Eliasieh v. Legally Mine, LLC

Background

Kasra Eliasieh brought a California state-law putative class action against Legally Mine, LLC arising from his purchase of an asset protection plan. The complaint asserted 14 claims under California’s Unfair Competition Law, the California Consumer Legal Remedies Act, and California common law.

The court previously granted Legally Mine’s motion to compel arbitration and dismissed the action without prejudice to reinstatement if further proceedings became necessary. Eliasieh then filed a demand for arbitration with the American Arbitration Association (AAA). AAA determined that its Consumer Arbitration Rules applied and instructed Legally Mine to pay required fees, register its arbitration clause, and waive two provisions that conflicted with AAA’s consumer due-process requirements.

Legally Mine did not pay the required fees or sign the requested waiver. After giving Legally Mine additional time and warnings, AAA terminated the arbitration and closed its file. Eliasieh then asked the court to reinstate the case, amend his complaint, award attorney’s fees and sanctions, and provide other relief.

Reinstatement of the Case

The court held that Legally Mine materially breached the arbitration agreement. A material breach is a serious failure to perform a contractual obligation. The court concluded that Legally Mine’s failure to pay the arbitration fees caused the arbitration to end and constituted such a breach. It also found that Legally Mine failed to use the procedures AAA provided for objecting to the application of the Consumer Arbitration Rules.

The court rejected Legally Mine’s arguments that it was entitled to arbitrate under different rules, that Eliasieh had improperly initiated arbitration, and that Legally Mine’s later efforts to resume arbitration cured the breach. The court emphasized that Legally Mine had selected AAA to administer arbitrations and was required to follow AAA’s procedures. Because Legally Mine’s nonpayment and failure to follow those procedures resulted in termination of the arbitration, the court ruled that Legally Mine could not compel Eliasieh to arbitrate his claims.

Sanctions and Ancillary Relief

The court denied Eliasieh’s request for sanctions, including attorney’s fees. Although the court recognized that Legally Mine had delayed and impeded the arbitration, Eliasieh had not provided enough detail to show which fees were caused by sanctionable conduct. The court also questioned whether it had authority to impose sanctions for conduct occurring after the case had been dismissed, because Eliasieh had not tied that conduct to a violation of a court order.

The court separately denied Eliasieh’s request for ancillary relief requiring Legally Mine and its attorneys to distribute the order to other customers or potential litigants. The court noted that Legally Mine had registered its consumer arbitration clause with AAA and removed the two problematic provisions. Eliasieh also had not shown that Legally Mine was using similar tactics with other potential litigants.

Leave to Amend and Disposition

The court granted Eliasieh leave to amend the complaint under Federal Rule of Civil Procedure 15(a)(2). The proposed amendment would add facts about AAA’s refusal to administer the arbitration, Legally Mine’s failure to remove AAA’s name from its arbitration agreement, and the proposed nationwide scope of the putative class. The court found no shown prejudice, bad faith, undue delay, or demonstrated futility.

The court therefore granted Eliasieh’s motion to reinstate the case and for leave to amend the complaint, and denied his request for sanctions and ancillary relief. It ordered Eliasieh to file the amended complaint within seven days and scheduled an initial case-management conference for May 14, 2020.