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Balan v. Tesla Motors Inc.

United States District Court, W.D. Washington, Seattle

June 27, 2019



          Marsha J. Pechman United States District Judge.

         THIS MATTER comes before the Court on Defendant Tesla Motors Inc.'s (“Tesla's”) Motion to Compel Arbitration. (Dkt. No. 17.) Having reviewed the Motion, the Response (Dkt. No. 28), the Reply (Dkt. No. 31), and all related papers, the Court GRANTS in part and DENIES in part Defendant's Motion.


         Plaintiff Christina Balan designed and engineered batteries used in Tesla's vehicles from August 2010 until January 2013 and again from July 2013 to April 2014. (Dkt. No. 1 (“Compl.”) at ¶ 3; Dkt. No. 18, Declaration of Nicole White (“White Decl.”) at ¶ 4.) Prior to both stints working for Tesla, Ms. Balan signed an identical, half-page arbitration agreement (the “Agreement”) that requires “final, binding and confidential arbitration” of “any and all disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the termination of your employment.” (Id. at ¶¶ 5-7, Ex. A at 7.) The Agreement further states: “you are waiving any and all rights to a jury trial but all court remedies will be available in arbitration, ” requires Tesla to “pay all arbitration fees in excess of those which would be required if the dispute was filed in a court of law, ” and requires arbitration to be conducted by Judicial Arbitration and Mediation Services/Endispute, Inc. (“JAMS”) under its then current rules. (Id. (emphasis in original).)

         Ms. Balan claims she was “forced out” of Tesla in April 2014 for starting an internal investigation over safety concerns. (Compl. ¶ 6, Ex. A at 3-4.) She eventually brought a wrongful termination suit and the parties entered arbitration before JAMS Judge James L. Warren, who issued a final arbitration award on October 18, 2018. (Dkt. No. 19, Declaration of Matthew C. Lewis (“Lewis Decl.”) at ¶ 7.)

         On September 8, 2017, before the final arbitration award was issued, the Huffington Post published an article discussing, in part, Ms. Balan's attempt to communicate design flaws through an email to Tesla CEO Elon Musk. (Compl., Ex. A at 3.) The newspaper then posted Tesla's response, which described Ms. Balan's theories as “nonsensical, ” and asserted that not “every email sent to senior Tesla leaders (particularly emails that are not relevant to our mission or the job at hand, or are clearly suspect or misleading) warrants a response . . . .” (Id. at 4.) Tesla also accused Ms. Balan of taking it upon herself to find an alternative supplier that had no prior relevant experience and had failed a mandatory site inspection, spending company time working on a “secret project” without her manager's approval, booking an unapproved trip to New York at Tesla's expense, and illegally recording conversations without permission. (Compl., Ex. A at 4-5.)

         Ms. Balan now brings a single defamation claim against Tesla, seeking damages and injunctive relief. (Compl. at ¶ 88(c).) Tesla has moved to compel arbitration, arguing the Agreement is valid and encompasses Plaintiff's defamation claim. (Dkt. No. 17 at 11-15.)


         I. Legal Standard

         Under the Federal Arbitration Act (“FAA”), “district courts shall direct the 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). The Court's role on a motion to compel is limited to determining (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 Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). Agreements to arbitrate may be invalidated by “generally applicable contract defenses, such as fraud, duress, or unconscionability.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). The party opposing arbitration bears the burden of showing that the agreement is not enforceable. Zuver v. Airtouch Commc'ns, Inc., 153 Wn. 2d 293, 302 (2004).

         II. Valid Agreement

         Ms. Balan argues that construing the Agreement to include her defamation claim is both procedurally and substantively unconscionable, rendering the Agreement invalid.[1] (Dkt. No. 28 at 8-12.) The Parties appear to agree that Washington law controls in this case, both relying exclusively on Federal and Washington law in their briefs. (See Dkt. No. 17 at 9-17; Dkt. No. 28 at 7 n.3.) And because the Court “sits in diversity, it must look to the forum state's choice of law rules to determine the controlling substantive law.” Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002); see also Burnside v. Simpson Paper Co., 123 Wn. 2d 93, 100 (1994) (noting that where a party does not address choice-of-law issues, a Washington court presumptively applies Washington law); see also Restatement (Second) of Conflict of Laws § 187 (Am. Law Inst. 1971)). The Agreement is therefore analyzed under Washington law.

         “In Washington, either substantive or procedural unconscionability is sufficient to void a contract.” Gandee v. LDL Freedom Enterprises, Inc., 176 Wn.2d 598, 603 (2013) (citation omitted). “The existence of an unconscionable bargain is a question of law for the courts.” Zuver, 153 Wn.2d at 302-03 (quoting Nelson v. McGoldrick, 127 Wn.2d 124, 131 (1995)).

         A. Procedural ...

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