Rubio v. Carreca Enters., Inc.

490 F.Supp.3d 1277

Penny RUBIO, individually, and on behalf of others similarly situated, Plaintiff,

v.CARRECA ENTERPRISES, INC. d/b/a Pizza Hut Clarksville, et al., Defendants.

No. 3:19-cv-00264

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

Filed April 28, 2020

James Gerard Stranch, IV, Joey P. Leniski, Jr., Branstetter, Stranch & Jennings, PLLC, Nashville, TN, Jay Forester, Forester Haynie PLLC, Dallas, TX, for Plaintiff.

Courtney L. Leyes, Fisher & Phillips, LLP (Memphis Office), Memphis, TN, Franklin Wolf, Joel Rice, Fisher & Phillips LLP (Chicago Office), Chicago, IL, for Defendants.

MEMORANDUM OPINION

ELI RICHARDSON, UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendants’ Motion to Dismiss and Compel Arbitration on an Individual Basis. (Doc. No. 30, "Motion"). Plaintiff has filed a response, and Defendants have replied. (Doc. Nos. 38, 40). For the reasons stated herein, Defendants’ Motion will be GRANTED . The Court will compel the parties to arbitrate this matter and dismiss this action without prejudice.

BACKGROUND¹

Plaintiff began her employment with Defendants as a pizza delivery driver in April 2018. (Doc. No. 1 at ¶ 7; Doc. No. 30-1 at ¶ 7). Plaintiff's employment ended in May 2018, but she began working for Defendants again in July 2018. (Doc. No. 30-1 at ¶ 8). Plaintiff's employment with Defendants ended in April 2019 when Defendants sold the Company (a.k.a. Pizza Hut Clarksville). (Doc. No. 1 at ¶ 7; Doc. No. 30-1 at ¶ 8).

On April 1, 2019, Plaintiff filed her Complaint in this case, on behalf of herself and other similarly situated current and former employees ("putative plaintiffs"), which alleges violations of the Fair Labor Standards Act, 29 U.S.C. § 216(b) ("FLSA"). (Doc. No. 1 at ¶ 2). Plaintiff alleges that Defendants Carreca Enterprises, Inc. d/b/a Pizza Hut Clarksville and Nona Carreca ("Defendants") failed to reimburse her and putative plaintiffs, specifically those employed as delivery drivers, "the reasonably approximate amount of their automobile expenses to such an extent that it diminishe[d] these employees’ wages beneath the federal minimum wage." (Id. at ¶ 43). Additionally, Plaintiff asserts an individual claim of unjust enrichment wherein she asserts that she "conferred a benefit upon Defendants by working on their behalf without compensation" and that "Defendants accepted and retained the benefit under such circumstances to make it inequitable for Defendants to retain the benefit without payment of its value." (Id. at ¶¶ 50-54).

Defendants filed the instant Motion, wherein they seek an order compelling arbitration of Plaintiff's claims, precluding class arbitration, and dismissing Plaintiff's Complaint with prejudice. (Doc. No. 30). Defendants assert that the Employee Policy Acknowledgement that Plaintiff signed, in which she agreed that she had read the "Arbitration of Employee Rights," binds her to arbitrate all claims arising between Plaintiffs and Defendants. (Id. at 3, Doc. No. 30-1 at 8). The "Agreement to Arbitrate" provides:

Agreement to Arbitrate. Bullock-Scott Restaurant Group/Carreca Enterprises, Inc. on behalf of itself and its parents and affiliates, officers and directors (collectively, "BSRG" or "CEI") and I agree to use binding arbitration, instead of going to court, for any claims, including any claims now in existence or that may exist in the future (a) that I may have against BSRG/CEI, its affiliates, and/or their current or former employees or (b) that BSRG/CEI and/or its affiliates may have against me or (c) any claim that I may have against Pizza Hut Inc. ("PHI") and/or PHI's parents, subsidiaries, and/or affiliates. Without limitation, such claims including any concerning wages, expense reimbursement, compensation, leave, employment (including, but not limited to, any claims concerning harassment, discrimination, or retaliation), conversion, breach of fiduciary duty, and/or termination of employment. [...]

BSRG/CEI and I agree that any and all claims subject to arbitration under this Agreement to Arbitrate may be instituted and arbitrated only in an individual capacity, and not on behalf of or as part of any purported class, collective, representative, private attorney general action, or consolidated action (collectively referred to in this Agreement to Arbitrate as a "Class Action"). Furthermore, BSRG/CEI and I agree that neither party can initiate a Class Action in court or in arbitration in order to pursue any claims that are subject to arbitration under this Agreement to Arbitrate.

Moreover, neither party can join a Class Action or participate as a member of a Class Action instituted by someone else in court or in arbitration in order to pursue any claims that are subject to arbitration under this Agreement to Arbitrate. [...]

I acknowledge and agree that this Agreement to Arbitrate is made in exchange for my employment or continued employment, as well as the mutual promises to resolve disputes through arbitration contained in this Agreement. [...]

I understand that, by entering into this Agreement to Arbitrate, I am waiving my right to a jury trial and any right I may have to bring any employment related claim covered by this agreement as a Class Action (as defined herein) or any class or representative action (either in court or in arbitration) or to participate in such an action.

(Doc. No. 30-1 at 5-6). Defendants contend that both of Plaintiff's claims concern an employment dispute; therefore, they fall under the Agreement to Arbitrate and this Court should compel the parties to arbitrate her claims and dismiss Plaintiff's Complaint. (Doc. No. 30 at 3). Plaintiff does not dispute that her claims fall within the scope of the Agreement to Arbitrate, but argues that the Court should not compel arbitration in this matter because she did not assent to the Agreement to Arbitrate, and, alternatively, because the Agreement to Arbitrate is unconscionable.

LEGAL STANDARD

The Federal Arbitration Act ("FAA") provides that a written provision in a contract "to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. This section of the FAA "embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts." Seawright v. Am. Gen. Fin. Servs., Inc. , 507 F.3d 967, 972 (6th Cir. 2007) (internal citation and quotation omitted).

Under the FAA, if a party establishes the existence of a valid agreement to arbitrate, the district court must grant the party's motion to compel arbitration and stay or dismiss proceedings until the completion of arbitration. Glazer v. Lehman Bros., Inc. , 394 F.3d 444, 451 (6th Cir. 2005) (citing 9 U.S.C. §§ 3 – 4 ). "Courts are to examine the language of the contract in light of the strong federal policy in favor of arbitration." Stout v. J.D. Byrider , 228 F.3d 709, 714 (6th Cir. 2000) (citation omitted). Therefore, any doubts regarding arbitrability must be resolved in favor of arbitration. Fazio v. Lehman Bros., Inc. , 340 F.3d 386, 392 (6th Cir. 2003). However, while the courts must respect "the liberal federal policy favoring arbitration agreements ... arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit." Seawright , 507 F.3d at 972 (internal citation and quotation omitted). Because arbitration agreements are fundamentally contracts, the enforceability of a purported agreement to arbitrate is evaluated according to the applicable state law of contract formation. Id.

When considering a motion to dismiss and compel arbitration under the FAA, a court has four tasks:

[F]irst, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.

Stout , 228 F.3d at 714 (citing Compuserve, Inc. v. Vigny Int'l Finance, Ltd. , 760 F. Supp. 1273, 1278 (S.D. Ohio 1990) ).

"In order to show that the validity of the agreement is in issue, the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate, a showing that mirrors the summary judgment standard." Great Earth Cos. v. Simons , 288 F.3d 878, 889 (6th Cir. 2002) (internal quotation marks omitted). Thus, the court views "all facts and inferences drawn therefrom in the light most favorable" to the party opposing arbitration and "determine[s] whether the evidence presented is such that a reasonable finder of fact could conclude that no valid agreement to arbitrate exists." Id. ; see Green Tree Fin. Corp.-Ala. v. Randolph , 531 U.S. 79, 91, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (stating that the party challenging arbitration has the burden of proving that the claims at issue are not arbitrable).

DISCUSSION

Here, Plaintiff challenges the arbitrability of her claims on validity grounds, asserting that there is no agreement to arbitrate. Specifically, Plaintiff claims that there was no mutual assent or meeting of the minds. (Doc. No. 38 at 4-10). Alternatively, Plaintiff argues that even if the Court were to find that there was mutual assent, and therefore an agreement existed, the Agreement to Arbitrate is nevertheless unenforceable because it is unconscionable. The Court will explore each of these assertions in turn.

A. Choice of Law

First, the Court must determine which state's law to apply when determining whether a valid agreement exists. When exercising diversity jurisdiction, the Court applies the choice of law principles of the...