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Byars v. Dart Transit Co.

United States District Court, M.D. Tennessee, Nashville Division

October 21, 2019

KIMBERLY BYARS, an individual appearing on behalf of herself and all others similarly situated, Plaintiff,
v.
DART TRANSIT COMPANY, et al. Defendants.

          MEMORANDUM OPINION

          WAVERLY D. CRENSHAW, JR. CHIEF UNITED STATES DISTRICT JUDGE.

         This putative class action arises out of an employment dispute concerning alleged unpaid wages. Pending before the Court is Defendants' Motion to Transfer Venue or, Alternatively, to Stay Proceedings and Compel Arbitration (Doc. No. 19) and Memorandum of Law in Support (Doc. No. 20). Plaintiff has responded in opposition (Doc. No. 27), Defendants have replied (Doc. No. 33), and Plaintiff has filed a sur-reply (Doc. No. 39). For the following reasons, Defendants' motion will be granted in part and denied in part.

         I. FACTUAL BACKGROUND

         In December 2016, Defendant Dart Transit Company (“Dart”), a Minnesota-based interstate trucking company, hired Plaintiff Kimberly Byars as a truck driver to transport trailers and freight for its shipping customers. (Doc. No. 20 at 1.) As part of her pre-employment on-boarding process in Texas, Plaintiff signed various employment related documents, including a Business Operating Agreement (“Dart BOA”) that contained the following provision regarding its scope:

This Agreement and any properly adopted Addenda shall constitute the entire agreement and understanding between the parties and it shall be interpreted under the laws of the State of Minnesota. If there are any changes, they must be Case 3:19-cv-00541 Document 46 Filed 10/21/19 Page 1 of 18 PageID #: 661 in writing and signed by both parties unless otherwise mutually assented to by both parties to the extent allowed by law. To the extent any disputes arise under this Agreement or in its interpretation, or that are related in any way to this Agreement, including those sounding in tort, DART and CONTRACTOR both agree to submit such disputes to final and binding arbitration under the commercial rules of the Transportation ADR Council, Inc., of Lenexa, Kansas at a point agreed upon or Minneapolis/St. Paul, Minnesota. Notwithstanding anything to the contrary contained or referred to herein, the parties agree that no class arbitrations shall be conducted. . . . Both parties agree to be fully and finally bound by the arbitration award, and, where allowed by law, a judgment may be entered on the award in any court having jurisdiction thereof.

(Doc. No. 20-2 at 7 (emphasis in original).) Directly above Plaintiff's signature, the Dart BOA also provided that “THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION (Paragraph 17) THAT MAY BE ENFORCED BY THE PARTIES.”[1] (Id. at 9 (bold and caps in original).)

         Plaintiff signed various addenda to the Dart BOA that also included mandatory arbitration provisions. (See id. at 17, 20-21, 23-24.) One of those addenda, the “Advantage® Fuel Network and Advances Contract, ” included a provision stating that “[a]ny question about whether Claims are subject to arbitration shall be resolved by interpreting this arbitration provision in the broadest way the law will allow it to be enforced. This arbitration provision is governed by the Federal Arbitration Act (the ‘FAA').” (Id. at 21.)

         In or around June 2017, Plaintiff left Dart to provide similar trucking services for Defendant Mainstream Transportation, Inc. (“Mainstream”), a Minnesota-based affiliate company of Dart that provides transportation services at many of Dart's intermodal ramps. (See Doc. No. 1 ¶ 17; Doc. No. 27 at 10.) Plaintiff also signed a Business Operating Agreement with Mainstream (“Mainstream BOA”), [2] which contained the same arbitration provision as the Dart BOA and the same arbitration disclaimer above Plaintiff's signature. (Doc. No. 20-3 at 7, 10.) Plaintiff stopped working for Mainstream in or around August 2017.

         Notwithstanding the arbitration provisions in the Dart and Mainstream BOAs (collectively, “BOAs”), Plaintiff filed suit in this Court against Dart and Mainstream (collectively “Defendants”) for alleged violations of the Fair Labor Standards Act's (“FLSA”) minimum wage provisions, 29 U.S.C. § 206(a), breach of contract, and unjust enrichment, and purports to seek relief “on behalf of herself and all other similarly situated individuals” under Federal Rule of Civil Procedure 23 and the FLSA's collective action provision, 29 U.S.C. § 216(b). Defendants now move to transfer venue to the District of Minnesota or, alternatively to stay proceedings and compel arbitration.

         II. DISCUSSION

         When a trial court is presented concurrently with a motion to transfer venue and a motion to compel arbitration, it is more efficient to consider the motion to compel arbitration first. See Doe #1 v. Déjà Vu Consulting, Inc., No. 3:17-cv-00040, 2017 WL 3837730, at *8 (M.D. Tenn. Sept. 1, 2017) (“based on strong federal policy favoring arbitration, . . . a motion to compel arbitration must take precedence over virtually any other pending motion”). “[I]f the court compels arbitration, . . . [it] need not address the alternative motion to transfer venue.” Educ. Mgmt. Servs., LLC. v. Ahrens, No. SA-14-CA-116-OLG, 2014 WL 12586407, at *6 (W.D. Tex. May 23, 2014) (citing Hinnant v. American Ingenuity, LLC, 554 F.Supp.2d 576, 588 n. 10 (E.D. Pa. 2008)), report and recommendation adopted, 2004 WL 12586778 (W.D. Tex. June 6, 2014). Accordingly, the Court will first address Defendants' motion to stay proceedings and compel arbitration.

         A. Motion to Compel Arbitration and Stay Proceedings

         Defendants move to stay this action in favor of arbitration based on the BOAs. In response, Plaintiff does not dispute that she signed separate BOAs with Dart and Mainstream, both of which include arbitration provisions. She instead argues against the BOAs' enforceability generally, claiming that the Court cannot compel arbitration under any applicable law in this case, and even if it could, the arbitration provisions in the BOAs are invalid and unconscionable.

         1. The Federal Arbitration Act Does Not Apply to the BOAs

         Generally, “where a litigant establishes the existence of a valid agreement to arbitrate the dispute at issue, ” the Federal Arbitration Act (“FAA”) requires “the district court [to] grant the litigant's motion to compel arbitration and stay or dismiss proceedings until the completion of arbitration.” Amos v. Lincoln Property Co., No. 3:17-cv-37, 2017 WL 2628820, at *4 (M.D. Tenn. June 19, 2017) (citing Glazer v. Lehman Bros., Inc., 394 F.3d 444, 451 (6th Cir. 2005)); 9 U.S.C. §§ 3-4. Earlier this year, however, the Supreme Court held that section 1 of the FAA excludes from the Act's coverage contracts between an interstate trucking company and its driver, regardless of the driver's status as an employee or independent contractor. New Prime Inc. v. Oliveira, 139 S.Ct. 532, 543-44 (2019). Thus, New Prime makes clear that the Court has no authority under the FAA to compel arbitration in this case.

         2. Choice of Law

         In New Prime, “the Supreme Court left open the possibility that a truck driver working for an interstate trucking company suing under the FLSA who had signed an arbitration agreement could still be compelled to arbitration, ” just not under the FAA. See Merrill v. Pathway Leasing LLC, No. 16-cv-02242-KLM, 2019 WL 1915597, at *2 (D. Col. Apr. 29, 2019) (emphasis in original) (citing New Prime, 139 S.Ct. at 537). That is because “[s]ection 1 [of the FAA] does not . . . in any way address the enforceability of employment contracts exempt from the FAA. It simply excludes these contracts from FAA coverage entirely.” Valdes v. Swift Transp. Co., Inc., 292 F.Supp.2d 524, 529 (S.D.N.Y. 2003) (“State arbitration law governs [arbitrability], however, if the FAA does not apply.”); Palcko v. Airborne Express, Inc., 372 F.3d 588 (3d Cir. 2004) (enforcing FAA-exempt arbitration agreement under Washington state law). In other words, “the fact that the [FAA] doesn't apply only means that its enforcement mechanisms aren't available, not that the whole dispute can't be arbitrated by enforcing the contract through another vehicle (like state law).” Atwood v. Rent-A-Center East, Inc., No. 15-cv-1023-MJR-SCW, 2016 WL 2766656, at *3 (S.D. Ill. May 13, 2016); Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1472 (D.C. Cir. 1997) (“[W]e have little doubt that, even if an arbitration agreement is outside the FAA, the agreement still may be enforced. . . .”). “That's true even when the contract says that the [FAA] applies and mentions no other law-if the federal act doesn't apply, the agreement to arbitrate remains viable, and the only question becomes what state's law applies to the contract to arbitrate.” Atwood at *3.

         Plaintiff argues that the BOAs' arbitration provisions cannot be enforced under state law because the parties intended that the FAA was the only law that applied to those agreements. (Doc. No. 27 at 10-13.) Specifically, she contends that because the Advantage® Fuel Network and Advances Contract addenda to the Dart BOA states that the FAA applies to the arbitration provision in that addendum, the parties have no valid agreement to arbitrate under any other law. (Id.) The BOAs, however, explicitly state that the entire “Agreement and any properly adopted Addenda . . . shall be interpreted under the laws of the State of Minnesota, ” and “any disputes aris[ing] under this Agreement or in its interpretation, or that are related in any way to this Agreement” shall be submitted “to final and binding arbitration. . . .” (Doc. No. 20-2 at 7; Doc. No. 20-3 at 7.) The addenda to the Dart BOA, including the Advantage® Fuel Network and Advances Contract, also state that they should be interpreted under the laws of the State of Minnesota. (See Doc. No. 20-2 at 17, 20-21, 24.) Contrary to Plaintiff's argument, this is not a situation like Rittmann v. Amazon.com where “the FAA is inapplicable and the contract clearly indicates that state law is also ...


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