Wang v. Life Insurance Company of the Southwest

Background

Youxiang Eileen Wang and Dalton Chen brought claims for fraud; conspiracy; an alleged endless-chain scheme under California law; violation of California’s Unfair Competition Law; and violation of the New Jersey Consumer Fraud Act. They brought the action for themselves and a proposed class.

Premier Financial Alliance, Inc. (PFA), David Carroll, Jack Wu, Lan Zhang, Bill Hong, Rex Wu, AJW Production, LLC, and The Consortium Group, LLC moved to compel arbitration of all claims against PFA. Alternatively, they asked the court to transfer the case to the Northern District of Georgia under 28 U.S.C. § 1404(a). The defendants relied on PFA’s Associate Marketing Agreement (AMA), which included an arbitration provision, Georgia choice-of-law and venue provisions, and other terms.

Motion to Compel Arbitration

Under the Federal Arbitration Act, a court may compel arbitration only when an enforceable written arbitration agreement exists and covers the dispute. The party seeking arbitration must prove that the parties agreed to arbitrate. When contract formation is disputed, the court—not an arbitrator—must resolve that issue before ordering arbitration.

PFA submitted evidence that its online application process required an applicant to review the AMA, click a box stating “I accept the terms and conditions,” electronically sign the agreement, and pay a $125 registration fee. The AMA stated that associates would submit disputes with PFA and related people to binding arbitration.

Wang and Chen submitted declarations stating that other PFA associates completed the registration process for them. Wang said that Bianca Zong used Zong’s laptop, that Wang did not see the screen, and that she understood the process only as arranging payment of the $125 registration fee. Chen said that Connie Huang controlled his enrollment from her mobile phone and that he was not shown or told about additional terms.

The defendants argued that the recruiting associates had authority to agree to the AMA for Wang and Chen, that Wang and Chen later accepted or confirmed the agreements by working under them, that they had notice of the arbitration clause, and that they could not avoid arbitration while seeking benefits of the AMA. The court rejected those arguments on the record before it. It found no evidence that the recruiters were acting as Wang’s or Chen’s agents, no evidence that the recruiters had authority to bind them or told them about the agreement’s terms, and insufficient evidence of notice, confirmation, or equitable estoppel.

Because the evidence presented material factual disputes about whether either plaintiff entered into the AMA, including its arbitration provision, the court denied the motion to compel arbitration. The court also sustained the plaintiffs’ objection to a late-filed declaration offered by the defendants in supplemental reply papers.

Alternative Motion to Transfer

The defendants alternatively sought transfer to the Northern District of Georgia under § 1404(a), arguing that the case could have been brought there and that the AMA consented to Georgia jurisdiction and venue. The plaintiffs argued that they were not bound by the AMA and that the relevant convenience and public-interest factors favored keeping the case in California.

The court gave no weight to the AMA’s forum provisions because of the factual disputes about whether the plaintiffs agreed to the contract. It also held that, even if the AMA applied, its language was permissive rather than mandatory: it said that PFA “may elect” to file certain litigation in Georgia and did not clearly designate Georgia as the exclusive forum. The court further questioned whether the clause covered the plaintiffs’ tort-like claims, because the clause was limited to matters involving interpretation, breach, or default under the AMA.

The private-convenience factors favored denying transfer. Chen was recruited and enrolled in California, PFA had extensive contacts there, many PFA associates and alleged top-level members were located in California, and the defendants did not identify necessary nonparty witnesses outside California whose testimony would favor Georgia. The court also found that California had a significant public interest because many PFA associates were located there and a high proportion of the policies sold during the alleged class period went to California consumers. The court therefore denied the motion to transfer venue.

Disposition and Next Steps

The court denied the motion to compel arbitration and denied the alternative motion to transfer venue. Because both sides indicated that they wanted additional discovery concerning contract formation, the court set a case-management conference for January 13, 2020, and directed the parties to meet and confer and file a joint statement. Judge Yvonne Gonzalez Rogers stated that the order terminated the motion filed as Docket No. 55.