Jimenez et al v. Menzies Aviation Inc et al

Filing 19

ORDER DENYING DEFENDANTS' MOTION TO COMPEL ARBITRATION by Hon. William H. Orrick denying 11 Motion to Compel. (jmdS, COURT STAFF) (Filed on 8/17/2015)

1
2
3

UNITED STATES DISTRICT COURT

4

NORTHERN DISTRICT OF CALIFORNIA

5
6
7
8
9
10

JESSICA JIMENEZ, et al.,
Plaintiffs,
v.
MENZIES AVIATION INC, et al.,
Defendants.

Case No. 15-cv-02392-WHO
ORDER DENYING DEFENDANTS’
MOTION TO COMPEL ARBITRATION
Re: Dkt. No. 11

United States District Court
Northern District of California

11

INTRODUCTION

12

During the pendency of this employment class action litigation, defendants Menzies

13

Aviation, Inc. and Menzies Aviation Group (USA), Inc. (collectively, “Menzies”) implemented an

14

ADR Policy requiring employees to arbitrate their employment claims. The policy required

15

employees to sign an arbitration agreement, did not advise putative class members about this

16

lawsuit, and failed to offer a reasonable opt-out opportunity. Menzies now argues that a new

17

overtime claim has been alleged in this case after the ADR Policy went into effect and that it must

18

be arbitrated because the putative class members signed an agreement to arbitrate their claims.

19

The questions raised in Menzies’s motion to compel arbitration are whether plaintiffs have

20

stated a new claim or an old claim with an additional theory of recovery, and whether the ADR

21

Policy is unenforceable because it was an improper class communication. I DENY Menzies’s

22

motion for two reasons: the overtime claim has always been in this case; and, Menzies could not

23

demand that its employees sign the arbitration agreement without notifying them of the

24

agreement’s impact on their participation in this case as a class member and of their right to opt

25

out of the agreement.

26
27
28

BACKGROUND
Menzies is a British company specializing in global aviation support, such as ground-

1

handling, cargo handling, aircraft maintenance, and aviation-related services at airports throughout

2

the world, including San Francisco International Airport (“SFO”). SAC ¶ 9 [Dkt. No. 15-4].

3

Jimenez, a Menzies employee, filed this putative class action in San Francisco Superior Court on

4

June 2, 2010, alleging, among other things, that Menzies failed to pay its SFO non-exempt

5

employees minimum wage and overtime. See Compl. [Dkt. No. 15-2]. Menzies removed the case

6

to this District in 2010.

7

In 2011, while the complaint was pending, Menzies adopted a new ADR Policy for its U.S.
locations. Bazerkanian Decl. ¶ 2 [Dkt. No. 11-1]. The policy requires individual arbitration of all

9

employment disputes, including the types of claims raised here, and does not contain an express

10

opt-out provision. See ADR Policy at 1-2 [Dkt. No. 11-2]. On October 28, 2011, Mijos signed

11
United States District Court
Northern District of California

8

onto the ADR Policy. See ADR Policy [Dkt. No. 11-3]. The agreement states that:

12

[I]t is agreed that the Alternative Dispute Resolution Policy attached
hereto which provides for final and binding arbitration, is the
exclusive means for resolving Covered Disputes as defined in the
Alternative Dispute Resolution Policy. No other action may be
brought in court or in any other forum. I understand that this
Agreement is a waiver of all rights to a civil court action for all
disputes relating to my employment, the terms and conditions of my
employment and/or the termination of my employment whether
brought by me or by Menzies. Only an arbitrator, not a judge or
jury, will decide the dispute. In addition, I understand that I am
prohibiting [sic] from joining a class action or representative action,
acting as a private attorney general or representative of others, or
otherwise consolidating a covered claim with the claims of others.

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Id. at 1 (all emphasis in original).
Covered Disputes are defined as:
[A]ny dispute arising out of or related to your employment, the
terms and conditions of your employment and/or the termination of
your employment based on, but not limited to . . . [c]laims alleging
failure to compensate for all hours worked, failure to pay overtime,
failure to pay minimum wage, failure to reimburse expenses, failure
to pay wages upon termination, failure to provide accurate, itemized
wage statements, failure to provide meal and/or breaks, entitlement
to waiting time penalties and/or other claims involving employee
wages, including, but not limited to, claims being brought under the
California Labor Code, the applicable wage orders, the Fair Labor
Standards Act and any other statutory scheme[.]
2

1

ADR Policy at 1-2.

2

The case was remanded to state court in April 2013. Cordero Decl. ¶¶ 7-11 [Dkt. No. 15-

3

1]. On July 17, 2013, Jimenez filed a first amended complaint (“FAC”) following a partial grant

4

of Menzies’s demurrer in state court. Id. ¶ 12.

5

On December 14, 2014, Menzies provided Jimenez with documentation about the putative

6

class, including time and payroll records. Id. ¶ 14. Jimenez discovered information allegedly

7

entitling a subgroup of putative class members to additional overtime-related damages. Id. ¶¶ 15-

8

16. Jimenez was not a part of this group, so she obtained leave to file a SAC adding Mijos, who

9

started at Menzies as a ramp agent in 2007, as the new subgroup’s class representative. Id. ¶¶ 18,
23. The SAC was filed on May 1, 2015. On May 29, 2015, Menzies again removed the case to

11
United States District Court
Northern District of California

10

this district. Notice of Removal [Dkt. No. 1].

12

Menzies now moves to compel arbitration of the claims for which Mijos is the class

13

representative, contending that those claims were first alleged in the SAC and are covered by the

14

ADR Policy executed by Mijos. I heard argument on August 5, 2015.

15
16

LEGAL STANDARD
The Federal Arbitration Act (“FAA”) governs motions to compel arbitration. 9 U.S.C. §§

17

1-14. Under the FAA, “the district court’s role is limited to determining whether a valid

18

arbitration agreement exists and, if so, whether the agreement encompasses the dispute at issue.”

19

Lifescan, Inc. v. Premier Diabetic Serv., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). “If the answer

20

is yes to both questions, the court must enforce the agreement.” Id.

21
22

DISCUSSION
Menzies argues that Mijos asserts new overtime theories in the SAC based on new factual

23

allegations and seeks to compel arbitration of those claims pursuant to the ADR Policy executed

24

by Mijos. Menzies does not seek arbitration of claims that were stated in the complaint before the

25
26
27
28
3

1

ADR Policy was executed.1 Plaintiffs argue that the SAC does not raise new claims and urge me

2

either to invalidate the ADR Policy as unconscionable or to exercise my discretion to regulate

3

class communications and find the policy unenforceable here.
As discussed below, I find that the SAC does not raise new claims. Menzies’s issuance of

4
5

its ADR Policy without advising putative class members of its impact on their class claims

6

constitutes an improper class communication and makes the ADR Policy unenforceable here. I do

7

not address whether the arbitration agreement is unconscionable and unenforceable generally.

8

I.

THE SECOND AMENDED COMPLAINT DOES NOT RAISE NEW CLAIMS
Menzies argues that Mijos asserts new overtime theories in the SAC based on new factual

9

allegations that were not raised by Jimenez in the prior complaints. It contends that Jimenez’s

11
United States District Court
Northern District of California

10

prior overtime allegations were limited to an off-the-clock theory that Menzies employees were

12

not compensated for time spent traveling to and from airport parking lots to the SFO terminal area.

13

It asserts that the prior complaints lacked any factual allegations that would support any other

14

overtime wage claims.
Notably, Menzies does not identify what new factual allegations related to plaintiffs’

15
16

overtime claims are raised for the first time in the SAC. It is undisputed that there are no new

17

causes of action. Nor, based on my review of the complaints, does the SAC include new factual

18

theories constituting new claims for purposes of this motion, either.

19

In the original complaint, filed in June 2010, Jimenez alleged that Menzies required class

20

members to park in off-site facilities and ride shuttles to their workplaces, taking over an hour or

21

two each day, but did not compensate the employees for this time. Compl. ¶¶ 20-29. Based on

22

these off-the-clock allegations, Jimenez alleged various causes of action, including failure to pay

23

overtime, on behalf of a SFO Non-Exempt Class defined as:

24
25
26
27
28

1

In its opposition to plaintiffs’ motion for leave to file the SAC in state court, Menzies argued that
the allegedly new claims were futile because the ADR Policy required Mijos to arbitrate all
employment claims against Menzies. See Opp. to SAC Mot. at 8-9 [Dkt. No. 1-12]. Menzies now
concedes that the arbitration agreement does not apply to claims that existed before the ADR
Policy was executed. I note, however, that on its face, the ADR Policy applies to all claims
asserted in this action; it does not expressly exempt claims already pending at the time.
4

All current and former non-exempt employees of MENZIES
AVIATION, INC. and/or MENZIES AVIATION GROUP (USA),
INC., employed at the San Francisco International Airport at any
time within the four years preceding the filing of the complaint to
the present.

1
2
3
4
5

Id. ¶ 42(a); see also id. ¶¶ 88-103 (cause of action for failure to pay overtime wages). In support
of the overtime claim, Jimenez alleged that:
Menzies violated Labor Code § 510 when they failed to pay Plaintiff
and the SFO Non-Exempt Class overtime wages for any and all
work performed, including work performed off-the-clock, in excess
of 8 hours per day, 40 hours per week, and/or for any and all work
performed on the seventh consecutive day in any one work week, by
the time set forth by law.

6
7
8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

Id. ¶ 78.2
Menzies issued the ADR Policy in 2011, while the original complaint was still the
operative complaint. Given that the original complaint included a class of all current non-exempt
employees, all non-exempt employees that executed the ADR Policy and were employed when the
complaint was filed in June 2010, including Mijos, were putative class members at the time that
they signed the ADR Policy.
The FAC, which was filed in July 2013, narrowed the SFO Non-Exempt Class to
employees “who worked at least one shift that ended between 11:54 p.m. and 5:28 a.m. and/or
worked at least one shift that started between 1:35 a.m. and 5:28 a.m.,” because those are the hours
that public transportation was not available to transport employees to or from their parked cars.
See, e.g., FAC ¶¶ 50, 74 [Dkt. No. 1-5]. The FAC again alleged that Menzies violated Labor Code
§ 510 by failing to pay class members for all work performed in excess of 8 hours per day, 40
hours per week, or on the seventh consecutive day in any one work week. Id. ¶ 101.
The SAC, filed in May 2015, alleges only causes of action already alleged in the prior
complaints, but adds a SFO Overtime Class for certain causes of action, including for the overtime
claim. The SFO Overtime Class, for which Mijos is the representative, is defined as:

26
27
28

2

Jimenez also alleged derivative causes of action for failure to timely pay all wages and failure to
provide accurate itemized wage statements on behalf of the SFO Non-Exempt Class. Those
claims did not rely on off-the-clock allegations.
5

All current and former non-exempt employees of MENZIES
AVIATION, INC., and/or MENZIES AVIATION GROUP (USA),
INC., employed at the San Francisco International Airport who
worked at least one shift that according to Defendants’ time clock
records worked one or more periods consisting of consecutive hours
that extended beyond midnight (12:00 a.m.) into the next calendar
day at any time from June 2, 2006 to the present.

1
2
3
4
5

SAC ¶ 62. The SAC alleges that Menzies violated Labor Code section 510 by failing to pay the

6

SFO Overtime Class (and the previously-alleged SFO Non-Exempt Class) overtime compensation

7

for hours worked in excess of eight hours in a workday, forty hours in a workweek, or on a

8

seventh consecutive work day. SAC ¶ 118.

9

This is not a new claim. As noted, the original complaint, which was pending when Mijos
executed the ADR Policy and in which Mijos was a putative class member, alleged that Menzies

11
United States District Court
Northern District of California

10

violated Labor Code § 510 by failing to pay overtime compensation for hours worked in excess of

12

eight hours in a workday, forty hours in a workweek, or on a seventh consecutive work day.

13

Compl. ¶ 78. The only distinction between the complaints is that the original complaint arguably

14

assumed that only class members who were forced to travel to and from the workplace without

15

compensation were denied overtime compensation. In contrast, the SAC clarifies that the

16

overtime allegations are not limited to employees that were forced to spend off-the-clock time

17

getting to and from the workplace. But a new theory of recovery does not render the allegations

18

in the SAC a new claim for purposes of this motion.3 Regardless of how class members allegedly

19

worked the hours constituting the uncompensated overtime—i.e., hours in excess of eight in a day,

20

forty in a week, or on a seventh consecutive day—the claim is the same: that class members were

21

not compensated for that time. Cf. Shefts v. Petrakis, 954 F. Supp. 2d 769, 789 (C.D. Ill. 2013)

22

(noting, on a motion to amend, that “the addition of a new theory of recovery, if based on the same

23
24
25
26
27

3

Menzies argues that the non-off-the-clock overtime claims in the SAC constitute new claims
because those claims were not fairly encompassed in the allegations in the original complaint
under a Federal Rule of Civil Procedure 8 notice-pleading analysis. I am not convinced that nonoff-the-clock overtime claims were not fairly encompassed by the allegations in the original
complaint, but, in any event, Menzies provides no authority that the Rule 8 analysis governs
whether claims are new in this context.

28
6

1

alleged injury, does not necessarily add a new ‘claim’”).
Federal and California law favor the adjudication of common claims in a single action. See

2
3

Gulf Oil Co. v. Bernard, 452 U.S. 89, 99 (1981) (“Rule 23 expresses a policy in favor of having

4

litigation in which common interests, or common questions of law or fact prevail, disposed of

5

where feasible in a single lawsuit.”); Vasquez v. Super. Ct., 4 Cal.3d 800, 808 (1971) (observing

6

the “several salutary by-products” of class actions). “In furtherance of the policy favoring class

7

actions, courts have allowed plaintiffs the opportunity to amend their complaints to redefine the

8

class, or to add new individual plaintiffs, or both, in order to establish a suitable representative,

9

when the named plaintiff has been found inadequate.” Howard Gunty Profit Sharing Plan v.
Super. Ct., 88 Cal. App. 4th 572, 578 (2001). Permitting Menzies to disrupt plaintiffs’ litigation

11
United States District Court
Northern District of California

10

strategy by using its newly implemented ADR Policy to split their claims would hinder that

12

interest.
Accordingly, because the overtime claim has always been in this case, Menzies’s motion

13
14

would be denied even if the ADR Policy were enforceable.

15

II.

16
17
18
19
20

THE ADR POLICY IS UNENFORCEABLE BECAUSE ITS ISSUANCE
CONSTITUTED IMPROPER CLASS COMMUNICATION
I also agree with plaintiffs that the ADR Policy is unenforceable because the policy

limited class members’ rights and the manner in which Menzies issued the policy—not informing
Mijos and other putative class members of the pending litigation, not explaining the consequences
of agreeing to the policy, and not providing an opt-out procedure—constituted improper class

21
22
23
24
25
26
27
28
7

1

communication. 4 Menzies does not respond to this point directly because it argues that it only

2

seeks to arbitrate new claims added in the SAC, and therefore that its motion has no bearing on the

3

class claims that existed when the ADR Policy was issued. By arguing that it only seeks to

4

arbitrate claims that were not at issue when the ADR Policy was issued, Menzies recognizes that it

5

would be improper to compel arbitration of claims that existed before the ADR Policy was issued.

6

As discussed above, I conclude that Menzies is in fact seeking to apply the ADR Policy to

7

claims that existed when it was issued. Because it did not inform the putative members of the

8

effect of the ADR Policy on those claims and give them a reasonable opportunity to opt out, the

9

issuance of the ADR Policy to putative class members constituted improper class communication

10

and the policy is unenforceable.
Federal Rule of Civil Procedure 23(d) provides courts with considerable discretion in

United States District Court
Northern District of California

11
12

regulating defendant communications with putative class members to prevent abuse. See FED. R.

13

CIV. P. 23(d); Gulf Oil, 452 U.S. at 100 (“Because of the potential for abuse, a district court has

14

both the duty and the broad authority to exercise control over a class action and to enter

15

appropriate orders governing the conduct of counsel and parties.”); Wang v. Chinese Daily News,

16

Inc., 623 F.3d 743, 755 (9th Cir. 2010) (district courts may regulate class communications to

17
18
19
20
21
22
23
24
25
26
27
28

4

Plaintiffs argue that they are exempt from the ADR Policy under section 1 of the FAA, which
exempts “contracts of employment of seamen, railroad employees, or any other class of workers
engaged in foreign or interstate commerce.” 9 U.S.C. § 1. But section 1 only exempts “those
workers actually engaged in the movement of goods in interstate commerce.” Circuit City Stores,
Inc. v. Adams, 532 U.S. 105, 112 (2001). Plaintiffs would be exempt if they were drivers
delivering goods distributed throughout the country and abroad. See Harden v. Roadway Package
Sys., Inc., 249 F.3d 1137, 1140 (9th Cir. 2001). But plaintiffs have not shown how employees
providing ground-handling, cargo handling, aircraft maintenance, and aviation-related services fall
within this narrow exemption. On the contrary, many courts have found that service employees in
the transportation industry do not fall within this exemption. See, e.g., Lenz v. Yellow Transp.,
Inc., 431 F.3d 348, 352-53 (8th Cir. 2005) (customer service representative for general
commodities carrier); Perez v. Globe Airport Sec. Serv., Inc., 253 F.3d 1280, 1284 (11th Cir.
2001) (airport security agent who “inspected goods, materials, and people” travelling nationally
and globally); Cole v. Burns Int’l Sec. Serv., 105 F.3d 1465, 1470-71 (D.C. Cir. 1997) (security
guard at Union Station); Veliz, 2004 WL 2452851, at *10 (work of sales representative who
delivered goods “more akin to customer service than it is to a warehouse worker, railroad
employee or seamen”). Accordingly, plaintiffs have not established that they are exempt under
section 1 of the FAA.
8

1

prevent “coercive behavior”), judgment vacated on other grounds, 132 S.Ct. 74 (2011).

2

Corrective action is appropriate if a class communication so much as “threatens the fairness of the

3

litigation.” Id. at 756.
Courts routinely exercise their discretion to invalidate or refuse to enforce arbitration

4
5

agreements implemented while a putative class action is pending if the agreement might interfere

6

with members’ rights. See, e.g., O’Connor v. Uber Tech., Inc., No. 13-cv-3826 EMC, 2013 WL

7

6407583, at *7 (N.D. Cal. Dec. 6, 2013) (invalidating arbitration agreement imposed before class

8

certification where imposing agreement risked interference with putative class members’ rights);

9

Balasanyan v. Nordstrom, Inc., 2012 WL 760566, at *1-2, 4 (S.D. Cal. Mar. 8, 2012) (declining to
enforce individual arbitration agreement in class action where defendant’s implementation of

11
United States District Court
Northern District of California

10

arbitration agreement was an improper class communication); Williams v. Securitas Sec. Serv.

12

USA, Inc., 2011 WL 2713818, at *1 (E.D. Pa. July 13, 2011) (refusing to enforce arbitration

13

agreement imposed during pendency of putative class action); In re Currency Conversion Fee

14

Antitrust Litig., 361 F. Supp. 2d 237, 252-54 (S.D.N.Y. 2005) (refusing to enforce arbitration

15

agreement instituted after putative class action was filed as it might mislead class members). I

16

will follow those courts’ leads.

17

Given that the ADR Policy applied to putative class members’ existing class claims and

18

that Menzies sought to compel arbitration of a subsection of those claims, there is little question

19

that the ADR Policy risked interference with putative class members’ rights. Moreover, it is

20

undisputed that Menzies did not inform Mijos or other putative class members about this action,

21

much less advise them of the ADR Policy’s impact on their rights in this case. In addition,

22

Menzies provided no opportunity to opt-out of its new policy, making assent to the ADR Policy a

23

condition of employment.5 At best, Menzies’s implementation of its new arbitration policy raises

24
25
26
27
28

5

Menzies disputes Mijos’s assertion that his supervisor threatened to withhold his wages if he did
not sign the ADR Policy. But the ADR Policy states that it is entered into “[i]n consideration of
and as a material condition of employment with Menzies Aviation,” evidently making the
agreement a condition of employment. Dkt. No. 11-3 (emphasis in original). At a minimum, the
ADR Policy gave the impression that it was a condition of employment, confirming the risk of
abuse.
9

1

the specter of interference with the rights of Mijos and other putative class members; at worst, it

2

was a deliberate effort to undermine pending class litigation. The issuance of the ADR Policy

3

clearly poses a risk to the rights of Mijos and other putative class members. I therefore decline to

4

enforce the arbitration provision to compel arbitration of the claims Mijos brings on behalf of the

5

SFO Overtime Class.

6

At oral argument, counsel for Menzies argued that finding the ADR Policy unenforceable

7

under these circumstances would effectively bar a company from adopting an arbitration

8

agreement so long as its employees are putative members in a pending class action. That is not

9

accurate. The ADR Policy is unenforceable against the putative class because the manner in
which it was issued constituted improper class communication. Had Menzies informed putative

11
United States District Court
Northern District of California

10

class members of the ADR Policy’s impact on their class rights and provided clear opt-out

12

opportunities, the potential for abuse and coercive behavior would likely have been ameliorated.

13

In addition, as discussed in Section I above, the ADR Policy is unenforceable here because

14

Menzies seeks to apply the policy to employees that were putative class members, and had

15

pending class claims, before the ADR Policy was issued. This ruling does not affect the

16

enforceability of the ADR Policy as to new employees who are not class members. It is

17

unenforceable against the putative class for the reasons stated.

18

CONCLUSION

19

Menzies’s motion to compel arbitration is DENIED. Dkt. No. 11.

20

IT IS SO ORDERED.

21
22
23

Dated: August 17, 2015
______________________________________
WILLIAM H. ORRICK
United States District Judge

24
25
26
27
28
10