Red Granite Medial LLC vs. Paysafe Direct, LLC

employee to consent to entry of an immediate injunction. (Ibid.) The confidentiality agreement here requires the employee to agree that Defendant will suffer irreparable harm, which is one of the factors identified in Alberto. But the other factors—waiver of the bond requirement and employee consent to an immediate injunction—are missing. On the whole, the Court finds the confidentiality agreement sufficiently mutual.

C. Severance

The arbitration agreement contains a severability clause. Defendant urges the Court to simply sever any unconscionable terms. The Court declines to do so. While a severability analysis is not a mere counting exercise, there are numerous unconscionable provisions of the arbitration agreement (when read together with the confidentiality agreement) such that the agreement is permeated with unconscionability. Severing the offending terms and enforcing the arbitration agreement would “create an incentive for an employer to draft a one-sided arbitration agreement in the hope employees would not challenge the unlawful provisions, but if they do, the court would simply modify the agreement to include the bilateral terms the employer should have included in the first place.” (Ramirez v. Charter Communications, Inc. (2025) 108 Cal.App.5th 1297, 1303- 1304.)

Rather than sever the offending terms, the Court declines to enforce the arbitration agreement.

17 Red Granite Medial Defendant's Motion to Compel Arbitration LLC vs. Paysafe Direct, LLC Case Management Conference

Defendants Paysafe Direct, LLC, PNC Bank, N.A., and Citizens 2026-01542882 Bank, N.A. move to compel arbitration of the claims of plaintiffs Red Granite Media, LLC and Tumbleweed Fortress, LLC. For the reasons set forth below, the motion is GRANTED. Plaintiffs are each ordered to individually arbitrate their claims. Their class claims are dismissed without prejudice. This action is stayed pending completion of the individual arbitrations. An arbitration review conference shall take place on March 30, 2027 at 8:30 a.m. in Department CX-101.

Defendants’ unopposed request for judicial notice of the exhibits in Plaintiffs’ notice of errata is GRANTED.

GROUNDS FOR RULING

I.

Background

Plaintiffs are merchants who accepted credit card payments. As alleged in the complaint, Paysafe Direct was the payment processor for both plaintiffs, PNC was the acquiring bank for Red Granite Media, and Citizens was the acquiring bank for Tumbleweed Fortress. Each plaintiff entered into a largely identical agreement with Paysafe Direct and their acquiring bank. The agreement between Red Granite Media, PNC, and Paysafe Direct is Exhibit A to plaintiffs’ notice of errata. The agreement between Tumbleweed Fortress, Citizens, and Paysafe Direct is Exhibit B. Each agreement identifies the plaintiff as “MERCHANT” and the acquiring bank and Paysafe Direct as “SERVICE PROVIDERS.” Section 10.12 of each agreement is an arbitration clause with a class action waiver.

Plaintiffs, on behalf of a putative class of similarly situated merchants, allege that defendants overcharged certain fees related to customer payment disputes. They bring contract, tort, and UCL claims. Defendants move to compel each plaintiff to arbitrate its claims individually, and to dismiss the class claims. There appears to be no dispute that all claims at issue in this matter are covered by the language of § 10.12. Instead, plaintiffs argue the arbitration clause is unenforceable.

II. Conflict Between §§ 10.10 and 10.12

First, plaintiffs contend the arbitration clause at § 10.12 conflicts with the forum selection clause at § 10.10. As a result, they contend, the arbitration clause must be construed in such a way that it is inapplicable (and the conflict disappears), or it must be struck.

Section 10.10 provides:

10.10 Binding Effect: Governing Law; jurisdiction and Venue. This Agreement shall be construed and governed by the laws of the State of California and the Federal Arbitration Act. Any action or proceeding on this Agreement by or against SERVICE PROVIDERS shall be initiated and maintained under the jurisdiction of the State of California with venue in the courts of Orange County, in which case this Agreement shall be construed and governed by the laws of the State of California. If any provision of this Agreement shall be held to be invalid, illegal, or unenforceable, the remaining provisions shall remain in effect.

In the event Section 10.12 is deemed void or unenforceable, all claims or controversies between the parties arising out or relating to this Agreement or the breach thereof, shall be brought in a federal or state court located in California, and the parties hereby expressly consent to the exclusive jurisdiction of such courts for such purpose.

Section 10.12 provides:

10.12 Dispute Resolution; Arbitration and Class Action Waiver. Any claims or controversies between the parties arising out of or relating to this Agreement or the breach thereof, including disputes over the enforceability, validity or scope of this Section 10.12, shall be resolved through arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, as then may be in effect (which rules are available at www.adr.org), except that (i) temporary equitable judicial relief may be sought in a federal or state court located in California, until an arbitrator can be empaneled and has determined whether that relief should be continued, modified or ended, and the parties hereby expressly consent to the exclusive jurisdiction of such courts for such purpose, and (ii) judicial relief may be sought in such court or any other court of competent jurisdiction to compel arbitration or to enforce an award issued pursuant to this section.

THE PARTIES ALSO AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN ITS INDIVIDUAL CAPACITY AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both Parties agree otherwise, the arbitrator may not consolidate more than one person's claims and may not otherwise preside over any form of a representative or class proceeding. In the event the foregoing prohibition on representative or class proceedings is invalidated or otherwise held unenforceable, the Parties agree that the remainder of this Section 10.12 similarly shall be deemed void and unenforceable.

Plaintiffs argue the §10.10 requirement that “[a]ny action or proceeding . . . shall be initiated and maintained under the jurisdiction of the State of California with venue in the courts of Orange County” conflicts with the §10.12 requirement that “[a]ny claims or controversies . . . shall be resolved through arbitration.”

They urge the Court to either (1) construe “claims or controversies” in a manner that avoids conflict or (2) strike the arbitration clause as inconsistent with the forum selection clause.

The Court disagrees that any conflict exists in the first place. Although § 10.12 requires arbitration of all claims or controversies, it allows the parties to seek temporary, interim relief in court and to ask a court to compel arbitration or confirm an arbitration award. In turn, § 10.10 requires any such judicial relief to be sought in Orange County courts. Moreover, § 10.10 provides that in the event § 10.12 is unenforceable, claims or controversies must be heard in California courts. As defendants point out in reply, this means § 10.10’s forum selection clause applies only when § 10.12’s arbitration clause fails (setting aside actions for interim relief, etc.).

Even if there were a conflict, plaintiffs’ proposed construction of “claim or controversy” does not ring true. At pages 5-7 of their opposition, they suggest “action or proceeding” be construed as a justiciable dispute, and “claim or controversy” be construed as a nonjusticiable dispute. This would have the effect of justiciable disputes being heard in court, while nonjusticiable disputes are heard in arbitration. But if the dispute is nonjusticiable, what is there for an arbitrator to decide? The arbitrator would apply the same California law a court would, and he or she would dismiss the arbitration just as a court would dismiss a nonjusticiable case. As defendants point out in their reply, plaintiffs’ construction of “claim or controversy” renders the arbitration clause a nullity.

As there is no conflict between §§ 10.10 and 10.12, plaintiffs cannot avoid arbitration on this basis.

III. Unconscionability

Plaintiffs argue the arbitration clause is procedurally and substantively unconscionable. Defendants correctly point out that the arbitration clause expressly delegates questions of enforceability to the arbitrator: “Any claims or controversies between the parties arising out of or relating to this Agreement or the breach thereof, including disputes over the enforceability, validity or scope of this Section 10.12, shall be resolved through arbitration . . . .” (Emphasis added.) This language is “clear and unmistakable.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 242.) Plaintiffs’ argument to the contrary relies on the perceived conflict between §§ 10.10 and 10.12. As discussed above, there is no such conflict.

A delegation may also be challenged under state-law contract defenses, such as unconscionability. (See ibid.) But when the FAA applies—as it does here, in a case involving California merchants, a Delaware payment processor, and banks headquartered in Pennsylvania and Rhode Island—the party resisting delegation must challenge the delegation itself, not the arbitration agreement more generally. (See Rent-A-Center West, Inc. v. Jackson (2010) 561 U.S. 63, 72 (“Accordingly, unless Jackson challenged the delegation provision specifically, we must treat it as valid under § 2 [of the FAA], and must enforce it under §§ 3 and 4, leaving any challenge to the validity of the Agreement as a whole for the arbitrator.”).)

Here, plaintiffs’ unconscionability arguments go to the arbitration clause as a whole, not the delegation provision specifically. As a result, these arguments are for the arbitrator, not the Court, to decide.

IV.

Conclusion

Defendants’ motion to compel arbitration is granted. Each plaintiff is ordered to separately arbitrate its claims on an individual basis. Plaintiffs’ class claims are dismissed without prejudice. This action is stayed pending completion of the arbitrations.