Gaines v. AT&T Mobility Services, LLC, 424 F.Supp.3d 1004

Five former African‑American employees of AT&T’s Mission Valley store sued under 42 U.S.C. § 1981 alleging racial discrimination, retaliation, and that manager Emmanuel (Manny) Morales pushed out Black employees and that AT&T tolerated/encouraged his conduct.
Morales was promoted into management after prior complaints and later was terminated in August 2016 following investigations into sexual harassment by female employees; plaintiffs allege a pattern of replacing Black employees with younger Latina employees who were favored by Morales.
AT&T moved to compel individual arbitration for two plaintiffs (Branisha Newberry and Kenyata Martin), relying on an emailed Management Arbitration Agreement (MAA) with a 60‑day opt‑out period and reminder emails; AT&T did not obtain plaintiff acknowledgments of receipt.
Newberry and Martin asserted they do not recall receiving or reviewing the emails; AT&T relied on company email policy and continued employment as evidence of consent to the MAA.
AT&T also moved to strike various portions of the First Amended Complaint (FAC) as immaterial, irrelevant to § 1981 (non‑race allegations), time‑barred, or prejudicial, including allegations of sexual harassment by Morales and others and historical complaints.
The court denied AT&T’s motion to compel arbitration (no proof of acknowledgment/consent) and denied the motion to strike (allegations could be relevant to liability and punitive damages and striking would be premature).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity/enforceability of MAA for Newberry & Martin	Plaintiffs: Email notice + silence insufficient; they didn’t receive/read or acknowledge receipt	AT&T: Email notice, reminders, and continued employment (plus email‑policy) establish consent and binding arbitration unless opted out	Denied: Court found AT&T failed to obtain an acknowledgment of receipt; silence without such acknowledgment insufficient to show consent
Sufficiency of email delivery as notice of arbitration	Plaintiffs: Email alone unreliable and inadequate	AT&T: Electronic delivery is permissible; hard copies unnecessary	Court: Email delivery not fatal but, without acknowledgment, insufficient to bind employees by silence
Motion to strike allegations (sexual harassment, historical complaints, corporate policy statements) as immaterial to § 1981	Plaintiffs: Allegations are relevant background, show pattern, AT&T knowledge/failure to act, and relevant to punitive damages and causation	AT&T: These allegations are non‑race, prejudicial, time‑barred or outside § 1981 scope and should be stricken	Denied: Court held allegations could bear on AT&T’s liability, managerial knowledge, and punitive damages; striking at pleading stage premature

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (FAA savings clause permits generally applicable contract defenses)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts certain state-law defenses to arbitration agreements)
Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (9th Cir. 2000) (two‑step inquiry for motions to compel arbitration)
United Computer Sys., Inc. v. AT&T Corp., 298 F.3d 756 (9th Cir. 2002) (when movant establishes existence and scope of arbitration agreement, court must compel arbitration)
Circuit City Stores, Inc. v. Najd, 294 F.3d 1104 (9th Cir. 2002) (employee silence to opt‑out can bind where acknowledgment and clear opt‑out process exist)
Norcia v. Samsung Telecommunications Am., LLC, 845 F.3d 1279 (9th Cir. 2017) (silence generally does not constitute acceptance except in limited circumstances where duty to respond exists)
Kolstad v. American Dental Ass'n, 527 U.S. 526 (1999) (standard for punitive damages against employers in employment discrimination cases)
Swinton v. Potomac Corp., 270 F.3d 794 (9th Cir. 2001) (employer’s inaction re: harassment complaints can be relevant to punitive damages and liability)
Fantasy, Inc. v. Fogerty, 984 F.2d 1524 (9th Cir. 1993) (background allegations may be stricken if irrelevant or unduly prejudicial)