McGowan v. NetApp, Inc.
- William Alsup
- 3:23-cv-04291
- U.S. District Court · Northern District of California
- 3
In McGowan v. NetApp, Inc., Judge Alsup granted the motion to compel arbitration, delegated arbitrability issues to the arbitrator, and stayed the case.
Neil McGowan and the defendants, including NetApp, Inc. and the named individual defendants, must address the remaining issues in arbitration rather than continuing the court action while the stay remains in effect.
What happened
McGowan v. NetApp, Inc. is an action involving commissions that Neil McGowan says were owed under annual compensation agreements with NetApp, Inc. The claims include violations of the Racketeer Influenced and Corrupt Organizations Act and the California Fair Employment and Housing Act.
McGowan generally accepted each annual compensation plan online by using his username and password and clicking “accept.” The court held that the arbitration agreement in the 2023 plan was part of the terms he accepted, even though the screen did not specifically warn that the terms contained an arbitration clause.
Judge William Alsup granted the defendants’ motion to compel arbitration and stayed the case while arbitration proceeds. The court held that the agreement assigns questions about arbitration’s validity, scope, and enforceability to the arbitrator, and that the named defendants who did not sign the agreement could enforce it as NetApp’s agents.
The detailed version
- McGowan v. NetApp, Inc. · No. 3:23-cv-04291
- William Alsup
- Jan. 26, 2024
Background
Neil McGowan sued NetApp, Inc., Henri Richard, Elizabeth O’Callahan, Debra McCowan, Cesar Cerunda, Richard Scurfield, Maxwell Long, Rosalind Hill, and Does 1 through 50. The opinion describes the action as involving claims under the Racketeer Influenced and Corrupt Organizations Act and the California Fair Employment and Housing Act. McGowan sought commissions under annual agreements called a “goal sheet” and an incentive commission plan, and the opinion states that he was suing under those contracts.
For fiscal year 2019, McGowan signed the goal sheet by hand. For the other years, he used his username and password to access the goal sheet and compensation plan and clicked an “accept” button. Immediately above that button, the screen stated: “I have read, understand, and agree to the Terms and Conditions.” The linked terms and conditions for the 2023 compensation plan contained an arbitration agreement on page 24 of 34.
Arbitration Agreement
McGowan argued that the screen should have warned users that the linked terms and conditions contained an arbitration agreement. The court distinguished the California appellate decision he cited because that case involved an employee-handbook acknowledgment that expressly said the handbook was not a contract. Here, the court found that the goal sheet and the compensation-plan terms and conditions purported to be a contract.
The court held that McGowan entered into the arbitration agreement by accepting the applicable terms and conditions. It further held that the agreement incorporated the institutional Judicial Arbitration and Mediation Services rules, which delegated questions about arbitrability, validity, and scope to the arbitrator. The court therefore stated that all further issues were for the arbitrator, including the alleged violation of California Labor Code section 2751.
Non-Signatory Defendants
The court also held that the named defendants who did not sign the arbitration agreement could enforce it. Relying on the rule that an agent may enforce an arbitration agreement against a party when a preexisting confidential relationship makes it equitable to impose the duty to arbitrate, the court found that the employee defendants acted as NetApp’s agents while acting in their official capacities as company executives.
Disposition
The court granted the defendants’ motion to compel arbitration. It stayed the action so arbitration could proceed and ordered the parties to report on July 11, 2024, at 8:00 a.m. about whether arbitration was complete. The court stated that the stay could be lifted if a defendant delayed the arbitration.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.