It is clearly a vacation week as there is only one case to report today. However, Gonzalez is worth reading as a reminder of the importance of asserting and reasserting any purported right to arbitrate a claim.
A notorious Boston Mayor from the early 20th century had a campaign song which advised constituents to “Vote Often and Early for James Michael Curley.” Gonzalez v. Diamond Resorts International Marketing, Inc., 2021 U.S. Dist. LEXIS 245572 (D. Nev. December 27, 2021), applies the same advice to asserting the right to arbitrate a dispute.
Plaintiffs, on behalf of a group of vacation counselors, brought the case as a collective action under the Fair Labor Standards Act and a class action asserting violation of Hawaii’s labor laws. Defendants moved to dismiss the claims of over 300 class members, alleging that they had signed arbitration agreements in connection with their employment. The court, Gordon, J., denies plaintiffs’ claim that Diamond Resorts, by delaying assertion of the arbitration clause, waived its right to rely thereon; however, he stays, rather than dismisses, plaintiffs’ claims.
The court easily rejects as impractical plaintiffs’ contention that Diamond had to assert the defense separately as to each of the 340 plaintiffs at the time that he or she opted in. “Filing a motion for each of the hundreds of opt-in plaintiffs would have been cumbersome and inefficient for the parties and the court.”
The question, therefore, becomes whether defendant “(1) ma[de] an intentional decision not to move to compel arbitration and (2) actively litigate[d] the merits of the case for a prolonged period of time in order to take advantage of being in court,” quoting Newirth ex rel Newirth v. Aegis Senior Communities, LLC, 931 F. 3d 935, 940 (9th Cir. 2019). The court recites the multiple times that Diamond Resorts referenced its claimed right to arbitrate the disputes. It raised the existence of the clause in its answer and in response to the plaintiffs’ motion to conditionally certify the collective action. In various correspondence, defense counsel inquired as to whether they needed to file motions to compel arbitration as to certain plaintiffs. Upon “inadvertently” sending discovery requests to “a few opt-in plaintiffs who had agreed to arbitrate,” counsel withdrew the requests before plaintiffs responded. Defense counsel continued to reference arbitration throughout mediation, the preparation of a new scheduling order, and correspondence between counsel regarding this motion to dismiss. “In sum,” the court opines, “throughout the history of this case, the defendants have consistently and repeatedly asserted that any plaintiff who was subject to an arbitration agreement should be dismissed from this action and the related action. The defendants have not litigated the merits of those claims in this forum and have resisted efforts to engage in discovery related to those plaintiffs other than to disclose evidence to show whether the plaintiffs are subject to an arbitration agreement. ” (Emphasis added).
In other words, while Emerson tells us that “consistency is the hobgoblin of little minds” and Wilde would have us believe that it is the “hallmark of the unimaginative,” when it comes to preserving an arbitration defense, you’re better off following Steely Dan – “You go back, Jack, do it, again.”
Enjoy the rest of this quiet week. The world kicks back in on Monday.
David A. Reif, FCIArb