistication in other legal contexts is largely unhelpful. Certainly, Plaintiffs are not as 

sophisticated as the large corporations that litigated the case in Oracle America. However, 

Defendant contends that Plaintiffs are experienced businesswomen, in addition to 

professional cleaners, and can therefore be expected to have some level of sophistication in 

the area of employment contracts. Reply at 3-4. At the hearing, this Court raised a 

number of questions, including whether the involvement of experienced attorneys imputes 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 8 of 16
United States District Court 

Northern District of Californi

a

9 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

sophistication to the parties, and whether the parties need to be experienced in the area of 

contract law, or merely in the handling of contracts. All of these questions remain. For the 

moment, however, this Court finds insufficient support to interpret Oracle America in the 

uniquely restrictive manner suggested by Plaintiffs, and therefore leaves these difficult 

questions for another day. 

II. Defendant’s Claim of Arbitrability Is Not Wholly Groundless. 

 In cases where the parties “clearly and unmistakably intend to delegate the power to 

decide arbitrability to an arbitrator,” the district court’s inquiry is “limited . . . [to] whether 

the assertion of arbitrability is ‘wholly groundless.’” Qualcomm Inc. v. Nokia Corp., 466 

F.3d 1366, 1371 (Fed. Cir. 2006) (applying Ninth Circuit law) (citing Dream Theater, Inc. 

v. Dream Theater, 124 Cal. App. 4th 547 (2004)). The “wholly groundless” inquiry allows 

the court to prevent a party from “asserting any claim at all, no matter how divorced from 

the parties’ agreement, to force an arbitration.” Id. at 1373 n.5. In conducting this inquiry: 

[T]he district court should look to the scope of the arbitration 

clause and the precise issues that the moving party asserts are 

subject to arbitration. Because any inquiry beyond a “wholly 

groundless” test would invade the province of the arbitrator, 

whose arbitrability judgment the parties agreed to abide by in 

the [agreement], the district court need not, and should not, 

determine whether [plaintiff’s claims] are in fact arbitrable. If 

the assertion of arbitrability is not “wholly groundless,” the 

district court should conclude that it is “satisfied” pursuant to 

section 3 [of the FAA]. 

Id. at 1374. If a court finds that the assertion of arbitrability is not “wholly groundless,” it 

should stay the action pending a ruling on arbitrability by the arbitrator. Id. 

 The arbitration provision in this case is broad, providing the arbitration of “any 

dispute, controversy or claim related to this Agreement.” Ex. A to Dua Decl. at 5 (Docket 

No. 8-1). A review of the complaint does not foreclose the possibility that Plaintiffs’ 

claims relate to the Agreement. See United Steelworkers of Am. v. Warrior & Gulf 

Navigation Co., 363 U.S. 574, 582-83 (1960) (“An order to arbitrate the particular 

grievance should not be denied unless it may be said with positive assurance that the 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 9 of 16
United States District Court 

Northern District of Californi

a

10 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

arbitration clause is not susceptible of an interpretation that covers the asserted dispute. 

Doubts should be resolved in favor of coverage.”). 

 Plaintiffs’ dispute could plausibly “relate to” the Agreement for a number of 

reasons. First, Plaintiffs assert that they were employees of Defendant when they provided 

cleaning services arranged through Defendant’s platform, while the Agreement expressly 

disclaims the existence of an employment relationship, stating: “Handybook.com is not an 

employment service and does not serve as an employer of any User.” Ex. A to Dua Decl. 

at 3. Second, Defendant “supplies a medium for the exchange of money,” including the 

money paid to Plaintiffs, and the Agreement is the only contract that governs this 

exchange. Id. at 2. Plaintiffs’ claims relate, in part, to the money they earned or were 

entitled to for the cleaning services they offered through Defendant’s platform. Finally, 

much of the evidence that will be considered to determine whether Plaintiffs were properly 

classified as independent contractors is found in the provisions of the contract, including 

clauses that detail Defendant’s right to terminate Plaintiffs’ employment, Plaintiffs’ right 

to and method of payment, and Defendant’s liability for disputes between Plaintiffs and 

individual clients. See S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 

Cal.3d 341, 350-51 (1989) (providing factors considered in employment classification). 

 Plaintiffs respond by highlighting cases that found employment misclassification 

claims were not covered by the disputed contract’s choice-of-law and forum selection 

provisions. Opp’n at 4-6 (citing Narayan v. EGL, Inc., 616 F.3d 895, 899 (9th Cir. 2010);

Cotter v. Lyft, Inc., No. 13-04065-VC, 2014 3884416 (N.D. Cal. Aug. 7, 2014); Quinonez 

v. Empire Today, LLC, No. 10-02048-WHA, 2010 WL 4569873 (N.D. Cal. Nov. 4, 2010)). 

The essential reasoning of these decisions was that employment misclassification claims 

are statutory in nature and therefore do not concern, and are not governed by, the 

underlying contract. While this reasoning is compelling, and may indeed be convincing to 

the arbitrator, it can be argued that choice-of-law and forum selection provisions do not 

benefit from the same strong presumption that favors the arbitration of disputes. See, e.g.,

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 10 of 16
United States District Court 

Northern District of Californi

a

11 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Mortensen v. Bresnan Comm’n, LLC, 722 F.3d 1151, 1160 (9th Cir. 2013) (“[T]he FAA’s 

purpose is to give preference (instead of mere equality) to arbitration provisions.”). 

 Because the Court has found that an arbitrator should determine the issue of 

arbitrability, it reserves judgment as to whether the arbitration provision actually covers 

Plaintiffs’ causes of action, applying instead the “wholly groundless” standard required by 

case law. To this end, the Court finds that Defendant’s argument that the preferential 

nature of arbitration provides some basis for a finding that the employment 

misclassification claims “relate to” the Parties’ Agreement is not “wholly groundless.” 

However, this should not be interpreted as the Court endorsing Defendant’s position, as it 

might have arrived at a different conclusion under a less forgiving standard. Nonetheless, 

the Court must now consider whether the Agreement’s class and representative action 

waivers change this assessment. 

 

III. The Class Arbitration Waiver is Valid. 

The Ninth Circuit has expressly endorsed sending individually named plaintiffs’ 

claims to arbitration despite class allegations, and has found class waivers in arbitration 

agreements enforceable. Murphy v. DirectTV, Inc., 724 F.3d 1218, 1226 (9th Cir. 2013) 

(“Section 2 of the FAA, which under Concepcion requires the enforcement of arbitration 

agreements that ban class procedures, is the law of California and of every other state.”); 

accord Kairy v. Supershuttle, Int’l, No. 08-02993-JSW, 2012 WL 4343229, at *3 (N.D. 

Cal. Sept. 20, 2012) (“[C]ourts must compel arbitration even in the absence of the 

opportunity for plaintiffs to bring their claims as a class action.”). 

The arbitration provision at issue in this case contains a valid class action waiver. 

Ex. A to Dua Decl. at 6 (“To the full extent permitted by law, (a) no arbitration will be 

joined with any other; (b) there is no right or authority for any Dispute to be arbitrated on a 

class-action basis or to utilize class action procedures[.]”). Consequently, if the arbitrator 

determines that Plaintiffs’ substantive claims are arbitrable (i.e., that they “relate to” the 

Agreement), named Plaintiffs can be required to arbitrate their claims on an individual 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 11 of 16
United States District Court 

Northern District of Californi

a

12 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

basis. Accordingly, the class claims are stayed pending a decision on arbitrability by the 

arbitrator. 

IV. The Representative Action Waiver is Invalid. 

In addition to the class action waiver, the Agreement in this case also contains a 

representative action waiver. Ex. A to Dua Decl. at 6 (“To the full extent permitted by law 

. . . there is no right or authority for any Dispute to be brought in a purported representative 

capacity on behalf of the general public or any other persons.”). Defendant contends that 

this waiver requires the Court to dismiss Plaintiffs’ representative PAGA claims. Mot. at 

13-15. Conversely, Plaintiffs argue that the waiver is invalid under state law, and the 

representative PAGA claims should proceed in this Court. Opp’n at 24-25. 

The Private Attorneys General Act permits individuals to bring representative 

claims for an employer’s violation of the California Labor Code. Cal. Lab. Code §§ 2699 

et seq. These individuals essentially act as private attorneys general, and can seek 

penalties for violations “that could otherwise only be assessed by California’s Labor and 

Workforce Development Agency.” Cunningham v. Leslie’s Poolmart, Inc., No. 13-2122-

CAS, 2013 WL 3233211, at *5 (C.D. Cal. June 25, 2013). In Iskanian v. CLS Transp. 

L.A., LLC, 59 Cal. 4th 348 (2014), the California Supreme Court held that arbitration 

agreements cannot waive the ability to pursue representative PAGA actions because a 

“PAGA representative action is . . . a type of qui tam action,” and the “government entity 

on whose behalf the plaintiff files suit is always the real party in interest in the suit.” Id. at 

382. Responding to the argument that the Federal Arbitration Act preempts the state 

policy invalidating PAGA waivers, the court concluded “that the rule against PAGA 

waivers does not frustrate the FAA’s objectives because . . . the FAA aims to ensure an 

efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute 

between an employer and the state Labor and Workforce Development Agency.” Id. at 

384 (emphasis in original). 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 12 of 16
United States District Court 

Northern District of Californi

a

13 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Defendant correctly asserts that this Court is not bound by Iskanian and cites a 

number of decisions in this circuit that have declined to follow the California Supreme 

Court. Mot. at 14 n. 4 (compiling cases). The cases cited by Defendant have generally 

found that California’s policy barring representative PAGA waivers frustrates the 

objectives of the FAA, which is prohibited by AT&T Mobility LLC v. Concepcion, 131 

S.Ct. 1740, 1751 (2011). This Court disagrees. 

Defendant identifies two decisions from the Northern District of California that 

have found California’s policy preempted by the FAA. Mot. at 14 (citing Parvataneni v. 

E*Trade Fin. Corp., 967 F.Supp.2d 1298 (2013)); Def.’s Admin. Mot. at 2 (Docket No. 

21) (citing Estrada v. CleanNet USA Inc., et al., No. 14-01785-JSW (N.D. Cal. Feb. 24, 

2015)). In response, Plaintiffs’ cite to a recent decision in this district that determined 

California’s policy was not preempted by the FAA. Pls.’ Stmt. of Recent Decision at 1 

(Docket No. 18) (citing Hernandez, et al. v. DMSI Staffing, LLC, et al., No. 14-1531-EMC, 

2015 WL 458083 (N.D. Cal. Feb. 3, 2015)). The Court is therefore presented with 

persuasive authority in support of either outcome. After careful consideration, and with 

full awareness that this issue may soon be resolved by the Ninth Circuit Court of Appeals, 

this Court chooses to follow Judge Chen’s well-reasoned decision in Hernandez. 

In Hernandez, the court agreed with Iskanian’s conclusion that the FAA does not 

preempt California’s policy barring PAGA waivers, and found that Concepcion, which 

was about class action waivers, does not apply. Id. at *6. The court explained that 

Concepcion was focused on the largely procedural attributes of class actions that make 

them inconsistent with the FAA’s objective of ensuring the efficient resolution of disputes 

- attributes that are not shared by PAGA actions. Id. (citing Concepcion, 131 S.Ct. at 

1751); Baumann v. Chase Inv. Services Corp., 747 F.3d 1117, 1123 (“[U]nlike Rule 23(a), 

PAGA contains no requirements of numerosity, commonality, or typicality.”). Concepcion 

emphasized the formality of class certification, such as the requirement for the opportunity 

to be heard and opt-out rights - time-consuming processes that frustrate the objectives of 

the FAA and are not present in representative PAGA actions because PAGA does not bind 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 13 of 16
United States District Court 

Northern District of Californi

a

14 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

other employees. Hernandez, 2015 WL 458083, at *6 (citing Concepcion, 131 S.Ct. at 

1751); Cal. Lab. Code § 2699(g)(1). Consequently, Hernandez reasoned, “[t]he dueprocess-related procedural requirements of formal class actions do not obtain in PAGA 

representative actions. Thus, the Iskanian rule against waiver of PAGA claims does not 

threaten to undermine the fundamental attributes of arbitration.” 2015 WL 458083, at *6. 

In addition to the many reasons that PAGA waivers are not analogous to class 

action waivers, and therefore not contemplated by Concepcion, PAGA claims cannot be 

waived because of their unique qui tam-like nature and the manner in which they implicate 

federalism concerns. Herandez explained that the real party in interest in a PAGA claim is 

the state, not the parties that concede to the waiver and agree to arbitration. Id. at *7. 

Where the objective of the FAA is to guarantee the efficient resolution of private disputes, 

that objective is not frustrated when the dispute is between the employer and the State, as 

with PAGA claims. Id. (explaining that in a PAGA action, the government exercises 

initial control over the action, receives the lion share of the statutory recovery, and is 

bound by any judgment obtained). Finally, Hernandez noted the federalism concerns that 

strongly advise against a finding of preemption in this context, explaining that “[l]abor law 

enforcement falls squarely within a state’s police powers.” Id. at *8-9 (citing Metro. Life 

Ins. Co. v. Massachusetts, 471 U.S. 724, 756 (1985)). Like the court in Hernandez, this 

Court is hesitant to intrude upon the State’s law enforcement activities, which are “central 

to state sovereignty.” Metro Life Ins. Co., 471 U.S. at 756; see also Printz v. United 

States, 521 U.S. 898, 928 (1997) (“It is an essential attribute of the States’ retained 

sovereignty that they remain independent and autonomous within their proper sphere of 

authority.”). 

The Court therefore concludes that barring the waiver of representative PAGA 

claims and requiring such claims to be arbitrated does not interfere with the objectives and 

fundamental attributes of arbitration as provided in the FAA. Cf. Concepcion, 131 S.Ct. at 

1748. Defendant in this case has not shown that arbitration of these claims would be 

particularly complex, cumbersome, time-consuming, or expensive. Furthermore, where 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 14 of 16
United States District Court 

Northern District of Californi

a

15 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

federalism concerns weigh heavily upon the Court’s determination, absent clear direction 

from the Ninth Circuit, the Court denies Defendant’s request to enforce the waiver of 

Plaintiffs’ representative PAGA claims. 

 As noted by Hernandez, “The fact that the waiver provisions of the arbitration 

clauses at issue cannot be enforced to bar PAGA representative claims does not necessarily 

dictate which forum is proper for their adjudication.” Hernandez, 2015 WL 458083, at *9. 

While the arbitration clause at issue in this case is broadly constructed, the inclusion of the 

representative action waiver suggests that the Parties did not anticipate that PAGA 

representative claims would be arbitrated. See id. (citing Iskanian, 59 Cal. 5th at 391). 

While it sounds in reason to the Court that these representative claims should not be 

subject to arbitration, as the real party in interest is a third party (the State of California), 

which did not concede to the arbitration of its disputes, the question of arbitrability is 

nonetheless left to the decision of the arbitrator, pursuant to AAA Rule 7(a). Accordingly, 

Plaintiffs’ representative PAGA claims are stayed along with the rest of this action, 

pending a decision on arbitrability of those representative claims by the arbitrator. 

 

CONCLUSION

In light of the Parties’ decision to conduct the resolution of their dispute in 

accordance with the AAA Commercial Rules, the Court leaves the question of arbitrability 

to be decided by the arbitrator in accordance with the clear and unmistakable intent of the 

Parties as defined by prevailing case law. Additionally, the Court finds that the 

Agreement’s waiver of Plaintiffs’ statutory right to pursue representative PAGA claims is 

invalid as a matter of state law. However, as with the other causes of action asserted by 

Plaintiffs, the arbitrability of these representative claims must be decided by an arbitrator. 

Therefore, the Court hereby GRANTS Defendant’s motion to compel arbitration. 

Additionally, in accordance with Section 3 of the FAA, the Court STAYS these 

proceedings pending a decision on arbitrability by the arbitrator. The Parties shall file a 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 15 of 16
United States District Court 

Northern District of Californi

a

16 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

joint status statement within one week of the arbitrator’s decision on arbitrability or by 

June 1, 2015, whichever is sooner. 

IT IS SO ORDERED.

Dated: 03/03/15 _____________________________________ 

THELTON E. HENDERSON 

United States District Judge 

Case 4:14-cv-05449-HSG Document 26 Filed 03/03/15 Page 16 of 16