Rushing v. Williams-Sonoma, Inc.

Background

Defendants Williams-Sonoma, Inc., and related defendants, collectively called “WSI,” moved to compel arbitration of plaintiff Elizabeth Perlin’s claims. Perlin was added as a named plaintiff in the eighth amended class-action complaint filed June 5, 2020. The complaint asserted California-law claims on behalf of a class of consumers.

Perlin had purchased bedding from Pottery Barn in January 2011 and alleged that the sheets ripped shortly after she began using them. She also purchased other items from WSI-affiliated websites on June 4, 2020. In that transaction, she agreed to terms and conditions containing an arbitration clause.

WSI moved to compel arbitration on July 8, 2020. Perlin opposed the motion, arguing principally that WSI had waived arbitration by litigating the case for almost five years, including litigation involving claims of unnamed potential class members. She also argued in a supplemental brief that the 2020 terms were an improper communication with potential class members under Federal Rule of Civil Procedure 23(d).

Waiver of Arbitration

Waiver means giving up a known legal right. The court explained that waiver of arbitration is disfavored and that the party asserting waiver bears a heavy burden. The relevant questions were whether WSI knew it had a right to compel arbitration, acted inconsistently with that right, and caused prejudice through those acts.

The court held that WSI could not have moved to compel arbitration against unnamed potential class members before class certification because WSI did not yet have an existing right to compel those individuals to arbitrate. The court also found that WSI’s assertion of arbitration as an affirmative defense was consistent with its stated intent to seek arbitration if and when a class was certified.

The court further concluded that WSI’s conduct after the eighth amended complaint did not establish waiver. The court would not fault WSI for filing a motion to dismiss by the deadline set at a case-management conference. Although WSI could have filed its arbitration motion earlier, the court found that the delay of slightly more than one month after the amended complaint did not conflict with WSI’s arbitration right and did not prejudice Perlin.

Rule 23(d) Communication Argument

Rule 23(d) allows a court to regulate communications with potential class members that are abusive, misleading, coercive, or otherwise interfere with the administration of justice in a pending class action. The court distinguished a prior case involving an employer’s adoption of a new arbitration policy during a pending class action.

Here, the court found that Perlin initiated the 2020 purchase that resulted in her agreement to the new terms. The court ruled that the transaction was not sufficiently abusive, misleading, or coercive to justify invalidating the arbitration clause and was not an improper communication by WSI.

Ruling and Effect

The court granted WSI’s motion to compel arbitration. The court stated that the parties did not otherwise dispute that the arbitrator should decide whether Perlin’s claims are arbitrable—that is, whether they fall within the arbitration agreement. The case was stayed pending the arbitrator’s determination. The parties were directed to request a case-management conference within ten days after the arbitrator’s ruling and to file a joint status report by April 6, 2021, if no ruling had issued by then.

The opinion also recounts that the court had previously denied WSI’s motion to dismiss on September 2, 2020, while allowing Perlin to file a supplemental brief after receiving the 2011 terms and conditions. The ruling summarized here is the later order granting the motion to compel arbitration.