Varma v. TCC Wireless, LLC

478 F.Supp.3d 724

Vikram VARMA, Plaintiff,

v.TCC WIRELESS, LLC and Frank Baree, Defendants.

Case No. 19-cv-7153

United States District Court, N.D. Illinois, Eastern Division.

Signed August 12, 2020

Dennis Ray Favaro, Patrick John Gorman, Favaro & Gorman, Ltd., Lakewood, IL, for Plaintiff.

Steve A. Miller, Scott C. Fanning, Fisher & Phillips LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

Steven C. Seeger, United States District Judge An employee is hired, and later quits. Then he is re-hired, and later fired. Does a contract signed at the outset of the first employment period govern claims arising under the second? Under the plain language of the contract, the answer is no. Defendants’ motion to compel arbitration is therefore denied.

Background

Plaintiff Vikram Varma is a former employee of Defendant TCC Wireless, LLC ("TCC"), a company that provides wireless phone services as a franchisee of T-Mobile. See First Am. Cplt. ¶ 6 (Dckt. No. 20).¹ Varma worked for TCC twice.

TCC first hired Varma in May 2016. Id. at ¶ 8. At that time, Varma signed an employee agreement that included an arbitration provision (the "Employment Agreement"). See Employment Agreement (Dckt. No. 11-1). Varma worked as a Retail Store Manager and Retail Training Manager for more than a year, from May 2016 to September 2017. See First Am. Cplt. ¶ 8; see also Pl.’s Resp., at 2 (Dckt. No. 14). In September 2017, Varma left TCC "for other opportunities," including working for Target. See First Am. Cplt. ¶ 8; Pl.’s Resp., at 2. At that point, the employment relationship ended.

Varma's absence didn't last long. The CEO of TCC, Jay Malik, reached out to Varma in October, scheduled a meeting, and told Varma that "he would be a great fit for a soon-to-be available role of Director of Operations." See First Am. Cplt. ¶¶ 9–10. The prospect of a promotion (and a raise) enticed Varma back. He rejoined TCC in late October 2017 as a Retail Auditor, with the expectation that TCC would promote him to Director of Operations (with a higher salary) by February 2018. Id. at ¶ 11.

When he was rehired, Varma signed an offer letter that expressly required him to sign other new hire paperwork. See 2017 Offer Letter, at 1 (Dckt. No. 14, at 10 of 11). "This offer is contingent upon your signing all necessary new hire paperwork and agreements." Id. But there is no indication that Varma signed another employee agreement, or a standalone arbitration agreement.

Varma's troubles at TCC started shortly after he rejoined the company. TCC didn't groom and ultimately elevate Varma for the Director of Operations role, as the company allegedly promised. See First Am. Cplt. ¶ 13. Instead, TCC put Varma under the supervision of Defendant Frank Baree, who, to Varma's surprise, held the Director of Operations title that the CEO had promised to Varma. Id. at ¶ 15. Instead of promoting Varma, they de facto demoted him. Baree assigned Varma jobs that had nothing to do with the Retail Auditor role. Id. at ¶ 12. Instead of handling "inventory and brand management," Varma performed menial tasks like "cleaning [stores], rewiring demos and organizing the backroom," id. at ¶¶ 13, 45, 55, 68, transporting equipment between stores, id. at ¶ 63, cleaning out a dirty company van, id. at ¶ 66, running "personal errands" for Baree, id. at ¶ 38, and photographing a company event, id. at ¶¶ 39–40.

To make matters worse, Varma allegedly suffered mistreatment, too. Baree (who is Pakistani) frequently harassed Varma based on his Indian ethnicity and Hindu faith. Id. at ¶¶ 5, 16, 30. Baree made offensive comments about Varma's ethnicity. Id. at ¶¶ 27–30, 48–52. He denied Varma vacation time for Hindu religious holidays, even though Pakistani employees were given vacation time for Muslim holidays. Id. at ¶¶ 22–23. And Baree even touched Varma inappropriately during an offsite work trip. Id. at ¶¶ 31–32.

The mistreatment extended to medical leave. Baree allegedly retaliated against him for exercising his rights under the Family and Medical Leave Act by taking medical leave. Id. at ¶¶ 7, 53–66, 69–73. Indeed, Varma alleges that TCC terminated Varma for exercising his FMLA rights. Id. at ¶¶ 69–73.

Varma ultimately filed a six-count complaint against TCC and Baree. The complaint includes federal law claims under the FMLA (Counts I-II) and Title VII (Counts III-IV), as well as state law claims for intentional infliction of emotional distress (Count V) and invasion of privacy (Count VI).

Defendants moved under the Federal Arbitration Act to compel arbitration of all of Varma's claims and to dismiss the complaint "with prejudice" under Fed. R. Civ. P. 12(b)(1), or, in the alternative, to stay the action pending the outcome of the arbitration. See Mtn. to Compel Arbitration (Dckt. No. 11).

Analysis

I. Motion to Dismiss for Lack of Subject Matter Jurisdiction

Based on the arbitration provision of the Employment Agreement, Defendants moved to dismiss the complaint with prejudice for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1). Id. Defendants cite the wrong Rule and ask for the wrong remedy.

An agreement to arbitrate is like any other " ‘freely negotiated contractual choice-of-forum provision[ ].’ " See Jackson v. Payday Fin., LLC , 764 F.3d 765, 773 (7th Cir. 2014) (quoting Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc. , 473 U.S. 614, 630–31, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ). Motions to compel arbitration "concern venue and are brought properly under Federal Rule of Civil Procedure 12(b)(3), not Rule 12(b)(1)." See Grasty v. Colorado Tech. Univ. , 599 F. App'x 596, 597 (7th Cir. 2015) (citing Jackson, 764 F.3d at 773 ). The presence of an arbitration agreement "does not affect a district court's subject-matter jurisdiction." Id. (citing Mitsubishi Motors Corp., 473 U.S. at 628, 105 S.Ct. 3346 ). A motion to compel arbitration is about the proper forum, not the power of the Court.

A dismissal for lack of subject matter jurisdiction is not a dismissal with prejudice, either. "A dismissal with prejudice is a ruling on the merits, because it carries with it a preclusive effect that prevents the plaintiffs from relitigating – in any court, ever again – any claim encompassed by the suit." MAO-MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co. , 935 F.3d 573, 581 (7th Cir. 2019). " ‘No jurisdiction’ and ‘with prejudice’ are mutually exclusive. A court that lacks subject matter jurisdiction cannot dismiss a case with prejudice." Murray v. Conseco, Inc. , 467 F.3d 602, 605 (7th Cir. 2006) (citation omitted); Lennon v. City of Carmel, Indiana , 865 F.3d 503, 509 (7th Cir. 2017) ("When a district court dismisses an action for lack of jurisdiction, the dismissal must be without prejudice.... This is because a dismissal with prejudice operates as a disposition on the merits, which a court without the power to hear a case may not issue.") (citation omitted). A court without power is powerless to dismiss a claim with prejudice.

Rule 12(b)(1) is the wrong rule for this motion, and dismissal with prejudice is the wrong relief. The motion to dismiss for lack of subject matter jurisdiction is denied.

II. Motion to Compel Arbitration or Stay Proceedings

The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 – 16, governs the enforcement, validity, and interpretation of arbitration clauses in employment contracts. See Gupta v. Morgan Stanley Smith Barney, LLC , 934 F.3d 705, 710 (7th Cir. 2019) (citing Circuit City Stores, Inc. v. Adams , 532 U.S. 105, 118–19, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001) ). Congress enacted the FAA to counteract the common law aversion to enforcing arbitration agreements, thereby "direct[ing] courts to abandon their hostility and instead treat arbitration agreements as ‘valid, irrevocable, and enforceable.’ " Epic Sys. Corp. v. Lewis , ––– U.S. ––––, 138 S. Ct. 1612, 1621, 200 L.Ed.2d 889 (2018) (quoting 9 U.S.C. § 2 ).

"Federal law favors arbitration." Brickstructures, Inc. v. Coaster Dynamix, Inc. , 952 F.3d 887, 891 (7th Cir. 2020) (citing Epic Sys. Corp. , 138 S. Ct. at 1621 ); see also Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) (describing a "national policy favoring arbitration"); Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ("[Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration .... The [FAA] establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.").

At the same time, "courts cannot require a party to submit a dispute to arbitration unless he has agreed to do so." Gupta , 934 F.3d at 710. After all, " ‘arbitration is a matter of contract.’ " See AT & T Mobility LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (citation omitted); Gilmer v. Interstate/Johnson Lane Corp. , 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (noting that the FAA put "arbitration agreements upon the same footing as other contracts"). The law favors arbitration when the parties have agreed to arbitration.

The Court starts with the presumption that "parties have not authorized arbitrators to resolve certain ‘gateway’ questions, such as ‘whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy.’ " Lamps Plus, Inc. v. Varela , ––– U.S. ––––, 139 S. Ct. 1407, 1416–17, 203 L.Ed.2d 636 (2019) (quoting Green Tree Fin. Corp. v. Bazzle , 539 U.S. 444, 452, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (plurality opinion)); Wisconsin Local Gov't Prop. Ins. Fund v. Lexington Ins. Co. , 840 F.3d 411, 414–15 (7th Cir. 2016). District courts ordinarily decide whether there is an agreement to arbitrate. See Bigger v. Facebook, Inc. , 947 F.3d 1043, 1051 (7th Cir. 2020) ("[D]etermining whether a valid...