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In re Sprouts Farmers Market, Inc. Employee Data Security Breach Litigation

United States District Court, D. Arizona

May 24, 2017

IN RE Sprouts Farmers Market, Inc. Employee Data Security Breach Litigation This Relates to All Actions

          ORDER

          Douglas L. Rayes United States District Judge

         Before the Court is Defendant Sprouts Farmers Market's motion to stay this action until the Supreme Court decides a pending case involving issues pertinent to the present action. (Doc. 42.) The motion is fully briefed and the Court has heard oral argument. For reasons stated below, the motion is granted.

         The cases brought in this multi-district litigation arise out of a data security breach at Sprouts from an email "phishing" scam that resulted in the disclosure of personal information, including W-2 tax forms and social security numbers, of thousands of Sprouts employees. The master class and collective action complaint asserts a host of claims sounding in tort and breach of contract, as well as statutory claims under both state and federal law. (Doc. 36.) Defendant contends that the claims are subject to individual arbitration agreements that contain class action waivers.

         In Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), this Circuit found certain class action waivers to be unenforceable under the National Labor Relations Act. After this action was filed, the Supreme Court granted a petition for certiorari in Morris. See Ernst & Young v. Morris, 2017 WL 125665 (Jan. 13, 2017). The parties agree that a primary issue in this case is whether the class action waivers are enforceable under Morris and that the Supreme Court's decision would greatly influence how this case should proceed, either by way of litigation or through arbitration. The parties disagree, however, whether a stay is warranted pending the decision in Morris.

         I. Legal Standard

         "A district court has discretionary power to stay proceedings in its own court." Lockyer v. Mirant Corp., 398 F.3d 1098, 1109 (9th Cir. 2005) (citing Landis v. N. Am. Co., 299 U.S. 248, 255 (1936)). The Court must weigh competing interests affected by a grant or denial of a stay, including (1) the possible damage caused by a stay, (2) the hardship to the parties if the suit is allowed to go forward, and (3) the orderly course of justice measured in terms of the simplifying or complicating of issues from a stay. Id. at 1110 (citing CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962)). The Court may also consider whether it is "efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of independent proceedings which bear upon the case." Leyva v. Certified Grocers of Cal. Ltd., 593 F.2d 857, 863 (9th Cir. 1979).

         II. Discussion

         A. Possible Damage from a Stay

         Plaintiffs contend that the delay caused by a stay will deprive them of the relief they seek and would result in continuing harm including the need to file taxes via mail rather than electronically, a delay in receiving tax refunds and the ability to spend the money on personal necessities, and the loss of an identity theft protection service provided by Defendant which expired in April 2017. In support of this alleged harm, Plaintiffs have provided a declaration from representative party Sandra Jean Esposito.

         This Circuit has made clear that monetary recovery cannot serve as the foundation to deny a stay. Lockyer, 398 F.3d at 1110. Although Plaintiffs seek more than just an award of damages and may suffer some continuing harm as a result of a stay, Plaintiffs have not made a sufficient showing that they "will suffer irreparable damage and a miscarriage of justice" if the case were to be stayed. CMAX, 300 F.2d at 268. Despite the alleged ongoing harm, Plaintiffs have not moved for preliminary injunctive relief. This is significant given that Plaintiffs filed this action more than a year ago and affirmatively sought injunctive relief in the complaint, but did not seek a temporary restraining order or a preliminary injunction to prevent the alleged harm. See Whitworth v. SolarCity Corp., No. 16-cv-01540-JSC, 2017 WL 2081155, at *3 (N.D. Cal. May 15, 2017) (plaintiffs' "argument as to delay in any monetary or injunctive relief is unpersuasive").

         The Court finds that this factor does not weigh strongly against a stay given that the decision in Morris will be made "within a reasonable time in relation to the urgency of the claims presented to the [C]ourt." Leyva, 593 F.2d at 864. Moreover, to the extent the arbitration agreements are determined to be unenforceable after the stay is lifted, the Court intends to set a vigorous schedule for resolution of this case and hold the parties to that schedule. See In re First Solar Derivative Litig., No. CV-12-00769-PHX-DGC, 2012 WL 6570914, at *2 (D. Ariz. Dec. 12, 2012) (granting stay where it would not delay the litigation for years and would save overall litigation costs and result in the clarification of issues).

         B. Possible Hardship Absent a Stay

         The Court next considers the hardship to Defendant absent a stay. As noted above, there is no dispute that the Supreme Court's decision in Morris is central to the arbitration issues present in this case. If the Supreme Court were to overturn this Circuit's decision in Morris, the arbitration agreements may be found enforceable and Plaintiffs would be precluded from moving forward with this class action litigation. Without a stay, however, Defendant would be required to defend a large class action that might be rendered moot and unnecessary by the Morris decision.

         Courts in another district have addressed this same issue, reaching different conclusions. A few courts found an outright stay to be unwarranted given that a decision in Morris is months away and discovery would aid both the litigation and any future arbitration. See Whitworth, 2017 WL 2081155, at *4; Daughtery v. SolarCity Corp., No. 16-5155-WHA, 2017 WL 386253, at *4 (N.D. Cal. Jan. 26, 2017); Rivera, No. 16-CV-05966-LHK, 2017 WL 1862509, at *5 (N.D. Cal. May 9, 2017). Other courts, however, concluded that the possible hardship to the defendant in litigating a suit that may be subject to arbitration outweighs any delay caused by a stay pending a decision in Morris. See McElrath v. Uber Techs., Inc., No. 16-cv-07241-JSC, 2017 WL 1862509, at *6 (N.D. Cal. ...


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