Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-01663/USCOURTS-casd-3_17-cv-01663-0/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 15:1681 Fair Credit Reporting Act

---

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

FILED 

SEP 0 5 2018 

CLERK US DISTRICT COURT 

SOUTHERN DISTAi T F CALIFORNIA 

BY DEPUTY 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

STACY McCOMACK, 

Plaintiff, 

v. 

MARRIOTT OWNERSHIP RESORTS, 

INC., a Corporation, 

Defendant. 

Case No.: 3:17-cv-01663-BEN-WVG 

ORDER: 

(1) GRANTING DEFENDANT'S 

MOTION TO COMPEL 

ARBITRATION AND STAY CASE; 

(2) DENYING DEFENDANT'S 

MOTION TO DISMISS OR STRIKE 

PLAINTIFF'S FIRST AMENDED 

COMPLAINT 

[Doc. Nos. 8, 15] 

21 Pending before the Court is Defendant Marriott Ownership Resorts, Inc. 

22 ("Marriott" or "Defendant") Motion to Compel Plaintiff Stacy McComack ("McComack" 

23 or "Plaintiff') to submit her claims to arbitration on an individual basis. Also before the 

24 Court is Defendants Motion to Dismiss or Strike the Plaintiffs First Amended 

25 Complaint. The Court decides these matters on the papers submitted and without oral 

26 argument. See Civ. L. R. 7.l(d.l). For the reasons stated below, the Court GRANTS 

27 

28 

3: l 7-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 1 of 11
1 Defendants' Motion to Compel Arbitration and Stay Proceedings and DENIES as moot 

2 Defendants' Motion to Dismiss or Strike. 

3 BACKGROUND 

4 Defendant develops, markets, sells and manages vacation ownership and related 

5 products under the Marriott Vacation Club and Grand Residences by Marriott brands. 1 

6 (Doc. No. 11 ~ 2.) Plaintiff was a Sales Executive for Defendant in California. (Doc. 

7 No. 11 ~~ 1-3.) As a condition of employment, Plaintiff signed a "Dispute Resolution 

8 Agreement" requiring arbitration of any claims between Plaintiff and Defendant. 

9 ("Agreement" [Doc. No. 8-3 Ex. 1].) The Agreement also contains a clause ("Class 

10 Action Waiver") which, if valid, would deny each side the right to file a class action 

11 claim against the other, whether in court, arbitration, or otherwise. 

12 On October 27, 2017, Plaintiff filed an amended complaint against the Defendant 

13 alleging various putative class and collective action claims stemming from violations of 

14 California and federal labor laws. 2 (See F AC [Doc. No. 11].) Defendant now moves to 

15 compel Plaintiff to submit her claims to arbitration on an individual basis. (See Mot. 

16 [Doc. No. 8].) 

17 LEGAL STANDARD 

18 There is no dispute as to the fact that the Federal Arbitration Act ("FAA") governs 

19 here. Under the FAA, a Court need consider only two questions to determine whether to 

20 compel arbitration: (1) is there a valid agreement to arbitrate? And, if so, (2) does the 

21 

22 

23 

24 

25 

1 Defendant also develops, markets, and sells vacation ownership and related products 

under The Ritz-Carlton Destination Club Brand and holds right to develop, market, and 

sell ownership residential products under The Ritz-Carlton brand. Defendant sells pointsbased vacation ownership products through Marriott Vacation Club and weeks-based 

vacation ownership products. The company sells its upscale tier vacation ownership 

26 products primarily through a network of resort-based sales centers and off-site sales 

locations. (Doc. No. 11 ~ 2.) 

27 2 On August 18, 2017, Plaintiff filed a complaint alleging various wage and hour 

28 violations against Defendant. (See Comp. [Doc. No. 1].) 

2 

3: l 7-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 2 of 11
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

agreement cover the matter in dispute? Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 

F.3d 1126, 1130 (9th Cir. 2000). The Agreement clearly covers the matters in dispute 

here. Accordingly, the Court need only consider whether the Agreement is valid. 

Section 2 of the Federal Arbitration Act ("FAA") states that: 

A written provision in any ... contract evidencing a transaction 

involving commerce to settle by arbitration a controversy thereafter 

arising out of such contract or transaction ... 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. Section 2 '"a national policy favoring arbitration of claims that parties 

contract to settle in that manner." Preston v. Ferrer, 552 U.S. 346, 352-53 (2008) (citing 

Southland Corp. v. Keating, 465 U.S. 1, 10 (1984)). 

. Section 3 of the FAA states where an issue involved in a suit or proceeding is 

referable to arbitration under an agreement in writing, the district court "shall on 

application of one of the parties' stay the trial of the action until such arbitration has been 

had in accordance with the terms of the agreement .... " 9 U.S.C. § 3. The language is 

mandatory, and district courts are required to order arbitration on issues as to which an 

arbitration agreement has been signed. Chiron Corp. 207 F.3d at 1130. 

Under California law, the elements ofa valid contract are (1) parties capable of 

contracting; (2) mutual consent; (3) a lawful object; and (4) consideration. Cal. Civ. 

Code§ 1550. However, a court will not enforce an otherwise valid contract ifthere 

exists a viable defense, such as illegality. 1 Witkin, Summary 10th (2005) Contracts,§ 

331, p. 365. 

DISCUSSION 

24 I. Marriott's Motion to Compel Arbitration 

25 Defendant asserts that the Court should compel Plaintiff to honor her mutual 

26 agreement to arbitrate her individual claims and stay further judicial proceedings pending 

27 completion of arbitration. (Doc. No. 13 at 3.) Plaintiff argues the Agreement is illegal, 

28 

3 

3:17-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 3 of 11
1 and therefore unenforceable because it contains an unlawful waiver of a representative 

2 Private Attorneys General Act ("PAGA") claim3 as well as an illegal Class Action 

3 Waiver of concerted employee actions in violation of the National Labor Relations Act 

4 ("NLRA"). (Doc. No. 12 at 2.) 

5 

6 

A. The Arbitration Agreement is Valid and Enforceable 

1. Private Attorney General Act Claims 

7 The Court must assess whether the arbitration agreement, at issue, is valid and 

8 enforceable under section 2 of the FAA, 9 U.S.C. § 2. Ticknor v. Choice Hotels, Int'!, 

9 Inc., 265 F.3d 931, 937 (9th Cir. 2001). "[G]enerally applicable contract defenses, such 

10 as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements 

11 without contravening§ 2." Doctor's Assocs. v. Casarotto, 517 U.S. 681, 687 (1996). 

12 However, this Court relies on California contract law to determine the issues raised in 

13 this action. 

14 "If a contract is unconscionable, under California law courts may refuse to enforce 

15 it." Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 1998). To be 

16 unenforceable, the arbitration clause must be both procedurally and substantively 

17 unconscionable, but not necessarily to the same degree. Ting v. AT & T, 319 F.3d 1126, 

18 1148 (9th Cir. 2003). "[T]he more substantively oppressive the contract term, the less 

19 evidence of procedural unconscionability is required to come to the conclusion that the 

20 term is unenforceable, and vice versa." Armendariz v. Found. Health Psychcare Servs., 

21 Inc., 24 Cal. 4th 83, 114 (2000). 

22 Procedural unconscionability "concerns the manner in which the contract was 

23 negotiated and the circumstances of the parties at that time." Kinney v. United 

24 HealthCare Servs., Inc., 70 Cal. App. 4th 1322, 1329 (1999). Procedural 

25 

26 

3 The Defendants arbitration agreement contains an illegal waiver of a PAGA claim in 

27 violation of Iskanian v. CLS Transportation, 59 Cal. 4th 348 (2014) and Sakkab v. 

28 Luxottica Retail N Am., Inc., 803 F.3d 425 (Sept. 28, 2015). 

4 

3:17-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 4 of 11
1 unconscionability requires either of two factors: oppression or surprise. Stirlen v. 

2 Supercuts, Inc., 51 Cal. App. 4th 1519 (1997). Oppression "arises from an inequality in 

3 bargaining power which results in no real negotiation and an absence of meaningful 

4 choice." (Id. at 1531.) 

5 Substantive unconscionability focuses "on overly harsh or one-sided results." 

6 Armendariz, 24 Cal. 4th at 114 (quotation marks and citations omitted). An arbitration 

7 clause is substantively unconscionable if"the terms of the agreement ... are so one-sided 

8 as to shock the conscience." Kinney, 70 Cal. App. 4th at 1329 (emphasis altered). 

9 "[M]utuality is the "paramount" consideration when assessing substantive 

10 unconscionability." Pokorny v. Quixtar, 601F.3d987, 997-98 (9th Cir. 2010) (citations 

11 omitted). "Agreements to arbitrate must contain at least 'a modicum ofbilaterality' to 

12 avoid unconscionability." (Id.) (internal citations and quotations omitted). The Court 

13 finds that Plaintiff fails to meet either of these requirements. 

14 a. Procedural Unconscionability 

15 First, as to Procedural Unconscionability, the Court notes that during Plaintiffs 

16 onboarding, she signed the "Dispute Resolution Agreement" ("Agreement") to arbitrate 

17 any claims arising out of her employment.4 (Doc. No. 8-1.) The Arbitration Agreement, 

18 a two-page document (see Doc. No. 8-3), provides in pertinent part: 

19 

20 

21 

4 Defendant submitted a copy of a "Dispute Resolution Agreement," which they represent 

Plaintiff executed on May 18, 2016, that included an arbitration agreement.4 (See Doc. 

22 No. 8-3 at 1.) The first page of the "Dispute Resolution Agreement" includes the 

23 

24 

25 

26 

27 

28 

following arbitration provision: 

" ... Except as it otherwise provides, this Arbitration Provision is intended to 

apply to the resolution of disputes that otherwise would be resolved in a 

court of law or before a forum other than arbitration. Except as otherwise 

stated in this Arbitration Provision, you and the Company agree that any 

legal dispute covered by this Arbitration Provision, or concerning the 

validity, enforceability or breach of this Arbitration Provision, shall be 

resolved by binding arbitration in accordance with the Employment 

Arbitration Rules and Procedures of JAMS ('JAMS Rules') then in effect, 

5 

3:17-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 5 of 11
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

Plaintiff and Defendant mutually agreed to arbitrate any disputes arising out 

of Plaintiffs employment, including but not limited to "disputes arising out 

of or related to ... background checks ... unfair competition, compensation 

... expense reimbursement, overtime, breaks and rest periods ... and claims 

arising under ... Fair Credit Reporting Act ... and all other federal or state 

legal claims arising out of or relating to [Plaintiffs] employment. 

(Doc. No. 8-1 at 1.) 

The parties further agreed to submit such disputes on an individual basis only to binding 

arbitration before JAMS (Judicial Arbitration Mediation Services). (Id.) 

Defendant requires all new employees to review and (i) sign, or (ii) opt-out of the 

Agreement during the onboarding process. (Id.) However, the Agreement expressly 

states that "arbitration is not a mandatory condition ... employment."5 (Id. at 3.) Thus, a 

party is not required to sign the Agreement in order to obtain or keep employment with 

12 the Defendant. (Id.) Moreover, even if an employee signs the Agreement, he or she can 

13 later reject the Agreement by providing Defendant with a written statement opting-out 

14 within thirty (30) days of signing it. (Id.) 

15 On May 18, 2016, Plaintiff electronically acknowledged that she read and 

16 understood the contents of Defendant's Agreement and agreed to be bound by it. (Id. at 

17 4.) Moreover, Plaintiff did not subsequently reject or opt-out the agreement. (Id.) Nor 

18 did Defendant ever waive or supersede the Agreement with other terms and conditions of 

19 Plaintiffs employment. (Id.) 

20 In this case, Plaintiff was made aware of the arbitration clause during her 

21 onboarding. Despite being made aware the agreement was optional and had no effect on 

22 

23 

24 

25 

26 

and not by court or jury trial, to be held (unless the parties agree in writing 

otherwise) within 45 miles of where you are or were last employed by the 

C ompany .... " 

5 By its own terms, the "Agreement" "replaces all prior agreements regarding the formal 

27 resolution of disputes covered by this Agreement and is the full and complete agreement 

28 relating to the formal resolution of those disputes." (Id. at 2.) 

6 

3:17-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 6 of 11
1 her employment opportunities, Plaintiff signed the agreement without any noted 

2 objection. Moreover, Plaintiff was provided a thirty-day option period to opt-out, but she 

3 chose not to exercise that option. Under these facts, the Court does not find Procedural 

4 Unconscionability. 

5 b. Substantive Unconscionabilitv 

6 In terms of Substantive Unconscionability, Plaintiff argues the arbitration 

7 agreement is unenforceable because an "employer may not, through private agreement, 

8 prospectively waive or bar a representative PAGA enforcement action expressly 

9 authorized by Labor Code§ 2699." (Doc. No. 12 at 2.) Citing to Iskanian, 59 Cal. 4th at 

10 360, plaintiff argues no portion of her PAGA claim can be compelled to arbitration 

11 because the "suit is fundamentally a law enforcement action brought by the employee 'as 

12 the proxy or agent of the state's law labor enforcement agencies."' Arias v. Super. Ct., 

13 46 Cal. 4th 969, 986 (2009). (Id. at 3.) 

14 The Court finds Plaintiffs' reading of Jskanian overbroad. The law is clear that 

15 PAGA claims are not waivable. However, nothing prevents them from being arbitrated. 

16 As discussed supra, Iskanian held that agreements waiving the right to bring 

17 representative PAGA claims - claims seeking civil penalties for Labor Code violations 

18 affecting other employees -are unenforceable under California law. (Id. at 384.) But as 

19 observed by our court of appeals, Iskanian "expresse[ d] no preference regarding whether 

20 individual PAGA claims are litigated or arbitrated," and provided only that representative 

21 PAGA claims may not be waived outright. Sakkab v. Luxottica Retail N. Am., Inc., 803 

22 F.3d 425, 434 (9th Cir. 2015). The appeals court later confirmed nothing categorically 

23 prevents PAGA claims from proceeding to arbitration, explaining Iskanian and Sakkab 

24 clearly contemplate that individual employees can agree to arbitrate PAGA claims. 

25 Valdez v. Terminix Int'! Co. Ltd. P'ship, 681 Fed. Appx. 592 594 (9th Cir. 2017). 

26 The Court does not find that the Plaintiff has demonstrated Substantive 

27 Unconscionability. 

28 

7 

3:17-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 7 of 11
1 Because Plaintiff is unable to demonstrate either Procedural or Substantive 

2 Unconscionability (despite both being required to be shown), the arbitration agreement is 

3 enforceable. 

4 

5 

6 

7 

8 

9 

10 

11 

2. Class Action Waiver 

Plaintiff argues that the Agreement is illegal, and therefore invalid because the 

Class Action Waiver violates the NLRA. Section 7 of the NLRA provides that: 

[ e ]mployees shall have the right to self-organization, to form, join, or assist 

labor organizations, to bargain collectively through representatives of their 

own choosing, and to engage in other concerted activities for the purpose of 

collective bargaining or other mutual aid or protection ... " 

29 u.s.c. § 157. 

Plaintiff argues this language creates a federal substantive right on behalf of employees to 

12 join together in class action litigation to prosecute employment disputes. In support, 

13 Plaintiff cites Morris v. Ersnt & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted, 

14 85 U.S.L.W. 3341 (U.S. Jan. 13, 2017) (No. 16-300). 

15 In Morris, Plaintiff Morris filed class and collective action claims against his 

16 employer Ernst & Young alleging that it violated the Fair Labor Standards Act and 

1 7 California labor laws by misclassifying him and others similarly situated as exempt 

18 employees to avoid paying overtime wages. Morris, 834 F.3d at 979. Because Morris 

19 had signed an arbitration agreement purporting to require him to bring all legal claims 

20 against Ernst & Young via arbitration as an individual and in separate proceedings, Ernst 

21 & Young moved to compel arbitration. (Id.) Morris opposed by arguing that the 

22 arbitration agreement, by requiring only individual prosecution of employment claims, 

23 violated his federal substantive rights under the NLRA to engage in "concerted action" 

24 against his employer. (Id. at 979-80.) The Ninth Circuit agreed. (Id. at 990.) 

25 

26 

27 

28 

8 

3: l 7-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 8 of 11
1 The Ninth Circuit determined that the National Labor Relations Act "("NLRA") 

2 establishes a core right to concerted activity,6 which "precludes contracts that foreclose 

3 the possibility of concerted work-related legal claims." (Id., 834 F.3d at 989-90.) Thus, 

4 the provision in the arbitration agreement at issue in Morris that required employees to 

5 resolve all of their legal claims in "separate proceedings" (i.e., a concerted action waiver) 

6 was unenforceable because it both "prevents concerted activity by employees in 

7 arbitration proceedings" and requires employees to only use arbitration, which effectively 

8 prevents the employees from initiating concerted legal action anywhere else. (Id. at 983-

9 84.) 

10 After the parties filed their briefs in this case, the Supreme Court granted certiorari 

11 in Morris v. Epic Sys. Corp., 138 S. Ct. at 1612. The Court considered Morris along with 

12 Seventh Circuit and Fifth Circuit cases that addressed whether employees should be 

13 allowed to bring class or collective actions where they agreed to one-on-one arbitration 

14 and reversed Morris. 7 (Id. at 1632.) 

15 On May 21, 2018, the Supreme Court reversed the Ninth Circuit's decision in 

16 Morris in Epic, 138 S. Ct. 1612 (2018)8

, which held that an arbitration agreement in 

17 which an employee agrees to arbitrate claims against an employer on an individual -

18 rather than on a class or collective - basis, is enforceable and does not violate the NLRA. 

19 In light of the recent decision in Epic, Plaintiff's argument that the class action waiver 

20 violates the NLRA in this matter is without merit. 

21 

22 

23 

24 

25 

26 

6 The right to concerted activity is "the right of employees to act together." Morris, 834 

F.3d at 980. 

7 In Morris, the Ninth Circuit reversed a district court's grant of a motion to compel 

arbitration. Epic Sys. Corp. 138 S. Ct. at 1620. The Ninth Circuit reasoned the FAA's 

"savings clause" does not require a court to compel arbitration if the arbitration 

agreement violates another federal law, such as violating sections of the National Labor 

Relations Act ("NLRB") by barring employees from pursuing collective action. (Id.) 

27 8 Epic was consolidated with Morris (No. 16-300) and a Fifth Circuit Court decision, 

28 NLRB v. Murphy Oil USA, Inc., No. 16-307. 

9 

3: 17-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 9 of 11
1 Therefore, for the reasons set forth above, the Motion to Compel Arbitration is 

2 GRANTED. 

3 B. A Stay of Proceedings Pending Completion of Arbitration is Warranted 

4 Defendant requests that the Court stay the proceedings pending arbitration, arguing 

5 that a stay is mandatory pursuant to section 3 of the FAA. (Doc. No. 8-1 at 10.) 

6 "A party is only entitled to a stay pursuant to section 3 as to arbitrable claims or 

7 issues." Wilyrey v. Kmart Corp., 692 F. App'x 356, 357 (9th Cir. 2017) (citing Leyva v. 

8 Cert. Grocers of Cal., Ltd. 593 F.2d 857, 863 (9th Cir. 1979). "As to non-arbitrable 

9 claims and issues, however, the district court has discretion whether to stay the litigation 

10 pending arbitration." (Id.) A trial court may grant a stay "pending resolution of 

11 independent proceedings which bear upon the case" where "it is efficient for [the courts] 

12 own docket and the fairest course for the parties." Leyva, 593 F. 2d at 863. 

13 Although a stay is mandatory as to Plaintiff's arbitrable claims, the Court has the 

14 discretion to decide whether to stay the proceedings as to Plaintiff's non-arbitrable PAGA 

15 claim. The Court finds that a stay is proper in these circumstances. First, the factual 

16 issues that will be resolved in arbitration clearly "bear upon [the instant] case" because 

17 these facts will determine Defendant's liability for Plaintiff's PAGA claim. (See Id.) 

18 Thus, it is in the interest of efficiency to grant a stay in order to avoid duplicative 

19 proceedings as to the same issues. Second, the Court is not convinced that there are any 

20 potential plaintiffs who will be prejudiced by the stay. Although PAGA claims are 

21 necessarily representative actions, they are not necessarily class actions. Arias v. Super. 

22 Ct., 209 P.3d 923, 930 n.5 (2009). And while Plaintiff seeks to represent a class of 

23 employees who were harmed by Defendant's conduct, (see FAC if 7) she has not alleged 

24 sufficient facts to support her contention that this is a class claim. Rather, the alleged 

25 facts and the nature of the claims appear highly individualized. Thus, no unfair prejudice 

26 will result from granting the stay. 

27 

28 

10 

3:17-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 10 of

 11
1 In light of the foregoing analysis granting Defendant's Motion to Compel 

2 Arbitration of Plaintiffs individual claims, the Court STAYS this action pursuant to the 

3 FAA, 9 U.S.C. § 3, pending completion of the arbitration proceedings. 

4 II. Marriott's Motion to Dismiss or Strike Plaintiff's First Amended Complaint 

5 Having determined that compelling arbitration is appropriate in this matter, the 

6 Court need not address Defendant's Motion to Dismiss or Strike Plaintiffs First 

7 Amended Complaint. 

8 Accordingly, the Court Orders the Motion to Dismiss or Strike hereby DENIED as 

9 moot. 

10 CONCLUSION 

11 In accordance with the conclusions set forth above, the Court GRANTS Marriott's 

12 Motion to Compel Arbitration as to Plaintiffs individual, non-PAGA claims. The 

13 proceedings are STAYED pending arbitration, including as to Plaintiffs non-arbitrable 

14 representative PAGA claim. Accordingly, in light of the stay, Defendant's Motion to 

15 Dismiss or Strike Plaintiff's First Amended Complaint is DENIED as moot without 

16 prejudice to Defendant's ability to bring this motion when the stay is lifted. The parties 

17 are hereby ORDERED to file a joint status report every three (3) months from the date of 

18 this Order or within ten (10) days of completion of 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

ORDERED. 

1-::.-...i.-::::er ¥Z_, 2018 

11 

EZ 

3: l 7-cv-01663-BEN-WVG 

Case 3:17-cv-01663-BEN-WVG Document 23 Filed 09/05/18 PageID.<pageID> Page 11 of

 11