Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_19-cv-07314/USCOURTS-cand-3_19-cv-07314-2/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1331 Fed. Question: Employment Discrimination

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United States District Court

Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

CRYSTAL SCRIPPS MCKELLAR,

Plaintiff,

v.

MITHRIL CAPITAL MANAGEMENT 

LLC, et al.,

Defendants.

Case No. 19-cv-07314-CRB 

ORDER COMPELLING 

ARBITRATION, DISMISSING CLAIMS, 

AND DENYING PRELIMINARY 

INJUNCTION

Crystal Scripps McKellar once served as a Managing Director and General Counsel of 

Mithril Capital Management LLC. Now, she is embroiled in no fewer than three lawsuits in three 

separate states with Mithril Capital, its owner and Managing General Partner Ajay Royan, and a

related entity, Mithril GP Employee Feeder LLC (collectively, “Mithril”). McKellar brought the 

instant action in an effort to enjoin Mithril from prosecuting the other two. Mithril has moved to 

compel certain of her claims to arbitration, and to stay or dismiss the rest of her case under the 

“first-to-file” rule. The Court agrees that it lacks jurisdiction over McKellar’s claims. Mithril’s 

motion is therefore granted, and McKellar’s motion is denied. Because no hearing is necessary to 

reach this conclusion, the motion hearing set for Friday, March 20, 2020, is vacated.

I. BACKGROUND

Mithril Capital is a venture capital firm that manages two venture capital funds. FAC 

(dkt. 40) ¶ 20.1 Royan is Mithril Capital’s owner and Managing General Partner. Id. ¶¶ 16, 20. 

1

 Mithril objects to McKellar’s reliance on her First Amended Complaint as evidence for her 

motion for a preliminary injunction. See Objection to Reply Evidence (dkt. 53). Because the 

motion for a preliminary injunction is being denied, this objection is moot. To the extent Mithril 

also objects to consideration of the FAC in connection with this motion, the Court will grant its 

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Mithril Feeder exists to distribute to certain employees of Mithril Capital carried interest generated 

by Mithril’s venture capital funds. Id. ¶ 31. Mithril Feeder is a Delaware limited liability 

company. Id. ¶ 16.

In happier times, McKellar was General Counsel and a Managing Director of Mithril 

Capital, a member of Mithril Feeder entitled to awards of carried interest, and long-time friend of 

Royan’s. Id. ¶¶ 21, 23, 31. She was well-qualified for these roles. McKellar is a Harvard Law 

School graduate, member of the California Bar, and has worked for Judge Marilyn L. Huff, Davis 

Polk & Wardwell LLP, and Morrison & Foerster LLP. Shipley Decl. Ex. A (dkt. 23-2) & Ex. B 

(dkt. 23-3).

As a member of Mithril Feeder, McKellar agreed to comply with Mithril Feeder’s LLC 

Agreement. FAC ¶¶ 31–32. The LLC Agreement provided that “in the event of any dispute 

arising out of or relating to this Agreement, or the negotiation, execution or performance of this 

Agreement . . . the parties hereto consent and submit to the exclusive jurisdiction of the Federal 

and state courts of the State of Delaware and the Federal and state courts of the State of 

California.” Royan Decl. Ex. 1 (dkt. 23-5) ¶ 15.07.

In the early morning hours of February 12, 2019, McKellar signed the Separation and 

Consulting Agreements (collectively, “the Agreements), which purported to set forth the terms of 

her departure from Mithril. FAC ¶¶ 233, 237. McKellar claims that she had no meaningful 

opportunity to review or negotiate the Agreements’ terms. Id. ¶¶ 235–37. According to her, she 

was presented with the Agreements on a take-it-or-leave-it basis, signed them just sixteen minutes 

after having received the final version of the Consulting Agreement, and was not represented by 

counsel during negotiations. Id. at 234–38.

The Separation Agreement provided for a $225,000 severance payment and carried interest 

points per the LLC Agreement. Royan Decl. Ex. 2 (dkt. 23-6) at 1. The Consulting Agreement 

provided for an additional $225,000 in payment for McKellar’s work as an independent 

alternative request to submit the Kingsbury Declaration as rebuttal evidence. Id. at 3. McKellar

has lodged her own objection to Mithril’s reply evidence. See Objection to Reply Evidence

(dkt. 65). Because the evidence McKellar objects to is not necessary to this Order or relevant to 

the Court’s analysis, that objection is denied as moot.

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contractor. Royan Decl. Ex. 3 (dkt. 23-7) ¶¶ 1.1, 3. McKellar was to “undertake advisory services 

in connection with management of the Company’s portfolios,” “as an independent contractor with 

the title ‘Advisory Managing Director.’” Id. ¶ 1.1. She was to “report directly to Ajay Royan or 

his designee and . . . provide her services in accordance with the instructions therefrom and with 

such reasonable instructions given . . . by any other member or officer of the Company.” Id.

Both agreements contained broad arbitration provisions. The Consulting Agreement stated

that “[t]o the fullest extent allowed by law, any controversy, claim or dispute between Consultant 

and the Company (and/or any of its owners, directors, officers, employees, or agents) relating to or 

arising out of Consultant’s relationship or the cessation of that relationship will be submitted to 

final and binding arbitration before a panel of arbitrators in . . . Travis County, Texas for 

determination in accordance with the American Arbitration Association’s (‘AAA’) National Rules 

for the Resolution of Employment Disputes.” Id. ¶ 13. The Separation Agreement included a 

similar provision. Royan Decl. Ex. 2 at 5.

Both agreements contain Texas choice-of-law provisions. Id. at 6; Royan Decl. Ex. 3 

¶¶ 12. The Consulting Agreement states that “each of the parties hereby consents to personal 

jurisdiction in Texas.” Royan Decl. Ex. 3 ¶ 12.

The parties offer starkly different accounts of the period that followed the execution of the 

Agreements. Mithril insists that “Ms. McKellar did practically no work for and provided minimal 

advisory services to Mithril Capital after February 11, 2019.” Mot. (dkt. 23) at 4. McKellar 

alleges that although she ceased to serve as Mithril’s General Counsel, she otherwise “continued 

to perform many of the same non-legal job functions that she performed at Mithril prior to 

February 11.” FAC ¶ 246. She claims that she continued to work out of Mithril’s San Francisco 

office and with a phone and laptop provided by Mithril. Id. ¶¶ 247–48. And, she says, her work 

was conducted “under the direction and supervision of [Mithril Chief of Staff John] Kingsbury, 

who acted as Royan’s proxy.” Id. ¶ 247.

Whatever McKellar did between this period of relatively friendly relations between her and 

Mithril, the peace was not to last. “On July 17, 2019, McKellar received a letter from Mithril, 

signed by Kingsbury, claiming that she was in violation of her Separation and Consulting 

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Agreements and that Mithril was terminating those agreements and forfeiting McKellar’s 

employment compensation, including her entire carried interest in” Mithril’s venture capital funds. 

Id. ¶ 196. McKellar’s position is that this constituted unlawful retaliation for her cooperation with 

the government’s investigation of Mithril. Id. ¶ 197.

Mithril Capital proceeded to sue McKellar in Texas state court (the “Texas Action”), 

alleging that she had violated various provisions of the Separation and Consulting Agreements. 

Id. ¶¶ 202–03. Next, Mithril Feeder sued McKellar in Delaware state court (the “Delaware 

Action”), seeking a declaration that it was appropriate to strip her of her carried interest. Id. ¶ 208. 

McKellar subsequently removed both actions to federal court. Royan Decl. Ex. 6 (dkt. 23-10); 

Ex. 8 (dkt. 23-12). A motion to remand is pending in the Delaware Action. Royan Decl. Ex. 9 

(dkt. 23-13). No discovery has been taken in either case, and Mithril has done nothing in the 

Texas Action besides file its complaint. Mot. at 5 & n.3.

McKellar responded by filing the instant action. She seeks a preliminary injunction 

barring Mithril from prosecuting the Texas and Delaware Actions under California Labor Code 

§ 925. See Mot. for PI (dkt. 21) at i. Mithril has moved to compel arbitration of McKellar’s 

claims against Mithril Capital and Royan, and to stay or dismiss her claims against Mithril Feeder. 

See generally Mot.

II. LEGAL STANDARD

The Federal Arbitration Act provides that an agreement to submit commercial disputes to 

arbitration 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. “[P]rivate 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). A party may therefore 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. 

“[A] party cannot be required to submit to arbitration any dispute which he has not agreed 

so to submit.” AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986). 

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However, courts have interpreted the FAA as “a liberal federal policy favoring arbitration 

agreements.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983). 

This presumption of arbitrability dictates that courts should not deny a motion to compel

arbitration “unless it may be said with positive assurance that the arbitration clause is not 

susceptible of an interpretation that covers the asserted dispute.” AT&T Techs., 475 U.S. at 650. 

Under the FAA, a district court’s role is “limited to determining (1) whether a valid agreement to 

arbitrate exists, and if it does, (2) whether the agreement encompasses the dispute at issue.” 

Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). “If the response 

is affirmative on both counts, then the Act requires the court to enforce the arbitration agreement 

in accordance with its terms.” Id. The Supreme Court, however, has recognized that “parties can 

agree to arbitrate [the] ‘gateway’ question[ ] of ‘arbitrability,’” thereby delegating that antecedent 

decision to an arbitrator. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68–69 (2010).

III. DISCUSSION

This Order proceeds as follows. First, it explains why it is compelling McKellar’s claims 

against Mithril Capital and Royan to arbitration. Next, it determines whether arbitration should 

proceed in Texas or California. Finally, it explains why the Court will decline jurisdiction over 

McKellar’s claims against Mithril Feeder.

A. Arbitration

Mithril’s motion to compel arbitration is granted for two reasons. First, because questions 

of arbitrability were themselves delegated to the arbitrator. The Court therefore has no jurisdiction 

to consider many of McKellar’s arguments against enforcement of the arbitration provisions. 

Second, because Mithril has not waived its right to compel arbitration.

1. Whether Questions of Arbitrability Were Delegated to the Arbitrator

The “gateway” question of arbitrability asks “whether the parties have submitted a 

particular dispute to arbitration.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). 

The parties can agree that this question, like any other, will be decided by an arbitrator. Rent-ACtr., 561 U.S. at 68–89. However, “the federal policy in favor of arbitration does not extend to 

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deciding questions of arbitrability.” Oracle Am., Inc., v. Myriad Grp. A.G., 724 F.3d 1069, 1072 

(9th Cir. 2013). Courts should presume that they determine arbitrability “unless the parties clearly 

and unmistakably provide otherwise.” Howsam, 537 U.S. at 83 (internal alterations and quotation 

marks omitted). Clear and unmistakable evidence can include “a course of conduct demonstrating 

assent . . . or . . . an express agreement.” Momot v. Mastro, 652 F.3d 982, 988 (9th Cir. 2011) 

(omissions in text). Courts should not necessarily resolve ambiguities regarding the delegation of 

arbitrability in favor of arbitration, see First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944–45

(1995), nor should they apply “ordinary state-law principles that govern the formation of 

contracts” as they normally would, Momot, 652 F.3d at 987–88.

Both the Separation and the Consulting Agreement state that arbitration is to be conducted 

pursuant to the “American Arbitration Association’s (‘AAA’) National Rules for the Resolution of 

Employment Disputes.” Royan Decl. Ex. 2 (dkt. 23-6) at 5; Royan Decl. Ex. 3 (dkt. 23-7) ¶ 13. 

The currently operative version of those rules provides that “[t]he 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.” Mot. at 11 (citing AAA Employment Arbitration Rules 

and Mediation Procedures, Rule 6(a)). The Ninth Circuit has held “that incorporation of the AAA 

rules constitutes clear and unmistakable evidence that contracting parties agreed to arbitrate 

arbitrability.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). This holding was 

limited to contracts between sophisticated parties. Id. at 1130–31. This Court has treated parties 

comparable to McKellar as sophisticated for purposes of applying the rule from Brennan. See

Khraibut v. Chahal, No. C15-04463 CRB, 2016 WL 1070662, at *6 (N.D. Cal. March 18, 2016) 

(finding that a “savvy entrepreneur in his own right” with “other dealings in the business world” 

“was at least minimally sophisticated,” such that Brennan applied).

McKellar does not contest her sophistication but argues that no delegation provision was 

incorporated by reference because the agreements refer to the AAA’s National Rules, and the 

delegation provision cited by Mithril is contained in the AAA’s Employment Arbitration Rules 

and Mediation Procedures. Opp’n (dkt. 43) at 9–10. The National Rules do not contain such a 

provision. Id. at 10.

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This argument fails, because the National Rules specifically provided that “[t]hese rules, 

and any amendment of them, shall apply in the form obtaining at the time the demand for 

arbitration or submission is received by the AAA.” Shelton Decl. Ex. A (dkt. 43-2) at Rule 1. 

The AAA’s Employment Arbitration Rules and Mediation Procedures—with a delegation 

provision—are the “amendment” of the National Rules which currently obtain. See Shelton Decl. 

Ex. B at 10 (“The National Rules for the Resolution of Employment Disputes have been re-named 

the Employment Arbitration Rules and Mediation Procedures. Any arbitration agreements 

providing for arbitration under its National Rules for the Resolution of Employment Disputes shall 

be administered pursuant to these Employment Arbitration Rules and Mediation Procedures.”). 

Other courts considering this question have concluded that when an agreement incorporates AAA 

rules which provide for application of the most up-to-date version of the rules, that agreement

incorporates the current version of the rules. Marriott Ownership Resorts, Inc. v. Flynn, No. 14-

00372 JMS-RLP, 2014 WL 7076827, at *14 (D. Haw. Dec. 11, 2014) (collecting cases).

In the alternative, McKellar argues that the delegation provision was unconscionable. 

Opp’n at 11. She alleges she had less than an hour to review the agreements, near midnight and in 

the early hours of February 12, 2019, without legal representation. FAC ¶¶ 237–38. She contends 

that under these circumstances, she could not have been expected to read the National Rules, and 

then find the delegation provision in the most up-to-date amended version of those rules. Opp’n at 

11.

Under California law, a contract provision must be both procedurally and substantively 

unconscionable for a court to refuse to enforce it under the doctrine of unconscionability.

2

 

Armendariz v. Foundation Health Psychare Servs., Inc., 6 P.3d 669, 690 (Cal. 2000), abrogated on 

other grounds by, abrogated on other grounds by, abrogated on other grounds by, AT&T Mobility 

LLC v. Concepcion, 563 U.S. 333 (2011). The former requirement looks to “‘oppression’ or 

2

 Arguably Texas law should apply. See Reply (dkt. 47) at 6 n.7. But Mithril has agreed to argue 

other unconscionability issues under California law, id., and in any event it appears that Texas 

contract law would yield the same result as California’s, see In re Halliburton Co., 80 S.W.3d 566, 

571 (Tex. 2002) (Texas law requires both procedural and substantive unconscionability); Saravia 

v. Dynamex, Inc., 310 F.R.D. 412, 419 (N.D. Cal. 2015) (recognizing situations where substantive 

unconscionability is more difficult to establish under California as opposed to Texas law).

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‘surprise’ due to unequal bargaining power, the latter [to] ‘overly harsh’ or ‘one-sided’ results.” 

Id. A mere bad bargain does not suffice to establish substantive unconscionability. The provision 

must be “so one-sided” that it “shock[s] the conscience.” Mohamed v. Uber Techs., Inc., 848 F.3d 

1201, 1210 (9th Cir. 2016) (quoting Baltazar v. Forever 21, Inc., 367 P.3d 6, 12 (Cal. 2016)). 

“[T]he more substantively oppressive the contract term, the less evidence of procedural 

unconscionability is required to come to the conclusion that the term is unenforceable, and vice 

versa.” Armendariz, 6 P.3d at 690.

Even if McKellar’s allegations are accepted as true, she has established at most a minor 

degree of procedural unconscionability. Her allegations concerning the circumstances under 

which she signed the agreements suggest that she did not have the time or representation necessary 

to meaningfully negotiate the terms of the bargain. Considering the analogous problem of 

contracts of adhesion, the Ninth Circuit has concluded that “the adhesive nature of a contract, 

without more, would give rise to a low degree of procedural unconscionability at most.” Poublon 

v. C.H. Robinson Co., 846 F.3d 1251, 1261–62 (9th Cir. 2017). To determine whether a contract 

of adhesion is in fact procedurally unconscionable, California courts consider various factors, 

including “relative bargaining power and sophistication of the parties,” the availability of “market 

alternatives,” whether the relevant provision “is buried in a lengthy agreement,” and whether the 

agreement arose in “a situation where adhesion contracts are oppressive . . . such as . . . when an 

employee is presented with an employment contract.” Shierkatz Rllp v. Square, Inc., No. 15-cv02202-JST, 2015 WL 9258082, at *9 (N.D. Cal. Dec. 17, 2015) (internal quotation marks, 

citations, and alterations omitted). The delegation provision was found in a document two degrees 

of incorporation by reference away from the actual Agreements, which surely weighs in favor of 

finding procedural unconscionability. See id. (“The fact that the Delegation Provision did not 

explicitly state that the arbitrator shall decide arbitrability, but instead did so by incorporating the 

AAA and JAMS rules, also supports a finding of procedural unconscionability.”). On the other 

hand, an experienced lawyer with an impressive resume is a highly sophisticated party in a better 

bargaining position than most employees. And the circumstances under which the agreements 

were signed were, even according to McKellar’s account, less oppressive than the typical 

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employment arrangement. McKellar was arranging relatively favorable terms for her departure

from Mithril. Surely she was under less pressure to accept than someone starting a job.

But even assuming McKellar has established some degree of procedural unconscionability, 

her failure to make any argument as to substantive unconscionability is fatal. See Opp’n at 11. 

Her arguments that the arbitration provisions generally were unconscionable may not be 

considered when assessing the enforceability of the delegation provisions specifically. Mohamed, 

848 F.3d at 1210. McKellar makes no arguments that delegating questions of arbitrability to the 

arbitrator is so unfair to her that it “shocks the conscience.” See Opp’n at 11. Having established 

at best a moderate degree of procedural unconscionability, McKellar’s failure to demonstrate any 

substantive unconscionability is fatal. See Gutierrez v. FriendFinder Networks Inc., No. 18-cv05918-BLF, 2019 WL 1974900, at *11 (N.D. Cal. May 3, 2019).

Because the agreements delegated gateway issues of arbitrability to the arbitrator, the 

Court does not consider McKellar’s arguments that the Agreements’ arbitration provisions are 

unconscionable. See Brennan, 796 F.3d at 1132. 

2. Waiver

As an initial matter, it appears that whether or not Mithril has waived its right to arbitrate 

has, like other gateway questions of arbitrability, been delegated to the arbitrator. True, “courts 

generally decide whether a party has waived his right to arbitration by litigation conduct.” Martin 

v. Yasuda, 829 F.3d 1118, 1124 (9th Cir. 2016). But that is because waiver is a “question of 

arbitrability” which is presumptively for a court to determine, “unless the parties clearly and 

unmistakably provide otherwise.” Id. at 1123 (citing Howsam, 537 U.S. at 83). As discussed 

above, incorporation of the AAA rules constitutes clear and unmistakable evidence of the parties’ 

intent to delegate this category of questions to the arbitrator, see Brennan, 796 F.3d at 1130, so it 

would appear that that the waiver question, like other questions of arbitrability, is on for the 

arbitrator. However, Mithril does not make that argument, so the Court will analyze whether it 

has waived its right to arbitration. See Reply at 2–5.

Like any other contractual right, the right to arbitration can be waived. Martin, 829 F.3d at 

1124. “[T]he strong federal policy favoring enforcement of arbitration agreements,” means that 

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“waiver of the right to arbitration is disfavored” and “any party arguing waiver of arbitration bears 

a heavy burden of proof.” Id. (quoting Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th 

Cir. 1986)). To prove waiver of the right to arbitrate, a party “must demonstrate: (1) knowledge of 

an existing right to compel arbitration; (2) acts inconsistent with that existing right; and 

(3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Id. (quoting 

Fisher, 791 F.2d at 694). Because the Court concludes that the second requirement is not met 

here, it is not necessary to consider whether Mithril knew of its right to arbitrate or if McKellar 

has suffered prejudice.

McKellar relies on Mithril’s filing the Texas Action in state court to show acts inconsistent 

with the right to arbitrate.3 Opp’n at 5–6. A survey of caselaw on waiver shows that most courts 

to consider the issue have concluded that the mere filing of a lawsuit is insufficient, on its own, to 

demonstrate waiver. See, e.g. ConWest Res., Inc. v. Playtime Novelties, Inc., No. C 06-5304 

SBA, 2007 WL 1288349, at *4 (N.D. Cal. May 1, 2007) (“While filing a complaint itself does not 

waive the right to pursue arbitration, intentionally electing a judicial forum rather than an arbitral 

forum is a factor that may be weighed.”); but see Steiner v. Horizon Moving Sys., Inc., No. EDCV 

08-682-VAP (CTx), 2008 WL 4822774, at *3 (C.D. Cal. Oct. 30, 2008) (“The second requirement 

for waiver exists here, as Plaintiff has acted inconsistently with the existing right by filing a 

lawsuit in lieu of seeking arbitration of her claims.”). The Court finds this approach consistent 

with the well-established presumption favoring enforcement of arbitration agreements and follows

it here. If anything, the mere filing of a complaint is an even less persuasive argument for waiver 

in this case, because McKellar is relying on related but distinct litigation. In other cases, the 

parties who ostensibly waived the right to arbitration had themselves initiated the litigation sought 

to be arbitrated. Cf. Steiner, 2008 WL 4822774, at *1.

The additional factors that courts have found to constitute inconsistent conduct when 

combined with filing a lawsuit are not present here. Courts have found that requesting a jury trial, 

3

 McKellar does not appear to rely on the Delaware Action to show waiver. Opp’n at 5–6. If she 

did, that argument would fail, because the parties agree that Mithril’s claims in the Delaware 

Action are not arbitrable. See Conover v. Dean Witter Reynolds, Inc., 837 F.2d 867, 868 (9th Cir. 

1988).

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see United Computer Sys., Inc. v. AT&T Corp., 298 F.3d 756, 765 (9th Cir. 2002), or refusing 

requests for arbitration, see ConWest Res., 2007 WL 1288349, at *4, combined with initiating 

litigation in court, is inconsistent with the right to arbitrate. In contrast, the Texas Action has 

hardly been litigated. After filing its complaint, Mithril did nothing besides request (and receive) 

a continuance pending this Court’s resolution of the pending motion. See Shipley Decl. Ex. A 

(dkt. 47-2) & Ex. B (dkt. 47-3). Mithril has not acted inconsistently with its right to arbitrate, and 

therefore has not waived that right.

B. California Labor Code § 925

Although the Court agrees McKellar’s claims against Royan and Mithril Capital must be 

compelled to arbitration, the question remains where that arbitration should proceed. California 

Labor Code § 925 renders voidable any contractual provision that requires “an employee who 

primarily resides and works in California, as a condition of employment, to agree to . . . adjudicate 

outside of California a claim arising in California” or which would “[d]eprive the employee of the 

substantive protection of California law with respect to a controversy arising in California.” If the 

employee requests that such a provision be voided, “the matter shall be adjudicated in California 

and California law shall govern the dispute.” Cal. Labor Code § 925(b).

The parties agree that section 925 is relevant to the instant motion because if the Court 

compels arbitration it must decide to do so either in California, per the statute, or in Texas, per the 

Agreements. See Mot. at 9 n.7; Opp’n at 14. Mithril maintains section 925 is inapplicable either 

because McKellar was not an employee once she signed the Agreements or because she was 

represented by counsel when the Agreements were negotiated.

1. Whether McKellar Was an Employee

Section 925 applies only to employees. Karl v. Zimmer Biomet Holdings, Inc., No. C 18-

04176 WHA, 2018 WL 5809428, at *2 (N.D. Cal. Nov. 6, 2018). Courts in this district 

considering motions to transfer venue have held that “whether § 925 applies . . . ‘depends on a 

careful consideration of whether the complaint sets out facts and circumstances (taken as true) 

from which one could conclude that plaintiff has made a substantial showing that he or she is an 

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employee under California law.” Yeomans v. World Fin. Grp. Ins. Agency, Inc., No. 19-cv00792-EMC, 2019 WL 5789273, at *3 (N.D. Cal. Nov. 6, 2019) (quoting Karl, 2018 WL 

5809428, at *3). Judge Chen has reasoned that “[t]hat approach recognizes the presumption of an 

employment relationship under California law, the strong policy underlying § 925, as well as the 

defendant’s interest in not having its right to the venue contemplated in its contract undermined by 

a frivolous or conclusory assertion by Plaintiffs.” Id. Although the instant motion is not one to

transfer venue, deciding where to compel an action to arbitration implicates the same concerns 

identified in Yeomans. This Order therefore applies the plausibility standard from Karl and 

Yeomans to decide whether section 925 applies to McKellar.

The parties dispute which of California’s two tests for determining employee status should 

be employed. Under California Labor Code § 2750.3 “a person providing labor or services for 

remuneration shall be considered an employee rather than an independent contractor unless the 

hiring entity” can show that “(A) The person is free from the control and direction of the hiring 

entity in connection with the performance of the work, both under the contract for the performance 

of the and in fact,” “(B) The person performs work that is outside the usual course of the hiring 

entity’s business,” and “(C) The person is customarily engaged in an independently established 

trade, occupation, or business of the same nature as that involved in the work performed.” But 

this test does not apply to “[a]n individual who holds an active license from the State of California 

and is practicing one of the following recognized professions,” including lawyers. Cal. Labor 

Code § 2750.3(b)(3). In that case, “the determination of employee or independent contractor 

status . . . shall instead be governed by the California Supreme Court’s decision in S.G. Borello & 

Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341 (Borello).” Cal. Labor 

Code § 2750.3(a)(3). Borello announced a multi-factored test, whose ultimate aim is to determine 

“whether the person to whom service is rendered has the right to control the manner and means of 

accomplishing the result desired.” 769 P.2d 399, 404 (Cal. 1989).

Mithril thinks that Borello controls, because McKellar is a licensed and practicing 

attorney. Mot. at 8. But McKellar claims she did no legal work after her change of role at Mithril. 

FAC ¶ 246. It is unnecessary to decide who has the better of this argument, because McKellar has 

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adequately alleged her status as an employee under either test.

Under both tests, a finding that the hiring entity controls the “manner and means” of the 

individual’s work is dispositive. The Consulting Agreement provided that McKellar would 

“report directly to Ajay Royan or his designee and shall provide her services in accordance with 

the instructions therefrom and with such reasonable instructions given to Consultant by any other 

member or officer of the company.” Royan Decl. Ex. 3 ¶ 1.1. And McKellar alleges that she 

“worked under the direction of Kingsbury, who was acting as Royan’s proxy.” FAC ¶ 151. These 

allegations illustrate that both under the terms of the Consulting Agreement and in fact, McKellar 

was working under the direction of the hiring entity and was therefore an employee under either 

test. 

This conclusion is supported by various other factors from Borello which are satisfied by 

McKellar’s allegations. She alleges that she continued to work in Mithril’s office space and using 

tools provided by Mithril, id. ¶¶ 150 & 210, was paid a salary, id. ¶ 245, and that her work was 

part of Mithril’s regular business of investing, id. ¶¶ 246–56; compare Borello, 769 P.2d at 404

(listing factors relevant to determining employee status).

Mithril’s contrary factual claims do not undermine this conclusion. It argues that “[a]

lawyer who, following her termination, is provided a courtesy title and paid handsomely to do 

essentially no work at all, and is anticipated to ‘perform services for others,’ cannot be an 

‘employee’ under any applicable test.” Mot. at 9. To the contrary, the amount of work McKellar 

did, the handsomeness of her compensation, and whether she did work for others are all irrelevant 

to the key question under either applicable test—Mithril’s control over the work she did do, 

however minimal. The fact that the Consulting Agreement referred to McKellar as a consultant 

“is not dispositive.” Borello, 769 P.2d at 403. The other evidence Mithril points to, such as the 

fact that McKellar submitted invoices for consulting work and was responsible for taxes and 

withholdings, see Opp’n to PI (dkt. 44) at 13, is suggestive but insufficient to overcome the central 

question of control.

Because McKellar was an employee even after she signed the Agreements, it is 

unnecessary to address her alternative argument that the Court should only consider her 

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employment status prior to signing the Agreements. Opp’n to Notice of Renewal (dkt. 59) at 5–6.

2. Whether McKellar Was Represented by Counsel

Even if McKellar was an employee, Mithril contends section 925 is inapplicable because it 

contains an exception for “an employee who is in fact individually represented by legal counsel in 

negotiating the terms of an agreement.” Cal. Labor Code § 925(e). Mithril does not claim 

McKellar was actually represented by a lawyer. See Mot. at 9–10. Indeed, McKellar’s allegations 

and Mithril’s own exhibits demonstrate she was not. See FAC ¶ 238; see also Royan Decl. Ex. 12 

(dkt. 44-17). Instead, Mithril argues that because the Consulting Agreement stated that McKellar 

was represented by a lawyer, California Evidence Code § 622 prevents her from claiming 

otherwise. Mot. at 9–10. Under section 622 “[t]he facts recited in a written instrument are 

conclusively presumed to be true as between the parties thereto.” Cal. Evid. Code § 622.

Other courts have held this rule inapplicable in cases where the contract is alleged to be 

unconscionable. Perez v. Performance Food Grp., Inc., No. LA CV17-00357 JAK (SKx), 2017 

WL 6940526, at *8 n.4 (C.D. Cal. Dec. 15, 2017) (collecting cases). The Court agrees with this 

logic and follows it here. If a contract is otherwise unenforceable, it would be unjust to bind the 

parties to its factual representations. A contrary rule would create a preserve incentive to preserve 

otherwise unenforceable contracts by slipping in false factual representations. Because McKellar 

argues the negotiation of the Agreements gave rise to procedural unconscionability, and that the 

arbitration provision was substantively unconscionable, Opp’n at 11–14, section 622 does not 

apply. Absent the evidentiary presumption, there is no evidence McKellar was represented, so 

section 925(e) is equally inapplicable.

Because the Court concludes section 925 is satisfied, it compels McKellar’s claims to 

arbitration in California. 

C. “First to File” Rule

District courts have discretion “to decline jurisdiction over an action when a complaint 

involving the same parties and issues has already been filed in another district.” Pacesetter Sys., 

Inc. v. Medtronic, Inc., 678 F.2d 93, 94–95 (9th Cir. 1982). Three factors dictate whether the first 

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to file rule applies: the chronology of the actions, the similarity of the parties, and the similarity of 

the issues. Wallerstein v. Dole Fresh Vegetables, Inc., 967 F. Supp. 2d 1289, 1293 (N.D. Cal. 

2013). “Normally sound judicial administration would indicate that when two identical actions 

are filed in courts of concurrent jurisdiction, the court which first acquired jurisdiction should try 

the lawsuit.” Pacesetter, 678 F.2d at 95. But, the “‘first to file’ rule is not a rigid or inflexible rule 

to be mechanically applied,” and so “[c]ircumstances and modern judicial reality” may require “a 

different approach from time to time.” Id. (internal citations omitted).

Mithril urges the Court to decline jurisdiction over McKellar’s claims against Mithril 

Feeder because the earlier-filed Delaware Action involves “the same parties and issues.”4 Mot. at 

14–15. There is no doubt that the Delaware Action was first filed and involves identical parties. 

It also involves similar issues. The “first to file” rule does not require identity of claims, only 

substantial similarity. Intersearch Worldwide, Ltd. v. Intersearch Grp., Inc., 544 F. Supp. 2d 949, 

959–60 (N.D. Cal. 2008). That standard is met here. Mithril’s complaint in the Delaware Action 

seeks declaratory relief that McKellar breached her agreement with Mithril Feeder, Royan Decl. 

Ex. 7 (dkt. 23-11) ¶¶ 64–74, and damages for the breach, id. ¶¶ 75–83. McKellar’s claims against 

Mithril Feeder are all based on her theory that she was wrongly denied the carried interest she was 

owed under her agreement with that entity. FAC ¶¶ 292–313, 346–62. Similarly, she seeks a 

declaration that she did not breach her agreement with Mithril Feeder. Id. ¶ 360. These claims 

implicate overlapping issues. Indeed, a finding for Mithril would foreclose McKellar’s claims, 

and (to at least some extent) vice versa. Maintaining jurisdiction over McKellar’s claims against 

Mithril Feeder in the face of the earlier-filed Delaware Action would therefore risk duplicative 

work and conflicting judgments. The core purposes of the first to file rule are implicated here. 

Pacesetter, 678 F.2d at 96.

4

 The parties agree most of McKellar’s claims against Mithril Feeder are not subject to arbitration. 

Mot. at 14–15. The exception is McKellar’s new Dodd-Frank Act retaliation claim, which Mithril 

argues “arises” from her work for the other Mithril defendants and is therefore subject to 

arbitration. Reply at 14–15. Because, as explained below, the Dodd-Frank Act claim is 

“substantially similar” to those in the Delaware Action, it is unnecessary to reach the issue. This

Court declines jurisdiction over this claim pursuant to the “first to file” rule. The court presiding 

over the Delaware Action may determine whether it should be compelled to arbitration.

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