Klink v. ABC Phones of North Carolina, Inc.

Background

Ariel Klink filed a proposed class action alleging that ABC Phones of North Carolina, Inc. failed to pay minimum and overtime wages, provide required meal and rest periods, timely pay wages at separation, provide accurate wage statements, reimburse necessary expenses, and comply with California’s Unfair Competition Law. ABC moved to compel arbitration under the Federal Arbitration Act and California Arbitration Act, dismiss the class allegations, and stay the case.

ABC contended that Klink electronically accepted an arbitration agreement during onboarding through its Learning Management System. Klink acknowledged using the system but denied clicking the button accepting the agreement. She stated that her manager was present when she created her login information, may have retained her credentials, and that coworkers sometimes used her credentials. She also argued that the agreement was unconscionable, meaning unfairly imposed or overly one-sided.

Formation of the Arbitration Agreement

Because the parties disputed whether Klink had consented to the agreement, the court held an evidentiary hearing under 9 U.S.C. § 4. At that hearing, ABC had to prove the agreement’s existence by a preponderance of the evidence, meaning that the evidence showed its existence was more likely than not.

The court found that ABC met that burden. It relied on time-stamped Learning Management System records showing that Klink completed the arbitration module on September 24, 2018, at 4:36 p.m. Pacific time. The court also found that Klink could not have accessed the system without creating a unique password and that her manager, Justin Cagle, was out sick on the relevant day. The court concluded that Klink’s declaration and testimony were not credible after she acknowledged that Cagle had not been with her on her first day but did not correct her sworn declaration.

The court rejected Klink’s argument that the module’s title suggested California employees were exempt. Supplemental screenshots showed that the version she saw was titled “Arbitration Agreement of ABC Phones—NC” and described as “Arbitration Agreement ABC Phones of North Carolina,” without the “CA exempt” language appearing in another administrative record. The court concluded that Klink clicked on, reviewed, and acknowledged the arbitration agreement.

Klink had made a general jury demand in her complaint, but she did not specifically demand a jury trial on whether an arbitration agreement existed when opposing ABC’s motion. The court held that she therefore waived a jury trial on that issue and decided it at the evidentiary hearing.

Enforceability of the Agreement

The court considered whether the agreement was unconscionable under California law. It found slight procedural unconscionability because the agreement was a contract of adhesion: ABC drafted it and presented it on a take-it-or-leave-it basis, without an opportunity for Klink to negotiate. The court held that this limited procedural unfairness was not enough by itself to invalidate the agreement.

The court rejected Klink’s challenges to the arbitration-cost provision, reasoning that the provision required costs to be allocated under applicable law and therefore did not require Klink to pay expenses that California law would prohibit an employee from paying. The court also considered the agreement’s unilateral-modification provision and its waiver of representative claims under California’s Private Attorneys General Act (PAGA). The court stated that the unilateral-modification provision and PAGA waiver were unconscionable provisions that could be separated from the remainder of the agreement. Because the agreement contained a severability clause, the court enforced the agreement except for those two provisions.

Class Allegations and Stay

The agreement required disputes to be brought in arbitration on an individual basis. Klink did not object to ABC’s request to dismiss the class action claims. The court therefore dismissed the non-PAGA class allegations and stated that Klink must arbitrate the non-PAGA claims individually.

The court also exercised its authority to stay the case until arbitration concluded.

Disposition

The court granted in part ABC’s motion to compel arbitration. It compelled arbitration under the agreement except for the PAGA waiver in section 3 and the unilateral-modification provision in section 8, dismissed the non-PAGA class allegations, and stayed the action pending arbitration of the non-PAGA individual claims. The order disposed of Docket No. 15.