Cases Denying Discovery

Hodsdon v. DirecTV, LLC, 2012 WL 5464615 (N.D.Cal. 2012)

Plaintiffs move for leave to conduct arbitration-related discovery in order to bolster their contention that DirecTV’s arbitration provision is unconscionable. Plaintiffs’ argument is premised upon California Civil Code section 1670.5(b) which provides for arbitration-related discovery upon a claim or appearance of unconscionability. (Motion for Leave to Conduct Arbitration–Related Discovery at 4 (citing Cal. Civ.Code § 1670.5(b).) That section allows the parties “a reasonable opportunity to present evidence as to [the provision’s] commercial setting, purpose, and effect to aid the court in making the [unconscionability] determination.” Cal. Civ.Code § 1670.5(b). Some courts have interpreted this “reasonable opportunity” language to allow for discovery on the question of unconscionability. See, e.g., Hamby v. Power Toyota Irvine, 798 F.Supp.2d 1163, 1164 (2011).  Here, Plaintiffs’ requested discovery would provide no new information that is necessary for the Court to determine the issue of unconscionability. Plaintiffs have failed to request any discovery that would actually aid the Court in making an unconscionability determination. Plaintiffs make several requests, most of which relate to the merits of their suit, rather than to unconscionability of the arbitration provision. ( See e.g., Plaintiffs’ First Set of Arbitration–Related Interrogatories at ¶ 12 (“State the number of Subscribers in the United States who signed up for satellite service with DirecTV, and whose personally identifiable information was retained by DirecTV after the termination of services”).) Further, Plaintiffs focus on DirecTV’s customers in general, rather than on the only relevant customers, which are Plaintiffs themselves. ( See id. at ¶ 4 (“[S]tate on an annual basis the number of disputes involving Consumers’ Accounts where the amount in controversy was less than $15,000 that were instituted and resolved in state and federal court”).)   The court in Meyer v. T–Mobile U.S.A. Inc. dealt with a very similar situation. 836 F.Supp.2d 994, 1007 (2011). There, the plaintiff was a consumer suing on behalf of herself and a putative class, and she requested arbitration-related discovery on the issue of unconscionability. Id. at 997; 1006–07. However, like Plaintiffs’ here, most of the Meyer plaintiff’s discovery requests did “not relate to the validity of Plaintiff’s arbitration agreement with [the DirecTV]. Instead, they concern[ed] all agreements, disputes, arbitrations and lawsuits relating to TMobile customers … other than Plaintiff.” Id. at 1007. The court there found that because the only relevant document-the agreement between the plaintiff and T–Mobile–was readily available to the court, no further discovery was necessary. Id.  Similarly here, the only relevant document is the actual arbitration agreement that Plaintiffs allege is unconscionable.FN1 Plaintiffs’ further requests for information would not aid the Court and would only serve to delay arbitration in contravention of the FAA and its stated purpose.

Hesse v. Sprint Spectrum, L.P., 2012 WL 37399 (W.D.Wash. 2012) (denying in part, granting in part)

Plaintiffs assert that they are entitled to discovery concerning whether Plaintiffs entered into an agreement to arbitrate. (Mot. at 5–6; Reply at 4.) The Ninth Circuit Court of Appeals has held that “[t]he FAA provides for discovery and a full trial only if ‘the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue.’ ” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 726 (9th Cir.1999) (quoting 9 U.S.C. § 4)). “[T]he making of the arbitration agreement is in issue if the plaintiff alleges that the arbitration clause was fraudulently induced, that one party had overwhelming bargaining power, or that the agreement does not exist.” Hibler v. BCI Coca–Cola Bottling Co. of L.A., No. 11–CV–298 JLS (NLS), 2011 WL 4102224, at * 1 (S.D.Cal. Sept.14, 2011) (citing Granite Rock Co. v. Int’l Broth. of Teamsters, ––– U.S. ––––, 130 S.Ct. 2847, 2856, 177 L.Ed.2d 567 (2010); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006); Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1269–70 (9th Cir.2006)).  Plaintiffs assert that they need this discovery because “whether the [arbitration] clause was agreed to” is in dispute. (Mot. at 5–6.) The court, however, disagrees. The argument that the formation of the arbitration agreement is in dispute has been foreclosed by Plaintiffs’ prior admissions. In an earlier motion for partial summary judgment, Plaintiffs expressly stated that their “relationship” with “Sprint is governed by the Terms & Conditions of Service, which sets forth the general terms, and a ‘service plan,’ which sets forth the specific rates and features of the plan.” (Pl. Resp to Mot. for S.J. (Dkt.# 185) at 1; see also Pl. Mot for Part. S.J. (Dkt.# 175) at 2; id. at 6 (admitting that “[t]he Terms & Conditions agreement … governs the relationship between Plaintiffs and Sprint ….”); see November 1, 2011 Terms & Conditions (Dkt.# 175–2) Ex. 1 at SPRINT–PCS–HO 000025) (“Your agreement (“Agreement”) with Sprint Specturm L.P …. is made up of these Terms and Conditions (“Terms”) and the Service Plan that we agree to provide you.”); August 1, 2002 Terms & Conditions (Dkt.# 175–2) Ex. 3 at SPRINT–PCS–HO 000047 (same).) FN2 The arbitration clauses relied upon by Sprint PCS in its motion to compel arbitration are contained within the Terms & Conditions applicable to the time periods of Plaintiffs’ relationship with Sprint PCS. ( See Mot. to Compel Arb. (Dkt.# 253) at 3–4, 6–7; Brenner Decl. (Dkt.# 177) Ex. 6 at SPRINT–PCS HO 000118; Skok Decl. (Dkt.# 245) Ex. A at 1, 9.) Because Plaintiffs have already admitted that their relationship with Sprint PCS is governed by the Terms & Conditions, the court finds that no further discovery with regard to this issue is required.. . . Finally, Plaintiffs assert that they need discovery regarding the alleged unconscionability of the arbitration clauses—specifically whether they will be able to effectively vindicate their statutory rights in the arbitral forum. ( See Mot. at 7–8; Reply at 4–6.) In Green Tree Financial Corporation—Alabama v. Randolph, 531 U.S. 70, 121 S.Ct. 471, 148 L.Ed.2d 366 (2000), the Supreme Court stated that “[i]t may well be that the existence of large arbitration costs could preclude a litigant … from effectively vindicating her federal statutory rights in the arbitral forum.” Id. at 90. Numerous courts have required discovery on such issues prior to ruling on a motion to compel arbitration. See, e.g., Newton v. Clearwire Corp., No. 2:11–CV–00783–WMS–DAD, 2011 WL 4458971, at *6–*8 (E.D.Cal. Sept.23, 2011) (permitting limited pre-arbitration discovery regarding unconscionability); Plows, 2011 WL 3501872, at *5 (permitting four months to conduct discovery on the enforceability of the arbitration agreement); Laguna, 2011 WL 3176469, at *7 (permitting limited discovery, narrowly tailored to determining whether arbitration clause is enforceable under state law); Hamby v. Power Toyota Irvine, 798 F.Supp.2d 1163, 1164–65 (S.D.Cal.2011) (permitting limited pre-arbitration discovery on issue of unconscionability); Larsen v. J.P. Morgan Chase Bank, N.A., Nos. 10–12936, 10–12937, 2011 WL 3794755, at *1 (11th Cir. Aug.26, 2011) (vacating district court order which denied a motion to stay pending arbitration and remanding with instructions to reconsider in light of the Supreme Court’s decision in Concepcion and that “discovery is to be limited to issues bearing significantly on the arbitrability of this dispute until the question of arbitrability has been decided.”). Accordingly, Plaintiffs’ motion for discovery is granted with respect to the narrow issue of whether the arbitration clauses at issue would permit Plaintiffs to vindicate their statutory rights.  The court, nevertheless, recognizes that there are potentially substantive issues with respect to Plaintiffs’ reliance on Green Tree. First, Plaintiffs are asserting state, and not federal, statutory rights. “[I]t is not clear that Green Tree ‘s solicitude for the vindication of rights applies to rights arising under state law….” Kaltwasser v. AT & T Mobility, LLC, –––F.Supp.2d ––––, 2011 WL 4381748, at *5 (W.D.Wash. Sept. 20, 2011). Further, “even assuming that Green Tree applies to state law claims, the notion that arbitration must never prevent a plaintiff from vindicating a claim is inconsistent with Concepcion.” Id. Indeed, another court within this district has concluded that “[i]f Green Tree has any continuing applicability, it must be confined to circumstances in which a plaintiff argues that costs specific to the arbitration process, such as filing fees and arbitrator’s fees, prevent her from vindicating her claims.” Id. at *6.   Although the court notes the foregoing issues, it declines, in the context of this motion to compel discovery, to make any substantive rulings concerning the continued viability of Green Tree following the Supreme Court’s ruling in Concepcion or its applicability to this dispute. The court prefers instead to consider such issues (if required) in the context of Defendants’ motion to compel arbitration (Dkt.# 253) and upon a complete record following the ordered discovery. The court, however, cautions the parties that the present order compelling limited discovery is by no means a license for Plaintiffs to embark on a fishing expedition, and in light of the court’s comments above should be narrowly construed. The court’s role at this juncture “is strictly limited to determining arbitrability and enforcing agreements to arbitrate.” See Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1131 (9th Cir.2000) (internal quotation marks omitted).

Alvarez v. T–Mobile USA, Inc., 822 F.Supp.2d 1081 (E.D. Cal. 2011) (Denying part, granting in part).

 There are two umbrella issues concerning the motion to compel arbitration: (1) did the parties enter into an agreement to arbitrate; (2) whether there exists a defense to the arbitration requirement. The United States Supreme Court has held that, “[T]he first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute.” Mitsubishi Motors v. Soler Chrysler–Plymouth, 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Whether an agreement to arbitrate exists is answered by applying state contract law, even where the agreement is covered by the FAA. Pokorny v. Quixtar, 601 F.3d 987, 994 (9th Cir.2010). Unconscionability is proven against a backdrop of state law, Bridge Fund Capital Corp. v. Fastbucks Franchise, 622 F.3d 996, 1003 (9th Cir.2010)—but only to a point. Each party has respective burdens at this stage of the proceedings. “ ‘The [party seeking arbitration] bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.’ ” Id. at 1005 quoting Engalla v. Permanente Med. Grp., Inc., 15 Cal.4th 951, 972, 64 Cal.Rptr.2d 843, 938 P.2d 903 (1997). Every unconscionability analysis involves both procedural and substantive unconscionability, Bridge Fund Capital Corp., 622 F.3d at 1004, and both *1085 must be found in order for an arbitration provision to be void. Id.   Accordingly, the court must determine whether the information sought is relevant in light of defendant’s objections.  With respect to the first threshold issue, formation of an agreement, Alvarez is entitled to discovery. Plaintiff did argue that no agreement to arbitrate had been formed in the first instance—the first threshold issue. According to Alvarez, he did not sign the agreement, but only signed an electronic pad that contained no terms and conditions but whose only purpose was to approve the credit card transaction. As a result, plaintiff contends that he was not given the Terms and Conditions or told of them, and therefore he received no notice of binding arbitration and the opt out provision. FN2 As set forth earlier, T–Mobile bears the burden of proof on this issue, and whether an agreement to arbitrate per se was ever formed is a hotly contested issue. Discovery is appropriate for this allegation. The interrogatories and Requests for Production reasonably relevant to the this first threshold issue are: Interrogatories 9 and 18; Requests for Production 4, 6(limited to confusion regarding arbitration provisions), and 8.  FN2. Plaintiff contends that one of the transactions did not involve a T–Mobile phone so the Terms and Conditions were not in the package as T–Mobile asserts.  The undersigned now turns to the second threshold issue, and the issue to which the bulk of the discovery is directed—the unconscionability, procedural and substantive, of the arbitration provision as written. The undersigned previously stated that state law determines unconscionability “to a point” because the Federal Arbitration Act can preempt that state law. The most recent Supreme Court case demonstrating the point is AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). The court held that the Federal Arbitration Act preempted California’s Discover Bank rule which had held that an arbitration agreement in a consumer contract setting could be unconscionable because it included a universal class action waiver (abrogating Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (2005)). Of importance here, the Concepcion court concluded that only principles of unconscionability that applied generally to all contracts could avoid the arbitration requirement; state law carving out special unconscionability rules for types of contracts, e.g., consumer contracts, would not pass muster.. . . On the other hand, plaintiff might argue that the opt out of arbitration as it related to class actions was so unclear in its written form, that no agreement was formed with respect to the opt out provision. That is, the bold letters in original tell the customer that he cannot participate in a class action whether in arbitration or in court (and the only way to get to court is to opt out of arbitration, Baca Declaration, supra ), and then the smaller print later tells the customer that if he timely opts not to proceed in arbitration than he can bring a class action in court. Well, which is it? No class action—period—whether in arbitration or court, or yes, you can bring a class action in court if you timely opt out. If there is a question about the vagueness of the provision at issue, the district judge will have to rule on the vagueness issue, and the effect of any finding as to vagueness, i.e., severance or not, enforceability or not. But this would be a matter of law for the court for which discovery is not seemingly needed. Baker v. Osborne Development Corp., 159 Cal.App.4th 884, 891, 71 Cal.Rptr.3d 854 (2008) FN5  FN5. See also Ersa Grae Corp. v. Fluor Corp., 1 Cal.App.4th 613, 2 Cal.Rptr.2d 288 (1991). “Under California law, a contract will be enforced if it is sufficiently definite (and this is a question of law) for the court to ascertain the parties’ obligations and to determine whether those obligations have been performed or breached.” But see Dotson v. Amgen Inc., 181 Cal.App.4th 975, 980, 104 Cal.Rptr.3d 341 (2010): “Procedural unconscionability focuses on the making of the agreement. Oppression results from unequal bargaining power, when a contracting party has no meaningful choice but to accept contract terms. Unfair surprise results from misleading bargaining conduct or other circumstances indicating that party’s consent was not an informed choice. ( Sanchez [ v. Western Pizza Enterprises, Inc.] , supra, 172 Cal.App.4th [154] at p. 173, 90 Cal.Rptr.3d 818 [ (2009) ].)”  Thus, in either case, Alvarez does not need the burdensome discovery on substantive unconscionability, and to order it would be wasteful of the parties’ and the court’s resources. The undersigned declines to do this as it is violative of the spirit of the district judge admonition that discovery is to be speedy and limited—it has to produce some meaningful result as well.

Cases Granting Discovery

 Andrus v. D.R. Horton, Inc., 2012 WL 1971326 (D.Nev. 2102)

While a court is determining the issue of whether an action should be stayed and the parties compelled to arbitrate, “a federal court may consider only issues relating to the making and performance of the agreement to arbitrate.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 726 (9th Cir.1999)(citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967); see also Sparking v. Hoffman Construction Co., 864 F.2d 635, 638 (9th Cir.1988). “[D]iscovery and a full trial in connection with a motion to compel arbitration” is permitted under 9 U.S. § 4 only if “the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue.” Id; 9 U.S. § 4. To require the parties to proceed with the action pending a ruling on the motion to compel arbitration and any appeal thereof would cause the party seeking to enforce the arbitration clause to be “deprived of the inexpensive and expeditious means by which the parties had agreed to resolve their disputes.” Alascom, Inc. v. ITT North Elec. Co., 727 F.2d 1419, 1422 (9th Cir.1984).  C. Discussion.  1. Staying Discovery  Since plaintiff’s discovery plan and scheduling order (# 23) did not propose limiting the scope of discovery to matters related to the “making and performance of the agreement to arbitrate,” staying discovery pending a ruling on the motion to compel arbitration (# 12) is warranted. Simula, Inc., 175 F.3d at 726. If the motion to compel arbitration is granted and the “dispute is arbitrable, responsibility for the conduct of discovery lies with the arbitrators …” CIGNA Health Care of St. Louis, Inc. v. Kaiser, 294 F.3d 849, 855 (7th Cir.2002) (citing 9 U.S.C. § 7). It is in the interest of conserving the resources of the parties and the court to stay discovery in this action pending a determination of the motion to compel arbitration. See Mundi v. Union Sec. Life Ins. Co., 2007 WL 2385069, at *6 (E.D.Cal.2007) (holding that “the parties should not be required to endure the expense of discovery that ultimately would not be allowed in arbitration”).

O’Brien v. American Exp. Co., 2012 WL 3628667 (S.D.Cal. 2012)  (District Court’s affirmance)

The Federal Arbitration Act (“FAA”) “calls for a summary and speedy disposition of motions or petitions to enforce arbitration clauses,” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 29, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), and therefore discovery in connection to a motion to compel arbitration is available “only if ‘the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue.’ “ Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 726 (9th Cir.1999) (citations omitted). “[T]he making of the arbitration agreement is in issue if the plaintiff alleges that the arbitration clause was fraudulently induced, that one party had overwhelming bargaining power, or that the agreement does not exist.” Hibler v. BCI Coca–Cola Bottling Co. of L.A., No. 11cv00298 JLS (NLS), 2011 WL 4102224, at *1 (S.D.Cal. Sept. 14, 2011).   Magistrate Judge Skomal found that the allegations in Plaintiff’s motion sufficiently placed the making of the agreement in issue, such that limited “discovery is relevant to the formation or making of the agreement[.]” (Doc. 20 at 3.) The Court finds no clear error in this determination or in Magistrate Judge Skomal’s decision to grant seven limited requests for document discovery (Doc. 20 at 7–10), and, accordingly, DENIES Defendant’s Rule 72(a) motion. The parties shall complete the discovery ordered by Magistrate Judge Skomal within 60 days of the entry of this order. Any disputes regarding the scope or content of discovery shall be referred to Magistrate Judge Skomal.

O’Brien v. American Exp. Co., 2012 WL 1609957 (S.D.Cal. 2012) (Magistrate’s Order)

Plaintiff seeks discovery on the making of the arbitration agreement and on whether the agreement is unconscionable. (Doc. No. 8 at 2–3.) American Express opposes any discovery, arguing that the formation of the agreement to arbitrate is not at issue, Plaintiff seeks information to support unconscionability arguments preempted by the Supreme Court’s decision in AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), Plaintiff seeks inappropriate class discovery, and Plaintiff seeks discovery that is publicly available or should be in Plaintiff’s possession.FN1 (Doc. No. 11.)    FN1. The Court notes that Defendant has not argued that the question of the arbitrability of Plaintiff’s claims is reserved for an arbitrator and therefore Plaintiff’s request for discovery should be heard by an arbitrator. Before compelling arbitration, courts must first consider whether the parties’ agreement reserved for the arbitrator questions regarding the validity and/or enforceability of the arbitration agreement itself. See Laguna v. Coverall N. Am., Inc., 2011 WL 3176469, at *4 (S.D.Cal. July 26, 2011). After reviewing the arbitration provision at issue, it appears that the question of arbitrability is not reserved for an arbitrator to decide . . . California Civil Code section 1670.5(b) provides that “[w]hen it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.” Cal. Civ.Code § 1670.5(b). Under this provision, courts have permitted a party opposing a motion to compel arbitration to obtain discovery relevant to the issue of unconscionability. See Hamby, 798 F.Supp.2d at 1164; Newton, 2011 WL 4458971 at *5–6. Therefore, under California law, Plaintiff may obtain limited discovery to make the argument that the arbitration agreement is unconscionable.

Hicks v. Citigroup, Inc., 2012 WL 254254 (W.D.Wash. 2012)

It is within the Court’s discretion to grant relief from a deadline or to “order discovery of any matter relevant to the subject matter involved in the action.” Fed.R.Civ.P. 26(b)(1); Local Rule CR 7(d). Defendants argue that the relief Plaintiff requests is unwarranted because Plaintiff has failed to demonstrate any need for arbitration-related discovery, and because allowing discovery prior to ruling on the motion to compel would frustrate the purpose of the Federal Arbitration Act (“FAA”), which is to “facilitate streamlined proceedings.” See AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 1748, 179 L.Ed.2d 742 (2011). Defendants cite numerous cases in which courts denied arbitration-related discovery on various grounds. ( See Dkt. No. 15 at 6–7.)  While cognizant that under the FAA, arbitration agreements “shall be valid, irrevocable, and enforceable,” the Court does not view limited discovery as to arbitrability in this instance as a threat to the goals of the FAA. See 9 U.S.C. § 2. The FAA states that arbitration agreements may be contested “upon such grounds that exist at law or in equity for the revocation of any contract.” Id. The Supreme Court in Concepcion cited the saving clause in § 2 in noting that the FAA “preserves generally applicable contract defenses.” 131 S.Ct. at 1748. Thus, discovery may be granted in connection with a motion to compel arbitration if “the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue.” 9 U . S.C. § 4; see also Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 726 (9th Cir.1999). Courts have permitted limited discovery as to arbitrability where parties have placed the validity of the arbitration agreement in issue. See, e.g., Alvarez v. T–Mobile USA, Inc., ––– F.Supp.2d ––––, 2011 WL 4566440 (E.D.Cal.2011); Dun Shipping Ltd. v. Amerada Hess Shipping Corp., 234 F.Supp.2d 291, 297 (S.D.N.Y.2002);  Here, Plaintiff avers that she has no recollection of having received the subject credit card agreements, and she notes that one of the agreements provided by Defendants does not include an arbitration clause. (Dkt. No. 18 at 2; Dkt. No. 19 at 2.) She has already served discovery requests relevant, at least in part, to the validity of the arbitration agreement. Permitting Plaintiff to oppose the motion to compel arbitration with responses to those discovery requests in hand is consistent with the FAA and within the Court’s discretion. The Court therefore grants Plaintiff’s motion for an extension of the deadline to respond to Defendants’ motion to compel arbitration.    Nonetheless, the Court notes that some of Plaintiff’s discovery requests go well beyond the issue of whether the parties reached a valid agreement to arbitrate. Those include Plaintiff’s entire first set of interrogatories (Dkt. No. 16 at 18–27) and requests for production 2, 9–23, and 25–27. ( Id. at 30–42.) Defendants need not respond to those discovery requests pending resolution of the motion to compel arbitration.