Cipolla v. Team Enterprises, LLC

Background

Alexis Wood and Felicia Cipolla filed a proposed wage-and-hour class action. After an appellate ruling held that the arbitration clause delegated the question of whether the clause was unconscionable to the arbitrator, the district court required both plaintiffs to arbitrate and stayed the case.

The arbitrators reached different results. One found Wood’s arbitration provision unconscionable and unenforceable. Cipolla’s arbitrator found her provision enforceable, and Cipolla moved for reconsideration. In September 2021, Judge Lynn Duryee (Ret.) ruled that Wood’s claims were not subject to mandatory arbitration.

Wood then moved to lift the stay and to add Bernadette Blanchard and Shirin Lessan as proposed named plaintiffs. Blanchard worked as a Team Enterprises promotion specialist in California from 2013 to 2017, and Lessan worked in that position from 2014 to 2016. Both had arbitrated their requests to strike their arbitration clauses, and Judge Duryee found their provisions unenforceable.

Lifting the Stay

The defendants argued that the court had to keep the entire case stayed until both arbitrations ended. The court rejected that argument. Section 3 of the Federal Arbitration Act requires a stay when the issue involved in the lawsuit is subject to arbitration, but the court relied on precedent holding that a defendant is not automatically entitled to stay claims that are not subject to arbitration.

The court concluded that Cipolla’s claims had to proceed through arbitration for the time being, while Wood’s claims did not because she had prevailed on the threshold question of arbitrability. The defendants did not request a discretionary stay of Wood’s claims. The court therefore granted Wood’s motion to lift the stay.

Amendment and Joinder

The court applied the liberal standard in Federal Rule of Civil Procedure 15 because the defendants conceded that the rule should apply. Under Rule 15, leave to amend is generally allowed when justice requires, considering factors such as bad faith, delay, prejudice, whether the amendment would be futile, and whether the plaintiff previously amended the complaint.

The court found no bad faith, futility, or prior amendment. It also found that the delay resulted from the defendants’ appeal and the arbitration process, and that the defendants had not shown sufficient prejudice. The court rejected the defendants’ argument that proposed class plaintiffs could not be added before class certification.

The court also applied Rule 20, which permits parties to be joined when their claims arise from the same transaction or series of transactions and share a common legal or factual question. It found that Blanchard and Lessan worked in the same position and during the same general period as Wood and Cipolla, had the same bosses, and alleged violations of various wage laws. Their joinder therefore satisfied Rule 20.

The court agreed with the defendants, however, that Blanchard and Lessan’s representative claims under California’s Private Attorneys General Act were time-barred. Leave to amend and join them was therefore granted only if Wood promptly deleted those claims.

Disposition

The court granted, to the extent stated in the order, the motion to lift the stay, amend, and join new plaintiffs. Wood’s claims could proceed in district court; Cipolla’s claims remained in arbitration; and Blanchard and Lessan could be joined subject to deletion of their time-barred representative claims.