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Doe v. Swift Transportation Co., Inc.

United States District Court, D. Arizona

February 24, 2017

John Doe 1, et al., Plaintiffs,
Swift Transportation Co., Inc., et al., Defendants.

          ORDER AND OPINION [RE: MOTIONS AT 879, 883, AND 884]



         At docket 879, Defendants Swift Transportation Co., Inc. (“Swift”), Interstate Equipment Leasing, Inc. (“IEL”), Chad Killebrew, and Jerry Moyes (collectively, Defendants) filed a motion for stay pending appellate review of the court's January 6, 2017 order at docket 862. The five named plaintiffs in this suit (“Plaintiffs”) respond at docket 899. Defendants reply at docket 902. Oral argument was heard on February 15, 2017.

         Plaintiffs filed a renewed motion to conditionally certify a Fair Labor Standards Act collective action at docket 883. They filed a motion for class certification as to their state law claims and leave to amend the complaint at docket 884.


         The complete factual and procedural background of this case is set forth in the court's order at docket 862. Suffice it to say for purposes of the motion to stay, after a lengthy procedural history, the court ultimately ruled that Plaintiffs had contracts of employment, which effectively was a denial of Defendants' request to compel arbitration pursuant to Plaintiffs' contracts with Swift. Given the intractable issue plaguing this litigation about whether the court should only look at the contract terms or whether it should consider how the parties' relationships functioned in practice, the court's opinion made clear that under either approach, Plaintiffs operated under contracts of employment. Looking solely to the terms of the contracts between the Plaintiffs and Swift and the terms of the lease agreements between Plaintiffs and IEL, which the court concluded were necessarily part of Plaintiffs' overall agreements with Swift, the contracts were ones of employment. Evidence regarding how those terms operated in practice only strengthened the court's conclusion.

         Defendants appealed the court's ruling and subsequently filed the motion to stay, requesting that the court stop all further litigation in this matter, including class certification issues, pending the Ninth Circuit's review of the court's decision.


         In the Ninth Circuit, unlike the Third, Fourth, Seventh, Tenth, and Eleventh Circuits, an appeal from a district court's denial of a motion to compel arbitration does not trigger an automatic stay.[1] Rather, the court may, after applying the traditional test for granting stays pending appeal, use its discretion to stay the litigation or proceed with matters not involved in the appeal. The basis for the Ninth Circuit's position is that, generally, appellate review of a collateral order does not deprive the district court of jurisdiction to proceed with matters not involved in the appeal and arbitrability is an issue easily severable from the merits of the underlying dispute. Here, however, the arbitration exemption issue is not easily severable from the underlying merits. Arbitrability is intertwined with Plaintiffs' underlying claim that Defendants violated employment laws by failing to pay them minimum wage. When the Ninth Circuit reviews this court's order at docket 862, it will necessarily review whether Plaintiffs had contracts of employment, which will require it to examine the terms of the contracts and decide whether the terms established an employment relationship. The appellate court could also potentially look at other evidence to see if, in practice, those terms were implemented in such a way as to create an employment relationship. Another basis for the appellate court's rule against automatic stays is that it prevents a defendant from “stall[ing] trial simply by bringing a frivolous motion to compel arbitration.”[2] No such frivolous motion is presented here.

         The court will apply the traditional test for granting a stay pending appeal. The test involves a balancing of four factors: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceedings; and (4) where the public interest lies.”[3] The first two factors are of critical importance.[4] The Ninth Circuit applies a continuum approach to balancing these two factors so that a stay is warranted where an applicant “‘shows[s] either a probability of success on the merits and the possibility of irreparable injury, or that serious legal questions are raised and the balance of hardships tips sharply in [the applicant's] favor.'”[5]

         Success on the Merits

         Defendants assert that success on the merits is likely given the dissenting and concurring opinions in In re Swift Transportation Co. Inc.[6] In that case, while the panel ultimately denied mandamus relief from the court's scheduling and planning order, the dissenting and concurring judges indicated that the court should look only to the terms of the contract when determining the § 1 exemption issue. This court's subsequent opinion acknowledged the dissenting judge's view in its order and attempted to apply the “categorical” approach she believed was warranted.[7] The court looked to the terms of the agreements between Plaintiffs and Swift to determine how those terms reflect on factors that define employment - control, payment, opportunity for profit and loss, autonomy, duration of relationship, and type of work.[8] It ruled, however, that the terms of the agreements between Plaintiffs and Swift necessarily include the IEL lease terms as well. Based on the language in both the contracts and the leases, the court concluded that Plaintiffs had employment contracts with Swift.[9] The court went on to discuss evidence reflecting on how the terms actually operated, but its ruling was not dependent on such outside evidence. Therefore, the court disagrees with Defendants' argument that their success on appeal is likely because the court failed to apply the proper procedure in its § 1 determination. It did limit its analysis to the terms of the contracts and nonetheless found in favor of Plaintiffs' position. To the extent Defendants believe that success is likely based on the merits of the court's conclusion, rather than the process it used in reaching that conclusion, they failed to present anything to cause the court to reconsider its ruling and find that it is likely to be overturned.

         As noted above, however, Defendants could still satisfy the first factor by looking toward the other end of the continuum-where an applicant need only show that “serious legal questions” are raised in the appeal if the balance of harm tips “sharply” in its favor. Here, while the court believes its conclusion is correct, it recognizes that the appeal presents serious legal questions as to how a court should properly determine whether a contract of employment existed. Indeed, the Ninth Circuit stated that the issue was one of first impression.[10] The dissent in In re Swift suggested that the court undertake a “categorical approach that focuses solely on the words of the contract and the definition of the relevant category.”[11] In an attempt to properly apply this approach, the court ended up looking at how the terms reflect on typical indicators of employment and ended up concluding that the IEL lease terms should also be considered. While the court believes it applied the categorical approach correctly, given the lack of precedent on the issue, it nonetheless acknowledges that the appeal does raise serious legal questions as to the proper method for analyzing the contract terms.

         Balance ...

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