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Bonner v. Michigan Logistics Inc.

United States District Court, D. Arizona

April 20, 2017

Xavier Bonner, et al., Plaintiffs,
Michigan Logistics Incorporated, et al., Defendants.


          Honorable G. Murray Snow United States District Judge

         Pending before the Court is the Motion to Compel Individual Arbitration and Stay Proceedings of Defendants Arizona Logistics LLC, Michigan Logistics Incorporated, and Parts Authority Arizona LLC, (Doc. 28).[1] For the following reasons, the Court grants the motion in part and denies the motion in part.


         Defendants Arizona Logistics LLC (“Arizona Logistics”) and Michigan Logistics Incorporated (“Michigan Logistics”) both do business under the name of Diligent Delivery Systems (“Diligent”). (Doc. 1 at 6-7, Doc. 28-1 at 1.) They are affiliated companies and the same person, Larry Browne, is the CEO of both. (Doc. 28-1 at 1.) Mr. Browne, in a declaration attached to the pending Motion, characterized Arizona Logistics' business model as follows:

Arizona Logistics is a delivery logistics company. It does not perform any deliveries, employ any delivery drivers, or own any delivery vehicles. Instead, it locates customers who need an outside delivery service, and then offers to connect those customers with independent delivery providers (“owner-operators”) willing to provide such a service. Arizona Logistics, therefore, acts as a broker by offering a customer's delivery opportunity to an owner-operator and, if the owner-operator accepts, connecting the customer and the owner-operator.

(Doc. 28-1 at 1-2.)

         The Plaintiffs in this action are individuals who contracted with Arizona Logistics to serve as delivery drivers. Each signed an Owner Operator Agreement, (“Agreement”), which formed the basis for the contractual relationship between Arizona Logistics and each driver. Each Plaintiff performed deliveries on behalf of Arizona Logistics' customer, Parts Authority Arizona LLC (“Parts Authority”), which runs a chain of automotive parts shops in Arizona. Each Owner Operator Agreement, [2] consistent with Mr. Browne's description of Arizona Logistics' business model, emphasized that the delivery drivers were independent “Owner Operators” and not employees of Arizona Logistics. (Doc. 28-2 at 1, Doc. 28-7 at 1.) Plaintiffs allege, however, that Arizona Logistics, Michigan Logistics and Parts Authority “formed a joint employment relationship with respect to Plaintiffs, ” and that they “constitute a unified operation, ” “a common enterprise, ” have “common management, “centralized control of labor relations, ” “common ownership” and constitute “a single employer” and an “integrated enterprise.” (Doc 1 at 9-10).

         Plaintiffs allege that Defendants “knowingly misclassified” them as independent contractors, rather than employees. (Doc. 1 at 2-3.) By doing this, Plaintiffs allege, Defendants were able to avoid paying statutorily mandated minimum and overtime wages, shift business expenses to Plaintiffs, avoid payroll taxes and benefits, and obtain an unfair competitive advantage in the marketplace. (Id.) Plaintiffs bring individual and class claims under the Fair Labor Standards Act (“FLSA”) and Arizona's Wage Act, and on a theory of restitution/unjust enrichment.[3] (Id. at 12-26.)

         Defendants bring this Motion to Compel based on Alternative Dispute Resolution (“ADR”) provisions included in the Owner Operator Agreements. The Agreements signed by Plaintiffs Bonner, Ross, Williams and Harris[4] included a four-page provision entitled “Dispute Resolution, ” which provided in part that:

(a) Arbitration of Claims: In the event of a dispute between the parties, the parties agree to resolve the dispute as described in this paragraph (hereafter “the Arbitration Provision”). This Arbitration Provision is governed by the Federal Arbitration Act, 9 U.S.C. § 1, et seq., and applies to any dispute brought by either Operator or DILIGENT arising out of or related to this Agreement or Operator's relationship with DILIGENT, including termination of the relationship. . . . Except as it otherwise provides, this Arbitration Provision is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law, and therefore this Arbitration Provision requires all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial.
(i) Claims Covered by Arbitration Provision: Unless carved out below, claims involving the following disputes shall be subject to arbitration under this Arbitration Provision regardless of whether brought by Operator, DILIGENT or any agent acting on behalf of either: (1) disputes arising out of or related to this Agreement; (2) disputes arising out of or related to Operator's relationship with DILIGENT, including termination of the relationship; and (3) disputes arising out of or relating to the interpretation or application of this Arbitration Provision, but not as to the enforceability, revocability or validity of the Arbitration Provision or any portion of the Arbitration Provision. This Arbitration Provision also applies, without limitation, to disputes regarding any city, county, state or federal wage-hour law, trade secrets, unfair competition, compensation, meal or rest periods, expense reimbursement, uniform maintenance, training, termination, discrimination or harassment and claims arising under the . . . Fair Labor Standards Act, . . . and state statutes, if any, addressing the same or similar subject matters, and all other similar federal and state statutory and common law claims (excluding workers' compensation, state disability insurance and unemployment insurance claims).
[. . .]
(d) Class Action Waiver: There shall be no right or authority for any dispute to be brought, heard or arbitrated as a class, collective or representative action (“Class Action Waiver”). Notwithstanding any other clause contained in this Arbitration Provision, the preceding sentence shall not be severable from this Arbitration Provision in any case in which the dispute to be arbitrated is brought as a class, collective or representative action. . . .

(Doc. 28-2 at 7-9.) The ADR provision in Plaintiff Six's Agreement, by contrast, says only the following:

DILIGENT and Operator both agree to resolve any disputes between DILIGENT and Operator directly or with an agreed form of Alternative Dispute Resolution. Both DILIGENT and Operator agree that neither will engage or participate in a collective or class suit against the other.

(Doc. 28-7 at 6.)

         Defendants ask the Court to compel arbitration and stay further proceedings based on these contractual provisions.


         I. Legal Standard

         Under the Federal Arbitration Act (“FAA”), “[a] written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, . . . shall be valid, irrevocable, and enforceable . . . .” 9 U.S.C. § 2; see, e.g., Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 113-19 (2001) (holding that FAA applies to employment contracts except those of transportation workers) (citing 9 U.S.C. §§ 1-2); Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000); Tracer Research Corp. v. Nat'l Envtl. Servs. Co., 42 F.3d 1292, 1294 (9th Cir. 1994), cert. dismissed, 515 U.S. 1187 (1995). “Although [a] contract provides that [state] law will govern the contract's construction, the scope of the arbitration clause is governed by federal law.” Tracer Research Corp, 42 F.3d at 1294 (citing Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1463 (9th Cir. 1983)); see Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002) (holding that FAA “not only placed arbitration agreements on equal footing with other contracts, but established . . . a federal common law of arbitrability which preempts state law”); Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999) (“Federal substantive law governs the question of arbitrability.”); Chiron Corp., 207 F.3d at 1130-31 (holding that “district court correctly found that the federal law of arbitrability under the FAA governs the allocation of authority between courts and arbitrators” despite arbitration agreement's choice-of-law provision).[5]

         “Notwithstanding the federal policy favoring it, ‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'” Tracer Research Corp., 42 F.3d at 1294 (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)); see French v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 784 F.2d 902, 908 (9th Cir. 1986). Where the arbitrability of a dispute is in question, a court must look to the terms of the contract. See Chiron Corp., 207 F.3d at 1130. “‘Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.'” Simula, 175 F.3d at 719 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983)); see French, 784 F.2d at 908.

         However, a court “cannot expand the parties' agreement to arbitrate in order to achieve greater efficiency [and] the [FAA] ‘requires piecemeal resolution when necessary to give effect to an arbitration agreement.'” Tracer Research Corp., 42 F.3d at 1294 (quoting Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25) (emphasis in original). “[T]he judicial inquiry . . . must be strictly confined to the question whether the reluctant party did agree to arbitrate[.]” United Steelworkers, 363 U.S. at 582. “The court's role under the [FAA] is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp., 207 F.3d at 1130 (citing Simula, 175 F.3d at 719-20; Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 477-78 (9th Cir. 1991)); see Simula, 175 F.3d at 720 (stating that “the district court can determine only whether a written arbitration agreement exists, and if it does, enforce it in accordance with its terms”) (citing Howard Elec. & Mech. v. Briscoe Co., 754 F.2d 847, 849 (9th Cir. 1985)).

         II. Analysis

         A. Plaintiffs Bonner, Ross, Williams and Harris agreed to arbitration, while Plaintiff Six only ...

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