Opinion
2:22-cv-00633 WBS AC
07-14-2022
LINNEA WHITNEY, on behalf of herself and others similarly situated, Plaintiff, v. SUBURBAN PROPANE, L.P., Defendant.
ORDER RE: DEFENDANT'S MOTION TO COMPEL ARBITRATION
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE
Plaintiff Linnea Whitney brought this putative class action against defendant Suburban Propane based on allegations that defendant routinely overcharged plaintiff and members of the putative class for propane defendant supplied. Specifically, the Complaint alleges (1) breach of contract and the implied covenant of good faith and fair dealing; (2) an alternative claim for unjust enrichment/quasi-contract; (3) violation of California's Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code § 1788 et seq.; (4) violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq; and (5) negligent infliction of emotional distress. (Compl. (Docket No. 1).) Defendant now moves to compel plaintiff to arbitrate her claims and seeks dismissal of the action. (Mot. (Docket No. 11-1).)
All facts recited herein are as alleged in the Complaint, except as otherwise noted.
Plaintiff is a former resident of Siskiyou County who has maintained an account with defendant for delivery of propane gas to her now-former residence in the County since December of 2019. (Compl. at ¶¶ 5, 20.) Many County residents rely on defendant and other propane suppliers for fuel to heat their homes during the winter and for other purposes. (Id. at ¶ 12.) Defendant delivers propane to customers on a monthly basis. (Id. at ¶ 14.) To determine the amount of gas used by a customer, and thus the amount the customer should be billed, a representative of defendant reads the gas meter at a customer's home or business, which displays the amount of gas used in a given period. (Id. at ¶ 15.) Plaintiff's service agreement with defendant (the “Contract”) established this procedure for ascertaining payments owed to defendant. (See id. at ¶ 20; Compl., Ex. A (Docket No. 1-1).)
“From at least 2020 onward,” however, plaintiff alleges that defendant erroneously billed her and members of the putative class for amounts of gas they did not actually consume. (Compl. at ¶ 16.) For example, plaintiff alleges that defendant charged her over $4,000 for a two-month usage period, billing her for an amount of gas that a residential customer typically uses over the course of two years, which would have been “virtually impossible” for her to do in two months. (Id. at ¶¶ 18-19, 21.) Several months later, defendant issued plaintiff a second bill, this time for over $7,000, based on consumption of an even larger amount of gas. (Id. at ¶ 29.) Plaintiff alleges defendant has repeatedly refused to correct these erroneous bills and has since issued an outstanding balance statement of $9,999.99, which plaintiff alleges is likewise untethered to any actual gas consumption. (See id. at ¶¶ 24-33.) She further alleges that other customers have been subject to similar practices and that they, like her, have been unable to close their accounts with defendant or recover security deposits paid to defendant pending satisfaction of their erroneous billing statements. (Id. at ¶¶ 32-41.)
The Contract includes an arbitration agreement (the “Agreement”). (See Compl., Ex. A, at 4.) The Agreement provides that “Customer and Suburban agree that . . . they each are waiving the right to a trial by judge or jury or to participate in a class action with respect to any Dispute.” (Id.) “Dispute” is defined so as to “be broadly interpreted to include, without limitation, any and all claim(s) arising out of or relating in any way to any aspect of the relationship between Suburban and Customer, whether based in contract, tort, statute, fraud, misrepresentation or any other legal theory.” (Id.) The Agreement exempts four categories of claims from this definition, including claims by the customer for physical injury to the customer or their property, and claims by Suburban for payment of amounts allegedly owed to it under the Contract. (Id.)
Pursuant to the Agreement, if a Dispute is not resolved informally between the parties, either party may commence an arbitration proceeding. The Agreement includes a clause providing that arbitrations “will be governed by the Commercial Dispute Resolution Procedures and the Supplementary Procedures for Consumer Related Disputes (collectively, ‘AAA Rules') of the American Arbitration Association” (“AAA”) and noting that “[t]he AAA Rules are available online at www.adr.org” (the “Incorporation Clause”). The Agreement further provides that “[a]ll issues that relate to the Dispute are for the arbitrator to decide” (the “Delegation Clause”).
II. Legal Standard
The Federal Arbitration Act (“FAA”) provides that a written provision in a “contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . 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. Because arbitration is a matter of contract, “the central . . . purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms.” Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 682 (2010) (internal quotation marks omitted); see also Perry v. Thomas, 482 U.S. 483, 490 (1987) (under the FAA, arbitration agreements “must be rigorously enforced”) (internal quotation marks omitted, alterations adopted).
The FAA “leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). “[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is a construction of the contract language itself or an allegation of waiver, delay, or like defense to arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983); see Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1259 (9th Cir. 2017) (same).
Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration. See Cohen v. Wedbush, Noble Cooke, Inc., 841 F.2d 282, 285 (9th Cir. 1988). “[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) (internal quotation marks omitted). However, “[a]lthough gateway issues of arbitrability presumptively are reserved for the court, the parties may agree to delegate them to the arbitrator.” Momot v. Mastro, 652 F.3d 982, 987 (9th Cir. 2011) (citing Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68-70 (2010)). Courts may “assume that the parties agreed to arbitrate arbitrability” only if “there is clear and unmistakable evidence that they did so.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 531 (2019) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).
An “express agreement” to arbitrate arbitrability, evinced by a contract's “language[ ] delegating to the arbitrators the authority to determine the validity or application of any of the provisions of the arbitration clause,” constitutes clear and unmistakable evidence. Momot, 652 F.3d at 988 (citations omitted). Where such evidence exists, unless a party opposing enforcement of the agreement “challenge[s] the delegation provision specifically, [courts] must treat it as valid . . ., leaving any challenge to the validity of the Agreement as a whole for the arbitrator.” Rent-A-Center, 561 U.S. at 72.
III. Analysis
Defendant seeks to compel arbitration not only of the underlying billing dispute between it and plaintiff, but also of whether that dispute is validly subject to arbitration under the Agreement. (See Mot.) Plaintiff argues that she cannot be compelled to arbitrate either issue because, as a threshold matter, the Agreement -- and thus the Delegation Clause, which defendant contends delegates arbitrability issues to the arbitrator -- is unenforceable as unconscionable and as lacking mutuality. (See Opp. at 15-19 (Docket No. 14).) Thus, according to plaintiff, the Agreement is exempt from the FAA's general requirement that arbitration agreements be enforced according to their terms. (Id. at 15-16); see 9 U.S.C. § 2.
A. The Court Cannot Consider Plaintiff's Contract Defenses
As explained below, in this case, whether the Agreement is unconscionable and lacks mutuality is a question for the arbitrator to decide. Ordinarily, under the FAA, courts may “refuse to enforce arbitration agreements ‘upon such grounds as exist at law or in equity for the revocation of any contract.'” Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1622 (2018) (quoting 9 U.S.C. § 2). Such “generally applicable contract defenses” include “unconscionability,” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)), and “lack of . . . mutual assent,” Circuit City Stores, Inc. v. Najd, 294 F.3d 1104, 1108 (9th Cir. 2002) (citing Doctor's Assocs., 517 U.S. at 687); see Nygaard v. Prop. Damage Appraisers, Inc., 779 Fed.Appx. 474, 476 (9th Cir. 2019) (same).
As the Supreme Court has explained, however, where an arbitration agreement purports to delegate questions regarding the validity and enforceability of the agreement to an arbitrator, courts “must treat” such delegation as valid unless the party opposing arbitration “challenge[s] the delegation provision specifically,” Rent-A-Center, 561 U.S. at 72, based on “generally applicable contract defenses,” Concepcion, 563 U.S. at 339. See Brennan v. Opus Bank, 796 F.3d 1125, 1133 (9th Cir. 2015) (party challenging arbitration agreement on unconscionability grounds must also do so specifically with respect to delegation provision to resist enforcement thereof) (citing Rent-A-Center, 561 U.S. at 73-75). Here, plaintiff has argued that the Delegation Clause does not actually delegate arbitrability to the arbitrator. (Opp. at 10-15.) Although she also argues that the Agreement as a whole is unconscionable and lacks mutuality, she does not specifically challenge the Delegation Clause on these grounds. (See id. at 16-22.) The court therefore “must” treat the Delegation Clause as valid. See Rent-A-Center, 561 U.S. at 72. Accordingly, whether the Agreement itself, which is to be evaluated separately from the Delegation Clause, see Brennan, 796 F.3d at 1133; (Hori Decl., Ex. 2, at 14), is enforceable -- including on grounds of unconscionability and lack of mutuality -- is a question for the arbitrator to decide, assuming that the relevant clauses in the Agreement in fact delegate arbitrability issues to the arbitrator. The court will therefore turn to this question next.
Although plaintiff states that she “clearly and unequivocally contests the delegation provision,” (Opp. at 13 n.1), she offers no argument as to why the provision itself -- as distinct from the overall Agreement -- is unconscionable or lacks mutuality. See Brennan, 796 F.3d at 1133.
B. The Agreement Delegates Arbitrability to the Arbitrator
As noted, defendant argues that the Agreement delegates “gateway issues of arbitrability,” Momot, 652 F.3d at 987, to the arbitrator, including the validity of the Agreement itself. (See Mot. at 11-12.) It contends that the Agreement's Delegation Clause, which states that “[a]ll issues that relate to the Dispute are for the arbitrator to decide,” (Compl., Ex. A, at 4), “clearly and unmistakably delegates arbitrability issues to the arbitrator.” (Mot. at 12.)
The court agrees. In Momot, the Ninth Circuit evaluated a clause in an arbitration agreement providing:
If a dispute arises out of or relates to this Agreement, the relationships that result from this Agreement, the breach of this Agreement or the validity or application of any of the provisions of this Section [ ], and, if the dispute cannot be settled through negotiation, the dispute shall be
resolved exclusively by binding arbitration.652 F.3d at 988. The court held that the clause, which specified that “the validity or application” of the agreement was to be resolved through arbitration, constituted a clear and unmistakable agreement to delegate issues of arbitrability. Id.
Although here the Agreement does not contain identical language, its Delegation Clause sweeps even more broadly than the one the Ninth Circuit addressed in Momot, as it designates for arbitration “ [a]ll issues that relate to the Dispute.” (Compl., Ex. A, at 4 (emphasis added).) Under a plain reading of the Delegation Clause, the manner in which a Dispute is to be resolved -- i.e., whether by a court or by an arbitrator, and the subsidiary question of whether an agreement purporting to require the latter is valid and enforceable -- is clearly an “issue[ ] that relate[s] to the Dispute.” This conclusion receives further support when read in the context of the Agreement as a whole, which specifies that the term “Dispute,” as used throughout the Agreement, “shall be broadly interpreted.” (Id.)
As noted, the Agreement's Incorporation Clause also incorporates by reference “the Commercial Dispute Resolution Procedures and the Supplementary Procedures for Consumer Related Disputes (collectively, ‘AAA Rules') of the American Arbitration Association” and includes a link to access those rules online. Defendant contends these rules further establish that the parties delegated threshold questions of arbitrability to the arbitrator. (See Mot. at 12-13.) Although the parties dispute the substance of the second set of AAA Rules identified in the Incorporation Clause, given that the AAA has evidently updated and changed the name of those rules, (see Opp. at 11-12); Reply at 10-11 (Docket No. 16)), no such dispute exists as to the first set of rules, the Commercial Dispute Resolution Procedures.
Those rules provide, in a section titled “Jurisdiction,” that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” (Decl. of Lucas Hori (“Hori Decl.”), Ex. 2, at 14 (Docket No. 12-2).) They further provide that “[t]he arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part,” noting that the “arbitration clause shall be treated as an agreement independent of the other terms of the contract.” (Id.) Although the court has concluded that the language of the Agreement's Delegation Clause is sufficient to clearly and unmistakably delegate threshold issues of arbitrability to the arbitrator, these provisions of the AAA Commercial Dispute Resolution Procedures provide additional support for this conclusion, as they specify that questions regarding the “validity of the arbitration agreement” or “arbitrability of any claim” are for the arbitrator to decide.
Because plaintiff has not specifically challenged the Delegation Clause “upon such grounds as exist at law or in equity for the revocation of any contract,” and because the court concludes that the Delegation and Incorporation Clauses validly delegate arbitrability issues to the arbitrator, the court will order the parties to arbitrate their dispute -- including gateway issues of arbitrability, unconscionability, and lack of mutuality -- in accordance with their agreement to do so. See Stolt-Nielsen, 559 U.S. at 682; Dean Witter Reynolds, 470 U.S. at 218; Momot, 652 F.3d at 987-88. The court will not, however, dismiss the action as defendant requests. (See Mot. at 17; Reply at 27.) Although not briefed by the parties, at oral argument counsel for plaintiff requested a stay, rather than dismissal, a request the court must honor. See 9 U.S.C. § 3 (where the court is “satisfied that the issue involved in [a] suit or proceeding is referable to arbitration under [an arbitration] agreement,” it “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”). Accordingly, the court will stay the action pending arbitration. See id.
IT IS THEREFORE ORDERED that defendant's Motion to Compel Arbitration (Docket No. 11-1) be, and the same hereby is, GRANTED. IT IS FURTHER ORDERED that judicial proceedings are STAYED pending arbitration.
The parties' respective requests for judicial notice (Docket Nos. 13, 15) are DENIED. The documents for which defendant seeks notice -- two sets of AAA rules -- are attached to defendant's motion; because the court is not limited only to consideration of the pleadings on a motion to compel arbitration, the court may consider these exhibits without formally taking judicial notice of them. Additionally, because the court concludes that the Agreement delegates arbitrability issues based on the language of its Delegation Clause, with additional support from the incorporated Commercial Dispute Resolution Procedures, notice of additional AAA rules is unnecessary to the resolution of the instant motion.
The Clerk shall close this file administratively, subject to it being reopened upon the application of either party after arbitration has been fully completed.