Court Opinion

ID: 4577350
Source: CourtListenerOpinion
Date Created: 2020-10-15 20:00:28.844603+00
Date Added: 2024-06-11T13:32:26.398713
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       OCT 15 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

RANDY BATEN, on behalf of himself and           No.    19-55865
all others similarly situated,
                                                D.C. No.
                Plaintiff-Appellee,             2:18-cv-10229-GW-MRW

 v.
                                                MEMORANDUM*
MICHIGAN LOGISTICS, INC., DBA
Diligent Delivery Systems; CALIFORNIA
LOGISTICS, INC., DBA Diligent Delivery
Systems; WESTERN DELIVERY AND
LOGISTICS, LLC, DBA Diligent Delivery
Systems; LARRY BROWNE,

                Defendants-Appellants.

                   Appeal from the United States District Court
                      for the Central District of California
                    George H. Wu, District Judge, Presiding

                     Argued and Submitted September 1, 2020
                              Pasadena, California

Before: SILER,** BERZON, and LEE, Circuit Judges.
Dissent by Judge LEE

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Eugene E. Siler, United States Circuit Judge for the
U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
                                          1
      Michigan Logistics, doing business as Diligent, appeals the district court’s

order denying Diligent’s motion to compel arbitration. We hold that the parties did

not have an agreement to arbitrate, and so affirm.

      We have jurisdiction over this interlocutory appeal under the Federal

Arbitration Act (FAA), 9 U.S.C. § 16(a)(1)(B). Section 16(a)(1)(B) of the FAA

allows federal appellate courts to review orders denying a petition compelling

arbitration under § 4 of the Act, which in turn allows courts to compel arbitration

where parties have “a written agreement for arbitration.” Id. § 4. Jurisdiction is

proper under § 16 where a party has “either move[d] to compel arbitration and stay

litigation explicitly under the FAA, or [made] it plainly apparent that he seeks only

the remedies provided for by the FAA—namely, arbitration.” W. Security Bank v.

Schneider Ltd. P’ship, 816 F.3d 587, 589 (9th Cir. 2016). Because Diligent invoked

the FAA in its supplemental briefing, § 16 applies to this appeal.

     The FAA does not define “arbitration.” This circuit looks to state law to

determine whether an agreement constitutes an agreement to arbitrate.1 Goldman

1
 We are in a minority of circuits in doing so: The First, Second, Sixth, and Tenth
Circuits apply federal common law to give content to the FAA’s terms. See Fit
Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1, 6–7 (1st Cir. 2004);
Bakoss v. Certain Underwriters at Lloyds of London Issuing Certificate No.
0510135, 707 F.3d 140, 143 (2d Cir. 2013); Evanston Ins. Co. v. Cogswell Props.,
LLC, 683 F.3d 684, 693 (6th Cir. 2012) and Salt Lake Tribune Publ'g Co., LLC v.
Mgmt. Plan., Inc., 390 F.3d 684, 689 (10th Cir. 2004). But cf. Hartford Lloyd's
Ins. Co. v. Teachworth, 898 F.2d 1058, 1062 (5th Cir. 1990).

                                          2
Sachs & Co. v. City of Reno, 747 F.3d 733, 743 (9th Cir. 2014); Portland Gen.

Elec. Co. v. U.S. Bank Tr. Nat’l Ass’n, 218 F.3d 1085, 1086 (2000).

     Under California law, an arbitration agreement is an agreement to “‘a process

of dispute resolution in which a neutral third party (arbitrator) renders a decision

after a hearing at which both parties have an opportunity to be heard. Where

arbitration is voluntary, the disputing parties select the arbitrator who has the

power to render a binding decision.’” Saeta v. Superior Court, 117 Cal. App. 4th
261, 268 (2004) (quoting Chen-Canindin v. Renaissance Hotel Assocs., 50 Cal.

App. 4th 676, 684 (1996)).

     Here, the dispute resolution provision of the parties’ contract does not bind

the parties to pursue dispute resolution through a third party, and does not contain

any of the elements of a true arbitration agreement. See Chen-Canindin, 50 Cal.

App. 4th at 684. The agreement binds the parties only to “resolve any disputes . . .

directly or with an agreed form of alternative dispute resolution.” But arbitration is

only “one of several mechanisms of ‘alternative dispute resolution,’ which is ‘[a]

procedure for settling a dispute by means other than litigation.’” Greenwood v.

CompuCredit Corp., 615 F.3d 1204, 1208 (9th Cir. 2010), rev'd on other grounds,

565 U.S. 95 (2012) (alteration and emphasis in original) (quoting Black’s Law

Dictionary 112). Mediation, for instance, is a form of alternative dispute resolution

that is not arbitration. See id.; Saeta, 117 Cal. App. 4th at 269. The parties’

                                           3
contractual agreement to agree to some form of alternative dispute mechanism is

therefore not an agreement to be bound by arbitration.

     Nor have the parties formed a post-dispute agreement to arbitrate. Although

Baten initially seemed willing to go forward with some form of arbitration, the

parties never reached a meeting of the minds on material points of the purported

arbitration agreement and therefore did not establish a contractual agreement. See

Bustamante v. Intuit, Inc., 141 Cal. App. 4th 199, 215 (2006). “[A] decision maker

who is chosen by the parties” is a key attribute of a “true arbitration agreement.”

Chen-Canindin, 50 Cal. App. 4th at 684. Diligent never agreed to arbitrate under

the American Arbitration Association’s auspices, as Baten proposed in his initial

letter. Under California law, “failure to reach a meeting of the minds on all

material points prevents the formation of a contract.” Bustamante, 141 Cal. App.
4th at 215. As Baten and Diligent never agreed on a material point—the

mechanism for choosing an arbitrator and the applicable rules governing the

arbitration, including payment of the arbitrator’s fees—the post-dispute

correspondence regarding arbitration therefore does not constitute an enforceable

agreement to arbitrate.

     Baten’s demand for arbitration likewise does not reach the level of conduct

required to establish an implied-in-fact arbitration agreement. We have held an

agreement was implied in fact where a party “initiated the arbitration, attended the

                                          4
hearings with representation, presented evidence, and submitted a closing brief of

fifty pages,” Nghiem v. NEC Elec., Inc., 25 F.3d 1437, 1440 (9th Cir. 1994), and

where a plaintiff “affirmatively urged the arbitrators to decide [the issue] and

asserted their authority to do so” and then, “after an unfavorable decision,

challenge[d] the authority of the arbitrators to act.” PowerAgent, Inc. v. Elec. Data

Sys. Corp., 358 F.3d 1187 (9th Cir. 2004); accord Serafin v. Balco Props. Ltd.,

LLC, 235 Cal. App. 4th 165, 176–77 (2015). These cases required far more than

an initial demand to establish a post-dispute arbitration agreement. Baten’s initial

arbitration request does not meet the standard set out in the case law.

     Neither the text of the parties’ contractual agreement nor their conduct,

therefore, established an agreement to arbitrate. “[T]he FAA limits courts'

involvement to “determining (1) whether a valid agreement to arbitrate exists and,

if it does, (2) whether the agreement encompasses the dispute at issue.” Cox v.

Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008). Because we hold

that no valid arbitration agreement exists between the parties, we may not reach the

other issues on appeal, including the survival of the dispute resolution provision;

whether the various other defendants were bound by the dispute resolution

provision; the meaning of the dispute resolution provision; and the applicability of

the class action waiver under California law.

     The judgment of the district court is AFFIRMED.

                                          5
                                                                            FILED
Randy Baten v. Michigan Logistics, Inc., No. 19-55865                       OCT 15 2020
LEE, Circuit Judge, dissenting:                                          MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

      This case hinges on the meaning of the term “Alternative Dispute Resolution”

in the Dispute Resolution section of the parties’ agreement:

      15. Dispute resolution: [Michigan Logistics] and Operator both
      agree to resolve any disputes between [Michigan Logistics] and
      Operator directly or with an agreed form of Alternative Dispute
      Resolution. Both [Michigan Logistics] and Operator agree that
      neither will engage or participate in a collective or class suit against
      the other.

      Randy Baten argues that the parties never agreed to arbitrate because the term

“Alternative Dispute Resolution” — which is not defined in the agreement — can

include mediation or other non-binding forms of dispute resolution. But based on

the full context of the Dispute Resolution section, “Alternative Dispute Resolution”

can only mean one thing — arbitration. I thus respectfully dissent and would reverse

the district court’s denial of the motion to compel arbitration.

                                     * * * * *

      In interpreting a contract, we must not fixate on a single word and instead

should give full meaning to all the words in a contractual provision. See, e.g., Int’l

Brotherhood of Teamsters v. NASA Servs., Inc., 957 F.3d 1038, 1042 (9th Cir. 2020)

(“[T]he intention of the parties is to be collected from the entire instrument and not

detached portions thereof . . . .”) (internal citation omitted). And consistent with that

principle, California does not appear to require the use of the word “arbitration” to

                                           1
have a valid arbitration agreement.        See Chen-Canindin v. Renaissance Hotel

Assocs., 57 Cal. Rptr. 2d 867, 871–72 (Cal. Ct. App. 1996) (discussing “attributes”

of an arbitration provision but not requiring the use of the word “arbitration”).

      Here, the Dispute Resolution provision makes clear that the parties have ruled

out litigation: the parties agree to “resolve any disputes . . . directly” (i.e., negotiate

and settle the case) or “with an agreed form of Alternative Dispute Resolution.” As

the majority points out, the term “alternative dispute resolution” can encompass non-

binding dispute resolution such as mediation. But in the context of this provision,

the parties could not have intended “alternative dispute resolution” to include

mediation because otherwise they would be in a no man’s land where there is no

binding way to resolve any disputes. Thus, I believe that the most reasonable reading

of “an agreed form of Alternative Dispute Resolution” is that the parties agreed to

arbitration, though they did not decide on the specifics (e.g., one or multiple

arbitrators, specific rules that must apply, the ADR provider). It appears that Mr.

Baten, too, agreed with this reading because he initially submitted a demand for

arbitration “pursuant to an Agreement signed on April 5, 2010” before he

backtracked three months later.

        I would also find that this arbitration provision survives the termination of

the agreement under Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (1991). The

Supreme Court in Litton advised that courts should “presume as a matter of contract

                                            2
interpretation that the parties did not intend a pivotal dispute resolution provision to

terminate for all purposes upon the expiration of the agreement.” Id. at 208. While

Litton arose in the context of a collective bargaining agreement, its reasoning applies

equally to other agreements, and at least one of our sister circuits has invoked Litton

in a non-labor agreement. See Huffman v. Hilltop Cos., LLC, 747 F.3d 391 (6th Cir.

2014). Thus, I believe that the parties agreed to a valid arbitration agreement, which

survived the termination of the contract.

      I respectfully dissent.

                                            3