McKellar v. Mithril Capital Management LLC, 3:19-cv-07314

Background:

Plaintiff Crystal Scripps McKellar, former Managing Director and General Counsel at Mithril Capital, signed a Separation Agreement and a Consulting Agreement on Feb. 12, 2019, under time pressure and without counsel, according to her.
Both agreements contained broad arbitration clauses and Texas choice-of-law and venue provisions; they incorporated the AAA rules for employment disputes.
Mithril Capital and Ajay Royan sued McKellar in Texas state court; Mithril GP Employee Feeder LLC sued her in Delaware state court; McKellar then filed this California action seeking a preliminary injunction (invoking Cal. Lab. Code § 925) to enjoin the other suits.
Mithril moved to compel arbitration as to McKellar’s claims against Mithril Capital and Royan and sought dismissal or a stay of claims against Mithril Feeder, invoking the first-to-file rule.
The Court found that the arbitration agreements (via incorporation of AAA rules) delegated arbitrability to the arbitrator, that Mithril had not waived arbitration, and that § 925 applies (so arbitration must proceed in California); the Court declined jurisdiction over the Feeder claims under the first-to-file rule and denied McKellar’s preliminary injunction.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether arbitrability was delegated to the arbitrator	McKellar: Agreements incorporated AAA "National Rules," which lack the delegation clause; delegation thus not clear; delegation unconscionable given rushed signing	Mithril: Incorporation of AAA rules (which adopt current Employment Arbitration Rules including a delegation clause) is clear and unmistakable evidence of delegation	Court: Delegation exists by incorporation of AAA rules; arbitrator decides gateway questions of arbitrability
Whether Mithril waived its right to arbitrate	McKellar: Filing the Texas action shows litigation conduct inconsistent with arbitration	Mithril: Filing the complaint alone (and minimal subsequent litigation) does not constitute waiver	Court: No waiver — mere filing insufficient and Mithril did not act inconsistently with arbitration rights
Whether Cal. Labor Code § 925 requires arbitration/adjudication in California	McKellar: She primarily resided/worked in CA, was an employee and not represented by counsel; § 925 therefore voids forum selection and requires CA adjudication	Mithril: McKellar was not an employee after the Agreements or was represented by counsel (so § 925 inapplicable)	Court: McKellar plausibly an employee under California tests and not shown to have had counsel; § 925 applies; arbitration compelled to proceed in California
Whether the Court should retain jurisdiction over claims against Mithril Feeder	McKellar: Seeks to enjoin Delaware/Texas actions and retain CA forum	Mithril: Delaware action was first-filed and raises substantially similar issues; court should decline under first-to-file rule	Court: Declined jurisdiction over Feeder claims under the first-to-file rule (to avoid duplicative/conflicting litigation)

Key Cases Cited

Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (arbitration agreements enforced according to their terms)
AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643 (1986) (parties cannot be forced to arbitrate disputes they did not agree to)
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favors arbitration)
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (parties may delegate gateway arbitrability questions to arbitrator)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (gateway question of arbitrability defined)
Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015) (incorporation of AAA rules is clear and unmistakable evidence of delegation)
Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (9th Cir. 2000) (district court role limited to existence and scope of arbitration agreement)
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995) (ambiguities about delegation should not be presumed for arbitrator absent clear evidence)
Poublon v. C.H. Robinson Co., 846 F.3d 1251 (9th Cir. 2017) (adhesive contract context gives low degree of procedural unconscionability)
S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations, 48 Cal.3d 341 (1989) (multi-factor test for employee vs. independent contractor)
Martin v. Yasuda, 829 F.3d 1118 (9th Cir. 2016) (waiver of arbitration analyzed by knowledge, inconsistent acts, and prejudice)
Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93 (9th Cir. 1982) (first-to-file rule and factors for declining jurisdiction)