Oracle Loses Bid to Overturn Former Employee’s Motion to Compel Arbitration

Posted March 21st, 2019.

As It Appeared On
The Recorder

Former sales employee Marcella Johnson originally filed a proposed class action in federal court, but dropped her suit and filed a petition for class arbitration. Oracle hoped to get a federal court to rule that she should be bound by a late arbitration agreement that bars classwide arbitration.

By Ross Todd

In a reversal of the typical employer-forces-employee-into-arbitration scenario, Oracle America Inc. has lost out on a bid to overturn an employee’s motion to compel arbitration in a dispute over how the enterprise software giant pays commissions.

Thursday’s unpublished decision from the U.S. Court of Appeals for the Ninth Circuit upholds a lower court ruling granting former sales employee Marcella Johnson’s motion to compel arbitration against the company. Johnson’s case, in turn, illustrates the lengths that employees and their lawyers at times must go to in order to get their claims considered on a classwide basis.

Reached by phone Thursday, Johnson’s lawyer, Michael Palmer of Sanford Heisler Sharp, admitted that it’s somewhat odd, as a lawyer who represents employees, to find himself on the winning side of an appellate decision upholding a motion to compel arbitration.

“It is not every day that you see that, by any means. But, you know, we live in strange times,” Palmer said.

Oracle’s lawyer in Johnson’s case, Brendan Dolan of Vedder Price, wasn’t immediately available for comment Thursday.

Johnson’s case against Oracle has been ongoing for more than two years.

Johnson originally sued the company in February 2017 in the U.S. District Court for the Northern District of California on behalf of a proposed class of sales employees. She claimed that changes to Oracle’s commission policies resulted in “clawbacks” of previously paid amounts that were illegal under multiple provisions of the California Labor Code—about $20,000 worth of commissions for herself, but an estimated $150 million from about 1,000 sales employees her lawyers alleged were similarly situated. After the company produced her personnel file, which contained an employment agreement that all parties agreed contained a valid arbitration provision, Johnson dropped her federal lawsuit and filed a demand for class arbitration with JAMS in San Francisco.

Oracle, however, refused to pay its portion of the arbitration fees, and contended that Johnson had petitioned for arbitration under a provision that had been superseded by a later agreement that explicitly blocked classwide treatment of claims in arbitration. Johnson’s lawyers in November 2017 moved to compel arbitration, claiming that an arbitrator could decide which version of the arbitration agreement governed the dispute, and if the earlier version applied, whether it allowed for classwide claims. Oracle’s lawyers at Vedder Price, however, argued that a decision on which provision applied was an issue for the district court to decide.

U.S. Magistrate Judge Elizabeth Laporte of the Northern District of California in November 2017 found that both agreements Oracle struck with Johnson delegated the decision over what could be decided in arbitration to an arbitrator. In Thursday’s decision, the Ninth Circuit upheld Laporte’s decision on delegation grounds and further found that the arbitrator could decide which version of the agreement applies.

Palmer, Johnson’s lawyer, said Thursday that the arbitration has been proceeding through the early stages of discovery while Oracle’s Ninth Circuit appeal has been appending, but now the arbitrator will get to decide the threshold issues of which agreement applies, and whether Johnson can pursue her claims class-wide.

“This is the world that we are in now,” Palmer said. “This is how things work, and you know I think companies feel like either they are going to prevent people from bringing class cases or they’re going to make it really, really difficult to do so.”

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