ALLEN v. SSC LEXINGTON OPERATING COMPANY, LLC
Filing
37
MEMORANDUM OPINION AND ORDER signed by CHIEF JUDGE WILLIAM L. OSTEEN, JR on 9/29/2017. For the reasons set forth above, IT IS HEREBY ORDERED that Defendant's Motion to Compel Individual Arbitration and Stay Proceedings (Doc. 10 ) is GRANTE D. FURTHER that Plaintiff's Motion for Conditional Certification and Notification of all Putative Class Members under the FLSA (Doc. 6 ) and Defendant's Partial Motion to Dismiss (Doc. 12 ) are DENIED AS MOOT WITHOUT PREJUDICE. (Butler, Carol)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
CYNTHIA ALLEN, individually
and on behalf of all similarly
situated individuals,
Plaintiff,
v.
SSC LEXINGTON OPERATING
COMPANY LLC, a North Carolina
Limited Liability Company,
d/b/a BRIAN CENTER NURSING
CARE/LEXINGTON,
Defendant.
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1:16CV1080
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
This matter comes before the court on Defendant’s Motion to
Compel Individual Arbitration and Stay Proceedings. (Doc. 10.)
Plaintiff filed a response in opposition (Doc. 22), and
Defendant filed a reply (Doc. 30). This matter is now ripe for
resolution and for the reasons stated herein, Defendant’s motion
will be granted.
I.
BACKGROUND
Plaintiff Cynthia Allen (“Allen”) filed this putative class
and collective action against Defendant SSC Lexington Operating
Company LLC, d/b/a Brian Center Nursing Care/Lexington (“SSC”)
on August 24, 2016, alleging claims under the Fair Labor
Case 1:16-cv-01080-WO-JEP Document 37 Filed 09/29/17 Page 1 of 12
Standards Act (“FLSA”) including failure to pay minimum wages,
failure to pay overtime wages, and failure to keep records.
(Complaint (Doc. 1) at 14-20.) Plaintiff also alleged similar
violations under certain provisions of the North Carolina Wage
and Hour Act (“NCWHA”) and the North Carolina Administrative
Code (“NCAC”). (Id. at 20-21.) On November 17, 2016, Plaintiff
filed a Motion for Conditional Certification and Notification of
all Putative Class Members under the FLSA. (Doc. 6.)
On February 16, 2017, Defendant filed the instant Motion to
Compel Individual Arbitration and Stay Proceedings (Doc. 10),
and a Partial Motion to Dismiss (Doc. 12). On March 23, 2017,
Plaintiff filed an Amended Complaint, again alleging a claim
under FLSA for failure to pay overtime wages and alleging
similar violations of state law. (Amended Complaint (“Am.
Compl.”) (Doc. 21) at 14-17.)
SSC is a North Carolina limited liability company providing
short-term and long-term health care services. (Am. Compl. (Doc.
21) ¶ 14.) Allen worked as an hourly employee for SSC from
February 2014 until September 2015 as a Licensed Vocational
Nurse/Licensed Practical Nurse. (Id. ¶ 13.) As part of her
employment, Allen was given certain documents including an
Employment Dispute Resolution Book (“EDR Booklet”), which
detailed an Employment Dispute Resolution Program (“EDR
Program”). (Def.’s Mem. in Supp. of Mot. to Compel (“Def.’s
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Br.”), Ex. 1, Sworn Decl. of Katherine M. Tate (“Tate Decl.”)
(Doc. 11-1) at 2-3; Exs. A & B attached to Tate Decl. (Doc.
11-1) at 5-15.)1 The last page of the EDR Booklet contained an
EDR Program acknowledgment form, which Allen signed on
February 10, 2014, acknowledging she was “bound to use the EDR
Program to resolve [her] employment related disputes as
described within the booklet.” (Tate Decl. (Doc. 11-1) at 3,
15.) The EDR Booklet provides in the introduction, in pertinent
part:
Your decision to accept employment or to continue
employment with the Company constitutes your agreement
to be bound by the EDR Program. Likewise, the Company
agrees to be bound by the EDR Program. This mutual
agreement to arbitrate claims means that both you and
the Company are bound to use the EDR Program as the
only means of resolving employment related disputes
and to forego any right either may have to a jury
trial on issues covered by the EDR Program. However,
no remedies that otherwise would be available to you
or the company in a court of law will be forfeited by
virtue of the agreement to use and be bound by the EDR
Program. This Program covers only claims by
individuals and does not cover class or collective
actions.
(Id. at 6 (emphasis added).) The EDR Booklet states that
“[d]isputes covered under the EDR Program pertain to claims such
as discipline, discrimination, fair treatment, harassment,
termination and other legally protected rights.” (Id. at 7.)
All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
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Under the EDR Program, covered disputes proceed in four steps,
with the last step being binding arbitration. (Id. at 8-10.) The
EDR Booklet also acknowledges that the “application,
interpretation and enforcement of the EDR Program is covered by
the Federal Arbitration Act.” (Id. at 7.)
II.
ANALYSIS
Defendant SSC moves this court to compel arbitration of
Plaintiff’s individual claims. SSC argues that Allen agreed, as
part of the EDR Program, to “arbitrate her individual claims” as
a condition of her employment. (Def.’s Br. (Doc. 11) at 2, 10.)
In SSC’s view, the sentence, “[t]his Program covers only claims
by individuals and does not cover class or collective actions,”
is an “express collective action and class action waiver.” (Id.
at 13-14.) The purported waiver, according to SSC, “expressly
prohibits class and collective arbitration.” (Id. at 2).
Therefore, SSC argues that Allen’s individual claims only should
be compelled to arbitration. (Id.)
Allen disputes this interpretation. She interprets “[t]his
Program covers only claims by individuals and does not cover
class or collective actions” to mean that only individual claims
fall within the scope of the EDR Program. (Pl.’s Resp. in Opp’n
to Def.’s Mot. to Compel Arbitration (“Pl.’s Resp.”) (Doc. 22)
at 2-3, 5-6.) Allen argues that because she brought a collective
and class action lawsuit, the EDR Program and, more
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specifically, the arbitration agreement, is simply inapplicable.
(Id. at 3.)
Initially, this court notes that federal policy strongly
favors arbitration. The Federal Arbitration Act (“FAA”)
represents “a liberal federal policy favoring arbitration
agreements” and applies “to any arbitration agreement within the
coverage of the [FAA].” Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24 (1983). Under the FAA, a written
arbitration agreement “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. A court must
compel arbitration if “(i) the parties have entered into a valid
agreement to arbitrate, and (ii) the dispute in question falls
within the scope of the arbitration agreement.” Chorley Enters.,
Inc. v. Dickey’s Barbecue Rests., Inc., 807 F.3d 553, 563 (4th
Cir. 2015), cert. denied, ____ U.S. ____, 136 S. Ct. 1656 (2016)
(citing Muriithi v. Shuttle Express, Inc., 712 F.3d 173, 179
(4th Cir. 2013)).
Here, the parties do not dispute that the arbitration
agreement is valid, and Allen does not argue that, had she
brought her FLSA and state law claims individually, that they
would be subject to arbitration. The parties’ only disagreement
centers on whether the dispute falls within the scope of the EDR
Program — specifically, whether the EDR Program precludes
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collective and class arbitration, (Def.’s Br. (Doc. 11) at 2,
13-14), or whether it simply does not apply to collective and
class proceedings in any forum. (Pl.’s Resp. (Doc. 22) at 5-6.)
“[W]hether an arbitration clause permits class arbitration
is a gateway question of arbitrability for the court.” Dell Webb
Cmtys., Inc. v. Carlson, 817 F.3d 867, 873 (4th Cir.), cert.
denied, ____ U.S. ____, 137 S. Ct. 567 (2016). The FAA does not
permit parties to contractually waive the right to pursue
statutory remedies to vindicate substantive legal rights. See
Hayes v. Delbert Servs. Corp., 811 F.3d 666, 674-75 (4th Cir.
2016). However, parties may agree to vindicate those rights
through arbitration and to “proceed on an individual rather than
a class action basis.”2 Id. at 674; see also Adkins v. Labor
Ready, Inc., 303 F.3d 496, 506 (4th Cir. 2002) (holding that
FLSA claims may be resolved in individual arbitration).
This court is aware of the consolidated cases scheduled
for oral argument before the Supreme Court on October, 2, 2017,
addressing whether certain rights under the National Labor
Relations Act (“NLRA”) render arbitration agreements restricting
employees from pursuing work-related claims on a collective or
class basis unenforceable under the FAA. See Epic Sys. Corp. v.
Lewis, ____ U.S. ____, 137 S. Ct. 809 (2017); Ernst & Young, LLP
v. Morris, ____ U.S. ____, 137 S. Ct. 809 (2017); N.L.R.B. v.
Murphy Oil USA, Inc., ____ U.S. ____, 137 S. Ct. 809 (2017). The
court is not suggesting that these cases are applicable to this
case, but notes that the parties have not raised any arguments
under the NLRA. Therefore, the court expresses no view on the
merits of such arguments.
2
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In reviewing arbitration agreements, courts must “apply
ordinary state law principles governing the formation of
contracts, including principles concerning the ‘validity,
revocability, or enforceability of contracts generally.’”
Muriithi, 712 F.3d at 179 (quoting Hill v. Peoplesoft USA, Inc.,
412 F.3d 540, 543 (4th Cir. 2005)). Courts must “also apply the
federal substantive law of arbitrability, which governs all
arbitration agreements encompassed by the FAA.” Id. “[W]hether a
dispute is arbitrable presents primarily a question of contract
interpretation, requiring [the court to] give effect to the
parties’ intentions as expressed in their agreement.” Id. “[I]n
applying general state–law principles of contract interpretation
to the interpretation of an arbitration agreement within the
scope of the [FAA], due regard must be given to the federal
policy favoring arbitration.” Nazarova v. Duke Univ., No.
1:16CV910, 2017 WL 823578, at *7 (M.D.N.C. Mar. 2, 2017), appeal
dismissed, No. 17-1427, 2017 WL 3700919 (4th Cir. Aug. 28, 2017)
(quoting Cara’s Notions, Inc. v. Hallmark Cards, Inc., 140 F.3d
566, 569 (4th Cir. 1998)). Any doubts regarding the scope of
arbitrable issues agreed to by the parties must be resolved in
favor of arbitration. Muriithi, 712 F.3d at 179 (citing Moses H.
Cone, 460 U.S. at 24–25). Therefore, courts “may not deny a
party’s request to arbitrate an issue ‘unless it may be said
with positive assurance that the arbitration clause is not
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susceptible of an interpretation that covers the asserted
dispute.’” Am. Recovery Corp. v. Computerized Thermal Imaging,
Inc., 96 F.3d 88, 92 (4th Cir. 1996) (quoting United
Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S.
574, 582–83 (1960)).
Under North Carolina law, courts will determine the intent
of the parties by looking to “the language used, the situation
of the parties, and objects to be accomplished.” Cater v.
Barker, 172 N.C. App. 441, 445, 617 S.E.2d 113, 116–17 (2005),
aff’d, 360 N.C. 357, 625 S.E.2d 778 (2006) (citation omitted).
“Presumably the words which the parties select were deliberately
chosen and are to be given their ordinary significance.” Id.,
617 S.E.2d at 117. However, “[a]n ambiguity exists where the
language of a contract is fairly and reasonably susceptible to
either of the constructions asserted by the parties.” Hemric v.
Groce, 169 N.C. App. 69, 76, 609 S.E.2d 276, 282 (2005)
(citation omitted).
Here, the EDR Program that Allen signed and acknowledged
includes the sentence, “[t]his Program covers only claims by
individuals and does not cover class or collective actions.”
(Tate Decl. (Doc. 11-1) at 6, 15.) “Cover” is not defined in the
EDR Booklet, and the court is not convinced, as SSC claims, that
the EDR Program constitutes an “express” waiver of collection
and class arbitration. For example, one interpretation of
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“cover” can mean to have sufficient scope to include. This
interpretation suggests, as Allen urges, that class or
collective actions are simply outside the scope of the EDR
Program.
On the other hand, reading the agreement as a whole, the
EDR Program introduction also provides, in the same paragraph,
that the employee is “bound to use the EDR Program as the only
means of resolving employment related disputes . . . on issues
covered.” (Def.’s Br. (Doc. 11) at 4; Tate Decl. (Doc. 11-1) at
6 (emphasis added).) If a party could circumvent the EDR Program
by bringing a class or collective action outside of arbitration,
then the EDR Program would be one of two means to resolve
employment related disputes, and the provision binding the
employee to use the EDR Program as the only means of resolving
employment related disputes would be rendered ineffectual.
For her interpretation, Plaintiff relies primarily on an
opinion from the Third Circuit, Novosad v. Thi of Pennsylvania
at Broomall, LLC, which held that the “plain language of [the
sentence, ‘covers only claims by individuals and does not cover
class or collective actions’] indicates the parties did not
agree to arbitrate Plaintiffs’ putative class and/or collective
action claims.” (Pl.’s Resp. (Doc. 22) at 6-7 (citing Novosad,
No. 15-cv-6252 (E.D. Penn. Apr. 11, 2016), aff’d sub nom.
Novosad v. Broomall Operating Co. LP, 684 F. App’x 165, 166 (3d
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Cir. 2017)). The court notes that the Novosad opinion is not
binding precedent to this court, and the court is not persuaded
by its holding.
Neither party disputes that the FLSA and state law claims,
brought individually, are covered disputes subject to
arbitration.3 At a minimum, the plain language of the agreement
raises doubt as to whether the parties intended their agreement
to include a waiver of class or collection action, and is
“susceptible to either of the constructions asserted by the
parties.” Hemric, 169 N.C. App. at 76, 609 S.E.2d at 282
(internal quotation marks omitted). Resolving all doubts in
favor of arbitration, Muriithi, 712 F.3d at 179, the court finds
that Plaintiff’s claims must be referred individually to
arbitration.
Having concluded that Plaintiff's claims fall within the
scope of the EDR Booklet and the EDR Program, § 3 of the FAA
requires the court to stay the proceedings until arbitration has
been had in accordance with the terms of the agreement. See
While not dispositive, the court also notes that a
putative class or collective action representative’s claim is
still brought individually to the extent that the court has not
yet made the findings necessary to conditionally certify a
collective action under FLSA, 29 U.S.C. § 216(b), or a class
action under the Federal Rules of Civil Procedure, Fed. R. Civ.
P. 23. Those individual claims are undisputedly arbitrable under
the EDR Program, further weakening Plaintiff’s reading of the
agreement.
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9 U.S.C. § 3. Despite the language of § 3, courts have noted
that dismissal may be a proper remedy when all claims presented
in a lawsuit are arbitrable. See, e.g., Choice Hotels Int’l,
Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709–10 (4th
Cir. 2001) (citing Alford v. Dean Witter Reynolds, Inc., 975
F.2d 1161, 1164 (5th Cir. 1992)). Here, however, Defendant
specifically requested in its motion that the case be stayed.
Accordingly, this court will stay the proceedings pending
arbitration.
III. CONCLUSION
For the reasons set forth above, IT IS HEREBY ORDERED that
Defendant’s Motion to Compel Individual Arbitration and Stay
Proceedings (Doc. 10) is GRANTED.
IT IS FURTHER ORDERED that Plaintiff's Motion for
Conditional Certification and Notification of all Putative Class
Members under the FLSA (Doc. 6) and Defendant’s Partial Motion
to Dismiss (Doc. 12) are DENIED AS MOOT WITHOUT PREJUDICE.
IT IS FURTHER ORDERED that this action is STAYED until
arbitration has been had in accordance with the terms of the
parties’ arbitration agreement.
The Clerk shall mark the case as inactive. Within 30 days
of completion of the arbitration, the parties shall file a joint
report advising the court of completion of the arbitration and
whether further proceedings in this court are required.
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This the 29th day of September, 2017.
______________________________________
United States District Judge
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