964 F. Supp. 2d 1169
N.D. Cal.2013Background
- Ambler, age-discrimination and wrongful-termination action, originally filed in state court; Defendant removed to federal court on diversity grounds.
- Defendant moves to compel arbitration under a 1995 Confidential Information and Invention Assignment Agreement (CIIAA) with INS, the predecessor to INS’s corporate successors including BT Americas.
- The CIIAA contains an at-will employment clause, an broad arbitration clause in Santa Clara County under AAA rules, and a provision that both sides pay half the arbitration costs; it also includes a broad survival clause.
- Ambler signed the CIIAA in 1995 as a condition of employment with INS; no new CIIAA signed since then.
- Court considers whether Defendant, as successor to INS, can enforce the CIIAA, and whether the CIIAA is unconscionable but severable, and whether its scope covers Ambler’s employment claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does a valid arbitration agreement exist and is enforceable? | Ambler contests enforceability of a non-signed successor issue. | INS/Defendant bound by CIIAA; signatures not required if written and bound by incorporation. | Yes; a valid written arbitration agreement exists and is enforceable; INS/Defendant bound. |
| Whether Defendant has standing to enforce the CIIAA as a successor to INS. | Defendant is not a successor and cannot enforce. | CIIAA inures to INS’s successors and assigns; corporate succession preserved. | Defendant has standing as a successor to INS; enforcement appropriate. |
| Whether the CIIAA is unconscionable and severable. | Cost-splitting and attorney-fee provisions are unconscionable. | Agreement is adhesive but severable; forum clause is legitimate. | Cost-splitting and attorney-fees provisions are unconscionable but severable; remainder enforceable. |
| Whether the arbitration scope covers Ambler’s employment claims. | Arbitration limited to confidential information/inventions; employment claims excluded. | Arbitration clause broad; covers disputes arising under the Agreement, including employment. | Arbitration provision is broad and encompasses Ambler’s employment claims within the Agreement’s scope. |
| Whether the case should be stayed or dismissed pending arbitration. | Court should keep proceedings live while arbitration occurs. | FAA and Supreme/Ninth Circuit precedent favor a stay of proceedings pending arbitration. | Stay, not dismissal; proceedings stayed pending final arbitration resolution; case administratively closed. |
Key Cases Cited
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986) (arbitration is contract-based; doubts resolved in favor of coverage)
- Cox v. Ocean View Hotel Corp., 533 F.3d 1114 (9th Cir. 2008) (determines arbitrability and scope under FAA)
- Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (9th Cir. 2000) (grounds for revocation of contract; enforceability and scope considerations)
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985) (FAA directs courts to compel arbitration)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (state contract-law principles govern formation and scope of arbitration clause)
- Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) (presumption of validity; unconscionability standards apply to arbitration agreements)
- Boucher v. Alliance Title Co., Inc., 127 Cal. App. 4th 262 (Cal. Ct. App. 2005) (limited exceptions allow nonsignatories to compel arbitration)
- Citizens Suburban Co. v. Rosemont Dev. Co., 244 Cal. App. 2d 666 (Cal. Ct. App. 1966) (definition of successor in contract context; burden of proof considerations)
- Bono v. David, 147 Cal. App. 4th 1055 (Cal. Ct. App. 2007) (broad arbitration clause interpretation and enforceability considerations)
- eFund Capital Partners v. Pless, 150 Cal. App. 4th 1311 (Cal. Ct. App. 2007) (arbitration scope and unconscionability considerations in California appellate context)