Brown v. Quantcast Corp.

Background

Tag Brown filed a proposed class and collective action against Quantcast Corp., his former employer. Brown alleged that Quantcast misclassified him and similarly situated employees as exempt from overtime pay. He asserted a claim under the federal Fair Labor Standards Act and a claim under California Business and Professions Code section 17200, which was based on the alleged Fair Labor Standards Act violation and certain California Labor Code provisions. Five other former Quantcast employees opted into the Fair Labor Standards Act collective action: Jalen Ransome, Tyler Berg, Sam Awrabi, Andrea Primer, and Pierce McManus.

Quantcast moved to compel arbitration as to Brown and all five additional plaintiffs. Quantcast relied on arbitration provisions in employment offer letters, and noted that some individuals also had arbitration provisions in sales commission plans or severance agreements. The court decided that it only needed to consider the offer letters. Brown and Berg received the first version; Primer, Ransome, Awrabi, and McManus received the second version.

First Offer Letter

The first offer letter required arbitration of disputes arising from or related to the interpretation, performance, enforcement, or breach of the letter agreement, except disputes arising from the confidentiality agreement. Brown and Berg argued that their statutory overtime claims did not arise under the employment agreement. The court rejected that argument because the provision covered disputes concerning the agreement’s performance, including the way the agreement classified and treated them as exempt from overtime pay.

Brown and Berg also argued that there was no clear agreement to arbitrate because their offer letters and sales commission plans referred to different arbitration rules: the offer letters referred to the Judicial Arbitration and Mediation Services, or JAMS, comprehensive rules, while the commission plans referred to American Arbitration Association rules. The court rejected this contract-formation argument. It reasoned that the documents could reasonably be understood to cover different types of disputes, and Brown and Berg had not identified a specific conflict between the rules.

The court then considered unconscionability, a contract defense involving unfair surprise, oppression, or unusually one-sided terms. It found a low degree of procedural unconscionability because the employees apparently could not negotiate or opt out of the arbitration requirement. It also found some substantive unconscionability because the confidentiality carve-out was likely to benefit Quantcast more than the employees and because the JAMS comprehensive rules appeared to contemplate employees paying substantial arbitration fees and costs.

The court nevertheless concluded that the agreement was not so permeated by unfairness that it had to be invalidated entirely. It held that the confidentiality carve-out and the provision requiring use of the JAMS comprehensive rules could be severed, meaning removed from the agreement. With those provisions severed, the court held that the first offer letter’s arbitration provision could be enforced.

Second Offer Letter

The second offer letter required arbitration of claims arising out of or related to employment or its termination, including claims based on contract or statute. It also waived class and collective proceedings for arbitrable claims and allowed either party to seek court injunctions concerning the improper use, disclosure, or misappropriation of private, proprietary, confidential, or trade-secret information.

The employees covered by the second offer letter challenged it only as unconscionable. The court found minimal procedural unconscionability because the agreement was presented as a condition of employment. It found the confidentiality-related exception less clearly one-sided than the first offer letter’s exception because either side could potentially bring a related claim. The court also noted that the second letter used JAMS employment arbitration rules, which protect employees from excessive arbitration fees. The court therefore held that the second offer letter’s arbitration provision could be enforced.

Ruling and Effect

The court granted Quantcast’s motion to compel arbitration, subject to severance of the offending provisions in the first offer letters. Because all six individuals’ claims were subject to arbitration, the court stayed the case under 9 U.S.C. section 3. The order disposed of Docket No. 22. The opinion did not decide the merits of the overtime or California claims.