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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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11 JESSE KNIGHT, Case No.: 5:23-cv-1511-CBM-SPx

12 Plaintiff, ORDER RE: MOTIVE ENERGY v. 13 TELECOMMUNICATIONS

MOTIVE ENERGY GROUP, INC.’S MOTION TO

14 TELECOMMUNICATIONS GROUP, COMPEL ARBITRATION

INC.,

15 Defendant. 16 17 18 The matter before the Court is Defendant Motive Energy 19 Telecommunications Group, Inc. (“Motive”)’s Motion to Compel Arbitration. 20 (Dkt. No. 39 (“Motion”).) 21 I. BACKGROUND 22 This is a collective action under the Fair Labor Standards Act (“FLSA”) filed 23 by Plaintiff Jesse Knight1 on August 1, 2023, for unpaid overtime wages. (Dkt. No. 24 1 (“Compl.”).) Plaintiff was a non-exempt field worker in Colorado for Motive, a 25 telecommunications company. (Compl., ¶ 8, 10.) Plaintiff alleges that in the three 26 years before filing suit, Motive failed to pay him and “similarly situated field 27 1 Another individual, Anthony Montanez, is an opt-in Plaintiff to this collective 28 1 workers” overtime compensation at “time and a half” of his regular pay, as required 2 under the FLSA. (Id., ¶¶ 28-29.) 3 On October 12, 2023, Motive filed an Answer to the Complaint. (Dkt. No. 4 20.) On February 19, 2024, the parties filed a joint Rule 26(f) report, and on 5 February 22, 2024, the Court set dates for discovery deadlines, settlement 6 conference, pretrial conference, and trial. (Dkt. Nos. 29, 30.) On May 15, 2024, 7 Motive filed a Motion to Compel Arbitration, arguing that Motive recently 8 discovered that Plaintiff entered into a valid and enforceable written arbitration 9 agreement (the “Agreement”) at the beginning of his employment with Motive, and 10 that the Agreement applies to Plaintiff’s claims in this action. On June 18, 2024, 11 Plaintiff filed an opposition to the Motion. (Dkt. No. 52 (“Opp.”).) On June 25, 12 2024, Motive filed its reply. (Dkt. No. 55 “Reply”).) The parties also filed 13 declarations in support of their respective positions. (Dkt. Nos. 40, 41, 52-1, 52-2, 14 56, 57-1, 72.) 15 II. STATEMENT OF THE LAW 16 Under the Federal Arbitration Act (“FAA”), a written agreement to arbitrate 17 involving interstate commerce is “valid, irrevocable and enforceable, save upon 18 such grounds as exist at law or in equity for the revocation of any contract.” 9 19 U.S.C. § 2; Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 118 (2001). A party 20 aggrieved by the refusal of another to arbitrate under a written arbitration agreement 21 may petition a United States district court for an order directing that such arbitration 22 proceed in the manner provided for in the agreement. 9 U.S.C. § 4. The FAA 23 “mandates that district courts shall direct the parties to proceed to arbitration on 24 issues as to which an arbitration agreement has been signed.” Chiron Corp. v. Ortho 25 Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). The Court’s role under 26 the FAA is therefore limited to determining: “(1) whether a valid agreement to 27 arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute 28 at issue.” Id. Additionally, “any doubts concerning the scope of arbitrable issues 1 should be resolved in favor of arbitration, whether the problem at hand is the 2 construction of the contract language itself or an allegation of waiver, delay, or a 3 like defense to arbitrability.” Moses H. Cone Memorial Hosp. v. Mercury Constr. 4 Corp., 460 U.S. 1, 24–25 (1983) (footnote omitted). 5 III. DISCUSSION 6 A. Valid and Enforceable Agreement 7 The parties dispute whether a valid arbitration agreement exists. “In 8 determining the validity of an agreement to arbitrate, federal courts should apply 9 ordinary state-law principles that govern the formation of contracts.” Pokorny v. 10 Quixtar, Inc., 601 F.3d 987, 994 (9th Cir. 2010) (cleaned up). “Before a federal 11 court may apply state-law principles to determine the validity of an arbitration 12 agreement, it must determine which state’s laws to apply.” Id. “[W]here, as here, 13 a federal court’s jurisdiction is not based on diversity of citizenship, federal 14 common law choice-of-law rules apply.” Charles v. Portfolio Recovery Assocs., 15 LLC, 2024 WL 1672350, at *1 (9th Cir. Apr. 18, 2024) (citing Schoenberg v. 16 Exportadora de Sal, S.A. de C.V., 930 F.2d 777, 782 (9th Cir. 1991)). “Federal 17 common law follows the Restatement (Second) of Conflict of Laws, under which 18 [state] law, as the parties’ choice of law, governs the validity of the arbitration 19 clause.” Id. 20 Here, the Agreement includes a general choice-of-law provision: 21 Governing Law. The validity, interpretation, effect, and enforcement of this Agreement shall be governed by the laws of the State of 22 Colorado without reference to choose of law principles. 23 (Dkt. No. 41-1 at 4.) The arbitration provisions within the Agreement also include 24 a choice-of-law clause, as follows: 25 The Company and Employee hereby mutually agree that any dispute or controversy between the parties arising from or in any way related to 26 Employee’s employment with the Company, shall be submitted to and determined by binding arbitration under the Colorado Arbitration Act 27 (hereinafter “Arbitration Agreement”). The Company and Employee agree, however, that an exception to the Arbitration Agreement exists 28 for purposes of the Company seeking an injunction from any court of 1 of this Agreement (“Enforcement of Agreements”). 2 (Dkt. No. 41-1 at 5.) 3 Therefore, Colorado law applies in determining the validity of the 4 Agreement. Under Colorado law, “[t]he court shall decide whether an agreement 5 to arbitrate exists or a controversy is subject to an agreement to arbitrate.” C.R.S. 6 § 13-22-206(2). Motive “has the burden of establishing that the matter is subject to 7 arbitration.” Johnson-Linzy v. Conifer Care Communities A, LLC, 2020 COA 88, 8 ¶ 23. 9 The parties’ only dispute regarding the validity of the Agreement is the 10 authenticity of Plaintiff’s signature on the Agreement itself. Motive argues Plaintiff 11 Knight signed the Agreement on February 8, 2022 at 19:03 CST, “as part of 12 Motive’s routine onboarding process” and that the Agreement was “presented to 13 Plaintiff alongside other pre-employment documents.” (Mot. at 6.) Knight denies 14 that he signed the Agreement and argues that the Agreement is not authentic because 15 (1) the other documents he signed as part of his onboarding process with Motive 16 were sent to him to be executed by DocuSign while his signature on the Agreement 17 “does not appear to have been generated by DocuSign”; (2) his signature on the 18 other documents “do not share the same format” as the one in the Agreement; (3) 19 both the execution date stated in the Agreement (February 14, 2021) and the date of 20 his purported signature to the Agreement (February 8, 2022) cast further doubt on 21 the Agreement’s authenticity; and (4) Wheeler did not start working for Motive until 22 November 2023 (after Knight left Motive and after this action was filed), yet 23 Wheeler’s signature is on the Agreement. 24 “When parties dispute the making of an agreement to arbitrate, a jury trial on 25 the existence of the agreement is warranted unless there are no genuine issues of 26 material fact regarding the parties’ agreement.” Bellman v. i3Carbon, LLC, 563 F. 27 App’x 608, 612 (10th Cir. 2014) (analyzing motion to compel arbitration under 28 1 Colorado law).2 “In ascertaining whether questions of material fact remain, we give 2 the nonmoving party—here, Plaintiff[]—the benefit of all reasonable doubts and 3 inferences that may arise.” Id. (internal quotations omitted). 4 Here, Motive submitted a declaration from its VP of Human Resources 5 stating Motive’s practice regarding new employees and completion of standard 6 paperwork, including signing an arbitration agreement. The declaration states that 7 Knight signed the Agreement at 19:03 on February 8, 2022, and attaches a copy of 8 the Agreement with his signature affixed. (Dkt. No. 41-1.) The declaration 9 provides no further detail about the process by which an employee affixes their 10 signature (such as whether the agreement is clickwrap, browser-wrap, or displayed 11 in some other manner, or how Knight provided his assent to the Agreement). 12 In response, Knight submitted a declaration stating that he does not recall 13 signing the Agreement, that he has no record of signing the Agreement in either his 14 email or his DocuSign history, and that he signed other onboarding documents on 15 January 28, 2022, not February 8, 2022. (Dkt. No. 52-2.) 16 Wheeler’s second declaration explains that at the time Knight was hired, 17 arbitration agreements were sent to new hires via ADP, while some other paperwork 18 was sent via DocuSign. (Dkt. No. 56, ¶ 7.) The declaration provides further details 19 about the process by which employees sign arbitration agreements—specifically, 20 that employees have to agree to use ADP, that they are provided their own login ID, 21 and that they create a unique password “that no one else can access or use.” (Id., ¶ 22 5.) The declaration also attaches “audit trails” pulled from ADP indicating that 23 Motive sent Knight the Agreement on February 8, 2022 and Knight signed the 24 Agreement the same day. (Dkt. Nos. 55-2, 55-3.) Finally, the declaration clarifies 25

26 2 See also J.A. Walker Co. v. Cambria Corp., 159 P.3d 126, 130 (Colo. 2007) (under 27 the Colorado Uniform Arbitration Act, the court “must determine “whether material issues of fact are disputed and, if such factual disputes exist, it must conduct an 28 1 that Wheeler signed “all arbitration agreements of past and current employees” upon 2 her joining Motive as a matter of policy. (Dkt. No. 56, ¶ 13.) 3 Knight’s second declaration states that he “did not have access to the ADP 4 Portal prior to his first day of employment,” that he searched his emails for any 5 emails containing the term “ADP” and found “no emails from ADP or from Motive 6 asking [him] to set up [his] ADP account and sign onboarding documents,” that the 7 audit trail exhibit submitted by Motive shows some documents he recalls 8 handwriting his signature on hard copies as having been signed “electronically 9 through the ADP Portal,” and that he did not electronically sign any onboarding 10 documents through the ADP Portal. (Dkt. No. 57-1, ¶¶ 9-11, 13.) 11 Finally, Wheeler’s third declaration states that she reviewed the metadata 12 associated with the Agreement and “can confirm that Plaintiff first registered his 13 own user credentials . . . to enable him to access his ADP Portal on February 8, 14 2022,” which coincides with the date and time that Plaintiff purportedly signed the 15 Agreement. (Dkt. No. 72, ¶ 6.) Wheeler also states that the IP address used to 16 access the ADP Portal on that date was from Hockley, Texas, which is “consistent 17 with the address listed on Plaintiff’s resume.” (Id., ¶ 7.) 18 The Court finds that Plaintiff has raised a genuine issue of material fact 19 regarding the authenticity of his signature and validity of the Agreement. While 20 “general denials and statements that a user does not recall visiting a website or 21 agreeing to arbitrate are insufficient to defeat arbitration” or raise a genuine issue 22 for trial, Plaintiff here offers more than “[his] lack of recall” (Beattie v. TTEC 23 Healthcare Sols., Inc., 2019 WL 2189481, at *2 (D. Colo. May 21, 2019) (cleaned 24 up))—he attests that he has no DocuSign or email record of Motive sending him the 25 Agreement, or email record of Motive or ADP requesting he set up an ADP account. 26 In response to Wheeler’s declaration explaining that Plaintiff signed the Agreement 27 via the ADP Portal and not via DocuSign, Plaintiff attests that he did not have access 28 to the ADP Portal prior to his first day of employment. (Dkt. No. 57-1, ¶ 9.) 1 Wheeler attests that the IP address used to register the user credentials associated 2 with Plaintiff was from Hockley, Texas, which is the same town Plaintiff listed as 3 his address on his resume. (Dkt. No. 72, ¶ 7.) There is no other evidence indicating 4 how Motive knows it is Plaintiff who registered those user credentials. Moreover, 5 Motive provides no details about the process by which Plaintiff assented to the 6 Agreement via the ADP Portal, such as how the Agreement was displayed or 7 presented to Plaintiff or what mechanism he used to signify his agreement and affix 8 the electronic signature. Motive cites to no authority holding that such evidence is 9 sufficient to authenticate Plaintiff’s signature on the Agreement. Another district 10 court has found that defendants failed to establish a valid arbitration agreement 11 where the defendants similarly lacked sufficient evidence authenticating electronic 12 signatures. See Smith v. Rent-A-Ctr., Inc., 2019 WL 1294443, at *7 (E.D. Cal. Mar. 13 21, 2019). 14 Plaintiff also attests that he signed several documents in handwriting on hard 15 copies, not “electronically” as indicated by the ADP audit trails attached to the 16 second Wheeler declaration. (Id., ¶ 11.) Motive did not explain this apparent 17 inconsistency or provide any evidence refuting Plaintiff’s statement in the third 18 Wheeler declaration.3 Courts have denied motions to compel arbitration where, in 19 response to rebuttal evidence that no valid arbitration agreement exists, a defendant 20 “offers no explanation for the contradictory … information” on an HR platform. 21 See Levine v. Vitamin Cottage Nat. Food Markets, Inc., 2021 WL 4439800, at *9 22 (D. Colo. Sept. 27, 2021). 23 Therefore, the Court finds that Motive has not met its burden to prove that a 24 valid arbitration agreement exists. 25 3 At the hearing on the Motion, the Court asked Motive how the Court can rely on 26 the ADP audit trails as evidence when Plaintiff’s second declaration has raised an 27 issue regarding the accuracy of the audit trails. Motive responded only that the audit trails accurately reflect Plaintiff’s signatures to the onboarding documents listed in 28 1 B. Waiver 2 Plaintiff argues that even if there is a valid arbitration agreement, Motive has 3 now waived its right to arbitrate Plaintiff’s claims by litigating this action in federal 4 court and delaying in bringing its Motion. (Dkt. No. 52 at 25.) “Parties may agree 5 to state law rules for arbitration even if such rules are inconsistent with those set 6 forth in the [FAA].” Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1269 (9th Cir.), 7 opinion amended on denial of reh’g, 289 F.3d 615 (9th Cir. 2002). But the “strong 8 default presumption is that the FAA, not state law, supplies the rules for arbitration.” 9 Id. “[A] general choice-of-law clause within an arbitration provision does not trump 10 the presumption that the FAA supplies the rules for arbitration.” Id. at 1270. In the 11 Ninth Circuit, “an arbitration clause providing that controversies are to be resolved 12 ‘in accordance with the laws of the State of California and the rules of the American 13 Arbitration Association,’ does not evince clear intent to incorporate California 14 arbitration rules. In contrast, a provision that requires arbitration to be ‘conducted 15 and subject to enforcement pursuant to the provisions of California Code of Civil 16 Procedure 1280 through 1295’ clearly exhibits an intent that the state law rules for 17 arbitration shall govern.” Sonic Auto., Inc. v. Younis, 2015 WL 12656915, at *3 18 (C.D. Cal. Oct. 19, 2015) (analyzing Ninth Circuit precedent in Fid. Fed. Bank, FSB 19 v. Durga Ma Corp., 386 F.3d 1306, 1312 (9th Cir. 2004) and Johnson v. Gruma 20 Corp., 614 F.3d 1062, 1067 (9th Cir. 2010)) (cleaned up); Shulman v. Kaplan, 2020 21 WL 2748022, at *5 (C.D. Cal. Jan. 28, 2020) (stating same). 22 Here, the parties have agreed to Colorado state law (and the Colorado 23 Uniform Arbitration Act) as the governing law for arbitration. The Colorado 24 Supreme Court has devised a six-factor test “to determine whether parties have 25 acted inconsistently with their contractual right to seek ADR”—(1) whether the 26 party has actually participated in the lawsuit or has taken other action inconsistent 27 with his rights; (2) whether litigation has substantially progressed by the time the 28 intention to arbitrate was communicated by the party moving to dismiss; (3) whether 1 there has been a long delay seeking a stay and whether the defendant filed 2 counterclaims without asking for a stay; (4) whether a request to compel arbitration 3 was initiated close to trial; (5) whether the party seeking arbitration has taken unfair 4 advantage of discovery proceedings which would not have been available in 5 arbitration; and (6) whether the other party was affected, misled, or prejudiced by 6 the delay. City & Cnty. of Denver v. Dist. Ct. (“Denver”), 939 P.2d 1353, 1369 7 (Colo. 1997). 8 In Waldman v. Old Republic Nat. Title Ins. Co., 12 P.3d 835, 837 (Colo. App. 9 2000), a Colorado appellate court found that where a “defendant removed the action 10 to federal court and, once in that forum, filed an answer to the complaint without 11 asserting its right to arbitrate as an affirmative defense,” had “additional 12 opportunities to request arbitration but failed to do so,” and had prejudiced plaintiffs 13 because it caused plaintiffs “to expend time and money in the litigation process,” 14 the defendant had waived its right to arbitrate. 15 The Court finds that factors (1), (3), and (6) weigh in favor of finding waiver, 16 while factors (2), (4), and (5) weigh against finding waiver. First, Motive has 17 “actually participated in the lawsuit”—it filed an answer and a joint Rule 26(f) 18 report, and according to Plaintiff, it has also engaged in some discovery. (Dkt. No. 19 52 at 30.) As in Waldman, Motive filed an answer to the complaint (as well as a 20 joint Rule 26(f) report) without asserting a right to arbitration as an affirmative 21 defense. Motive contends that it did not provide the Agreement “upon initial review 22 of [Plaintiff’s] employee file due to a lack of understanding as to the legal 23 requirements at that time” (Dkt. No. 41, ¶ 8), but that statement indicates that Motive 24 knew of the existence of the Agreement well before it filed its Motion, even if 25 Motive’s counsel only learned of the Agreement later.4 Second, Motive has yet to 26

27 4 At the hearing on the Motion, Motive did not address when the company learned of the Agreement—only that counsel learned of the Agreement in February 2024. 28 1 | file any dispositive motions or raise any arguments on the merits of □□□□□□□□□□□ 2 | claims. Although this action has been pending since August 2023, litigation has not 3 || yet substantially progressed, as the parties have only exchanged some informal 4 || discovery. Third, Motive has not filed counterclaims, but it delayed seeking to 5 || compel arbitration for several months. Fourth, Motive’s Motion was not made close 6 | to trial. Fifth, since the parties are not far into discovery, it is unlikely that Motive 7 | has taken advantage of discovery proceedings that would not be available in 8 | arbitration. Sixth, because Motive failed to raise the existence of the Agreement in 9 | either its Answer or the joint Rule 26(f) report, its delay has likely misled Plaintiff, 10 | as he had no reason to believe his claims would not proceed in federal court until 11 | Motive informed him of its intent to file this Motion.° 12 On balance, the Court finds that even if a valid arbitration agreement existed, 13 | Motive’s actions in this litigation have waived its right to arbitrate □□□□□□□□□□□ 14 | claims. Because Motive has waived its right to arbitrate Plaintiff's claims, the 15 | Court finds that denial of the Motion, rather than a jury trial or evidentiary hearing 16 | regarding the existence of a valid arbitration agreement, is appropriate. 17 IV. CONCLUSION 18 Accordingly, the Court DENIES the Motion to Compel Arbitration. The 19 | Court hereby sets the following case schedule deadlines: 20 e ADR-1 Form shall be filed no later than September 5, 2024. 21 22 as October 2023 (the date of Motive’s Answer), and likely as early as August 2023 23 | (the date of the Complaint) or even May 2023 (the date of Plaintiff's demand letter)—and delayed raising it with Plaintiff and with the Court until recently. > Following Morgan v. Sundance, Inc., 596 U.S. 411 (2022), prejudice is no longer 25 || a requirement to finding waiver of arbitration. However, the Court has considered 26 it here as part of the sixth factor within the test laid out in Denver. ° Moreover, at the hearing on the Motion, the parties agreed that Motive has not 27 || moved to compel arbitration of opt-in Plaintiff Montanez’s claims. Therefore, even 28 if Knight’s claims were compelled to arbitration, there would still be live claims remaining in this action, and a stay or dismissal would not be appropriate. 10

1 e Fact discovery shall be completed on or before March 4, 2025. 2 e Initial expert disclosures shall be due no later than April 4, 2025. 3 e Settlement conference shall be held on or before April 7, 2025. 4 e Rebuttal expert disclosures shall be due no later than May 7, 2025. 5 e Expert discovery shall be completed on or before May 21, 2025. 6 e Last day to hear dispositive motions is July 24, 2025. 7 e Pre-trial conference is set for August 21, 2025. 8 e Jury trial is set for September 18, 2025 (est. 6-8 days). 9 IT IS SO ORDERED. 10 11 | DATED: August 27, 2024 _ 12 UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11