Smith v. Keypoint Government Solutions Inc

Filing 22

ORDER denying 17 MOTION for Temporary Restraining Order filed by Richard Smith by Judge Robert E. Blackburn on 6/23/2015. (mlace, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Action No. 15-cv-00865-REB-KLM
RICHARD SMITH, individually and on behalf of all others similarly situated,
Plaintiffs,
v.
KEYPOINT GOVERNMENT SOLUTIONS, INC., a Delaware corporation,
Defendant.

ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER
Blackburn, J.
This matter is before me on that portion of Plaintiff’s Ex Parte Application for
Temporary Restraining Order and Setting of Hearing for Preliminary Injunction or,
in the Alernative [sic], Motion for Protective Order [#17],1 filed June 19, 2015, which
requests a temporary restraining order. Defendant filed a response [#20], on June 22,
2015.2 On June 23, 2015, I heard arguments on the motion for temporary restraining
order and took the matter under advisement. At the hearing, the parties did not submit
further evidence to that already proffered with the motion and response. Having
considered the arguments, authorities, and evidence submitted by the parties, I deny
the request for issuance of a temporary restraining order.

1
“[#17]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s case management and electronic case filing system (CM/ECF). I use this
convention throughout this order.
2

Thus, although the motion was designated as being filed ex parte, defendant received notice of
the motion and was able to respond both in writing and in person at the hearing. The requirements and
standards of Fed. R. Civ. P. 65(b) therefore are inapplicable.

I. JURISDICTION
I have jurisdiction over this case under 28 U.S.C. § 1331 (federal question).
II. STANDARD OF REVIEW
A temporary restraining order constitutes extraordinary relief. Thus, a party
seeking a temporary restraining order must show (1) a substantial likelihood that the
movant eventually will prevail on the merits; (2) that the movant will suffer irreparable
injury unless the injunction issues; (3) that the threatened injury to the movant
outweighs whatever damage the proposed injunction may cause the opposing party;
and (4) that the injunction, if issued, would not be adverse to the public interest.
Lundgrin v. Claytor, 619 F.2d 61, 63 (10th Cir. 1980).
III. ANALYSIS
This is a putative collection action under the Fair Labor Standards Act (“FLSA”),
29 U.S.C. § 201 et seq. Plaintiff seeks to represent a class of professionals who are
engaged by defendant to perform background checks and similar investigative services
for federal governmental agencies with which defendant contracts. Plaintiff alleges that
defendant has misclassified these individuals as independent contractors and thus has
wrongfully failed to compensate them for overtime hours worked in violation of the
FLSA. The action was filed originally in the United States District Court for the Northern
District of California and subsequently transferred to this district. No motion seeking
conditional certification of a collective action pursuant to 29 U.S.C. § 216(b) has yet
been filed.

2

The present motion arises from defendant’s recent revision to its Independent
Contractor Engagement Agreement (ICEA) earlier this month. On June 4 and 9, 2015,
defendant sent emails to its contractors working on Office of Personnel Management
and Department of Homeland Security contracts, respectively. In a two-page cover
letter attached to the emails, defendant’s representative advised as follows:
Please be advised that the enclosed ICEA contains an
arbitration agreement which applies to all pending and future
litigation, including but not limited to Richard Smith, et al. v.
KeyPoint Government Solutions, Case No.
1:15-cv-00865, pending in the United States District Court
for the District of Colorado. The Smith case is a proposed
collective action which alleges that KeyPoint has violated the
Fair Labor Standards Act by classifying some investigators
(possibly including you) as independent contractors instead
of employees and alleges that these investigators should
have been paid overtime for hours worked over 40 per week.
KeyPoint denies and is vigorously contesting these
allegations. A copy of the operative complaint in the Smith
case is attached.
The ICEA also contains an opt-out provision with respect to
pending litigation. If you execute the ICEA and do not return
the opt-out form as provided in the ICEA, you will not be able
to participate in the Smith collective action either as a
plaintiff or member of the collective action. Instead, if you
wanted to bring a claim against KeyPoint like that in the
Smith case, you would not be precluded from doing so, but
you would be required to do so in arbitration on behalf of
yourself only. If you execute the ICEA and also execute
and return the opt-out form as provided in the ICEA, the
arbitration provision will have no effect on your ability to
participate in the Smith collective action; although the
arbitration provision will continue to apply to other claims you
have or in the future may have. Whether or not you return
the opt-out form is completely up to you, and regardless of
what you choose, there will be no adverse action taken
against you as a consequence.

3

(Def. Resp. App., Exh. 2(A) at 3 of 27.) In addition, the ICEA itself (which also was
attached to the emails) included a prominent paragraph which specifically permitted
contractors to opt out of the arbitration clause with respect to this lawsuit:
(g) Contractor’s Right to Opt Out of Arbitration of
Pending Litigation. Arbitration of litigation pending in
federal or state court is not a mandatory condition of
contracting with KeyPoint. If you wish to opt out of
mandatory arbitration of litigation pending at the time of
execution of this contract, you must execute the
“Arbitration of Pending Litigation Opt-Out Form” that is
attached to this contract as Exhibit A, and return it with
the executed contract. If you opt out as provided in this
paragraph, you will not be subject to any adverse action
as a consequence of that decision and may pursue
available legal remedies with respect to pending
litigation without regard to this Agreement. You have the
right to consult with counsel of your choice concerning
this Agreement.
(Id. ¶ 6(g) at 9 of 27.) Finally, defendant also attached to the emails a form permitting
the recipient to opt out of the arbitration provision (id. at 4 of 27), as well as a copy of
the complaint in this lawsuit (id. at 13-26 of 27). Recipients were advised that they had
ten business days from the date of the letter in which to return the opt-out forms.3
Plaintiff’s seeks a temporary restraining order based on his assertion that this
form of notice affords putative class members insufficient time in which to make an
informed decision as to whether to opt in to this lawsuit. He further contends that the
notice is misleading and confusing insofar as it does not contain a neutral description of

3

At the hearing, counsel for defendant represented that those recipients who requested
additional time in which to consider whether to opt out had been afforded that opportunity. She further
represented that, as of June 22, 2015, 87 percent of the OPM contractors had returned their opt-out forms,
of which 67% had elected to opt out. Thirty-six percent of the DHS contractors had returned their forms,
with 70% of those returned opting out of arbitration.

4

the claims made in the lawsuit, does not explain the procedure for opting in to the
lawsuit, and does not advise potential plaintiffs of the applicable statute of limitations
that may impact their right to pursue relief under the FLSA. Stated succinctly, plaintiff
believes that defendant’s notice is too dissimilar in form and substance from that which
the court would provide, assuming arguendo that this case is conditionally certified as a
collection action under the FLSA. Although these matters may well inform and guide
the entry of a protective order,4 they fall short of substantiating entitlement to the
extraordinary relief of a temporary restraining order.
As an initial matter, I express substantial jurisdictional concerns of both ripeness
and standing as to the relief sought herein. Plaintiff’s arguments ultimately go to the
enforceability vel non of the arbitration agreements as they pertain to this lawsuit. Yet
that particular issue would not appear to be ripe unless and until some putative class
member, having failed to opt out of the arbitration provision of the revised ICEA,
attempts to opt in to this litigation and defendant thereafter challenges that contractor’s
right to do so based on the arbitration agreement. It is only in such a scenario that the
court would be called on to determine whether defendant’s form of notice was
inadequate and the resulting arbitration clause unenforceable. Moreover, as plaintiff
himself did not receive a copy of the revised ICEA (being a former, rather than current,
contractor for defendant), it seems unlikely that he has standing or otherwise could be
considered an adequate representative of any such putative future class members if
and when they seek to join this lawsuit.

4
I will refer that alternative request of the present motion to the magistrate judge for
consideration by separate order.

5

Nevertheless, even assuming arguendo that there is an actual case and
controversy to be determined and that plaintiff has standing to pursue it, I find and
conclude that plaintiff has shown neither a likelihood of success on the merits nor
irreparable harm if a temporary restraining order is not granted.5
As to the likelihood of success, I concur with defendant that, given the thrust of
plaintiff’s arguments in his motion, the relevant inquiry in this regard must focus on the
likely success of plaintiff’s arguments regarding the validity of the arbitration provision of
the revised ICEA as applied to this litigation. As plaintiff has focused instead on the
likelihood of his success on the merits of his underlying FLSA claim, he has failed to
proffer either argument or evidence relevant to this more apposite inquiry.
Considering that question in the abstract, however, the court disagrees with
plaintiff’s characterization of defendant’s notice as confusing or misleading. The
description of the claims asserted in this case is quite similar to that which the court
itself might have given had it been directing notice following conditional certification of
the collective action. In addition, contrary to plaintiff’s arguments, the notice made clear
that consultation with an attorney was advisable and that no adverse consequence – no
retaliation – would attach to a contractor’s decision to opt out of the arbitration
provision.6

5

Moreover, my resolution of these two factors ultimately makes the remaining two
considerations – balance of the harms between the parties and the public interest – a wash.
6

The three declarations of putative class members appended to plaintiff’s motion do not
convince me otherwise. Despite their professed initial confusion, all three of these contractors contacted
counsel for plaintiff and opted out of the arbitration provisions. Their inchoate fear of retribution for having
done so adds nothing to the court’s calculus in considering the propriety of the relief requested herein.

6

Nor do I perceive anything inherently unreasonable in affording contractors ten
business days in which to consider whether to opt out of the arbitration provision.
Those contractors who requested additional time in which to consider their options were
granted it. The relatively healthy rate of return of the arbitration opt out forms suggest
far less confusion than plaintiff fears exists.7 (See supra note 3.) In addition, although
plaintiff points out that courts typically provide much longer periods in which to opt in to
a collective action once conditionally certified, that period is not statutorily mandated.
This court’s own experience is to adopt that time period for return of the opt-in forms to
which the parties stipulate, regardless of its relative length.
As for irreparable injury, there is nothing threatened to be done by the entry into
arbitration agreements that cannot be undone at a later date without lingering effect to
the substantive rights of any putative class member. The court certainly has the
authority, should the need arise, to refuse to enforce the arbitration provision, either as
to one ore more particular class members or in toto. To the extent any such injury may
occur in the future, therefore, it is not irreparable.
IV. ORDERS
Accordingly, I find and conclude that plaintiff has failed to demonstrate that he is
entitled to the extraordinary relief afforded by a temporary restraining order. Thus, that
portion of his motion will be denied.

7

This fact tends to undermine plaintiff’s suggestion at the hearing that the fact that three
contractors were “hardy” enough to overcome their initial confusion (see supra note 6) does not
demonstrate that others were not confused also. Moreover, this wholly speculative inference is woefully
inadequate to satisfy plaintiff’s burden of proof as the movant.

7

THEREFORE, IT IS ORDERED that the portion of Plaintiff’s Ex Parte
Application for Temporary Restraining Order and Setting of Hearing for
Preliminary Injunction or, in the Alernative [sic], Motion for Protective Order [#17],
filed June 19, 2015, which requests a temporary restraining order is denied.
Dated June 23, 2015, at Denver, Colorado.
BY THE COURT:

8