Thomerson v. Covercraft Indus.

1

JOHN A. THOMERSON; ERIK GULDAGER; PHALA E. VELARDE; and ELIZABETH WHITE, Plaintiffs, v. COVERCRAFT INDUSTRIES, LLC, and JASBIR PATEL, Defendants.

No. 2:23-cv-02225-DCN

United States District Court, D. South Carolina, Charleston Division

March 25, 2024

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

This matter is before the court on Magistrate Judge Thomas E Rogers, III's report and recommendation (“R&R”), ECF No. 31, on resolution of a motion to dismiss and to compel arbitration, which is alternatively a motion to transfer the case. ECF No. 15. Namely, the magistrate judge recommends that the court grant defendants Covercraft Industries, LLC (“Covercraft”) and Jasbir Patel's (“Patel”) (together, “defendants”) motion to dismiss, motion to compel arbitration, or alternatively, motion to transfer case, ECF No. 15, only as to plaintiffs John A. Thomerson (“Thomerson”) Erik Guldager (“Guldager”), and Elizabeth White (“White”). The magistrate judge recommends that Thomerson, Guldager, and White's claims be transferred to the Western District of Kentucky. The magistrate judge further recommends that the court deny the motion as to plaintiff Phala E. Velarde (“Velarde”)^[1]and that her claims be severed and retained in this court. For the reasons set forth below, the court adopts in part and rejects in part the R&R and grants in part and denies in part the motion. The court thereafter transfers Thomerson, Guldager, and White's claims to the Western District of Oklahoma. Velarde is not bound to the arbitration agreement and the § 1404(a) factors do not favor transfer of her claim to the Western District of Oklahoma. Velarde's claim is accordingly severed and retained in this district.^[2]

I. BACKGROUND

The R&R ably recites the facts of the case, and the parties do not object to the R&R's recitation thereof. Therefore, the court will only briefly summarize material facts as they appear in the R&R for the purpose of aiding an understanding of the court's legal analysis.^[3]

This dispute arises from plaintiffs' employment with Covercraft as sales management employees. Within the past several years, Covercraft was acquired by private equity hedge funds-first by Century Park Capital Partners and more recently by Audax Private Equity (“Audax”). Relevant to this suit, Audax installed Patel to lead its takeover team after the acquisition with the purpose of overhauling the company to increase the company's value in a future sale. One strategy that team used was to reduce the cost of the Covercraft payroll by instituting a mass layoff of Covercraft employees (the “Private Equity Layoff Strategy”). On March 1, 2023, defendants called each of the plaintiffs, and, in some cases, followed up with an email, to inform them that their employment with Covercraft was terminated, that their Covercraft computer connections would be turned off in ten minutes, and that their positions were being eliminated. Plaintiffs allege that the termination decisions were impermissibly based on age and gender.

Plaintiffs allege that the Private Equity Layoff Strategy unequally targeted older employees for termination. As of that date of termination, Thomerson was sixty-six years old, Guldager was sixty-three years old, and Velarde was sixty-four years old. Plaintiffs point to three examples which allegedly demonstrate that defendants impermissibly terminated Thomerson, Guldager, and Velarde on the basis of age. First, in or around January 2023, at a Covercraft manager meeting, Guldager asked Patel a question about a proposed action, and Patel allegedly responded, “you're too old to understand.” Second, plaintiffs allege that Patel, who is around fifty years old, has surrounded himself with a management takeover team which consists of individuals who are around forty years of age. Third, plaintiffs emphasize that defendants opted to lay off half of its sales team but only chose those employees who were in their sixties, with the remaining sales representatives being fifty-six, forty-eight, and thirty-six years of age.

Plaintiffs also allege that the Private Equity Layoff Strategy unequally targeted women employees for termination. First, Patel staffed his management takeover team primarily with men, with only one female vice president included. Second, at the SEMA Show in Las Vegas, Patel allegedly addressed the two female plaintiffs White and Velarde with the question, “Am I supposed to know who you are?” which is a condescension he allegedly did not direct toward any male management attendees. Third, even though White and Velarde were the only two female sales management employees of the six in that Decisional Unit, “they constituted fifty percent of those sales management employees adversely affected”^[4] by the layoffs. Altogether, plaintiffs rely on these allegations to conclude that defendants' decision to layoff White and Velarde was motivated by an impermissible sex animus.

Defendants assert that in 2016, Covercraft began requiring all of its employees to agree to the terms of its Arbitration Agreement and Dispute Resolution Policy (the “DRP”).^[5]The text of the Arbitration Agreement states that the “Employee acknowledges that the Company has a mandatory Dispute Resolution Policy (DRP) which requires binding arbitration to resolve all disputes between the Employee and the Company including any such disputes which may arise out of or relate to employment (see also paragraph 5 below).” See ECF Nos. 15-2; 15-3; 15-4 (the “Arbitration Agreements”), Arbitration Agreements ¶ 2. It provides that the DRP covers “any claim or dispute between the Employee and the Company, including any claim or dispute in any way related to or arising out of his/her employment with the Company” and lists specific claims including, inter alia, claims of discrimination, harassment, or retaliation under the ADEA and Title VII, claims under the WARN Act, and claims or disputes with the “Company's owners, directors, managers [and] other employees.” Id. ¶ 5. The Arbitration Agreement further provides that the “Employee understands and acknowledges that by accepting and/or continuing employment with the Company, and thereby agreeing to the terms of the DRP, that both Employee and the Company give up the right to trial by jury in a court of law for all employment-related disputes.” Id. ¶ 4. The Arbitration Agreement requires that arbitration occur in Oklahoma City, Oklahoma. Id. ¶ 16.

Defendants have produced signed Arbitration Agreements for Guldager, Thomerson, and White. See ECF Nos. 15-2; 15-3; 15-4. Guldager, White, and Thomerson each claim that their respective signed Arbitration Agreements should be voided. For example, Guldager avers that he was rushed into signing the agreement without reading it during a company meeting. ECF No. 17-3, Guldager Aff. ¶¶ 3-5. White avers that though she signed the Arbitration Agreement while she lived in California, she was not given a copy of the agreement when she asked for it, and that defendants should, therefore, not be able to rely on it. ECF No. 17-5, White Aff. ¶¶ 1, 3, 5. Thomerson avers that, because Covercraft demanded the agreement back while he was out of town, he did not sign it but that his wife signed it for him without him reviewing or understanding it. ECF No. 17-2, Thomerson Aff. ¶¶ 1-7.

Defendants have not produced a signed Arbitration Agreement with Velarde. Defendants note that while they have not located a signed Arbitration Agreement with Velarde, Covercraft required every employee to sign the agreement and would have terminated any employee who refused to sign it. ECF No. 15-5, Klause Aff. ¶¶ 4-6. Denise Klause (“Klause”) was Covercraft's Director of Human Resources at the time the DRP was implemented. Id. ¶ 1. Klause avers that she has no recollection of any employee refusing to sign the arbitration agreements and, in turn, avers that she does not remember needing to terminate any employee's employment based on their refusal to comply with Covercraft's DRP. Id. ¶¶ 7-8. Klause specifically recalls that Velarde was employed at Covercraft in its California operations at the time the DRP was rolled out, and Klause made a specific effort to ensure that all California employees signed and returned the arbitration agreements. Id. ¶¶ 9-10. In contrast, Velarde avers that she never signed any Arbitration Agreement with either Covercraft or Patel. ECF No. 17-4, Velarde Aff. ¶¶ 1-2. Each of the plaintiffs aver that they never entered into any agreements to arbitration with Patel. Velarde Aff. ¶ 2; Thomerson Aff. ¶ 3; Guldager Aff. ¶ 2; White Aff. ¶ 6.

On May 24, 2023, plaintiffs filed a complaint alleging seven causes of action.^[6]ECF No. 1, Compl. All pretrial proceedings in this case were referred to Magistrate Judge Rogers pursuant to the provisions of 28 U.S.C. § 636(b)(1)(A) and Local Civ. Rule 73.02(B)(2)(g) (D.S.C.). On June 29 2023, defendants filed a motion to dismiss and/or to compel arbitration, or, alternatively, a motion to transfer case. ECF No. 15. On July 12, 2023, plaintiffs filed a response in opposition, ECF No. 17, to which defendants replied on July 19, 2023, ECF No. 20. On July 23, 2023, plaintiffs filed a motion for leave to file a sur reply, ECF No. 23, to which defendants responded in opposition on July 24, 2023, ECF No. 24. On January 22, 2024, Magistrate Judge Rogers granted the motion for leave to file a sur reply, ECF No. 30,^[7] and issued a report and recommendation which recommended that the court grant the motion to transfer as to Thomerson, Guldager, and White. ECF No. 31, R&R at 21. It further recommended the court deny the motion as to Velarde, and, in so doing, sever Velarde's claims from the remaining plaintiffs. Id. On January 24, 2024, plaintiffs objected to the R&R. ECF No. 32....