Cicero v. Quality Dining, Inc.

BRIEF in Opposition

D.N.J.November 7, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CYNTHIA CICERO, on behalf of herself and similarly situated employees, Plaintiffs, v. QUALITY DINING, INC.; SOUTHWEST DINING, INC.; and GRAYLING CORPORATION, Defendants. : : : : : : : : : : : : : 1:16-cv-05806-NLH-KMW ELECTRONICALLY FILED Notice of Motion Date: November 21, 2016 PLAINTIFFS’ BRIEF IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Date: November 7, 2016 Peter Winebrake* R. Andrew Santillo (NJ ID #025512004) Mark J. Gottesfeld, Esq. (NJ ID #027652009) WINEBRAKE & SANTILLO, LLC 715 Twining Road, Suite 211 Dresher, PA 19025 (215) 884-2491 Jerry Martin* Seth Hyatt* Barrett Johnston Martin & Garrison LLC 414 Union Street, Suite 900 Nashville, TN 37219 (615) 244-2202 *admission pro hac vice anticipated Attorneys for Plaintiffs Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 1 of 36 PageID: 538 i TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY OF THE ARGUMENT .................. 1 II. BACKGROUND .......................................................................................... 2 A. Plaintiffs’ Legal Claims ........................................................................... 2 B. Relevant Procedural History.................................................................... 4 C. The NLRB files a Complaint Charging Defendants with violating the NLRA ................................................................................................ 5 III. ARGUMENT ................................................................................................ 5 A. Recent court opinions have created an irreconcilable split on the question of whether Defendants’ class/collective action waiver is illegal under the NLRA and unenforceable ............................................. 5 B. The Court should defer ruling on Defendants’ Motion until after the Third Circuit rules on this issue, but promptly grant Plaintiffs’ pending motion for conditional certification and authorize notice to be sent to the putative FLSA collective .............................................. 8 C. If the Court decides to address the merits of Defendants’ Motion now, it should follow recent federal appellate and district court authority to hold that Defendants’ class/collective action waiver is invalid and unenforceable because it violates the NLRA ................. 11 1. The Section 7 right to engage in “concerted activities” includes participation in class and collective action lawsuits concerning wages and work conditions .............................................................. 11 2. Employees’ rights under Section 7 of the NLRA to engage in concerted activities through good faith collective litigation are substantive in nature and not merely procedural ............................. 15 3. Defendants’ class/collective action waiver interferes with employees’ substantive right to engage in concerted legal activity in violation of Section 8(a)(1) of the NLRA ....................... 18 Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 2 of 36 PageID: 539 ii 4. Because Defendants’ mandatory class/collective action waiver violates the NLRA, it is unenforceable under the FAA’s savings clause ....................................................................... 19 5. The FAA’s savings clause eliminates the potential for conflict with the NLRA .................................................................... 24 6. The FAA does not provide parties with the limitless ability to waive class/collective action arbitration ........................... 25 IV. CONCLUSION ........................................................................................... 27 Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 3 of 36 PageID: 540 iii TABLE OF AUTHORITIES CASES/DECISIONS ABF Freight System, Inc. v. NLRB, 510 U.S. 317 (1994) .................................................................................... 17 Altex Ready Mixed Concrete Corp. v. NLRB, 542 F.2d 295 (5th Cir. 1976) ....................................................................... 12 American Express Co. v. Italian Colors Restaurant, __ U.S. __, 133 S. Ct. 2304 (2013) ................................................ 23, 25, 26 AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) ................................................................... 19, 20, 25, 26 Brady v. Nat’l Football League, 644 F.3d 661 (8th Cir. 2011) ...................................................................... 12 Bloomingdale’s, Inc., 363 NLRB 172 (2016) ................................................................................. 18 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006).................................................................................... 21 Chesapeake Energy Corp., 362 NLRB 80 (2015) .............................................................................. 18-19 CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012) ...................................................................................... 15 Curtis v. Contract Mgmt. Servs., 2016 U.S. Dist. LEXIS 134129 (D. Me. Sept. 29, 2016) ............ 7, 12, 17, 19 CVS RX Servs., 363 NLRB 180 (2016) ................................................................................. 18 D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) ............................................................. 6, 25, 26 Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 4 of 36 PageID: 541 iv D. R. Horton, Inc., 357 NLRB 184 (2012) ...................................................................... 7, 12, 17 Eastex, Inc. v. NLRB, 437 U.S. 556 (1978).................................................................................... 12 Emporium Capwell Co. v. Western Addition Community Org., 420 U.S. 50 (1975)...................................................................................... 17 Ford v. Lehigh Valley Restaurant Group, Inc., 2014 U.S. Dist. LEXIS 92801 (M.D. Pa. July 9, 2014) ............................. 3-4 Gaffers v Kelly Services, Inc., 2016 U S Dist LEXIS 112789 (E.D. Mich. Aug. 24, 2016) ........................ 7 Gerton v. Fortiss, LLC, 2016 U.S. Dist. LEXIS 19297 (N.D. Cal. Feb. 16, 2016) ............................. 7 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) ............................................................................ 15, 16, 22 Harco Trucking, LLC, 344 NLRB 478 (2005) ................................................................................ 12 Herrington v. Waterstone Mortgage Corporation, 993 F. Supp. 2d 940 (W.D. Wis. 2014) .............................................. 7, 19, 23 In re Fresh & Easy, LLC, 2016 Bankr. LEXIS 3690 (Bankr. D. Del. Oct. 11, 2016) ...... 7, 12, 17, 19, 20 Kaiser Steel Corp. v. Mullins, 455 U.S. 72 (1982) .................................................................................. 21, 23 Kobren v. A-1 Limousine Inc., et al., 3:16-cv-00516-BRM-DEA (D.N.J. Nov. 7, 2011) ................................ 7-8, 11 Kmart Corp., 363 NLRB 66 (2015) ..................................................................................... 18 Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 5 of 36 PageID: 542 v Le Madri Rest., 331 NLRB 269 (2000) ................................................................................ 12 Leviton Mfg. Co. v. NLRB, 486 F.2d 686 (1st Cir. 1973) ......................................................................... 12 Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016) ............... 6, 10, 12, 14, 16-17, 18, 20, 21-22, 23, 24-25, 26-27 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) ................................................................................ 15, 22 Mohave Elec. Co-op., Inc. v. NLRB, 206 F.3d 1183 (D.C. Cir. 2000) .................................................................... 12 Montano v. Montrose Rest. Assocs., Inc., 800 F.3d 186, 193 (5th Cir. 2015) ................................................................... 4 Morris v. Ernst & Young, LLP, 834 F.3d 975, 2016 U.S. App. LEXIS 15638 (9th Cir. Aug. 22, 2016) ................ 6, 10, 12, 14, 15-16, 17, 18, 21, 22, 25, 27 Murphy Oil USA, Inc., 361 NLRB (2014) ...................................................................................... 7, 17 NLRB v. City Disposal Systems, Inc., 465 U.S. 822 (1984) ...................................................................................... 13 NLRB v. J. Weingarten, Inc., 420 U.S. 251 (1975) ...................................................................................... 14 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937) .......................................................................................... 13 Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013) ...................................................................... 6 Patterson v. Raymours Furniture Co., __ F.3d __, 2016 U.S. App. LEXIS 16240 (2d Cir. Sept. 2, 2016) ............... 6 Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 6 of 36 PageID: 543 vi Phillips Petrol. Co. v. Shutts, 472 U.S. 797 (1985) ................................................................................ 13-14 Proma Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).................................................................................... 20 Rodriguez v. United States, 480 U.S. 522 (1987).................................................................................... 26 Roussell v. Brinker Int’l, Inc., 441 F. App’x 222 (5th Cir. 2011) .................................................................. 4 Securitas Sec. Servs. USA, Inc., 363 NLRB 182 (2016)................................................................................... 18 Schnaudt v. Johncol, Inc., 2016 U.S. Dist. LEXIS 132321 (S.D. Ohio. Sept. 27, 2016) .................. 9-11 Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013) ............................................................................ 6 Sylvester v. Wintrust Fin. Corp., 2013 U.S. Dist. LEXIS 140381 (N.D. Ill. Sept. 30, 2013) ............................. 7 The Rose Group, 2015 NLRB 932 (Dec. 22, 2015) .................................................................... 8 Tigges v. AM Pizza, Inc., 2016 U.S. Dist LEXIS 100366 (D. Mass. July 29, 2016) .......... 7, 17, 19, 20 Totten v. Kellogg Brown & Root, LLC, 152 F. Supp. 3d 1243 (C.D. Cal. 2016) ................ 7, 12, 17-18, 19, 22, 23-24 Trinity Trucking & Materials Corp., 221 NLRB 364 (1975) ................................................................................. 12 United Parcel Serv., Inc., 252 NLRB 1015 (1980) ............................................................................... 12 Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 7 of 36 PageID: 544 vii UnitedHealth Group, Inc., 363 NLRB 134 (2016) ................................................................................ 18 Waller v. Foulke Mgmt. Corp., 2011 U.S. Dist. LEXIS 90591 (D.N.J. Aug. 11, 2011) .......................... 22-23 ZEP, Inc., 363 NLRB 192 (2016) ................................................................................ 18 24 Hour Fitness USA, Inc., 363 NLRB 84 (2015) ..................................................................................... 18 STATUTES, RULES, AND MISCELLANEOUS 9 U.S.C. § 2 ........................................................................................................... 20 29 U.S.C. § 151, et seq. .................................................................................. Passim 29 U.S.C. § 203(m). ................................................................................................ 3 29 U.S.C. § 216(b) ..................................................................................... 2, 4, 5, 9 Harry Kalven, Jr. & Maurice Rosenfield, The Contemporary Function of the Class Suit, 8 U. CHI. L. REV. 684 (1941) ...................................................................... 14 Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 8 of 36 PageID: 545 1 I. INTRODUCTION AND SUMMARY OF THE ARGUMENT This is a class/collective action lawsuit brought on behalf of servers who worked in Chili’s Grill & Bar (“Chili’s”) restaurants in New Jersey owned by Defendants Quality Dining, Inc. (“Quality Dining”), Southwest Dining, Inc. (“Southwest”), and Grayling Corporation’s (“Grayling”) (collectively “Defendants”). According to the servers, Defendants have violated the minimum wage provisions of the Fair Labor Standards Act (“FLSA”) and the New Jersey State Wage and Hour Law (“NJWHL”) by requiring them to share their tips with restaurant expediters who do not directly interact with restaurant customers. Defendants have filed a motion asking the Court to compel this lawsuit to arbitration on an individual basis based on a mandatory class/collective action waiver in Plaintiff Cynthia Cicero’s (“Cicero”) employment agreement. See Doc. 45 (the “Motion”). Plaintiffs Cicero and Gabrielle Pallum (“Pallum”) (collectively “Plaintiffs”) agree that Ms. Cicero’s claims are covered by her arbitration agreement. See Doc. 45-2 at Exhibit 1A. However, Plaintiffs oppose Defendants’ efforts to compel Ms. Cicero’s claims to arbitration on an individual basis. As Defendants recognize, federal courts are irreconcilably split on whether class/collective action waivers in employment agreements are legal and enforceable. The Seventh and Ninth Circuits have held that these provisions are invalid and unenforceable because they impermissibly waive employees’ Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 9 of 36 PageID: 546 2 substantive rights under the Nation Labor Relations Act (“NLRA”). The Second, Fifth and Eighth Circuits have ruled otherwise. While our Court of Appeals has yet to address the legality of class/collective action waivers under the NLRA, it heard oral arguments on this issue last month and is expected to rule shortly. Due to this current uncertainty, Plaintiffs would respectively suggest that the Court should deny Defendants’ Motion without prejudice to allow the Third Circuit (and potentially the U.S. Supreme Court) to address this issue. At that time, Defendants can renew their Motion should they so choose. In the meantime, the Court should promptly rule on Plaintiffs’ pending Motion for Conditional Certification so that the putative FLSA collective can be notified of this lawsuit and provided the opportunity to join pursuant to 29 U.S.C. 216(b). See Doc. 49. However, if the Court concludes that it must resolve this issue now, it should strike Defendants’ class/collective action waiver as unenforceable based on the recent federal appellate and district court authority finding similar class/collective action waivers to be illegal under the NLRA. II. BACKGROUND A. Plaintiffs’ Legal Claims. Plaintiffs worked as servers at Chili’s restaurants in New Jersey owned and operated by Defendants. They were paid an hourly wage of $2.13 plus tips. In attempting to satisfy the federal minimum wage requirement of $7.25 per hour and Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 10 of 36 PageID: 547 3 the higher New Jersey minimum wage of $8.38 per hour, Defendants utilized a “tip credit” for each hour worked by servers. This tip credit represented the difference between the hourly minimum required by law and the $2.13 per hour paid by Defendants. Thus, under the FLSA, Defendants have enjoyed the benefit of a $5.12/hour tip credit. Meanwhile, under New Jersey law, Defendants have enjoyed the benefit of a $6.25/hour tip credit. Defendants also maintained a company-wide policy of requiring servers to contribute a portion of their tips to a “tip pool” shared with expediters who had no direct interaction with customers. See generally Am. Cpl. (Doc. 37); Plaintiffs’ Motion for Conditional Certification (Doc. 49). Earlier this year, Defendants changed their compensation policy and removed expediters from the tip pool at their New Jersey Chili’s restaurants. See Doc. 49-1 at p. 5. The FLSA allows: (i) a restaurant to utilize customer tips to satisfy a portion of its minimum wage obligations to servers/bartenders and (ii) “the pooling of tips” among restaurant employees. See 29 U.S.C. § 203(m). But there’s a catch: restaurants utilizing tips to satisfy its minimum wage obligations may not allow tip pool proceeds to be shared with restaurant employees who do not “customarily and regularly receive tips.” 29 U.S.C. § 203(m). Courts both in and outside of this Circuit have held that an employee must have direct customer interaction as part of their duties to be properly part of a tip pool. See, e.g., Ford v. Lehigh Valley Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 11 of 36 PageID: 548 4 Restaurant Group, Inc., 2014 U.S. Dist. LEXIS 92801, *12-13 (M.D. Pa. July 9, 2014); Montano v. Montrose Rest. Assocs., Inc., 800 F.3d 186, 193 (5th Cir. 2015); Roussell v. Brinker Int’l, Inc., 441 F. App’x 222, 231 (5th Cir. 2011). Plaintiffs allege that restaurant employees who worked as expediters had no direct interaction with customers. See generally Am. Cpl. (Doc. 37); Plaintiffs’ Motion for Conditional Certification (Doc. 49). According to the servers, Defendants have violated the minimum wage provisions of the FLSA and the NJWHL by taking the tip credit against the minimum wage and requiring servers to share their tips through the tip pool with expediters. Id. B. Relevant Procedural History. Ms. Cicero started this lawsuit by filing a collective action complaint in the Northern District of Indiana where Defendants are headquartered. See Doc. 1. Ms. Circero’s complaint asserted a single collective action claim under the FLSA pursuant to 29 U.S.C. § 216(b). Id. Defendants responded to Ms. Circero’s complaint by seeking to transfer the case to this Court. See Doc. 23, 23. After the motion to transfer was fully briefed, Ms. Cicero filed an amended complaint adding a Rule 23 class action claim under the NJWHL. See Doc. 37. Ms. Circero simultaneously withdrew her opposition to Defendants’ motion to transfer. See Doc. 38. On September 22, 2016, the transfer to this Court was completed. See Doc. Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 12 of 36 PageID: 549 5 40. Since then, one other server (Gabrielle Pallum) has consented to become a Plaintiff pursuant to 29 U.S.C. § 216(b). See Doc. 48. On October 13, 2016, Plaintiffs moved for conditional certification of a FLSA collective action asking the Court to allow notice of this lawsuit to be sent to other Chili’s servers who worked for Defendants in New Jersey within the last three years. See generally Plaintiffs’ Motion for Conditional Certification (Doc. 49). C. The NLRB files a Complaint Charging Defendants with violating the NLRA. In response to a charge filed by one of Defendants’ Pennsylvania servers, the National Labor Relations Board (“NLRB”) filed a complaint against Defendants based on, inter alia, their use of the mandatory class/collective action waiver at issue in Defendants’ Motion. See Exhibit A. Specifically, the Complaint alleges that Defendants’ class/collective action waiver violates Section 8(a)(1) of the NLRA by interfering with employees’ right to engage in concerted activity under Section 7 of the NLRA. Id. The NLRB and Defendants subsequently stipulated to a factual record, see Exhibit B, and a November 28, 2016 deadline has been set for briefing the legality of this provision, see Exhibit C. III. ARGUMENT A. Recent court opinions have created an irreconcilable split on the question of whether Defendants’ class/collective action waiver is illegal under the NLRA and unenforceable. Prior to 2016, the majority of courts that had examined the legality of Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 13 of 36 PageID: 550 6 class/collective action waivers in arbitration agreements held that the NLRA did not preclude their enforcement. This authority includes a divided Fifth Circuit, see D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) (“Horton II”), and the Eighth Circuit, see Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013). In addition, the Second Circuit dedicated a footnote in Sutherland v. Ernst & Young LLP to adopt the Eighth Circuit’s holding in Owen. See 726 F.3d 290, 297 n.8 (2d Cir. 2013). However, in recent months both the Seventh Circuit and Ninth Circuit issued opinions refusing follow this authority and holding that class/collective action waivers similar to Defendants’ are unenforceable because they violate the NLRA. See Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016) (Wood, C.J.); Morris v. Ernst & Young, LLP, 834 F.3d 975, 2016 U.S. App. LEXIS 15638 (9th Cir. Aug. 22, 2016) (Thomas, C.J.). 1 Several other federal district courts have followed the lead of the Lewis and Morris courts and found class/collective action waivers to be illegal. See, e.g., 1 Earlier this fall, the Second Circuit was asked to re-examine its prior holding in Sutherland on this issue in a case titled Patterson v. Raymours Furniture Co., __ F.3d __, 2016 U.S. App. LEXIS 16240 (2d Cir. Sept. 2, 2016). After summarizing the conflicting authority discussed above, Judge Gerald Lynch suggested that were it not bound by its prior holding in Sutherland, it would probably follow the Lewis and Morris opinions. Id. at *5 (“If we were writing on a clean slate, we might well be persuaded, for the reasons forcefully stated in Chief Judge Wood’s and Chief Judge Thomas’s opinions in Lewis and Morris, to join the Seventh and Ninth Circuits and hold that the EAP’s waiver of collective action is unenforceable.”). Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 14 of 36 PageID: 551 7 Curtis v. Contract Mgmt. Servs., 2016 U.S. Dist. LEXIS 134129 (D. Me. Sept. 29, 2016) (Torresen, C.J.); Gaffers v Kelly Services, Inc., 2016 U S Dist LEXIS 112789 (E.D. Mich. Aug. 24, 2016) (Lawson, J.); Tigges v. AM Pizza, Inc., 2016 U.S. Dist LEXIS 100366 (D. Mass. July 29, 2016) (Young, J.); Totten v. Kellogg Brown & Root, LLC, 152 F. Supp. 3d 1243 (C.D. Cal. 2016) (Gee, J.); see also Herrington v. Waterstone Mortgage Corporation, 993 F. Supp. 2d 940 (W.D. Wis. 2014) (Crabb, J.).2 Within the Third Circuit, the only two trial courts that have addressed whether class/collective action waivers are enforceable in light of the NLRA have only added to the split in authority. Compare In re Fresh & Easy, LLC, 2016 Bankr. LEXIS 3690 (Bankr. D. Del. Oct. 11, 2016) (attached as Exhibit D) with Kobren v. A-1 Limousine Inc., et al., 3:16-cv-00516-BRM-DEA (D.N.J. Nov. 7, These holdings are also consistent with the NLRB’s determination that class/collective action waivers violate the NLRA. See, e.g., D. R. Horton, Inc., 357 NLRB 184 (2012) (“Horton I”); Murphy Oil USA, Inc., 361 NLRB (2014). 2 Defendants attempt to diminish the weight of this authority by incorrectly suggesting that the majority of district courts in circuits that have not addressed this issue have held that class/collective action waivers are enforceable. See Doc. 45-1 at p. 21 n.5. Unfortunately for Defendants, many of the decisions cited therein either: (i) are located in the Seventh or Ninth Circuits which have issued opinions on this issue, see, e.g., Gerton v. Fortiss, LLC, 2016 U.S. Dist. LEXIS 19297, at *3 (N.D. Cal. Feb. 16, 2016); Sylvester v. Wintrust Fin. Corp., 2013 U.S. Dist. LEXIS 140381 (N.D. Ill. Sept. 30, 2013); or (ii) have held exact opposite, see, e.g., Herrington v. Waterston Mortg. Co., 993 F. Supp. 2d (W.D. Wis. 2014). Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 15 of 36 PageID: 552 8 2011) (attached as Exhibit E). B. The Court should defer ruling on Defendants’ Motion until after the Third Circuit rules on this issue, but promptly grant Plaintiffs’ pending motion for conditional certification and authorize notice to be sent to the putative FLSA collective. As discussed above, the Lewis and Morris opinions have created an irreconcilable conflict among the circuit courts on the legality of Defendants’ mandatory class/collective action waiver. However, it is expected that our Court of Appeals will soon be entering the fray. Early last month, the Third Circuit heard oral arguments in a case titled The Rose Group v. NLRB, App. No. 15-4092 (3d. Cir.). The employer in The Rose Group is seeking judicial review of an NLRB finding that a mandatory arbitration provision prohibiting the pursuit of class or collective actions violates the NLRA. See The Rose Group, 2015 NLRB 932 (Dec. 22, 2015). In reaching this conclusion, the NLRB asserts many of the arguments relied on by Lewis and Morris in finding class/collective action waivers to be unenforceable as illegal. Id. A ruling by the Third Circuit on this issue will obviously have substantial impact on the parties’ respective arguments in this case. Instead of trying to predict how the Third Circuit will interpret the conflicting authority, Plaintiffs would respectfully suggest that the Court should delay ruling on Defendants’ Motion until at least after an opinion is issued in The Rose Group appeal. In the meantime, the Court should promptly rule on Plaintiffs’ pending Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 16 of 36 PageID: 553 9 Motion for Conditional Certification, see Doc. 49, and authorize notice to be sent to Defendants’ other New Jersey servers to provide them with the opportunity to decide whether they wish to become Plaintiffs in this case pursuant to 29 U.S.C. § 216(b). As discussed in Plaintiffs’ Conditional Certification Motion, the claims of putative FLSA collective members (unlike Rule 23 class members) are not tolled by the filing of Plaintiffs’ complaint. See Doc. 49-1 at pp. 1-2. Thus, “time [is] of the essence for purposes of FLSA notice” and “early certification and notice are favored in order to protect plaintiffs’ rights.” Id. at p. 2 (internal quotations omitted). Neither party will be prejudiced by this approach. Should the Third Circuit follow the Seventh and Ninth Circuits and find that class/collective action waivers violate the NLRA, Plaintiffs will proceed with their class and collective claims. If the Third Circuit reaches the opposite conclusion, Defendants can renew their Motion and Plaintiffs’ claims will be dismissed and compelled to arbitration on an individual basis. A similar approach was recently adopted by Southern District of Ohio when faced with a similar motion to compel individual arbitration in a case titled Schnaudt v. Johncol, Inc. 2016 U.S. Dist. LEXIS 132321 (S.D. Ohio. Sept. 27, 2016). As here, the Schnaudt court did not have the benefit of appellate authority from within its circuit addressing this issue. Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 17 of 36 PageID: 554 10 In Schnaudt, three pizza delivery drivers brought collective action claims for unpaid wages under the FLSA. See 2016 U.S. Dist. LEXIS 132321, at *2-3, 27.3 The Schnaudt court was prepared to grant the employers’ motion and compel the case to arbitration on an individual basis, but declined to do so because of the recent opinions in Lewis and Morris: Each of the three Schnaudt plaintiffs signed agreements requiring their wage disputes to be arbitrated on an individual basis and “not on a collective basis.” Id. at *4-5. Were the court’s analysis to end with the issues raised in the original briefing of defendants’ motion to compel arbitration, the court would grant the motion. But plaintiffs have filed supplemental briefs noting two recent court of appeals decisions of the Seventh and Ninth Circuits, which if followed here, would lead to the opposite result. Id. at *24. The Schnaudt court ultimately ordered that the parties submit supplemental briefing on Lewis and Morris. However, the Schnaudt court warned that it “may find it prudent to await further developments at the appellate level” on the legality of class/collective action waivers, noting that “[i]t is plausible, if not likely, that the Sixth Circuit or perhaps the Supreme Court will resolve the issue in the foreseeable future.” Id. at *31. Ultimately, the Schnaudt court “provisionally” granted the employer’s motion to compel arbitration as to Plaintiffs’ collective FLSA claims “but 3 One of the three plaintiffs also brought an individual claim for retaliatory termination under the FLSA which was ultimately sent to arbitration. Id. at *3, 27. Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 18 of 36 PageID: 555 11 with[held] an order compelling arbitration pending further consideration and developments regarding the issue of whether a collective action waiver in an arbitration agreement violates the NLRA or FLSA.” Id. at *31.4 C. If the Court decides to address the merits of Defendants’ Motion now, it should follow recent federal appellate and district court authority to hold that Defendants’ class/collective action waiver is invalid and unenforceable because it violates the NLRA. In the meantime, the Schnaudt court ordered that the parties “proceed with discovery and motion practice on the issue of whether the court should certify the putative collective action.” Id. at *31-32. As discussed below, if the Court chooses to decide the legality of Defendants’ class/collective action waiver now, it should deny Defendants’ Motion because this provision violates the NLRA and is unenforceable. 1. The Section 7 right to engage in “concerted activities” includes participation in class and collective action lawsuits concerning wages and work conditions. Section 7 of the NLRA states that “[e]mployees 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. Both federal courts and the NLRB have interpreted 4 But see Kobren, 3:16-cv-00516-BRM-DEA, slip op. at 10 (declining to wait for a decision by the Third Circuit on the legality of class/collective action waivers before ruling on a pending motion to compel arbitration). Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 19 of 36 PageID: 556 12 Section 7 as protecting the concerted pursuit of work-related legal claims such as this lawsuit. See Lewis, 826 F.3d at 1154; Morris, 2016 U.S. App. LEXIS 15638, at *10; Fresh & Easy, 2016 Bankr. LEXIS 3690, at *12-17; Curtis, 2016 U.S. Dist. LEXIS 134129, at *11-12; Totten, 152 F. Supp. 3d at 1254-55; Herrington, 2012 U.S. Dist. LEXIS 36220, at *10-11; Harco Trucking, LLC, 344 NLRB 478, 478-79 (2005); Le Madri Rest., 331 NLRB 269, 275 (2000); United Parcel Serv., Inc., 252 NLRB 1015, 1018, 1026 & n.26 (1980), enforced, 677 F.2d 421 (6th Cir. 1982); Trinity Trucking & Materials Corp., 221 NLRB 364, 365 (1975), enforced mem., 567 F.2d 391 (7th Cir. 1977). The Seventh Circuit addressed this very issue in Lewis and held that Section 7 gives workers the right to file and participate in class and collective action lawsuits: Section 7’s “other concerted activities” have long been held to include “resort to administrative and judicial forums.” Eastex, Inc. v. NLRB, 437 U.S. 556, 566, 98 S. Ct. 2505, 57 L. Ed. 2d 428 (1978) (collecting cases). Similarly, both courts and the Board have held that filing a collective or class action suit constitutes “concerted activit[y]” under Section 7. See Brady v. Nat’l Football League, 644 F.3d 661, 673 (8th Cir. 2011) (“[A] lawsuit filed in good faith by a group of employees to achieve more favorable terms or conditions of employment is ‘concerted activity’ under § 7 of the National Labor Relations Act.”); Altex Ready Mixed Concrete Corp. v. NLRB, 542 F.2d 295, 297 (5th Cir. 1976) (same); Leviton Mfg. Co. v. NLRB, 486 F.2d 686, 689 (1st Cir. 1973) (same); Mohave Elec. Co-op., Inc. v. NLRB, 206 F.3d 1183, 1189, 340 U.S. App. D.C. 391 (D.C. Cir. 2000) (single employee’s filing of a judicial petition constituted “concerted action” under NLRA where “supported by fellow employees”); D. R. Horton, 357 N.L.R.B. 2277, at 2278 n.4 (collecting cases). This Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 20 of 36 PageID: 557 13 precedent is in line with the Supreme Court’s rule recognizing that even when an employee acts alone, she may “engage in concerted activities” where she “intends to induce group activity” or “acts as a representative of at least one other employee.” NLRB v. City Disposal Systems, Inc., 465 U.S. 822, 831, 104 S. Ct. 1505, 79 L. Ed. 2d 839 (1984). *** The NLRA does not define “concerted activities.” The ordinary meaning of the word “concerted” is: “jointly arranged, planned, or carried out; coordinated.” Concerted, NEW OXFORD AMERICAN DICTIONARY 359 (3d ed. 2010). Activities are “thing[s] that a person or group does or has done” or “actions taken by a group in order to achieve their aims.” Id. at 16. Collective or class legal proceedings fit well within the ordinary understanding of “concerted activities.” The NLRA’s history and purpose confirm that the phrase “concerted activities” in Section 7 should be read broadly to include resort to representative, joint, collective, or class legal remedies. (There is no hint that it is limited to actions taken by a formally recognized union.) Congress recognized that, before the NLRA, “a single employee was helpless in dealing with an employer,” and “that union was essential to give laborers opportunity to deal on an equality with their employer.” NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 33, 57 S. Ct. 615, 81 L. Ed. 893 (1937). In enacting the NLRA, Congress’s purpose was to “to equalize the bargaining power of the employee with that of his employer by allowing employees to band together in confronting an employer regarding the terms and conditions of their employment.” City Disposal Systems, 465 U.S. at 835. Congress gave “no indication that [it] intended to limit this protection to situations in which an employee's activity and that of his fellow employees combine with one another in any particular way.” Id. Collective, representative, and class legal remedies allow employees to band together and thereby equalize bargaining power. See Phillips Petrol. Co. v. Shutts, 472 U.S. 797, 809, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985) (noting that the class action procedure allows plaintiffs who would otherwise “have no realistic day in court” to enforce their Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 21 of 36 PageID: 558 14 rights); Harry Kalven, Jr. & Maurice Rosenfield, The Contemporary Function of the Class Suit, 8 U. CHI. L. REV. 684, 686 (1941) (noting that class suits allow those “individually in a poor position to seek legal redress” to do so, and that “an effective and inclusive group remedy” is necessary to ensure proper enforcement of rights). Given Section 7’s intentionally broad sweep, there is no reason to think that Congress meant to exclude collective remedies from its compass. Lewis, 823 F.3d at 1152-53; see also id. at 1154 (“Congress was aware of class, representative, and collective legal proceedings when it enacted the NLRA. The plain language of Section 7 encompasses them, and there is no evidence Congress intended them to be excluded.”). The Ninth Circuit reached a similar conclusion in Morris. See 2016 U.S. App. LEXIS 15638, at *9-11 (“The pursuit of a concerted work-related legal claim “clearly falls within the literal wording of § 7 that ‘[e]mployees shall have the right . . . to engage in . . . concerted activities for the purpose of . . . mutual aid or protection.’” NLRB v. J. Weingarten, Inc., 420 U.S. 251, 260, 95 S. Ct. 959, 43 L. Ed. 2d 171 (1975) (quoting 29 U.S.C. § 157). The intent of Congress in § 7 is clear and comports with the Board’s interpretation of the statute.”). Consistent with the above authority, Plaintiffs’ filing of, and participation in, this class/collective action lawsuit is a “concerted activity” protected by Section 7 of the NLRA. Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 22 of 36 PageID: 559 15 2. Employees’ rights under Section 7 of the NLRA to engage in concerted activities through good faith collective litigation are substantive in nature and not merely procedural. Defendants attempt to diminish the recent circuit court authority by arguing that Plaintiffs’ Section 7 rights to participate in collective litigation are merely “procedural” rather than “substantive” in nature. See Doc. 45-1 at pp. 25-30. However, as discussed by both the Seventh and Ninth Circuits, the protections provided under Section 7 are substantive because they advance the fundamental purpose of the NLRA. The Ninth Circuit addressed this same argument in Morris, and cogently described the difference between “substantive” and “procedural” rights provided by statute: The Supreme Court has often described rights that are the essential, operative protections of a statute as “substantive” rights. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 29, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985)). In contrast, procedural rights are the ancillary, remedial tools that help secure the substantive right. See id.; CompuCredit Corp. v. Greenwood, 565 U.S. 95, 132 S. Ct. 665, 671, 181 L. Ed. 2d 586 (2012) (describing difference between statute’s “guarantee” and provisions contemplating ways to enforce the core guarantee). 2016 U.S. App. LEXIS 15638, at *19. Based on this distinction, the Morris court concluded that Section 7 was the core substantive right provided by the NLRA: Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 23 of 36 PageID: 560 16 The rights established in § 7 of the NLRA—including the right of employees to pursue legal claims together—are substantive. They are the central, fundamental protections of the Act, so the FAA does not mandate the enforcement of a contract that alleges their waiver. The text of the Act confirms the central role of § 7: that section establishes the “Right of employees as to organization.” 29 U.S.C. § 157 (emphasis added). No other provision of the Act creates these sorts of rights. Without § 7, the Act’s entire structure and policy flounder. For example, § 8 specifically refers to the “exercise of the rights guaranteed in section 157.” 28 U.S.C. § 158; Bighorn Beverage, 614 F.2d at 1241 (“Section 8(a)(1) of the Act implements [§ 7's] guarantee”). The Act’s other enforcement sections are similarly confused without the rights established in § 7. See, e.g., 29 U.S.C. § 160 (providing powers of the Board to prevent interference with rights in § 7). There is no doubt that Congress intended for § 7 and its right to “concerted activities” to be the “primary substantive provision” of the NLRA. See Gilmer, 500 U.S. at 24. 2016 U.S. App. LEXIS 15638, at *21-22; see also id. at *5-6 (“Concerted activity– the right of employees to act together–is the essential, substantive right established by the NLRA.”). The Seventh Circuit reached a similar conclusion in Lewis, repeatedly rejecting the employer’s argument that Section 7 protections are simply procedural: The right to collective action in section 7 of the NLRA is not, however, merely a procedural one. It instead lies as the heart of the restructuring of employer/employee relationships that Congress meant to achieve in the statute. *** That Section 7’s rights are “substantive” is plain from the structure of the NLRA: Section 7 is the NLRA’s only substantive provision. Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 24 of 36 PageID: 561 17 Every other provision of the statute serves to enforce the rights Section 7 protects. Compare 29 U.S.C. § 157 with id. §§ 151-169. *** But just because the Section 7 right is associational does not mean that it is not substantive. It would be odd indeed to consider associational rights, such as the one guaranteed by the First Amendment to the U.S. Constitution, non-substantive. 823 F.3d at 1160, 1161. The Lewis and Morris opinions are not only consistent with the NLRB, which has repeatedly interpreted Section 7 as providing workers with substantive protections to concerted activity, see Murphy Oil USA, Inc., 361 NLRB 72 (2014); D.R. Horton, 357 NLRB 184 (2012),5 5 The Supreme Court has previously held that the NLRB’s interpretations of the NLRA are to be given considerable deference. See ABF Freight System, Inc. v. NLRB, 510 U.S. 317, 324 (1994). but also with several district courts that have reached the same conclusion. See, e.g., Fresh & Easy, 2016 Bankr. LEXIS 3690, at *19-21 (“The ability to act collectively is the fundamental right of the NLRA and ‘guarantees employees the most basic rights of industrial self-determination.’”) (quoting Emporium Capwell Co. v. Western Addition Community Org., 420 U.S. 50, 61 (1975)); Curtis, 2016 U.S. Dist. LEXIS 134129, at *12 (“The text and structure of the NLRA demonstrate that the rights protected by Section 7 are substantive.”); Tigges v. AM Pizza, Inc., 2016 U.S. Dist. LEXIS 100366, *43 (D. Mass. July 29, 2016) (“‘the very essence of labor right[s] under the . . . National Labor Relations Act is collective action.”); see also Totten, 152 F. Supp. 3d at Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 25 of 36 PageID: 562 18 1257-58.6 3. Defendants’ class/collective action waiver interferes with employees’ substantive right to engage in concerted legal activity in violation of Section 8(a)(1) of the NLRA. An employer violates Section 8(a)(1) of the NLRA by “interfere[ing] with, restrain[ing], or coerc[ing] employees in the exercise of the rights guaranteed in section 7.” 29 U.S.C. § 158(a)(1). As the Seventh Circuit observed in Lewis: “A contract that limits Section 7 rights that is agreed to as a condition of continued employment qualifies as ‘interfer[ing] with’ or ‘restrain[ing] . . . employees in the exercise’ of those rights in violation of Section 8(a)(1).” 823 F.3d at 1155; see also Morris, 2016 U.S. App. LEXIS 15638, at *14. Again, the Seventh and Ninth Circuits are not alone in reaching this conclusion. The NLRB and several district courts agree that arbitration agreements precluding class/collective litigation violate Section 8(a)(1). See, e.g., ZEP, Inc., 363 NLRB 192 (2016); Securitas Sec. Servs. USA, Inc., 363 NLRB 182 (2016); CVS RX Servs., 363 NLRB 180 (2016); Bloomingdale’s, Inc., 363 NLRB 172 (2016); UnitedHealth Group, Inc., 363 NLRB 134 (2016); 24 Hour Fitness USA, Inc., 363 NLRB 84 (2015); Kmart Corp., 363 NLRB 66 (2015); Chesapeake 6 Defendants also argue that an interpretation of Section 7’s express language precludes a finding that it provides workers with non-waivable substantive rights. See Doc. 45-1 at pp. 28-30. However, this argument completely ignores the NLRB’s own interpretation of the statute which is entitled to deference, see footnote 5 supra, as well as the NLRA’s broad remedial purpose, see Lewis, 823 F.3d at 1153. Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 26 of 36 PageID: 563 19 Energy Corp., 362 NLRB 80 (2015); Herrington, 993 F. Supp. 2d at 943-46; Fresh & Easy, 2016 Bankr. LEXIS 3690, at * 21; Curtis, 2016 U.S. Dist. LEXIS 134129, at *12; Tigges, 2016 U.S. Dist. LEXIS 100366, at *44-45; Totten, 152 F. Supp. 3d at 1260-66. Defendants’ mandatory class/collective action waiver clearly impinges on Ms. Cicero’s Section 7 right to participate in concerted legal activity by requiring that she, as a condition of her employment, assert work related claims in arbitration strictly on an individual basis. Thus, the class/collective action waiver is illegal under Section 8(a)(1) of the NLRA and unenforceable. 4. Because Defendants’ mandatory class/collective action waiver violates the NLRA, it is unenforceable under the FAA’s savings clause. Defendants argue that the Federal Arbitration Act’s (“FAA”) purportedly pro-arbitration edict trumps Ms. Cicero’s NLRA rights and requires that their mandatory class/collective action waiver be enforced in totality. See Doc. 45-1 at pp. 18-24. This argument, however, ignores the FAA’s express savings clause in addition to the Supreme Court’s instruction that arbitration agreements waiving substantive rights (such as those under Section 7 of the NLRA) are unenforceable. The FAA was enacted to ensure that “courts [] place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). However, Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 27 of 36 PageID: 564 20 the Supreme Court has specifically held that that FAA is not limitless. See Proma Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967) (FAA’s purpose is “to make arbitration agreements as enforceable as other contracts, but not more so.” (emphasis supplied)); see also Fresh & Easy, 2016 Bankr. LEXIS 3690, at *25 (“the FAA was not meant to make arbitration agreements more enforceable than other contracts”). As Judge Young of the District of Massachusetts observed: “The FAA does not place arbitration agreements on a ‘pedestal’ on which all other legal rights are to be sacrificed.” Tigges, 2016 U.S. Dist. LEXIS 100366, at *46. Section 2 of the FAA states that arbitration agreements are “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. The FAA’s enforcement requirement combined with the savings-clause “reflect[s] both a liberal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract.” Concepcion, 563 U.S. at 339. In essence, “[t]he FAA’s savings clause permits agreements to arbitrate to be invalidated by generally applicable contract defenses, … but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” Lewis, 823 F.3d at 1156 (quoting Concepcion, 563 U.S. at 339). “Illegality is one of those grounds.” See id. at 1157 (emphasis Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 28 of 36 PageID: 565 21 supplied); accord Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444 (2006); see also Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 83-84 (1982) (“a federal court has a duty to determine whether a contract violates federal law before enforcing it.”). As the Ninth Circuit observed in Morris: “When an illegal provision not targeting arbitration is found in an arbitration agreement, the FAA treats the contract like any other; the FAA recognizes a general contract defense of illegality. The term may be exercised, or the district court may decline enforcement of the contract altogether.” 2016 U.S. App. LEXIS 15638, at *18 (internal citations omitted). Defendants’ mandatory class/collective action waiver falls squarely within the FAA’s savings clause. As discussed above, this provision is illegal under the NLRA because it infringes on employees’ Section 7 rights in violation of section 8(a)(1). See section III.C.2, supra. The Seventh Circuit reached this same conclusion in Lewis, holding: The NLRA prohibits the enforcement of contract provisions like [the employer’s], which strip away employees’ rights to engage in “concerted activities.” Because the provision at issue is unlawful under Section 7 of the NLRA, it is illegal, and meets the criteria of the FAA’s saving clause for nonenforcement. *** Illegality is a standard contract defense contemplated by the FAA’s savings clause. See Buckeye Check Cashing, 546 U.S. at 444. If the NLRA does not render an arbitration provision sufficiently illegal to Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 29 of 36 PageID: 566 22 trigger the savings clause, the savings clause does not mean what it says. 823 F.3d at 1157, 1159; see also id. at 1159-60 (“To immunize an arbitration agreement from judicial challenge on a traditional ground such as illegality would be to elevate it over other forms of contract-a situation inconsistent with the savings clause.’”) (internal quotations omitted); Morris, 2016 U.S. App. LEXIS 15638, at *24 (“[W]e join the Seventh Circuit in treating the interaction between the NLRA and the FAA in a very ordinary way: when an arbitration contract professes to waive a substantive federal right, the savings clause of the FAA prevents the enforcement of that waiver”); Totten, 152 F. Supp. 3d at 1263 (a class action waiver that violates the NLRA “falls squarely within the ambit of the FAA’s savings clause.”). Consistent with the FAA’s savings clause, both the Supreme Court and this Court have held that arbitration agreements are invalid and unenforceable if they require a party to waive substantive federal rights. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991) (“‘[B]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.’”) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 628 (1985)); Waller v. Foulke Mgmt. Corp., 2011 U.S. Dist. LEXIS 90591, *8 (D.N.J. Aug. 11, 2011) (“When a party agrees to arbitrate its statutory claims, they Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 30 of 36 PageID: 567 23 do not forego the substantive rights afforded to them by the statute. They only submit their claims to an arbitral, rather than a judicial, forum.”) (Hillman, J.); see also Lewis, 823 F.3d at 1160 (“Arbitration agreements that act as a ‘prospective waiver of a party’s right to pursue statutory remedies’—that is, of a substantive right—are not enforceable.”) (quoting American Express Co. v. Italian Colors Restaurant, __ U.S. __, 133 S. Ct. 2304, 2310 (2013)). Under this principle, federal courts have not hesitated to invalidate contractual provisions (including those in arbitration agreements) that interfere with substantive statutory rights provided under federal laws such as the NLRA. See Kaiser, 455 U.S. at 86 (“While only the [NLRB] may provide affirmative remedies for unfair labor practices, a court may not enforce a contract provision which violates [the NLRA]. Were the rule otherwise, parties could be compelled to comply with contract clauses, the lawfulness of which would be insulated from review by any court.”); see also Lewis, 823 F.3d at 1160 (citing examples). Several district courts have agreed, rejecting Defendants’ argument that Section 7’s protections are merely procedural and able to be waived by agreement. See, e.g., Herrington, 993 F. Supp. 2d at 943-44 (“Again, it is well established that an arbitration agreement may not require a party to waive a substantive federal right.”); Totten, 152 F. Supp. 3d at 1262 (“The Supreme Court has already established that a valid arbitration agreement cannot require a party to waive a Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 31 of 36 PageID: 568 24 substantive federal right.”). 5. The FAA’s savings clause eliminates the potential for conflict with the NLRA. Defendants repeatedly argue in support of their Motion that the class/collective action waiver must be enforced as drafted because the NLRA does not contain a contrary congressional command that would allow it to override the FAA. See Doc. 45-1 at pp. 18-23, 28. However, “this argument puts the cart before the horse” because it automatically assumes that the FAA and NLRA cannot co-exist. See Lewis, 823 F.3d at 1156. As Chief Judge Wood observed in Lewis, the FAA’s savings clause prevents these statues from conflicting: [The employer] must overcome a heavy presumption to show that the FAA clashes with the NLRA. “[W]hen two statutes are capable of co- existence ... it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective.” Moreover, “[w]hen two statutes complement each other”—that is, “each has its own scope and purpose” and imposes “different requirements and protections”—finding that one precludes the other would flout the congressional design. Courts will harmonize overlapping statutes “so long as each reaches some distinct cases.” Implied repeal should be found only when there is an “‘irreconcilable conflict’ between the two federal statutes at issue.” [The employer] has not carried that burden, because there is no conflict between the NLRA and the FAA, let alone an irreconcilable one. As a general matter, there is “no doubt that illegal promises will not be enforced in cases controlled by the federal law.” The FAA incorporates that principle through its saving clause: it confirms that agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Illegality is one of those grounds. The NLRA prohibits the enforcement of contract provisions … which strip away Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 32 of 36 PageID: 569 25 employees’ rights to engage in “concerted activities.” Because the provision at issue is unlawful under Section 7 of the NLRA, it is illegal, and meets the criteria of the FAA’s saving clause for nonenforcement. Here, the NLRA and FAA work hand in glove. Lewis, 823 F.3d at 1157 (internal citations omitted); see also id. at 1157-58 (criticizing Horton II for making “no effort to harmonize the FAA and NLRA” and holding that there is “no conflict between the NLRA and the FAA, let alone an irreconcilable one”); Morris, 2016 U.S. App. LEXIS 15638, at *23-24 (“The dissent and [the employer] insist that we must effectively ignore the [FAA’s] savings clause and first search to see which of two statutes will “trump” the other. But this is not the way the Supreme Court has instructed us to approach statutory construction.”). Since the FAA and NLRA are able to co-exist through the FAA’s savings clause, a congressional command that the NLRA trumps the FAA is not needed to find that Defendants’ class/collective action waiver is unenforceable. 6. The FAA does not provide parties with the limitless ability to waive class/collective action arbitration. Defendants cite to the Supreme Court’s decisions in Concepcion and Italian Colors to argue that the FAA somehow provides parties with the unbridled ability to waive the use of class/collective action procedures because they “interfere with fundamental attributes of arbitration.” See Doc. 45-1 at pp. 23-24. This argument was also soundly rejected by both the Seventh and Ninth Circuits and should Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 33 of 36 PageID: 570 26 receive the same treatment here. As Chief Judge Wood detailed in Lewis: Neither Concepcion nor Italian Colors goes so far as to say that anything that conceivably makes arbitration less attractive automatically conflicts with the FAA, nor does either case hold that an arbitration clause automatically precludes collective action even if it is silent on that point. In Concepcion, the Supreme Court found incompatible with the FAA a state law that declared arbitration clauses to be unconscionable for low-value consumer claims. See Concepcion, 563 U.S. at 340. The law was directed toward arbitration, and it was hostile to the process. Here, we have nothing of the sort. Instead, we are reconciling two federal statutes, which must be treated on equal footing. The protection for collective action found in the NLRA, moreover, extends far beyond collective litigation or arbitration; it is a general principle that affects countless aspects of the employer/employee relationship. This case is actually the inverse of Italian Colors. There the plaintiffs argued that requiring them to litigate individually “contravene[d] the policies of the antitrust laws.” 133 S. Ct. at 2309. The Court rejected this argument, noting that “the anti-trust laws do not guarantee an affordable procedural path to the vindication of every claim.” With regard to the enforcement of the antitrust laws, the Court commented that “no legislation pursues its purposes at all costs.” Id. (quoting Rodriguez v. United States, 480 U.S. 522, 525-526, 107 S. Ct. 1391, 94 L. Ed. 2d 533 (1987) (per curiam)). In this case, the shoe is on the other foot. The FAA does not “pursue its purposes at all costs”—that is why it contains a saving clause. Id. If these statutes are to be harmonized—and according to all the traditional rules of statutory construction, they must be—it is through the FAA’s saving clause, which provides for the very situation at hand. Because the NLRA renders Epic's arbitration provision illegal, the FAA does not mandate its enforcement. We add that even if the dicta from Concepcion and Italian Colors lent itself to the Fifth Circuit’s interpretation [in Horton II], it would not apply here: Sections 7 and 8 do not mandate class arbitration. Indeed, they say nothing about class arbitration, or even arbitration generally. Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 34 of 36 PageID: 571 27 Instead, they broadly restrain employers from interfering with employees’ engaging in concerted activities. See 29 U.S.C. §§ 157, 158. Sections 7 and 8 stay Epic’s hand. (This is why, in addition to its being waived, Epic’s argument that Lewis relinquished his Section 7 rights fails.) Epic acted unlawfully in attempting to contract with Lewis to waive his Section 7 rights, regardless of whether Lewis agreed to that contract. The very formation of the contract was illegal. See Italian Colors, 133 S. Ct. at 2312 (Thomas, J., concurring) (noting, in adopting the narrowest characterization of the FAA’s saving clause of any Justice, that defenses to contract formation block an order compelling arbitration under FAA). Lewis, 823 F.3d at 1158-59; see also Morris, 2016 U.S. App. LEXIS 15638, at *28 (“The dissent and [the employer] attempt to read Concepcion for the proposition that concerted claims and arbitration are fundamentally inconsistent. But Concepcion makes no such holding.”) (emphasis supplied); id. at *30 (“[N]othing in the Supreme Court’s recent arbitration case law suggest that a party may simply incant the acronym ‘FAA’ and receive protection for illegal contract terms anytime the party suggest it will enjoy arbitration less without those illegal terms.”). Moreover, Defendants have failed to demonstrate just how a class/collective arbitration of this case would interfere with the arbitration process. For example, the American Arbitration Association has its own “Supplementary Rules for Class Arbitrations” to address these types of claims. See Exhibit F. Thus, this argument should be rejected as well. IV. CONCLUSION For the reasons discussed above, Plaintiffs respectfully request that Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 35 of 36 PageID: 572 28 Defendants’ Motion be denied. Date: November 7, 2016 Respectfully submitted, s/ R. Andrew Santillo Peter Winebrake* R. Andrew Santillo (NJ ID #025512004) Mark J. Gottesfeld, Esq. (NJ ID #027652009) WINEBRAKE & SANTILLO, LLC 715 Twining Road, Suite 211 Dresher, PA 19025 (215) 884-2491 Jerry Martin* Seth Hyatt* Barrett Johnston Martin & Garrison LLC 414 Union Street, Suite 900 Nashville, TN 37219 (615) 244-2202 *admission pro hac vice anticipated Attorneys for Plaintiffs Case 1:16-cv-05806-NLH-KMW Document 54 Filed 11/07/16 Page 36 of 36 PageID: 573 Exhibit A Case 1:16-cv-05806-NLH-KMW Document 54-1 Filed 11/07/16 Page 1 of 6 PageID: 574 Case 1:16-cv-05806-NLH-KMW Document 54-1 Filed 11/07/16 Page 2 of 6 PageID: 575 Case 1:16-cv-05806-NLH-KMW Document 54-1 Filed 11/07/16 Page 3 of 6 PageID: 576 Case 1:16-cv-05806-NLH-KMW Document 54-1 Filed 11/07/16 Page 4 of 6 PageID: 577 Case 1:16-cv-05806-NLH-KMW Document 54-1 Filed 11/07/16 Page 5 of 6 PageID: 578 Case 1:16-cv-05806-NLH-KMW Document 54-1 Filed 11/07/16 Page 6 of 6 PageID: 579 Exhibit B Case 1:16-cv-05806-NLH-KMW Document 54-2 Filed 11/07/16 Page 1 of 7 PageID: 580 Case 1:16-cv-05806-NLH-KMW Document 54-2 Filed 11/07/16 Page 2 of 7 PageID: 581 Case 1:16-cv-05806-NLH-KMW Document 54-2 Filed 11/07/16 Page 3 of 7 PageID: 582 Case 1:16-cv-05806-NLH-KMW Document 54-2 Filed 11/07/16 Page 4 of 7 PageID: 583 Case 1:16-cv-05806-NLH-KMW Document 54-2 Filed 11/07/16 Page 5 of 7 PageID: 584 Case 1:16-cv-05806-NLH-KMW Document 54-2 Filed 11/07/16 Page 6 of 7 PageID: 585 Case 1:16-cv-05806-NLH-KMW Document 54-2 Filed 11/07/16 Page 7 of 7 PageID: 586 Exhibit C Case 1:16-cv-05806-NLH-KMW Document 54-3 Filed 11/07/16 Page 1 of 2 PageID: 587 UNITED STATES OF AMERICA BEFORE THE NATIONAL LABOR RELATIONS BOARD DIVISION OF JUDGES QUALITY DINING, INC., Respondent and Case 04-CA-175450 RYAN RUTHERFORD, An Individual ORDER GRANTING JOINT MOTION, APPROVING STIPULATED RECORD, AND SETTING DATE TO FILE BRIEFS On October 21, 2016, the parties filed a joint motion requesting that I issue a decision in this matter without a hearing based on a stipulated record, pursuant to Section 102.35(a)(9) of the Board's Rules and Regulations. The motion included the parties' stipulation of facts with attached exhibits and a statement of the issues. The parties requested that I permit them to forego submission of statements of position. On that same date, the Region postponed indefinitely the hearing scheduled for October 24, 2016. The motion is granted and the stipulation of facts is approved. Briefs should be filed with the Washington, DC, Office of the Division of Judges no later than November 28, 2016. Dated, Washington, D.C. October 25, 2016 51. Susan A. Flynn Administrative Law Judge Case 1:16-cv-05806-NLH-KMW Document 54-3 Filed 11/07/16 Page 2 of 2 PageID: 588 Exhibit D Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 1 of 13 PageID: 589 Neutral As of: October 20, 2016 6:48 PM EDT In re Fresh & Easy, LLC United States Bankruptcy Court for the District of Delaware October 11, 2016, Decided Chapter 11, Case No. 15-12220 (BLS), Adv. No. 15-51897 (BLS), Related to Adv. Docket Nos. 26, 27, 34, 36, 38, 65, & 67 Reporter 2016 Bankr. LEXIS 3690 In re: Fresh & Easy, LLC, Debtor.Diana Chan, Plaintiff, v. Fresh & Easy, LLC, YFE Holdings, Inc., and The Yucaipa Companies, LLC, Defendants. Counsel: [*1] For Plaintiff: Rosemary J. Piergiovanni, Esquire, FARNAN LLP, Wilmington, DE; Eduard Korsinsky, Esquire, Christopher J. Kupka, Esquire, Michael B. Ershowsky, Esquire, Levi & Korsinksy LLP, New Yor, NY. For Fresh & Easy, LLC, Defendant: Norman L. Pernick, Esquire, Cole Schotz P.C., Wilmington, DE; Michael L. Gallion, Esquire, David Van Pelt, Esquire, Kelley Drye & Warren LLP, Los Angeles, CA. Judges: Brendan Linehan Shannon, Chief United States Bankruptcy Judge. Opinion by: Brendan Linehan Shannon Opinion OPINION1 Before the Court is Fresh & Easy, LLC's (the "Debtor") motion to compel arbitration (the "Motion") under the Federal Arbitration Act ("FAA").2 The Debtor requests the Court to send the above-captioned matter to arbitration on an individual basis, expunge Diana Chan's ("Ms. Chan" or the "Plaintiff") purported class claims, and stay this adversary proceeding until completion of the arbitration. Ms. Chan opposes the Motion on the ground that the arbitration agreement between the 1 This Opinion constitutes the Court's findings of fact and conclusions of law, as required by the Federal rules of Bankruptcy Procedure. Fed. R. Bankr. P. 7052, 9014(c). 2 D.I. 26 & 27. parties is unenforceable under the National Labor Relations Act, 29 U.S.C. § 151 et seq. (the "NLRA") because it contains [*2] a class-action waiver provision. 3 This case presents two matters of first impression in this jurisdiction. The first issue is whether a class-action waiver provision in an arbitration agreement violates the NLRA. There is little consensus on this issue. It has received a great deal of attention in recent months, with two Courts of Appeal parting ways with the majority of courts that have previously considered the issue. The second issue before the Court is whether an arbitration agreement containing a provision that violates the NLRA remains enforceable if that agreement allows an employee to revoke it after following certain procedures. As discussed in detail below, the Court concludes that a class-action waiver provision violates substantive rights at the heart of the NLRA. Further, the Court finds that the opt-out provision does not operate to save the Arbitration Agreement at issue here. The Debtor's Motion is denied. I. BACKGROUND On October 30, 2015, Fresh & Easy, LLC filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The Debtor operated a chain of grocery stores in the southwest United States. The Debtor's stores have all closed [*3] and substantially all of its assets have been sold during this bankruptcy proceeding. Ms. Chan worked in the produce department at one of the Debtor's California distribution centers until her termination on October 30, 2015. On November 12, 2015, Ms. Chan commenced this adversary proceeding 3 D.I. 34 & 65. Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 2 of 13 PageID: 590 Page 2 of 12 by filing a complaint4 (the "Complaint") on behalf of herself and a purported class of similarly situated former employees against YFE Holdings, Inc., the Yucaipa Companies, LLC, and the Debtor (collectively, the "Defendants"). The Plaintiff requests this action proceed as a class action under Federal Rule of Bankruptcy Procedure 7023 ("Rule 23") and that she be designated as the class representative. The Plaintiff's two-count Complaint seeks to recover damages on account of alleged violations of the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101-2109, and its California counterpart, California Labor Code §§ 1400-1408 (the "Claims"). The Plaintiff avers that the Defendants violated these statutes by failing to give her and other similarly situated employees at least sixty days advance notice of termination.5 The Plaintiff asserts that the class of affected employees is thus entitled to sixty days wages and certain benefits under the Employee Retirement Income Security [*4] Act. The Plaintiff has filed the Complaint but has not filed a proof of claim in her individual capacity or a class proof of claim on behalf of similarly situated former employees of the Debtor. Nearly two years before the Plaintiff's termination, on November 29, 2013, she entered into an arbitration agreement with the Debtor (the "Arbitration Agreement") that required her to resolve all employment-related disputes through arbitration.6 The Arbitration Agreement further provided that the Plaintiff could revoke the agreement if within thirty days of signing the agreement she: (i) notified the Debtor in writing that she was revoking; (ii) signed the notice; and (iii) delivered the revocation notice to the Debtor's human resources department. The record reflects that she did not opt-out of the Arbitration Agreement. At the outset, the Arbitration Agreement states that the parties "agree that any and all disputes or claims arising [*5] out of or relating to the Company/Employee employment relationship, including its termination . . . shall be resolved by final and binding arbitration by a single neutral arbitrator." The agreement covered any 4 D.I. 1. 5 See 29 U.S.C. § 2102(a) ("An employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order to each representative of the affected employees as of the time of the notice . . . ."); Cal. Lab. Code § 1401(a)(1) (same). 6 D.I. 28, Ex. A. dispute with the Debtor's employees, officers, directors, parents, subsidiaries, and affiliated entities. It also permitted Ms. Chan to bring claims only in her individual capacity (hereinafter, the "Class Waiver"): "THE PARTIES AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN THEIR RESPECTIVE INDIVIDUAL CAPACITIES AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS, REPRESENTATIVE OR COLLECTIVE ACTION." In the event a provision in the agreement was held to be void, the Arbitration Agreement provided that the remainder of the contract would remain in full force and effect. On January 25, 2016, the Debtor filed its Motion seeking to compel arbitration pursuant to the terms of the Arbitration Agreement and dismissal of the Plaintiff's class claims.7 On February 8, 2016, the Plaintiff filed a memorandum of law in opposition to the Motion, and on February 16, 2016, the Debtor filed a reply.8 While this briefing was underway, this Court ruled in a separate adversary [*6] proceeding in this case that it lacked discretion to deny enforcement of an identical arbitration agreement9 under the rule stated in Mintze v. Am. Gen. Fin. Servs. (In re Mintze), 434 F.3d 222 (3d Cir. 2006).10 Shortly after that decision was issued, the Court granted the Plaintiff's request to file supplemental briefing to address a recent decision by the United States Court of Appeals for the Seventh Circuit.11 The Plaintiff and the Debtor subsequently filed further briefing in support of their respective positions.12 This matter has been fully briefed and is ripe for decision. II. JURISDICTION AND VENUE 7 Regarding the latter request, there is no relief the Court can grant. Per review of the claims registry maintained by Epiq Bankruptcy Solutions LLC, the Plaintiff did not file a proof of claim in her individual capacity or a class proof of claim on behalf of similarly situated former employees of the Debtor. The Plaintiff's pleading also do not mention the filing of a proof of claim. 8 D.I. 34 & 36. 9 Except for the signature line and date, the arbitration agreements are the same. Adv. Proc. No. 15-51906, D.I. 27, Ex. A. 10 Adv. Proc. No. 15-51906, D.I. 63. The Court did not consolidate the adversaries for purposes of disposition because of the different arguments presented by the plaintiffs. 11 D.I. [*7] 64. 12 D.I. 65 & 67. 2016 Bankr. LEXIS 3690, *3 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 3 of 13 PageID: 591 Page 3 of 12 The Court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157(b)(1). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. Consideration of the Motion constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B) and (O). 13 III. DISCUSSION A. The Parties' Positions The Debtor argues that the FAA requires enforcement of the Arbitration Agreement. The Debtor posits that this Court lacks discretion to deny enforcement of the Arbitration Agreement under Mintze because there is no inherent conflict between arbitrating the Claims and the Bankruptcy Code's underlying purposes. [*8] The Plaintiff suggests that the Court need not reach the question (central to the analysis under Mintze) of whether there is an inherent conflict because the Class Waiver renders the Arbitration Agreement unenforceable under the NLRA and the FAA's savings clause.14 Relying on the recent decision in Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), the Plaintiff contends that Section 7 of the NLRA confers a substantive right for employees to pursue class actions because they constitute concerted activities, which are specifically protected under the NLRA. Because Section 8 of the NLRA deems it an unfair labor practice to interfere with the exercise of rights guaranteed under Section 7, the Plaintiff contends that the Class Waiver violates the NRLA and renders the Arbitration Agreement unenforceable. 13 The question presented by the Motion is, in what forum will claims against this Debtor be adjudicated? The Court determines that this is a question that invokes this Court's core jurisdiction. The fact that Plaintiff has not filed a proof of claim is of limited significance here, given that Plaintiff has timely filed the Complaint, thereby invoking the Court's jurisdiction. Pursuant to the Amending Standing Order of Reference dated , to the extent it is subsequently determined that the matter before this Court is non-core, a reviewing court may consider this Opinion as proposed findings of fact and conclusions of law under Fed. R. Bankr. P. 9033. 14 The Plaintiff also challenges the applicability of the Arbitration Agreement on grounds that the Claims are not covered by that Agreement. The Arbitration Agreement covers claims for wrongful termination, wages, penalties, and benefits. D.I. 28, Ex. A. The Plaintiff seeks damages for sixty days' wages and benefits, as well as civil penalties provided for under the WARN Act. Thus, the Arbitration Agreement clearly covers the causes of action asserted in the Complaint. In response, the Debtor [*9] submits that the Seventh Circuit incorrectly held in Lewis that collective legal adjudication is a substantive right protected by the NLRA. The Debtor relies largely on the reasoning embraced by the majority of courts that have considered the issue: those courts have concluded that class actions are a procedural tool and not a substantive right protected by the NLRA. Consequently, Debtor contends that decisions by the National Labor Relations Board (the "Board") interpreting Section 7 to confer a substantive right are not entitled to deference. Further, Debtor argues that the relief requested in its Motion is consistent with the Supreme Court's FAA jurisprudence, which has endorsed an expansive view in favor of arbitrating disputes. Finally, the Debtor asserts that Lewis is materially distinguishable from this case: unlike in Lewis -- where the arbitration agreement was a condition of continued employment -- the Arbitration Agreement at issue here contains an opt-out clause that enabled the Plaintiff to revoke it. B. Analysis The Plaintiff's challenge to the enforceability of the Arbitration Agreement raises two statutory interpretation issues. First, whether the right to file a class action [*10] qualifies as "concerted activities" for "mutual aid or protection" under Section 7 of the NLRA. 29 U.S.C. § 157. If it does, a class waiver infringes on a substantive federal right. Because the Court holds that it does, the Court must address another interpretation question under Section 8 of the NLRA, which makes it "an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7." 29 U.S.C. § 158(a)(1). The Court must decide whether an illegal contractual provision that may be revoked by the employee still interferes with, restrains, or coerces employees in the exercise of their Section 7 rights. The Court addresses each issue in turn. 1. Section 7 Reflects the Unambiguous Intention of Congress to Create and Protect Employees' Right to Pursue Collective Legal Action The NLRA is not interpreted on a clean slate. The Board has been delegated the power and responsibility to interpret the NLRA. NLRB v. City Disposal Sys. Inc., 465 U.S. 822, 829, 104 S. Ct. 1505, 79 L. Ed. 2d 839 (1984) ("[T]he task of defining the scope of § 7 is for the Board to perform in the first instance as it considers the wide variety of cases that come before it . . . .")(internal quotation marks omitted). Because the Board is charged 2016 Bankr. LEXIS 3690, *7 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 4 of 13 PageID: 592 Page 4 of 12 with administering the NLRA, a court cannot "simply impose its own construction of the statute." [*11] Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). Supreme Court precedent teaches how courts should approach the Board's interpretation. If Congress has directly spoken to the question at issue through the text of the statute, that is the end of inquiry as both the Board and a court must give effect to the intent of Congress. Id. But if Congress has not unambiguously expressed its intent, the question then is whether the Board's "answer is based on a permissible construction of the statute." Id. If the Board has adopted a reasonable construction, it is "entitled to considerable deference." City Disposal Sys., 465 U.S at 829; see ABF Freight System, Inc. v. NLRB, 510 U.S. 317, 324, 114 S. Ct. 835, 127 L. Ed. 2d 152 (1994) (observing that the Board's views regarding scope of the NLRA are entitled to "the greatest deference"). Before reaching the question of whether the Board's interpretation is reasonable, the Court must exhaust "the devices of judicial construction [that] have been tried and found to yield no clear sense of congressional intent." Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 600, 124 S. Ct. 1236, 157 L. Ed. 2d 1094 (2004). The starting point in statutory interpretation always begins with the language of the statute. When a statute's language is plain, courts must enforce the statute according to its plain meaning. E.g., Lamie v. U.S. Tr., 540 U.S. 526, 534, 124 S. Ct. 1023, 157 L. Ed. 2d 1024 (2004); Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S. Ct. 3245, 73 L. Ed. 2d 973 (1982). If Congress has not defined a particular term in the statute or elsewhere in the statutory scheme, a court [*12] must give that term its ordinary and customary meaning. Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 388, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993). Section 7 sets forth the rights of employees under the NLRA. It provides that "[e]mployees 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). The term "concerted activities" is not specifically identified in the NLRA. According to the version of the Oxford English Dictionary in print when Congress enacted the NLRA, "concerted" means "arranged by mutual agreement; agreed upon, pre- arranged; planned, contrived; done in concert;" and "concert" means an "agreement of two or more persons or parties in a plan, design, or enterprise; union formed by such mutual agreement." Oxford English Dictionary 764 (1st ed. 1933); see Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997, 2003, 182 L. Ed. 2d 903 (2012) (commenting that the Oxford English Dictionary is "one of the most authoritative on the English language"); Sanders v. Jackson, 209 F.3d 998, 1000 (7th Cir. 2000) ("We frequently look to dictionaries to determine the plain meaning of words, and in particular we look at how a phrase was defined at the time the statute was drafted and enacted."). [*13] And the Oxford English Dictionary defines "activity" as "the state of being active; the exertion of energy, action." Oxford English Dictionary 95 (1st ed. 1933). The understanding and meaning of "concerted" remains unchanged today. The current edition of the Oxford American Dictionary defines "concerted" as "jointly arranged, planned, or carried out; coordinated." New Oxford American Dictionary 359 (3d ed. 2010). Finally, Black's Law Dictionary defines "concerted activity" as "action by employees concerning wages or working conditions; esp., a conscious commitment to a common scheme designed to achieve an objective." Black's Law Dictionary (10th ed. 2014.) Synthesizing these authorities leads the Court to conclude that the ordinary meaning of "concerted activities" within the context of Section 7 protects a broad range of employee conduct.15 Collective adjudication fits well within this protected range because at its core it is a planned arrangement among more than one employee for a particular work-related purpose. Other courts have similarly construed "concerted activities" as encompassing collective adjudication. Morris v. Ernst & Young, LLP, No. 13-16599, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *3 (9th Cir. Aug. 22, 2016); Lewis, 823 F.3d at 1153; see Brady v. Nat'l Football League, 644 F.3d 661, 673 (8th Cir. 2011) 15 Admittedly, there is some breadth to the meaning of "concerted activities." Merely because a term is broad in scope, however, does not render it ambiguous. See Penn. Dep't of Corrections v. Yeskey, 524 U.S. 206, 212, 118 S. Ct. 1952, 141 L. Ed. 2d 215 (1998). By using intentionally broad language, Congress does not have to spell out every conceivable contingency. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 499, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985) (describing how a statute which can be "applied in situations not expressly anticipated by Congress does not demonstrate ambiguity . . . . It demonstrates breadth"). See also Haroco, Inc. v. American National Bank & Trust Co. of Chicago, 747 F.2d 384, 389 (7th Cir. 1989) aff'd 473 U.S. 606, 105 S. Ct. 3291, 87 L. Ed. 2d 437 (1985). 2016 Bankr. LEXIS 3690, *10 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 5 of 13 PageID: 593 Page 5 of 12 ("[A] lawsuit filed in good faith by a group of employees to achieve [*14] more favorable terms or conditions of employment is 'concerted activity' under § 7 of the National Labor Relations Act."). The purpose behind Section 7's enactment supports such a reading. When interpreting a word in a statute, the whole statutory text and purpose must be considered. Dolan v. U.S. Postal Serv., 546 U.S. 481, 486, 126 S. Ct. 1252, 163 L. Ed. 2d 1079 (2006). A court should not be guided "by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy." Kelly v. Robinson, 479 U.S. 36, 43, 107 S. Ct. 353, 93 L. Ed. 2d 216 (1986). The labor policy concerns at the time of the NLRA's enactment and the issues it was designed to address indicate that Section 7 protects the right of employees to act collectively to assert legal claims against an employer. In Eastex, Inc. v. NLRB, the Supreme Court recognized this and remarked that Section 7 protects employees "when [*15] they seek to improve working conditions through resort to administrative and judicial forums." 437 U.S. 556, 566, 98 S. Ct. 2505, 57 L. Ed. 2d 428 (1978). The Court reasoned that "Congress knew well enough that labor's cause often is advanced on fronts other than collective bargaining and grievance settlement within the immediate employment context." Id. at 565. Likewise, in NLRB v. City Disposal Sys. Inc., the Supreme Court observed the importance the NLRA placed on collective action against an employer: "It is evident that, in enacting § 7 of the NLRA, Congress sought generally to equalize the bargaining power of the employee with that of his employer by allowing employees to band together in confronting an employer regarding their terms and conditions of their employment." 465 U.S. 822, 835, 104 S. Ct. 1505, 79 L. Ed. 2d 839 (1984). Congress gave no indication that Section 7 was "intended to limit [Section 7] protection to situations in which an employee's activity and that of his fellow employees combine with one another in any particular way." Id. Interpreting Section 7 to include collective-suit filing clearly furthers the policies underlying the NLRA. Section 1 of the NLRA, which is captioned "Findings and declaration of policy," makes clear that the chief focus of the NLRA is to protect the right of employees to act collectively. It provides, among other things, that [*16] the NLRA was enacted to provide "equality of bargaining power between employers and employees" and to "protect the exercise by workers of full freedom of association . . . for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection." 29 U.S.C. § 151. Collective legal action balances the playing field by providing a feasible means for employees to assert rights where they would otherwise "have no realistic day in court if a class action were not available." Phillips Petrol. Co. v. Shutts, 472 U.S. 797, 809, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985). "Collective, representative, and class legal remedies allow employees to band together and thereby equalize bargaining power." Lewis, 823 F.3d at 1153. Many of the chief benefits of proceeding as a class dovetail with the notion of equalizing the parties' disparate positions; for instance, proceeding as a class action may bolster employees' negotiating position, allows access to counsel that would not otherwise take the case given the amount of the individual claims, and helps ensure employers listen to its employees' allegations given the aggregate liability of the pooled claims. Access to judicial fora is one of the recognized ways employees seek to improve terms and conditions of employment. Eastex, 437 U.S. at 566. Requiring employees [*17] to bring claims individually frustrates the NLRA's goal of "protect[ing] the right of workers to act together to better their working conditions." NLRB v. Washington Aluminum Co., 370 U.S. 9, 14, 82 S. Ct. 1099, 8 L. Ed. 2d 298 (1962). Accordingly, this Court concludes that Congress has spoken directly through enactment of the NLRA to create a substantive right for employees to proceed collectively to protect or vindicate rights conferred under Section 7. 2. The Board's Interpretation of Section 7 is Entitled to Deference Consideration of the Board's interpretation of Section 7 is not required here under Chevron, since the Court has concluded that the NLRA unambiguously protects the right of employees to bring a collective action. It is, however, difficult to ignore the alternative interpretations other courts have adopted. Reasonable minds appear to disagree on the meaning of "concerted activities." Compare Morris, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *3, with D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 355 (5th Cir. 2013). But even if this term is ambiguous and the Court resorts to the second step of the Chevron analysis, the Court's conclusion would remain unchanged. The Board, on at least two occasions, has interpreted Section 7 to provide a substantive right to class or collective remedies. Murphy Oil USA, Inc., 361 NLRB No. 72, at *6-7 (2014) ("Murphy") enf. denied 808 F.3d 1013 (5th Cir. 2015); D.R. Horton, 357 NLRB No. 184, at *16 (2012) 2016 Bankr. LEXIS 3690, *13 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 6 of 13 PageID: 594 Page 6 of 12 ("Horton") enf. denied 737 F.3d 344 (5th Cir. 2013) ("Horton II"). The Board's interpretation of Section 7 is rational and consistent with the [*18] NLRA's statutory scheme. As such, its interpretation is entitled to considerable deference. Lechmere, Inc. v. NLRB, 502 U.S. 527, 536, 112 S. Ct. 841, 117 L. Ed. 2d 79 (1992). The Debtor argues that the Board's rulings in Horton and Murphy are not entitled to deference because it construed and applied statutes beyond those that it administers. Indeed, the Board in both of those decisions interpreted statutes, and discussed precedent, beyond its particular expertise. And courts have correctly held that the Board should not be afforded Chevron deference when interpreting the FAA. See Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297 n.8 (2d Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1054 (8th Cir. 2013). Similar to the Debtor's argument, these courts reason that no deference is owed because the Board does not have special competence or experience in interpreting the FAA. This Court, however, is not relying on the Board's construction of the FAA, the interplay of the FAA and NLRA, its interpretation of Supreme Court precedent, or whether the FAA should yield to the NLRA. Rather, the Court looks to the Board's interpretation only "on an issue that implicates its expertise in labor relations." City Disposal, 465 U.S. at 829 (1984). The Court cannot disregard the Board's explicit determination that the NLRA grants employees a substantive right to adjudicate claims collectively. The Court therefore finds that the Board is [*19] entitled to deference in its interpretation of Section 7. See Chevron, 467 U.S. at 844 ("We have long recognized that considerable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer, and the principle of deference to administrative interpretations."). The remaining issues before the Court are largely resolved following the determination that Section 7 protects collective legal action. As discussed in detail below, since Section 7 protects collective actions, it confers a substantive right to employees to engage in the same; Section 8 renders contractual provisions invalid that violate an employee's Section 7 rights. Therefore, the Class Waiver is illegal and unenforceable pursuant to both the FAA's savings clause and well- settled case law holding that a party cannot give up the right to pursue statutory remedies by agreeing to arbitration. i. Section 7 confers a substantive right As stated above, the right of employees to utilize a collective mechanism is a substantive right protected under the NLRA. The framework of the NLRA confirms this conclusion. Morris, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *8 ("Without § 7, the Act's entire structure and policy flounder."); Lewis, 823 F.3d at 1160 ("That Section 7's rights are 'substantive' is plain from the structure of the NLRA."). [*20] Section 7 is the heart of the NLRA and establishes three rights—the right to organize, the right to bargain collectively, and the right to engage in other concerted activities. These rights are the core substantive rights protected by the NLRA, Morris, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *5, a conclusion buttressed the fact that Section 7 is the only substantive provision; the remaining provisions of the NLRA serve to protect the rights set forth in Section 7. The ability to act collectively is the fundamental right of the NLRA and "guarantees employees the most basic rights of industrial self- determination." Emporium Capwell Co. v. Western Addition Community Org., 420 U.S. 50, 61, 95 S. Ct. 977, 43 L. Ed. 2d 12 (1975). Unlike procedural rights that concern "the manner and the means by which the litigants' rights are enforced," the right to pursue work- related legal claims on a collective or concerted basis is the very right created and protected under Section 7. Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.S. 393, 407, 130 S. Ct. 1431, 176 L. Ed. 2d 311 (2010) (finding that substantive rules "alter the rights themselves, the available remedies, or the rules of decision by which the court adjudicates either"). The Debtor contends that the ability to participate in a class action lawsuit is only a procedural device. Case law teaches that, depending upon the statutory scheme, the availability or use of class actions may be a procedural right and ancillary to the underlying [*21] substantive claim. See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13, 117 S. Ct. 2231, 138 L. Ed. 2d 689 (1997); Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 332, 100 S. Ct. 1166, 63 L. Ed. 2d 427 (1980); Reed v. Fla. Metro. Univ., Inc., 681 F.3d 630, 643 (5th Cir. 2012). The Debtor's reliance on this legal proposition and body of case law, however, is misplaced because prohibiting collective action here directly affects the substantive rights being adjudicated. D.R. Horton, 357 NLRB No. 184, at *12 ("Rule 23 may be a procedural rule, but the Section 7 right to act concertedly by invoking Rule 23 . . . or other legal procedurals is not."). In this case, the Class Waiver wrongfully restricted the Plaintiff's Section 7 rights by only permitting her to bring 2016 Bankr. LEXIS 3690, *17 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 7 of 13 PageID: 595 Page 7 of 12 claims in her individual capacity. The Plaintiff here seeks to assert an independent statutory right accorded by Congress—the right to proceed collectively.16 Section 8(a)(1) renders the Class Waiver invalid because it violates Section 7; accordingly, the Class Waiver is unenforceable under the NLRA.17 ii. The FAA's savings clause renders the Class Waiver unenforceable The Debtor asserts that the FAA requires enforcement of the Class Waiver because arbitration agreements must [*22] be enforced as written. The FAA, however, does not enforce a provision that is illegal under another federal statute. The FAA's savings clause, found in Section 2 of the FAA, provides that valid written arbitration agreements shall be enforceable "save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. This section renders arbitration agreements invalid "by generally applicable contract defenses, such as fraud, duress, or unconscionability." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011). Illegality is also among these contract defenses. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444, 126 S. Ct. 1204, 163 L. Ed. 2d 1038 (2006). The Class Waiver fits under the FAA's savings clause because it violates the NLRA and is deemed illegal under Section 8(a)(1). Importantly, the invalidity of the Class Waiver is not predicated upon the fact that it is contained in an arbitration agreement. The illegality of the Class Waiver has nothing to do with the designation of arbitration as the forum. As the Ninth Circuit cogently described in Morris: It would equally violate the NLRA for [the employer] to require its employees to sign a contract requiring the resolution of all work-related disputes in court and in 'separate proceedings.' The same infirmity would exist if the contract required disputes to be resolved through casting lots, [*23] coin toss, duel, trial by ordeal, or any other dispute resolution mechanism, if the contract (1) limited resolution to that mechanism and (2) required separate 16 Of course, Section 7 protects the right to pursue work- related legal claims as a class; it does not guarantee that the class will satisfy the strictures of Rule 23. 17 As will be discussed below, the presence of an opt-out provision does not change the Court's conclusion that the Class Waiver is unenforceable. individual proceedings. 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *6 (emphasis in original). The Debtor contends that refusing to enforce the Class Waiver runs afoul of Supreme Court cases holding that arbitration agreements can require legal claims to be adjudicated on an individual basis. The issue the Court has with this argument, which is in essence an iteration of the Fifth Circuit's reasoning in Horton II, is that "it is not clear to [the Court] that the FAA has anything to do with this case." Lewis, 823 F.3d at 1156. The FAA reflects a "federal policy favoring arbitration agreements," Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983), and requires courts to "rigorously enforce" them, Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985). "Congress enacted the FAA in response to widespread judicial hostility to arbitration." American Express Co. v. Italian Colors Rest., 133 S.Ct. 2304, 2308-09, 186 L. Ed. 2d 417 (2013). One of the purposes of the FAA is "to make arbitration agreements as enforceable as other contracts, but not more so." Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967); see also Concepcion, 563 U.S. at 339. The FAA's mandate may be overridden if a party can demonstrate that "Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue." Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 227, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987). Congressional intent to override the FAA can be deduced from the statute's [*24] text, the statute's legislative history, or from an inherent conflict between arbitration and the statute's underlying purposes. Id. But before reaching this conflicts question, which should not be reached lightly, the court must determine whether the "two statutes are capable of co-existence." Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 533, 115 S. Ct. 2322, 132 L. Ed. 2d 462 (1995). Courts have a duty to try and harmonize overlapping statutes to preserve the effect and purpose of each one. F.C.C. v. NextWave Personal Commc'ns Inc., 537 U.S. 293, 304, 123 S. Ct. 832, 154 L. Ed. 2d 863 (2003); Morton v. Mancari, 417 U.S. 535, 551, 94 S. Ct. 2474, 41 L. Ed. 2d 290 (1974) ("The courts are not at liberty to pick and choose among congressional enactments, and when two statutes are capable of co- existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to 2016 Bankr. LEXIS 3690, *21 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 8 of 13 PageID: 596 Page 8 of 12 regard each as effective."). Courts disagree on whether the FAA and NLRA conflict. Compare Horton, 737 F.3d at 359-60, and Jasso v. Money Mart Exp., Inc., 879 F. Supp. 2d 1038, 1048 (N.D. Cal. 2012), with Lewis, 823 F.3d at 1157. If they conflict, then the Court must determine whether a contrary congressional demand exists and which statute must yield to the other. The Court does not need to make that determination. There is no conflict between the statutes because the FAA does not require enforcement of class waivers. Morris, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *7; Lewis, 823 F.3d at 1157; Michael D. Schwartz, A Substantive Right to Class Proceedings: The False Conflict Between the FAA and NLRA, 81 Fordham L. Rev. 2945, 2955 (2013). The FAA's savings clause and the substantive [*25] nature of class actions under Section 7 convince the Court that the NLRA and the FAA can coexist. The FAA's savings clause prevents a conflict between the statutes. Morris, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *7; Lewis, 823 F.3d at 1157. The FAA's savings clause places arbitration agreements on equal footing as other contracts and subjects them to ordinary contract defenses. Section 2 demonstrates that the purpose of the FAA was not meant to make arbitration agreements more enforceable than other contracts. Prima Paint, 388 U.S. at 404 n.12. The FAA does not elevate arbitration agreements and the rights conferred thereunder on a pedestal "on which all other legal rights are to be sacrificed." Tigges v. AM Pizza, Inc., No. CV 16-10136-WGY, 2016 U.S. Dist. LEXIS 100366, 2016 WL 4076829, at *14 (D. Mass. July 29, 2016). The FAA does not require the enforcement of illegal provisions and Section 2 of the FAA excepts from the FAA's enforcement grasp those contracts where a valid contract defense applies. An illegal class waiver in an arbitration agreement fits squarely under the ambit of Section 2. Consequently, the FAA's savings clause operates to avoid any conflict with the NLRA. To find otherwise would render the FAA's savings clause a nullity, since illegality is a generally applicable contract defense justifying revocation of the contract. Lewis, 823 F.3d at 1159. When analyzing whether the NLRA and FAA conflict, the distinction between [*26] a substantive and procedural right is critical. The Supreme Court's interpretation of the FAA recognizes and appreciates this distinction; the Court has repeatedly found that the FAA does not require enforcement of an arbitration agreement that waives a party's substantive rights. For example, in Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc, the Court concluded that "agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute." 473 U.S. 614, 627, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985); see also Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991). Where an arbitration agreement contains a waiver of a party's substantive right, a court should "have little hesitation in condemning the agreement." Id. at 637 n.19. Similarly, in American Express Co. v. Italian Colors Restaurant, the Court explained that its decisions interpreting the FAA teach an important limiting principle "designed to safeguard federal rights: 'An arbitration clause will be enforced only 'so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum.'" 133 S. Ct. 2304, 2314, 186 L. Ed. 2d 417 (2013) (quoting Mitsubishi, 473 U.S. at 637). Enforcing class waivers rings more than a dissonant chord with the NLRA: it directly conflicts with substantive rights under Section 7. The Debtor mistakenly asserts that the [*27] Supreme Court's FAA jurisprudence dictates a contrary result. The Plaintiff relies on AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011) and DirecTV v. Imburgia, 136 S. Ct. 463, 193 L. Ed. 2d 365 (2015) for the proposition that agreements to arbitrate under the FAA can require legal claims to be adjudicated on an individual basis. In Concepcion, the issue before the Court was whether Section 2 of the FAA preempted California's judicial rule that deemed collective-arbitration waivers in consumer contracts unconscionable. 563 U.S. at 340. The Court held that the FAA preempted this rule because it disfavored arbitration and stood as an "obstacle to the accomplishment and execution of the full purposes and objectives" embodied in the FAA. Id. at 352. The California law, which basically required the availability of class arbitration, interfered with the fundamental attributes of arbitration; namely, facilitating streamlined proceedings and affording parties discretion in designating certain arbitration processes. Id. at 345-46. Contrary to Concepcion, the invalidation of class waivers pursuant to the NLRA does not rest on "defenses that apply only to arbitration." Id. at 339; see also Morris, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *6. The NLRA has equal application outside of the arbitration context. And therefore the NLRA does not have a "disproportionate impact on arbitration agreements" because it extends to [*28] all agreements involving an employer and employee relationship. Id. at 343. 2016 Bankr. LEXIS 3690, *24 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 9 of 13 PageID: 597 Page 9 of 12 Regarding Imburgia, the Court finds it inapposite. Imburgia was a contract interpretation case that involved determining whether an arbitration clause stating the "law of your state" included California law invalidating class arbitration waivers. Imburgia, 136 S. Ct. at 469-71. Other than a few salutary comments regarding the Court's regard for the FAA, the Court's discussion focused on its interpretation of a contract. It is unnecessary to determine whether a contrary congressional demand exists because the NLRA and the FAA do not conflict. The FAA has never been held to deny a party a substantive right provided for under a federal statute. Lewis, 823 F.3d at 1160. And the statutes can be harmonized by application of the FAA's savings clause. Thus, the Court holds that the Class Waiver is unenforceable under Section 7.18 The Court must still consider, however, whether the ability to revoke the Arbitration Agreement impacts the enforceability analysis. 3. The Opt-Out Provision Does Not Revive the Class Waiver The Debtor contends that the Arbitration Agreement is distinguishable from Lewis and other cases similarly interpreting Section 7 because it contains an opt-out clause. Unlike Lewis, the Arbitration Agreement was not a condition of employment and the Plaintiff could have elected to revoke the agreement. Relying on Johnmohammadi v. Bloomingdales, 755 F.3d 1072 (9th Cir. 2014), the Debtor argues that the Arbitration Agreement is enforceable because the opt-out clause demonstrates that the Debtor did not interfere with, restrain, or coerce the Plaintiff to agree to individual arbitration. Without a reference to any Board decision or discussion of Chevron deference,19 the Ninth Circuit in 18 The Debtor stresses that its "position as a debtor in bankruptcy" is significant in determining whether Section 7 invalidates the Class Waiver. The Court fails to see how the Debtor being in bankruptcy influences whether Section 7 protects the right of [*29] the Plaintiff to pursue a class action. While it may be true that the class action vehicle is not favored as a procedural mechanism in bankruptcy, whether a procedural device is welcome or not has nothing to do with what substantive rights Section 7 of the NLRA confers on employees. 19 In Johnmohammadi, the Ninth Circuit did not have the benefit of the two Board decisions and the two Circuit opinions discussed below, as they were issued the following year. Johnmohammadi held that an arbitration agreement requiring individual arbitration is enforceable where the employee could opt-out of the agreement. 755 F.3d at 1077. The court declined to determine whether a class waiver violated Section 7 and relied exclusively on Section 8. The employer could [*30] not be held in violation of the NLRA, the court reasoned, because the employee effectively retained the right to file a class action and nothing prevented her from opting out of the arbitration agreement. The court concluded that an employee who freely elects to resolve employment- related disputes through individual arbitration "cannot claim that enforcement of the agreement violates . . . the NLRA." Id. at 1077. While no other circuit courts have directly addressed this issue, the Lewis and Morris courts each touched upon the topic. In Lewis, the court intimated that it disagreed with the holding in Johnmohammadi, observing that the Johnmohammadi decision "conflicts with a much earlier decision from this court [NLRB v. Stone, 125 F.2d 752 (7th Cir. 1942)], which had held that contracts between employers and individual employees that stipulate away Section 7 rights necessarily interfere with employees' exercise of those rights in violation of Section 8." Lewis, 823 F.3d at 1155; see Stone, 125 F.2d at 756 (holding that employees obligated to sign an arbitration agreement which infringes on Section 7 rights was a per-se violation of the NLRA)). [*31] The court in Lewis also found that the employer acted "unlawfully in attempting to contract with [the employee] to waive his Section 7 rights, regardless of whether [the employee] agreed to that contract." Lewis, 823 F.3d at 1159 (emphasis added). Similarly, the Ninth Circuit in Morris stated that "[p]reventing the exercise of a § 7 right strikes us as 'interference' within the meaning of § 8. Thus, the Board's determination that a concerted action waiver violates § 8 is no surprise. And an employer violates § 8 a second time by conditioning employment on signing a concerted action waiver." Morris, 2016 U.S. App. LEXIS 15638, 2016 WL 4433080, at *4 (emphasis added). Importantly, the Board has recently addressed this issue. On Assignment Staffing Servs., Inc., 362 NLRB No. 189 (2015), rev'd per curiam, On Assignment Staffing Servs., Inc. v. NLRB, No. 15-60642, 2016 U.S. App. LEXIS 12750, 2016 WL 3685206 (5th Cir. June 6, 2016); 24 Hour Fitness USA, Inc., 363 NLRB No. 84 (2015); 24 Hour Fitness USA, Inc. v. NLRB, No. 16- 60005, 2016 U.S. App. LEXIS 13082, 2016 WL 2016 Bankr. LEXIS 3690, *28 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 10 of 13 PageID: 598 Page 10 of 12 3668038 (5th Cir. June 27, 2016).20 In On Assignment Staffing Servs., Inc., the Board held that requiring employees to opt out of an arbitration agreement that otherwise waives the right to collective action interferes with an employee's exercise of rights provided under the NLRA. 362 NLRB No. 189, at *1. The Board offered two distinct grounds for its holding. First, requiring employees to affirmatively act by following certain procedures to opt-out in order to retain the right to pursue collective legal action interferes with and burdens the exercise of Section 7 rights. Id. *6. Even though an opt-out provision allows employees [*32] to preserve their Section 7 rights, "Section 8(a)(1)'s reach is not limited to employer conduct that completely prevents the exercise of Section 7 rights. Instead, the long-established test is whether the employer's conduct reasonably tends to interfere with the free exercise of employee rights under the Act." Id. at *5 (emphasis in original). It burdens the exercise of Section 7 rights when an employer requires employees to take certain steps to retain the right to file pursue collective legal action. Id. at *6. The Board further reasoned that opt-out provisions impermissibly require employees to "make 'an observable choice that demonstrates their support for or rejection of'" pursuing collective-action claims under Section 7. Id. (quoting Allegheny Ludlum Corp., 333 NLRB 734, 740 (2001), enf'd. 301 F.3d 167 (3d Cir. 2002)). Second, the Board concluded that employers cannot require employees to prospectively waive their Section 7 right to engage in concerted activity. Id. at *8. "Any binding agreement that precludes individual employees from pursuing protected concerted legal activity in the future amounts to a prospective waiver of Section 7 rights — rights that may not be traded away. . . and thus is contrary the Act." Id. at *8 (quoting Mandel Security Bureau, 202 NLRB 117, 119 (1973)). The statutory text of Sections 7 and 8 controls the outcome of this issue. Under Section 8(a)(1), an employer commits an unfair labor practice when an employer interferes with, restrains, or coerces employees in the exercise of the rights guaranteed under Section 7. 29 U.S.C. § 158(a)(1). The Court has already determined that class waivers infringe on 20 The Board's decisions in On Assignment Staffing and 24 Hour Fitness were summarily reversed by the Fifth Circuit with no [*33] discussion. This is unsurprising given that the Fifth Circuit previously held that class waivers do not infringe on any Section 7 right. D.R. Horton, 737 F.3d at 362. As such, the presence of an opt-out clause in a contract containing a class waiver would be immaterial under the Fifth Circuit's precedent. Section 7 rights. The question therefore becomes whether an employer can escape the jaws of the NLRA by giving its employees an option to revoke a class waiver. Applying the same Chevron rubric as described above, the Court must first determine whether Congress has directly spoken on this issue. Chevron, 467 U.S. at 843. Congressional intent is discerned from the statutory text. Lamie, 540 U.S. at 534. The operative words under Section 8 are "interfere with, restrain, and coerce." The Court cannot say Section 8(a)(1) plainly renders invalid all class waivers when an employee can opt out. See PDK Labs. Inc. v. U.S. D.E.A., 362 F.3d 786, 796, 360 U.S. App. D.C. 344 (D.C. Cir. 2004) ("That a statute is susceptible of one construction does not render its meaning plain if it is also susceptible of [*34] another, plausible construction, as we believe this statute is."). There are no strings attached in an employee's decision to revoke the Arbitration Agreement. The agreement here specifically notes that the employment terms would remain unchanged regardless of the employee's decision whether or not to opt out. In choosing not to revoke the agreement, the employee, not the employer, is the party who elects to not exercise rights guaranteed under Section 7. See 29 U.S.C. § 158(a)(1) ("It shall be an unfair labor practice for an employer . . . .") (emphasis added). When an employee voluntarily enters into an arbitration agreement and is free to choose between these two options, and there are no consequences attached to either choice, Section 8(a)(1) can reasonably be construed against deeming this an unfair labor practice. Johnmohammadi, 755 F.3d at 1075-76. The Court concludes that Section 8(a)(1) is susceptible to two plausible constructions, and we therefore turn to the second step of Chevron. As noted, the Court must defer to the Board's interpretation so long as it is rational and consistent with the NLRA. E.g., Lechmere, 502 U.S. at 536. In On Assignment Staffing, the Board interpreted Section 8 and held that barring collective legal action "reasonably tends to interfere with the free exercise of employee [*35] rights under [the NLRA]." 362 NLRB No. 189, at *1. The Board's interpretation of Section 8(a)(1) is reasonable and consistent with the NLRA's purpose. Tigges, 2016 U.S. Dist. LEXIS 100366, 2016 WL 4076829, at *15-16 (holding that Board interpreting Section 8 as prohibiting class action waivers even when there is a right to opt out as "eminently reasonable"); 2016 Bankr. LEXIS 3690, *31 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 11 of 13 PageID: 599 Page 11 of 12 see Lewis, 823 F.3d at 1159 (finding that an employer that even attempts to contract with an employee to waive Section 7 rights is unlawful). The Board relied on a substantial body of authority and thoroughly explained its position. Important to the Court's decision to defer, however, was the Board's application of federal labor policy and drawing upon its body of experience. The Board exists, at least in part, to redress the inequality of bargaining power between employers and their employees. As one of its core functions, it is responsible for developing and applying national labor policy. In On Assignment Staffing, the Board relied on its specialized experience and intimate understanding of the policies underpinning the NLRA. 362 NLRB No. 189. For example, the Board observed that "to the extent that individual agreements limit the ability of workers to act collectively, such agreements detract from the 'full freedom of association' Congress deemed so essential to accomplishing the Act's [*36] stated objectives." Id. at *9. Opt-out mechanisms thwart the declared public policy of the NLRA by undercutting the ability of employees to exercise this sacrosanct right to freely associate. Id. Notably, the Board expressly rejected the proposition that voluntary agreements should be enforced as written because it is contrary with the "last eight decades of federal labor law and policy, which rejects the notion that unrestrained 'freedom of contract' should govern the relationship between employers and individual employees." Id. at *11. The Court finds no reason to disregard the Board's interpretation of Section 8(a)(1) and will follow its interpretation. Tigges, 2016 U.S. Dist. LEXIS 100366, 2016 WL 4076829, at *15-16. Therefore, the fact that the Plaintiff was given an opportunity to opt out of the Arbitration Agreement does not alter the Court's determination that the Class Waiver is unenforceable.21 Id., 2016 U.S. Dist. LEXIS 100366, 2016 WL 4076829, at *15-16; On Assignment Staffing Servs., Inc., 362 NLRB No. 189, at *8-10; 24 Hour Fitness, 363 NLRB No. 84. With the Class Waiver held to be invalid, the final question for the Court is whether the entire Arbitration Agreement is unenforceable because it 21 There is no need to address the Plaintiff's other argument that this Court should exercise its discretion and deny the Debtor's demand for compulsory arbitration under Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987) because there is an inherent conflict between [*37] arbitrating the Claims and the Bankruptcy Code's underlying purposes. The Court's ruling on the Plaintiff's NLRA argument gets her to the same place. cannot be severed. C. The Class Waiver Cannot Be Severed When a provision in a contractual agreement is found to be illegal, a court has the discretion either to excise the provision or refuse to enforce the entire agreement. "In exercising this discretion, courts look to whether the central purpose of the contract is tainted with illegality or the illegality is collateral to [its] main purpose." Pokorny v. Quixtar, Inc., 601 F.3d 987, 1005 (9th Cir. 2010) (internal quotation marks omitted). When evaluating whether severability is appropriate, both the First and Second Restatements of Contracts consider whether the provision was an essential component of the agreement. Restatement (First) of Contracts § 603 (1932); Restatement (Second) of Contracts § 184 (1979). "If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate." Newton v. Am. Debt Servs., Inc., 854 F. Supp. 2d 712, 728-29 (N.D. Cal. 2012), aff'd, 549 F. App'x 692 (9th Cir. 2013). Applying these principles, the Court finds that the Class Waiver cannot be severed because [*38] it was central to the parties' agreement. While the Arbitration Agreement does contain a savings clause that provides that the remaining agreement shall remain in force if any provision is held to be unenforceable, such a provision does not override the Court's discretion, especially where an essential piece of the overall contract is illegal. The primary purpose of the agreement appears to be two-fold: (i) all employment-related disputes must go to arbitration; and (ii) claims against the Debtor must be brought in the employees' individual capacities. The language of the Arbitration Agreement supports this reading. The Class Waiver provision is one of three sentences, out of the entire arbitration agreement, that is in bold and all capitals. Furthermore, the allocation of costs in the agreement are primarily placed on the Debtor. Allowing class arbitration to proceed would substantially change the cost-allocation contemplated by the Arbitration Agreement. The Court's discretion is also guided by the fact that excising the Class Waiver and compelling arbitration would effectively be requiring class arbitration. Such a requirement fundamentally alters the agreed upon terms. Class arbitration [*39] is discernably different 2016 Bankr. LEXIS 3690, *35 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 12 of 13 PageID: 600 Page 12 of 12 than bilateral arbitration. Concepcion, 563 U.S. at 348- 50 (noting that the switch from bilateral to class arbitration makes the process slower, more costly, and increases procedural formality and the risks to defendants). Notably, the Arbitration Agreement does not provide a specific saving mechanism in the event the Class Waiver is held unenforceable. See generally Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 271 (3d Cir. 2003). Without contractual language that the parties would agree to class arbitration in the event the Class Waiver was held invalid, the Court will not require the Debtor to proceed to class arbitration. "[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." Stolt-Nielsen, 559 U.S. at 684 (emphasis in original). Thus, the Class Waiver cannot be severed because the agreement does not indicate the parties intended to be bound by class arbitration. Id. at 685 (holding that parties cannot be presumed to consent to class arbitration for "simply agreeing to submit their disputes" to arbitration). IV. CONCLUSION For all these reasons, the Motion to Compel Arbitration is DENIED. An appropriate Order will issue. Dated: October 11, 2016 Wilmington, Delaware BY THE COURT: /s/ Brendan [*40] Linehan Shannon Brendan Linehan Shannon Chief United States Bankruptcy Judge ORDER Upon consideration of the Motion to Compel Arbitration [Dkt. #26] and the Plaintiff's opposition thereto [Dkt. #34]; it is hereby ORDERED that the Motion to Compel Arbitration is DENIED for the reasons stated in the accompanying Opinion. Dated: October 11, 2016 Wilmington, Delaware BY THE COURT: /s/ Brendan Linehan Shannon Brendan Linehan Shannon Chief United States Bankruptcy Judge End of Document 2016 Bankr. LEXIS 3690, *39 Case 1:16-cv-05806-NLH-KMW Document 54-4 Filed 11/07/16 Page 13 of 13 PageID: 601 Exhibit E Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 11/07/16 Page 1 of 15 PageID: 602 NOT FOR PUBLICATION UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY ____________________________________ : MICHAEL KOBREN, on behalf of himself : and all others similarly situated, : : Plaintiff, : : Civil Action No. 16-516-BRM-DEA v. : : A-1 LIMOUSINE INC., MICHAEL : STARR, and JEFFREY STARR, : : OPINION Defendants. : ____________________________________: MARTINOTTI, DISTRICT JUDGE Before this Court is a Motion to Compel Arbitration and Stay the Action filed by Defendants A-1 Limousine Inc. (“A-1”), Michael Starr and Jeffrey Starr (collectively, the “Defendants”). (Dkt. No. 23.) Plaintiff Michael Kobren (“Kobren” or “Plaintiff”), on behalf of himself and all others similarly situated (collectively, the “Plaintiffs”), opposes the motion. (Dkt. No. 27.) Having considered the parties’ submissions and arguments of counsel, for the reasons set forth herein, Defendants’ motion is GRANTED in part and DENIED in part. I. BACKGROUND1 A-1 operates “the largest independently owned limousine company in New Jersey.” (Compl. (Dkt. No. 1) at ¶ 10.) Its fleet includes over 200 vehicles, including lower-weight vehicles designed or used to transport eight (8) or fewer passengers (including the driver) for compensation 1 The facts set forth in this Opinion are taken from the parties’ briefs and related filings. 1 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 1 of 14 PageID: 318Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 2 of 15 PageID: 603 (the “Small Vehicles”). (Id. at ¶¶ 11-13.) A-1 employs drivers (collectively, the “Drivers” and, individually, each is a “Driver”), whose primary duties include transporting A-1’s customers in the Small Vehicles, among others. (Id. at ¶14.) During the three-year time period relevant to this lawsuit, Defendants employed at least 300 Drivers. (Id. at ¶ 15.) Plaintiff was employed by Defendants as a Driver from approximately July 2008 until approximately October 2015. (Compl. ¶ 16.) Plaintiff’s duties as a Driver included, among other things, operating the Small Vehicles and Plaintiff was paid an hourly wage of $8.38 per hour plus gratuities. (Id. at ¶¶ 17-19.) The Complaint alleges Drivers frequently worked over 40 hours per week, but Defendants failed to pay Plaintiff and/or other Drivers any overtime premium compensation for hours worked over 40 per week. (Compl. ¶¶ 20-21.) Instead, Defendants allegedly paid Drivers (including Plaintiff) only an amount equal to the total hours worked multiplied by the straight-time hourly wage, plus gratuities. (Id. at ¶ 21.) On or about May 22, 2013, A-1 engaged SOI to act as its Professional Employer Organization. (Declaration of Randall C. Schauer, Esq., dated April 22, 2016 (the “Schauer Decl.”) (Dkt. No. 23-1) at ¶ 6.) As part of that engagement, A-1, through SOI, obtained an Assigned Employee Notice and Acknowledgements from all its then extant employees, including Plaintiff, and has continued to do so for all subsequently-hired employees. (Id.) Plaintiff executed an Assigned Employee Notice & Acknowledgements, dated May 22, 2013. (Id. at ¶ 3; Ex. B.) The Assigned Employee Notice & Acknowledgements Plaintiff executed provides, in pertinent part, as follows: I and SOI agree that: Any dispute involving SOI, Company [A-1], or any benefit plan, insurer, employee, officer, or director of SOI or Company (all of which are Beneficiaries of these Acknowledgements) arising from or related to my employment, application for employment, or termination from employment 2 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 2 of 14 PageID: 319Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 3 of 15 PageID: 604 will be resolved exclusively through binding arbitration before a neutral arbitrator in the capital or largest city of the state in which I work or another mutually agreed location (SOI may appear by phone); The Arbitrator may grant the same remedies that would be available in a court of law (and no more), and will use the same rules of evidence as a federal court; Unless prohibited by law, costs of arbitration will be shared equally by the parties; If applicable law requires provisions in an arbitration agreement, which are different from what is included here, they will be deemed incorporated to the minimum extent required; Disputes will be resolved solely upon applicable law, evidence adduced, and defenses raised, and no other basis, and the arbitrator may grant summary disposition or disposition on the pleadings; The arbitrator will render a reasoned written decision. In addition: I AND SOI MUTUALLY WAIVE ANY RIGHT TO A JURY TRIAL, and I agree to participate in any legal dispute with any Beneficiary only in my individual capacity not as a member of a representative of a class or part of a class action. I understand that nothing herein impairs my right to engage in collective action under Section 7 of the National Labor Relations Act and I am not prohibited from complaining to government agencies or cooperating with their investigations. My agreements to arbitrate, waive jury trials, and participate only in my individual capacity are contracts under the Federal Arbitration Act and any other laws validating such agreements and waivers. No failure to strictly enforce these agreements will constitute a waiver or create any future waivers, and no-one other than counsel for SOI (in writing) may waive this agreement for SOI. If any part is unenforceable, the rest will still be enforceable. (Dkt. No. 23-1 at Ex. B.)2 On January 29, 2016, Plaintiff filed a two-count Complaint. (Dkt. No. 1.) 3 In Count I, Plaintiff asserts, on a collective basis, violations of the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. (“FLSA”). (Id.) Count II asserted, on behalf of a putative class, violations of the New Jersey Wage and Hour Law, N.J.S.A. §§ 34:11-56a, et seq., but was dismissed with prejudice pursuant to a Stipulation, So-Ordered by the Honorable Freda L. Wolfson, U.S.D.J. on May 13, 2016. (Dkt. No. 26.) 2 During oral argument, portions of the Employee Notice & Acknowledgements were read into the record by Defendants’ counsel and marked as Exhibit D-1 for identification. 3 Thereafter, Kobren filed a Notice of Consent of Jerry Daniel (“Daniel”) to participate as a party plaintiff. (Dkt. No. 13.) On or about May 23, 2013, Daniel, like Kobren, executed an Employee Notice & Acknowledgements. (Dkt. No. 23-1 at Ex. C.) The agreements executed by Kobren and Daniel are identical in all respects material to the instant motion. (Compare id. with id. at Ex. B.) 3 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 3 of 14 PageID: 320Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 4 of 15 PageID: 6 5 Defendants now move to compel arbitration and stay this action based on the arbitration provision in the Assigned Employee Notice & Acknowledgements executed by Plaintiffs. (Dkt. No. 23.)4 The Court heard oral argument on November 4, 2016. (See Dkt. No. 40.) II. LEGAL STANDARD Federal law presumptively favors the enforcement of arbitration agreements. Harris v. Green Tree Fin. Corp., 183 F.3d 173, 178 (3d Cir. 1999). The Federal Arbitration Act, 9 U.S.C. §§ 1, et seq. (“FAA”), directs federal courts to compel arbitration of claims “arising out of” a valid agreement to arbitrate.5 The FAA was enacted “to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). Under the FAA, agreements to arbitrate are “valid, irrevocable, and enforceable,” subject only to traditional contract principles. 9 U.S.C. § 2; see also CompuCredit Corp. v. Greenwood, 132 S.Ct. 665, 669 (2012) (citations omitted) (explaining the FAA favors arbitration agreements and “requires courts to enforce agreements to arbitrate according to their terms”). The FAA provides that contract provisions manifesting the intent of the parties to settle disputes in arbitration shall be binding, allows for the stay of federal court proceedings in any matter referable to arbitration, and permits both federal and state courts to compel arbitration if one party has failed to comply with an agreement to arbitrate. 9 U.S.C. §§ 2-4. Cumulatively, those provisions “manifest a liberal federal policy favoring arbitration agreements.” Gilmer, 500 U.S. at 24 (quotations omitted). 4 After Defendants’ motion was fully-briefed, Plaintiff filed four (4) Notices of Supplemental Authority in Further Opposition to the motion to compel. (See Dkt. Nos. 28, 31, 36, 39.) 5 The Employee Notice and Acknowledgements at issue in this action also specifically state that Plaintiffs’ “agreements to arbitrate, waive jury trials, and participate only in [their] individual capacit[ies] are contracts under the Federal Arbitration Act…” (Dkt. No. 23-1 at Exs. B-C.) 4 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 4 of 14 PageID: 321Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 5 of 15 PageID: 606 “[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); Townsend v. Pinnacle Entm’t, Inc., 457 F. App’x. 205, 207 (3d Cir. 2012) (same). Thus, a motion to compel arbitration “should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650 (1986); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (“[C]ourts must place arbitration agreements on equal footing with other contracts and enforce them according to their terms.”). In determining whether to compel parties to arbitrate a certain dispute, the court must “engage in a limited review to ensure that the dispute is arbitrable.” John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 137 (3d Cir. 1988). When engaging in this limited review, the court must consider: (1) whether a “valid agreement to arbitrate exists between the parties;” and (2) whether “the specific dispute falls within the substantive scope of that agreement.” Id. If a party fails to honor an agreement to arbitrate, the court must compel arbitration. Scherk v. AlbertoCulver Co., 417 U.S. 506, 511 (1974). III. DECISION Plaintiff essentially concedes the Employee Notice & Acknowledgements he (and all other Drivers) executed is a valid agreement to arbitrate between the parties but nevertheless argues the arbitration agreement should not be enforced for two reasons. First, Plaintiff argues the class/collective action waiver is invalid and unenforceable because it violates the National Labor Relations Act (“NLRA”). Second, Plaintiff argues that enforcement of the cost-sharing provision would prevent Plaintiff(s) from vindicating his(their) statutory rights. Plaintiff argues these 5 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 5 of 14 PageID: 322Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 6 of 15 PageID: 607 provisions of the arbitration agreement are unconscionable. The Court addresses each argument in turn. A. Validity of Class/Collective Action Waiver By executing the Employee Notice & Acknowledgements, Plaintiff “agree[d] to participate in any legal dispute with any Beneficiary only in [his] individual capacity, not as a member or representative of a class or part of a class action.” (Schauer Cert., Ex. B.) Plaintiff argues this class- action waiver is unconscionable and unenforceable because it interferes with his right to engage in protected concerted activity under Sections 7 and 8(a)(1) of the NLRA. (Dkt. No. 27 at §§ C-D (citations omitted).) In Concepcion, the Supreme Court addressed the issue of unconscionability of class-wide arbitration waivers in arbitration agreements. 563 U.S. 333. There, the Supreme Court overruled a line of cases that had found class arbitration waivers unconscionable in consumer adhesion contracts because the “disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has ... deliberately cheat[ed] large numbers of consumers out of individually small sums of money.” Litman v. Cellco P'ship, 655 F.3d 225, 231 (3d Cir. 2011) (discussing Concepcion’s overruling of the California Supreme Court opinion in Discover Bank v. Superior Court, 36 Cal. 4th 148 (Cal. 2005)); Concepcion, 563 U.S. at 344 (holding that a state law “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”). After Concepcion, the Third Circuit held the FAA preempts the rule enunciated in Muhammad v. County Bank of Rehoboth Beach, Delaware, 189 N.J. 1 (2006) that class arbitration waivers are unconscionable and unenforceable under New Jersey law. Litman, 655 F.3d at 231 6 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 6 of 14 PageID: 323Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 7 of 15 PageID: 608 (“[C]ontrary to our earlier decisions in Homa and in this case, the rule established by the New Jersey Supreme Court in Muhammad is preempted by the FAA.”). In so doing, the Third Circuit “now endorse[d] the District Court’s decision to reject New Jersey law holding that waivers of class arbitration are unconscionable.” Id. at 232. These cases stand for the proposition that neither individual claims nor class arbitration waivers are unconscionable in the context of consumer adhesion contracts, even when there is a clear disparity of bargaining power and when only small monetary amounts are at issue. Guided by Concepcion and its progeny, this Court finds the class arbitration waiver here is not unconscionable even assuming, as Plaintiff contends, the Employee Notice & Acknowledgements is a contract of adhesion. See Bourgeois v. Nordstrom, Inc., 2012 WL 42917 (D.N.J. Jan. 9, 2012) (finding employee/employer adhesion contract where employee had no opportunity to negotiate terms did not, by itself, make the contract unconscionable).6 Furthermore, absent binding authority to the contrary, 7 this Court agrees with the reasoning of the Second, Fifth, and Eight Circuits that there is no “inherent conflict” between the FAA and NLRA, particularly in light of the strong public policy considerations underlying the FAA and the general understanding that the NLRA permits and requires arbitration in labor disputes. D.R. 6 It is not clear whether any Driver was given an opportunity to review the Employee Notice and Acknowledgements prior to signing or negotiate any of its terms, although the Court notes Plaintiff’s assertion that “Defendants’ drivers were required to sign the Arbitration Agreement as a condition of their employment and were unable to ‘opt-out’ or exclude themselves from its terms.” (Dkt. No. 27 at p. 2.) However, “[e]ven if Plaintiffs’ allegations that the [arbitration] [a]greement was presented on a ‘take-it-or-leave-it’ basis and that the parties’ were of unequal bargaining power are accepted as true, these are not sufficient grounds for this Court to find that the formation of the agreement was procedurally unconscionable.” Bonnano v. Quiznos Master LLC, 2006 WL 3359673, at *5 (D.N.J. Nov. 17, 2006); see also Alexander v. Anthony Int’l, L.P., 341 F.3d 256, 265 (3d Cir. 2003) (“An adhesion contract is not necessarily unenforceable.”) (citation omitted). 7 The parties agree the Third Circuit has not yet addressed whether class action waivers violate the NLRA. (See Dkt. No. 29, n.2; see generally Dkt. No. 27 (discussing circuit split).) Recently, however, on October 5, 2016, the Third Circuit heard oral arguments in NLRB v. The Rose Group, Case Nos. 15-4092, 16-1212, an appeal that directly implicates these issues. 7 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 7 of 14 PageID: 324Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 8 of 15 PageID: 609 Horton, Inc. v. NLRB, 737 F.3d 344, 364 (5th Cir. 2013) (“The use of class action procedures … is not a substantive right” but merely a “procedural device.”); see also Patterson v. Raymours Furniture Co., 2016 WL 4598542, at *2 (2d Cir. Sept. 2, 2016) (observing the NLRB has “repeatedly concluded that Sections 7 and 8(a)(1) of the NLRA … foreclose enforcement of arbitration agreements that waive an employee’s right to pursue legal claims … on a collective basis” but that “[t]he circuit courts, however, are irreconcilably split on the question.”); Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013) (per curium); Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013). These Circuits hold that the right to concerted litigation activity under Section 7 of the NLRA is not a protected substantive right that cannot be waived by an arbitration agreement.8 This Court likewise finds the class-arbitration waiver at issue is merely a procedural device that can be contractually waived by the parties without infringing upon any of Plaintiffs’ statutory rights.9 Finding no “inherent conflict” between the FAA and NLRA, the Court will enforce the parties’ agreement according to its terms. American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2309 (2013) (directing lower courts to “rigorously enforce arbitration 8 In fact, the Fifth and Eighth Circuits have reversed the NLRB’s rulings on, at least, three (3) separate occasions. See D.R. Horton, Inc. v. N.L.R.B., 737 F.3d 344; Murphy Oil USA, Inc. v. N.L.R.B., 808 F.3d 1013, 1015 (5th Cir. 2015); Cellular Sales of Missouri, LLC v. N.L.R.B., 824 F.3d 772 (8th Cir. 2016). The Seventh and Ninth Circuits, on the other hand, have agreed with the NLRB that contract clauses precluding employees from bringing, in any forum, a concerted legal claim violate the NLRA, and have further held that such agreements are unenforceable under the FAA. See Morris v. Ernst & Young, LLP, 2016 WL 4433080 (9th Cir. Aug. 22, 2016); Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016). These Circuits have held that an “illegal” arbitration agreement, one that is unlawful under the NLRA, “meets the criteria of the FAA”s savings clause for nonenforcement.” Id. at 1157; see also Morris, 2016 WL 4433080, at *7 (“when an arbitration contract professes the waiver of a substantive federal right, the FAA”s saving clause prevents a conflict between the statutes by causing the FAA’s enforcement mandate to yield.”). 9 The Court also notes that, by executing the Employee Notice & Acknowledgements, Plaintiffs specifically acknowledged that “nothing herein impairs [their] right to engage in collective action under Section 7 of the National Labor Relations Act and [they] a[re] not prohibited from complaining to government agencies or cooperating with their investigations.” (Dkt. No. 23-1 at Exs. B-C.) 8 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 8 of 14 PageID: 325Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 9 of 15 PageID: 610 agreements according to their terms, including terms that specify with whom [the parties] choose to arbitrate their disputes, and the rules under which that arbitration will be conducted.”) (internal quotation marks and citations omitted; emphasis and brackets in original). Plaintiff requests, “in the alternative, the Court [] deny Defendants’ Motion without prejudice to allow for the NLRB to complete its ongoing investigation of Defendants’ use of the Arbitration Agreement.” (Dkt. No. 27 at p. 13.) The Court declines to do so. In effect, Plaintiff is seeking an indefinite stay. But a stay “is not a matter of right. It is instead an exercise of judicial discretion, the propriety of which is dependent upon the circumstances of the parties.” Akishev v. Kapustin, 2014 WL 2608388, at *5 (D.N.J. May 28, 2014) (quoting Niken v. Holder, 556 U.S. 418 (2009)) (internal marks omitted). When determining whether a stay should be issued, courts weigh a number of factors, including: (1) “whether a stay would unduly prejudice or present a clear tactical advantage to the non-moving party;” (2) whether denial of the stay would create “a clear case of hardship or inequity for the moving party;” (3) “whether a stay would simplify the issues and the trial of the case;” and (4) “whether discovery is complete and a trial date has been set.” Id. at *3. Here, Plaintiff has failed to show sufficient hardship or inequity to justify a stay in this matter. Hertz Corp. v. Gator Corp., 250 F.Supp.2d 421, 424-25 (D.N.J. 2003) (holding the moving party bears the burden of demonstrating a “clear case of hardship or inequity, if there is even a fair possibility that the stay would work damage on another party”). Initially, there is no indication as to when, or if, the NLRB will conclude its allegedly ongoing investigation,10 a factor that weighs 10 On November 3, 2016, Plaintiff filed a Notice of Supplemental Information in Further Support of his Opposition to Defendants’ Motion to Compel (Dkt. No. 39), indicating that, on September 30, 2016, the NLRB entered an order consolidating Kobren’s and Daniel’s cases against A-1 and scheduling a hearing for December 16, 2016. During oral argument, Plaintiff’s counsel described the consolidated complaint as the NLRB’s “interpretation” of the parties’ agreement and urged the 9 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 9 of 14 PageID: 326Case 1:16-cv-05806-NLH-KMW Document 5 -5 Filed 11/07/16 Page 10 of 15 PageID: 611 against imposing a stay. See Young v. City of Philadelphia, 2008 WL 450103, at *2 (E.D.Pa. Feb. 15, 2008) (describing “an open-ended stay” as an “extraordinary remedy”). Nor is it a given that the results of the NLRB’s allegedly ongoing investigation will have preclusive effect on this Court. See Koontz v. U.S. Steel, LLC, 2002 WL 398817, at *3 (E.D.Pa. Mar. 14, 2002) (rejecting “the contention that the decision of an ALJ, under appeal to the agency’s appellate board and therefore, not yet affirmed by the board, constitutes a final decision” that would have preclusive effect on a pending district court matter). Furthermore, a stay of the motion to compel arbitration pending an ultimate disposition from the NLRB would harm Defendants by forcing them to litigate these claims in court until the NLRB has “complete[d] its ongoing investigation” or the Third Circuit has conclusively ruled on the issue, effectively negating the potential benefits of the arbitration agreement to the parties and to judicial economy and efficiency. For these reasons, the Court declines to stay this action pending a decision from the NLRB or Third Circuit. Painters’ Pension Trust Fund of Washington, D.C. & Vicinity v. Manganaro Corp., 693 F.Supp. 1222, 1225 (D.D.C. 1988) (problems associated with inconsistent verdicts “cannot by [them]selves mandate that the court discontinue its proceedings”). Accordingly, the Court will enforce the parties’ agreement to arbitrate according to its terms. B. Enforceability of Cost-Splitting Provision Plaintiff argues the arbitration agreement here should not be enforced because its requirement that the costs of arbitration will be shared equally by the parties impairs effective prosecution of Plaintiff’s claims (and those of the putative class, too). (Dkt. No. 27 at pp. 3-6.) Court to give “great deference” to that interpretation; i.e., Plaintiff requests the Court find the parties’ agreement violates the NLRA based exclusively on the unadjudicated allegations in the complaint. For reasons that should be obvious, the Court declines to do so and finds such allegations are entitled to little deference at this stage of the NLRB proceedings. 10 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 10 of 14 PageID: 327Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 11 of 15 PageID: 612 Defendants respond that Plaintiff’s “effective vindication” argument ignores the qualifying language of the parties’ agreement that provides the cost of the arbitration would only be shared “unless prohibited by law.” (Dkt. No. 29, at pp. 2-7.) Defendants also point to the agreement’s severability clause and argue that, if the cost-sharing provision is invalidated, it should simply be disregarded, resulting in Defendants’ payment of all arbitration costs. (Id.)11 A party who has agreed to arbitrate disputes may nevertheless go to court if she demonstrates that she cannot vindicate her federal statutory rights in arbitration. See Gilmer, 500 U.S. at 28. The Supreme Court has found “the existence of large arbitration costs could preclude a litigant … from effectively vindicating her federal statutory rights in the arbitral forum.” Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 90 (2000). This is because “[a]rbitration costs are directly related to a litigant’s ability to pursue the[ir] claim.” Blair v. Scott Specialty Gases, 283 F.3d 595, 604 (3d Cir. 2002). The “party seeking to invalidate an arbitration agreement because arbitration would be prohibitively expensive bears the burden of showing this likelihood.” Spinetti v. Service Corp. Int’l, 324 F.3d 212, 217 (3d Cir. 2003) (citing Green Tree, 531 U.S. at 92); see also Parilla v. IAP Worldwide Services, VI, Inc., 368 F.3d 269, 284-85 (3d Cir. 2004). Kobren and Daniel attempt to carry this burden by submitting declarations detailing their income and expenses. (Dkt. Nos. 27-3, 27-4.) Kobren, for example, declares that he “get[s] paid only $9.00 per hour plus gratuity,” his “monthly take home pay is approximately $2,500 per month” and is “currently in debt more than $15,000 for medical treatment for cancer” with debt service payments amounting to “between 40% and 60% of [his] net income each month.” (Dkt. 11 In their briefs, Defendants do not appear to contest Plaintiff’s argument that, because of his financial condition, the cost-sharing provision is unconscionable as applied to him. (See id.) During oral argument, however, Defendants’ counsel argued Plaintiff failed to meet his burden of proof, but conceded that a plaintiff can make such a showing by submitting a declaration(s), as both Kobren and Daniel did here. 11 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 11 of 14 PageID: 328Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 2 of 15 PageID: 613 No. 27-3 at ¶ 6.) Similarly, Daniel declares that he “make[s] $17.95 per hour for a little over thirty hours per week” and is “currently in debt more than $19,000 …, which constitutes approximately 40% of [his] net income each month.” (Dkt. No. 27-4 at ¶ 6.) The declarations also set forth the potential fees if an arbitration were held before either the American Arbitration Association or JAMS. (Id. at ¶¶ 4-5 (setting forth potential fees for AAA and JAMS, respectively).) Both declarations conclude that, “[g]iven the potential size of my claim for unpaid overtime and my financial condition, I would not be able to afford to pursue my right to unpaid overtime pay through arbitration.” (Dkt. Nos. 27-3 at ¶¶ 4-5, 7; 27-4 at ¶¶ 4-5, 7.) The Court is satisfied with Plaintiff’s showing that the cost-sharing provision of the arbitration agreement would be prohibitively expensive so as to impair the effective prosecution of Plaintiffs’ claims. See Spinetti, 324 F.3d at 216 (finding “District Court’s analysis properly followed the ‘case-by-case’ teachings of Green Tree on how to decide if a cost-splitting provision in an arbitration agreement denies potential litigants the opportunity to vindicate their statutory rights”) (citing Green Tree, 531 U.S. at 92); Scott Specialty Gases, 283 F.3d at 610 (declining to “hold that the mere existence of a fee-splitting provision in an agreement would satisfy the claimant’s burden to prove the likelihood of incurring prohibitive costs under Green Tree” and remanding to district court to “give [plaintiff] the opportunity to prove, as required under Green Tree, that resort to arbitration would deny her a forum to vindicate her statutory rights.”) (citations omitted). As Defendants correctly note, the cost-sharing provision expressly applies only “unless prohibited by law.” Under such circumstances, the Employee Notice & Acknowledgements contains an explicit severability clause stating: “If applicable law requires provisions in an arbitration agreement, which are different from what is included here, they will be deemed 12 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 12 of 14 PageID: 329Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 13 of 15 PageID: 614 incorporated to the minimum extent required” and, further, “[i]f any part is unenforceable, the rest will still be enforceable.” (Dkt. No. 23-1 at Ex. B.) This Court is required to enforce the parties’ agreement to arbitrate according to its terms. 9 U.S.C. § 2; CompuCredit, 132 S.Ct. at 669 (interpreting FAA to “require[] courts to enforce agreements to arbitrate according to their terms”). In doing so, there is little doubt that the arbitration agreement in the Employee Notice & Acknowledgements, shorn of the cost-sharing provision, is enforceable under the FAA. Spinetti, 324 F.3d at 213-14, 218-23 (affirming district court’s determination to sever the unenforceable cost-sharing provisions and compel arbitration under remaining terms of parties’ contract because its primary purpose was “to provide a mechanism to resolve employment-related disputes” and emphasizing that “[y]ou don’t cut down the trunk of a tree because some of its branches are sickly.”); see also Gannon v. Circuit City Stores, Inc., 262 F.3d 677, 683 n.3 (8th Cir. 2001) (noting the parties’ agreement contained an explicit clause providing for severability and explaining that “[s]evering the … clause is consistent with the terms of the contract, the intent of the parties, [state] contract law, and the FAA’s policy favoring the enforcement of arbitration agreements”); Girodano v. Pep Boys – Manny, Moe & Jack, Inc., 2001 WL 484360, at *6 (E.D.Pa. Mar. 29, 2001) (finding presence of a severability clause is not decisive on its own, but merely leaves “little doubt” as to the enforceability following a severance). The result in this case, then, is that Defendants shall bear the costs of arbitration and the filing fees over and above the applicable filing fees for which Plaintiff would be responsible were he filing his claim in federal court. For the reasons stated above, the Order accompanying this Opinion shall provide that Defendants’ motion to compel arbitration is GRANTED as to the Employee Notice & Acknowledgements, exclusive of the provision that the “costs of arbitration will be shared equally 13 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 13 of 14 PageID: 330Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 14 of 15 PageID: 615 by the parties,” and require Defendants to bear the costs of arbitration and the amount of filing fees in excess of the cost of filing a complaint in federal court. IV. CONCLUSION For the reasons set forth above, Defendant’s Motion to Compel Arbitration and Stay the Action is GRANTED as modified by this Opinion. An appropriate order will follow. Date: November 7, 2016 /s/ Brian R. Martinotti___________ HON. BRIAN R. MARTINOTTI UNITED STATES DISTRICT JUDGE 14 Case 3:16-cv-00516-BRM-DEA Document 41 Filed 11/07/16 Page 14 of 14 PageID: 331Case 1:16-cv-05806-NLH-KMW Document 54-5 Filed 1/07/16 Page 15 of 15 PageID: 6 6 Exhibit F Case 1:16-cv-05806-NLH-KMW Document 54-6 Filed 11/07/16 Page 1 of 7 PageID: 617 Supplementary Rules for Class Arbitrations Rules Effective October 8, 2003 Fees Effective January 1, 2010 Table of Contents 1. Applicability 1 2. Class Arbitration Roster and Number of Arbitrators 2 3. Construction of the Arbitration Clause 2 4. Class Certification 2 5. Class Determination Award 3 6. Notice of Class Determination 4 7. Final Award 4 8. Settlement, Voluntary Dismissal, or Compromise 5 9. Confidentiality; Class Arbitration Docket 5 10. Form and Publication of Awards 5 11. Administrative Fees and Suspension for Nonpayment 6 12. Applications to Court and Exclusion of Liability 6 1. Applicability (a) These Supplementary Rules for Class Arbitrations ("Supplementary Rules") shall apply to any dispute arising out of an agreement that provides for arbitration pursuant to any of the rules of the American Arbitration Association ("AAA") where a party submits a dispute to arbitration on behalf of or against a class or purported class, and shall supplement any other applicable AAA rules. These Supplementary Rules shall also apply whenever a court refers a matter pleaded as a class action to the AAA for administration, or when a party to a pending AAA arbitration asserts new claims on behalf of or against a class or purported class. (b) Where inconsistencies exist between these Supplementary Rules and other AAA rules that apply to the dispute, these Supplementary Rules will govern. The arbitrator shall have the authority to resolve any inconsistency between any agreement of the parties and these Supplementary Rules, and in doing so shall endeavor to avoid any prejudice to the interests of absent members of a class or purported class. (c) Whenever a court has, by order, addressed and resolved any matter that would otherwise be decided by an arbitrator under these Supplementary Rules, the arbitrator shall follow the order of the court. 2. Class Arbitration Roster and Number of Arbitrators Case 1:16-cv-05806-NLH-KMW Document 54-6 Filed 11/07/16 Page 2 of 7 PageID: 618 (a) In any arbitration conducted pursuant to these Supplementary Rules, at least one of the arbitrators shall be appointed from the AAA's national roster of class arbitration arbitrators. (b) If the parties cannot agree upon the number of arbitrators to be appointed, the dispute shall be heard by a sole arbitrator unless the AAA, in its discretion, directs that three arbitrators be appointed. As used in these Supplementary Rules, the term "arbitrator" includes both one and three arbitrators. 3. Construction of the Arbitration Clause Upon appointment, the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class (the "Clause Construction Award"). The arbitrator shall stay all proceedings following the issuance of the Clause Construction Award for a period of at least 30 days to permit any party to move a court of competent jurisdiction to confirm or to vacate the Clause Construction Award. Once all parties inform the arbitrator in writing during the period of the stay that they do not intend to seek judicial review of the Clause Construction Award, or once the requisite time period expires without any party having informed the arbitrator that it has done so, the arbitrator may proceed with the arbitration on the basis stated in the Clause Construction Award. If any party informs the arbitrator within the period provided that it has sought judicial review, the arbitrator may stay further proceedings, or some part of them, until the arbitrator is informed of the ruling of the court. In construing the applicable arbitration clause, the arbitrator shall not consider the existence of these Supplementary Rules, or any other AAA rules, to be a factor either in favor of or against permitting the arbitration to proceed on a class basis. 4. Class Certification (a) Prerequisites to a Class Arbitration If the arbitrator is satisfied that the arbitration clause permits the arbitration to proceed as a class arbitration, as provided in Rule 3, or where a court has ordered that an arbitrator determine whether a class arbitration may be maintained, the arbitrator shall determine whether the arbitration should proceed as a class arbitration. For that purpose, the arbitrator shall consider the criteria enumerated in this Rule 4 and any law or agreement of the parties the arbitrator determines applies to the arbitration. In doing so, the arbitrator shall determine whether one or more members of a class may act in the arbitration as representative parties on behalf of all members of the class described. The arbitrator shall permit a representative to do so only if each of the following conditions is met: (1) the class is so numerous that joinder of separate arbitrations on behalf of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; (4) the representative parties will fairly and adequately protect the interests of the class; (5) counsel selected to represent the class will fairly and adequately protect the interests of the class; and (6) each class member has entered into an agreement containing an arbitration clause which is substantially similar to that signed by the class representative(s) and each of the other class Case 1:16-cv-05806-NLH-KMW Document 54-6 Filed 11/07/16 Page 3 of 7 PageID: 619 members. (b) Class Arbitrations Maintainable An arbitration may be maintained as a class arbitration if the prerequisites of subdivision (a) are satisfied, and in addition, the arbitrator finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class arbitration is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (1) the interest of members of the class in individually controlling the prosecution or defense of separate arbitrations; (2) the extent and nature of any other proceedings concerning the controversy already commenced by or against members of the class; (3) the desirability or undesirability of concentrating the determination of the claims in a single arbitral forum; and (4) the difficulties likely to be encountered in the management of a class arbitration. 5. Class Determination Award (a) The arbitrator's determination concerning whether an arbitration should proceed as a class arbitration shall be set forth in a reasoned, partial final award (the "Class Determination Award"), which shall address each of the matters set forth in Rule 4. (b) A Class Determination Award certifying a class arbitration shall define the class, identify the class representative(s) and counsel, and shall set forth the class claims, issues, or defenses. A copy of the proposed Notice of Class Determination (see Rule 6), specifying the intended mode of delivery of the Notice to the class members, shall be attached to the award. (c) The Class Determination Award shall state when and how members of the class may be excluded from the class arbitration. If an arbitrator concludes that some exceptional circumstance, such as the need to resolve claims seeking injunctive relief or claims to a limited fund, makes it inappropriate to allow class members to request exclusion, the Class Determination Award shall explain the reasons for that conclusion. (d) The arbitrator shall stay all proceedings following the issuance of the Class Determination Award for a period of at least 30 days to permit any party to move a court of competent jurisdiction to confirm or to vacate the Class Determination Award. Once all parties inform the arbitrator in writing during the period of the stay that they do not intend to seek judicial review of the Class Determination Award, or once the requisite time period expires without any party having informed the arbitrator that it has done so, the arbitrator may proceed with the arbitration on the basis stated in the Class Determination Award. If any party informs the arbitrator within the period provided that it has sought judicial review, the arbitrator may stay further proceedings, or some part of them, until the arbitrator is informed of the ruling of the court. (e) A Class Determination Award may be altered or amended by the arbitrator before a final award is rendered. 6. Notice of Class Determination Case 1:16-cv-05806-NLH-KMW Document 54-6 Filed 11/07/16 Page 4 of 7 PageID: 620 (a) In any arbitration administered under these Supplementary Rules, the arbitrator shall, after expiration of the stay following the Class Determination Award, direct that class members be provided the best notice practicable under the circumstances (the "Notice of Class Determination"). The Notice of Class Determination shall be given to all members who can be identified through reasonable effort. (b) The Notice of Class Determination must concisely and clearly state in plain, easily understood language: (1) the nature of the action; (2) the definition of the class certified; (3) the class claims, issues, or defenses; (4) that a class member may enter an appearance through counsel if the member so desires, and that any class member may attend the hearings; (5) that the arbitrator will exclude from the class any member who requests exclusion, stating when and how members may elect to be excluded; (6) the binding effect of a class judgment on class members; (7) the identity and biographical information about the arbitrator, the class representative(s) and class counsel that have been approved by the arbitrator to represent the class; and (8) how and to whom a class member may communicate about the class arbitration, including information about the AAA Class Arbitration Docket (see Rule 9). 7. Final Award The final award on the merits in a class arbitration, whether or not favorable to the class, shall be reasoned and shall define the class with specificity. The final award shall also specify or describe those to whom the notice provided in Rule 6 was directed, those the arbitrator finds to be members of the class, and those who have elected to opt out of the class. 8. Settlement, Voluntary Dismissal, or Compromise (a) (1) Any settlement, voluntary dismissal, or compromise of the claims, issues, or defenses of an arbitration filed as a class arbitration shall not be effective unless approved by the arbitrator. (2) The arbitrator must direct that notice be provided in a reasonable manner to all class members who would be bound by a proposed settlement, voluntary dismissal, or compromise. (3) The arbitrator may approve a settlement, voluntary dismissal, or compromise that would bind class members only after a hearing and on finding that the settlement, voluntary dismissal, or compromise is fair, reasonable, and adequate. (b) The parties seeking approval of a settlement, voluntary dismissal, or compromise under this Rule must submit to the arbitrator any agreement made in connection with the proposed settlement, voluntary dismissal, or compromise. (c) The arbitrator may refuse to approve a settlement unless it affords a new opportunity to request Case 1:16-cv-05806-NLH-KMW Document 54-6 Filed 11/07/16 Page 5 of 7 PageID: 621 exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so. (d) Any class member may object to a proposed settlement, voluntary dismissal, or compromise that requires approval under this Rule. Such an objection may be withdrawn only with the approval of the arbitrator. 9. Confidentiality; Class Arbitration Docket (a) The presumption of privacy and confidentiality in arbitration proceedings shall not apply in class arbitrations. All class arbitration hearings and filings may be made public, subject to the authority of the arbitrator to provide otherwise in special circumstances. However, in no event shall class members, or their individual counsel, if any, be excluded from the arbitration hearings. (b) The AAA shall maintain on its Web site a Class Arbitration Docket of arbitrations filed as class arbitrations. The Class Arbitration Docket will provide certain information about the arbitration to the extent known to the AAA, including: (1) a copy of the demand for arbitration; (2) the identities of the parties; (3) the names and contact information of counsel for each party; (4) a list of awards made in the arbitration by the arbitrator; and (5) the date, time and place of any scheduled hearings. 10. Form and Publication of Awards (a) Any award rendered under these Supplementary Rules shall be in writing, shall be signed by the arbitrator or a majority of the arbitrators, and shall provide reasons for the award. (b) All awards rendered under these Supplementary Rules shall be publicly available, on a cost basis. 11. Administrative Fees and Suspension for Nonpayment (a) A preliminary filing fee of $3,350 is payable in full by a party making a demand for treatment of a claim, counterclaim, or additional claim as a class arbitration. The preliminary filing fee shall cover all AAA administrative fees through the rendering of the Clause Construction Award. If the arbitrator determines that the arbitration shall proceed beyond the Clause Construction Award, a supplemental filing fee shall be paid by the requesting party. The supplemental filing fee shall be calculated based on the amount claimed in the class arbitration and in accordance with the fee schedule contained in the AAA's Commercial Arbitration Rules. (b) Disputes regarding the parties' obligation to pay administrative fees or arbitrator's compensation pursuant to applicable law or the parties' agreement may be determined by the arbitrator. Upon the joint application of the parties, however, an arbitrator other than the arbitrator appointed to decide the merits of the arbitration, shall be appointed by the AAA to render a partial final award solely related to any disputes regarding the parties' obligations to pay administrative fees or arbitrator's compensation. (c) If an invoice for arbitrator compensation or administrative charges has not been paid in full, the AAA Case 1:16-cv-05806-NLH-KMW Document 54-6 Filed 11/07/16 Page 6 of 7 PageID: 622 may so inform the parties in order that one of them may advance the required deposit. If such payments are not made, the arbitrator may order the suspension or termination of the proceedings. If no arbitrator has yet been appointed, the AAA may suspend the proceedings. (d) If an arbitration conducted pursuant to these Supplementary Rules is suspended for nonpayment, a notice that the case has been suspended shall be published on the AAA's Class Arbitration Docket. 12. Applications to Court and Exclusion of Liability (a) No judicial proceeding initiated by a party relating to a class arbitration shall be deemed a waiver of the party's right to arbitrate. (b) Neither the AAA nor any arbitrator in a class arbitration or potential class arbitration under these Supplementary Rules is a necessary or proper party in or to judicial proceedings relating to the arbitration. It is the policy of the AAA to comply with any order of a court directed to the parties to an arbitration or with respect to the conduct of an arbitration, whether or not the AAA is named as a party to the judicial proceeding in which the order is issued. (c) Parties to a class arbitration under these Supplementary Rules shall be deemed to have consented that judgment upon each of the awards rendered in the arbitration may be entered in any federal or state court having jurisdiction thereof. (d) Parties to an arbitration under these Supplementary Rules shall be deemed to have consented that neither the AAA nor any arbitrator shall be liable to any party in any action seeking damages or injunctive relief for any act or omission in connection with any arbitration under these Supplementary Rules. © 2011 American Arbitration Association, Inc. All rights reserved. These Rules are the copyrighted property of the American Arbitration Association (AAA) and are intended to be used in conjunction with the AAA's administrative services. Any unauthorized use or modification of these Rules may violate copyright laws and other applicable laws. Please contact 800.778.7879 or websitemail@adr.org for additional information. Case 1:16-cv-05806-NLH-KMW Document 54-6 Filed 11/07/16 Page 7 of 7 PageID: 623 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CYNTHIA CICERO, on behalf of herself and similarly situated employees, Plaintiff, v. QUALITY DINING, INC.; SOUTHWEST DINING, INC.; and GRAYLING CORPORATION, Defendants. : : : : : : : : : : : 1:16-cv-05806-NLH-KMW ORDER AND NOW, this _____ day of _______________________, 2016, upon consideration of Defendants’ “Motion to Dismiss” (“Motion”), Plaintiffs’ opposition thereto, and all other papers and proceedings herein, it is hereby ORDERED that the Motion is DENIED. . BY THE COURT: ____________________________ Noel L. Hillman, U.S.D.J. Case 1:16-cv-05806-NLH-KMW Document 54-7 Filed 11/07/16 Page 1 of 1 PageID: 624