Anderson v. Starbucks Corporation

Background

Plaintiffs filed a California wage-and-hour class action in state court in 2019. The case included claims under California's Private Attorneys General Act, or PAGA, and other claims. Starbucks asked the court to compel arbitration of the non-PAGA claims of 10 named plaintiffs: Elizabeth Anderson, Jeffrey Bellows, James Hancock, Eric Lorack, Amanda Brekke, Casey McKay, Jordone Shane-Sanchez, Sherri Bradley, Kevin Steinbeck, and Omar Garland. Starbucks did not seek arbitration for 11 other named plaintiffs.

Six of the 10 plaintiffs—Brekke, McKay, Shane-Sanchez, Bradley, Steinbeck, and Garland—did not oppose Starbucks's request. The court said they had effectively voluntarily chosen to arbitrate all their non-PAGA claims and would not serve as named plaintiffs for the proposed class. Anderson, Bellows, Hancock, and Lorack opposed arbitration.

Arbitration waiver

Starbucks had included arbitration agreements in its employment contracts since 2014. The four opposing plaintiffs signed those agreements between May 2015 and November 2016. Starbucks knew about the agreements before the original state-court complaint was filed, and its answer identified arbitration as an affirmative defense.

Despite that knowledge, Starbucks did not move to compel arbitration for almost two years. During that period, it actively litigated in state and federal court. It participated in discovery, produced documents, served discovery requests, entered protective orders, took part in case-management proceedings, removed the case to federal court under the Class Action Fairness Act, and filed a motion addressing other claims. Starbucks mentioned arbitration in some filings but did not make a serious effort to seek arbitration until the motion at issue.

The court applied the federal-law standard for waiver of arbitration. A party claiming waiver had to show that the other party knew of its arbitration right, acted inconsistently with that right, and prejudiced the opposing party. The court decided the waiver question itself because the arbitration agreement did not clearly assign that question to the arbitrator.

Court's ruling

The court held that Starbucks had waived its right to compel arbitration for Anderson, Bellows, Hancock, and Lorack. It found that Starbucks's nearly two-year delay and extensive litigation conduct were inconsistent with arbitration. The court also found prejudice because the plaintiffs spent additional time, money, and effort litigating in both state and federal court, including through substantial discovery.

The order states that arbitration is denied for Anderson, Bellows, Hancock, and Lorack. It does not state that the court granted Starbucks's motion as to the six plaintiffs who did not oppose it; instead, it says those plaintiffs effectively voluntarily elected to arbitrate their non-PAGA claims.