McGowan v. NetApp, Inc.

Background

Neil McGowan sued NetApp, Inc., Henri Richard, Elizabeth O’Callahan, Debra McGowan, Cesar Cernuda, Richard Scurfield, Maxwell Long, Rosalind Hill, and Does 1 through 50. The opinion describes the action as asserting claims under the Racketeer Influenced and Corrupt Organizations Act and the California Fair Employment and Housing Act. McGowan’s claims arose from a compensation plan that governed his salary and commissions as a commission-earning employee. He alleged that the plan allowed NetApp to delay or deny earned commissions.

McGowan was terminated in August 2022 and filed suit in August 2023. In January 2024, the court granted the defendants’ motion to compel arbitration and stayed the civil action. That earlier order found that McGowan had agreed to NetApp’s 2023 compensation plan and that the plan included an arbitration agreement. Six months later, the court learned that neither side had initiated arbitration, and the parties disputed who was responsible for starting it.

Analysis

The court applied the Federal Arbitration Act, which requires enforcement of a valid arbitration agreement according to its terms. Because an earlier order had already found that the agreement was valid and covered McGowan’s claims, this order addressed only whether McGowan or the defendants had to initiate arbitration.

The court rejected McGowan’s argument that the dispute first had to go through NetApp’s internal dispute-resolution process or its Sales Compensation Review Board. The court found that the 2023 plan contained no such prerequisite. The plan stated that external dispute resolution was the exclusive way for NetApp or a U.S. participant to resolve a dispute, and its internal process expressly preserved rights under the arbitration agreement.

The agreement stated that “the party asserting the Dispute” had to deliver a written demand for arbitration describing the claim, requested relief, and dollar amount of damages. The court interpreted “Dispute” using the plan’s definition: any dispute between a participant and NetApp about entitlement to compensation or arising from the plan or its application. Because the court had previously found that McGowan’s claims were brought under the plan, it held that McGowan was the party asserting the dispute and therefore had the burden to initiate arbitration. The court noted that this result depended on the wording of this agreement and did not establish that plaintiffs under all arbitration agreements must initiate arbitration.

Ruling

The court ordered McGowan to initiate arbitration under the agreement within 28 days and certify in the civil action that he had done so. The order states that if he failed to do so within that period, the civil action would be dismissed rather than merely remaining stayed.