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Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 1 of 12
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`AUSTIN DIVISION
`
`
`
`
`
`
`CASE NO. 1:22-CV-00597
`
`JOHN LYNCH AND DAXTON HARTSFIELD,
` Individually and for
`
`
`Others similarly situated,
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`PLAINTIFFS,
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`v.
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`TESLA, INC.,
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`DEFENDANT.
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`











`
`
`DEFENDANT’S MOTION TO DISMISS AND COMPEL INDIVIDUAL ARBITRATION
`UNDER RULE 12(B)(1) or 12(B)(3)
`
`Tesla moves to dismiss and compel Plaintiffs John Lynch and Daxton Hartsfield’s claims
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`to individual arbitration under Federal Rule of Civil Procedure 12(b)(1) or 12(b)(3) because both
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`signed binding arbitration agreements containing class action waivers—as did all of the individuals
`
`in the putative class Plaintiffs seek to represent.
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`Plaintiffs entered into the subject arbitration agreements over three years prior to initiating
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`this lawsuit. Hartsfield also entered into an enforceable separation agreement with Tesla before
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`he filed this lawsuit, in which he released the claims he now asserts here and also agreed for a
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`second time to arbitrate all employment-related claims against Tesla.
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`The above facts are indisputable and Plaintiffs’ claims in this case are baseless. Tesla
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`engages in a bi-annual process of right-sizing its workforce and discharging low performing
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`employees—like Plaintiffs. As part of this process, Tesla always ensures compliance with the
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`Worker Adjustment Retraining Notification (“WARN”) Act. Here, Plaintiffs were not discharged
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`as part of a WARN triggering event and were not entitled to WARN notice—which Tesla will
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`demonstrate when this case is properly compelled to individual arbitration.
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`DB1/ 131544208.2
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`1
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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 2 of 12
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`I.
`
`BACKGROUND
`
`
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`For at the least the past 15 years, Tesla has entered into mutual binding arbitration
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`agreements with all of its employees. See Exhibit A (Decl. of Benjamin Flesch) at ¶ 3. Plaintiffs
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`are no exception. On May 29, 2017, Tesla sent Lynch an offer for a Maintenance Technician
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`position that contains an arbitration provision. See Exhibit A-1. On August 28, 2017, Tesla sent
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`Hartsfield a similar offer letter for a Quality Technician position that contains an identical
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`arbitration provision. See Exhibit A-2.
`
`
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`The arbitration provision in the offer letters is broad and provides that Plaintiffs and Tesla
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`mutually agree that “any and all disputes, claims, or causes of action, in law or equity, arising from
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`or relating to [Plaintiffs’] employment, or the termination of [“Plaintiffs’] employment, will be
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`resolved, to the fullest extent permissible, by final, binding and confidential arbitration . . . .”
`
`See Exhibit A-1 & A-2 at p. 3 (emphasis in original). Tesla and Plaintiffs also mutually agreed to
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`waive the right to bring or participate in a class action as the arbitration provision provides, “any
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`claim, dispute, or cause of action must be brought in a party’s individual capacity, and not as a
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`plaintiff or class member in any purported class or representative proceeding.” Id.
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`
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`Lynch electronically signed and accepted the offer letter and agreed to be bound by the
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`arbitration provision on June 16, 2017.
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`See Exhibit A-1 at p. 8.
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`2
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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 3 of 12
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`
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`Hartsfield signed and accepted the offer letter and agreed to be bound by the arbitration
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`provision on August 28, 2017. See Exhibit A-2 at p. 8.
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`See Exhibit A-2 at p. 8.
`
`
`
`
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`As reflected in the above signatures, Plaintiffs received and signed the offer letters through
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`the Taleo system. See Exhibit A at ¶¶ 5–8. Tesla used the Taleo system at the time Plaintiffs were
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`hired to manage the application and onboarding process for its employees. Id. Plaintiffs, like all
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`applicants at the time, created Taleo accounts using their first names, last names, personal e-mail
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`addresses, and telephone numbers. Id. at ¶ 5. They then created their own unique user names and
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`passwords to access the Taleo system and upload their resumes and receive communications from
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`Tesla, including their offer letters. Id. Plaintiffs also accepted and electronically signed their offer
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`letters through the Taleo system by clicking on a button entitled “Accept and eSign offer.” Id. at
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`¶ 6. They were then required to enter their name, last name, email address, and unique, individually
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`created passwords to further confirm their acceptance of their respective offer letters. Id. Once
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`accepted, a unique signature ID was also affixed by the Taleo system to the header of every page
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`of the offer letters, which shows that those pages were presented to Plaintiffs for review before
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`they electronically signed and accepted the terms of the letters. Id. at 7–8.
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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 4 of 12
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`II.
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`Standard of Review
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`
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`The Fifth Circuit Court of Appeals has not definitively decided whether a pre-answer
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`motion to compel arbitration should be brought under Federal Rule of Civil Procedure 12(b)(1) or
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`12(b)(3) and Tesla, therefore, asserts this Motion under both rules. See Gilbert v. Donahoe, 751
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`F.3d 303, 307 (5th Cir. 2014) (“We have held that a district court lacks subject matter jurisdiction
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`over a case and should dismiss it pursuant to Federal Rule of Civil Procedure 12(b)(1) when the
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`parties’ dispute is subject to binding arbitration.”) (internal citations omitted); Lim v. Offshore
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`Specialty Fabricators, Inc., 404 F. 3d 898, 902 (5th Cir. 2005) (noting that “circuits are split on
`
`the issue of whether Rule 12(b)(1) or 12(b)(3) is the proper motion for seeking dismissal based on
`
`a forum selection or arbitration clause,” but electing to analyze the subject motion to compel
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`arbitration under Rule 12(b)(3) because “our court has accepted Rule 12(b)(3) as a proper method
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`for seeking dismissal based on a forum selection clause . . . .”).
`
`
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`Under Rule 12(b)(1), the burden “is on the party asserting jurisdiction” to “prove by a
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`preponderance of the evidence that the court has jurisdiction based on the complaint and the
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`evidence.” Donahoe, 751 F.3d at 303. Similarly, once venue is challenged under Rule 12(b)(3),
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`“the burden is on the plaintiff to establish that the district he chose is a proper venue.” Asevedo v.
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`NBCUniversal Media, LLC, 921 F. Supp. 2d 573, 589 (5th Cir. 2013). The Court can find that
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`personal jurisdiction is lacking under Rule 12(b)(1), or that venue is improper under Rule 12(b)(3),
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`based on: “(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced
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`in the record; or (3) the complaint supplemented by undisputed facts plus the court’s resolution of
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`disputed facts.” Ballew v. Continental Airlines, Inc., 668 F.3d 777, 781 (5th Cir. 2012); In re
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`FEMA Trailer Formaldehyde Products Liability Litigation (Mississippi Plaintiffs), 668 F.3d 281,
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`286 (5th Cir. 2012).
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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 5 of 12
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`III. ARGUMENT
`
`A.
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`
`
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`As Mandated by the Federal Arbitration Act Plaintiffs’ Claims Should be Dismissed
`and Compelled to Arbitration under Either Rule 12(b)(1) or 12(b)(3).
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`The Federal Arbitration Act (“FAA”), which governs the subject arbitration provision,
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`provides that “pre-dispute arbitration agreements ‘shall be valid, irrevocable, and enforceable, save
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`upon such grounds as exist at law or in equity for the revocation of any contract.’”1 Carter v.
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`Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004) (quoting 9 U.S.C. § 2.). The
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`FAA permits an aggrieved party to file a motion to dismiss and compel arbitration when an
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`opposing “party has failed, neglected, or refused to comply with an arbitration agreement.” See
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`American Bankers Ins. Co. of Florida v. Inman, 436 F.3d 490, 493 (5th Cir. 2006) (citing 9 U.S.C.
`
`§ 4).
`
`
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`“Federal courts have supported a strong policy in favor of arbitration.” Lim v. Offshore
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`Specialty Fabricators, Inc., 404 F.3d 898, 906 (5th Cir.2005). Accordingly, “there is a strong
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`presumption in favor of arbitration and a party seeking to invalidate an arbitration agreement bears
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`the burden of establishing invalidity.” Carter, 362 F.3d at 297. Further, “any doubt concerning
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`the scope of arbitrable issues should be resolved in favor of arbitration” and “individuals seeking
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`to avoid the enforcement of an arbitration agreement face a high bar.” Id.; Moses H. Cone Mem.
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`Hosp., v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983).
`
`
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`Courts employ a two-step process in assessing a motion to compel arbitration. Jones v.
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`Halliburton Co., 583 F.3d 228, 233 (5th Cir. 2009). At step one, the Court considers merely
`
`
`The FAA applies to contracts “evidencing a transaction involving commerce” and “[t]he requirement that the
`1
`underlying transaction involve commerce ‘is to be broadly construed so as to be coextensive with congressional power
`to regulate under the Commerce Clause.’” See 9 U.S.C. § 2; Moses H. Cone Memorial Hosp., 460 U.S. 1, 24, (1983).
`It is beyond dispute that the offer letters containing the arbitration agreements here and Plaintiffs employment with
`Tesla involve interstate commerce as, among other things, Tesla distributes products from its various locations through
`the normal channels of interstate commerce and Plaintiffs worked on products and used materials in the course of their
`employment that were both received from and shipped to states outside of the state in which they worked. See Exhibit
`A at ¶ 1.
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`DB1/ 131544208.2
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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 6 of 12
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`whether the plaintiff has agreed to arbitrate the dispute at issue. Id. at 233–34. This step requires
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`the Court to ask only: (1) whether there is a valid agreement to arbitrate between the parties; and
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`(2) whether the dispute in question falls within the scope of the agreement. Webb v. Investascorp,
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`Inc., 89 F.3d 252, 256-57 (5th Cir. 1996). Once the Court is satisfied that the parties agreed to
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`arbitrate and that the dispute falls within the scope of the agreement, the second step is to determine
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`whether any federal statute or policy renders the claims non-arbitrable, despite the strong
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`presumption in favor of arbitration. Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th
`
`Cir. 2004).
`
`
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`As established below: (1) the arbitration provision to which Plaintiffs agreed to be bound
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`is valid; (2) Plaintiffs’ claims against Tesla fall within the scope of the arbitration provision; and
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`(3) the Court should strike Plaintiffs’ improvident class claims and compel Plaintiffs to individual
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`arbitration. Further, once it is determined that all of the issues raised in the district court must be
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`submitted to arbitration, “[t]he weight of authority supports dismissal of the case” as opposed to
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`staying the action pending arbitration. Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164
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`(5th Cir. 1992) (“The weight of authority clearly supports dismissal of the case when all of the
`
`issues raised in the district court must be submitted to arbitration.”). This is so because “retaining
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`jurisdiction and staying the action will serve no purpose.” Id.
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`
`
`
`
`1.
`
`Plaintiffs Offer Letters Contain Valid and Enforceable Arbitration Provisions.
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`Federal courts look to the state law of contract formation to determine whether a valid
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`arbitration agreement exists. See OPE Intern. LP v. Chet Morrison Contractors, Inc., 258 F.3d
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`443, 445–456 (5th Cir. 2001) (observing that “whether there is a valid agreement to arbitrate . . . is
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`governed by ordinary state-law contract principles”). Here, Plaintiffs’ offer letters each contain a
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`California choice-of-law provision. See Exhibits A-1 & A-2 at p. 4.
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`DB1/ 131544208.2
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`6
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`

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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 7 of 12
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`“Under California law, a contract is valid if there is mutual assent between the parties and
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`valid consideration.” Totten v. Kellogg Brown & Root, LLC, 152 F. Supp. 3d 1243, 1250 (C.D.
`
`Cal. 2016). California’s Uniform Electronic Transaction Act provides that a “signature may not
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`be denied legal effect or enforceability solely because it is in electronic form,” and specifies that
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`“[a] contract may not be denied legal effect or enforceability solely because an electronic record
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`was used in its formation.” Cal. Civ. Code § 1633.7(a)-(b); see also Mikhak v. Univ. of Phoenix,
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`No. C16-00901 CRB, 2016 WL 3401763, at *6 (N.D. Cal. June 21, 2016) (“Electronic signatures
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`and clicking ‘Accept’ are valid means of expressing assent to a contract.”).
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`In this case, Plaintiffs “accepted” and “signed” their offer letters. See Exhibit A-1 & A-2
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`at p. 8. Specifically, the executed offer letters evince that Plaintiffs utilized a unique signature ID
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`to access and electronically sign the document. See Exhibit A at ¶¶ 5–8. Moreover, while
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`Plaintiffs’ electronic “acceptance” and “signature” of the offer letters cannot be seriously disputed,
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`Plaintiffs also “implicitly accepted” the offer letters through continued employment with Tesla.
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`See Craig v. Brown & Root, Inc., 84 Cal. App. 4th 416, 420, 100 Cal.Rptr.2d 818 (2000) (“This
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`means that a party’s acceptance of an agreement to arbitrate may be express...or implied-in-fact
`
`where, as here, the employee’s continued employment constitutes her acceptance of an agreement
`
`proposed by her employer.”).
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`There is also ample consideration for the arbitration agreements. First, the parties mutually
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`agreed to arbitrate. See Exhibit A-1 & A-2 at p. 3 (“you and Tesla agree that any and all dsiputes,
`
`claims, or causes of action, in law or equity, arising from or relating to your employment, or the
`
`termination of your employment, will be resolved, to the fullest extent permissible, by final,
`
`binding and confidential arbitration . . . .”). An agreement to be mutually bound by arbitration
`
`is sufficient consideration. See Cir. City Stores, Inc. v. Najd, 294 F.3d 1104, 1108 (9th Cir. 2002)
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`(a “promise to be bound by the arbitration process itself serves as adequate consideration”). And
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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 8 of 12
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`second, it is undisputed that Plaintiffs worked for Tesla after accepting the offer letters, and
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`continued employment constitutes sufficient consideration for an arbitration agreement. See Asfaw
`
`v. Lowe's HIW, Inc., No. LA CV14-00697 JAK, 2014 WL 1928612, at *3 (C.D. Cal. May 13,
`
`2014) (“However, it is undisputed that, in exchange for agreeing to arbitrate disputes, Plaintiff
`
`either accepted Defendant's offer of employment or continued working for Defendant [and]
`
`[c]ontinued employment constitutes consideration for an agreement to arbitrate.”).
`
`Finally, well-established case law precedent establishes the validity of the arbitration
`
`provision in question. At least three federal district courts have held that Tesla offer letters
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`containing substantively identical arbitration provisions to those at issue here were enforceable
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`and have compelled arbitration pursuant to their terms. See Hansen v. Tesla, Inc., No. 3:19-cv-
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`00413, 2020 WL 4004800 *1, *3 (D. Nev. July 15, 2020); Williams v. Tesla, Inc., No. CV 18-
`
`4120, 2018 WL 6499867, at *1, *3 (D.N.J. Dec. 11, 2018); Hidalgo v. Tesla Motors, Inc, No. 5:15-
`
`CV-05185, 2016 WL 3541198, at *1, *5 (N.D. Cal. June 29, 2016).
`
`2.
`
`The Arbitration Provision Covers Plaintiffs’ Claims.
`
`
`
` “An order to arbitrate the particular grievance should not be denied unless it may be said
`
`with positive assurance that the arbitration clause is not susceptible of an interpretation that covers
`
`the asserted dispute. Doubts should be resolved in favor of coverage.” Jha v. Asurgen Inc., No.
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`1:19-CV-1070-RP, 2020 WL 7029157, at *4 (W.D. Tex. Nov. 30, 2020) (quoting AT & T Techs.,
`
`Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650 (1986)). Here, there can be no dispute that
`
`the subject arbitration provision covers Plaintiffs’ claims as it applies to all disputes, claims, or
`
`causes of action “arising from or relating to [Plaintiffs’] employment, or the termination of
`
`[Plaintiffs’] employment” and Plaintiffs’ sole allegation in this lawsuit is that Tesla terminated
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`their employment and the employment of the members of the alleged class in violation of the
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`WARN Act.
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`DB1/ 131544208.2
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`

`

`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 9 of 12
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`
`
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`The Court Should Compel Individual Arbitration and Strike Plaintiffs’ Class
`Claims.
`
`3.
`
`
`Plaintiffs’ claims must be compelled to individual arbitration consistent with the terms of
`
`the binding arbitration provision in which Tesla and Plaintiffs mutually agreed that “any claim,
`
`dispute, or cause of action must be brought in a party’s in a party’s individual capacity, and not as
`
`a plaintiff or class member in any purported class or representative proceeding.” Exhibit A-1 &
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`A-2 at p. 3. This waiver is enforceable as “a party may not be compelled under the FAA to submit
`
`to class arbitration unless there is a contractual basis for concluding that the party agreed to do so”
`
`and it is now well-established that class action waivers like the one at issue here are fully
`
`enforceable under the FAA. See Stolt–Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 684
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`(2010) (emphasis in original); Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1418 (2019).
`
`In compelling individual arbitration, the Court should also strike Plaintiffs’ improvident
`
`class claims both because Plaintiffs waived the right to bring their lawsuit as a class action and
`
`because all of the individual class members whom Plaintiffs seek to represent signed the same or
`
`a similar arbitration provision to the one Plaintiffs signed and in doing so waived the right to
`
`participate as class members in this case. See Exhibit A at ¶ 3; In re Online Travel Co., 953 F.
`
`Supp. 2d 713, 725 (N.D. Tex. 2013) (striking the plaintiff’s class claims because “[a]ny claims by
`
`absent class members bound by the [subject arbitration agreement] would be impertinent, as those
`
`class members would be bound to individually arbitrate their claims.”); see also Daniels v. Virginia
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`Coll. at Jackson, No. 3:11-CV-496-WHB-LRA, 2011 WL 13182997, at *6–7 (S.D. Miss. Nov.
`
`29, 2011), aff'd, 478 F. App'x 892 (5th Cir. 2012) (upon finding named plaintiff’s claims were
`
`subject to mandatory arbitration, court found plaintiff’s “class action allegations have been
`
`rendered moot, and should be dismissed as such”).
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`DB1/ 131544208.2
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`9
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`

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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 10 of 12
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`
`
`
`
`IV.
`
`Plaintiff’s Emergency Motion for a Protective Order Should be Denied
`
`As a final matter, on July 5, 2022, Plaintiffs filed an Emergency Motion for Protective
`
`Order asking the Court to enjoin Tesla under Rule 23(d) from sending separation agreements to its
`
`employees and invalidating separation agreements with others. See Doc. No. 7. As will be more
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`fully explained in Tesla’s forthcoming response, which is due by July 19, 2022, Plaintiffs’ motion
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`should be denied in its entirety for at least four separate reasons.
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` First, Plaintiffs’ motion should be denied because it will be moot after Plaintiffs’ claims
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`are properly compelled to individual arbitration through Tesla’s present motion to compel.
`
`
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`Second, it would be wholly improper and unprecedented for a Court to enjoin Tesla’s
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`alleged disputed acts under Rule 23(d) on a class-wide basis where, as here, there is no likelihood
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`a class will eventually be certified because the plaintiffs signed arbitration agreements precluding
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`them from representing a class and all of the members of the proposed class have signed
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`enforceable agreements precluding them from participating as class members in this case.
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` Third, Plaintiffs have not satisfied their burden of showing that Tesla engaged in any
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`misconduct, much less serious misconduct as required to attain relief under Rule 23(d), because:
`
`(i) Plaintiffs and all of the potential class members entered into binding arbitration agreements
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`with Tesla before this lawsuit was filed—which distinguishes this case from all of the authority
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`cited in Plaintiffs’ motion; (ii) it is Tesla’s standard practice to issue separation agreements to
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`involuntarily terminated employees, and Hartsfield received and signed such agreement prior to
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`the initiation of this lawsuit; and (iii) Plaintiffs have presented no evidence of any potential class
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`members having received and signed a separation agreement after the initiation of this lawsuit.
`
`
`
`Fourth, the relief Plaintiffs request is impermissibly overbroad, unreasonable, and
`
`untenable because, among other things: (i) it asks the Court to invalidate binding separation
`
`agreements entered into between Tesla and individuals prior to the initiation of this lawsuit; and
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`DB1/ 131544208.2
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`10
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`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 11 of 12
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`(ii) there is no way for the Court or Tesla to determine who is a member of the proposed class, if
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`anyone, and who would, in turn, be effected by Plaintiffs’ proposed protective order as the fail-
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`safe class definition in Plaintiffs’ Complaint only encompasses individuals who are entitled to
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`WARN notice, which Tesla contends is nobody at this juncture and there has been no finding to
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`the contrary.
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`V.
`
`CONCLUSION
`
`
`
` For the foregoing reasons, Tesla asks the Court to dismiss Plaintiffs’ individual and class
`
`action claims under Federal Rule of Civil Procedure 12(b)(1) or 12(b)(3) and compel Plaintiffs’ to
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`individual arbitration.
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`DB1/ 131544208.2
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`Respectfully submitted,
`
`MORGAN, LEWIS & BOCKIUS LLP
`
`/s/Robert E. Sheeder
`Robert E. Sheeder
`Texas Bar No. 18174300
`robert.sheeder@morganlewis.com
`Clayton M. Davis
`Texas Bar No. 24092323
`clayton.davis@morganlewis.com
`1717 Main Street, Suite 3200
`Dallas, Texas 75201
`Telephone: (214) 466-4000
`Facsimile: (214) 466-4001
`
`T. Cullen Wallace
`State Bar No. 24072412
`1000 Louisiana Street, Suite 4000
`Houston, TX 77002
`T: 713.890.5000
`F: 713.890.5001
`cullen.wallace@morganlewis.com
`
`ATTORNEYS FOR DEFENDANT
`
`11
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`

`

`Case 1:22-cv-00597-RP Document 13 Filed 07/14/22 Page 12 of 12
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`CERTIFICATE OF SERVICE
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`I hereby certify that on the 14th day of July 2022, I electronically filed the foregoing using
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`the CM/ECF system, which will send a notice of electronic filing to all counsel of record.
`
`
`/s/Robert E. Sheeder
`Robert E. Sheeder
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`DB1/ 131544208.2
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`12
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`

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