Mercadante v. XE Servs., LLC, Civil Action No. 11–1044 CKK

78 F.Supp.3d 131

C.J. Mercadante, et al., Plaintiffs

v.XE Services, LLC, et al., Defendant

Civil Action No. 11–1044 CKK

United States District Court, District of Columbia.

Signed January 15, 2015

Michael J. Trevelline, Law Offices of Michael Trevelline, Scott J. Bloch, Law Offices of Scott J. Bloch, PA, Washington, DC, for Plaintiffs.

Rene E. Thorne, Charles F. Seemann, III, Jason M. Stein, Jackson Lewis LLP, New Orleans, LA, Jennifer A. Harper, Bean, Kinney & Korman, P.C., Arlington, VA, Matthew F. Nieman, Jackson Lewis LLP, Reston, VA, for Defendant.

MEMORANDUM OPINION

COLLEEN KOLLAR–KOTELLY United States District Judge

Plaintiffs C.J. Mercadante, Robert Biddle, Johnny Jefferson, and Phillip W. OHara (collectively “Plaintiffs”) brought this action on their own behalf and on behalf of a putative class against Defendants XE Services, LLC; U.S. Training Center, Inc.; USTC Security Consulting, LLC f/k/a Blackwater Security Consulting, LLC; and Blackwater Worldwide Trust, Health and Welfare Plan and Trustees (collectively, “Defendants” or “Blackwater”). Plaintiffs assert a series of claims—including breach of contract, fraud, and breach of fiduciary duty under the Employment Retirement Income Security Act of 1974—and allege, among other things, that they were misclassified as independent contractors and denied various employment benefits. See First Am. Compl. for Damages & Declaratory & Injunctive Relief & Class Relief (“First Am. Compl.”), ECF No. 11. Presently before the Court is Defendants' [24] Second Renewed Motion to Compel Arbitration. Upon consideration of the pleadings,¹ the relevant legal authorities, and the record as a whole, the Court GRANTS Defendants' motion. The Court concludes that the parties have delegated the authority to determine questions of arbitrability to an arbitrator and that the delegation agreement survives Plaintiffs' challenges to its validity. Having resolved this gateway question, the remainder of Plaintiffs' arguments are for an arbitrator—not the Court—to consider. Accordingly, this action is STAYED during the pendency of the arbitration.

I. BACKGROUND

The question before the Court is whether the parties have delegated to an arbitrator—through a valid delegation agreement—the question of whether the underlying claims brought by Plaintiffs are arbitrable. Because the Court resolves that gateway question in the affirmative, concluding that the parties have validly delegated questions of arbitrability to an arbitrator, the Court recites only the background that informs the Court's answer to that gateway question.

A. Factual Background

Between 2006 and 2009, each plaintiff served as a security contractor in Iraq or Afghanistan under contracts that Blackwater held with the U.S. Department of State. See Mercadante Decl. ¶ 2; Biddle Decl. ¶ 2; OHara Decl. ¶ 2; Jefferson Decl. ¶ 2; Defs.' Supp. Statement ¶¶ 62, 108, 144, 194. Each plaintiff signed an Independent Contractor Service Agreement (ICSA) with Blackwater. See Defs.' Statement of Undisputed Material Facts in Support of Defs.' Supp. Br., ECF No. 38–1 (“Defs.' Supp. Statement”), ¶ 31 (Plaintiff Mercadante); id. ¶ 77 (Plaintiff Biddle); id. ¶ 119 (Plaintiff OHara); id. ¶ 154 (Plaintiff Jefferson). Plaintiffs' claims pertain to their work for Blackwater in this period and primarily revolve around their argument that they were inappropriately categorized as independent contractors rather than as employees. See First Am. Compl, ¶¶ 12, 21.

Each ICSA includes an identical arbitration clause. See Pls.' Response to Defs.' Statement of Undisputed Material Facts (“Pls.' Response Facts”), ¶¶ 41 (Mercadante), 76 (Biddle), 125 (OHara), 157 (Jefferson's first ICSA); 163 (Jefferson's second ICSA). The clause reads in full:²

Law/Exclusive Venue/Arbitration . This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, applicable to contracts made and to be fully performed therein, excluding its conflict of laws principles; provided, however, to the extent that BSC [Blackwater Security Consulting, LLC] provides DBA Insurance³ to Contractor and Contractor's Group, Contractor and Contractor's Group hereby agree that the remedies and benefits provided by the United States Department of Labor shall be the sole and exclusive remedies in place of all other liability of BSC; provided further, that to the extent an action is brought on behalf of Contractor or Contractor's Group, regardless of what is plead in any complaint, Contractor waives the right to any venue other than the United States Department of Labor or a federal court with jurisdiction to review such matters. Contractor and BSC hereby agree that any dispute regarding interpretation or enforcement of any of the parties' rights or obli gations under this Agreement shall be resolved by binding arbitration according to the rules of the American Arbitration Association. Proceeding to arbitration and obtaining an award thereunder shall be a condition precedent to the bringing or maintaining of any action in any court with respect to any dispute arising under this Agreement, except for the institution of a civil action of a summary nature where the relief sought is predicated on there being no dispute with respect to any fact or relief of an injunctive nature. Contractor hereby waives any rights to seek removal of any dispute to the state or federal courts.

Id. (emphasis added). The rules of the American Arbitration Association (“AAA”) provide for an arbitrator to decide questions of arbitrability. See AAA Employment Arbitration Rules and Mediation Procedures, Rule 6. Three of the plaintiffs—Mercadante, OHara, and Jefferson—acknowledge that the initials on the pages that include the arbitration clause are theirs; Plaintiff Biddle stated that he did not know whether the initials on those pages were his. Defs.' Supp. Statement ¶ 32 (Mercadante); id. ¶ 120 (OHara); id. ¶¶ 155, 165 (Jefferson); id. ¶ 78 (Biddle). The parties dispute the circumstances that surround the signing of ICSAs, including the dates on which the ICSAs were signed. See, e.g., Pls.' Response Facts ¶ 10.

Each plaintiff also signed one or more additional “schedules” providing further details about each plaintiff's assignment, which were dated after the ICSAs. Each schedule includes the following language:

This Schedule [ ] is incorporated into and made part of that certain agreement entitled “Independent Contractor Service Agreement” between Blackwater and Contractor. All other terms and conditions of the Independent Contractor Service Agreement shall remain unchanged.

Defs.' Supp. Statement ¶ 47–48 (Mercadante's Schedule 3.1—Compensation Policy). See id . ¶¶ 52, 55 (Mercadante's Schedule A—Engagement Specific Information); id. ¶¶ 94–95 (Biddle's Schedule 3.1; id. ¶¶ 98–99 (Biddle's second Schedule 3.1); id. ¶ 104 (Biddle's Schedule A); id. ¶ 134 (OHara's first Schedule A); id. ¶ 143 (OHara's second Schedule A); id. ¶¶ 174, 178 (Jefferson's Schedule 3.1); id. ¶¶ 183–84 (Jefferson's first Schedule A); id. ¶¶ 188–89 (Jefferson's second Schedule A). While some of the plaintiffs acknowledge having read this statement regarding incorporation in the ICSA when signing the schedules, others deny having read it. See Defs.' Supp. Statement ¶¶ 47, 50, 55, 94, 135, 141, 179, 184, 189.

B. Procedural History

Plaintiffs filed a Complaint for Damages and Injunctive and Class Relief. Defs.' Statement of Undisputed Material Facts in Support of Defs.' Supp. Br., ECF No. 38–1 (“Defs.' Supp. Statement”), ¶¶ 1–2. Defendants moved to compel arbitration. Id . ¶ 3. On May 22, 2012, the Court denied that motion without prejudice.See Memorandum Opinion and Order, ECF No. 20 (“2012 Mem. Op. & Order”), at 1. The Court reasoned that, because Defendants had argued for the first time in their reply brief that the parties had delegated the question of arbitrability to an arbitrator, “Defendants deprived Plaintiffs of an opportunity to render a meaningful response.” Id. at 5. The Court denied the motion to compel arbitration without prejudice in order to be able to consider a renewed motion to compel with the benefit of additional briefing “on the question of whether Defendants may invoke the delegation agreement in this case in order to compel the arbitration on gateway questions of arbitrability.” Id . The Court also ordered the parties not to incorporate arguments from prior submissions. Id. at 5–6.

After considering the parties' additional briefing with respect to Defendants' [24] Second Renewed Motion to Compel Arbitration,⁴ the Court concluded that “additional fact development on the narrow question of contract formation is appropriate.” Order, dated April 22, 2013, ECF No. 29 (“2013 Order”), at 7. Accordingly, the Court ordered limited discovery on that narrow question and set a schedule for subsequent additional briefing. Id . at 8. The Court once again ordered the parties not to incorporate by reference arguments from previous submissions. See id. at 9. The Court is now considering that briefing. On November 17, 2014, the Court asked the parties for additional briefing limited to the impact of Torrence v. Nationwide Budget Finance, 753 S.E.2d 802 (N.C.App.2014), on the unconscionability analysis that the Court must conduct. The Court will consider the briefing in response to that request, as well.

II. LEGAL STANDARD

A. Motion to Compel

A motion to compel arbitration is treated as “a request for summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.” Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C.Cir.2008) ; see also Haire v. Smith, Cur r ie & Hancock LLP, 925 F.Supp.2d 126, 129 (D.D.C.2013). “Under Rule 56(c), summary judgment is appropriate only if ‘there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.’ ” Aliron Int'l, 531 F.3d at 865 (quoting Anderson v. Liberty...