Green v. Flowers Foods Inc et al

RESPONSE in Opposition re MOTION to Dismiss or, in the Alternative, to Compel Individual Arbitration with Incorporated Memorandum of Law

N.D. Ala.September 22, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA NORTHEASTERN DIVISION MATTHEW GREEN, Individually, ) and on behalf of himself and all ) others similarly situated, ) ) Plaintiff, ) vs. ) Case No. 17-CV-00784 ) FLOWERS FOODS, INC., ) FLSA Opt-In Collective Action and FLOWERS BAKING CO. OF ) BIRMINGHAM, LLC, ) JURY DEMAND ) Defendants. ) PLAINTIFF’S RESPONSE TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION __________________________________________________________________ Comes now Plaintiff, Matthew Green, individually and on behalf of himself and others similarly situated in this putative Fair Labor Standards Act (“FLSA”) collective action, and responds to Defendants’ Motion to Dismiss or to Compel Individual Arbitration (“Motion to Compel Arbitation;” ECF No. 35), as follows: I. INTRODUCTION While Defendants seek to dismiss Opt-in/Consent Plaintiff Nicholas Jahraus’ (“Jahraus”) FLSA claims, force him to arbitrate, or stay his claims,1 Plaintiff 1 Defs.’ Mt. to Dismiss, or in the Alternative, to Compel Individual Arbitration (ECF No. 35; “Motion to Compel Arbitration”) at 1-2. FILED 2017 Sep-22 PM 12:03 U.S. DISTRICT COURT N.D. OF ALABAMA Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 1 of 13 2 contends Jahraus’ claims are not arbitrable, or, at the least, his claims should be stayed pending the Supreme Court’s determination of whether his “arbitration agreement” is enforceable. I. SUMMARY OF FACTS Plaintiff filed this lawsuit against his employers for FLSA violations on behalf of himself individually and on behalf of all others that are similarly situated.2 Defendants (“Flowers”) filed a Motion to Dismiss, or in the Alternative, to Compel Individual Arbitration (ECF No. 35). In that Motion, Defendants sought to dismiss the claims of Opt-in Jahraus, to force him to individually arbitrate, or to stay his claims.3 Defendants claim that Jahraus signed an arbitration agreement that waives his right to participate in any collective claim “either in court or in arbitration.” 4 Plaintiff agrees that the arbitration agreement purports to waive Jahraus’ collective rights to a collective action and collective arbitration. Further, Defendants claim the purported arbitration agreement defines covered claims to include “claims premised upon [Plaintiff’s] alleged status as anything other than an independent contractor . . . and claims for alleged unpaid compensation, civil penalties, or statutory penalties under either federal or state law.”5 2 Complaint (ECF No. 1). 3 Mt. to Compel Individual Arbitration (ECF No. 35) at 1-2; Jahraus’ Arbitration Agreement (ECF No. 35-1; “Arbitration Agreement”) at 40. 4 Mt. to Compel Individual Arb. (ECF No. 35) at 6; Arbitration Agreement (ECF No. 35-1) at 40. 5 Mt. to Compel Individual Arb. (ECF No. 35) at 5. Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 2 of 13 3 The issue raised in Jahraus’ alleged arbitration agreement, which is currently pending before the United States Supreme Court, is whether arbitration agreements that waive employees’ collective rights to both collective action and collective arbitration are unenforceable since they violate the National Labor Relations Act (“NLRA”).6 LAW AND ARGUMENT While Defendants contend that Opt-in Jahraus signed an arbitration agreement and that his individual claims should be dismissed, arbitrated, and/or stayed,7 this Court should not enforce that arbitration agreement, which purports to waive Jahraus’ collective rights (i.e., to collective action and collective arbitration), since it is unenforceable due to its violation of the National Labor Relations Act (“NLRA”).8 Plaintiff contends that Jahraus’ purported arbitration agreement is unenforceable because it attempts to prohibit him from joining in a collective action and from participating in any collective arbitration in violation of the NLRA’s guarantee of the right to engage in concerted activity for the purpose of “mutual aid or protection.” 29 U.S.C. § 157; see also Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016); NLRB v. Alt. Entm't, Inc., 858 F.3d 393(6th Cir. 2017). 6 See infra at 9. 7 Mt. to Compel Individual Arbitration (ECF No. 35) at 1-2. 8 This issue is currently pending before the United States Supreme Court. See infra at 9. Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 3 of 13 4 While agreements to arbitrate employment-related matters may be enforceable under the Federal Arbitration Act (“FAA”), the FAA’s “Savings Clause” clearly indicates that such agreements may be invalid and thus unenforceable upon “such grounds as exist at law or in equity or contract.” 9 U.S.C. § 2. Here, Defendants’ purported arbitration agreement is invalid and unenforceable because its provisions violate Plaintiff’s substantive rights guaranteed by the NLRA, including the right to engage in concerted activity. See Alternative Entertainment, Inc., 858 F.3d at 401 (“Contractual provisions that “illegal[ly] restrain[ ]” employees’ rights under the NLRA are unenforceable”) (citing Nat’l Licorice Co. v. NLRB, 309 U.S. 350, 360, 365 (1940)). Although the Eleventh Circuit has yet to address the enforceability of class and collective action waiver in arbitration agreements, a number of circuits have persuasively concluded that such agreements fall within the FAA’s savings clause and are thus unenforceable. This Court should join the reasoning of the Sixth, Seventh, and Ninth Circuits and conclude that class and collective action waivers in employment arbitration agreements are unenforceable.9 The NLRA was put into place to correct the inequality of bargaining power that exists in the employer-employee relationship. See NLRB v. City Disposal Sys., 9 See Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016); NLRB v. Alt. Entm't, Inc., 858 F.3d 393(6th Cir. 2017). Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 4 of 13 5 465 U.S. 822, 835 (1984); see also Brady v. Nat’l Football League, 644 F.3d 661, 671 (8th Cir. 2011). Section 7 of the NLRA explains that “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . .” 29 U.S.C. 157 (emphasis added). As the Sixth, Seventh, and Ninth, Circuits have concluded, the right to engage in “concerted activities” is a substantive right that “include[s] resort to representative, joint, collective, or class legal remedies.” Lewis, 823 F.3d at 1153; see also Alternative Entm’t Inc., 858 F.3d at 401 (“[m]andatory provisions that permit only individual arbitration of employment- related claims are illegal pursuant to the NLRA and unenforceable pursuant to the FAA’s savings clause”); Morris, 834 F.3d at 983 (“Section 7's ‘mutual aid or protection clause’ includes the substantive right to collectively ‘seek to improve working conditions through resort to administrative and judicial forums.’") (citing Eastex, Inc. v. NLRB, 437 U.S. 556, 566 (1978). This conclusion is foremost supported by the plain language of Section 7 of the NLRA, and courts should “‘giv[e] the words used their ordinary meaning.’” Lewis, 823 F.3d at 1152 (quoting Lawson v. FMR LLC, 134 S. Ct. 1158, 1165 (2014)). “The ordinary meaning of the word ‘concerted’ is: ‘jointly arranged, planned, or carried out; coordinated’ and “[a]ctivities are ‘thing[s] that a person or Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 5 of 13 6 group does or has done’ or ‘actions taken by a group in order to achieve their aims.’" Id. at 1153 (quoting NEW OXFORD AMERICAN DICTIONARY 359 (3d ed. 2010)). Individuals banding together as a class to pursue lawfully owed compensation under the FLSA fits both of those definitions. Secondly, the National Labor Relations Board’s (“Board”) conclusion that class and collective action arbitration waivers are unlawful under the NLRA, and thus unenforceable under the FAA, is entitled to Chevron deference. See Alternative Entertainment, 858 F.3d at 404. When “a court reviews an agency's construction of the statute which it administers . . . [and] the court determines Congress has not directly addressed the precise question at issue . . . the question for the court is whether the agency's answer is based on a permissible construction of the statute.” Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 842-43 (1984). Yet, as noted above, the term “concerted activity” is not ambiguous: it encompasses “actions taken by a group in order to achieve their aims.”10 Nonetheless, assuming, arguendo, that the term “concerted activity” is ambiguous “at the very least the NLRB's determination that the right is substantive is a permissible construction of the NLRA entitled to Chevron deference.” Alt. Entm't, Inc., 858 F.3d at 404; see also Lewis, 823 F.3d at 1153-54. Moreover, “[c]ontractual provisions that ‘illegal[ly] restrain[ ]’ employees’ rights under the NLRA are unenforceable” and “are a continuing 10 See supra at 5-6. Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 6 of 13 7 means of thwarting the policy of the Act.” Alternative Entm’t Inc., 858 F.3d at 401 (quoting Nat’l Licorice Co. v. NLRB, 309 U.S. 350, 361 (1940)). Section 8 of the NLRA prohibits employers from “interfer[ing] with, restrain[ing], or coerc[ing] employees in the exercise of the rights” provided within the NLRA. 29 U.S.C. § 158. Therefore, arbitration agreements containing class action waivers, such as the ones at issue here, violate Section 7 and 8 of the NLRA. Here, the purported arbitration agreement states that Opt-in Plaintiff Jahraus waives any right to “initiate or maintain any covered claim on class, collective, representative or multi-plaintiff basis either in court or in arbitration” including “claims premised upon [Plaintiff’s] alleged status as anything other than an independent contractor . . . and claims for alleged unpaid compensation.”11 Furthermore, the alleged arbitration agreements are invalid because they not only contain collective action waivers that preclude employees from filing suits in court but also contain waivers of their collective arbitration rights, which together impermissibly thwarts the effective vindication of Opt-in Jahraus’ statutory rights under the NLRA to engage in concerted activities (such as participating in a collective action or collective arbitration). Here, Opt-in Jahraus worked as a distributor for Defendants at the time he signed the arbitration agreement prohibiting him from bringing any collective action 11 See supra, n. 3-5. Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 7 of 13 8 or engaging in collective arbitration, which essentially barred him from engaging in “concerted activities for the purpose of collective bargaining or other mutual aid or protection,” such as requesting lawfully owed overtime compensation for him and other putative class members. Since, “[m]andatory provisions that permit only individual arbitration of employment-related claims are illegal pursuant to the NLRA and unenforceable pursuant to the FAA’s savings clause,” the Court cannot enforce such arbitration agreements. Nat’l Labor Relations Bd. v. Alternative Entm’t Inc., 858 F.3d 393, 401 (6th Cir. 2017).12 Since Jahraus purportedly signed an arbitration agreement that violates the NLRA by preventing him from engaging in concerted activities (like a collective action or collective arbitration) to advocate for better wages while he was still an employee, his agreement was invalidated by his employer’s illegal action of obtaining such agreement; therefore, since contracts that are illegal when signed are void, his arbitration agreement is void and cannot be a defense to his FLSA claims. Alternative Entm’t Inc., 858 F.3d at 403 (“According to the FAA’s saving clause, because any contract that attempts to undermine 12 See also Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), cert granted (U.S. Jan. 13, 2017) (No. 16-285); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert granted (U.S. Jan. 13, 2017) (No. 16-300). Jahraus could not have legally signed his purported arbitration agreement as an employee because that would have violated Section 8 of the NLRA. See Nat’l Labor Relations Bd. v. Alternative Entm’t Inc., 858 F.3d 393, 403, 407 (6th Cir. 2017) (“an employer violates Section 8(a)(1) by compelling employees, as a condition of employment, to waive their right to ‘collectively pursue litigation of employment claims in all forum, arbitral and judicial;” section “8 makes it illegal to force workers, as a conditional of employment, to give up the right to concerted legal action, whether that right is substantive or procedural”). Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 8 of 13 9 employees’ right to engage in concerted legal activity is unenforceable, an arbitration provision that attempts to eliminate employees’ right to engage in concerted legal activity is unenforceable.”). In the alternative, should this Court decline to deny Defendants’ Motion due to the unenforceability of collective action waivers under the NLRA, it should temporarily stay the disposition of the present Motion since this very issue is in a consolidated appeal currently pending before the Supreme Court. See Murphy Oil, U.S.A. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), cert granted (U.S. Jan. 13, 2017) (No. 16-307); Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), cert granted (U.S. Jan. 13, 2017) (No. 16-285); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert granted (U.S. Jan. 13, 2017) (No. 16-300) (consolidated appeal collectively referred to as “Morris”). The Supreme Court is set to hear oral argument in Morris on October 2, and its holding in Morris will be controlling in the disposition of Defendants’ Motion. Id. If this Court cannot deny Defendants’ Motion at the present time, Jahraus’ claims should at least be stayed (instead of dismissed) pending the Supreme Court’s determination of whether his arbitration agreement waiving all his collective rights is enforceable under the NLRA since such a temporary stay would preserve his claims (which are otherwise subject to being decreased or entirely eliminated due to the running of his statute of limitations) in case the Supreme Court determines that Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 9 of 13 10 his arbitration agreement is unenforceable on that basis; further, in this case, the arbitrator has been given sole authority to decide all issues of arbitrability (besides whether the collective waiver is enforceable), and if Jahraus is successful in his challenges to the purported arbitration agreement on any non-collective waiver basis (which he hereby reserves his right to assert in arbitration, if such is ordered by the Court) before the arbitrator, his claims will also be preserved by the tolling of his statute of limitations by virtue of such stay.13 See Williams v. Omainsky, No. 15- 0123-WS-N, 2016 WL 297718, at *7-8 (S.D. Ala. Jan. 21, 2016) (even if opt-in has an arbitration agreement, the case should be stayed instead of dismissed pending outcome of arbitration since opt-in may have challenges to the arbitration agreements and the statute of limitations is not otherwise tolled; further, arbitration agreements should not affect the similarly-situated status of potential opt-ins or deprive them of receiving court-ordered notice in the case).14 13 Arbitration Agreement (ECF No. 35-1) at 40. Jahraus reserves the right to argue before the arbitrator (if arbitration is later ordered) that Flowers’ unilateral ability to change the arbitration agreement it contends applies to his wage claims (including claims that arose prior to the arbitration agreement) makes it illusory, unconscionable, and unenforceable because there is no sufficient consideration. See id. at 41; see also Morrison v. Amway Corp., 517 F.3d 248, 255-58 (5th Cir. 2008) (since employer could unilaterally modify arbitration agreement affecting claims prior to that agreement, it was deemed illusory and unenforceable). If this Court cannot deny Defendants’ Motion, Plaintiff consents to the stay of Jahraus’ individual claims only, pending a determination by the Supreme Court of whether such an arbitration agreement waiving all collective rights is enforceable under the NLRA. 14 Notably, the Court may not stay the entire action in this case because Defendants have not requested such an action or produced arbitration agreements for the Named Plaintiff’s or any other Opt-ins’ claims. Named Plaintiff Matthew Green and the rest of the putative class, whom Defendants have not shown have arbitration agreements, still have justiciable claims that are within the statute of limitations for this action; thus, the court must allow the case to proceed as a Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 10 of 13 11 IV. CONCLUSION For all of the foregoing reasons, Defendant’s Motion should be denied. Respectfully submitted, s/ Gordon E. Jackson Gordon E. Jackson (TN Bar No. 08323) J. Russ Bryant (TN Bar No. 033830) Paula R. Jackson (TN Bar No. 020149) JACKSON, SHIELDS, YEISER & HOLT 262 German Oak Drive Memphis, TN 38018 Telephone: (901) 754-8001 Facsimile: (901) 754-8524 gjackson@jsyc.com rbryant@jsyc.com pjackson@jsyc.com Admitted Pro Hac Vice s/ Kimberly E. Linville (with permission by Gordon E. Jackson) Kimberly E. Linville (ASB-7835-K33-P) Larry B. Moore (ASB-4345-074-L) Ian Michael Berry (ASB-7372-A32-B) MOORE, BERRY & LINVILLE 211 North Court Street Florence, Alabama 36530 T: (256) 718-0120 F: (256) 718-0251 E: klinville@mblattorneys.com lbmoore@mblattorneys.com imberry@mblattorneys.com collective action. See Gunn v. NPC Intern., Inc., No. 13-1035, 2014 WL 1224396, at *4-5 (W.D. Tenn. Mar. 24, 2014) (even if claims of Named Plaintiffs are mooted by offer of judgment, Opt- ins claims are still justiciable). Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 11 of 13 12 Michael L. Weinman (Tenn. 015074) Weinman Thomas Law Firm 112 S. Liberty Street, Suite 321 P.O. Box 266 Jackson, TN 38302 (731) 423-5565 mike@weinmanthomas.com Admitted Pro Hac Vice Emily Emmons (Tenn. 033281) Gilbert McWherter Scott Bobbitt 341 Cool Springs Blvd., Suite 230 Franklin, TN 37067 eemmons@gilbertfirm.com Admitted Pro Hac Vice ATTORNEYS FOR PLAINTIFFS CERTIFICATE OF SERVICE I hereby certify that on September 22, 2017, I caused to be served the foregoing Plaintiff’s Response to Defendants’ Motion to Compel Arbitration via electronic service by virtue of the Court’s electronic filing system and via email upon the following Attorneys for Defendants: OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. Chris W. Deering Josh C. Harrison 420 20th Street North Suite1900 Birmingham, AL35203 chris.deering@ogletree.com josh.harrison@ogletree.com & Margaret S Hanrahan, Pro Hac Vice 201 South College Street Suite 2300 Charlotte, NC 28244 704-405-3119 Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 12 of 13 13 Fax: 704-342-4379 maggie.hanrahan@ogletree.com s/ Gordon E. Jackson Gordon E. Jackson Case 5:17-cv-00784-MHH Document 36 Filed 09/22/17 Page 13 of 13