Bey et al v. XPO Logistics, Inc.
Filing
35
ORDER granting 31 Motion to compel arbitration. This case is STAYED pending arbitration. The parties are DIRECTED to jointly notify the Court of the status of the arbitration proceedings on Wednesday, December 6, 2017, and every ninety days thereafter. The parties are further DIRECTED to immediately notify the Court upon conclusion of the arbitration proceedings. The Clerk is DIRECTED to administratively close the file. Signed by Judge Roy B. Dalton, Jr. on 9/7/2017. (ZRR)
Case 6:16-cv-02195-RBD-KRS Document 35 Filed 09/07/17 Page 1 of 11 PageID 234
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
REINA ORTIZ BEY; RICARDO
PACHECO; ASHLEE ALLARD; and
SHANNON SUGGS,
Plaintiffs,
v.
Case No. 6:16-cv-2195-Orl-37KRS
XPO LOGISTICS, INC.,
Defendant.
_____________________________________
ORDER
Before the Court is Defendant’s Motion to Dismiss Complaint and Compel
Arbitration, and Memorandum of Law (Doc. 31), to which Plaintiffs responded (Doc. 32).
For the reasons set forth below, the motion is due to be granted and the action is due to
be stayed.
I.
BACKGROUND
On December 22, 2016, Plaintiffs initiated this putative collective action alleging
that Defendant failed to pay them overtime wages in violation of the Fair Labor Standards
Act (“FLSA”). (Doc. 1.) After successfully moving for two extensions, Defendant
answered the Complaint and asserted several affirmative defenses on March 3, 2017.
(Doc. 20.) Now—six months after Plaintiffs filed their Complaint—Defendant moves to
compel arbitration and dismiss this action or, alternatively, stay it pending the outcome
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of the forthcoming arbitration proceedings. (Doc. 31 (“Motion to Compel”).) 1 Plaintiffs
oppose the Motion to Compel. (Doc. 32.)
According to the Complaint, Plaintiffs are former employees of Defendant. (Doc. 1,
¶¶ 12, 19, 26, 33.) As a condition of their employment, each Plaintiff signed an
employment agreement (collectively “Agreements”). 2 (See Doc. 31-1.) Among others, the
Agreements include the following provisions:
17. Governing Law; Arbitration; Consent to Jurisdiction; and
Waiver of Jury Trial.
(a) Governing Law: This Agreement shall be
governed by and construed in accordance with
its express terms, and otherwise in accordance
with the laws of the State of North Carolina
without reference to its principles of conflicts of
law.
(b) Arbitration of Claims Initiated by You: Any
claim you [employee] wish to initiate arising
out of or relating to this Agreement, the breach
thereof, your employment with us, or the
termination of that employment will be
resolved by binding arbitration before a single
arbitrator in the City of Charlotte, North
Carolina administered by the American
Arbitration Association in accordance with its
Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof
The U.S. Court of Appeals for the Eleventh Circuit has expressed a preference
that district courts stay rather than dismiss arbitral claims. Bender v. A.G. Edwards & Sons,
Inc., 971 F.2d 698, 699 (11th Cir. 1992). Accordingly, the Court construes the motion as a
motion to stay the proceedings and compel arbitration rather than as a “Motion to
Dismiss and Compel Arbitration.” (See Doc. 31, p. 1.)
2 Alongside its Motion to Compel, Defendant attached a composite exhibit, which
includes four separate Agreements—one for each Plaintiff. (See Doc. 31-1.) Apart from
the signature, the Agreements are identical.
1
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(“Arbitration Provision”).
(See, e.g., Doc. 31-1 pp. 8–9) (emphasis added).
The Arbitration Provision incorporates by reference the American Arbitration
Association’s Commercial Arbitration Rules (“AAA Commercial Arbitration Rules”).
(Doc. 31-1 p. 9.) In pertinent part, the AAA Commercial Arbitration Rules provide that
the arbitrator shall have the power to: (1) “rule on his or her own jurisdiction, including
any objections with respect to the existence, scope, or validity of the arbitration agreement
or the arbitrability of any claim or counterclaim”; and (2) “determine the existence or
validity of a contract of which an arbitration clause forms a part” (collectively,
“Delegation Provision”). Commercial Arbitration Rules and Mediation Procedure, AM. ARB.
ASS’N
Rule
7(a),
(b)
(Oct.
13,
2013),
https://www.adr.org/sites/default/files/Commercial%20Rules.pdf.
Defendant requests that the Court compel arbitration under the Arbitration
Provision because: (1) it is enforceable; and (2) Plaintiffs’ FLSA claims fall within its scope.
(Doc. 31, pp. 4–5.) Anticipating Plaintiffs’ position, Defendant also asserts that it has not
waived its right to compel arbitration. (Id. at 6–9.) In their response, Plaintiffs counter
that: (1) Defendant waived its right to arbitrate; and (2) notwithstanding waiver, the
Arbitration Provision is unenforceable because it is unconscionable under North Carolina
law. (Doc. 32, pp. 6–12.)
II.
A.
LEGAL STANDARDS
Federal Arbitration Act
Under the Federal Arbitration Act (“FAA”), “courts must rigorously enforce
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arbitration agreements according to their terms.” Am. Express Co. v. Italian Colors Rest.,
133 S. Ct. 2304, 2309 (2013). Upon the motion of any party to a valid arbitration agreement,
courts must stay or dismiss litigation of all claims that fall within the agreement’s scope
and compel arbitration according to the agreement’s terms. See 9 U.S.C. §§ 3–4.
Arbitration agreements are presumptively valid and enforceable. See 9 U.S.C. § 2.
Arbitration under the FAA is ultimately “a matter of consent, not coercion,” Volt
Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 479 (1989), and parties
opposing arbitration can challenge the formation and validity of a contract containing an
arbitration clause. Specifically, the Eleventh Circuit recognizes “three distinct types of
challenges to a contract containing an arbitration clause”: (1) challenges to the formation,
or “the very existence,” of the contract; (2) challenges “to the validity of the arbitration
clause standing alone”; and (3) challenges “to the validity of the contract as a whole.”
Wiand v. Schneiderman, 778 F.3d 917, 924 (11th Cir. 2015). Under a delegation provision
“parties may agree to commit even [these] threshold determinations to an arbitrator, such
as whether an arbitration agreement is enforceable.” Parnell v. CashCall, Inc., 804 F.3d
1142, 1146 (11th Cir. 2015).
B.
Waiver
“[D]espite the strong policy in favor of arbitration, a party may, by its conduct,
waive its right to arbitration.” Garcia v. Wachovia Corp., 699 F.3d 1273, 1277 (11th Cir. 2012)
(quoting S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir. 1990)).
Indeed, courts will not compel arbitration where the party who seeks to arbitrate has
waived that right. Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1200 (11th Cir. 2011).
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“Waiver occurs when both: (1) the party seeking arbitration ‘substantially
participates in litigation to a point inconsistent with an intent to arbitrate’; and (2) ‘this
participation results in prejudice to the opposing party.’” In re Checking Account Overdraft
Litig., 754 F.3d 1290, 1294 (11th Cir. 2014) (quoting Morewitz v. W. of Eng. Ship Owners Mut.
Prot. & Indem. Ass’n (Luxembourg), 62 F.3d 1356, 1365 (11th Cir. 1995)). Nevertheless, “any
party arguing waiver of arbitration bears a heavy burden of proof.” Stone v. E.F. Hutton
& Co., Inc., 898 F.2d 1542, 1543 (11th Cir. 1990).
III.
ANALYSIS
The Court begins its analysis with Plaintiffs’ waiver argument. Although not
raised by the parties, the Court notes that the Eleventh Circuit has held that whether a
party has waived its right to compel arbitration based on its earlier litigation conduct is
an issue presumptively for a court, rather than an arbitrator. Grigsby & Assocs., Inc. v. M
Secs. Inv., 664 F.3d 1350, 1353 (11th Cir. 2011). Thus, absent “clear and unmistakable”
evidence of an agreement to the contrary, disputes concerning conduct-based waiver are
left to courts. See Plaintiff’s S’holders Corp. v. S. Farm Bureau Life Ins. Co., 486 F. App’x 786,
789 (11th Cir. 2012)3 (finding that conduct-based waiver issue is not within the scope of
the American Arbitration Association’s Rule 7(a) because it is not an objection to the
validity of the agreement). As neither party has pointed to such “clear and unmistakable”
While unpublished opinions are not binding precedent, they may be considered
as persuasive authority. See 11th Cir. R. 36-2; see also United States v. Almedina,
686 F.3d 1312, 1316 n.1 (11th Cir. 2012).
3
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evidence, the Court—rather than an arbitrator—will decide whether Defendant has
waived its right to compel arbitration based on its earlier litigation conduct.
A.
Waiver
Here, the parties agree on the conduct preceding the Motion to Compel but
dispute the implication of such conduct. (See Doc. 31, p. 8; Doc. 32, p. 6.) Plaintiffs contend
that Defendant has acted inconsistently with the right to arbitrate, as Defendant: (1) filed
an answer that failed to raise arbitration as an affirmative defense (Doc. 20, p. 9);
(2) participated in the preparation and filing of a case management report, which
indicated that the parties did not agree to arbitration (Doc. 25); and (3) complied with its
disclosure obligations under the FLSA and Federal Rule of Civil Procedure 26. (See
Doc. 31, p. 8; Doc. 32, p. 6.) According to Plaintiffs, such conduct prejudiced them by
raising their litigation costs. (Doc. 32, p. 7.) Thus, Defendant has waived its right to
compel arbitration. (Id. at 7.) The Court disagrees.
1.
Substantial Participation
Under the first prong of waiver, a court must “decide if, under the totality of the
circumstances, the party has acted inconsistently with the arbitration right.” Ivax Corp. v.
B. Braun of Am., Inc., 286 F.3d 1309, 1315–16 (11th Cir. 2002). A party acts inconsistently
with the arbitration right when that party “substantially invokes the litigation machinery
prior to demanding arbitration.” Garcia, 699 F.3d at 1277 (quoting S & H Contractors,
906 F.2d at 1514) (emphasis added).
Not all litigation activity results in waver; rather, it is a matter of degree. As
examples, the Eleventh Circuit has found waiver in cases with long delays and extensive
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use of discovery or motion practice prior to the defendant’s assertion of its arbitration
right. See e.g., Robinson v. Alston, 596 F. App’x 871, 873 (11th Cir. 2015) (finding wavier
where the defendant waited eight months before demanding arbitration, during which
time there had been “numerous filings,” and the defendant ignored both the opposing
party and the Court’s invitations to initiate arbitration proceedings); Garcia,
699 F.3d at 1277–78 (finding waiver where party failed to move to compel arbitration even
though the court invited it to do so, and the party conducted discovery for more than a
year, including more than 15 depositions and production of nearly 900,000 pages of
documents); S & H Contractors, Inc., 906 F.2d at 1514 (finding waiver where party had
filed two motions and engaged in five depositions before demanding arbitration); Stone,
898 F.2d at 1543–44 (finding waiver where the defendant waited more than a year and
eight months before demanding arbitration during which time the defendant deposed
the plaintiff twice and had propounded on the plaintiff multiple sets of interrogatories
and requests for production, and scheduled other depositions). 4
Even the district court cases that Plaintiffs rely on align with the Eleventh Circuit
opinions concerning the degree of conduct necessary to constitute waiver. See, e.g., Lewis
v. Keiser Sch., Inc., No. 11-62176-CIV, 2012 WL 4193366, at *4 (S.D. Fla. Sept. 18, 2012)
(finding waiver where the defendant participated in discovery, obtained an extension of
discovery, and engaged in motion practice prior to demanding arbitration seven months
after initiation of the action); GEMB Lending, Inc. v. RV Sales of Broward, Inc.,
No. 9-61670-CIV, 2010 WL 1949548, at *2 (S.D. Fla. May 14, 2010) (during the four-month
delay prior to demanding arbitration the defendant filed a motion to dismiss,
propounded requests for production, and taken a deposition); Snelling & Snelling, Inc. v.
Reynolds, 140 F. Supp. 2d 1314, 1322 (M.D. Fla. 2001) (finding waiver where the defendant
had waited fourteen months before demanding arbitration and had taken depositions,
requested document production, served written discovery, and responded to the
plaintiff’s written discovery).
4
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True, Defendant waited six months after Plaintiffs initiated this action before
demanding arbitration. (See Doc. 32, pp. 1, 6.) As a general matter, a delay in seeking
arbitration weighs in favor of finding waiver. Morewitz, 62 F.3d at 1366. But courts have
found that the length of time in itself does not establish waiver. See Grigsby & Assocs., Inc.
v. M. Secs. Inv., 635 F. App’x 728, 733 (11th Cir. 2015). Instead, the delay must be “coupled
with other substantial conduct inconsistent with an intent to arbitrate.” Id. (citing S & H
Contractors, Inc., 906 F.2d at 1514). Here, Plaintiffs point to no other substantial conduct
inconsistent with Defendant’s intent to arbitrate, and the weight of authority counsels
against a finding of substantial participation on this record.
2.
Prejudice
Even if the Court concluded that Defendant’s conduct amounted to substantial
participation, Plaintiffs have failed to demonstrate prejudice. “Prejudice has been found
in situations where the party seeking arbitration allows the opposing party to undergo
the types of litigation expenses that arbitration was designed to alleviate.” Morewitz,
62 F.3d at 1366. To determine prejudice, a court “may consider the length of delay in
demanding arbitration and the expense incurred by that party from participating in the
litigation process.” Garcia, 699 F.3d at 1277.
Plaintiffs argue that Defendant’s delay in seeking to compel arbitration has raised
their litigation costs. (Doc. 32, p. 7.) But Plaintiffs fail to include what litigation expenses
they incurred or the amount. (See id.) Given the limited nature of the proceedings,
Plaintiffs could not have expended more than minimal time and resources in prosecuting
this action prior to the Motion to Compel. The Court’s conclusion is strengthened by
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Plaintiffs having only served discovery on Defendant two weeks before the Motion to
Compel. (See Doc. 33 (noting that Plaintiffs served their initial interrogatories and
requests for production on June 9, 2017).)
In sum, Plaintiffs have failed to satisfy their “heavy burden of proof” in
demonstrating that Defendant acted so inconsistently with its arbitration right as to
constitute waiver. See Stone, 898 F.2d at 1543.
B.
Unconscionability
Having determined that Defendant has not waived its right to compel arbitration,
the Court turns to whether it may decide the merits of Plaintiffs’ unconscionability
argument. The Court finds that it may not.
Plaintiffs alternatively challenge the enforceability of the Arbitration Provision
under § 2 of the FAA. (Doc. 32, p. 7.) In doing so, they argue that it is unconscionable
under North Carolina law. (Id. at 7–12.)
Where, as here, “an arbitration agreement contains a delegation provision and the
plaintiff raises a challenge to the contract as a whole, the federal courts may not review
his claim because it has been committed to the power of the arbitrator.” Parnell, 804 F.3d
at 1146. Thus, a court retains jurisdiction to review a challenge only to the delegation
provision specifically. See Rent-A-Center, W. Inc. v. Jackson, 561 U.S. 63, 72 (2010); see also
Parnell, 804 F.3d at 1144. Only if a court determines “that the delegation clause is itself
invalid or unenforceable may [a court] review the enforceability of the arbitration
agreement as a whole.” Parm v. Nat’l Bank of Cal., N.A., 835 F.3d 1331, 1335 (11th Cir. 2016).
Thus, for the Court to examine the merits of Plaintiffs’ unconscionability
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argument, they must have alleged that the Delegation Provision specifically—and not
just the Arbitration Provision as a whole—is unconscionable. See Parnell, 804 F.3d at 1146.
None of Plaintiffs’ arguments are even remotely aimed at the Delegation Provision.
(Doc. 32, pp. 9–14.) Indeed, neither party even mentions the Delegation Provision.
Instead, the heart of Plaintiffs’ argument is directed at the Arbitration Provision as a
whole. (See Doc. 32, pp. 10–12.) As Plaintiffs have failed to challenge the Delegation
Provision specifically, the Court is required to treat it as valid under § 2 of the FAA and
must enforce it under §§ 3 and 4, leaving any challenge to the enforceability of the
Arbitration Provision as a whole for the arbitrator. See Jackson, 561 U.S. at 72; Parnell,
804 F.3d at 1146–47.
IV.
CONCLUSION
Accordingly, it is ORDERED AND ADJUDGED as follows:
1.
Defendant’s Motion to Dismiss [] Complaint and Compel Arbitration, and
Memorandum of Law in Support (Doc. 31) is GRANTED.
2.
This case is STAYED pending arbitration.
3.
The parties shall submit their dispute to the American Arbitration
Association.
4.
The parties are DIRECTED to jointly notify the Court of the status of the
arbitration proceedings on Wednesday, December 6, 2017, and every
ninety days thereafter. The parties are further DIRECTED to immediately
notify the Court upon conclusion of the arbitration proceedings.
5.
The Clerk is DIRECTED to administratively close the file.
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DONE AND ORDERED in Chambers in Orlando, Florida, on September 7, 2017.
Copies to:
Counsel of Record
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