Carey Brennan v. Opus Bank
796 F.3d 1125
9th Cir.2015Background
- Brennan, a senior executive and former attorney, signed an Employment Agreement with Opus Bank that included a broad arbitration clause and an express incorporation of the AAA Rules (the "Delegation Provision").
- Brennan resigned for "Good Reason" under the contract and claimed Opus Bank improperly treated his notice as a voluntary resignation, denying severance; he sued in federal court for breach and wage claims under diversity jurisdiction.
- Opus Bank moved to compel arbitration under the Federal Arbitration Act (FAA) and argued the Delegation Provision delegates arbitrability (including unconscionability challenges) to the arbitrator; it also sought to seal the complaint.
- The district court applied federal arbitrability law, concluded incorporation of the AAA Rules clearly and unmistakably delegated arbitrability to the arbitrator, and dismissed the action in favor of arbitration.
- The district court declined to rule on Opus Bank’s motion to seal and later denied reconsideration as moot; Opus Bank cross-appealed that denial.
- The Ninth Circuit affirmed dismissal for arbitration and reversed the denial-as-moot of the sealing-reconsideration, remanding for the district court to decide the seal motion.
Issues
| Issue | Plaintiff's Argument (Brennan) | Defendant's Argument (Opus Bank) | Held |
|---|---|---|---|
| Which law governs arbitrability (federal or California)? | California law governs arbitrability because the contract references California procedures and rights. | Federal arbitrability law governs because the agreement falls under the FAA and does not clearly designate state arbitrability law. | Federal law governs arbitrability. |
| Does incorporation of the AAA Rules constitute "clear and unmistakable" delegation of arbitrability to the arbitrator? | Incorporation does not clearly and unmistakably delegate arbitrability; unconscionability is for the court under California law. | Incorporation of AAA Rules (which empower the arbitrator to decide jurisdiction/validity) is clear and unmistakable evidence of delegation. | Incorporation of AAA Rules is clear and unmistakable evidence of delegation. |
| Who decides unconscionability of the Delegation Provision itself? | Brennan argued the court should decide unconscionability of the arbitration clause as a whole; he did not challenge the Delegation Provision specifically. | Opus Bank argued Rent-A-Center requires the court to enforce the delegation unless the specific delegation provision is challenged; otherwise arbitrator decides. | Under Rent-A-Center, because Brennan failed to challenge the Delegation Provision specifically, the arbitrator decides unconscionability of the broader arbitration clause. |
| Was the motion to seal moot after dismissal and appeal? | (implicit) Dismissal mooted sealing; district court treated reconsideration as moot. | District court retains supervisory power over its records after judgment and notice of appeal; motion to seal not moot. | Denial-as-moot was reversed; remanded for district court to decide seal motion on the merits. |
Key Cases Cited
- Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63 (2010) (party must specifically challenge a delegation provision for a court to decide its validity)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (FAA governs agreements evidencing transactions involving commerce)
- Cape Flattery Ltd. v. Titan Maritime, 647 F.3d 914 (9th Cir. 2011) (parties must clearly designate nonfederal arbitrability law or federal law applies)
- Volt Info. Scis., Inc. v. Bd. of Trustees, 489 U.S. 468 (1989) (FAA does not preclude parties choosing different procedural rules for arbitration)
- Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069 (9th Cir. 2013) (incorporation of arbitration rules is persuasive evidence of delegation)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (challenges to validity of contract as whole go to arbitrator unless challenge is specifically to arbitration clause)
- First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995) (courts should not assume parties agreed to arbitrate arbitrability absent clear evidence)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (gateway procedural questions can be for arbitrator when parties so provide)
- Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996 (9th Cir. 2010) (court decides arbitrability when challenge to arbitration clause is distinct from challenge to contract as a whole)
- Quilloin v. Tenet Health Sys. Phila., Inc., 673 F.3d 221 (3d Cir. 2012) (where contract contains no separate delegation provision, arbitrability remains for the court)
- Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982) (notice of appeal confers appellate jurisdiction but district court retains control over ancillary matters)
- Hagestad v. Tragesser, 49 F.3d 1430 (9th Cir. 1995) (district courts have supervisory power over their records)
- Nixon v. Warner Commc’ns, Inc., 435 U.S. 589 (1978) (courts have supervisory power over their own records)
- Oliner v. Kontrabecki, 745 F.3d 1024 (9th Cir. 2014) (decision on sealing judicial records reviewed for abuse of discretion)
- Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162 (9th Cir. 2006) (district court must exercise discretion rather than deny motions as moot where merits not considered)