Davis v. Hilton Resorts Corporation

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Fidel Bernard Davis,
Plaintiff,
v.
Hilton Resorts Corporation,
Defendant.
No. CV-25-00203-TUC-RM (BGM)
REPORT AND RECOMMENDATION
Before the Court is Defendant Hilton Resorts Corporation’s Motion to Compel
Arbitration. (Doc. 25.) The motion has been fully briefed. (See Docs. 26, 27.) Pursuant
to 28 U.S.C. § 636(b)(1) and Local Rules of Civil Procedure 72.1 and 72.2, this case was
referred to Magistrate Judge Bruce G. Macdonald for a report and recommendation. (Doc.
15.) After review of the parties’ briefs and exhibits, the Magistrate Judge recommends that
the District Judge, after her independent review, deny Defendant’s motion and instruct it
to answer or otherwise respond to Plaintiff’s first amended complaint.
BACKGROUND AND PROCEDURAL HISTORY1
In March 2013, Defendant’s corporate predecessor, Diamond Resorts International,
Inc., (Diamond), hired Plaintiff Fidel Bernard Davis. (Doc. 25-2, ¶ 7.) During Plaintiff’s
employment, Diamond adopted a Mutual Binding Arbitration Agreement, which it
distributed to all of its existing employees. (Id. ¶ 4.) Plaintiff was provided with a copy of
1 All uncontested facts and reasonable inferences drawn from those facts have been
construed in a light most favorable to the Plaintiff as the non-moving party. Switch, LLC
v. ixmation, Inc., No. 15-CV-01637, 2015 WL 4463672, at *3 (N.D. Cal. July 21, 2015).
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the agreement, given time to review it, and given time to opt out of the agreement. (Id. ¶¶
3-7.) On August 20, 2018, Plaintiff signed the agreement. (See Doc. 26-2 at 2.)
On November 26, 2024, Plaintiff submitted an accommodation request for remote
work due to a chronic lung condition. (Doc. 16 at 3.) During the same time period, he also
submitted workplace misconduct reports. (Id.) As a result of his misconduct reports,
Plaintiff was subject to retaliation. (Id. at 3-4.) Finally, on December 17, 2024, while
Plaintiff was out on FMLA leave, Defendant terminated his employment. (Id. at 4.)
On August 5, 2025, Plaintiff filed a first amended complaint raising thirteen claims
against Defendant, including: (i) discrimination under the Americans with Disabilities Act,
(ADA), 42 U.S.C. § 12112; (ii) interference and retaliation under the Family and Medical
Leave Act, (FMLA), 29 U.S.C. § 2615; (iii) discrimination and retaliation under Title VII
of the Civil Rights Act of 1964, 42 U.S.C. § 2000e; (iv) age discrimination under the Age
Discrimination in Employment Act, (ADEA), 29 U.S.C. § 623; (v) discrimination under
the Civil Rights Act of 1866, 42 U.S.C. § 1981; (vi) wrongful discharge under the Arizona
Employment Protection Act, (EPA), A.R.S. § 23-1501; (vii) constructive discharge under
A.R.S. § 23-1502; (viii) retaliation under the ADA, 42 U.S.C. § 12203; (ix) duplicate
interference and retaliation claims under 29 C.F.R. § 825.220; (x) civil conspiracy under
42 U.S.C. § 1985; (xi) invasion of privacy under Arizona law; (xii) negligent supervision
under Arizona law; and (xiii) defamation under Arizona law. (Doc. 16 at 5-7.)
On September 5, 2025, Defendant filed a motion to compel arbitration. (Doc. 25.)
Defendant attached two exhibits to its motion: Exhibit A, a copy of a Mutal Binding
Arbitration Agreement; and Exhibit B, the Declaration of Ciera Pope. (Docs. 25-1 at 1-8;
25-2 at 1-4.) On September 19, 2025, Plaintiff filed a response in opposition to Defendant’s
motion to compel arbitration. (Doc. 26.) Plaintiff attached nine exhibits to his motion:
Exhibit 1, a copy of a Mutual Binding Arbitration Agreement Acknowledgment; Exhibit
2, a copy of Ciera Pope’s LinkedIn profile; Exhibit 3, a screenshot of Defendant’s job
postings for Director of Engineering positions; Exhibit 4, a screenshot of Defendant’s job
postings for high management positions; Exhibit 5, a copy of Plaintiff’s accommodation
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request; Exhibit 6, a copy of Plaintiff’s absence request receipt; Exhibit 7, a copy of Ciera
Pope’s Declaration; Exhibit 8, a copy of an email concerning Plaintiff’s accommodation
request; and Exhibit 9, a copy of an email from Ciera Pope concerning Plaintiff’s meeting
request. (Docs. 26-2 at 2; 26-3 at 2; 26-4 at 2; 26-5 at 2; 26-6 at 2-3; 26-7 at 2; 26-8 at 3-
5; 26-9 at 2-3; 26-10 at 2.) On September 26, 2025, Defendant filed its reply in support of
motion to compel arbitration. (Doc. 27.) This Report and Recommendation follows.
LEGAL STANDARD
“The Federal Arbitration Act (FAA) governs arbitration agreements.” Hicks v.
Utiliquest, LLC, 736 F. Supp. 3d 849, 858 (E.D. Cal. 2024) (citing 9 U.S.C. § 2). The FAA
affords litigants the right to obtain an order directing that arbitration proceed in the manner
outlined in the agreement. Hicks, 736 F. Supp. 3d at 858. To decide a motion to compel
arbitration, the court must determine: “(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 Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). While “[a]rbitration is
a matter of contract, and the FAA requires courts to honor parties’ expectations,” AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 351 (2011), the parties may use general
contract defenses to invalidate an arbitration agreement, see id. at 339. “Thus, a court
should order arbitration of a dispute only where satisfied that neither the agreement’s
formation nor its enforceability or applicability to the dispute is at issue.” Hicks, 736 F.
Supp. 3d at 858 (citing Granite Rock Co. v. Int'l Brotherhood of Teamsters, 561 U.S. 287,
299 (2010)). “Where a party contests either or both matters, the court must resolve the
disagreement.” Granite Rock, 561 U.S. at 299-300 (cleaned up). Arbitration is mandatory
if a valid arbitration agreement encompassing the dispute exists. Dean Witter Reynolds,
Inc. v. Byrd, 470 U.S. 213, 218 (1985). If the court is satisfied that the dispute is referrable
to arbitration, the court shall “stay the trial of the action until such arbitration has been had
in accordance with the terms of the agreement.” 9 U.S.C. § 3.
“In determining whether parties have agreed to arbitrate a dispute, [courts] apply
general state-law principles of contract interpretation, while giving due regard to the federal
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policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in favor
of arbitration.” Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1044 -45 (9th Cir. 2009).
The presumption of arbitrability applies equally to disputes about the enforceability of an
arbitration agreement. Granite Rock, 561 U.S. at 298. Generally speaking, “the party
resisting arbitration bears the burden of proving that the claims at issue are unsuitable for
arbitration.” Longnecker v. Am. Exp. Co., 23 F. Supp. 3d 1099, 1106 (D. Ariz. 2014).
When resolving a motion to compel arbitration, “[i]t is permissible to consider evidence
outside the pleadings.” Scott-Ortiz v. CBRE Inc., 501 F. Supp. 3d 717, 721 (D. Ariz. 2020).
To the extent there are conflicts in the evidence submitted by the parties, the court applies
a standard similar to that applicable for a motion for summary judgment under Rule 56.
Id. (citing Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003)). Under this standard,
“[t]he party opposing arbitration receives the benefit of any reasonable doubts and the court
draws reasonable inferences in that party’s favor, and only when no genuine disputes of
material fact surround the arbitration agreement’s existence and applicability may the court
compel arbitration.” Smith v. H.F.D. No. 55, Inc., No. 2:15-cv-1293, 2016 WL 881134, at
*4 (E.D. Cal. Mar. 8, 2016) (citing Three Valleys Mun. Water Dist. v. E.F. Hutton & Co.,
925 F.2d 1136, 1141 (9th Cir. 1991)). A material fact is genuine if “the evidence is such
that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). Conversely, “[w]here the record taken as a whole
could not lead a rational trier of fact to find for the non-moving party, there is no genuine
issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986) (cleaned up).
DISCUSSION
Plaintiff does not dispute that he entered into a binding arbitration agreement with
Diamond or that the subject matter of his claims are encompassed by the terms of that
agreement. (See generally Doc. 26.) Instead, Plaintiff asserts that Defendant fails to
demonstrate that he entered into a mutually binding arbitration agreement with it as
opposed to its predecessor, and that even if the arbitration agreement is interpreted to
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encompass Defendant as a party to the agreement, the agreement is unenforceable for a
number of independent reasons. (Doc. 26 at 5-6.) Specifically, Plaintiff argues that: (i)
declarant Cierra Pope lacks personal knowledge of Diamond’s arbitration agreement; (ii)
Defendant’s rollout of the agreement was procedurally unconscionable; (iii) the terms of
the agreement are one-sided; (iv) Defendant’s leadership instability and insider knowledge
weigh against enforcing the agreement; (v) boilerplate “successor” language fails to bind
him to the agreement; and (vi) Defendant waived its right to arbitrate through its litigation
conduct. (Id.) While the Court finds Plaintiff’s fifth argument persuasive and dispositive
of the motion at hand, it nonetheless addresses Plaintiff’s arguments in the order raised.
I. Declaration Authenticating Arbitration Agreement Valid
Plaintiff first argues that the motion to compel arbitration should be denied because
the declaration of Ciera Pope, Defendant’s custodian of records, which Defendant uses to
authenticate the arbitration agreement between Plaintiff and Diamond, lacks personal
knowledge and is inadmissible under Federal Rule of Evidence 602. (Doc. 26 at 3-4.)
Plaintiff asserts that at the time the agreement was distributed by Diamond, there was no
representative to explain the agreement, answer questions, or provide instructions. (Id. at
3.) Plaintiff also asserts that Pope lacks personal knowledge of the agreement because she
did not begin her employment with Defendant until months after the agreement was rolled
out and signed by him. (Id.) Plaintiff argues Pope is not a neutral custodian of records but
an instrument of management, which undermines her competence to authenticate the
agreement. (Id. at 4.) Plaintiff finally asserts that Pope’s statements call into question her
role and knowledge of the agreement. (Id.) The Court disagrees.
On a motion to compel arbitration, the court may consider the pleadings, documents
of uncontested validity, and affidavits submitted by either party. Myers v. Experian Info.
Sols. Inc., 734 F. Supp. 3d 912, 918 (D. Ariz. 2024). Under Federal Rule of Civil Procedure
56(c)(4), “[a]n affidavit or declaration used to support or oppose a motion must be made
on personal knowledge, set out facts that would be admissible in evidence, and show that
the affiant or declarant is competent to testify on the matters stated.” “Evidence to prove
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personal knowledge may consist of the witness’s own testimony,” Fed. R. Evid. 602, and
personal knowledge “can be inferred from an affiant’s position,” see Self-Realization
Fellowship Church v. Ananda Church of Self-Realization, 206 F.3d 1322, 1330 (9th Cir.
2000) (collecting cases).
In the declaration at hand, Pope testifies under penalty of perjury that she serves as
a custodian of records for Defendant’s human resources department. (Doc. 25-2, ¶ 1.) She
asserts she is familiar with the employment and business records that Defendant maintains
and that its predecessor maintained before Defendant acquired it. (Id.) Pope affirms that
she has personal knowledge of the information set forth in her affidavit or that she obtained
the information from records that were maintained in the ordinary course of business. (Id.)
Pope testifies that employees returned the executed arbitration agreements to Diamond
management personnel who in turn provided the executed agreements to Diamond’s human
resources department. (Id. ¶ 5.) Pope asserts that the agreements were maintained in the
employees’ respective personnel files and in the company’s human resources information
system. (Id.) Pope further asserts that if necessary, she can testify to the information
provided in her declaration. (Id. ¶ 1.)
This information is sufficient to satisfy the personal knowledge and competency
requirements of Rule 56(c)(4). Other courts within the United States Court of Appeals for
the Ninth Circuit have found nearly identical information sufficient authentication
material. See, e.g., Bryant v. JPMorgan Chase Bank, N.A., 763 F. Supp. 3d 946, 950 (C.D.
Cal. 2025) (finding affiant’s statements sufficient to infer personal knowledge); Myers, 734
F. Supp. 3d at 919 (finding affiant’s statements met “the minimum standards for
consideration under Federal Rule of Civil Procedure 56(c)”); Williams v. Experian Info.
Sols. Inc., No. CV-23-01076, 2024 WL 3876171, at *8 (D. Ariz. Aug. 20, 2024) (finding
affiant’s job title and description of his duties sufficient to establish personal knowledge).
Furthermore, the presence of a human resources representative is not necessary to prove
the validity of an executed arbitration agreement under general contract principles. See
Coup v. Scottsdale Plaza Resort, LLC, 823 F. Supp. 2d 931, 949 (D. Ariz. 2011) (“Plaintiffs
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after-the-fact speculation does not overcome the traditional rule of contract law that a party
to a contract is assumed to have read and understood the terms of a contract he or she
signs.”). As such, Plaintiff’s argument that Pope’s declaration is invalid because she lacks
personal knowledge of the rollout and execution of the arbitration agreement and is too
biased to authenticate it should be denied.
II. Agreement Rollout Not Procedurally Unconscionable
Plaintiff next argues that the motion to compel arbitration should be denied because
the rollout of the arbitration agreement was procedurally unconscionable. (Doc. 26 at 4.)
Plaintiff asserts the rollout was unconscionable because the agreement has an effective date
of August 13, 2018, and Plaintiff’s acknowledgement is dated August 20, 2018. (Id.)
Plaintiff contends these facts establish that the agreement’s 30-day opt-out period was
shortened by a week, which contradicts the contract’s terms. (Id.) The Court disagrees.
“[U]nconscionability is a generally applicable contract defense, which may render
an arbitration provision unenforceable.” Coup, 823 F. Supp. 2d at 947. Procedural
unconscionability is concerned with “unfair surprise, fine print clauses, mistakes or
ignorance of important facts or other things that mean bargaining did not proceed as it
should.” Maxwell v. Fid. Fin. Servs., Inc., 907 P.2d 51, 57-58 (Ariz. 1995) (internal
quotation marks and citation omitted). Substantive unconscionability addresses the actual
terms of the contract and the relative fairness of the obligations assumed. Id. at 58. The
plaintiff bears the burden of proving the unenforceability of the arbitration provision, and
the determination of unconscionability is made by the [c]ourt as a matter of law. Pinto v.
USAA Ins. Agency Inc. of Tex., 275 F. Supp. 3d 1165, 1170 (D. Ariz. 2017).
“Under Arizona law, procedural unconscionability is concerned with ‘unfair
surprise,’ and courts focus on ‘those factors bearing upon … the real and voluntary meeting
of the minds of the contracting part[ies]: age, education, intelligence, business acumen and
experience, relative bargaining power, who drafted the contract, whether the terms were
explained to the weaker party, [and] whether alterations in the printed terms were
possible.’” Newbill v. CVS Caremark, LLC, 683 F. Supp. 3d 1004, 1010 (D. Ariz. 2023)
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(quoting Maxwell, 907 P.2d at 58). Here, Plaintiff fails to show that there was not a meeting
of the minds between the contracting parties; rather, he contends the rollout of the
arbitration agreement was procedurally unconscionable because the 30-day opt-out period
outlined in the agreement was reduced by one week. (Doc. 26 at 4.) This argument fails.
To start, the arbitration agreement in question contained a clear and unambiguous
“opt-out” provision. It provides:
By signing below or by continuing my employment with the Company on
receiving notice of this agreement, I hereby acknowledge that I have
carefully read the above arbitration agreement, understand it, and knowingly
and voluntarily agree to its terms and give this specific authorization to
submit to arbitration any dispute that has arisen or that may arise between the
parties to this Agreement, unless I opt out within thirty (30) days utilizing
the procedures set forth above in the section entitled "Right to Opt Out of the
Agreement."
(Doc. 26-2 at 2.)
This clear and unambiguous opt-out provision undermines Plaintiff’s assertion that
there was an “illusory opt-out right” in a “coercive agreement,” (see Doc. 26 at 4). As the
agreement’s terms provide, Plaintiff had the option of opting out of the agreement within
30 days of receipt. (Doc. 26-2 at 2.) The contention that Plaintiff executed the agreement
seven days after its effective date does not make the agreement procedurally
unconscionable. See Newbill, 683 F. Supp. 3d at 1010-11 (ruling that a 30-day opt-out
provision was not procedurally unconscionable where the provision was “clear and
conspicuous” and that consenting to the arbitration agreement was not a precondition of
employment). Plaintiff’s written execution of the agreement (i.e., signature) also signifies
that he read and understood the terms of the contract he signed including the agreement’s
opt-out provision. See Coup, 823 F. Supp. 2d at 949 (citing Flores v. ADT Sec. Servs., Inc.,
2011 WL 1211769, at *3 (D. Ariz. Jan. 31, 2011)) (“Plaintiffs’ after-the-fact speculation
does not overcome the traditional rule of contract law that a party to a contract is assumed
to have read and understood the terms of a contract he or she signs.”).
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Even accepting as true Plaintiff’s contention that Defendant’s conduct somehow
reduced the opt-out period by one week, Plaintiff fails to provide convincing argument or
persuasive caselaw for the Court to conclude that such behavior made the agreement
procedurally unconscionable. The cases Plaintiff uses to support his position present facts
and scenarios that are inapposite to the case at hand. See Chavarria v. Ralphs Grocery Co.,
733 F.3d 916, 922 (9th Cir. 2013) (upholding procedural unconscionability finding where
arbitration policy was precondition of employment, presented on a take-it-or-leave-it basis,
and was provided to the plaintiff three weeks after she agreed to be bound by it); Nagrampa
v. MailCoups, Inc., 469 F.3d 1257, 1283-84 (9th Cir. 2006) (finding franchise contract of
adhesion procedurally unconscionable where plaintiff provided agreement on a take-it-or-
leave-it basis). Plaintiff’s argument that Defendant’s rollout of the arbitration agreement
was procedurally unconscionable should therefore be denied.
III. Agreement Provision Not Substantively Unconscionable
In addition to arguing the agreement’s rollout was procedurally unconscionable,
Plaintiff argues the arbitration agreement is substantively unconscionable because it strips
him of the right to litigate his ADA, FMLA, Title VII, ADEA, and Section 1981 claims in
federal court while preserving Defendant’s access to judicial remedies. (Doc. 26 at 4.)
Plaintiff asserts that agreements that impose such one-sided obligations are unenforceable.
(Id. at 4-5.) Plaintiff contends that forcing employees to arbitrate statutory discrimination
and leave claims while allowing Defendant access to judicial remedies undermines the
federal policies favoring enforcement of ADA, FMLA, and Title VII rights. (Id. at 5.)
Plaintiff surmises that such an arrangement offends basic notions of fairness and due
process and should not be enforced. (Id.) Plaintiff misconstrues the arbitration agreement
in question, and the Court disagrees with his arguments.
“Substantive unconscionability requires an examination of the actual terms of the
contract and the relative fairness of the obligations assumed by each party.” Batory v.
Sears, Roebuck & Co., 456 F. Supp. 2d 1137, 1140 (D. Ariz. 2006) (citing Maxwell, 907
P.2d at 59). “Indicative of substantive unconscionability are contract terms so one-sided
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as to oppress or unfairly surprise an innocent party, an overall imbalance in the obligations
and rights imposed by the bargain, and significant cost-price disparity.” Maxwell, 907 P.2d
at 58. Plaintiff argues that the arbitration agreement is unconscionable because it strips
him of the right to litigate his federal claims in court while preserving Defendant’s access
to judicial remedies. However, the plain language of the agreement indicates otherwise.
The “Included Claims” provision of the agreement provides, in pertinent part:
This Agreement specifically covers, without limitation, claims under the Age
Discrimination in Employment Act; the Civil Rights Acts of 1964 and 1991;
the Americans with Disabilities Act; the Rehabilitation Act; the Occupational
Safety and Health Act; the Equal Pay Act; the Pregnancy Discrimination Act;
the Family and Medical Leave Act; the Fair Labor Standards Act; the
Uniformed Services Employment and Reemployment Rights Act; the
Workers Adjustment and Retraining Notification Act; 42 U.S.C. § 1981; and
their state and local law statutory counterparts. Subject to the express
exclusions below for injunctive relief for certain specified Claims, this
Agreement also covers any and all claims that the Company may have
against me, including (but not limited to) claims for misappropriation of
Company property, disclosure of proprietary information or trade secrets,
interference with contract, trade libel, gross negligence, or any other claim
for alleged wrongful conduct or breach of the duty of loyalty. Also,
specifically included are all claims, disputes, and/or controversies relating to
the scope, validity, or enforceability of this Agreement.
(Doc. 25-1 at 3) (emphasis added).
While the agreement preserves the right of Diamond to bring claims for injunctive
relief and claims for equitable relief involving theft, the improper use or possession of trade
secrets, or for orders to restrain threats of and/or acts of violence in any court of competent
jurisdiction, the Included Claims and Excluded Claims provisions are clear that the
“[a]greement also covers any and all [included] claims that the Company may have against
me,” and that “any action for damages arising from such [excluded] [c]laims are subject to
mandatory binding arbitration under [the a]greement.” (Doc. 25-1 at 3.) Other than the
limited exclusion of certain claims for Diamond, the obligation to arbitrate federal claims
applies to both parties subject to the agreement. (Id. (“Subject to the express exclusions
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below for injunctive relief for certain specified [c]laims, this [a]greement also covers any
and all claims that the Company may have against me”); cf. Carroll v. Lee, 712 P.2d 923,
926 (Ariz. 1986) (“Mutuality of obligation is a requirement for a valid contract; however,
mutuality is absent when only one of the contracting parties is bound to perform.”).
In addition to the mutuality of obligations in the agreement, there is not an “Arizona
case that squarely addresses whether there must be a mutual obligation to arbitrate in the
context of claim of substantive unconscionability in an employer-employee relationship.”
Coup, 823 F. Supp. 2d at 952. Plaintiff fails to demonstrate otherwise and the cases he
uses to support his substantive unconscionability argument, which are based on California
law, are not dispositive of the issue at hand. See Chavarria, 733 F.3d at 923 (upholding
substantive unconscionability finding where arbitrator selection clause always produced
the defendant’s proposed arbitrator, precluded institutional arbitration administrators such
as the AAA, and required the arbitrator to apportion its fees between the parties regardless
of the merits of the plaintiff’s claim); Ingle v. Cir. City Stores, Inc., 328 F.3d 1165, 1173
(9th Cir. 2003) (ruling arbitration agreement substantively unconscionable where
agreement applied only to employment-related legal disputes of putative employees and
not to claims employer could bring against employees). Plaintiff also conspicuously fails
to mention that both federal and Arizona law favor arbitration in situations such as this.
See, e.g., Foy v. Thorp, 920 P.2d 31, 33 (Ariz. Ct. App. 1996) (internal citation omitted)
(“Arizona law favors arbitration, both statutorily and by the courts as a matter of public
policy.”); Samson v. NAMA Holdings, LLC, 637 F.3d 915, 923 (9th Cir. 2011) (internal
quotation marks and citation omitted) (“In enacting the FAA, Congress declared a national
policy favoring arbitration that was intended to reverse centuries of judicial hostility to
arbitration agreements.”). As such, Plaintiff’s argument that the arbitration agreement is
substantively unconscionable should be denied.
IV. Leadership Instability and Insider Knowledge Irrelevant to Enforceability
Plaintiff next argues that he should not be compelled to arbitrate his claims because
Defendant’s leadership structure is unraveling and this instability underscores why public
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litigation is necessary to resolve his claims. (Doc. 26 at 5.) Plaintiff contends that allowing
Defendant to proceed to arbitration would frustrate the truth-seeking process and shield
systemic problems from public view. (Id.) Once again, the Court disagrees.
“Absent a valid contract defense, the FAA leaves no place for the exercise of
discretion by a district court, but instead mandates that district courts shall direct the parties
to proceed to arbitration on issues as to which an arbitration agreement has been signed.”
Smith v. Autonation, Inc., No. CV-10-987, 2011 WL 380517, at *1 (D. Ariz. Feb. 2, 2011)
(internal quotation marks and citation omitted). While arbitration agreements can be
invalidated by “generally applicable contract defenses, such as fraud, duress, or
unconscionability,” arbitration agreements cannot be invalidated by “defenses that apply
only to arbitration or that derive their meaning from the fact that an agreement to arbitrate
is at issue.” Concepcion, 563 U.S. at 339.
Here, Plaintiff raises inapplicable public policy theories to support the proposition
that he should not be required to arbitrate his claims because the company attempting to
enforce the arbitration agreement is undergoing alleged instability and senior-level
departures. (Doc. 26 at 5.) Plaintiff contends that such instability underscores the need for
“public litigation.” (Id.) Plaintiff’s public-policy theories, however, fail to constitute
“generally applicable contract defenses;” and even if they did, Plaintiff fails to demonstrate
how his public policy defense theories overcome state and federal public policies favoring
arbitration. See Rogers v. Royal Caribbean Cruise Line, 547 F.3d 1148, 1159 (9th Cir.
2008) (ruling that plaintiffs failed to show public policy favoring seafarers was sufficient
to overcome public policy favoring arbitration). Plaintiff’s argument that public policy
dictates that his claims must be litigated in public should therefore be denied.
V. Nonsignatory Defendant Cannot Enforce Arbitration Agreement
Plaintiff next argues that he should not be compelled to arbitrate his claims because
the boilerplate successor language in the arbitration agreement does not automatically
allow Defendant as a nonsignatory to enforce arbitration of Plaintiff’s claims. (Doc. 26 at
5.) Plaintiff asserts that Defendant fails to present evidence that he consented to arbitrate
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his claims with it or that Defendant assumed its predecessor’s obligations through a signed
acknowledgment or reissuance of the arbitration agreement. (Id.) Plaintiff adds that even
if the agreement is interpreted to encompass Defendant, Defendant cannot overcome the
contract defects Plaintiff outlines in his opposition brief. (Id. at 6.) The Court agrees that
Defendant fails to show that it can enforce the arbitration agreement between Plaintiff and
Diamond and recommends that Defendant’s motion to compel be denied.
As it concerns the assignment of rights to successors and assigns, the agreement
provides:
ARBITRATION OF DISPUTES
I agree and acknowledge that, unless I opt out of the Agreement within thirty
(30) days using the procedure specified in the section below entitled “Right
to Opt Out of the Agreement,” the Company and I will utilize binding
arbitration to resolve all disputes that have arisen or that may arise out of the
employment context unless expressly excluded below. Both the Company
and I agree that any claim, dispute, and/or controversy that either I may have
against the Company, its parents, subsidiaries, affiliates, predecessors,
successors and assigns, and each of their respective owners, directors,
officers, managers, employees (other team members), agents, home owners
or home owners associations (all of whom may enforce this Agreement as
either a direct or third-party beneficiary), or the Company has or may have
against me, arising from, related to, or having any relationship or connection
whatsoever with my seeking employment, employment, termination of
employment, or other association with the Company (collectively “Claims”),
shall be submitted to and determined exclusively by binding arbitration under
the Federal Arbitration Act.
(Doc. 25-1 at 2) (emphasis added).
Generally, as a matter of federal law, “any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration.” Moses H. Cone Mem'l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25 (1983). However, the question Plaintiff raises here is not
whether a particular issue is arbitrable, but whether Plaintiff is bound to arbitrate his claims
against Defendant because of an arbitration agreement he signed with Diamond. Under
these circumstances, the liberal federal policy regarding the scope of arbitrable issues does
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not apply. See Comer v. Micor, Inc., 436 F.3d 1098, 1104 n.11 (9th Cir. 2006) (noting that
the liberal federal policy favoring arbitration agreements is inapplicable when determining
“whether a particular party” is bound by the agreement). Instead, traditional principles of
state law determine whether a contract may be enforced by nonparties to the agreement.
Rajagopalan v. NoteWorld, LLC, 718 F.3d 844, 847 (9th Cir. 2013); see also ROI Props.
Inc. v. Burford Cap. Ltd., No. CV-18-03300, 2019 WL 1359254, at *5 (D. Ariz. Jan. 14,
2019) (citing Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 631 (2009)) (“Enforcement
of an arbitration agreement by a nonsignatory under the FAA is governed by the law of the
forum state.”). Under Arizona law, Defendant, as a nonsignatory, bears the burden of
demonstrating that it is a party to the arbitration agreement. Kaatz v. Rainguard Brands,
LLC, No. 1 CA-CV 24-0286, 2025 WL 213849, at *2 (Ariz. Ct. App. Jan. 16, 2025) (ruling
that the party moving to compel arbitration bears the burden of proving that a valid
agreement to arbitrate between the parties exists). The question of whether a nonsignatory
can enforce an arbitration agreement is properly resolved by the court as a matter of law.
Duenas v. Life Care Ctrs. of Am., Inc., 336 P.3d 763, 771 (Ariz. Ct. App. 2014).
In Arizona, “[a]bsent some exception to the usual rule, a non-signatory may not
enforce contract provisions.” Henderson v. Moskowitz, 579 P.3d 869, 871 (Ariz. 2025).
However, state courts have recognized limited instances in which an arbitration agreement
may be enforced against a nonsignatory under contract and agency law theories such as
“incorporation by reference, assumption, agency, veil-piercing or alter ego, equitable
estoppel, and third-party beneficiary.” Duenas, 336 P.3d at 772. While Arizona courts
have recognized limited instances in which an arbitration agreement could be enforced
against a nonsignatory, this Court cannot locate any Arizona case where a nonsignatory to
an employment-related arbitration agreement has been permitted to enforce the terms of
the agreement against the plaintiff signatory where the plaintiff signatory’s claims fall
outside the scope of the arbitration agreement. Defendant fails to demonstrate otherwise.
(See Doc. 25 at 10-12.)
To the contrary, Defendant invokes the “strong federal policy favoring arbitration,”
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noncontrolling case law, and inapposite contract principles to argue that it can enforce the
agreement against Plaintiff. (See id.) The Court addresses Defendant’s arguments in turn.
A. Defendant Did Not Assume Predecessor’s Contract Rights
Defendant’s first theory of contract enforcement appears to rest upon an assumption
of rights. (See Doc. 25 at 11.) To support its theory, Defendant asserts that the arbitration
agreement expressly intends that Diamond’s successors and assigns be bound by its terms;
it acquired Diamond in 2021; and it assumed Diamond’s rights and obligations under the
agreement when it acquired Diamond. (Id.) Defendant then concludes that as Diamond’s
successor, it may enforce the agreement against Plaintiff. (Id.) This argument fails.
To begin, to the extent Defendant fails to support its theory of contract enforcement
with relevant legal authority, its argument is waived and should be denied. See Surfvivor
Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005) (finding unfair practices
claim waived where plaintiff-appellant failed to support claim with citation to governing
law). As it concerns Defendant’s unsupported assumption theory of contract enforcement,
this Court cannot located, and Defendant fails to provide, any controlling Arizona case that
instructs that a nonsignatory can enforce an arbitration agreement against a signatory based
on the theory that the nonsignatory assumed its predecessor’s contractual obligations by
acquiring it. Cf. Cardona v. Exclusive Auto Grp. LLC, No. CV-25-01843, 2025 WL
3551243, at *2 (D. Ariz. Dec. 11, 2025) (cleaned up) (“Arizona law [only] allows a non-
signatory to compel arbitration with a signatory to an arbitration agreement if the claims at
issue are intimately founded in and intertwined with the underlying contract obligations.”).
As such, Defendant’s argument that Plaintiff must arbitrate his claims because it impliedly
assumed its predecessor’s employment-related contract obligations should be denied.
B. Defendant Not Third-Party Beneficiary to Contract
Defendant’s second theory of contract enforcement is that it can enforce the
arbitration agreement against Plaintiff under third-party beneficiary principles. (See Doc.
25 at 11.) However, “[t]he Arizona rule is that in order for an [entity] to recover as a third-
party beneficiary of a contract, an intention to benefit that [entity] must be indicated in the
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contract itself.” Norton v. First Fed. Sav., 624 P.2d 854, 856 (Ariz. 1981). “The
contemplated benefit must be both intentional and direct, and it must definitely appear that
the parties intend to recognize the third party as the primary party in interest.” Id. (cleaned
up). If the third party is merely an incidental beneficiary then it cannot recover under the
contract. Basurto v. Utah Const. & Min. Co., 485 P.2d 859, 863 (Ariz. 1971). As Plaintiff
suggests, the boilerplate successor language in the arbitration agreement is insufficient to
demonstrate that Defendant was the intentional and direct beneficiary to the agreement.
See Henderson, 579 P.3d at 873 (“[U]nder Arizona law, third-party beneficiaries must be
explicitly named in the contract to enforce the contract’s provisions.”). Defendant also
fails to highlight contract language that persuasively indicates that Plaintiff and Diamond
intended Defendant to be the primary party in interest to the contract. (See Doc. 25 at 11.)
Because Defendant fails to show that it is a third-party beneficiary to the arbitration
agreement, it cannot enforce the agreement against Plaintiff. See In re Mortgages Ltd., 427
B.R. 780, 785 (D. Ariz. 2010) (affirming conclusion that because the defendants were not
third-party beneficiaries of the assignments, they could not enforce the obligations of the
underlying contract). Defendant’s argument that it can compel Plaintiff to arbitrate his
claims under a third-party beneficiary theory should therefore be denied.
C. Defendant Not Successor In Interest to Contract
Defendant’s third theory of contract enforcement is that it can enforce the arbitration
agreement against Plaintiff as a “successor in interest” because “[w]here courts require
signatories to arbitrate claims with non-signatories, they do so because of the close
relationship between the entities involved.” (Doc. 25 at 11 (internal quotation marks and
citation omitted).) What Defendant fails to mention, however, is that Arizona has explicitly
rejected this theory of non-signatory contract enforcement. See Henderson, 579 P.3d at
873 (“[W]e decline to add another exception by which non-signatories may enforce
contract provisions by adopting the closely related party doctrine.”). Defendant’s argument
that it can compel Plaintiff to arbitrate his claims as a successor in interest under the closely
related party doctrine should therefore be denied as well as its motion to compel arbitration.
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VI. Plaintiff Fails to Demonstrate Waiver
Plaintiff’s final argument in opposition to Defendant’s motion to compel arbitration
is that Defendant waived its right to arbitration through its litigation conduct. (Doc. 26 at
6.) Plaintiff asserts that Defendant waived its arbitration rights because it requested two
extensions of time to respond to his complaint. (Id.) Plaintiff contends such dilatory tactics
prejudiced him because he incurred delays, additional expense, and personal injury trying
to preserve his claims in this forum. (Id.) The Court disagrees.
“Waiver of a contractual right to arbitration is not favored,” Fisher v. A.G. Becker
Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986), and a party seeking to demonstrate waiver
must show: “(1) knowledge of an existing right to compel arbitration; and (2) intentional
acts inconsistent with that existing right,” Hill v. Xerox Bus. Servs., LLC, 59 F.4th 457,
468 (9th Cir. 2023). As it concerns the second element of the waiver rule, “[t]here is no
concrete test to determine whether a party has engaged in acts that are inconsistent with its
right to arbitrate; rather, [courts] consider the totality of the parties’ actions.” Newirth v.
Aegis Senior Cmtys., LLC, 931 F.3d 935, 941 (9th Cir. 2019) (cleaned up).
Plaintiff argues that Defendant has acted inconsistently with its contractual right to
arbitrate because it filed two requests for extensions of time to respond to his complaint
rather than invoking the arbitration agreement and that its dilatory tactics have caused him
prejudice. (Doc. 26 at 6.) As Plaintiff acknowledges, however, prejudice to the person
opposing arbitration is no longer an element of the arbitration waiver standard, see Morgan
v. Sundance, Inc., 596 U.S. 411, 416 (2022), and an opponent’s requests for additional time
to respond to a complaint, which amounted to a cumulative 17-day delay of its motion to
compel arbitration, is insufficient to show that Defendant intentionally acted inconsistent
with its right to compel arbitration. See Fox v. Experian Info. Sols., Inc., 718 F. Supp. 3d
1231, 1239 (2024) (finding 11-month delay in moving to compel arbitration insufficient to
establish waiver where motion was “first substantive motion filed in this action”). As such,
Plaintiff’s argument that Defendant has waived its arbitration rights because of its dilatory
litigation activity should be denied.
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RECOMMENDATION
The Magistrate Judge recommends that the District Judge, after her independent
review, deny Defendant’s motion to compel arbitration, (Doc. 25), and instruct Defendant
to answer or otherwise respond to Plaintiff’s first amended complaint within fourteen (14)
days of issuance of the District Judge’s Order. Due to the delay in addressing the motion
to compel arbitration, any party may serve and file written objections within seven (7) days
of being served with a copy of this Report and Recommendation. A party may respond to
another party’s objections within seven (7) days after being served with a copy of the
objections. No replies shall be filed unless leave is granted by the District Judge. If
objections are filed, the parties shall use the following case number: CV-25-203-RM.
Failure to file timely objections to any factual or legal determinations of the Magistrate
Judge may result in waiver of the right of de novo review.
Dated this 26th day of February, 2026.
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