Ouadani v. Dynamex Operations East, LLC

Filing 31

Chief Judge Patti B. Saris: ORDER entered. MEMORANDUM AND ORDER DENYING re: 14 MOTION to Dismiss and Compel Arbitration. (DaSilva, Carolina)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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Plaintiff,
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v.
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DYNAMEX OPERATIONS EAST, LLC
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Defendant.
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DJAMEL OUADANI,
on behalf of himself and
all others similarly situated,

Civil Action
No. 16-12036-PBS

MEMORANDUM AND ORDER
May 10, 2017
Saris, C.J.
INTRODUCTION

Plaintiff Djamel Ouadani brings this putative class action

against Defendant, Dynamex Operations East (“Dynamex”), alleging
violations of the Fair Labor Standards Act (“FLSA”), and the
Massachusetts misclassification and wage laws. Pending before
the Court is Dynamex’s motion to compel arbitration and dismiss
under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16
(2012), and Fed. R. Civ. P. 12(b)(1) (Docket No. 14). After
reviewing the parties’ briefs and hearing argument, the Court
DENIES the motion to compel arbitration and dismiss (Docket No.
14).

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FACTUAL BACKGROUND
The relevant facts are drawn from Ouadani’s complaint,
exhibits to the complaint, and the Dynamex-Selwyn and Birtha
Shipping, LLC Independent Contractor Agreement, which Dynamex
filed in support of its motion. See Docket No. 15, Ex. 1.1
Dynamex has not disputed any of these facts for the purposes of
evaluating its motion to compel arbitration.2
Ouadani is a Cambridge, Massachusetts resident who
responded to a Craigslist ad that Dynamex posted seeking
delivery drivers in the Boston area. Dynamex contacted Ouadani
and invited him to a meeting at Dynamex’s offices in Wilmington,
Massachusetts. Ouadani met with Dynamex employees, who described
the services that Dynamex provided for Google Express. Ouadani
also completed Dynamex paperwork (including his availability for
delivery shifts), paid for a Dynamex t-shirt, and had his
picture taken for a Dynamex ID badge. Dynamex employees told
Ouadani that he would have to associate with one of three
“Dynamex-affiliated vendors” in order to become a driver.

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The parties have not yet obtained discovery. However, neither
party objected to hearing the motion at this stage.
2

The First Circuit has not stated what standard the movant
should be held to at this stage, although some courts have
applied a summary judgment standard. See Proulx v. Brookdale
Living Communities, Inc., 88 F. Supp. 3d 27, 29 (D.R.I. 2015)
(citing cases). Neither party addressed the appropriate standard
of review in its brief.

2

Ouadani associated with Selwyn and Birtha Shipping, LLC (“SBS”),
but he never interviewed with its owner and manager, Edward
Alwis, who also worked as a Dynamex delivery driver. Neither
Dynamex nor SBS classified Ouadani as an employee.
Ouadani passed a drug test, received his Dynamex ID badge,
a cell phone and scanner set up with Google Express software,
and began performing delivery services, wearing his Dynamex
shirt all the while. Dynamex also issued Ouadani a company email
address, at which he received emails about shift scheduling,
work policies, and delivery procedures. See Docket No. 1, Exs.
4–9. Ouadani made pickups and deliveries across greater Boston.
SBS paid Ouadani an amount the former described as its payment
from Dynamex less a 17.5 percent deduction, which SBS attributed
to taxes and insurance. On August 22, 2016, Ouadani complained
to Dynamex that he did not have the independence of a contractor
and that he should be paid as an employee. The next day, Ouadani
was permanently removed from the driver schedule, resulting in
his termination.
Nearly three months before Ouadani’s interview with
Dynamex, Alwis, on behalf of SBS, signed a contract with
Dynamex. That contract governed the relationship between SBS and
Dynamex at all relevant times. Included in that agreement was an
obligation that SBS “furnish at its own discretion, selection,
and expense any and all Personnel required, necessary or
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incidental to [SBS]’s performance” of contracted services.
Docket No. 15, Ex. 1, at ¶ 6(b)(i). SBS was responsible for
paying its employees for work performed in relation to the
Dynamex-SBS independent contractor agreement. Id.
The Dynamex-SBS independent contractor agreement included a
sweeping arbitration provision governed by the FAA. The
arbitration clause covers disputes brought by SBS, Dynamex, “or
any agent acting on behalf of either.” Id. at ¶ 16(a)(i). The
provision explicitly subjects to arbitration “disputes regarding
any city, county, state or federal wage-hour law.” Id.
DISCUSSION
I.

The Road to Arbitration
Congress enacted the FAA in 1925 in “response to hostility

of American courts to the enforcement of arbitration agreements,
a judicial disposition inherited from then-longstanding English
practice.” Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111
(2001). To give effect to this purpose, section 2 of the FAA
provides that written arbitration agreements “shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C.
§ 2 (2012); see also Circuit City, 532 U.S. at 111. In short,
section 2 “is a congressional declaration of a liberal federal
policy favoring arbitration agreements.” Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). “At a
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minimum, this policy requires that ambiguities as to the scope
of the arbitration clause itself must be resolved in favor of
arbitration.” PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10, 15
(1st Cir. 2010).
In cases where the applicability of the arbitration
provision is unclear either in terms of scope or whether one or
more parties is bound by the agreement, courts conduct
additional inquiry. “[A]rbitration is a matter of contract and a
party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit.” AT & T Techs., Inc. v.
Commc’ns Workers of Am., 475 U.S. 643, 648 (1986) (quoting
United Steelworkers of Am. v. Warrior & Gulf Navig. Co., 363
U.S. 574, 582 (1960)). The party seeking to compel arbitration
must “demonstrate [1] that a valid agreement to arbitrate
exists, [2] that the movant is entitled to invoke the
arbitration clause, [3] that the other party is bound by that
clause, and [4] that the claim asserted comes within the
clause’s scope.” Soto-Fonalledas v. Ritz-Carlton San Juan Hotel
Spa & Casino, 640 F.3d 471, 474 (1st Cir. 2011); see also
McCarthy v. Azure, 22 F.3d 351, 354–55 (1st Cir. 1994).
Regarding the third prong, “courts should be extremely cautious
about forcing arbitration in situations in which the identity of
the parties who have agreed to arbitrate is unclear.” InterGen
N.V. v. Grina, 344 F.3d 134, 143 (1st Cir. 2003).
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Where one of the parties to a dispute is not a signatory to
the contract containing the arbitration clause, there are
typically five bases for requiring nonsignatories to arbitrate:
“1) incorporation by reference; 2) assumption; 3) agency; 4)
veil-piercing/alter ego; and 5) estoppel.” Thomson-CSF, S.A. v.
Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995). Two such
theories and a third, related theory might apply here: agency,
equitable estoppel, and third-party beneficiary.
II.

Forks in the Road
Dynamex argues that its independent contractor agreement

with SBS is valid and that Ouadani’s wage law claims are
expressly covered by the arbitration provision in that
agreement. Dynamex further argues that, even though Ouadani did
not sign that agreement, the arbitration provision requires
Ouadani to arbitrate his claims either because he was a SBS
agent or a third-party beneficiary to the agreement, or because
equitable estoppel prevents him from securing the benefits of
the agreement (work for pay) while avoiding the arbitration
provision.
Ouadani drives home one central argument: as a nonsignatory
to the Dynamex-SBS agreement, he cannot be bound by the
arbitration provision. Ouadani asserts that he had no knowledge
of the agreement at any point before, during or after his time
driving for Dynamex. It was only when Dynamex filed the pending
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motion, Ouadani claims, that he learned that the agreement and
its arbitration provision existed. At the hearing, Dynamex’s
counsel conceded that she had no information that Ouadani was
aware of the agreement during the relevant time period.
Rebutting Dynamex’s agency theory, Ouadani argues that the
principal’s contract with a third party only binds the agent if
the agent himself agrees. Ouadani asserts that he is not bound
by the arbitration as a third-party beneficiary because the
contract did not express a clear intent to afford rights and
benefits to Ouadani or other drivers. Finally, Ouadani states
that he cannot be bound to arbitrate on an equitable estoppel
theory because he has not embraced the Dynamex-SBS agreement, or
its benefits, in any way.
a.

Agency

“Traditional principles of agency law may bind a
nonsignatory to an arbitration agreement.” Thomson-CSF, S.A., 64
F.3d at 777. “[A]n agent is entitled to the protection of her
principal’s arbitration clause when the claims against her are
based on her conduct as an agent.” Grand Wireless, Inc. v.
Verizon Wireless, Inc., 748 F.3d 1, 11 (1st Cir. 2014). Accord
Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d
1110, 1121 (3d Cir. 1993) (applying traditional agency
principles and permitting defendant’s nonsignatory employee to
invoke arbitration clause). The cases Dynamex relies on to bind
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the nonsignatory agent to an arbitration clause by virtue of his
agency are ones in which the nonsignatory agent was a defendant
in the case seeking the protection of an arbitration clause in
an agreement the plaintiff signed with the principal. The
analysis in those cases focused on granting the agent the
protection of the arbitration clause in order to prevent a
signatory plaintiff from evading arbitration by suing an agent
rather than the principal. See Pritzker, 7 F.3d at 1122.
This case is distinct. Ouadani is not seeking the
protection of an arbitration clause, and he alleges that he was
not aware the arbitration provision existed at any point while
he worked for Dynamex, or up until Dynamex filed its motion.
Ouadani cannot be bound to arbitrate on traditional agency
principles.
b.

Equitable Estoppel

The doctrine of equitable estoppel precludes a party from
enjoying rights and benefits under a contract while at the same
time avoiding its burdens and obligations. InterGen, 344 F.3d at
145. On this basis, “a party may be estopped from asserting that
the lack of his signature on a written contract precludes
enforcement of the contract’s arbitration clause when he has
consistently maintained that other provisions of the same
contract should be enforced to benefit him.” Int’l Paper Co. v.
Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th
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Cir. 2000). Federal courts generally “have been willing to estop
a signatory from avoiding arbitration with a nonsignatory when
the issues the nonsignatory is seeking to resolve in arbitration
are intertwined with the agreement that the estopped party has
signed.” Thomson–CSF, 64 F.3d at 779. But they have been
hesitant to estop a nonsignatory seeking to avoid arbitration.
InterGen, 344 F.3d at 145–46. In the latter situation, estoppel
has been limited to “cases [that] involve non-signatories who,
during the life of the contract, have embraced the contract
despite their non-signatory status but then, during litigation,
attempt to repudiate the arbitration clause in the contract.”
E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin
Intermediates, S.A.S., 269 F.3d 187, 200 (3d Cir. 2001).
Dynamex’s equitable estoppel argument hits another
roadblock. Dynamex has offered no evidence of how Ouadani
secured the benefits of the Dynamex-SBS agreement before seeking
to avoid arbitration. The First Circuit requires the
nonsignatory to have “embraced” the contract during its life in
order for equitable estoppel to prevent it from evading an
arbitration provision. See InterGen, 344 F.3d at 146. The two
cases Dynamex cites in support of its equitable estoppel theory
involve more “knowing” embrace of the benefits of the contract
containing the arbitration clause. See Kairy v. SuperShuttle
Int’l, Inc., No. 08-02993, 2012 WL 4343220, at *9 (N.D. Cal.
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Sept. 20, 2012); Fluehmann v. Assocs. Fin. Servs., No. 01-40076,
2002 WL 500564, at *7 (D. Mass. March 29, 2002).
Kairy is the closest case on point. Kairy involved FLSA and
California wage and misclassification claims brought by airport
shuttle franchisees and independent contractors. 2012 WL
4343220, at *1. Most of the plaintiffs signed contracts
containing arbitration provisions, but, certain “secondary
drivers” hired by franchisees did not sign agreements with the
defendant. Id. at *9. In Kairy, the Court determined that the
secondary drivers, despite their nonsignatory status, “knowingly
exploited the rights and privileges granted under the
[franchise] agreements.” Id. The Court discussed how the wage
claims required that the secondary drivers specifically perform
under the franchise agreements. Id. Additionally, the Court
deemed the secondary drivers to be “intended third party
beneficiaries to the contracts.” Id. Thus, Kairy rests both on a
finding that the nonsignatory plaintiffs “knowingly exploited
the rights and privileges under the agreements” and that the
nonsignatory plaintiffs were “intended third-party
beneficiaries” of those agreements.
Here, there is no evidence that Ouadani embraced the
Dynamex-SBS contract, and it is clear he could not, given that
he did not know it existed. At the hearing on its motion,
Dynamex’s counsel asserted that Ouadani embraced the benefits of
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the Dynamex-SBS contract because that was how he determined that
he was to be paid $72 for a four-hour shift. In his complaint,
though, Ouadani alleges that Dynamex employees told him, during
a meeting at Dynamex’s offices, that he would be paid $72 for a
four-hour shift. Docket No. 1, ¶ 5. And Dynamex cites no term in
the Dynamex-SBS contract requiring SBS to pay its independent
contractors at that rate, or at any particular rate at all. See
Docket No. 15, Ex. 1, ¶ 6(b)(i).
To bind Ouadani on an equitable estoppel theory, Dynamex
must show that Ouadani embraced the benefits of the Dynamex-SBS
agreement. Dynamex has failed to meet its burden on the record
before the Court.
c.

Third-party beneficiary

When the nonsignatory is a third-party beneficiary of the
contract containing the arbitration clause, he or she may be
forced to arbitrate. InterGen, 344 F.3d at 146. The law requires
“special clarity” to support a finding “that the contracting
parties intended to confer a benefit” on a third party.
McCarthy, 22 F.3d at 362.
Dynamex’s third-party beneficiary argument is unavailing.
Dynamex has not pointed to any language in its agreement with
SBS that meets the rigorous standard for establishing thirdparty beneficiary status. See InterGen, 344 F.3d at 146.
Although the agreement obligates SBS to make sure that its
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drivers “satisfy and comply with all terms” of the agreement,
see Docket No. 15, Ex. 1, at ¶ 6(b)(v), that language does not
express a clear intent to afford rights and benefits on Ouadani
and other drivers. Cf. Torres v. Simpatico, Inc., 781 F.3d 963,
971 (8th Cir. 2015) (allowing nonsignatories to invoke
arbitration clause as third-party beneficiaries where agreement
expressly stated its intent “to benefit and bind certain third
party non-signatories” via the arbitration provision).
III. End of the Road
Dynamex advances no other theory for binding Ouadani, a
nonsignatory, to arbitrate under the Dynamex-SBS independent
contractor agreement. The Court will not address the other
issues raised by Ouadani. In other words, that road ends here.
ORDER
Dynamex’s motion to compel arbitration and dismiss (Docket
No. 14) is DENIED.

/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge

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