Order granting motion to compel arbitration — Hyde-Edwards v. JPMorgan (S.D. Cal.)

Record facts

UNITED STATES DISTRICT COURT · No. 3:20-cv-00762-DMS-MDD · Doc. 22 · 2020-11-23 · Docket on CourtListener

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UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF CALIFORNIA 
 
HYDE-EDWARDS SALON & SPA, 
Individually and on Behalf of All Others 
Similarly Situated, 
Plaintiffs, 
v. 
JP MORGAN CHASE & CO and 
JPMORGAN CHASE BANK, N.A., 
Defendants. 
 Case No.:  20cv762 DMS(MDD) 
 
ORDER GRANTING 
DEFENDANTS’ MOTION TO 
COMPEL ARBITRATION AND TO 
STAY THE ACTION PENDING 
ARBITRATION 
 
  
This case comes before the Court on Defendants’ motion to compel arbitration and 
to stay the action pending arbitration.  Plaintiff filed an opposition and Defendants filed a 
reply.  For the following reasons, the Court grants the motion.   
I. 
BACKGROUND 
 
Plaintiff Hyde-Edwards Salon and Spa is a customer of Defendants JP Morgan 
Chase & Co. and JP Morgan Chase Bank, N.A.  (Compl. ¶39.)  On approximately March 
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17, 2020, Plaintiff’s business closed in accordance with San Diego County’s Shelter in 
Place Order issued in response to the COVID-19 pandemic.  (Id. ¶38.)   
After Plaintiff’s business closed, the federal government enacted the Coronavirus 
Aid, Relief, and Economic Security (“CARES”) Act, which was meant to provide $376 
billion in economic assistance to small businesses.  (Id. ¶18.)  As part of the CARES Act, 
the Government established a federal Paycheck Protection Program (“PPP”), which “was 
designed to help small business owners cover the costs associated with retaining their 
employees during the COVID-19 pandemic by providing 100% federally guaranteed 
loans.”  (Id. ¶21.)   
On approximately April 8, 2020, Plaintiff applied for loan assistance through the 
PPP with Defendants.  (Id. ¶39.)  On April 19, 2020, Plaintiff received an email stating “its 
application was in Stage 2 of the review process, but that PPP funds were no longer 
available.”  (Id. ¶41.)  Plaintiff alleges it has received no further communication from 
Defendants about the status of its loan application.  (Id.)   
 
On April 22, 2020, Plaintiff filed the present case.  In the Complaint, Plaintiff alleges 
Defendants made “false, misleading, and deceptive representations and omissions 
concerning their processing of economic assistance via the [PPP], by engaging in conduct 
prohibited by law and regulations with customers and clients, and by otherwise engaging 
in sharp business practices.”  (Id. ¶1.)  Specifically, Plaintiff alleges the PPP guidelines 
stated that loans should be processed on a “first come, first served” basis, but Defendants 
ignored those guidelines.  (Id. ¶3.)  Instead, Defendants:  
prioritized the processing of large loans over smaller loans and loans for which 
Defendants risked greater exposure in the event of a business failure over 
loans where the risk exposure was less.  For instance, Defendants prioritized 
processing the loans for large restaurant chains such as Ruth’s Chris 
Steakhouse (approved $20 million on April 7), Shake Shack ($10 million), 
Potbelly Sandwich Shop (approved $10 million on April 6), and Texas Taco 
Cabana (approved $10 million on April 8).   
 
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(Id.)  Plaintiff alleges Defendant misled and deceived it “into believing applications for 
loans through the PPP were processed in the order received with no regard to loan amount, 
when in fact the loan amount certainly influenced the order in which loans were processed 
and approved.”  (Id. ¶44.)  Plaintiff alleges it would have submitted its application through 
another lender had it known of Defendants’ actual practices.  (Id. ¶45.)   
Based on these allegations, Plaintiff brings five claims against Defendants on behalf 
of itself and the following class:  “All eligible persons or entities in the State of California 
who applied for a loan under the PPP with Defendants and whose applications were not 
processed by Defendants in accordance with SBA regulations and requirements or 
California law.”  (Id. ¶53.)  The claims allege:  (1) violations of California’s False 
Advertising Law, Cal. Bus. & Prof. Code § 17500, et seq., (2) violations of California’s 
Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq., (3) fraudulent 
concealment, (4) breach of fiduciary duty, and (5) negligence.  In response to the 
Complaint, Defendants filed the present motion.     
II. 
DISCUSSION 
Defendants move to compel arbitration of Plaintiff’s claims pursuant to Plaintiff’s 
Deposit Account Agreement (“DAA”) with Chase and Chase’s Online Services Agreement 
(“Online Agreement”), both of which include an arbitration provision.  Plaintiff does not 
dispute that it signed these Agreements, but argues they do not apply to the claims alleged 
in this case.  The parties also dispute whether these Agreements delegate arbitrability to 
the arbitrator. 
The FAA governs the enforcement of arbitration agreements involving interstate 
commerce.  Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 232–33 (2013).  “The 
overarching purpose of the FAA ... is to ensure the enforcement of arbitration agreements 
according to their terms so as to facilitate streamlined proceedings.”  AT&T Mobility LLC 
v. Concepcion, 563 U.S. 333, 344 (2011).  “The FAA ‘leaves no place for the exercise of 
discretion by the district court, but instead mandates that district courts shall direct the 
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parties to proceed to arbitration on issues as to which an arbitration agreement has been 
signed.’”  Kilgore v. KeyBank, Nat. Ass’n, 718 F.3d 1052, 1058 (9th Cir. 2013) (quoting 
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)) (emphasis in original). 
Consistent with these principles, the Court’s role under the FAA is to determine “(1) 
whether a valid agreement to arbitrate exists, and if it does, (2) whether the agreement 
encompasses the dispute at issue.”  Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 
1126, 1130 (9th Cir. 2000).  “However, these gateway issues can be expressly delegated to 
the arbitrator where ‘the parties clearly and unmistakably provide otherwise.’”  Brennan v. 
Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015) (quoting AT & T Techs., Inc. v. Commc'ns 
Workers of Am., 475 U.S. 643, 649 (1986)).   
Here, Plaintiff does not dispute that it agreed to the DAA and the Online Agreement, 
both of which include an arbitration provision.  (See Decl. of Laura Deck in Supp. of Mot. 
(“Deck Decl.”), Ex. 5, ECF No. 17-1 at 142-42 (“DAA”); Decl. of Nicholas Sergi in Supp. 
of Mot. (“Sergi Decl.”), Ex. 10, ECF No. 17-3 at 38-39 (“Online Agreement”).)  Thus, 
there appears to be a valid agreement to arbitrate.   
The real dispute here is whether these agreements cover the claims alleged in this 
case.  Defendants argue they do, or at a minimum, that this issue should be decided by the 
arbitrator.  In support of the latter argument, Defendants cite the plain language of the 
Online Agreement, and the reference in both the Online Agreement and the DAA to both 
JAMS and the American Arbitration Association (“AAA”).  Plaintiff disagrees that either 
of these references evidences a clear and unmistakable delegation of arbitrability to the 
arbitrator.  The Court agrees with Defendants.   
The Online Agreement states:   
This binding arbitration provision applies to any and all Claims that you have 
against us, our parent, subsidiaries, affiliates, licensees, predecessors, 
successors, assigns, and against all of their respective employees, agents, or 
assigns, or that we have against you; it also includes any and all Claims 
regarding the applicability of this arbitration clause or the validity of the 
Agreement, in whole or in part.   
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(Sergi. Decl., Ex. 9, ECF No. 17-3 at 38) (emphasis added).  The Ninth Circuit has found 
this kind of language evidences a clear and unmistakable agreement between the parties 
“to arbitrate the question of arbitrability.”  Momot v. Mastro, 652 F.3d 982, 988 (9th Cir. 
2011).  District courts, including this one, have also reached the same conclusion when 
considering language similar to the language at issue here.  See Robbins v. Checkr, Inc., 
No. 19-cv-05717-JST, 2020 WL 4435139, at *3-4 (N.D. Cal. July 30, 2020) (finding clause 
delegating disagreements about applicability and validity of arbitration agreement 
evidenced clear and unmistakable agreement to delegate question of arbitrability to 
arbitrator); Cote v. Barclays Bank Delaware, No. 14cv2370-GPC-JMA, 2015 WL 251217, 
at *2-3 (S.D. Cal. Jan. 20, 2015) (same).   
Plaintiff attempts to avoid this conclusion by arguing that the delegation clause 
applies only to “Claims,” which the arbitration provision defines as “any dispute, claim or 
controversy arising now or in the future under or relating in any way to this agreement, or 
to the online service[.]”  (Sergi Decl., Ex. 11, ECF No. 17-3 at 87.)  Plaintiff argues the 
claims alleged in this case do not fall within the Agreement’s definition of “Claims” 
because they involve loan-related claims, in particular, loans “for a federally funded 
program that is not part of any Chase software or app.”  (Opp’n at 13.)  But this is just 
another way of saying that the claims at issue here do not fall within the scope of the 
arbitration clause.  It does not address the threshold issue of whether the Court or the 
arbitrator should decide the scope of the arbitration clause.  Given the plain language of 
the Online Agreement and the case law set out above, the answer to that threshold issue is 
clear:  Questions about the scope of the arbitration clause are for the arbitrator, not the 
Court.1  Accordingly, the Court grants Defendants’ motion to compel arbitration. 
                                              
1 In light of this finding, the Court declines to address Defendants’ argument that the 
reference to JAMS and AAA constitutes clear and unmistakable evidence of delegation of 
arbitrability to the arbitrator.  Even if the Court were to address that issue, however, the 
outcome would likely be the same.  See Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th 
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III. 
CONCLUSION AND ORDER 
Because the parties do not dispute that there is a valid agreement to arbitrate, and 
because the Online Agreement delegates questions of arbitrability to the arbitrator, the 
Court grants Defendants’ motion to compel and stays this case pending the parties’ 
arbitration.  Pursuant to Defendants’ request, this case is stayed to permit the arbitrator to 
decide the questions of arbitrability, and then, if permissible to arbitrate the substantive 
claims.  Within 14 days of the completion of the arbitration proceedings, the parties shall 
submit a joint report to the Court advising of the outcome of the arbitration, and request to 
dismiss the case or vacate the stay.  
 
IT IS SO ORDERED. 
Dated:  November 23, 2020 
 
                                              
Cir. 2015) (“[I]ncorporation of the AAA Rules constitutes clear and unmistakable evidence 
that contracting parties agreed to arbitrate arbitrability.”) 
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