Judge: Ronald F. Frank, Case: 24TRCV00980, Date: 2025-01-15 Tentative Ruling
Case Number: 24TRCV00980 Hearing Date: January 15, 2025 Dept: 8
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HEARING DATE: January 15, 2024
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CASE NUMBER: 24TRCV00980
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CASE NAME: Monica Rigali v.
Pelican Products, Inc., et al.
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MOVING PARTY: Defendants, Pelican Products, Inc. and Platinum Equity Advisors,
LLC
RESPONDING PARTY: Plaintiff, Monica Rigali
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TRIAL DATE: Not
Set.
MOTION:¿ (1) Motion to Stay Proceedings
Tentative Rulings: (1) ARGUE the Pre-emption
issue
I. BACKGROUND¿¿
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A. Factual¿¿
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On March 21, 2024, Plaintiff, Monica Rigali
(“Plaintiff”) filed a Complaint against Defendants, Pelican Products, Inc.,
Platinum Equity Advisors, LLC, James Curleigh, Kevin Miniard, Jeffrey Goldberg,
Philip Gyori, and DOES 1 through 50. The Complaint alleges causes of action
for: (1) Hostile Work Environment Sexual Harassment in Violation of FEHA; (2)
Discrimination on the Basis of Sex/Gender in Violation of FEHA; (3) Failure to
Prevent Discrimination and Harassment in Violation of FEHA; (4) Retaliation in Violation
of FEHA; (5) Whistleblower Retaliation (Cal. Lab. Code § 1102.5); (6) Wrongful
Termination in Violation of Public Policy; (7) Intentional Infliction of
Emotional Distress; (8) Defamation; and (9) Breach of Implied-in-Fact Contract
not to Terminate Employment.
On
May 28, 2024, Defendants,
Pelican Products, Inc. and Platinum Equity Advisors, LLC (collectively “Moving
Defendant”) filed this Motion to Compel
Arbitration. On October 9, 2024, this Court DENIED Moving Defendants’ Motion to
Compel Arbitration on the grounds that the Arbitration Agreement was
unenforceable as to the entire case under the “Ending Forced Arbitration of
Sexual Assault and Sexual Harassment Act of 2021” (“EFAA”).
On November 27, 2024, Moving Defendants filed their Notice of
Appeal of this order. Now, Moving Defendants have filed a Motion for an Order
staying the Proceeding pending that appeal.
B. Procedural¿¿
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On December 9, 2024, Moving Defendants filed this
Motion to Stay Proceedings pending their appeal of this Court’s October 9, 2024
ruling denying their Motion to Compel Arbitration. On January 2, 2025,
Plaintiffs filed an opposition brief. On January 8, 2025, Moving Defendants
filed a reply brief.
II. ANALYSIS
A.
Legal Standard
“An
aggrieved party may appeal from: (a) An order dismissing or denying a petition
to compel arbitration.” (Code Civ. Proc., § 1294, subd. (a) [added by Stats.
1961, c. 461, p. 1550, § 2, eff. until Dec. 31, 2023].) “An aggrieved
party may appeal from: (a) An order dismissing or denying a petition to compel
arbitration. Notwithstanding Section 916, the perfecting of such an appeal
shall not automatically stay any proceedings in the trial court during the
pendency of the appeal.” (Code Civ. Proc., § 1294, subd. (a) [amended by Stats.
2023, c. 710 (S.B. 365), § 1, eff. Jan. 1, 2024].)
“Except
as provided in Sections 917.1 to 917.9, inclusive, and in Section 116.810, the
perfecting of an appeal stays proceedings in the trial court upon the judgment
or order appealed from or upon the matters embraced therein or affected
thereby, including enforcement of the judgment or order, but the trial court
may proceed upon any other matter embraced in the action and not affected by
the judgment or order.” (Code Civ. Proc., § 916, subd. (a).) “When there
is a stay of proceedings other than the enforcement of the judgment, the trial
court shall have jurisdiction of proceedings related to the enforcement of the
judgment as well as any other matter embraced in the action and not affected by
the judgment or order appealed from.” (Code Civ. Proc., § 916, subd.
(b).)
Additionally,
“a court ordinarily has inherent power, in its discretion, to stay proceedings
when such a stay will accommodate the ends of justice.” (OTO, L.L.C. v. Kho
(2019) 8 Cal.5th 111, 141 [citing People v. Bell (1984) 159 Cal.App.3d
323, 329.]) “[T]he power to stay proceedings is incidental to the power
inherent in every court to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and for litigants.” (Landis
v. North American Co. (1936) 299 U.S. 248, 254; OTO, L.L.C., supra,
at p. 141.)¿¿
B.
Discussion
i.
The FAA and Senate Bill 365
Moving
Defendants move on the grounds that pursuant to the Federal Arbitration Act
(“FAA”), as interpreted by Coinbase, Inc. v. Bielski (2023) 599 U.S. 736
(“Coinbase”) , a stay is mandatory and automatic pending appeal of an
order denying a motion to compel arbitration. (Ibid.) Moving Defendants
argue that the FAA also preempts the amendment to California Code of Civil
Procedure section 1294(a) which provides that a stay is no longer automatic
under California law when a motion to compel is denied. (Ibid.) In the
alternative, Moving Defendants argue that they are entitled to a discretionary
stay as the appeal to promote justice and judicial economy.
In
opposition, Plaintiff argues that Coinbase only applies to federal
litigation and has no impact on state court procedures. Plaintiff correctly argues
that the decision in Coinbase was issued before SB 365 passed. Plaintiff
also contends that neither the FAA nor Coinbase preempts the application
of Code of Civil Procedure section 1294; certainly nothing in the EFAA says so
and EFAA is an amendment to the FAA. Additionally, Plaintiff argues that all other
cases cited in Defendants’ motion address other applications of the FAA to
state law and do not show that the FAA preempted more specific state law.
Plaintiff states this Court should not issue a discretionary stay because
discovery and proceedings in the trial court will not be wasted.
The
FAA does not mandate that a state court stay litigation pending an appeal
concerning whether the Ending Forced Arbitration of Sexual Assault and Sexual
Harassment Act (“EFAA”) applies. “Section 16(a) does not say whether
district court proceedings must be stayed pending resolution of an
interlocutory appeal.” (Coinbase,
Inc. v. Bielski (2023) 599 U.S. 736, 143 S.Ct. 1915, 1916.) Justice Kavanaugh’s opinion in Coinbase notes
that Congress ordinarily does not say anything about at stay in federal
legislation unless it specifically intends to enact a “no-stay” provision which
it has done on many occasions.
Defendant
relies heavily on Coinbase, a 5-4 decision which specifically addresses
the procedures in federal district courts under the FAA. Coinbase does
not address the EFAA, nor does it specifically extend its requirements or
language to state trial courts. Moreover, the recent amendment to
California law under Code of Civil Procedure section 1294(a) empowers state
courts to continue litigation even during such appeals. The amended statute now
explicitly states that “[n]otwithstanding [Code of Civil Procedure] Section
916, the perfecting of such an appeal shall not automatically stay any
proceedings in the trial court during the pendency of the appeal” when dealing
with the denial or dismissal of a petition to compel arbitration. (Code Civ.
Proc. §1294(a).) This legislative change eliminates the presumption of an
automatic stay in cases like this one, where a petition to compel arbitration
has been denied in a case filed in state court that has not been removed to a
federal district court.
The
California Legislature’s amendment to Section 1294(a) was aimed to curtail the
abuse of the appeals process by defendants seeking to delay litigation without
substantial justification. (2023 S.B. No. 365, California 2023-2024 Regular
Session, pg. 1 of 12 [“Proponents of this bill argue that corporate defendants
are abusing the automatic stay when a motion to compel arbitration is denied by
the trial court and then appealed by the defendant, using it as a delay tactic
causing real harm to consumers and workers. This bill provides that there shall
be no stay of the proceedings when an order dismissing or denying a motion to
compel arbitration is appealed.”].)
Defendant argues that the
FAA preempts California’s recent arbitration procedure amendment to Section
1294(a), even though Congress’ amendment to the FAA -- that was the basis for this
Court’s denial of the motion to compel arbitration -- was predicated on federal
law, i.e., the EFAA. Congressional
intent, per this Court’s prior ruling, is that cases like this are expressly
exempt from arbitration notwithstanding a signed arbitration agreement. Congress has not occupied the field regarding
the arbitration of disputes. (Ding v. Structure Therapeutics, Inc. (N.D. Cal., Oct. 29, 2024, No.
24-CV-01368-JSC) 2024 WL 4609593, at *6.)
The EFAA does appear to preempt contrary state laws that
would require arbitration of sexual assault and sexual harassment claims that
arise on or after EFAA’s March 3, 2022 effective date, but that point is not
helpful to defendants’ position on this motion.
Because the parties did not brief
Ding or the preemption cases it cites, the Court will entertain oral argument
and perhaps supplemental briefing on the “equal treatment” preemption or the “obstacle
preemption” arguments discussed in Deng in the context of the CAA’s 30-day
payment-of-fees requirement. Section 1294(a),
like 1281.98, arguably is an arbitration-specific provision regardless of whether
it favors or disfavors arbitration.
As
such, this Court seeks further argument or further briefing to address what appears
to be an issue of first impression.
ii.
Discretionary Power
As noted
above, Moving Defendants also argue that the Court may use its discretion to
stay the action in the interests of promoting justice and judicial economy. Thus,
the Court reviews elements of a discretionary stay below.
1. Likelihood of Success on the
Merits
Moving
Defendants argue that they are likely to succeed on the merits of the appeal.
However,
Moving Defendants do not present argument on how they would succeed on the
merits, admitting that the EFAA was enacted in 2022 and because of this, there
is limited authority addressing its interpretation and application. Instead,
Moving Defendants assert that the appeal will be addressing “substantial” legal
questions. The Court agrees as it too analyzed these substantial legal
questions. However, this Court came to the conclusion that the EFAA barred
arbitration of Plaintiff’s entire suit. As such, the Court believes this factor
weighs in favor of Plaintiff absent any argument from Moving Defendants as to
how they are likely to succeed on the merits of their case.
2. Irreparable Injury from
Denial of a Stay
Next,
Moving Defendants contend they will suffer irreparable injury if forced to
continue litigating this case while its appeal is pending. Moving Defendants
contend that they would be forced to engage in, potentially, meaningless, expensive,
and burdensome litigation that could have been avoided had the case simply been
stayed pending the appeal. However, the Court finds that this factor is not
particularly persuasive. Is this case is merely in it infancy as far as
litigation goes, the Parties would proceed in discovery in either forum. Plaintiff
also points out that Moving Defendants refused to stipulate to a request for
calendar preferences and expedited briefing schedule for the appeal process,
and that for these reasons, Moving Defendants are not concerned with speed or
economy.
The Court acknowledges that Appeals regularly take years
to resolve. In the meantime, witnesses forget details, documents get lost, and
discovery becomes harder and more expensive as everything in life moves on from
what it once was. Although not every case is highly fact specific, this matter
is likely to involve a significant amount of discovery, including multiple
depositions. Even if the Court did err in keeping this matter, Defendant
would still have to engage in discovery through the arbitration process. Evidence needed by each side to prove or
defend its substantive position needs to be preserved lest it grow stale or lost
to time. As such, the Court also believes this factor favors Plaintiff.
3. Public Policy
Lastly, Moving Defendants assert
that because this Court’s decision regarding the EFAA is one that has been
hotly litigated since the EFAA’s enactment, obtaining a decision from the Court
of Appeal on this critical issue weighs in favor of public policy to stay this
action pending appeal. The Court acknowledges that this may be the case, but
simultaneously recognizes the public policy preference of moving discovery
forward in order to preserve discovery that might be lost and/or forgotten during
a potentially lengthy appeal. The Court
is thus not inclined to exercise its discretion to order a stay.
IV.
CONCLUSION¿¿
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For the foregoing reasons, Moving
Defendants’ Motion to Stay Proceedings is to be ARGUED.
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