Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-00963/USCOURTS-cand-4_06-cv-00963-4/pdf.json

Parties Involved:
Kangana Beri
Plaintiff
Tata America International Corporation
Defendant
Tata Consultancy Services, Ltd
Defendant
Tata Sons, Ltd
Defendant
Gopi Vedachalam
Plaintiff

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

 

GOPI VEDACHALAM and KANGANA 

BERI,on behalf of themselves 

and all others similarly 

situated,

Plaintiffs, 

 No C 06-0963 VRW

v

 ORDER

TATA AMERICA INTERNATIONAL

CORPORATION, a New York

corporation; TATA CONSULTANCY 

SERVICES, LTD, an Indian 

corporation; and TATA SONS, LTD,

an Indian corporation,

 Defendants. 

_______________________________/

Plaintiffs allege various California wage and hour

violations in this diversity-based class action, along with

collateral claims. Defendants assert that Gopi Vedachalam, one of

the plaintiffs, executed various agreements rendering his claims

subject to arbitration. Defendants, therefore, move to compel

arbitration under section 206 of the Federal Arbitration Act (FAA),

9 USC §§ 201-208, and to dismiss or stay the case pending

completion of arbitration of Vedachalam’s claims. Arbitrability of

Vedachalam’s claims presumably would render him an inadequate class

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representative. Having reviewed the parties’ submissions, for the

reasons stated herein the court DENIES defendants’ motion.

I

A

Tata America International Corporation, Tata Consultancy

Services, Ltd and Tata Sons, Ltd are named as defendants in this

action. Tata Consultancy Services, Ltd (TCS) is an informationtechnology-outsourcing and consulting company incorporated in

India. Doc #10 at 3-4. Tata Sons, Ltd is the parent company of

TCS and is also incorporated in India. Id. Tata America

International Corporation is a United States subsidiary of TCS. 

Id. These entities are referred to collectively as “defendants.”

Gopi Vedachalam is one of two plaintiffs in the suit. 

Vedachalam is a citizen of India who has worked for one or more of

the defendant entities as a project manager in the United States

since April 2000 under an L-1 visa. Doc #24 at 3. The L-1 visa

allows multinational companies to transfer foreign employees to

work for parent, subsidiary, affiliate or branch offices in the

United States. Id. From 2000 to 2003, Vedachalam worked in

Hayward, California. Id. Since 2003, Vedachalam has worked in

Woodland Hills, California. Id. Vedachalam’s complaint pleads

claims arising from his deputation to the United States.

Defendants move to compel arbitration in Mumbai, India

based primarily on two documents: a 1997 agreement between

Vedachalam, his father and TCS and a letter drafted by TCS dated

September 24, 2000 that Vedachalam signed. A description of these

and related documents, in chronological order, follows.

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The first document is an untitled form agreement. Doc #

11 Ex B. Blanks for day and month are filled in with “twentieth”

and “February,” respectively, by hand. The blank on the form for

year remains blank and no other markings on the form indicate the

year; the parties agree, however, that the agreement was made in

1997. Doc #10 at 4, Doc #31 at 1.

The document has no title and the parties disagree about

what to call it. Defendants refer to this document as a “service

agreement.” Doc #10 at 4. Vedachalam refers to this document as a

“training agreement.” Doc #31 at 4. Because the parties disagree

and there is no compelling extrinsic evidence in the record

supporting either label, the court will refer to this document as

“the 1997 agreement.”

The 1997 agreement lists three parties, the first of

which is printed on the form, the other two filled in by hand: 

“Tata Sons Limited acting through its Division Tata Consultancy

Services;” V Gopi (Vedachalam), “hereinafter referred to as

Probationer” (although the terms “Trainee” and “Probationer” are

used throughout the contract about equally); and A Vedachalam

(Vedachalam’s father), described as “The Surety/Sureties.” Doc #11

Ex B at 1.

The agreement recites that “the training is of a duration

of [blank] months and is liable to be extended by a further

duration based on the performance of the Trainee during the

Training Program * * *.” The word “one” is handwritten in the

blank before the printed word “months.” Id. The 1997 agreement

recites, inter alia, that the subject training “involves

considerable expenditure” and “sustantially [sic] improves the

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Trainee’s professional standing and it has been imparted by the

Division at considerable expenditure as an investment.” Id at 2.

Vedachalam’s part of the bargain was “to serve the

Division * * * for a period of [blank] years * * * and he/she

agrees not to take employment with any other person, firm or

company during such period.” The word “two” is handwritten before

“years.” Id. Id at page 2. 

“By way of guarantee” of Vedachalam’s performance, the

1997 agreement requires a refundable deposit of 50,000 rupees for

two years and Vedachalam’s father to “stand as Surety.” Id at

pages 2-3. “In the event of a breach of any of the terms and

conditions of this agreement of which the Division shall be the

sole judge, the said deposit amount with interest shall be

forfeited.” Id. In addition, Vedachalam’s father, as surety, “in

the event of [Vedachalam’s] failure/neglect to fulfill any of the

terms of this undertaking or of any other form of breach of the

same he/she will be liable to pay the Division Rs 50,000 as

compensation with interest thereon at nine percent OR [Vedachalam’s

father] shall be liable jointly and severally with the Trainee to

pay the same to the Division.” Id at 3.

The provision of the 1997 agreement of greatest interest

to the parties in connection with the instant motion provides that

“any dispute or disagreement over the interpretation of any of the

terms herein above contained or any claim of liability of any part

including the surety/sureties * * * shall be referred to a person

to be nominated by the division” which “shall be deemed a

submission to arbitration.” Id. The two-year period of employment

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required by the agreement was completed over a year before

Vedachalam was deputed to the United States. Doc #30 at 14.

The copy of the 1997 agreement attached to defendants’

moving papers bears the signatures of Vedachalam and his father,

but the signature blank for TCS is empty. Doc #11 Ex B at 5.

The next document is a “Service Agreement Addendum” (the

Addendum) signed by Vedachalam and his father. Doc #11 Ex D. The

agreement itself is not dated although the text “12-4-2000” is

written near the top of the form. Id at 1. Defendants’ declaration

says this document was “executed on or about April 12, 2000.” Doc

#11 at 3. The Addendum recites, inter alia, that “the Employee has

executed a Service Agreement that, among other things, contains

service commitments by the Employee” and that “the Employee may

require [sic] to embark on an overseas deputation” and that “TCS and

the Employee wish to clarify the service commitments of the Employee

that will derive from this overseas deputation.” Doc #11 Ex D at 1. 

Paragraph two of the Addendum provides that Vedachalam “agrees to

return to India after completion of every overseas deputation * * *

for a minimum period of six months.” Id at 2. 

The addendum further provides that “in the event of the

Employee’s breach of the commitment specified in Paragraph two,

above, the matter will proceed to arbitration” and, moreover,

specified, as alternatives, two arbitrators: Mr Navroze H Seerval

and Mr Keki Mehta, both of Mumbai, India. Id. The Addendum also

contained the following provision that seemed to tie into the 1997

agreement or one similar to it:

when an employee proceeds on an overseas

deputation for a TCS assignment at one of its

client companies, then the Employee’s remaining

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obligations under the Service Agreement will be

as follows:

The Employee will be obligated to serve TCS for

any time remaining under the Employee’s

two/three year service commitment. If committed

in the service agreement then such commitment

will run concurrently with any additional

service commitment incurred by the Employee as a

result of this overseas deputation, and the

Employee remains subject to his/her Rs 50,000

obligation with respect to this commitment.

Id at 3.

The next document, also apparently signed by Vedachalam on

April 12, 2000, is a “Non Immigration Agreement.” Doc #11 Ex F. 

Like the Service Agreement Addendum, the “Non Immigration Agreement”

itself is not dated. A handwritten note of the date “12-4-2000” is

written near the top of the form. Id at 1. Defendants’ declaration

states that this document was “executed on or about April 12, 2000.” 

Doc #11 at 3. This agreement provides that Vedachalam “shall not

under any circumstances attempt to apply for permanent immigration

or any other non-immigrant status while * * * on work

experience/assignment” and “shall not accept employment or

assignment with any other [TCS] client, who has been introduced to

me during the deputation or employment by any competitor of [TCS] or

any other employer in USA * * *” during the deputation. The

agreement specified liquidated damages of $30,000 for breach by

Vedachalam, reimbursement of “not exceeding Rs 5,00,000 [sic]

towards allowances being paid from the day of deputation along with

airfare and salary” and payment of “all costs and expenses of

litigation and reasonable Attorney’s fees up to 30% of the amount of

Judgement [sic].” Id at 1. 

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Vedachalam also signed a “Deputation Agreement.” Doc #11

ex E at 1. Filled-in blanks in the deputation agreement indicate

the date of agreement to be April 24, 2000 although a handwritten

note bears the date “12-4-2000,” the same as the two documents just

discussed. Defendant’s declaration states that the deputation

agreement was “executed on or about April 24, 2000.” Doc #11 at 3. 

The deputation agreement provided that the “Employee does agree and

commit, to complete his/her Deputation in the Country of deputation

and to return to India at the conclusion of the Deputation.” Id. 

The “Employee expressly acknowledges that, as a salaried and exempt

employee, he/she may be required to work long hours without

additional compensation.” Id at 5. Paragraph 9.1 provides, in

part, that the parties have:

the understanding and expectation that the

Deputation (and all assignments of the

Deputation) will be successfully completed by

the Employee to the Employer’s satisfaction. 

The Employee acknowledges and agrees that by

leaving any assignment on this Deputation before

its completion would automatically result in

breach of the terms and conditions of the

agreement.

Id at 6. Regarding dispute resolution, paragraph 9.2(a) provides:

any claim or controversy arising out of the

Employee’s breach as specified in paragraph 9.1,

above, will be settled by litigation in courts

of competent jurisdiction in the place of

deputation, or India at the option fo [sic] the

employer

Id. The deputation agreement, like the non-immigration agreement,

also provides for liquidated damages:

In connection with the calculation of damages

resulting from the Employee’s breach as

specified in Paragraph 9.1 * * * the parties

have agreed to an amount equivalent to that of

US $30,000 as liquidated and agreed upon

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damages, and not as a penalty, in the event of

any such breach, together with pre-judgment

interest at the prevailing rate.

Id at 7. Regarding arbitration, paragraph 9.2(c) contains the

following rather convoluted provision:

The parties acknowledge that if they have

entered into a Service Agreement and a Service

Agreement Addendum (collectively referenced to

[sic] as “Service Agreements”) in India which if

it contains contractual commitment by the

Employee (i) to serve the Employer for a minimum

period of two/three years from the date of

joining the Employer, and (ii) to return to

India after this Deputation, and to continue to

work for the Employer in India for the period

specified in the Service Agreements, then the

parties further acknowledge that the Service

Agreements contain a mechanism for an

arbitration in India (pursuant to Indian law) in

the event the Employee breaches either of these

commitments.

Id.

Also in the record is a one-paragraph form letter drafted

by TCS. Doc #11 Ex C. Vedachalam’s name, address, telephone and

signature and the date —— September 24, 2000 —— are handwritten on

the letter. The letter provides:

In the context of [TCS] deputing me abroad and

any dispute/s arising thereof, I hereby

authorize Mr Navroze H Seervai * * * as the Sole

Arbitrator and in the event that he is unable to

serve as an arbitrator then Mr Keki Mehta * * *

being appointed as the Sole Arbitrator to hear

and resolve the said dispute/s.

Id. These are the same arbitrators specified in the Service

Agreement Addendum. 

On May 4, 2001, Vedachalam signed a second deputation

agreement containing provisions substantially the same as those

noted above with one important exception: paragraph 9.2(a) provides

that “any claim or controversy arising out of the employee’s breach

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as specified in paragraph 9.1, above, [failure to complete the

deputation] will be settled by litigation in courts of competent

jurisdiction in the state of Maryland, court [sic] of Montgomery.” 

Doc #11 Ex G at 4. The second deputation agreement contained a

$30,000 liquidated damages provision like the first one. It also

provided that the agreement “shall be governed by the laws of the

state of Maryland, without giving effect to its internal principles

of conflicts of law.” Id at 5. 

B

Vedachalam filed his complaint initiating this action on

February 14, 2006. Doc # 1. He filed a first amended complaint on

June 5, 2006. Doc #24. The amended complaint contains allegations

related to both Vedachalam and co-plaintiff Kangana Beri. Because

defendants move to compel arbitration only of claims made by

Vedachalam, facts unrelated to Vedachalam are beyond the scope of

this order.

Vedachalam alleges that defendants, through a visa

petition signed under penalty of perjury, represented that

Vedachalam would receive a salary of $74,000 per year during his

deputation in the United States, but that he did not receive this

amount of salary in 2004 or 2005 and is not currently receiving this

amount of annual salary. Doc #24 at ¶ 30. In addition, Vedachalam

alleges that defendants forced him to endorse his tax refund check

over to TCS by stamping the back of the check “[p]ay to the order of

* * * Tata Consultancy Services.” Doc #24 at ¶ 42. Vedachalam

further alleges that defendants thus retained state and local tax

refunds intended for him totaling nearly $25,000. Doc #24 at ¶ 46.

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Vedachalam is a plaintiff in six of the nine claims

alleged in the complaint: (1) breach of contract for failing to pay

the salary promised in the Deputation Terms Agreement; (2)

conversion of tax refunds; (3) unjust enrichment through retaining

tax refunds; (4) violation of California Labor Code § 221 (which

provides that it “shall be unlawful for any employer to collect or

receive from an employee any part of wages theretofore paid”); (8)

violation of California Labor Code § 226 (which requires that the

employer provide accurate statements showing gross wages and

deductions); and (9) “false, unfair, fraudulent and deceptive

business practice within the meaning of [California] Business and

Professions Code §§ 17200” necessitating injunctive relief on behalf

of themselves and the public.

On May 4, 2006, defendants filed the instant motion to

compel arbitration. Doc #10.

II

To compel arbitration, defendants must identify a valid

agreement to arbitrate and establish that the agreement to arbitrate

covers the claims asserted by Vedachalam. Unless both conditions

are present, the court may not compel arbitration.

The United Nations Convention on the Recognition and

Enforcement of Foreign Arbitral Awards (the Convention) defines

conditions that must be met before the court may compel arbitration. 

The Convention “shall be enforced in United States.” 9 USC § 201. 

Article II, paragraph one of the Convention provides that:

Each contracting state shall recognize an

agreement in writing under which the parties

undertake to submit to arbitration all or any

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differences which have arisen or which may arise

between them in respect of a defined legal

relationship, whether contractual or not,

concerning a subject matter capable of

settlement by arbitration.

The court may compel arbitration only if there is “an agreement in

writing” and this agreement “undertake[s] to submit [the dispute] to

arbitration.” The two requirements listed above are not the only

requirements imposed by the Convention; it is unnecessary, however,

for the court to address other requirements at this time.

Under article II of the Convention, “the first task of a

court asked to compel arbitration of a dispute is to determine

whether the parties agreed to arbitrate that dispute. The court is

to make this determination by applying the ‘federal substantive law

of arbitrability, applicable to any arbitration agreement within the

coverage of the Act.’” Mitsubishi Motors Corp v Soler

Chrysler-Plymouth, Inc, 473 US 614, 626 (1985), quoting Moses H Cone

Memorial Hospital v Mercury Construction Corp, 460 US 1, 24 (1983). 

In so doing, the court applies the federal common law of contracts. 

“In applying federal contract law, we are guided by general

principles of contract law and by the Restatement.” First

Interstate Bank of Idaho v Small Business Administration, 868 F2d

340, 343 (9th Cir 1989).

III

Defendants move to compel arbitration based on the 1997

agreement and the form letter designating arbitrators signed by

Vedachalam on September 24, 2000. Neither document meets both

requirements stated above. The scope of the 1997 agreement does not

encompass Vedachalam’s claims. The 2000 letter lacks consideration

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and is unenforceable. Because neither document clearly establishes

that the parties jointly undertook to submit the claims stated in

Vedachalam’s complaint to arbitration, the criteria required for

compelling arbitration are absent.

Of note, although the documentary record of the legal

relationship between Vedachalam and the defendant entities suggests

inequality in the parties’ bargaining power, Vedachalam does not

contend in opposing the motion that the agreements he signed were

unconscionable and circumstances in India might be that what appears

unfair to American eyes is not out of line. In any event, the court

has not considered unconscionability and related concepts in

adjudicating this motion. 

A

The 1997 agreement appears to have expired by its own

terms at the end of two years, at which point Vedachalam had

presumably completed his minimum service to the defendants and thus

discharged his debt or obligation for the one month of training he

received. On or about February 20, 1999, therefore, Vedachalam was

no longer obligated by this document to work for defendants, his

father was no longer required to serve as a surety and his father

was entitled to a refund of his 50,000 rupees. 

Defendants argue, however, that while some provisions

expired or were discharged, the arbitration agreement in paragraph

four continued to govern the relationship between the parties. At

oral argument, defendants’ counsel contended that because each

subsequent agreement “supplement[ed] and [did] not supersede any

other written agreement,” they somehow kept alive or revived a

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document that had expired by its own terms more than a year before

the earliest of these subsequent agreements came into being. 

Defendants furthermore seek to avoid paragraph four’s plainly-worded

scope —— to arbitrate disputes over the meaning of the 1997

agreement —— by pointing to the catch-all language after “or”: “In

the event of any dipute [sic] or disagreement over the

interpretation of any of the terms herein above contained or any

claim of liability of any part * * *.” The court is not persuaded. 

Article II, section one of the Convention requires the

court to recognize an agreement “under which the parties undertake

to submit to arbitration all or any differences * * * in respect of

a defined legal relationship.” Accordingly, the court must

determine whether the claims stated in the complaint are within the

scope of the legal relationship defined in the 1997 training

agreement.

The relationship defined by the 1997 training agreement is

primarily that of trainer and trainee. Although the 1997 agreement

is untitled, the terms of the agreement relate to a training period

and a related right to exclusive employment and surety given in

exchange for training. The agreement refers to Vedachalam

repeatedly as “Trainee.” Doc #11 ex B at 3. The agreement also

notes that the duration of the training period may be extended based

on Vedachalam’s performance during the “training programme.” 

Accordingly, the 1997 training agreement primarily defines a legal

relationship between trainee and trainer, not necessarily a

continuing or regular employment relationship.

Vedachalam’s claims in his suit are not “in respect of”

the training relationship as required by the Convention. Defendants

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argue that the training agreement demonstrates that Vedachalam

“agreed to arbitrate ‘any claim of liability’ concerning his

employment with TCS.” Doc #10 at 9. But Vedachalam’s claims arise

from his deputation in the United States, not the training period or

the training program. As Vedachalam points out, “[t]here is no

dispute that Mr Vedachalam received his training and did not work

for any other employer within two years of the date of joining the

division.” Doc #31 at 10. In a more general sense, it is simply

too much of a stretch to hold that by entering into an agreement

that was entirely about a defined training/probationary period of

employment for a new employee, the parties agreed to anything

concerning a deputation to the United States that may not have been

within the contemplation of any party in 1997. 

The 1997 training agreement does not provide a basis for

compelling arbitration of Vedachalam’s claims before this court. 

B

The letter dated September 24, 2000 similarly does not

support defendant’s attempt to compel arbitration. 

Under federal contract law, an agreement without

consideration is generally unenforceable. “In applying federal

contract law, we are guided by general principles of contract law

and by the Restatement.” First Interstate Bank of Idaho v Small

Business Admin, 868 F2d 340, 343 (9th Cir 1989). Formation of a

contract requires “a bargain in which there is a manifestation of

mutual assent to the exchange and a consideration.” Restatement

(Second) of Contracts § 17 (1981). 

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The 2000 letter is not an enforceable agreement to

arbitrate because it lacks consideration; not only does it not bind

TCS to arbitrate disputes, it offers no other corresponding benefit

for Vedachalam. Defendants nonetheless argue that the 2000 letter

“demonstrate[s] the intent of the parties to arbitrate disputes.” 

Doc #10 at 8. But the 2000 letter uses a singular pronoun —— “I

hereby authorize” —— indicating that Vedachalam alone assented to

arbitration. In addition, because TCS drafted the language in

question, its failure to include itself in the arbitration provision

is especially significant. Doc #33 at 5. It is, moreover,

consistent with other provisions in the documents before the court

that unilaterally bind Vedachalam, such as paragraphs 9.2(a) and (b)

of the deputation agreement (Doc #11, Ex E), which provide, in the

event of breach of the agreement by the employee, for liquidated

damages to be paid by Vedachalam and for the matter to be resolved

by litigation “in the place of deputation, or India at the option of

the employer.” The unmistakable import of these documents, taken

together with defendants’ stance before this court, is that

defendants would have one set of rules apply to Vedachalam and

another set of rules apply to them in the event of legal disputes. 

This kind of contractual arrangement simply does not manifest the

mutual assent to arbitrate the instant disputes that the law

requires. 

IV

To repeat the above-cited quotation from Justice

Blackmun’s opinion in Mitsubishi Motors Corporation, “the first task

of a court asked to compel arbitration of a dispute is to determine

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United States District Court

For the Northern District of California

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whether the parties agreed to arbitrate that dispute.” 473 US at

626. Because the record does not support a finding that the parties

agreed to arbitrate the claims stated in this suit, the court DENIES

defendants’ motion to compel arbitration. 

The parties will appear for a case management conference

on March 27, 2007 at 9:00 am. The parties’ joint case management

conference statement must be filed with the court no later than one

week before the conference.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 4:06-cv-00963-CW Document 55 Filed 03/13/07 Page 16 of 16