Thomas et al v. Downriver Staffing Group, LLC et al
Filing
27
OPINION and ORDER Granting In Part and Denying In Part Defendants' 20 Motion to Compel Arbitration and Stay or Dismiss Proceedings. Signed by District Judge Linda V. Parker. (RLou)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
VINCENT THOMAS AND
ALAN QUEEN,
Plaintiffs,
v.
Civil Case No. 15-10055
Honorable Linda V. Parker
RIGHT CHOICE STAFFING
GROUP, LLC, ADEPT
SERVICES GROUP, INC.,
DOWNRIVER STAFFING
GROUP, LLC, AUTOLINE
TRANSPORTATION, INC.
TIMOTHY SCHULTZ, AND
TRACY SHAFFER,
Defendants.
__________________________/
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND STAY OR
DISMISS PROCEEDINGS
On January 7, 2015, Plaintiffs filed this putative class action lawsuit against
Defendants alleging violations of the Fair Labor Standards Act (“FLSA”), 29
U.S.C. §§ 201-219. Plaintiffs filed an amended complaint on February 20, 2015.
(ECF No. 4.) Presently before the Court is Defendants’ Motion to Compel
Arbitration and Stay or Dismiss Proceedings, filed April 1, 2015. (ECF No. 20.)
The motion has been fully briefed. (ECF Nos. 21, 23-24, 26.) Finding the facts
1
and legal arguments sufficiently presented in the parties’ pleadings, the Court
dispensed with oral argument pursuant to Eastern District of Michigan Local Rule
7.1(f) on April 28, 2015. (ECF No. 22.) For the reasons that follow, the Court is
granting in part and denying in part Defendants’ motion.
Factual and Procedural Background
Defendants Right Choice Staffing Group, LLC (“Right Choice”), Adept
Services Group, Inc. (“Adept”), Downriver Staffing Group, LLC (“Downriver
Staffing”), and Autoline Transportation, Inc. (“Autoline”) (collectively “Defendant
Entities”) are in the business of moving automobiles, primarily for Chrysler Group,
LLC, from one location to another within the State of Michigan. (Am. Compl.
¶ 29.) Defendant Timothy Schultz (“Schultz”) is the resident agent, authorized
officer, and manager of the Defendant Entities. (Id. ¶ 20.) Defendant Tracy
Shaffer (“Shaffer”) is the Staffing Manager, Manager, and Human Resources agent
for the Defendant Entities. (Id. ¶ 21.) The Defendant Entities share the same
resident agent, managers, office location, staff, and employees, and otherwise
operate as the same business entity. (Id. ¶ 22; see also Pls.’ Resp., Ex. 1, ECF No.
21-2.) Autoline, which was incorporated on June 15, 2012, was dissolved as a
Michigan corporation on February 25, 2014. (Am. Compl. ¶ 19; Pls.’ Resp., Ex. 1,
ECF No. 21-1.)
2
Defendants hire qualified drivers to move vehicles as needed by Defendants’
clients. Plaintiff Vincent Thomas (“Thomas”) began working as a driver in
September 2012. Although Defendants state that Thomas was hired by Right
Choice, the Michigan Department of Licensing and Regulatory Affairs’ website
reflects Right Choice as having been formed only on September 17, 2013. (Pls.’
Resp., Ex. 1, ECF No. 21-2.) On October 21, 2013, Thomas signed a document
with the heading “Adept Services Group” in which he represents that he is a
“contractor” or “contract worker” of Adept or its subsidiaries, including but not
limited to Autoline and Right Choice and that, as such, he is “responsible for [his]
own health insurance pursuant to the Affordable Care Act . . ..” (Defs.’ Mot., Ex.
2, ECF No. 20-3.) Thomas also executed a “Subcontractor Agreement” between
himself and Right Choice. (Id., Ex. 3, ECF No. 20-4.)
The Subcontractor Agreement states that it is “made and effective” on
December 16, 2013, and it is signed by Shaffer as Chief Operating Officer of Right
Choice. (Id.) The document provides that “the Contractor [Right Choice] has
entered into an agreement with the Subcontractor [Thomas] for various duties such
as driveway work known henceforth as ‘Subcontractor Work.’ ” (Id.) It further
provides that Thomas “shall be employed as an independent contractor and shall be
responsible to provide and furnish all tools, materials and supplies needed or
necessary to the performance of the work . . ..” (Id.) The agreement reflects that
3
Thomas would be paid $8.00 per hour for his work. (Id.) It contains the following
arbitration clause:
Any and all disputes arising out of the Subcontract between
Contractor and Subcontractor shall be resolved by binding arbitration.
In doing so, the parties expressly waive their right to a jury trial if any,
on these issues and further agree that the award of the arbitrator shall
be final and binding upon them as though rendered by a court and
shall be enforceable in any court having jurisdiction over the same.
(Id. ¶ 8.)
Plaintiff Alan D. Queen (“Queen”) began working as a driver on or about
February 26, 2013. On October 21, 2013, Queen also signed an “Adept Services
Group” document, stating that he is a contractor and responsible for his own health
insurance pursuant to the Affordable Care Act. (Defs.’ Mot., Ex. 4, ECF No. 205.) On December 16, 2013, Queen also executed a Subcontractor Agreement,
which is identical to the agreement signed by Thomas except that Queen’s hourly
rate is identified as $11.00. (Id., Ex. 5, ECF No. 20-6.)
In this lawsuit, Plaintiffs allege that although classified as independent
contractors, they in fact were employees and thus were entitled under the FLSA to
one and a half times their regular rates of pay for hours worked over forty hours in
a week. Plaintiffs allege that they and other similarly situated individuals worked
more than forty hours per week, but were not compensated by Defendants in
accordance with the FLSA.
4
Defendants’ Arguments and Plaintiffs’ Response
In their pending motion, Defendants argue that the Subcontractor
Agreement, specifically the arbitration clause therein, requires Plaintiffs to
arbitrate their FLSA claims, including their claim that they were erroneously
classified as independent contractors rather than employees. Defendants maintain
that the Honorable Judith E. Levy compelled arbitration in a case against Right
Choice and Adept in which the same Subcontractor Agreement governed the
parties’ relationship. (Defs.’ Br. in Supp. of Mot. at Pg ID 125, citing Order
Granting in Part and Den. in Part Defs.’ Mot. to Compel Arbitration and Stay or
Dismiss Proceedings, Conner v. Right Choice Staffing Group, LLC, No. 14-12887,
(E.D. Mich. Jan. 16, 2015), ECF No. 21.)
Defendants argue that Plaintiffs must submit their claims to arbitration
individually, rather than for class-wide arbitration. Defendants contend that
Plaintiffs’ claim against Downriver Staffing, Autoline, Schultz, and Shaffer should
be dismissed with prejudice because Plaintiffs did not work for them, but rather
only Right Choice.
Alternatively, Defendants contend that Plaintiffs’ claim against Downriver
Staffing, Autoline, Schultz, and Shaffer should be submitted to arbitration pursuant
to the terms of the Subcontractor Agreement based on the agency relationship
between these defendants and Right Choice and because the claim is intertwined
5
with the underlying contract. Specifically, Defendants argue, Plaintiffs claims
against all defendants is dependent upon whether Plaintiffs were fully compensated
and worked as independent contractors.
Finally, Defendants argue that Plaintiffs settled their claims when they
received, endorsed, and presented for payment checks they received from Right
Choice in a settlement with the United States Department of labor. (Defs.’ Mot.,
Exs. 7, 8, ECF Nos. 20-8, 20-9.) Thomas was paid $661.00, and Queen was paid
$1,307.48. (Id.)
Plaintiffs argue in response that because they are not claiming that Right
Choice violated any terms of the Subcontractor Agreements, their FLSA claims do
not fall within the arbitration clause of those agreement.1 Plaintiffs contend that
their claims instead arise out of the employment relationship. Analogizing their
case to Bratt Enterprises, Inc. v. Noble International Limited, 338 F.3d 609 (6th
Cir. 2003), Plaintiffs maintain that the language of the arbitration clause in the
Subcontractor Agreements is not sufficiently broad to encompass their claims.
Plaintiffs stress that their opposition to Defendants’ motion to compel is not
premised on an argument that the Subcontractor Agreements are unenforceable,
unconscionable, or obtained through fraud or duress or that Defendants waived any
right to arbitration. (Pls.’ Resp. Br. at Pg ID 158-59, ECF No. 21.) Plaintiffs
indicate that they also are not arguing that the arbitration provision is
unenforceable because it impinges on federally guaranteed substantive or
procedural rights or because of a lack of knowing and voluntary waiver of any
rights on Plaintiffs’ behalf. (Id.)
6
1
But even if their claims fall within the scope of the Subcontractor
Agreements, Plaintiffs contend that there is no basis for requiring them to arbitrate
their claims against any defendant but Right Choice, as Adept, Downriver Staffing,
and Autoline are neither parties to nor third-party beneficiaries of the
Subcontractor Agreements, and, Plaintiffs argue, they do not fall within any of the
recognized factors under which non-signatories are bound to arbitration
agreements. Plaintiffs contest Defendants’ assertion that they worked only for
Right Choice-- pointing out that Right Choice was formed only after Thomas and
Queen were hired. Plaintiffs maintain that whether they were contractors or
employees also is a fact in dispute.
Plaintiffs argue that the facts and legal arguments asserted by the parties in
Bratt Enterprises are distinguishable from the present case and thus Judge Levy’s
decision in that case provides no support for Defendants’ arguments here. Finally,
Plaintiffs argue that they have not settled their claims by accepting, endorsing, and
submitting for payment the checks they received pursuant to Right Choice’s
settlement with the Department of Labor, because there is no showing of an
informed and meaningful agreement to waive their right to bring a private action.
Applicable Law and Analysis
The Court addresses first Defendants’ arguments that Plaintiffs already
settled their claims and that Downriver Staffing, Autoline, Schultz, and Shaffer
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should be dismissed with prejudice because Plaintiffs did not work for them.
Defendants fail to show an informed and meaningful agreement by Plaintiffs to
waive their right to bring a private action. The mere cashing of a check for back
wages does not constitute an “agreement” to settle and thus a waiver of the
employee’s right to sue. See, e.g., Walton v. United Consumers Club, Inc., 786
F.2d 303, 305-06 (7th Cir. 1986) (explaining Department of Labor’s distinctive
treatment for settlements it believes constitute a full settlement on behalf of
employees and those that fall short); see also Beauford v. ActionLink, LLC, 781
F.3d 396, 406 (8th Cir. 2015) (“Simply tendering a check and having the employee
cash that check does not constitute an ‘agreement’ to waive claims” . . . the
employee must also sign a waiver of any legal claims in a process supervised by
the Department of Labor); Sneed v. Sneed’s Shipbuilding, Inc., 545 F.2d 537 (5th
Cir. 1997) (finding valid waiver under the FLSA where the employee agreed to
accept the payment the Department of Labor determined to be due and signed a
waiver).
Defendants offer no evidence in support of their assertion that Plaintiffs
never worked for any entity but Right Choice, and the assertion is contrary to the
allegations in Plaintiffs’ amended complaint. (See, e.g., Am. Compl. ¶ 1.)
Plaintiffs’ allegations must be presumed true for purposes of deciding Defendants’
motion to dismiss. See Erickson v. Pardus, 551 U.S. 89, 94 (2007). Moreover,
8
Plaintiffs both began working as drivers before Right Choice is reflected as being
formed. Thus they presumably worked for one or more of the other defendants
prior to that time. Lastly, the documents Plaintiffs signed related to health
insurance coverage bears the heading “Adept Services Group.”
Plaintiffs allege that Schultz and Shaffer worked as a manager, staffing
manager, or human resources agent. Shaffer signed the Subcontractor Agreements
as Right Choices’ Chief Operating Officer. The FLSA imposes individual liability
on “any person acting directly or indirectly in the interest of an employer in
relation to an employee . . ..” 29 U.S.C. § 203(d). The Sixth Circuit uses an
“economic reality” test to determine whether a person is an “employer” responsible
for FLSA obligations. Fegley v. Higgins, 19 F.3d 1126, 1131 (6th Cir.), cert.
denied, 513 U.S. 875 (1994). This test considers whether the individual has
operational control of the corporation, has a significant ownership interest in it,
controls significant functions of the business, determines salaries, or makes hiring
decisions. Id.; see also U.S. Dep’t of Labor v. Cole Enter., Inc., 62 F.3d 775, 778
(6th Cir. 1995). At this stage of the proceedings, Schultz’s and Shaffer’s roles are
not sufficiently developed to determine whether they can or cannot be held liable
under the FLSA.
For these reasons, the Court cannot conclude that Downriver Staffing,
Autoline, Schultz, or Shaffer must be dismissed with prejudice or that Plaintiffs
9
settled their claims. Thus the Court turns to the question of whether Plaintiffs’
claims against these defendants and Right Choice are subject to arbitration.
When considering a motion to stay proceedings and compel arbitration
under the Federal Arbitration Act (“FAA”), the court has four tasks: (1) to
determine whether the parties agreed to arbitrate; (2) to determine the scope of any
agreement to arbitrate; (3) if federal statutory claims are asserted, to decide
whether Congress intended those claims to be non-arbitrable; and (4) if the court
finds some, but not all, claims subject to arbitration, to decide whether to stay the
remainder of the proceedings pending arbitration. Stout v. J.D. Byrider, 228 F.3d
709, 714 (6th Cir. 2000).
Plaintiffs do not dispute that they agreed to arbitrate certain matters. The
Sixth Circuit has concluded that FLSA claims are arbitrable. Floss v. Ryan’s
Family Steak Houses, Inc., 211 F.3d 306 (6th Cir. 20000). Thus the only tasks this
Court has to perform are determining whether the arbitration agreement’s scope
extends to Plaintiffs’ FLSA claims and, if it reaches some but not all of Plaintiffs’
claims, whether a stay of any non-arbitrable claim is appropriate.
When analyzing the scope of an arbitration agreement, courts in the Sixth
Circuit examine the language of the agreement “in light of the strong federal policy
in favor of arbitration, resolving any doubts as to the parties’ intentions in favor of
arbitration.” Albert M. Higley Co. v. N/S Corp., 445 F.3d 861, 863 (6th Cir. 2006)
10
(citing Great Earth Cos., Inc. v. Simons, 288 F.3d 878 (6th Cir. 2002)); see also
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)
(interpreting the FAA as establishing that “as a matter of federal law, any doubts
concerning the scope of arbitrable issues should be resolved in favor of
arbitration”). “However, countervailing principles also apply,” Nestle Waters N.
Am., Inc. v. Bollman, 505 F.3d 498, 504 (6th Cir. 2007), as “the federal policy in
favor of arbitration is not an absolute one[.]” Albert M. Higley Co., 445 F.3d at
863. Rather, “[a]rbitration under the [FAA] is ‘a matter of consent, not
coercion.’ ” Id. (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford
Junior Univ., 489 U.S. 468, 479 (1989)). Thus, “[w]hile ambiguities in the
language of the agreement should be resolved in favor of arbitration, we do not
override the clear intent of the parties, or reach a result inconsistent with the plain
text of the contract, simply because the policy favoring arbitration is implicated.”
EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002) (internal citation omitted).
In sum, “no matter how strong the federal policy favors arbitration, arbitration is a
matter of contract between the parties, and one cannot be required to submit to
arbitration a dispute which it has not agreed to submit to arbitration.” Simon v.
Pfizer Inc., 398 F.3d 765, 775 (6th Cir. 2005) (citations omitted).
Plaintiffs can prevail in this matter only if they are found to have been
employees rather than independent contractors, because “[u]nder the FLSA, only
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employees are entitled to overtime and minimum-wage compensation. . . .
Independent contractors do not enjoy [the] FLSA’s protections.” Keller v. Miri
Microsystems LLC, 781 F.3d 799, 807 (6th Cir. 2015) (citing cases). The
agreements signed by Plaintiffs require the parties to submit to binding arbitration
“[a]ny and all disputes arising out of this Subcontract between Contractor and
Subcontractor[.]” (Defs.’ Mot. Exs. 3, 5 (emphasis added).) The agreements do
more than establish the hourly rate to be paid Plaintiffs. (Id.) They define
Plaintiffs as independent contractors. (Id.) The dispute regarding Plaintiffs’
classification therefore arises out of the agreements and falls within the scope of
the arbitration provision. See Muriithi v. Shuttle Exp., Inc., 712 F.3d 173, 179 (4th
Cir. 2013) (finding arbitration clause in agreement classifying the plaintiff as an
independent contractor sufficiently broad to render arbitrable the issue of
plaintiff’s classification for purposes of his FLSA claim). The Court, however,
must address the fact that the Subcontractor Agreements were effective only as of
December 16, 2013 (after Plaintiffs began the work for which they claim
entitlement to overtime pay) and the fact that the agreements are between Plaintiffs
and Right Choice, only.
As relevant to the effective date of the agreements, the FLSA statute of
limitations is two years for non-willful violations and three years for willful ones.
29 U.S.C. § 255(a). In their amended complaint, Plaintiffs allege that Defendants’
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violations were willful. (Am. Compl. ¶ 35.) Thomas began working in September
2012, and Queen began working in February 2013. As such, Plaintiffs are seeking,
and can seek, relief under the FLSA for a period before the Subcontractor
Agreements became effective. The plain language of the agreements does not
render them retroactive. Nothing in the language of the agreements reflects an
intent to impose a duty to arbitrate matters arising before the effective date, nor do
the agreements define the work Plaintiffs’ performed before the effective date.
Therefore, the Court concludes that Plaintiffs cannot be compelled to arbitrate their
claims with respect to their FLSA rights before December 16, 2013.2
With respect to the fact that only Right Choice is a signatory to the
agreements with Plaintiffs, a contract generally cannot bind a nonparty. AFSCME
Council 25 v. Wayne Cnty., 811 N.W.2d 4, 11 (Mich. Ct. App. 2011) (quoting
The Court acknowledges the Michigan courts’ preference for disputes in a case
being resolved in a single forum. See City of Detroit Police & Fire Ret. Sys. v.
GSC CDO Fund, Ltd., No. 289185, 2010 WL 1875758, at *4 (Mich. Ct. App. May
11, 2010) (quoting Rooyakker & Sitz, PLLC v. Plante & Moran, PLLC, 742
N.W.2d 409, 421 (Mich. Ct. App. 2007) (“[T]his state has a strong public policy
that favors arbitration ‘as a single, expeditious means of resolving disputes,’ and
that this policy would be thwarted if all disputed issues in a case had to be
segregated into arbitrable and non-arbitrable categories.”). Nevertheless, as
indicated, “[w]hile ambiguities in the language of the agreement should be
resolved in favor of arbitration, [the court] do[es] not override the clear intent of
the parties, or reach a result inconsistent with the plain text of the contract, simply
because the policy favoring arbitration is implicated.” Huffman v. Hilltop Co., 747
F.3d 391, 396 (6th Cir. 2014). “Moreover, because arbitration is a creature of
contract, a party may not be compelled to arbitrate any dispute he has not agreed to
arbitrate.” Id. (internal quotation marks, citation, brackets, and ellipsis omitted).
13
2
EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002) (“It goes without saying
that a contract cannot bind a nonparty.”)). Therefore, “a party cannot be required
to arbitrate when it is not legally or factually a party to the agreement.” St. Clair
Prosecutor v. AFSCME, 388 N.W.2d 231, 239 (Mich. 1986). Nevertheless,
“[n]onsignatories of arbitration agreements can still be bound by [the] agreement
pursuant to ordinary contract-related legal principles, including incorporation by
reference, assumption, agency, veil-piercing/alter ego, and estoppel.” AFSCME
Council 25, 811 N.W.2d at 81 (citing Thomson-CSF, S.A. v. Am. Arbitration Ass’n,
64 F.3d 773, 776 (2d Cir. 1995)). State law governs the question of whether a nonparty can enforce an arbitration clause against a party. Arthur Andersen LLP v.
Carlisle, 556 U.S. 624, 631 (2009).
Under Michigan law, “a party to an arbitration agreement may be equitably
estopped from litigating its claims against non-parties in court and may be ordered
to arbitration . . . ‘when the signatory raises allegations of substantially
interdependent and concerted misconduct by both the non-signatory and one or
more signatories to the contract.’ ” City of Detroit Police and Fire Ret. Sys. v.
GSC CDO Fund, Ltd., No. 289185, 2010 WL 1875758, at *6 (Mich. Ct. App. May
11, 2010) (unpublished opinion) (quoting Brown v. Pacific Life Ins. Co., 462 F.3d
384, 398 (5th Cir. 2006)). Several federal circuit courts have utilized this estoppel
theory-- termed “alternative estoppel”-- to bind a signatory to arbitrate with a non14
signatory at the non-signatory’s insistence because of the close relationship
between the entities involved, the relationship of the alleged wrongs to the
obligations and duties in the contract, and the fact that the signatory’s claims
“ ‘were intimately founded in and intertwined with the underlying contract
obligations.’ ” Thomson-CSF, 64 F.3d at 779 (brackets removed) (quoting Sunkist
Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir. 1993),
abrogated on other grounds by Carlisle, 556 U.S. 624); see also J.J. Ryan & Sons,
Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 320-21 (4th Cir. 1988); McBro
Planning & Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342, 344 (7th Cir.
1984), abrogated on other grounds by Carlisle, 556 U.S. 624. Specifically related
to the present case, courts have relied on alternative estoppel to require arbitration
of a signatory’s charges against a parent company where the signatory entered into
an arbitration agreement with the parent’s subsidiary. J.J. Ryan & Sons, 863 F.2d
at 320-21 (citing cases) (“when the charges against a parent company and its
subsidiary are based on the same facts and are inherently inseparable, a court may
refer claims against the parent to arbitration even though the parent is not formally
a party to the arbitration agreement.”).
The Honorable Judith E. Levy recently relied on alternative estoppel when
requiring the signatories to an arbitration agreement to arbitrate their FLSA claims
against a non-signatory in Southerland v. Corporate Transit of America, No. 1315
14462, 2014 WL 4906891, at *5 (E.D. Mich. Sept. 30, 2014) (unpublished)-- a
case different than the one cited in Defendants’ motion. In Southerland, the
plaintiffs were delivery drivers who provided transportation services to third
parties on behalf of the defendant, Corporate Transit of America (“CTA”). Id. at
*1. CTA obtained the plaintiffs’ services through a third party, Subcontracting
Concepts, LLC (“SCI”). Id. The plaintiffs alleged they were employed as drivers
by CTA and thus entitled to overtime pay under the FLSA. Id. CTA alleged that
the plaintiffs were independent contractors and thus not entitled to the FLSA’s
protections. Id.
In order to work for CTA, the plaintiffs had to sign both an Independent
Contractor Acknowledgment Form with CTA and an Owner/Operator Agreement
with SCI. Id. The latter agreement contained an arbitration clause. Id. at **1-2.
When the plaintiffs sued CTA for FLSA violations, CTA moved to compel
arbitration pursuant to the terms of the SCI agreement and Judge Levy granted the
motion. The court relied on the undisputed fact that CTA and SCI were closely
related, that the plaintiffs foresaw the involvement of CTA in their relationship
with SCI, and finally that “most, if not all, of the issues raised by the plaintiff[s]
. . . are explicitly addressed by the SCI Agreement.” Id. at 5.
Similarly, in the present case, the Defendant Entities are closely related.
Plaintiffs in fact allege that “Defendant corporations share the same Resident
16
Agent, Managers, office location, staff and employees and otherwise operate as the
same business entity.” (Am. Compl. ¶ 22.) The issues raised by Plaintiffs-- that is,
whether they were employees or independent contractors-- are explicitly addressed
by the Subcontractor Agreements. This Court therefore concludes that Plaintiffs
are required to arbitrate their FLSA claims against all Defendants relating to work
performed as of the effective date of the Subcontractor Agreements.
Having reached the above conclusions, the Court next turns to Plaintiffs’
request for classwide relief. Plaintiffs’ request raises two issues: (1) whether the
arbitration agreement provides for classwide arbitration; and (2) whether the court
or arbitrator must decide the issue of classwide arbitrability. See Reed Elsevier,
Inc. v. Crockett, 734 F.3d 594 (6th Cir. 2013). As to the latter issue, the Sixth
Circuit has held “that the question whether an arbitration agreement permits
classwide arbitration is a gateway matter, which is reserved ‘for judicial
determination unless the parties clearly and unmistakably provide otherwise.’ ” Id.
at 599. Where the agreement does not mention classwide arbitration at all, the
Reed Elsevier court held that the determination of classwide arbitrability lies with
the court. Id. According to the court, silence with respect to classwide arbitration
also means that classwide arbitration is not authorized. Id. (“The principle reason
to conclude that this arbitration clause does not authorize classwide arbitration is
that the clause nowhere mentions it.”); see also Huffman v. The Hilltop Co., 747
17
F.3d 391, 398-99 (6th Cir. 2014) (finding Reed Elsevier controlling such that an
agreement’s silence as to classwide arbitration is construed as not authorizing
classwide arbitration). The arbitration clause in the Subcontractor Agreements
does not mention classwide arbitration. As such, the Court makes the
determination that Plaintiffs may not seek classwide relief with respect to their
FLSA claims arising from work performed under the Subcontractor Agreement
(i.e., work performed as of December 16, 2013).
The remaining question is whether the Court should stay the proceedings
with respect to Plaintiffs’ FLSA claims related to work performed prior to
December 16, 2013, pending arbitration. The Federal Arbitration Act allows
piecemeal, concurrent litigation where only some of the relevant issues are
arbitrable. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985).
Nevertheless, the Supreme Court has determined that “[i]n some cases . . . it may
be advisable to stay litigation among the nonarbitrating parties pending the
outcome of the arbitration. That decision is one left to the district court . . . as a
matter of its discretion to control its docket.” Moses H. Cone Mem’l Hosp., 460
U.S. at 20 n. 23. Exercising that discretion, several district courts within the Sixth
Circuit have stayed the litigation of non-arbitrable claims pending the outcome of
an arbitration. See, e.g., Stacy v. H & R Block Tax Servs., Inc., No. 07-13327,
2008 WL 321300 (E.D. Mich. Feb. 4, 2008); Vaughn v. Marshall, No. 2:09 CV
18
00097, 2009 WL 3260382, at *4 (S.D. Ohio Oct. 8, 2009); DRS Precision Echo,
Inc. v. Michigan Magnetics, Inc., No. 1:02-cv-161, 2003 WL 1141900, at *5 (W.D.
Mich. Jan. 7, 2003).
Citing a Sixth Circuit case as precedent, one district judge in this Circuit
held that “where some claims are non-arbitrable, they can simultaneously proceed
in [the district c]ourt only if they can be separated out; in other words, if their
resolution has no effect on the arbitrable issues.” DRS Precision Echo, Inc., 2003
WL 1141900, *5 (emphasis in original) (citing Lipskey v. Oppenheimer & Co., 717
F. 2d 314, 319-20 (6th Cir. 1983)). As stated by another district judge, a court
should stay litigation of non-arbitrable claims “where a decision in one forum
could affect the resolution of claims in the other.” Spartech CMD, LLC v. Int’l
Auto. Components Grp., N.A., No. 08-13234, 2009 WL 440905, at *13 (E.D. Mich.
Feb. 23, 2009). Courts have found a stay appropriate where “a lawsuit against a
nonsignatory [to an arbitration agreement] depends upon the same facts and is
inherently inseparable from the arbitrable claims,” Patnik v. Citicorp Bank Trust
FSB, 412 F. Supp. 2d 753, 762 (N.D. Ohio 2005), where the arbitration may
resolve issues in the lawsuit, Sierra Rutile Ltd. v. Katz, 937 F.2d 743, 750 (2d Cir.
1991), or where staying the litigation would promote the federal policy in favor of
arbitration, AgGrow Oils, LLC v. Nat’l Union Fire Ins. Co., 242 F.3d 777, 782 (8th
Cir. 2001). In comparison, courts have found a stay unnecessary after finding the
19
non-arbitrable issues insufficiently intertwined with arbitrable issues, such as
where the claims are “ based on separate and distinct projects. . ..” Yamasaki Korea
Architects, Inc. v. Yamasaki Assoc., Inc., No. 08-10342, 2008 WL 4940590, at *5
(E.D. Mich. Nov. 17, 2008); see also Spartech CMD, 2009 WL 440905, at *14
(declining to stay non-arbitrable claims which were based on a contract distinct
from those requiring arbitration and involved an independent transaction).
In the instant case, Plaintiffs’ arbitrable and non-arbitrable claims are
inseparable, as a resolution of both depends upon the determination of whether
Plaintiffs were employees or independent contractors when they worked as drivers
for Defendants. There is no suggestion that the manner in which Plaintiffs
performed this work changed over time and thus it appears that they retained the
same status (employer or independent contractor) before and after the
Subcontractor Agreements’ effective date. A decision in one forum with respect to
this issue clearly has an effect on the resolution of Plaintiffs’ FLSA claims in the
other forum. Efficiency concerns also favor a stay. If the arbitrator determines
that Plaintiffs were independent contractors, that finding would be dispositive of
their non-arbitrable FLSA claims. As such, the Court is staying Plaintiffs’ nonarbitrable FLSA claims pending the outcome of arbitration.
20
Conclusion
In summary, the Court finds no basis to dismiss Plaintiffs’ claims against
any defendant at this time. The Court also finds that Plaintiffs and Right Choice
agreed to arbitrate disputes arising under the Subcontractor Agreements, effective
December 16, 2013, and that the scope of the arbitration clause in those
agreements extends to the issue of whether Plaintiffs were independent contractors
or employees when they worked as drivers. Alternative estoppel requires Plaintiffs
to arbitrate their FLSA claims against all Defendants with respect to this issue.
The plain language of the Subcontractor Agreements does not extend the scope of
the arbitration clause to Plaintiffs’ request for relief under the FLSA for work
performed prior to December 16, 2013. The Court is staying proceedings with
respect to whether Plaintiffs are entitled to relief for work performed prior to
December 16, 2013, pending the outcome of arbitration.
Accordingly,
IT IS ORDERED, that Defendants’ Motion to Compel Arbitration and Stay
or Dismiss Proceedings is GRANTED IN PART AND DENIED IN PART in
that Plaintiffs must arbitrate their FLSA claims with respect to work performed
after December 16, 2013. Defendants fail to establish that any defendant must be
dismissed at this time;
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IT IS FURTHER ORDERED, that this matter is STAYED pending
arbitration.
s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: July 6, 2015
I hereby certify that a copy of the foregoing document was mailed to counsel of
record and/or pro se parties on this date, July 6, 2015, by electronic and/or U.S.
First Class mail.
s/ Richard Loury
Case Manager
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