Court Opinion

ID: 4016885
Source: CourtListenerOpinion
Date Created: 2016-07-18 20:01:09.26566+00
Date Added: 2024-06-11T09:25:49.519172
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        JUL 18 2016
                                                                      MOLLY C. DWYER, CLERK
                           FOR THE NINTH CIRCUIT                       U.S. COURT OF APPEALS

 JANE ROES, 1-2, on behalf of themselves         No.    15-15437
 and all others similarly situated,
                                                 D.C. No. 3:14-cv-03616-LB
                 Plaintiff-Appellee,

    v.                                           MEMORANDUM*

 SFBSC MANAGEMENT, LLC,

                 Defendant-Appellant.

                   Appeal from the United States District Court
                      for the Northern District of California
                   Laurel D. Beeler, Magistrate Judge, Presiding

                        Argued and Submitted July 6, 2016
                            San Francisco, California

Before: SILVERMAN, and NGUYEN, Circuit Judges, and GARBIS,** District
Judge.

   SFBSC Management, LLC (“BSC”) appeals from the district court’s denial of

its motion to compel arbitration. We have jurisdiction pursuant to 9 U.S.C. §

16(a)(1)(B). Because BSC was not a party to the performer contracts and failed to

         *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
         **
             The Honorable Marvin J. Garbis, United States District Judge for the
District of Maryland, sitting by designation.
establish that it has standing to enforce the arbitration clause, we affirm. 1 See

Britton v. Co-op Banking Grp., 916 F.2d 1405, 1413 n.9 (9th Cir. 1990) (standing

is “always a threshold issue” when evaluating a motion to compel arbitration).

    1. Given BSC’s denials and the contradictory evidence submitted in

connection with its motion to compel arbitration, we decline to treat the allegations

in the complaint as “judicial admissions” that establish BSC’s standing to compel

arbitration as a matter of law. As the party seeking to compel arbitration, BSC

had the burden under the Federal Arbitration Act (“FAA”) to show (1) the

existence of a valid, written agreement to arbitrate; and, if it exists, (2) that the

agreement to arbitrate encompasses the dispute at issue. Ashbey v. Archstone

Prop. Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015). While the amended

complaint contains conclusory allegations that BSC acted as an “agent” of the

nightclubs and that BSC was able to manage certain aspects of the clubs, BSC

denied all of these allegations in its Answer and, more importantly, submitted

1
  We may reach a legal issue not passed upon below if the record has been fully
developed. See Davis v. Nordstrom, Inc., 755 F.3d 1089, 1094-95 (9th Cir. 2014).
In addition, the panel “may affirm on any basis finding support in the record.”
Hell’s Angels Motorcycle Corp. v. McKinley, 360 F.3d 930, 933 (9th Cir. 2004).
Here, BSC agrees that the record was fully developed and asks that we decide the
issue of standing on appeal. Our decision is limited to BSC’s standing to compel
arbitration as a non-signatory with respect to the specific nightclubs at issue in this
case.

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affirmative evidence contradicting Plaintiffs’ allegations. For instance, Gary

Marlin, who served as president of BSC and as a consultant thereafter, submitted

multiple declarations in which he explained the relationship between BSC and the

nightclubs in minimalistic, arm’s-length terms. In other declarations, nightclub

managers likewise described BSC only as a management consulting firm that

provided contracts for the nightclub management as well as administrative

services. Under these circumstances, Plaintiffs’ allegations in the complaint alone

do not conclusively establish BSC’s standing to compel arbitration.2 See, e.g.,

Nat’l Abortion Fed’n v. Ctr. for Med. Progress, 134 F. Supp. 3d 1199, 1205-06

(N.D. Cal. 2015) (declining to treat alter ego allegations in complaint as binding

2
  BSC relies on two California state court cases for the proposition that alter ego or
agency allegations in a complaint conclusively establish non-party standing for the
purposes of arbitration. See Rowe v. Exline, 153 Cal. App. 4th 1276 (2007),
Thomas v. Westlake, 204 Cal. App. 4th 605 (2012). Even assuming BSC’s
reading of those cases could apply notwithstanding the affirmative, contradictory
evidence that BSC submitted, we note that those cases were decided under
California’s arbitration statute, Cal. Civ. Proc. Code § 1280 et seq., whereas this
case is governed by the Federal Arbitration Act. While the question of non-
signatory standing draws on background principles of state substantive law on
contracts, Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009),
questions of arbitration procedure – including the effect of purported “judicial
admissions” in a complaint – are governed by federal procedural law. See Fid.
Fed. Bank, FSB v. Durga Ma Corp., 386 F.3d 1306, 1311 (9th Cir. 2004) (stating
that there is a “strong default presumption” that federal law, not state law, supplies
the procedural rules for arbitration under the FAA).

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judicial admissions on an issue for which defendants later had the burden of proof);

Swift v. Zynga Game Network, Inc., 805 F. Supp. 2d 904, 916 (N.D. Cal. 2011)

(declining to treat “agency” allegations as binding where defendants denied that

they were agents and discovery subsequently revealed that the defendants were

actually “independent contractors”).3

    2. BSC’s own evidence fails to support its argument that it had a principal-

agent relationship with the nightclubs (or vice-versa). Marlin, BSC’s former

president, stated only that his company provided “consulting and administrative

services to the nightclubs,” including “marketing and advertising, human resources

support, payroll coordination, and contract review and administration.” He also

stated that the nightclubs were independently owned and operated, and that they

had “differing policies and procedures” regarding the dancers’ employment.

While Darius Rodrigues, a former nightclub manager, said he believed that BSC

controlled the nightclubs, neither he nor Marlin ever stated that the nightclubs

controlled BSC. On the contrary, the declarations from Marlin, and two other

nightclub managers portray an arm’s-length contractual relationship in which BSC

3
  BSC concedes that it is not making any estoppel arguments. Cf. Britton, 4 F.3d
at 744 (considering whether estoppel barred a plaintiff from denying allegations in
a complaint regarding a defendant’s status as an agent or successor in interest).

                                          4
provides marketing, human resources support, and other administrative “services”

for its independently operating “clients.” And although BSC stated in its Answer

that these services are provided “pursuant to written agreements” with the

nightclubs, BSC never produced these agreements, so the extent to which those

clubs could “control” BSC – let alone the extent to which BSC was authorized to

“represent” the nightclubs in their dealings with third parties – was not established.

See Murphy v. DirecTV, Inc., 724 F.3d 1218, 1232-33 (9th Cir. 2013) (refusing to

allow Best Buy to compel arbitration under an agreement between customers and

DirecTV, based on agency, because “Best Buy has presented no evidence … that

DirecTV controlled its behavior in ways relevant to Plaintiffs’ allegations.”); Swift,

805 F. Supp. 2d at 916 (denying non-signatory’s motion to compel arbitration

because evidence indicated that the alleged principals and agents were “corporate

third parties simply engaged in arm’s length business transactions”).

   Nor does the record show that BSC was the nightclubs’ principal. BSC’s own

evidence contradicted Rodrigues’ statement that BSC controlled the nightclubs.

For instance, Marlin claimed that “Mr. Rodrigues’ statement in his declaration that

BSC ‘exerts control over all aspects of the Nightclubs as well as the working

relationship with the exotic dancers’ is false.” Marlin also stated that “BSC does

                                          5
not own the nightclubs listed in Plaintiffs’ Amended Complaint or Mr. Rodrigues’

declaration” and that “[e]ach of the nightclubs is owned by a different company or

business entity[.]” Marlin emphasized that BSC had “no role” in many aspects of

the nightclubs’ operations; “[a]s for BSC’s role in the Nightclubs’ working

relationship with exotic dancers, BSC does monitor developments regarding state

and local laws regulating exotic dancer conduct and it advises the Client

Nightclubs on such issues.” See DeSuza v. Andersack, 63 Cal. App. 3d 694, 699

(1976) (“The right of the alleged principal to control the behavior of the alleged

agent is an essential element which must be factually present in order to establish

the existence of agency, and has long been recognized as such in the decisional

law.”); accord Batzel v. Smith, 333 F.3d 1018, 1035-36 (9th Cir. 2003).

   3. Finally, BSC failed to show that it was a purported alter ego of the

nightclubs. “Ownership is a prerequisite to alter ego liability, and not a mere

‘factor’ or ‘guideline.’” S.E.C. v. Hickey, 322 F.3d 1123, 1128 (9th Cir. 2003).

Here, as discussed, BSC expressly denied owning the nightclubs and provided

multiple declarations indicating that it maintained an independent, distinct business

structure.

      AFFIRMED.

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