O'Connell v. Celonis, Inc.

Background

Shawn O’Connell brought ten claims against Celonis concerning his employment, compensation, restricted stock units, and termination. The claims included intentional misrepresentation, false promise, negligent misrepresentation, declaratory relief, breach of contract, promissory estoppel, retaliation under California’s Fair Employment and Housing Act, retaliation under the California Labor Code, violation of California’s Unfair Competition Law, and wrongful termination in violation of public policy.

O’Connell alleged that Celonis offered him 3,000 restricted stock units and that the offer letter referred to a planned or completed one-for-ten stock split. Celonis later calculated that he received 6,000 units after a one-for-twenty split, while O’Connell believed he was entitled to 60,000 units. He also alleged that Celonis terminated him after disputes concerning his compensation, his refusal to testify in favor of Celonis in a workplace sexual-assault investigation, and his reports of what he believed were securities violations.

Celonis removed the case from California state court based on diversity jurisdiction and filed two motions. It sought transfer to the Southern District of New York or, alternatively, an order requiring arbitration. It also sought dismissal of O’Connell’s claims based on the offer letter’s New York choice-of-law provision and its arguments that the complaint did not state valid claims.

Transfer of Venue

The offer letter required disputes connected to O’Connell’s employment to be brought in federal or state courts in New York. The court held that California Labor Code section 925 made that provision voidable by O’Connell. Section 925 generally prevents an employer from requiring an employee who primarily lives and works in California to agree to litigate California employment claims outside California or to give up California’s substantive legal protections. The statute does not apply when the employee was individually represented by legal counsel in negotiating the relevant forum or choice-of-law terms.

Celonis did not dispute that O’Connell primarily worked and lived in California, that he was not represented by counsel during contract negotiations, or that the contract was entered after January 1, 2017. The court rejected Celonis’s argument that the forum provision was not a condition of employment merely because O’Connell could have tried to negotiate it away. The offer letter did not say that the provision was optional or explain that O’Connell could opt out. The court therefore concluded that the provision was voidable and could not be enforced over O’Connell’s objection.

The court separately concluded that the factors under 28 U.S.C. § 1404(a), which permits discretionary transfer for convenience and the interests of justice, weighed against transfer. O’Connell lived and worked in California, most of his work occurred there, and he identified California-based coworkers and a supervisor. The court also found that California had a strong interest in resolving a labor dispute involving a local employee under California law. The motion to transfer was denied.

Motion to Compel Arbitration

Celonis argued that O’Connell accepted arbitration terms contained in TriNet’s online Terms and Conditions after accessing the TriNet platform. The court applied California contract law, under which an arbitration agreement requires mutual consent. Celonis had the burden of proving that an arbitration agreement existed by a preponderance of the evidence, meaning that the evidence had to show that the agreement was more likely than not formed.

The court found that Celonis did not meet that burden. Celonis provided no evidence from a person with personal knowledge at Celonis or TriNet showing that TriNet was authorized to bind Celonis employees to arbitration, that the terms supplied to the court were the terms available to O’Connell, or that the terms were provided to him at an email address he regularly used. The copy of the TriNet agreement also lacked a signature, electronic acknowledgment, or other written confirmation by O’Connell.

For an online agreement to be enforceable, the website must give the user actual notice or place a reasonably careful user on notice that agreement is required. Celonis did not provide screenshots or other evidence showing how the TriNet website appeared in December 2018, how the terms were presented, or how users were expected to show assent. The court also found that the alleged confirmation email, even if authenticated, was not enough by itself to establish notice or assent. The motion to compel arbitration was denied.

Motion to Dismiss

The court held that California law governed O’Connell’s claims. It concluded that the offer letter’s New York choice-of-law provision was also voidable under section 925 because it deprived O’Connell of California’s substantive legal protections. The court therefore applied California law and denied Celonis’s motion to dismiss.

The court found that the offer letter was ambiguous concerning the restricted stock units. The language stating that O’Connell would receive 3,000 units was accompanied by a note saying that the number assumed completion of a one-for-ten stock split, while also describing that split as “currently executed.” Because O’Connell’s interpretation was plausible, he adequately pleaded his breach-of-contract and related misrepresentation theories. The court also allowed extrinsic evidence—evidence outside the written contract—to help interpret the ambiguous language.

The court allowed the intentional misrepresentation and false-promise claims to proceed at this stage, at least as alternative theories to breach of contract. It also allowed the negligent-misrepresentation claim because O’Connell specifically identified the alleged misrepresentations. His promissory-estoppel claim survived because he based it on the alleged grant of restricted stock units at the start of employment, rather than on a promise of continued employment or additional vesting after termination. The declaratory-relief claim also survived because the underlying contract claim could not be resolved on the pleadings.

The court further held that O’Connell adequately alleged retaliation under the Fair Employment and Housing Act and California Labor Code section 1102.5, as well as wrongful termination. He identified the protected activities, alleged that supervisors or coworkers knew about them, and alleged that his termination followed closely and was motivated by that conduct. His Unfair Competition Law claim also survived because the applicability of two California statutes concerning releases and wages, and the other alleged bases for the claim, depended on disputed facts and could be considered after discovery.

Disposition

The court denied the motion to transfer venue, denied the motion to compel arbitration, and denied the motion to dismiss. The order allowed the case to proceed in the federal court where it was pending; it did not finally determine the merits of O’Connell’s claims.