RICHARDS v. ERNST YOUNG LLP (2013)

OPINION

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, –––U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (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

“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).

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 district court.” Peterson v. Highland Music, Inc., 140 F.3d 1313, 1321 (9th Cir.1998). We also note that the only court 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 because 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 .³ Finally, the Supreme Court recently has reiterated that “courts must rigorously enforce arbitration agreements according to their terms” and that this “holds true for claims that allege a violation of a federal statute, unless the FAA's mandate has been overridden by a contrary congressional command.” Am. Express v. Italian Colors Rest., ––– U.S. ––––, ––––, 133 S.Ct. 2304, 2309, 186 L.Ed.2d 417 (2013) (internal quotation marks omitted). “Congress,” however, “did not expressly provide that it was overriding any provision in the FAA when it enacted the NLRA or the Norris–LaGuardia Act.” Morvant v. P.F. Chang's China Bistro, Inc., 870 F.Supp.2d 831, 845 (N.D.Cal.2012).

REVERSED.⁴

PER CURIAM: