Bonner et al v. Michigan Logistics Incorporated et al

Filing 45

ORDER granting in part and denying in part 28 the Motion to Compel Individual Arbitration and Stay Proceedings of Defendants Arizona Logistics LLC, Michigan Logistics Incorporated, and Parts Authority Arizona LLC. The Clerk shall continue the st ay of this action until further Order of the Court. The parties are directed to file a status report on or before July 19, 2017 and every ninety (90) days thereafter until the stay has been lifted. See Order for details. Signed by Judge G Murray Snow on 04/20/2017.(KAS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Xavier Bonner, et al.,

No. CV-16-03662-PHX-GMS

Plaintiffs,

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ORDER

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v.

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Michigan Logistics Incorporated, et al.,

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Defendants.

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Pending before the Court is the Motion to Compel Individual Arbitration and Stay

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Proceedings of Defendants Arizona Logistics LLC, Michigan Logistics Incorporated, and

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Parts Authority Arizona LLC, (Doc. 28).1 For the following reasons, the Court grants the

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motion in part and denies the motion in part.
BACKGROUND

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Defendants Arizona Logistics LLC (“Arizona Logistics”) and Michigan Logistics

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Incorporated (“Michigan Logistics”) both do business under the name of Diligent

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Delivery Systems (“Diligent”). (Doc. 1 at 6–7, Doc. 28-1 at 1.) They are affiliated

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companies and the same person, Larry Browne, is the CEO of both. (Doc. 28-1 at 1.)

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Mr. Browne, in a declaration attached to the pending Motion, characterized Arizona

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Plaintiffs have requested oral argument. That request is denied because the parties have
had an adequate opportunity to discuss the law, and oral argument will not aid the Court’s
decision. See Lake at Las Vegas Inv’rs Grp., Inc. v. Pac. Malibu Dev. Corp., 933 F.2d
724, 729 (9th Cir. 1991).

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Logistics’ business model as follows:

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Arizona Logistics is a delivery logistics company. It does not perform any
deliveries, employ any delivery drivers, or own any delivery vehicles.
Instead, it locates customers who need an outside delivery service, and then
offers to connect those customers with independent delivery providers
(“owner-operators”) willing to provide such a service. Arizona Logistics,
therefore, acts as a broker by offering a customer’s delivery opportunity to
an owner-operator and, if the owner-operator accepts, connecting the
customer and the owner-operator.

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(Doc. 28-1 at 1–2.)

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The Plaintiffs in this action are individuals who contracted with Arizona Logistics

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to serve as delivery drivers. Each signed an Owner Operator Agreement, (“Agreement”),

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which formed the basis for the contractual relationship between Arizona Logistics and

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each driver.

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customer, Parts Authority Arizona LLC (“Parts Authority”), which runs a chain of

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automotive parts shops in Arizona. Each Owner Operator Agreement,2 consistent with

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Mr. Browne’s description of Arizona Logistics’ business model, emphasized that the

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delivery drivers were independent “Owner Operators” and not employees of Arizona

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Logistics. (Doc. 28-2 at 1, Doc. 28-7 at 1.) Plaintiffs allege, however, that Arizona

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Logistics, Michigan Logistics and Parts Authority “formed a joint employment

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relationship with respect to Plaintiffs,” and that they “constitute a unified operation,” “a

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common enterprise,” have “common management, “centralized control of labor

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relations,” “common ownership” and constitute “a single employer” and an “integrated

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enterprise.” (Doc 1 at 9-10).

Each Plaintiff performed deliveries on behalf of Arizona Logistics’

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Plaintiffs allege that Defendants “knowingly misclassified” them as independent

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contractors, rather than employees. (Doc. 1 at 2–3.) By doing this, Plaintiffs allege,

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Defendants were able to avoid paying statutorily mandated minimum and overtime

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wages, shift business expenses to Plaintiffs, avoid payroll taxes and benefits, and obtain

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The Agreements signed by Plaintiffs Bonner, Ross, Williams and Harris were identical
in all relevant aspects, while the Agreement signed by Plaintiff Six differed in certain
relevant aspects. To avoid redundancy the Court will cite only to Plaintiff Bonner’s
Agreement, (Doc. 28-2), and, when necessary, Plaintiff Six’s Agreement, (Doc. 28-7).
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an unfair competitive advantage in the marketplace. (Id.) Plaintiffs bring individual and

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class claims under the Fair Labor Standards Act (“FLSA”) and Arizona’s Wage Act, and

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on a theory of restitution/unjust enrichment.3 (Id. at 12–26.)

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Defendants bring this Motion to Compel based on Alternative Dispute Resolution

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(“ADR”) provisions included in the Owner Operator Agreements. The Agreements

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signed by Plaintiffs Bonner, Ross, Williams and Harris4 included a four-page provision

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entitled “Dispute Resolution,” which provided in part that:

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(a) Arbitration of Claims: In the event of a dispute between the parties,
the parties agree to resolve the dispute as described in this paragraph
(hereafter “the Arbitration Provision”). This Arbitration Provision is
governed by the Federal Arbitration Act, 9 U.S.C. § 1, et seq., and applies
to any dispute brought by either Operator or DILIGENT arising out of or
related to this Agreement or Operator’s relationship with DILIGENT,
including termination of the relationship. . . . Except as it otherwise
provides, this Arbitration Provision is intended to apply to the resolution of
disputes that otherwise would be resolved in a court of law, and therefore
this Arbitration Provision requires all such disputes to be resolved only by
an arbitrator through final and binding arbitration and not by way of court
or jury trial.

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(i) Claims Covered by Arbitration Provision: Unless carved out
below, claims involving the following disputes shall be subject to
arbitration under this Arbitration Provision regardless of whether brought
by Operator, DILIGENT or any agent acting on behalf of either: (1)
disputes arising out of or related to this Agreement; (2) disputes arising out
of or related to Operator’s relationship with DILIGENT, including
termination of the relationship; and (3) disputes arising out of or relating to
the interpretation or application of this Arbitration Provision, but not as to
the enforceability, revocability or validity of the Arbitration Provision or
any portion of the Arbitration Provision. This Arbitration Provision also
applies, without limitation, to disputes regarding any city, county, state or
federal wage-hour law, trade secrets, unfair competition, compensation,
meal or rest periods, expense reimbursement, uniform maintenance,
training, termination, discrimination or harassment and claims arising under
the . . . Fair Labor Standards Act, . . . and state statutes, if any, addressing
the same or similar subject matters, and all other similar federal and state
statutory and common law claims (excluding workers’ compensation, state

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The Secretary of Labor subsequently brought suit against Arizona Logistics and Parts
Authority for FLSA violations on behalf of over one thousand delivery drivers, including
Plaintiffs Bonner, Ross, Williams and Harris but not including Plaintiff Six. (Doc. 28-8
at 10–36.)
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Several “consent to sue” letters have been filed on behalf of other putative Plaintiffs,
and the parties’ pleadings refer to Marcus Thompson, one of these putative Plaintiffs, as a
Plaintiff. Until Thompson is joined he is not a party to this lawsuit; the Court does note
that to the extent his Owner Operator Agreement is identical to those of Bonner, Ross,
Williams and Harris, the same analysis applies.
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disability insurance and unemployment insurance claims).

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[. . .]

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(d) Class Action Waiver: There shall be no right or authority for any
dispute to be brought, heard or arbitrated as a class, collective or
representative action (“Class Action Waiver”). Notwithstanding any
other clause contained in this Arbitration Provision, the preceding sentence
shall not be severable from this Arbitration Provision in any case in which
the dispute to be arbitrated is brought as a class, collective or representative
action. . . .

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(Doc. 28-2 at 7–9.) The ADR provision in Plaintiff Six’s Agreement, by contrast, says
only the following:

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DILIGENT and Operator both agree to resolve any disputes between
DILIGENT and Operator directly or with an agreed form of Alternative
Dispute Resolution. Both DILIGENT and Operator agree that neither will
engage or participate in a collective or class suit against the other.

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(Doc. 28-7 at 6.)

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Defendants ask the Court to compel arbitration and stay further proceedings based
on these contractual provisions.

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DISCUSSION
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Legal Standard
Under the Federal Arbitration Act (“FAA”), “[a] written provision in . . . a

contract evidencing a transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or transaction, or the refusal to perform
the whole or any part thereof, . . . shall be valid, irrevocable, and enforceable . . . .” 9
U.S.C. § 2; see, e.g., Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 113–19 (2001)
(holding that FAA applies to employment contracts except those of transportation
workers) (citing 9 U.S.C. §§ 1–2); Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d
1126, 1130 (9th Cir. 2000); Tracer Research Corp. v. Nat’l Envtl. Servs. Co., 42 F.3d
1292, 1294 (9th Cir. 1994), cert. dismissed, 515 U.S. 1187 (1995).

“Although [a]

contract provides that [state] law will govern the contract’s construction, the scope of the
arbitration clause is governed by federal law.” Tracer Research Corp, 42 F.3d at 1294
(citing Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1463 (9th Cir.
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1983)); see Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002) (holding

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that FAA “not only placed arbitration agreements on equal footing with other contracts,

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but established . . . a federal common law of arbitrability which preempts state law”);

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Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999) (“Federal substantive law

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governs the question of arbitrability.”); Chiron Corp., 207 F.3d at 1130–31 (holding that

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“district court correctly found that the federal law of arbitrability under the FAA governs

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the allocation of authority between courts and arbitrators” despite arbitration agreement’s

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choice-of-law provision).5

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“Notwithstanding the federal policy favoring it, ‘arbitration is a matter of contract

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and a party cannot be required to submit to arbitration any dispute which he has not

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agreed so to submit.’”

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Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)); see

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French v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 784 F.2d 902, 908 (9th Cir.

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1986). Where the arbitrability of a dispute is in question, a court must look to the terms

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of the contract. See Chiron Corp., 207 F.3d at 1130. “‘Any doubts concerning the scope

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of arbitrable issues should be resolved in favor of arbitration.’” Simula, 175 F.3d at 719

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(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983));

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see French, 784 F.2d at 908.

Tracer Research Corp., 42 F.3d at 1294 (quoting United

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However, a court “cannot expand the parties’ agreement to arbitrate in order to

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achieve greater efficiency [and] the [FAA] ‘requires piecemeal resolution when necessary

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to give effect to an arbitration agreement.’” Tracer Research Corp., 42 F.3d at 1294

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(quoting Moses H. Cone Mem’l Hosp., 460 U.S. at 24–25) (emphasis in original). “[T]he

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judicial inquiry . . . must be strictly confined to the question whether the reluctant party

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did agree to arbitrate[.]” United Steelworkers, 363 U.S. at 582. “The court’s role under

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the [FAA] is therefore limited to determining (1) whether a valid agreement to arbitrate

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However, though “‘courts may not invalidate arbitration agreements under state laws
applicable only to arbitration provisions,’ general contract defenses such as fraud, duress,
or unconscionability, grounded in state contract law, may operate to invalidate arbitration
agreements.” Circuit City Stores, 279 F.3d at 892 (quoting Doctor’s Assocs., Inc. v.
Casarotto, 517 U.S. 681, 687 (1996)) (emphasis in original).
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exists and, if it does, (2) whether the agreement encompasses the dispute at issue.”

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Chiron Corp., 207 F.3d at 1130 (citing Simula, 175 F.3d at 719–20; Republic of

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Nicaragua v. Standard Fruit Co., 937 F.2d 469, 477–78 (9th Cir. 1991)); see Simula, 175

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F.3d at 720 (stating that “the district court can determine only whether a written

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arbitration agreement exists, and if it does, enforce it in accordance with its terms”)

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(citing Howard Elec. & Mech. v. Briscoe Co., 754 F.2d 847, 849 (9th Cir. 1985)).

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II.

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Analysis
A.

Plaintiffs Bonner, Ross, Williams and Harris agreed to arbitration,
while Plaintiff Six only agreed to an unspecified form of ADR.

A court deciding a motion to compel arbitration must first decide whether and to
what extent the parties agreed to arbitrate.

See Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).
With respect to Plaintiffs Bonner, Ross, Williams and Harris, the Agreements
clearly contemplate arbitration, including arbitration of all claims at issue in this case.
Plaintiffs do not dispute the content of the agreed-to contract, instead raising numerous
reasons why the agreed-to arbitration provision is inapplicable or unenforceable. Those
arguments will be considered in subsequent sections. See Mitsubishi Motors Corp., 473
U.S. at 628 (noting that only upon finding that an agreement to arbitrate is applicable
should a court consider “whether legal constraints external to the parties’ agreement
foreclose[] the arbitration of . . . claims”).
Plaintiff Six’s case is more complicated. There is a question of whether the ADR
provision of Six’s Agreement survives the termination of the Agreement, and a related
factual question of whether the Agreement has been terminated. But this factual dispute
is actually immaterial, because the ADR provision of Six’s Agreement survives any
termination of the contract.
The Supreme Court has noted that contractual “provisions relating to remedies and
dispute resolution—for example, an arbitration provision—may in some cases survive in
order to enforce duties arising under the contract.” Litton Fin. Printing Div., a Div. of
Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190, 208 (1991) (citing Nolde Bros., Inc. v. Local
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No. 358, Bakery & Confectionery Workers Union, 430 U.S. 243 (1977)). Litton instructs

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that:

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A postexpiration grievance can be said to arise under the contract [and
therefore be subject to the contract’s dispute resolution provisions] only
where it involves facts and occurrences that arose before expiration, where
an action taken after expiration infringes a right that accrued or vested
under the agreement, or where, under normal principles of contract
interpretation, the disputed contractual right survives expiration of the
remainder of the agreement.

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Id. at 205–06; see also Operating Eng’rs Local Union No. 3 v. Newmont Mining Corp.,
476 F.3d 690, 692–93 (9th Cir. 2007). And, courts should “presume as a matter of
contract interpretation that the parties did not intend a pivotal dispute resolution provision
to terminate for all purposes upon the expiration of the agreement.” Litton, 501 U.S. at
208.

This presumption is overcome only when “negated expressly or by clear

implication.” Id. at 204 (quoting Nolde Bros., 430 U.S. at 255). While the contract in
Litton dealt with an arbitration provision specifically, the discussion in Litton applies to
other forms of alternative dispute resolution as well.

See id. at 208 (addressing

“structural provisions relating to remedies and dispute resolution” and “pivotal dispute
resolution provision[s]”).
Applying the Litton presumption, as well as the presumption in favor of arbitration
embodied by the FAA, the Sixth Circuit recently held that an arbitration provision
survived the termination of a contract, even when that arbitration provision was not
specifically mentioned in an otherwise specific survival provision.

See Huffman v.

Hilltop Cos., LLC, 747 F.3d 391, 397–98 (6th Cir. 2014). While the Ninth Circuit has
not yet addressed this question, at least one district court in this circuit has adopted
Huffman’s rationale. See OwnZones Media Network, Inc. v. Sys. In Motion, LLC, No.
C14-0994JLR, 2014 WL 4626302, at *7 (W.D. Wash. Sept. 15, 2014). The FAA’s
presumption in favor of arbitration does not apply where, as here, the parties did not
actually agree to arbitrate. See Tracer Research Corp., 42 F.3d at 1294. But the
presumption of contract interpretation identified in Litton—that parties are presumed not
to intend the termination of pivotal contractual dispute resolution provisions—does.
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The Court therefore applies the reasoning of Litton and Huffman to Six’s

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Agreement. That the ADR provision was not enumerated in the Agreement’s survival

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provision does not constitute the express or clearly implied negation of the presumption

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in favor of survivability. Moreover, the dispute here involves “facts and occurrences that

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arose before expiration.” Litton, 501 U.S. at 206. Whether or not Six’s Agreement has

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terminated, then, he remains bound by the ADR provision.

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However, while Six did agree to an ADR provision that survived any termination

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of the Agreement, that ADR provision did not specify the form of ADR to which the

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parties agreed. Arbitration is just “one of several mechanisms of ‘alternative dispute

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resolution,’ which is ‘[a] procedure for settling a dispute by means other than litigation,

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such as arbitration or mediation.’” Greenwood v. CompuCredit Corp., 615 F.3d 1204,

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1208 (9th Cir. 2010) (quoting Black’s Law Dictionary 86 (8th ed. 2004)), rev’d on other

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grounds, 565 U.S. 95 (2012). There is thus no basis for the Court to compel arbitration

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specifically. However, the ADR provision in Six’s Agreement evinces an agreement

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between the parties to resolve disagreements through ADR rather than litigation. That

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the exact ADR procedure was not specified is not a bar to enforcement under Arizona

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law. See Lancer Realty & Invs., Inc. v. Anderson, 146 Ariz. 76, 78, 703 P.2d 1225, 1227

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(Ct. App. 1985) (“A party to a contract cannot be permitted to escape the obligations of

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an agreement . . . just because a condition of that contract has been left to be ironed out

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later.”).

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Barring external reasons to be considered in subsequent paragraphs, the Court will

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honor the parties’ bargained-for agreement to resolve disputes through alternative dispute

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resolution rather than litigation.

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B.

The Federal Arbitration Act applies to the Agreements signed by
Plaintiffs Bonner, Ross, Williams and Harris.

The FAA provides in relevant part that:
A written provision in any . . . contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out of
such contract or transaction, or the refusal to perform the whole or any part
thereof, shall be valid, irrevocable, and enforceable, save upon such

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grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. § 2. The FAA does not apply to “contracts of employment of seamen, railroad
employees, or any other class of workers engaged in foreign or interstate commerce.” 9
U.S.C. § 1.
The Supreme Court has held that the applicability language of § 2 is to be
construed broadly, so as to “provide for the enforcement of arbitration agreements within
the full reach of the Commerce Clause.” Perry v. Thomas, 482 U.S. 483, 490 (1987).
There is no dispute that delivery drivers such as the plaintiffs here are “involved” in
commerce within the broad meaning of Congress’s power to regulate interstate
commerce. See, e.g., Gonzales v. Raich, 545 U.S. 1, 17 (2005) (“Our case law firmly
establishes Congress’s power to regulate purely local activities that are part of an
economic ‘class of activities’ that have a substantial effect on interstate commerce.”).
Thus the FAA presumptively applies to their contracts.
By contrast, the exception language of § 1 is construed more narrowly. See
Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 117–19 (2001). Here, “engaged in
foreign or interstate commerce” does not invoke the extent to which Congress may
regulate commerce, but rather more closely tracks the plain meaning of the phrase. In
essence, it is meant to exclude the contracts of workers who are literally engaged in the
process of moving goods across state and national boundaries—workers like seamen and
railroad employees. See Levin v. Caviar, Inc., 146 F. Supp. 1146, 1152–54 (N.D. Cal.
2015). Thus, the plaintiffs here were not engaged in foreign or interstate commerce, and
the Court need not address the dependent argument that the Agreements were contracts of
employment within the meaning of § 1. See id. at 1154–55.
As a result, to the extent that the relevant parties are bound, and no other
exceptions are called for, the Court must compel arbitration. See 9 U.S.C. § 4 (“[T]he
court shall make an order directing the parties to proceed to arbitration in accordance
with the terms of the agreement.”).

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C.

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invoke

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the Agreements, seek to enforce the ADR provisions of the Agreements. Under the
circumstances of this case, they may do so. Plaintiffs allege that Arizona Logistics,
Michigan Logistics and Parts Authority “formed a joint employment relationship with
respect to Plaintiffs,” and that they “constitute a unified operation,” “a common
enterprise,” have “common management, “centralized control of labor relations,”
“common ownership” and constitute “a single employer” and an “integrated enterprise.”
(Doc 1 at 9–10.)
The Arizona Court of Appeals6 has adopted the “alternative estoppel” theory of

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may

Michigan Logistics and Parts Authority, Defendants here but non-signatories to

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Michigan Logistics and Parts Authority
arbitration/ADR provisions of the Agreements.

non-signatory enforcement of arbitration clauses against signatories. See Sun Valley
Ranch 308 Ltd. P’ship ex rel. Englewood Props., Inc. v. Robson, 231 Ariz. 287, 296–97,
294 P.3d 125, 134–35 (Ct. App. 2012). Alternative estoppel “takes into consideration the
relationships of persons, wrongs, and issues.” Id. at 296 (quoting Merrill Lynch Inv.
Managers v. Optibase, Ltd., 337 F.3d 125, 131 (2d Cir. 2003)). Specifically,
[a] nonsignatory can enforce an arbitration clause against a signatory to the
agreement in several circumstances. One is when the relationship between
the signatory and nonsignatory defendants is sufficiently close that only by
permitting the nonsignatory to invoke arbitration may evisceration of the
underlying arbitration agreement between the signatories be avoided.
Another is when the signatory to a written agreement containing an
arbitration clause must rely on the terms of the written agreement in
asserting [its] claims against the nonsignatory. When each of a signatory’s
claims against a nonsignatory makes reference to or presumes the existence
of the written agreement, the signatory’s claims arise out of and relate
directly to the written agreement, and arbitration is appropriate.

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“‘[T]raditional principles of state law’ determine whether a ‘contract [may] be enforced
by or against nonparties to the contract through . . . third-party beneficiary theories . . .
and estoppel.’” Rajagopalan v. NoteWorld, LLC, 718 F.3d 844, 847 (9th Cir. 2013)
(quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009)). A federal court
sitting in diversity applies the forum state’s choice-of-law rules to determine what state’s
law to apply. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Arizona
courts apply the “law of the state having the most significant relationship to the
transaction and to the parties.” Landi v. Arkules, 172 Ariz. 126, 131, 835 P.2d 458, 463
(Ct. App. 1992). Here, there is no dispute that that state is Arizona and the Court thus
applies Arizona law.
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Id. at 296–97 (quoting CD Partners, LLC v. Grizzle, 424 F.3d 795, 798 (8th Cir. 2005)).

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The relationship between the signatory and nonsignatory defendants here, as

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alleged in the complaint, is not one of distinct, separate entities. Plaintiffs allege that all

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the Defendants are together joint employers. According to the Complaint:

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Defendant Parts Authority Arizona LLC’s Drivers were all hired by
Defendants Michigan Logistics Inc. and Arizona Logistics LLC; however,
the Drivers[’] day to day employment was and is controlled by Defendant
Parts Authority Arizona LLC, who required and continues to require the
Drivers to report to various Parts Authority Arizona LLC stores each
workday in order to deliver[] necessary supplies.

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(Doc. 1 at 3–4.) Plaintiffs allege that this arrangement constituted a “joint employment

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relationship,” wherein “Defendants Michigan Logistics Inc. and Arizona Logistics LLC

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hire employees who are supervised by Defendant Parts Authority.” (Id. at 9.) They

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further allege that the Defendants “constitute a unified operation,” a “common

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enterprise,” and a “single employer”; have “interrelated operations,” “common

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management,” “a centralized control of labor relations,” and “common ownership”; and

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that they “commingled funds” and “share the same physical addresses.” (Id. at 9–10.)

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Various courts across the country have confronted similar factual allegations and

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applied alternative estoppel to allow nonsignatory defendants to invoke arbitration

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provisions. Ragone v. Atlantic Video at Manhattan Center, 595 F.3d 115 (2d Cir. 2010),

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involved a makeup artist suing multiple entities for retaliation and sexual harassment.

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The plaintiff, Ragone, was employed by Atlantic Video, with whom she had signed an

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arbitration agreement. 595 F.3d at 118–19. ESPN was a client of Atlantic Video’s, and

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Ragone performed services for ESPN, who was not a signatory to the arbitration

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agreement. Id. at 119. Ragone sued both Atlantic Video and ESPN (as well as certain

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individuals); the defendants sought to invoke the arbitration agreement. Id. at 117. In

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allowing ESPN to invoke the arbitration provision under an estoppel theory, the Second

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Circuit noted:

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It is true, as we have already said, that ESPN is not mentioned in the
arbitration agreement, or in any other document relating to Ragone’s initial
employment that is contained in the record. . . . Nevertheless, as set forth in
her complaint, it is plain that when Ragone was hired by AVI, she
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understood ESPN to be, to a considerable extent, her co-employer. . . .
Further, while “she reported to [AVI management],” she “was also required
to follow the instructions and directives of ESPN talent and ESPN
supervisors on the set. . . .”
[. . .]
In this case, there is . . . no question that the subject matter of the dispute
between Ragone and AVI is factually intertwined with the dispute between
Ragone and ESPN. It is, in fact, the same dispute: whether or not Ragone
was subjected to acts of sexual harassment which were condoned by
supervisory personnel at AVI and ESPN. . . .

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Id. at 127–28. The Southern District of New York likewise applied estoppel in allowing

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a nonsignatory to invoke an arbitration provision, in a lawsuit with nearly identical facts

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to this one. See Ouedraogo v. A-1 Int’l Courier Serv., Inc., No. 12 Civ. 5651(AJN), 2014

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WL 1172581, at *4–5 (S.D.N.Y. Mar. 21, 2014) (allowing nonsignatory defendant to

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enforce arbitration clause against delivery driver who asserted claims under FLSA). And

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multiple district courts have emphasized in similar contexts that plaintiffs “cannot be

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permitted to argue Defendants are joint employers while, at the same time, argue their

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relationship is not so close that all Defendants cannot compel arbitration.” Arnold v.

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DirecTV, No. 4:10-CV-00352-JAR, 2013 WL 6159456, at *4 (E.D. Mo. Nov. 25, 2013)

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(quoting Carter v. Affiliated Comput. Servs., Inc., No. 6:10-cv-06074, 2010 WL 5572078,

18

at *4 (W.D. Ark. Dec. 15, 2010)).

19

Given the allegations Plaintiffs make in this case, this reasoning is persuasive and

20

applicable here.

21

Defendants here may invoke the arbitration provisions of the Agreements. Because the

22

Court finds that the non-signatory Defendants may seek to enforce the arbitration

23

provisions of the Agreements as a matter of estoppel, the Court need not reach the

24

alternative argument that they may do so as third-party beneficiaries to the Agreements.

25
26
27
28

D.

Thus alternative estoppel is appropriate and the nonsignatory

The concerted action waiver does not bar enforcement of the
arbitration/ADR provisions.

Courts may not enforce arbitration agreements that are unenforceable “upon such
grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.
The Ninth Circuit recently held that the National Labor Relations Act (“NLRA”)
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1

precludes enforcement of an arbitration provision that included a concerted action waiver.

2

See Morris v. Ernst & Young, LLP, 834 F.3d 975, 983–84 (9th Cir. 2016). However, this

3

holding does not apply when the employee had a right to opt out of the concerted action

4

waiver. Id. at 982 n.4; see also Johnmohammadi v. Bloomingdale’s, Inc., 755 F.3d 1072,

5

1076 (9th Cir. 2014).7

6
7

Here, the Agreements signed by Plaintiffs Bonner, Ross, Williams and Harris had
such an opt-out provision:

8

(h) Opt-Out Provision: If Operator does not want to be subject to this
Arbitration Provision, Operator may opt out of this Arbitration Provision by
notifying DILIGENT in writing of Operator’s desire to opt out of this
Arbitration Provision, which writing must be dated, signed and submitted
by U.S. Mail or hand delivery to DILIGENT at Arizona Logistics, Inc.
d/b/a Diligent Delivery Systems, 333 N. Sam Houston Pkwy E, St 500,
Houston, TX 77060. In order to be effective, the writing must clearly
indicate Operator’s intent to opt out of this Arbitration Provision and the
envelope containing the signed writing must be postmarked within 30
days of the date this Agreement is executed by Operator. Operator’s
writing opting out of this Arbitration Provision will be filed with a copy of
this Agreement and maintained by DILIGENT. Should Operator not opt
out of this Arbitration Provision within the 30-day period, Operator and
DILIGENT shall be bound by the terms of this Arbitration Provision.

9
10
11
12
13
14
15
16

(Doc. 28-2 at 10.) Other courts have found that Morris does not bar concerted action

17

waivers when such a 30-day opt out period is provided. See, e.g., Galvan v. Michael

18

Kors USA Holdings, Inc., No. CV 16-07379-BRO (AFMx), 2017 WL 253985, at *9

19

(C.D. Cal. Jan. 19, 2017). Therefore, even assuming that Plaintiffs are employees within

20

the meaning of the NLRA, the Court is not barred from enforcing the Arbitration

21

Provision against Plaintiffs Bonner, Ross, Williams and Harris.8

22

Plaintiff Six’s Agreement, however, did not include an opt-out. Under the Morris

23
24

7

26

The protections afforded by the NLRA to “employees” do not extend to independent
contractors. 29 U.S.C. § 152(3). The question of whether Plaintiffs are employees or
independent contractors is at the heart of the dispute between the parties, and the Court
need not resolve it here. For purposes of the concerted action waiver analysis, the Court
assumes without deciding that Plaintiffs are employees and covered by the NLRA.

27

8

25

28

The Ninth Circuit did not reach the question of whether concerted action waivers violate
the Norris LaGuardia Act. Morris, 834 F.3d at 990. Even assuming they do, the opt-out
provision would still allow the concerted action waiver to stand. See Johnmohammadi,
755 F.3d at 1077.
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1

analysis, the concerted action waiver in Six’s Agreement would thus be unenforceable

2

under the NLRA. The Court must therefore determine whether the concerted action

3

waiver is severable, such that the remainder of the ADR provision may still be enforced.

4

See Morris, 834 F.3d at 990.

5

In Arizona, “[g]enerally, courts do not rewrite contracts for parties.”

6

Olliver/Pilcher Ins., Inc. v. Daniels, 148 Ariz. 530, 533, 715 P.2d 1218, 1221 (1986).

7

However, “[i]f it is clear from its terms that a contract was intended to be severable, the

8

court can enforce the lawful part and ignore the unlawful part.” Id. This intent need not

9

be made explicit in certain cases. “The Arizona Supreme Court has recognized that in the

10

context of contract creating restrictive covenants but not containing a severability clause,

11

Arizona courts will eliminate ‘grammatically severable, unreasonable provisions.’”

12

Cooper v. QC Fin. Servs., Inc., 503 F. Supp. 2d 1266, 1291 (D. Ariz. 2007) (quoting

13

Fearnow v. Ridenour, Swenson, Cleere & Evans, P.C., 213 Ariz. 24, 32, 138 P.3d 723,

14

731 (2006)).

15

Citing these principles of Arizona law, the court in Cooper severed, as

16

unconscionable, a concerted action waiver from an otherwise enforceable arbitration

17

provision. 503 F. Supp. 2d at 1291. In so doing, the court noted that “[p]reserving the

18

arbitration provision sans [the unconscionable concerted action waiver] is . . . consistent

19

with the Federal Arbitration Act and Arizona public policy favoring both arbitration and

20

class actions.” Id. at 1292.

21

Under the same principles of federal and Arizona law, the concerted action waiver

22

in Six’s Agreement is severable. Therefore, even assuming that the NLRA applies to Six

23

as an employee, and a concerted action waiver without an opt-out would be

24

unenforceable, that concerted action waiver may be severed and the Court may still

25

enforce the ADR provision against Six.

26

CONCLUSION

27

The ADR provisions of the Agreements are therefore enforceable against each

28

Plaintiff. Plaintiffs Bonner, Ross, Williams and Harris agreed to a specific form of

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1

arbitration and the Court therefore compels arbitration as to these Plaintiffs as described

2

in each Agreement. Further proceedings in this Court are stayed. With respect to

3

Plaintiff Six, the Court orders that Six initiate an ADR proceeding as contemplated in the

4

Agreement if he wishes to pursue a remedy. Further proceedings in this Court as to

5

Plaintiff Six are also stayed.

6

IT IS THEREFORE ORDERED that the Motion to Compel Individual

7

Arbitration and Stay Proceedings of Defendants Arizona Logistics LLC, Michigan

8

Logistics Incorporated, and Parts Authority Arizona LLC, (Doc. 28), is GRANTED IN

9

PART AND DENIED IN PART.

10

IT IS FURTHER ORDERED that Plaintiffs Bonner, Ross, Williams and Harris

11

must individually arbitrate their claims against Defendants as contemplated in each

12

Plaintiff’s Owner Operator Agreement; and that further proceedings in this Court as to

13

these claims are stayed.

14

IT IS FURTHER ORDERED that proceedings as to Plaintiff Six are stayed to

15

allow him to pursue his claims against Defendants through a form of ADR, as

16

contemplated in his Owner Operator Agreement. Should any dispute arise out of the

17

parties’ contractual obligation to agree upon a specific ADR procedure and/or the form of

18

ADR initiated by Six, the Court will hear such dispute and/or lift the stay in this matter.

19

IT IS FURTHER ORDERED directing the Clerk of Court to continue the stay of

20

this action until further Order of the Court. The parties are directed to file a status report

21

on or before July 19, 2017 and every ninety (90) days thereafter until the stay has been

22

lifted.

23

Dated this 20th day of April, 2017.

24
25
26

Honorable G. Murray Snow
United States District Judge

27
28

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