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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.




         At docket 885, the five named plaintiffs in this lawsuit (“Plaintiffs”) filed a motion for temporary restraining order and preliminary injunction regarding a new independent contractor operating agreement (“ICOA”) that Defendant Swift Transportation Co., Inc. (“Swift”) is currently requiring current contract drivers, whom Plaintiffs refer to as lease operators, to sign before March 1, 2017. Defendants Swift, Interstate Equipment Leasing, Inc. (“IEL”), Chad Killebrew, and Jerry Moyes (collectively, “Defendants”) were given an opportunity to respond and did so at docket 899. Plaintiffs reply at docket 906. Oral argument was heard on February 15, 2017.


         The complete factual and procedural background of this case is set forth in the court's order at docket 862 and will not be repeated in full here. It should be noted that the operative complaint at docket 588 includes class action claims. On January 5, 2017, the court ruled that Plaintiffs had contracts of employment, which effectively denied Defendants' request to compel arbitration pursuant to a provision in those contracts. A few days after this court issued the order effectively denying arbitration, Swift informed its current contract drivers operating trucks under a lease agreement (“Lease Operators”) via its on-board satellite communications system, Qualcomm, that they must sign a new ICOA by March 1, 2017, or be terminated.[1] The message indicated that the new agreement will be retroactively effective as of January 1, 2017, and that the new agreement “is not intended to change rates or compensation.”[2]However, the message did not inform the Lease Operators as to what provisions were altered or what the new ICOA was intended to address. The message stated that Lease Operators can approve of and sign the new ICOA simply by replying to the message through the Qualcomm system.[3] It informed them that they can seek independent advice from counsel.[4] Swift thereafter continued sending Qualcomm messages to Lease Operators requesting that Lease Operators sign the new ICOA before the March 1 deadline.[5]

         The new ICOA is presented to the court as Exhibit A to Plaintiffs' motion.[6] It states that Lease Operators are independent contractors, and it is generally similar in this respect and others to the previous agreement that the court analyzed in its January order at docket 862. The pertinent difference is that the new ICOA contains two new provisions, inserted as paragraphs 16 and 17E, which set forth payment and indemnification obligations in the event of a “reclassification decision.” Plaintiffs argue that these provisions “are having a profound chilling effect on the Lease Operators who are being required by Swift to sign the [ICOA]” because they could reasonably be read to limit damages and to make the Lease Operator liable for Swift's attorneys' fees if Plaintiffs ultimately fail to prevail on their claims in this case.[7] They assert that, prior to filing the motion, Defendants' counsel refused to disavow the applicability of the new provisions to the case at hand or clarify the scope and meaning of these provisions. Plaintiffs ask that the court take the following actions: (1) enjoin the application of paragraphs 16 and 17E of the new ICOA; (2) require Defendants to inform all lease operators, including those who have already signed the Agreement, that paragraphs 16 and 17E are not operative; (3) enjoin Defendants and their counsel from engaging in any further contacts with current opt-ins and putative class members regarding the matters raised in this suit, including communications that request or require Lease Operators to enter into agreements that may in any way impact the liability or damages issues that are currently pending before this court without first informing Plaintiffs' counsel and obtaining permission from the court.[8]

         At oral argument, Defendants represented that the challenged provisions were not meant to intimidate Lease Operators or affect their rights in this case. While maintaining the position that paragraphs 16 and 17E are not misleading, Defendants nevertheless voluntarily offered to issue a clarifying communication to the recipients of the new ICOA. The court directed the parties to confer and to file any proposed notices with the court. Defendants and Plaintiffs were unable to agree on a proposed notice. Defendants filed their proposed notice and memorandum at docket 912, and Plaintiffs filed their proposed notice and memorandum at docket 914.


         Plaintiffs structure their motion as one for an injunction, first as a temporary restraining order and then as a preliminary injunction. In setting an expedited briefing schedule and holding a hearing, the court effectively rejected Plaintiffs' request for an immediate restraining order. There was no reason provided to the court to enjoin Defendants without notice as provided for under Rule 65(b).

         Both parties have now been heard, as Plaintiffs' request for an injunction has been fully briefed and argued. In a typical order addressing a request for a preliminary injunction, the court would apply the familiar four-factor test involving the movant's likelihood of success on the merits, the possibility of irreparable harm in the absence of preliminary relief, the balance of equities, and the public interest. Here, however, such an analysis makes little sense. There is nothing preliminary about Plaintiffs' request, because resolution of the underlying case will not resolve the questions put to the court in this motion. Thus, a finding that Plaintiffs are likely to succeed on the merits is meaningless in this situation.

         Instead, the court finds its authority to address the dispute here in Rule 23(d) of the Federal Rules of Civil Procedure. Rule 23(d) provides that the court may issue orders that “require-to protect members and fairly conduct the action-giving appropriate notice to some or all class members of . . . any step in the action, ” “impose conditions on the representative parties, ” or “deal with similar procedural matters.”[9]According to the Advisory Committee Notes, the provision is “concerned with the fair and efficient conduct of the action . . . .”[10]

         As the Supreme Court has acknowledged, courts presiding over a class action have “both the duty and the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of counsel and parties.”[11] The Ninth Circuit in Wang v. Chinese Daily News, Inc., [12] explained that this duty and authority extends to control over certain communications with class members: “In the face of coercive behavior by a party opposing a class, district courts may regulate communications with class members related to the notice and opt-out process.”[13] The Wang court cited Kleiner v. First National Bank of Atlanta[14] with approval, noting that the Eleventh Circuit acknowledged that a trial court's power to manage a class action includes the power to prohibit unilateral communications with the class.[15] While Wang dealt with improper attempts to persuade employees to opt out of a class action suit, the district court's power also extends to any communication that “threatens the fairness of the litigation.”[16] Communications that affect participation in the lawsuit are included in this category.[17]

         When exercising its authority to limit communications, however, the court must tailor its order to prevent potential interference with the rights of the parties.

[A]n order limiting communications between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties. Only such a determination can ensure that the court is furthering, rather than hindering, the policies embodied in the Federal Rules of Civil Procedure, especially Rule 23. In addition, such a weighing-identifying the potential abuses being addressed-should result in a carefully drawn order that limits speech as little as possible, consistent with the rights of the parties under the circumstances.[18]

         “[A]n order limiting communications regarding ongoing litigation between a class and class opponents will satisfy first amendment concerns if it is grounded in good cause and issued with a ‘heightened sensitivity' for first amendment concerns.”[19]



         Defendants argue that there is no class action to manage given the class has not yet been certified and that the five named Plaintiffs do not otherwise have standing to challenge the new ICOA because they are no longer employed by Swift. The court finds such an argument unavailing. The named Plaintiffs certainly have an interest in what current drivers are being required to sign to the extent it affects this case. Plaintiffs are alleging that the challenged provisions in the new ICOA are misleading and confusing to current Lease Operators in that they suggest participation in this class action lawsuit could result in the Lease Operators having to pay damages and attorneys' fees. Such a misunderstanding has the potential to undermine Plaintiffs' ability to obtain participation and cooperation from putative class members. The court agrees that Plaintiffs have standing to protect the putative class.[20] Indeed, the Supreme Court in Gulf Oil recognized that the lower courts' Rule 23(d) authority extends to communications between counsel and “prospective class members.”[21]Courts exercising their authority under Rule 23(d) have invalidated communications made by a defendant to putative class members before class certification.[22]

         Moreover, as noted by Plaintiffs in their reply brief, “Swift's standing argument ignores the fact that [the] motion is made on behalf of all the parties in this case, including the opt-ins that currently drive for Swift and are clearly affected by being made to sign the new [ICOA].”[23] Opt-in plaintiffs are parties to this action unless the court finds that the parties are not similarly situated and declines to certify the class.[24] There are more than 650 opt-in plaintiffs, and certainly some have received the new agreement and have standing to seek the relief requested.

         Paragraphs 16 and 17E

         “Courts . . . have limited communications, as well as invalidated agreements that resulted from those communications, when they omitted critical information or were otherwise misleading or coercive.”[25] Plaintiffs assert that both paragraph 16 and paragraph 17E are misleading and coercive because they are written so as to suggest that they will affect Lease Operators' damages in this case.

         Paragraph 16 provides that “[i]f any of [Lease Operator's] workers is determined to be an employee of [Swift] . . . either party may, at its election, rescind this Agreement back to the time of its formation and both parties would then be returned to their respective positions before it was signed.” Paragraph 16C allows either party to terminate the agreement on one (1) day's notice in the event of a decision reclassifying the workers as employees of Swift. In the event either party rescinds the ICOA, paragraph 16A then states that the Lease Operator will “owe [Swift], for the period of time this [ICOA] was in effect, all gross compensation . . . previously paid to [Lease Operator] by [Swift]” less any expenses the driver incurred in performance of the ICOA that were not paid for by Swift. Swift then under 16B “will immediately owe the [Lease Operator] . . . the then-applicable “mean hourly wage” for Occupation Code 53-3032 in the Phoenix, Arizona metropolitan area, as published by the Bureau of Labor Statistics of the U.S. Department of Labor (or, if higher, the federal minimum hourly wage but only to the extent [Lease Operators's] wage-earning activities occurred in that state), multiplied by [Lease Operator's] total hours spent actually performing on-duty work for Swift, consisting of both driving and non-driving time, under any applicable hours-of-service regulations.”

         This paragraph is misleading in that it suggests Swift may impose its own measure of damages in the event of a reclassification decision. Paragraph 16, Swift fairly suggests that, in the event of a reclassification, it will simply recapture mileage payments given to drivers and substitute hourly wages, but the FLSA is considered on a workweek by workweek basis and does not permit averaging of hours over two or more weeks as Swift proposes.[26] The FLSA provides the proper remedial mechanisms that cannot be changed by an agreement to use a different approach.[27] Paragraph 16 also suggests that Swift's approach of recapture and substitution will satisfy its FLSA obligations; that is not the case. The FLSA also entitles prevailing workers to liquidated damages and a worker may not waive the right to liquidated damages through private agreement.[28] Therefore, Paragraph 16 is misleading and confusing.

         Paragraph 17 is entitled “Indemnification” and subparagraph E requires that the Lease Operator indemnify Swift for all reasonable attorneys' fees and litigation expenses that Swift may incur in defending against any claims “by any of [Lease Operator's] workers, or, at [Lease Operator's] instance or with [Lease Operator's] consent, by any union or other private organization or member of the public, alleging that any of [Lease Operator's] workers is an employee of Swift, ” but which suit is ultimately unsuccessful. This paragraph makes a Lease Operator liable for Swift's attorneys' fees in the event a suit seeking to have a worker treated as an employee is unsuccessful. Again, this is misleading to those considering participating in the class action, because the FLSA's fee-shifting provision refers only to a prevailing plaintiff.[29] A successful defendant is generally not entitled to attorneys' fees under the FLSA.[30]

         Defendant's assertion that paragraph 16 of the new agreement only applies to persons employed by the Lease Operators (but not signing Lease Operators themselves) is belied by section 16C. Paragraph 16C states as follows: "[b]ecause reclassification of [Lease Operator] or any of its workers as an employee of [Swift] would fundamentally change the parties' assumptions and expectations, either party may, upon issuance of a Reclassification Decision, terminate this Agreement on 1 day's notice." It references the reclassification of the Lease Operator himself. Thus, paragraph 16 is fairly readable to include the opt-in plaintiffs and putative class members who are Lease Operators and not just subcontracting drivers the Lease Operators themselves may employ. Looking to 17E, the indemnification obligation applies to any action brought “by [Lease Operators'] workers” or “by any . . . member of the public” “with the [Lease Operator's] consent.” Such language certainly could be read to include claims made by the Lease Operators themselves, especially given the language in paragraph 16C.

         Read together paragraphs 16 and 17E have a coercive effect on potential class members who, after reading the agreement, have a well-founded fear that they may end up owing Swift money whether or not the case is ultimately resolved in their favor. Under paragraph 16, a Lease Operator could rightly fear that even if the Lease Operators prevail he could nonetheless end up owing Swift money if his mileage wages average more than minimum wages over the course of the agreement. Under Paragraph 17E, a Lease Operator may fear that he will owe Swift attorneys' fees and costs if the claims prove unsuccessful. The threat of owing money undoubtedly has a chilling effect on participation in the class action, particularly in the context of an employer-worker relationship such as here.[31] The coercive nature of the new provisions is only heightened by the fact that Swift's request for current Lease Operators to sign the new agreement by March 1, 2017, is explicitly tied to preservation of their jobs. “Set against the backdrop of the employer-employee ...

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