Michelle Richards v. Ernst & Young, LLP , 744 F.3d 1072 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHELLE RICHARDS, on behalf of No. 11-17530
herself and others similarly situated
and on behalf of the general public, D.C. No.
Plaintiff-Appellee, 5:05-cv-04867-
RMW
v.
ORDER AND
ERNST & YOUNG, LLP, AMENDED
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the Northern District of California
Jeremy D. Fogel, District Judge, Presiding
Argued and Submitted
June 14, 2013—San Francisco, California
Filed August 21, 2013
Amended December 9, 2013
Before: Mary M. Schroeder, Kenneth F. Ripple,*
and Consuelo M. Callahan, Circuit Judges.
Order;
Per Curiam Opinion
*
The Honorable Kenneth F. Ripple, Senior Circuit Judge for the U.S.
Court of Appeals for the Seventh Circuit, sitting by designation.
2 RICHARDS V. ERNST & YOUNG, LLP
SUMMARY**
Arbitration
The panel reversed the district court’s denial of Ernst &
Young, LLP’s motion to compel arbitration of state wage and
hour claims asserted by the former employee plaintiff.
The district court determined that Ernst & Young had
waived its right to arbitration by failing to assert that right as
a defense in an action brought by two former employees,
whose action had been consolidated with that of the plaintiff.
The panel reversed the district court’s judgment because the
plaintiff had not established any prejudice as a result of Ernst
& Yong’s alleged delay in asserting its arbitral rights.
COUNSEL
Rex S. Heinke, Gregory William Knopp, and Katharine Jane
Galston, Akin Gump Strauss Hauer & Feld LLP, Los
Angeles, California, for Defendant-Appellant.
Max Folkenflik, Folkenflik & McGerity, New York, New
York; H. Tim Hoffman, Arthur William Lazear, and Ross L.
Libenson, for Plaintiffs-Appellees.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
RICHARDS V. ERNST & YOUNG, LLP 3
ORDER
The opinion filed on August 21, 2013, is hereby amended
for the purposes of clarification. A copy of the amended
opinion will be filed concurrently with this order. As the
amendments are not substantive, the Plaintiff-Appellee’s
Petition for Panel Rehearing and/or Rehearing En Banc is not
affected and remains pending before the court.
OPINION
PER CURIAM:
Defendant Ernst & Young, LLP appeals the district
court’s denial of its motion to compel arbitration of state
wage and hour claims asserted by its former employee,
Michelle Richards.1 The defendant filed the motion after the
Supreme Court’s decision in AT&T Mobility LLC v.
Concepcion, 131 S. Ct. 1740 (2011). The district court
determined that Ernst & Young had waived its right to
arbitration by failing to assert that right as a defense in an
action brought by two other former employees, David Ho and
Sarah Fernandez, whose action had been consolidated with
that of Ms. Richards. Because Ms. Richards has not
established any prejudice as a result of Ernst & Young’s
alleged delay in asserting its arbitral rights, we reverse the
judgment of the district court.2
1
The district court’s jurisdiction was based on 28 U.S.C. § 1332.
2
Our jurisdiction is based on 9 U.S.C. § 16(a)(1)(B).
4 RICHARDS V. ERNST & YOUNG, LLP
“Waiver of a contractual right to arbitration is not
favored,” and, therefore, “any party arguing waiver of
arbitration bears a heavy burden of proof.” Fisher v. A.G.
Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)
(quotation marks omitted). Specifically, “[a] party seeking to
prove waiver of a right to arbitration must demonstrate:
(1) knowledge of an existing right to compel arbitration;
(2) acts inconsistent with that existing right; and (3) prejudice
to the party opposing arbitration resulting from such
inconsistent acts.” Id. “Where, as here, the concern is
whether the undisputed facts of defendant’s pretrial
participation in the litigation satisfy the standard for waiver,
the question of waiver of arbitration is one of law which we
review de novo.” Id. at 693.
Ms. Richards argues that she was prejudiced because
there was litigation on the merits, and, as a result, some of her
claims were dismissed. We cannot accept this argument.
One of Ms. Richards’ claims—Ernst & Young’s failure to
provide meal and rest breaks—was dismissed without
prejudice, which is not a decision on the merits. See Oscar v.
Alaska Dep’t of Educ. & Early Dev., 541 F.3d 978, 981 (9th
Cir. 2008). The other claim on which the district court
ruled—Ms. Richards’s claim for injunctive relief—was
resolved by the district court on the basis of standing: Ms.
Richards, as a former employee, could not benefit from
prospective relief and therefore did not have standing to
assert that claim. We previously have observed that “[t]he
jurisdictional question of standing precedes, and does not
require, analysis of the merits.” Equity Lifestyle Props., Inc.
v. Cnty. of San Luis Obispo, 548 F.3d 1184, 1189 n.10 (9th
Cir. 2008).
RICHARDS V. ERNST & YOUNG, LLP 5
Ms. Richards also maintains that she was prejudiced
because Ernst & Young conducted discovery that caused her
to incur expenses during the years of litigation prior to the
motion to compel. Ms. Richards does not contend, however,
that Ernst & Young used discovery “to gain information
about the other side’s case that could not have been gained in
arbitration.” Saint Agnes Med. Ctr. v. PacifiCare of Cal.,
31 Cal. 4th 1187, 1204, 8 Cal. Rptr. 3d 517, 530, 82 P.3d 727,
738 (Cal. 2003) (noting that courts have found prejudice in
such circumstances). Moreover, in Fisher, we rejected the
notion that “self-inflicted” expenses could be evidence of
prejudice. 791 F.2d at 698. Like the plaintiffs in Fisher, Ms.
Richards was a “part[y] to an agreement making arbitration
of disputes mandatory,” and therefore “[a]ny extra expense
incurred as a result of [Ms. Richards’s] deliberate choice of
an improper forum, in contravention of their contract, cannot
be charged to” Ernst & Young. Id.Alternatively, Ms. Richards urges that we may rely on the
decision of the National Labor Relations Board (“NLRB”)
decision in D.R. Horton, 357 N.L.R.B. No. 184, 2012 WL
36274 (Jan. 3, 2012), to affirm the district court’s judgment.
We decline to do so. Ms. Richards failed to raise the
argument that her arbitration agreement with Ernst & Young
was unenforceable under the National Labor Relations Act
(“NLRA”) until after the parties had briefed, and the district
court had denied, Ernst & Young’s motion to compel. “We
apply a ‘general rule’ against entertaining arguments on
appeal that were not presented or developed before the
6 RICHARDS V. ERNST & YOUNG, LLP
district court.” Peterson v. Highland Music, Inc.,140 F.3d
1313, 1321 (9th Cir. 1998).3
3
Without deciding the issue, we also note that the two courts of appeals,
and the overwhelming majority of the district courts, to have considered
the issue have determined that they should not defer to the NLRB’s
decision in D.R. Horton on the ground that it conflicts with the explicit
pronouncements of the Supreme Court concerning the policies
undergirding the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16. See,
e.g., Sutherland v. Ernst & Young, LLP, 726 F.3d 290, 297 n.8 (2d Cir.
2013) (declining to follow D.R. Horton or to grant the NLRB’s decision
any deference); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir.
2013) (“[G]iven the absence of any ‘contrary congressional command’
from the FLSA that a right to engage in class actions overrides the
mandate of the FAA in favor of arbitration, we reject Owen’s invitation
to follow the NLRB’s rationale in D.R. Horton . . . .” (quoting
CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012)); Delock
v. Securitas Sec. Servs. USA, Inc., 883 F. Supp. 2d 784, 789 (E.D. Ark.
2012) (“The Court declines to endorse, however, the Board’s application
of the Federal Arbitration Act or its reading of the precedent applying that
Act. The NLRA, as interpreted in Horton, conflicts with the FAA, as
interpreted by the Supreme Court.”); Morvant v. P.F. Chang’s China
Bistro, Inc., 870 F. Supp. 2d 831, 845 (N.D. Cal. 2012) (noting that the
Supreme Court had “held that courts are required to enforce agreements
to arbitrate according to their terms, unless the FAA’s mandate has been
overridden by a contrary congressional command,” but concluding that
“Congress did not expressly provide that it was overriding any provision
in the FAA when it enacted the NLRA or the Norris-LaGuardia Act”
(internal quotation marks omitted)); Jasso v. Money Mart Express, Inc.,
879 F. Supp. 2d 1038, 1049 (N.D. Cal. 2012) (“Because Congress did not
expressly provide that it was overriding any provision in the FAA, the
Court cannot read such a provision into the NLRA and is constrained by
[AT&T Mobility LLC v.] Concepcion[, 131 S. Ct. 1740 (2011),] to enforce
the instant agreement according to its terms.”); LaVoice v. UBS Fin.
Servs., Inc., No. 11 Civ. 2308 (BSJ) (JLC), 2012 WL 124590, at *6
(S.D.N.Y. Jan. 13, 2012) (holding that “this Court must read AT & T
Mobility as standing against any argument that an absolute right to
collective action is consistent with the FAA’s ‘overarching purpose’ of
‘ensur[ing] the enforcement of arbitration agreements according to their
terms so as to facilitate streamlined proceedings’” and that, “[t]o the
RICHARDS V. ERNST & YOUNG, LLP 7
REVERSED.4
extent that LaVoice relies on . . . the recent decision of the [NLRB] in
D.R. Horton, Inc. . . . , as authority to support a conflicting reading of
AT&T Mobility, this Court declines to follow th[at] decision[]” (quoting
AT&T Mobility, 131 S. Ct. at 1748)). But see Brown v. Citicorp Credit
Servs., No. 1:12-cv-00062-BLW, 2013 WL 645942, at *3 (D. Idaho Feb.
21, 2013) (deferring to NLRB’s decision in D.R. Horton under Chevron,
U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), as
“rational and consistent” with the NLRA, but failing to consider
countervailing policies or deference with respect to the FAA); Herrington
v. Waterstone Mortg. Corp., No. 11-cv-779-bbc, 2012 WL 1242318, at *6
(W.D. Wis. Mar. 16, 2012) (finding “the Board’s interpretation of the
NLRA in D.R. Horton[] is reasonably defensible” and, therefore,
“applying it . . . to invalidate the collective action waiver in the arbitration
agreement” (internal quotation marks omitted)).
4
Because the district court should have compelled arbitration, and
because the arbitration agreement between Ernst & Young and Ms.
Richards precludes class arbitration, we also vacate the district court’s
order certifying a class of litigants with Ms. Richards as its representative.