Pruitt et al v. Act Fast Delivery, Inc. et al

Western District of Texas, txwd-5:2019-cv-00049

Response in Opposition to Motion, filed by Sandra Pruitt, re [22] MOTION filed by Defendant Mike D Miller, Defendant Act Fast Delivery, Inc., Defendant Act Fast Delivery of Travis County, Inc., Defendant Act Fast Delivery of S.A., Inc., Defendant Act Fast Delivery of Houston, Inc., Defendant Act Fast Courier of Texas, Inc., Defendant Act Fast of Coastal Bend, Inc., Defendant Act Fast Delivery of Tyler, Inc.

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0 WESTERN DISTRICT OF TEXAS UNITED STATES DISTRICT COURT SAN ANTONIO DIVISION SANDRA PRUIT, et al., § § Plaintiffs, § § v. § No. 5:19-cv-00049-DAE § ACT FAST DELIVERY, INC., et al., § § Defendants. § PLAINTIFFS' RESPONSE IN OPPOSITION TO DEFENDANTS' MOTION TO COMPEL ARBITRATION Defendants Act Fast Delivery, Inc.; Act Fast Courier of Texas, Inc.; Act Fast Delivery of Houston, Inc.; Act Fast of Coastal Bend, Inc.; Act Fast Delivery of S.A., Inc.; Act Fast Delivery of Tyler, Inc.; Act Fast Delivery of Travis County, Inc.; and Mike Miller (collectively referred to as "Defendants" or "Act Fast") have requested that the Court refer the claims asserted by Sandra Pruitt, Karen Lawson, Ayan Nur, and Jasmine Huntsberry to binding arbitration.1 (See generally, Defs.' Mot. Compel Arb. (Doc. 22).) For the reasons explained below, the motion should be denied. 1 Act Fast has not requested that Yuvannda Watson's claims be referred to binding arbitration. (See generally, Defs.' Mot. Compel Arb. (Doc. 22).) She did not agree to arbitrate her claims. 0 I. Introduction Pruitt, Lawson, Nur, Hunstberry and Watson2 sued Act Fast claiming that they and others were denied overtime in violation of the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201-219 ("FLSA"). (See generally, Pl.'s Compl. (Doc. 1).) In response, Act Fast moved to refer the claims asserted by Pruitt, Lawson, Nur and Hunstberry (but not Watson3) to binding arbitration. (See generally, Defs.' Mot. Compel Arb. (Doc. 22).) Specifically, Act Fast claims that certain arbitration agreements entered into by Pruitt, Lawson, Nur and Hunstberry together with the Federal Arbitration Act, 9 U.S.C. §§ 1-16, ("FAA") "mandate[] that [the C]ourt[] direct [the] parties to proceed to arbitration … ." (Id. at pp. 2-4.) The motion should be denied for at least three reasons: First, assuming without conceding a valid arbitration agreement exists, the FAA does not apply to contracts of employment (which includes independent contractor agreements) of transportation workers, and federal courts, therefore, do not have the authority under the FAA to order arbitration of claims involving unpaid wages asserted by those workers against their putative employers. Second, valid arbitration agreements do not exist between Pruitt, Lawson, Nur and Hunstberry and Act Fast. Third, the claims asserted by Pruitt, Lawson, Nur and Hunstberry do not "arise under" the arbitration agreement because they have asserted claims under the FLSA rather than the independent contractor agreement. 2 Watson's claims are not subject to arbitration. See supra note 1. 3 See supra notes 1-2. -2- 0 II. Argument & Authorities A. Standard of Review Subject to certain qualifications, the FAA "requires courts to enforce private arbitration agreements." New Prime, Inc. v. Oliveira, 139 S. Ct. 532, 536 (2019); see also, id. at 537 ("While a court's authority under the [FAA] to compel arbitration may be considerable, it isn't unconditional."). But before compelling arbitration, a court must determine gateway issues of arbitrability (for example, whether a valid agreement to arbitrate exists and, if so, whether it covers the parties' disputes). Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003); Tittle v. Enron Corp., 463 F.3d 410, 418-19 (5th Cir. 2006) (quoting Webb v. Investacorp, 89 F.3d 252, 258 (5th Cir. 1996)). In determining whether a valid agreement to arbitrate exists, courts apply ordinary principles of state contract law. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). This includes state law contract defenses, such as unconscionability, which may invalidate an arbitration agreement. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). If the arbitration agreement is valid—in other words, if it qualifies as a contract under state law—"federal law governs the scope of an arbitration clause." In re Weekley Homes, 180 S.W.3d 127, 130-31 (Tex. 2005). If the agreement is valid and covers the dispute, the next step is to determine "whether legal constraints external to the parties' agreement foreclose[s] the arbitration of [the] claims." Tittle, 463 F.3d at 418 (citations and quotations omitted). Some of these gateway issues (for example, contract validity) may be delegated to an arbitrator. Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 69 (2010); see also, Houston Refining, L.P. v. United Steel, Paper & Forestry, Rubber Mfg., 765 F.3d 396, 408 (5th Cir. 2014) ("[T]he -3- 0 law presumes that courts have plenary power to decide the gateway question of a dispute's arbitrability—i.e., whether [the parties] agreed to arbitrate the merits." (second alteration in original) (citations and quotations omitted)). "But the party contending that an arbitrator has authority to decide arbitrability bears the burden of demonstrating clearly and unmistakably that the parties agreed to have the arbitrator decide that threshold question." Houston Refining, 765 F.3d at 408 (citations and quotations omitted). And there are limitations on the ability to delegate gateway issues to an arbitrator. For example, "[i]f the argument that the claim at hand is within the scope of the arbitration agreement is wholly groundless," a court may—and should—rule on that gateway issue even where there is a delegation clause. Douglas v. Regions Bank, 757 F. 3d 460, 464 (5th Cir. 2014) (quotations omitted). "[A] court should also decide for itself whether [any of the FAA's] exclusion[s] appl[y] before ordering arbitration." New Prime, Inc., 139 S. Ct. at 537. "After all, to invoke its statutory powers under §§ 3 and 4 [of the FAA] to stay litigation and compel arbitration according to a contract's terms, a court must first know whether the contract itself falls within or beyond the boundaries of §§ 1 and 2." Id.; see also, id. at 537-38 ("The parties' private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the Act authorizes a court to stay litigation and send the parties to an arbitral forum."). Regardless of who decides the gateway issues, the party seeking to compel arbitration has the burden to establish that a valid arbitration agreement exists and that the claim is covered by the agreement. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999). And in resolving all of the issues, the Court must be mindful that arbitration is fundamentally -4- 0 a matter of consent; it cannot compel parties to arbitrate issues where they have not agreed to do so. AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648 (1986); B. Act Fast's Motion to Compel Arbitration (Doc. 22) Should Be Denied Because the Arbitration Agreements Are Excluded from the FAA and the Court Cannot, Therefore, Compel the Parties to Arbitrate Their Disputes Even assuming that a valid arbitration agreement exists, between Act Fast and Pruitt, Lawson, Nur and Hunstberry, it is excluded from FAA coverage—and the Supreme Court says so. In New Prime, Inc., the employer was a transportation company and the employee work[ed] as one of its drivers. But, at least on paper, [the employee was]n't an employee; the parties' contracts label him an independent contractor. Those agreements also instruct that any disputes arising out of the parties' relationship should be resolved by an arbitrator[.] Eventually, of course, a dispute did arise. In a class action lawsuit in federal court, [the employee] argued that [the employer] denies its drivers lawful wages. The company may call its drivers independent contractors. But, [the employee] alleged, in reality [his employer] treats them as employees and fails to pay the statutorily due minimum wage. In response to [the employee]'s complaint, [the employer] asked the court to invoke its statutory authority under the [FAA] and compel arbitration according to the terms found in the parties' agreements. New Prime, Inc., 138 S. Ct. at 536. Ultimately, the New Prime, Inc. court held that it did not matter whether the workers were classified as employees or independent contractors; disputes arising out of their agreements to perform work fell "within § 1's exception[ for contracts of employment of workers engaged in foreign or interstate commerce], [and] the court … lacked authority under the [FAA] to order arbitration[.]" New Prime, Inc., 138 S. Ct. at 544. Like New Prime, Inc., this case involves transportation workers who claim that they were misclassified as independent contractors and denied lawful wages. (See generally, Pl.'s -5- 0 Compl. (Doc. 1).) Disputes about their wages are not subject to arbitration under the FAA. 9 U.S.C. § 1. Accordingly, Act Fast's Motion to Compel Arbitration (Doc. 22) should be denied. C. The Arbitration Agreements Are Not Valid In connection with its Motion to Compel Arbitration (Doc. 22), Act Fast has submitted copies of the arbitration agreements. (See, Arb. Agreements (Doc. 22-1).4) What it did not do (likely because doing so would have foreclosed its arguments vis-à-vis arbitration) is include copies of the independent contractor agreements themselves. Those agreements contain no arbitration provisions, and they have a merger clause: This Agreement, including all exhibits, constitutes the entire agreement and understanding between the parties. This Agreement shall not be modified, altered, changed, or amended in any respect unless in writing and signed by both parties. This agreement supersedes any other agreements between the parties in force o the date of execution of this Agreement. Ex. A, Independent Contractor Agreement p. 5 (cleaned up). A "merger clause" is a contractual provision to the effect that the written terms of the contract may not be varied by prior agreements because all such agreements have been merged into the written document. IKON Office Solutions, Inc. v. Eifert, 125 S.W.3d 113, 125 n.6 (Tex. 4 Aside from other problems, the agreements themselves make no sense. For example, they purport to apply to all claims arising out of "employment" with Act Fast—and they reference a panoply of laws and claims only available to employees—while simultaneously disclaiming that the signatory is, in fact, an employee, instead referring to him or her as an "independent contractor" and to "independent contractor agreement[s] or relationship[s] … ." (See, e.g., Arb. Agreements (Doc. 22-1) pp. 3, 5.) If Act Fast cannot decide whether its workers are couriers are employees or independent contractors, its "agreements" that independent contractors resolve rights reserved for employees through binding arbitration are fit for nothing. -6- 0 App.—Houston [14th Dist.] 2003, pet. denied) (citing Black's Law Dictionary 989 (6th ed. 1990)). Merger clauses bar claims based on extra-contractual agreements or representations. See, Carousel's Creamery, L.L.C. v. Marble Slab Creamery, Inc., 134 S.W.3d 385, 395 (Tex. App.—Houston [1st Dist.] 2004, pet. dism'd). In other words—and according to its own terms—the Independent Contractor Agreement is the entire agreement between the parties. And since it contains no arbitration provision, Act Fast's Motion to Compel Arbitration (Doc. 22) must be denied. C. FLSA Claims Do Not "Arise Under" the Independent Contractor Agreement or "Relate to" any Independent Contractor Relationship The key provisions of the arbitration agreements purport to require arbitration of any disputes that Pruitt, Lawson, Nur, Hunstberry and Watson have against Act Fast "arising from, related to, or having any relationship or connection whatsoever with [their] independent contractor agreement[s] or relationship[s] … ." Claims for violation of the FLSA do not depend at all on any independent contractor agreement or relationship. As one court explained in the context of construing the applicability of a forum-selection clause: "suits to recover payments due under the FLSA, such as overtime payments, are not dependent on the plaintiff's employment agreement." Pacheco v. St. Luke's Emergency Associates, P.C., 879 F. Supp. 2d 136, 141 (D. Mass. 2012). In Pacheco, the language of the forum-selection clause was "limited to disputes which are 'derived out of this [employment] agreement." Id. at 140-41. The court found that where "derive" meant "take, receive, or obtain especially from a specified source," that the plaintiff's FLSA rights were distinct from the employment agreement. Id. at 141. According to the court, where "FLSA claims do not depend on the existence of the employment contract, nor does the resolution of [plaintiff's] FLSA claims related to the interpretation of the employment contract[,]' the forum selection clause which is limited to -7- 0 claims which are derived from the employment contract does not apply." Id. (citing Saunders v. Ace Mortg. Funding, Inc., No. 05-1437, 2005 WL 3054594, at *3 (D. Minn. Nov. 14, 2005)). The court found that the plaintiff's FLSA claims were "not dependent on any provision of the employment agreement, and [thus] not controlled by the forum selection clause." Pacheco, 879 F.Supp.2d at 142. This case is essentially similar to Pacheco. Interpretation of an FLSA claim does not "depend on the existence of [an] employment contract." Id. at 141 (quoting Saunders v. Ace Mortg. Funding, Inc., No. 05-1437, 2005 WL 3054594, at *3 (D. Minn. Nov. 14, 2005)); see also Baker v. Flint Engineering & Const. Co., 137 F.3d 1436, 1440 (10th Cir.1998). Instead, the court must look to the economic reality of the relationship between the parties. Chao v. Hotel Oasis, Inc., 493 F.3d 26, 33-34 (1st Cir.2007). Thus, the service-provider agreement has no bearing on whether the plaintiffs' claims that [the defendant] has improperly classified them as independent contractors, and plaintiffs' FLSA claims are therefore not subject to the forum-selection clause. … Accordingly, [the defendant's] motion to dismiss will be denied. Chebotnikov v. LimoLink, Inc., 150 F. Supp. 3d 128, 131-32 (D. Mass. 2015). For essentially the same reasons, Act Fast's Motion to Compel Arbitration (Doc. 22) should be denied. See also, supra note 4. III. Conclusion For the foregoing reasons, Act Fast's Motion to Compel Arbitration (Doc. 22) should be denied. -8- 0 Respectfully Submitted, MOORE & ASSOCIATES By: Melissa Moore State Bar No. 24013189 Federal Id. No. 25122 Curt Hesse State Bar No. 24065414 Federal Id. No. 968465 Lyric Centre 440 Louisiana Street, Suite 675 Houston, Texas 77002 Telephone: (713) 222-6775 Facsimile: (713) 222-6739 ATTORNEYS FOR PLAINTIFF DANA WHITE Of Counsel: Bridget Davidson State Bar No. 24096858 Federal Id. No. 3005005 MOORE & ASSOCIATES 440 Louisiana Street, Suite 675 Houston, Texas 77002 Telephone: (713) 222-6775 Facsimile: (713) 222-6739 -9- 0 CERTIFICATE OF SERVICE As required by Fed. R. Civ. P. 5(a)(1), I certify that I served this document on all parties or their attorney(s) of record on July 19, 2019, in accordance with Fed. R. Civ. P. 5(b) by filing it with the Court's CM/ECF system, which will send notification of such filing to all counsel of record. Melissa Moore - 10 -