Former sales rep for software maker claims company ‘stonewalling’ case over commission practices

Posted September 18th, 2017.

As It Appeared On
Legal Newsline

by Jessica Karmasek

SAN FRANCISCO (Legal Newsline) – A former sales representative for Oracle, who in February filed a proposed class action lawsuit against the Fortune 100 technology giant, claims the company now is obstructing the arbitration process.

Plaintiff Marcella Johnson originally filed her action Feb. 14 in the U.S. District Court for the Northern District of California, accusing defendant Oracle America Inc. of illegal debt servitude, among other things.

Oracle, headquartered in Redwood Shores, Calif., specializes primarily in developing and marketing database software and technology, cloud engineered systems and enterprise software products, particularly its own brands of database management systems.

In 2015, it was the second-largest software maker by revenue, after Microsoft.

Soon after Johnson’s filing in February, Oracle filed a motion to dismiss on the ground that the federal court lacked subject matter jurisdiction under the Class Action Fairness Act.

The company also produced Johnson’s personnel file, which contained an arbitration agreement.

Accordingly, Johnson dismissed the federal action and filed an arbitration demand with Judicial Arbitration and Mediation Services, or JAMS, in San Francisco, pursuant to the parties’ agreement. JAMS, according to its website, is the largest private alternative dispute resolution provider in the world.

Johnson, in a Sept. 6 petition to compel arbitration, filed in the Northern District of California, San Francisco Division, claims Oracle imposed the arbitration agreement on her as a non-negotiable condition of employment. Johnson says she had no say in the matter.

“But, Respondent Oracle has flatly refused to participate and cooperate in the arbitration and has obstructed the arbitration process,” Johnson wrote in the four-page petition. “Among other things, Oracle has refused to pay its share of the arbitration fee or to participate in the selection of the arbitrator.

“Based on Oracle’s recalcitrance, the arbitration cannot proceed.”

According to Johnson’s petition, Oracle’s mandatory arbitration agreement selects JAMS as an “appropriate and exclusive forum” for resolving employment disputes.

But Johnson alleges Oracle now insists that the parties’ relationship is governed by a second arbitration agreement, which, the company contends, prohibits class arbitrations.

“This is not a proper basis on which to resist arbitration or the appointment of an arbitrator,” Johnson’s attorneys argue. “It is uncontested and settled that Johnson’s employment-related disputes belong in JAMS arbitration. Thus, it is up to the arbitrator to determine which agreement applies as well as the form and procedures that the arbitration will take. It is up to the arbitrator to determine whether class-based procedures are available.

“The fundamental role for a court is to determine whether arbitration will occur at all — i.e. whether the parties’ dispute comes within the scope of an arbitration agreement and whether the arbitration clause is valid and enforceable. Once it is established (as here) that the substantive claims are arbitrable, a court’s role is at an end.”

Johnson argues that even assuming that a second, superseding agreement does, indeed, apply, Oracle’s class waiver would be void and unenforceable under binding Ninth Circuit law.

“Oracle seeks to do nothing more than stonewall and delay this case in hopes that Morris (v. Ernst & Young) may be overturned during the next Supreme Court term,” according to her petition.

In August 2016, the majority of a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit vacated a district court’s order compelling individual arbitration in a class action filed against Ernst & Young by its employees.

The Ninth Circuit sided with the approach of the National Labor Relations Board in ruling that individual arbitration waiver agreements are unenforceable under federal law.

The employees, Stephen Morris and Kelly McDaniel, alleged Ernst & Young, one of the “Big Four” audit firms, misclassified employees to deny overtime wages in violation of the Fair Labor Standards Act and California labor laws.

The case has made its way to the U.S. Supreme Court, which has scheduled arguments on the validity of such class action waiver clauses in employer/employee arbitration agreements for next month.

Oral arguments in the three consolidated cases, Epic Systems Corp. v. Lewis, Ernst & Young v. Morris and NLRB v. Murphy Oil USA Inc., are set for Oct. 2.

The October argument date means a decision likely won’t be reached by the Supreme Court until late this year or even early 2018.

“Oracle’s conduct has had the effect of bogging down both the court system and the arbitral forum with needless protracted litigation,” Johnson alleges in her petition, which seeks to compel the company to arbitrate the underlying action before JAMS in San Francisco.

“Oracle’s outright embargo of arbitration is unjustified, frivolous, and taken for improper purposes.”

Johnson also wants the federal court to sanction Oracle for its “dilatory, bad faith conduct.”

Last month, Johnson filed a first amended demand for class arbitration in JAMS to recover earned but unpaid sales commissions that she claims Oracle wrongly withheld from her and others similarly situated.

According to the 23-page demand, she alleges Oracle engages in “deceptive and unlawful maneuvers to avoid paying representatives their rightful commission wages.”

Johnson also claims Oracle arbitrarily and retroactively changed her commissions after they had been earned and paid — to the point where Oracle claimed she actually owed the company $20,000.

Oracle then unlawfully compelled her to work without receiving commissions until she paid off her so-called “debt,” Johnson alleges in her Aug. 25 demand.

She is represented by Sanford Heisler Sharp LLP, which has offices in San Francisco, Washington, D.C., and New York, and Valerian Law in Oakland, Calif.

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