Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-01689/USCOURTS-casd-3_16-cv-01689-1/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity Action

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

KEVIN SMITH,

Plaintiff,

v.

MEDIDATA SOLUTIONS, INC.,

Defendant.

Case No.: 16cv1689-L(JLB)

ORDER GRATING TO 

DEFENDANT'S MOTION TO 

COMPEL ARBITRATION AND 

STAYING PLAINTIFF'S THE PAGA 

CLAIM PENDING ARBITRATION

In this action for wrongful termination, fraud and violation of California wages and 

hour laws, Defendant Medidata Solutions, Inc. filed a motion to compel arbitration. 

Plaintiff filed an opposition, and Defendant replied. The Court decides the matter on the 

papers submitted and without oral argument. See Civ. L. R. 7.1(d.1). For the reasons 

stated below, Defendant's motion is granted. Plaintiff's causes of action numbered one 

through twelve are dismissed; however, Plaintiff may reassert them in arbitration. 

Plaintiff's thirteenth cause of action under the Private Attorney General Act is stayed 

pending arbitration.

According to the second amended complaint, Plaintiff was employed by Defendant 

as a senior director of sales. Plaintiff's compensation consisted of base salary plus 

commissions, bonuses, benefits, and other compensation. Plaintiff claims that he and 

others were not paid all commissions owed, and that Defendant had a practice of 

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terminating employees to avoid paying large commissions. After complaining to 

Defendant about its practices regarding payment of commissions, Plaintiff was 

terminated. It is undisputed that when he was hired, Plaintiff signed an agreement with 

an arbitration provision.

Plaintiff filed an action in this Court. In his second amended complaint, he alleges 

numerous California Labor Code violations, wrongful termination, promissory estoppel, 

fraud, unjust enrichment, violation of the California Unfair Competition Law (Cal. Bus. 

& Prof. Code § 17200 et seq.), and receiving stolen property in violation of California 

Penal Code § 496(a). Plaintiff also seeks penalties on behalf of himself and other 

aggrieved employees and on behalf of the California Labor Workforce Development 

Agency ("LWDA") for the Labor Code violations, including failure to timely pay all 

wages due, unlawful deduction (undisclosed payment using a lower pay scale than 

designated by statute or contract), violations relating to commissions, unlawful 

retaliation, failure to pay all wages due upon termination, and failure to provide accurate 

itemized wage statements). The Court has diversity jurisdiction under 28 U.S.C. § 1332.

Defendant filed the pending motion to compel arbitration of Plaintiff's individual 

claims. Defendant concedes that Plaintiff's PAGA claim is not subject to arbitration. 

(Mot. at 1 n.1 (citing Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 440 (9th Cir. 

2015).) See Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348, 386-88 (2014) 

(no Federal Arbitration Act preemption when an aggrieved employee brings a PAGA 

claim as an agent of a state agency, "where any resulting judgment is binding on the state 

and any monetary penalties largely go to state coffers."). Defendant argues that 

Plaintiff's remaining claims are covered by the arbitration clause included in the 

Employee Confidentiality, Invention Assignment and Non-Competition Agreement 

which Plaintiff signed when he was hired. (Decl. of Jessica Micciche Ex. A 

("Agreement").) Plaintiff opposes, arguing that the arbitration clause is unenforceable. 

Arbitration clauses are governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq.

("FAA") and California contract law. "The FAA mandates that district courts shall direct 

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the parties to proceed to arbitration on issues as to which an arbitration agreement has 

been signed." Kilgore v. KeyBank N.A., 718 F.3d 1052, 1058 (9th Cir. 2013) (emphasis 

in original) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)). "As 

federal substantive law, the FAA preempts contrary state law." Mortensen v. Bresnan 

Comm'cns, LLC, 722 F.3d 1151, 1158 (9th Cir. 2013). However, the FAA does not 

require enforcement of arbitration agreements that may be invalidated on "such grounds 

as exist at law or in equity for the revocation any contract." 9 U.S.C. § 2. "This saving 

clause permits agreements to arbitrate to be invalidated by generally applicable contract 

defenses, such as fraud, duress, or unconscionability . . .." AT&T Mobility LLC v. 

Concepcion, 563 U.S. 333, 339 (2011) (internal quotation marks and citation omitted). 

The burden of proving that the arbitration agreement cannot be enforced is on the party 

resisting arbitration. Green Tree Fin. Corp. - Ala. v. Randolph, 531 U.S. 79, 92 (2000).

Initially, Plaintiff contends that the arbitration clause is unenforceable for failure of 

consideration because Defendant failed to pay him in full. This argument is undermined 

by the Agreement itself, which expressly addresses the issue of consideration:

c. Consideration. I UNDERSTAND THAT EACH PARTY'S 

PROMISE TO RESOLVE CLAIMS BY ARBITRATION IN 

ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, 

RATHER THAN THROUGH THE COURTS, IS CONSIDERATION FOR 

OTHER PARTY'S LIKE PROMISE. I FURTHER UNDERSTAND THAT 

I AM OFFERED EMPLOYMENT IN CONSIDERATION OF MY 

PROMISE TO ARBITRATE CLAIMS.

(Agreement § 11.c. (emphasis in original).) It is undisputed that Plaintiff signed the 

Agreement and that he was offered, and accepted, employment with Defendant. 

Plaintiff's argument that the arbitration clause is unenforceable for failure of 

consideration is therefore rejected.

Next, Plaintiff argues that his claims do not fall within the scope of the 

Agreement's forum selection clause. This argument is inapposite. Defendant's motion is 

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not seeking to enforce the forum selection clause, but the arbitration clause. In this 

regard, the arbitration clause provides:

a. Arbitration. . . . [¶] THIS ARBITRATION CLAUSE . . . 

RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO 

ALL ASPECTS IF THE EMPLOYER/EMPLOYEE RELATIONSHIP . . ., 

INCLUDING, BUT NOT LIMITED TO THE FOLLOWING CLAIMS:

i. ANY AND ALL CLAIMS FOR WRONGFUL 

DISCHARGE OF EMPLOYMENT; . . .;

ii. ANY AND ALL CLAIMS FOR VIOLATION OF ANY 

FEDERAL, STATE OR MUNICIPAL STATUTE . . .;

iii. ANY AND ALL CLAIMS ARISING OUT OF ANY 

OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT . 

. ..

(Agreement § 11.a. (emphasis in original).) In addition to the PAGA claim, which is not 

the subject of the pending motion, Plaintiff alleges claims for violation of numerous 

California Labor Code provisions, wrongful termination in violation of public policy, 

promissory estoppel, fraud, unjust enrichment, unfair competition, and receiving stolen 

property, i.e., his wages, in violation of California Penal Code. Plaintiff does not dispute, 

but agrees, that all of his claims relate to his employment relationship with Defendant. 

(See Opp'n at 10 ("the question is whether, in failing to pay SMITH the wages earned by 

him, has Defendant violated the law?") (emphasis in original).) All of Plaintiff's claims, 

except for PAGA, fall within the scope of the arbitration clause.

Plaintiff further contends that the forum selection clause does not require exclusive 

jurisdiction. (Opp'n at 10-11.) Again, this argument is inapposite, as Defendant is not 

seeking to enforce the forum selection clause, but compel arbitration. Although the 

arbitration clause provides that arbitration be held in New York (Agreement § 11.a.), 

Defendant is not requesting to arbitrate in New York. Accordingly, the Court does not 

express any opinion regarding the validity of the forum selection clause. With respect to 

arbitration, to the extent the arbitration clause applies to Plaintiff's claims, it is not 

optional. See 9 U.S.C. § 4 ("upon being satisfied that the making of the agreement for 

arbitration or the failure to comply therewith is not in issue, the court shall make an order 

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directing the parties to proceed to arbitration in accordance with the terms of the 

agreement") (emphasis added); see also Kilgore, 718 F.3d at 1058 ("The FAA mandates 

that district courts shall direct the parties to proceed to arbitration on issues as to which 

an arbitration agreement has been signed.") (emphasis in original).

Plaintiff also contends that the arbitration provision cannot be enforced because it 

is unconscionable under California law. The arbitration provision includes a choice of 

law clause, stating, "THIS AGREEMENT WILL BE GOVERNED AND CONSTRUED

ACCORDING TO THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING 

EFFECT TO ITS CONFLICT OF LAW PRINCIPLES." (Agreement § 11.d. (emphasis 

in original).) Defendant claims that New York law applies to the question whether the 

arbitration clause is enforceable. (Mot. at 5.) Plaintiff counters that when an employer is 

seeking to enforce an agreement against a California employee, California law should be 

applied in determining the underlying contract validity. (Opp'n at 11.) Plaintiff's reliance

for this proposition on Ingle v. Circuit City Stores, Inc. 328 F.3d 1165, 1170 (9th Cir. 

2003), is unavailing because, unlike here, the court in Ingle had no occasion to consider a 

choice of law clause. When an arbitration clause includes a choice of law clause, the 

clause may be enforced. See, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514 

U.S. 52, 58-64 (1995). If, as unambiguously stated in the Agreement, New York law 

applies, Plaintiff concedes that the arbitration clause is enforceable, as he does not 

contend otherwise in his opposition. See Civ. Loc. R. 7.1.f.3.b. ("The opposition brief 

must contain . . . a complete statement of all reasons in opposition to the position taken 

by the movant . . .."). 

Alternatively, the arbitration clause is not unconscionable under California law, as 

Plaintiff contends. To prevail, Plaintiff must show that the arbitration clause is both 

procedurally and substantively unconscionable. See Armendariz v. Found. Health 

Psychcare Servs., Inc., 24 Cal.4th 83, 99 (2000). The procedural element focuses on 

"oppression or surprise due to unequal bargaining power," and the substantive element 

focuses on "overly harsh and one-sided results." Id. A sliding scale is applied, so that the 

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more substantively oppressive the contract term, the less evidence of procedural 

unconscionability is required to find it unenforceable and vice versa. Id.

Plaintiff argues that the arbitration clause is unconscionable because Defendant did 

not explain it to him, he was not given an opportunity to negotiate its terms, and it was 

presented to him on a "take it or leave it" basis. Defendant "was under no obligation to 

highlight the arbitration clause of its contract, nor was it required to specifically call that 

clause to [Plaintiff]'s attention. Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899, 

914 (2015). A fortiori, Defendant was under no obligation to explain the arbitration 

provision to Plaintiff. Furthermore, the arbitration provision is unambiguous and set off 

from the rest of the Agreement's provisions by the use of all caps. Nevertheless, it was 

included in a contract of adhesion. Procedural unconscionability can be based on a 

showing of oppression, Lhotka v. Geographic Expeditions, Inc., 181 Cal. App. 4th 816, 

821, 824 (2010), which "arises from inequality in bargaining power that results in no real 

negotiation and an absence of meaningful choice," Gatton v. T-Mobile USA, Inc., 152 

Cal. App. 4th 571, 581 (2008). This often takes the form of a contract of adhesion -- a 

standardized contract drafted by the party of superior bargaining strength and imposed on 

the other, without an opportunity to negotiate the terms. See Shroyer v. New Cingular 

Wireless Servs., Inc., 498 F.3d 976, 981 (9th Cir. 2007); see also Gatton, 152 Cal. App. 

3d 582 ("adhesion pertains to the oppression aspect of procedural unconscionability"). 

The Court therefore finds that "the adhesive nature of the contract is sufficient to 

establish some degree of procedural unconscionability." Sanchez, 61 Cal.4th at 915. 

"Yet a finding of procedural unconscionability does not mean that a contract will not be 

enforced, but rather that courts will scrutinize the substantive terms of the contract to 

ensure they are not manifestly unfair or one-sided." Id. (internal quotation marks and 

citation omitted).

Substantive unconscionability focuses on whether the results of the contract terms

are overly harsh or one-sided. Armendariz, 24 Cal.4th at 114. Plaintiff contends that the 

arbitration provision is substantively unconscionable because Defendant reserves the 

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right to file a court action with respect to certain types of claims, it imposes excessive 

costs, and does not permit for recovery of attorney's fees. 

The arbitration clause carves out Defendant's right to pursue injunctive relief in 

court under certain circumstances:

B. Equitable remedies. I AGREE THAT IT WOULD BE 

IMPOSSIBLE OR INADEQUATE TO MEASURE AND CALCULATE 

THE COMPANY'S DAMAGES FROM ANY BREACH OF THE 

COVENANTS SET FORTH IN SECTIONS 2 [Outside Employment], 3

[Confidential Information], 4 [Inventions], 5 [Competitive Activities],

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[Returning Company Documents] AND 8 [Non-Solicitation; Non-Hire] 

HEREIN. ACCORDINGLY, I AGREE THAT IF I BREACH ANY OF 

SUCH SECTIONS, THE COMPANY WILL HAVE AVAILABLE . . . THE 

RIGHT TO OBTAIN AN INJUNCTION FROM A COURT OF 

COMPETENT JURISDICTION RESTRAINING SUCH BREACH OR 

THREATENED BREACH AND TO SPECIFIC PERFORMANCE OF 

ANY SUCH PROVISION OF THIS AGREEMENT. . . .

(Agreement § 11.b. (emphasis in original).) Plaintiff argues that this is sufficiently onesided to render the arbitration clause substantively unconscionable. California law does 

not require complete mutuality as Plaintiff assumes. See Armendariz, 24 Cal.4th at 117

(only a "modicum of bilaterality" is required) (internal quotation marks and citations

omitted). "Although parties are free to contract for asymmetrical remedies and 

arbitration clauses of varying scope, . . . the doctrine of unconscionability limits the 

extent to which a stronger party may, through a contract of adhesion, impose the 

arbitration forum on the weaker party without accepting that forum for itself." Id. at 118. 

The limit is defined by the commercial justification for the one-sidedness: 

a contract can provide a "margin of safety" that provides the party with 

superior bargaining strength a type of extra protection for which it has a 

legitimate commercial need without being unconscionable. However, unless 

 

1 Section 5, Competitive Activities, does not apply to California employees like 

Plaintiff. (See Decl. of Kevin Smith in Supp. of Opp'n to Def.'s Mot. to Compel Arb. at

3-4.)

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the "business realities" that create the special need for such an advantage are 

explained in the contract itself, . . . it must be factually established.

Id. at 117 (internal quotation marks and citations omitted). Here, the arbitration clause 

states that claims related to competition, confidentiality and intellectual property require

injunctive relief and/or specific performance to be adequately remedied. Such remedies 

may be obtainable on an emergency basis in a court action. This does not render the 

arbitration clause unconscionable. See Sanchez, 61 Cal.4th at 922 (holding that an 

arbitration clause carving out a car dealer's right to repossession was not substantively 

unconscionable).

Plaintiff next contends that the cost-sharing clause in the arbitration provision is 

per se unconscionable. (Opp'n at 19.) It may be possible to invalidate an arbitration

agreement as unconscionable if it "required a plaintiff to pay 'filing and administrative 

fees attached to arbitration that are so high as to make access to the forum 

impracticable.'" Chevarria v. Ralphs Grocery Co., 733 F.3d 916, 927 (9th Cir. 2013) 

(quoting American Express Co. v. Italian Colors Rest., 570 U.S. 228, 236 (2013)). The

cost-sharing clause provides that, "THE COMPANY AND I SHALL EACH PAY ONEHALF OF THE COSTS AND EXPENSES OF SUCH ARBITRATION . . .." 

(Agreement § 11.a. (emphasis in original).) The arbitration provision also states that the 

arbitration is to be conducted under the rules of the American Arbitration Association

("AAA"). (Id.) Plaintiff does not contend that the AAA fees are so high as to preclude 

him from arbitrating. The AAA's fee schedule for employment disputes caps an 

individual party's fees at $300. See https://www.adr.org/sites/default/files/Employment_

Arbitration_Fee_Schedule.pdf (last visited Mar. 30, 2018). The filing fee for an action 

filed in this Court is $400. See https://www.casd.uscourts.gov/Attorneys/SitePages/

FeesOfTheUSDistrictCourt.aspx (last visited Mar. 30, 2018). Whether he proceeds in 

this Court or before the AAA, he will incur costs. Like this Court, the arbitrator, under 

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the AAA Employment Arbitration Rule 39, may award costs "in accordance with 

applicable law."2 See https://www.adr.org/sites/default/files/employment_arbitration_

rules_and_mediation_procedures_0.pdf (last visited Mar. 30, 2018) ("Rule 39"). For the 

foregoing reasons, the cost sharing clause does not render the arbitration provision 

substantively unconscionable.

Finally, Plaintiff objects to the clause that "EACH OF US SHALL SEPARATELY 

PAY OUR COUNSEL FEES AND EXPENSES." (Agreement § 11.a. (emphasis in 

original).) As Defendant concedes, this provision does not preclude an attorney fee 

award at the conclusion of arbitration. (Reply at 9.) Under Rule 39, the arbitrator may 

award attorney's fees "as provided by applicable law." If he prevails in arbitration, 

Plaintiff will therefore be able to recover fees as if he had proceeded in this Court. 

Accordingly, the attorneys' fee clause is not substantively unconscionable for the same 

reasons as the cost sharing clause.

For the foregoing reasons, Plaintiff has not demonstrated that the arbitration 

provision is unconscionable under California law. Plaintiff has conceded that it is not 

unconscionable under New York law. Plaintiff has therefore not shown that a contract

defense renders the arbitration provision unenforceable. 

Defendant's motion is therefore granted as follows:

1. Plaintiff's causes of action alleged in the second amended complaint and 

numbered one through twelve are dismissed. Plaintiff may reassert these claims as 

provided in the Employee Confidentiality, Invention Assignment and Non-Competition 

Agreement which Plaintiff signed when he was hired by Defendant. (Decl. of Jessica 

Micciche Ex. A ("Agreement").) 

 

2 To the extent Plaintiff contends that California law, as opposed to New York law, 

may favor him, the concern has no merit. Under the Agreement's choice of law clause, 

New York law governs the Agreement and how the Agreement is construed. (Agreement 

§ 11.d.) It does not apply to Plaintiff's substantive claims.

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2. Plaintiff's thirteenth cause of action pursuant to the Private Attorney General 

Act is stayed pending arbitration pursuant to 9 U.S.C. § 3.

3. The parties shall file a joint status report upon entry of the arbitration award, or 

on March 30, 2019, whichever first occurs. Failure to timely comply with this provision 

will result in dismissal pursuant to Federal Rule of Civil Procedure 41(b).

IT IS SO ORDERED.

Dated: March 30, 2018

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