in the united states district court for the eastern ... · khaldoun cherdoud, civil action no....
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
Hon. Michael M. Baylson, U.S.D.J.
Civil Action No. 16-0573
PLAINTIFFS ALI RAZAK, KENAN SABANI AND KHALDOUN
CHERDOUD’S BRIEF IN OPPOSITION TO DEFENDANTS UBER
TECHNOLOGIES, INC. AND GEGEN LLC’S MOTION TO DISMISS
JOHN K. WESTON
PA Attorney No. 26314
JEREMY E. ABAY
PA Attorney No. 316730
SACKS WESTON DIAMOND, LLC
1845 Walnut Street, Suite 1600
Philadelphia, Pennsylvania 19103
Telephone: (215) 925-8200
Attorneys for Plaintiffs
Dated: April 29, 2016
ALI RAZAK, KENAN SABANI and
KHALDOUN CHERDOUD,
individually and on behalf of all others
similarly situated,
Plaintiffs,
v.
UBER TECHNOLOGIES, INC. and
GEGEN LLC,
Defendants.
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ................................................................................. ii
PROCEDURAL HISTORY ................................................................................... 1
SUMMARY OF FACTS ....................................................................................... 2
I. Background on the Contracts and Opt-Out Notices ................................... 2
II. Background on the California Litigation ................................................... 3
LEGAL ARGUMENT ........................................................................................... 5
I. Standard of Review ................................................................................... 5
II. The December 2015 Agreement continues to govern the parties’
relationship and, accordingly, there is no governing arbitration clause ...... 6
A. The December 23, 2015 Order Did Not Enjoin the Entire December
2015 Agreement, which Remains Controlling ...................................... 6
B. Even if the December 23, 2015 Order is Overturned, Plaintiffs Opted
Out of the December 2015 Agreement’s Arbitration Provision ............ 7
III. None of the Prior Driver Agreements Apply to this Action ....................... 8
B. The Temporal Scope of the Prior Agreements Is Limited and, as a
Result, Those Agreements Do Not Reach the Parties’ Current Dispute
............................................................................................................10
C. Defendants are Estopped from Arguing that the Prior Agreements are
Applicable ...........................................................................................11
IV. Even if a Severability Substitution were Possible, the Replacement Clause
would Need to Give Effect to Plaintiffs’ Opt-Out Notices ........................12
V. Since there is no Valid Class Action Waiver, this Case may Proceed as a
Class and Collective Action .....................................................................12
CONCLUSION ....................................................................................................13
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TABLE OF AUTHORITIES
Page
Cases
Alexander v. Angel,
37 Cal. 2d 856, 862 (Cal. 1951) .......................................................................8,9
Beckwith v. Sheldon,
165 Cal. 319, 323-24 (Cal. 1913) ....................................................................... 9
Castle Cheese, Inc. v. MS Produce, Inc.,
2008 U.S. Dist. LEXIS 71053, *60-61 (W.D. Pa. Sep. 19, 2008) ....................... 9
Elinich v. Discover Bank,
2013 U.S. Dist. LEXIS 12659 (E.D. Pa. Jan. 29, 2013) ...................................... 9
George Foreman Assocs., Ltd. v. Foreman,
389 F. Supp. 1308, 1315-16 (N.D. Cal. 1974) .................................................... 9
Greenleaf v. Garlock, Inc.,
174 F.3d 352 (3d Cir. 1999) ..............................................................................11
Guidotti v. Legal Helpers Debt Resolution, L.L.C.,
716 F.3d 764, 773 (3d Cir. 2013) .................................................................... 5, 7
Guidotti v. Legal Helpers Debt Resolution, L.L.C.,
74 F. Supp. 3d 699, 708 (D.N.J. 2014) ............................................................... 6
Herzfeld v. 1416 Chancellor, Inc.,
2015 U.S. Dist. LEXIS 95256, *7 (E.D. Pa. July 22, 2015)................................ 5
Karibjanian v. Chromalloy Pharm., Inc.,
1991 U.S. Dist. LEXIS 8890 (E.D. Pa. June 24, 1991) ......................................11
Kocjancic v. Bayview Asset Mgmt., LLC,
2014 U.S. Dist. LEXIS 157206 (E.D. Pa. Nov. 5, 2014) .................................... 5
Montana v. United States,
440 U.S. 147 (1979) ..........................................................................................11
O'Connor v. Uber Techs., Inc.,
No. 13-cv-03826-EMC (N.D. Cal. Dec. 9, 2015) .......................................... 4, 11
O'Connor v. Uber Techs., Inc.,
2015 U.S. Dist. LEXIS 171570, *19 (N.D. Cal. Dec. 23, 2015) ...................... 4, 6
Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,
636 F.2d 51, 54 (3d Cir. 1980) ........................................................................... 7
Producers Fruit Co. v. Goddard,
75 Cal.App. 737, 755-56 (Cal. 1925) ................................................................. 9
Taub v. Merriam,
251 Pa. Super. 572, 380 A.2d 1245 (1977) ........................................................11
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Page
Rules
Fed. R. Civ. P. 12(b)(6) .......................................................................................... 5
Fed. R. Civ. P. 23 ..................................................................................................14
Fed. R. Civ. P. 56 ................................................................................................... 5
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PROCEDURAL HISTORY
Plaintiffs commenced this class and collective action on behalf of themselves
and all other UberBLACK drivers operating in Philadelphia, Pennsylvania. (Notice
of Removal, Ex. A, ECF No. 1.) The complaint raises two general claims: (1)
Defendants violated, and continue to violate, the Fair Labor Standards Act and
similar state statutes by refusing to pay wages and expenses to the class members;
(2) Defendants breached their duties to the class members by implementing UberX,
a direct – and illegal – competitor in Philadelphia. (Id. at ¶¶ 121-178.) The
complaint seeks damages and injunctive relief. (Id.)
Defendants removed the action from the Philadelphia Court of Common Pleas
to this Court. (Notice of Removal, ECF No. 1.) Thereafter, Defendants responded
to the complaint by filing the instant motion to dismiss. (Mot. Dismiss, ECF No.
15.) Defendants argue that the Plaintiffs are subject to arbitration clauses requiring
dismissal of this action in favor of individual, binding arbitration. (Id.)
Alternatively, Defendants request a stay pending resolution of the individual
arbitrations. (Id. at 20)
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SUMMARY OF FACTS
I. BACKGROUND ON THE CONTRACTS AND OPT-OUT NOTICES
Plaintiffs are UberBLACK drivers who operate in Philadelphia, Pennsylvania.
(Notice of Removal, Ex. A, ¶ 108, ECF No. 1.) In order to access Defendants’ driver
platform, Plaintiffs are required to download and continually update Defendants’
mobile phone application. (Def.s’ Br., 2-4). During the original download,
Defendants require Plaintiffs to electronically consent to a “Driver Agreement”
containing an arbitration clause. (Id.) Defendants frequently, and unilaterally,
promulgate superseding Driver Agreements. (Id.) New Driver Agreements are
packaged into mandatory software updates. (Id.) Moreover, Plaintiffs cannot access
Defendants’ driver platform – which they need to earn a living – until they
electronically consent to the new contract. (Id.)
With respect to the instant motion, there are four relevant contracts: the June
2014 Agreement; the November 2014 Agreement; the April 2015 Agreement; and
the December 2015 Agreement.1 All of these agreements contain an “Entire
Agreement” provision, stating:
This Agreement, including all Supplemental Terms, constitutes
the entire agreement and understanding of the parties with
respect to its subject matter and replaces and supersedes all prior
1 See June 2014 Agreement, Def.s’ Ex. F; Nov. 2014 Agreement, Def.s’ Ex. C.; Apr.
2015 Agreement, Def.s’ Ex. D; Dec. 2015 Agreement, Def.s’ Ex. I.
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or contemporaneous agreements or undertakings regarding such
subject matter.2
Each named Plaintiff provided electronic consent to the December 2015 Agreement
– the latest one. (Def.s’ Br., 5.)
The arbitration provision, section 15.3, of the December 2015 Agreement is
different from the preceding contracts. Subsection viii instructs:
Arbitration is not a mandatory condition of your contractual relationship
with Uber. If you do not want to be subject to this Arbitration Provision,
You may opt out of this Arbitration Provision by notifying Uber…
(Dec. 15 Agreement, Def.s’ Ex. I, ¶ 15.3.viii.) Defendants concede that they
received opt-out notices from the named Plaintiffs – and some 240 other drivers –
within the time frame proscribed by subsection viii.3
II. BACKGROUND ON THE CALIFORNIA LITIGATION
As the result of similar – and in some respects, identical – class actions filed
prior to this one, the Northern District of California has already interpreted all of the
agreements at issue here.4 As noted by Defendants, Judge Chen enjoined
2 See ¶ 13.3 for the June 2014 Agreement and ¶ 14.5 for the latter agreements.
3 Defendants argue, half-heartedly, that the opt-out notices were ineffective because
they were mailed to Defendants by their class counsel, rather than personally by each
individual class member. (Def.s’ Br., n.3.) Defendants offer no authority to support
this unusual proposition – that an attorney cannot send mail on behalf of his client.
4 For the captions of the California class actions see Def.s’ Br., n.4.
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enforcement of the December 2015 arbitration clause on December 23, 2015,
ordering: “The arbitration provision of the 2015 Agreement may not be
enforced…”5 O'Connor v. Uber Techs., Inc., No. 13-cv-03826-EMC, 2015 U.S.
Dist. LEXIS 171570, *19 (N.D. Cal. Dec. 23, 2015) (emphasis added). Defendants
fail to note that the remaining terms of the December 2015 contract, however, remain
in effect: “The Court does not rule on the enforceability of the terms of the December
2015 Agreement, nor will it prohibit Uber from sending out any arbitration
agreements in the future.” Id. at *18.
Defendants’ motion contains an even more egregious omission – it shrewdly
avoids explaining why Defendants drafted the December 2015 Agreement. On
December 9, 2015, Judge Chen declared the June 2014, November 2014 and April
2015 Agreements (all of the prior agreements) to be unenforceable.6 O'Connor v.
Uber Techs., Inc., No. 13-cv-03826-EMC (N.D. Cal. Dec. 9, 2015). Having just lost
all of their Driver Agreements, Defendants promulgated the December 2015
Agreement just two days later.
5 See Abay Decl., Ex. A. for a copy of the Dec. 23, 2015 Order.
6 See Abay Decl., Ex. B. for a copy of the Dec. 9, 2015 Order. (pages 9-24 analyze
the Nov. 2014, June 2014 and Apr. 2015 arbitration clauses, concluding on page 24
with: “Because the arbitration agreements are unenforceable as a matter of public
policy, a procedural unconscionability analysis is no longer required”).
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Taking Judge Chen’s December 9, 2015 Order into consideration, Defendants
are now asking this Court to revert back to agreements that were previously voided
– indeed, that is why Defendants’ motion does not reference the December 9th Order.
LEGAL ARGUMENT
I. STANDARD OF REVIEW
“Before a party to a lawsuit can be ordered to arbitrate and thus be deprived
of a day in court, there should be an express, unequivocal agreement to that effect.”
Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 773 (3d Cir. 2013)
(internal quotation omitted). If arbitrability is apparent on the face of the complaint
– i.e., the complaint references an arbitration agreement or directly contests an
arbitration agreement – then Fed. R. Civ. P. 12(b)(6) governs the motion to dismiss.
Id. at 774. If arbitrability is not apparent, then the court should apply the summary
judgment standard under Fed. R. Civ. P. 56.7 Id. at 776.
Here, arbitrability is not apparent, as the complaint does not reference an
arbitration agreement.8 In accordance with Fed. R. Civ. P. 56, the Court must
conduct “a restricted inquiry into factual issues” to determine whether the parties
7 See, e.g., Herzfeld v. 1416 Chancellor, Inc., 2015 U.S. Dist. LEXIS 95256, *7 (E.D.
Pa. July 22, 2015); Kocjancic v. Bayview Asset Mgmt., LLC, 2014 U.S. Dist. LEXIS
157206 (E.D. Pa. Nov. 5, 2014).
8 See, generally, Notice of Removal, Ex. A, ECF No. 1.)
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engaged in a meeting of the minds on the agreement to arbitrate. Id. The Court
should not grant Defendants’ motion unless there is no “genuine factual dispute as
to the validity of the agreement.” Guidotti v. Legal Helpers Debt Resolution, L.L.C.,
74 F. Supp. 3d 699, 708 (D.N.J. 2014). “In so considering, the Court must view the
evidence in the light most favorable to [Plaintiffs], and must provide [Plaintiffs] with
the benefit of all reasonable inferences.” Id.
II. THE DECEMBER 2015 AGREEMENT CONTINUES TO GOVERN THE PARTIES’
RELATIONSHIP AND, ACCORDINGLY, THERE IS NO GOVERNING ARBITRATION
CLAUSE
A. The December 23, 2015 Order Did Not Enjoin the Entire December 2015
Agreement, which Remains Controlling
Defendants over-read the Northern District of California’s December 23,
2015 Order. Judge Chen did not enjoin enforcement of the entire contract between
Plaintiffs and Defendants. Instead, Judge Chen narrowly enjoined enforcement of
one portion of that contract – the arbitration clause. O'Connor, 2015 U.S. Dist.
LEXIS 171570, *19. The remainder of the December 2015 Agreement continues in
full force and effect, as Judge Chen plainly ruled: “The Court does not rule on the
enforceability of the terms of the December 2015 Agreement, nor will it prohibit
Uber from sending out any arbitration agreements in the future…” Id. at *18.
Furthermore, the December 2015 Agreement expressly superseded all prior
contracts between Plaintiffs and Defendants:
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Entire agreement. This Agreement, including all Supplemental
Terms, constitutes the entire agreement and understanding of the parties
with respect to its subject matter and replaces and supersedes all prior
or contemporaneous agreements or undertakings regarding such subject
matter. In this Agreement, the words “including” and “include” mean
“including, but not limited to.” The recitals form a part of this
Agreement.
(See Def.s’ Ex. I, ¶ 14.5.) Consequently, there is only one contract between Plaintiffs
and Defendants, and that is the December 2015 Agreement. That contract – per
Judge Chen’s Order – lacks an enforceable arbitration clause. Without an “express,
unequivocal [arbitration] agreement,” disputes between the parties are governed in
the ordinary fashion.9 Defendants’ motion, therefore, must fail.
B. Even if the December 23, 2015 Order is Overturned, Plaintiffs Opted Out
of the December 2015 Agreement’s Arbitration Provision
Defendants’ motion is duplicative in nature. Defendants contend that, as a
result of Judge Chen’s December 23, 2015 Order, Plaintiffs are subject to their prior
Driver Agreements. The December 23, 2015 Order is, in essence, the cornerstone
of Defendants’ instant motion.
Defendants have nevertheless appealed the December 23, 2015 Order. (Def.s’
Br., n.16) Indeed, Defendants have requested that the Ninth Circuit overturn the
very ruling they rely on here. Defendants’ position in California directly conflicts
with their position in Pennsylvania.
9 Guidotti, 716 F.3d at 773 (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,
636 F.2d 51, 54 (3d Cir. 1980)).
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In any event, Plaintiffs opted-out of the December 2015 Agreement. If Judge
Chen’s December 23, 2015 Order is overruled, then Defendants’ instant motion is
moot. Defendants are in a no-win situation.
III. NONE OF THE PRIOR DRIVER AGREEMENTS APPLY TO THIS ACTION
A. Even if the Entire December 2015 Agreement were invalid, Defendants
Cannot Resuscitate the Prior Agreements
As set forth above, the December 2015 Agreement expressly supersedes any
and all earlier agreements. Those prior agreements cannot be automatically,
involuntarily resuscitated. The December, 2015 contract took the place of the earlier
agreements. “[I]t necessarily follows that the old agreement has been entirely
abrogated or extinguished.” Alexander v. Angel, 37 Cal. 2d 856, 862 (Cal. 1951).
At first glance, Defendants’ resuscitation argument appears to be
unprecedented. Plaintiffs, however, discovered one other instance in which a
defendant, whose superseding contract was declared invalid, asked a court to revert
back to a prior agreement. That defendant (who should have known better than to
take on George Foreman) failed:
Finally, Associates argues that if the 1972 Agreement is invalidated,
the court must reinstate the 1971 Agreement which preceded it.
However, paragraph 17 of the 1972 Agreement provides that all prior
agreements are merged in the 1972 Agreement and shall not survive its
execution; furthermore, various documents executed at the time of the
1972 Agreement (including the Releases and the Settlement
Agreement) clearly indicate the intention of the parties to relinquish all
rights and obligations under the 1971 Agreement. Against that
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background, California law provides no basis for reviving the 1971
Agreement upon a holding that the 1972 Agreement is invalid.
George Foreman Assocs., Ltd. v. Foreman, 389 F. Supp. 1308, 1315-16 (N.D. Cal.
1974) (citing Alexander, 37 Cal.2d at 862; Beckwith v. Sheldon, 165 Cal. 319, 323-
24 (Cal. 1913); Producers Fruit Co. v. Goddard, 75 Cal.App. 737, 755-56 (Cal.
1925)).
Pennsylvania law requires the same result. “Under Pennsylvania law, a
substituted contract, or ‘novation,’ effectively extinguishes all rights and duties
flowing from the earlier contract.” Castle Cheese, Inc. v. MS Produce, Inc., Civil
Action No. 04-878, 2008 U.S. Dist. LEXIS 71053, *60-61 (W.D. Pa. Sep. 19, 2008)
(citing Pennsylvania authorities).
Elinich v. Discover Bank, No. 12-1227, 2013 U.S. Dist. LEXIS 12659 (E.D.
Pa. Jan. 29, 2013), cited by Defendants, is not contrary to this rule. In Elinich, the
original agreement, which contained the arbitration clause, was modified by a series
of subsequent amendments.10 Id. at *4. The court held that the arbitration clause
applied to those subsequent amendments. By contrast, the December 2015
Agreement here did not amend the prior agreements, it expressly replaced them in
10 “Defendants made a number of amendments to [p]laintiff's account, to which she
did not object, and which she accepted through use of the account.” Elinich, 2013
U.S. Dist. LEXIS 12659, *4.
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their entireties. The December 2015 Agreement, regardless of its validity, is
controlling. Defendants’ motion thus fails.
B. The Temporal Scope of the Prior Agreements is Limited and, as a Result,
Those Agreements Do Not Reach the Parties’ Current Dispute
By their own terms, the arbitration clauses in the prior agreements govern
disputes arising under those earlier contracts. This limitation is expressly stated in
each of arbitration clauses:
Enforcement of this Agreement.
This Arbitration Provision is the full and complete agreement relating
to the formal resolution of disputes arising out of this Agreement.11
This action arises under the December 2015 Agreement, so the earlier contracts, and
their arbitration clauses, have no bearing on this matter.
Defendants implicitly concede this point by referencing the survival clauses
in the earlier agreements:
This Arbitration Provision is governed by the Federal Arbitration Act,
9 U.S.C. § 1 et seq. (the “FAA”) and evidences a transaction involving
commerce. This Arbitration Provision applies to any dispute arising
out of or related to this Agreement or termination of the Agreement and
survives after the Agreement terminates.12
11 See Nov. 2014 Agreement, Def.s’ Ex. C, ¶ 15.3(ix); Apr. 2015 Agreement, Def.s’
Ex. D, ¶ 14.3(ix); June 2014 Agreement, Def.s’ Ex. F, ¶(ix). Emphasis added.
12 See Nov. 2014 Agreement, Def.s’ Ex. C, ¶ 15.3(i); Apr. 2015 Agreement, Def.s’
Ex. D, ¶ 14.3(i); June 2014 Agreement, Def.s’ Ex. F, ¶(i).
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The survival clauses thus survive only to govern disputes arising out of the earlier
agreements. For example, the arbitration clause would apply to a claim that the June
2014 agreement was wrongfully terminated. There is no language suggesting that
the clauses would apply to disputes arising out of contracts negotiated in the future.
Indeed, if these clauses were meant to survive forever, there would be no need for
Defendants to include them in subsequent agreements, or to revise them, as was done
with the December 2015 Agreement.
C. Defendants are Estopped from Arguing that the Prior Agreements are
Applicable, as Each One was Previously Declared Unenforceable
Even if the arbitration clauses from the earlier Driver Agreements had been
intended to survive, the Northern District of California has already declared those
clauses to be void as against public policy.13 O'Connor v. Uber Techs., Inc., No. 13-
cv-03826-EMC (N.D. Cal. Dec. 9, 2015). “Because the arbitration agreements are
unenforceable as a matter of public policy, a procedural unconscionability analysis
is no longer required.” Id. (emphasis added). That holding applies to this case
through principles of issue preclusion, or collateral estoppel.14 Moreover, no
13 See Abay Decl., Ex. B. for a copy of the Dec. 9, 2015 Order, pages 9 -24.
14 The district court’s order is a “final order” for purposes of issue preclusion. See
Greenleaf v. Garlock, Inc., 174 F.3d 352 (3d Cir. 1999); Karibjanian v. Chromalloy
Pharm., Inc., Civil Action No. 90-4641, 1991 U.S. Dist. LEXIS 8890 (E.D. Pa. June
24, 1991); and Taub v. Merriam, 251 Pa. Super. 572, 380 A.2d 1245 (1977).
Montana v. United States, 440 U.S. 147 (1979) is often cited for the Supreme Court’s
general guidance on issue preclusion.
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arbitration clause applies here for the simple reason that all of Defendants’
arbitration clauses have been previously declared unenforceable by the Northern
District of California. See infra.
IV. EVEN IF A SEVERABILITY SUBSTITUTION WERE POSSIBLE, THE
REPLACEMENT ARBITRATION CLAUSE WOULD HAVE TO INCLUDE AN OPT-
OUT PROVISION
The December, 2015 agreement contained a severability clause stating:
Severability. If any provision of this Agreement is or becomes invalid
or non-binding, the parties shall remain bound by all other provisions
hereof. In that event, the parties shall replace the invalid or non-binding
provision with provisions that are valid and binding and that have, to
the greatest extent possible, a similar effect as the invalid or non-
binding provision, given the contents and purpose of this
Agreement.15
Under this term, if the December 2015 Agreement’s arbitration clause was replaced,
its replacement would also have to include an opt-out provision. Accordingly,
Plaintiffs’ out-opt notices would also apply to the replacement provision.
V. SINCE THERE IS NO VALID CLASS ACTION WAIVER, THIS CASE MAY
PROCEED AS A CLASS AND COLLECTIVE ACTION
Clearly, if there is no valid arbitration clause, there is no valid class action
waiver. For the reasons set forth above, none of Defendants’ arbitration clauses
apply to this action. Accordingly, this case should proceed under Fed. R. Civ. 23.
15 See Dec. Agreement, Def.s’ Ex. I, ¶ 14.3. Emphasis added
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CONCLUSION
The bottom line is this: there is no enforceable arbitration clause that requires
this case to be arbitrated. The Northern District of California declared that all of the
arbitration agreements named by Defendants in their motion are either void or
unenforceable. Even in the absence of such a conclusive judicial ruling, the
December 2015 Agreement clearly superseded all prior agreements, and the
Plaintiffs here opted out of its arbitration provision. The motion to dismiss should
be denied, Defendants should be directed to file an answer, and the case should
proceed to discovery.
Respectfully submitted,
SACKS WESTON DIAMOND, LLC
s/ John K. Weston
JOHN K. WESTON
s/ Jeremy E. Abay
JEREMY E. ABAY
Attorneys for Plaintiffs
Dated: April 29, 2016
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