Awuah v. Coverall N. Am., Inc.

• Decision Date: 10 February 2012
• Docket Number: Civil Action No. 07–10287–WGY.
• Citation: 843 F.Supp.2d 172
• Parties: Pius AWUAH, Denisse Pineda, Jai Prem, Aldivar Brandao, Richard Barrientos, Nilton Dos Santos, Gerardo Correia, Benecira Cavalcante, Phillip Beitz, Marian Lewis, Stanley Steward, Anthony Graffeo, Maniel Dasilva, and all others Similarly Situated, Plaintiffs, v. COVERALL NORTH AMERICA, INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

843 F.Supp.2d 172

Pius AWUAH, Denisse Pineda, Jai Prem, Aldivar Brandao, Richard Barrientos, Nilton Dos Santos, Gerardo Correia, Benecira Cavalcante, Phillip Beitz, Marian Lewis, Stanley Steward, Anthony Graffeo, Maniel Dasilva, and all others Similarly Situated, Plaintiffs,

v.COVERALL NORTH AMERICA, INC., Defendant.

Civil Action No. 07–10287–WGY.

United States District Court,

D. Massachusetts.

Feb. 10, 2012.

Brant Casavant, Lichten & Liss–Riordan, PC, Erica F. Crystal, Pyle, Rome, Lichten, Ehrenberg & Liss–Riordan, David S. Rosenthal, Nixon & Peabody, LLP, Hillary A. Schwab, Claret M. Vargas, Lichten & Liss–Riordan, P.C., John M. Simon, Stoneman, Chandler & Miller, LLP, Alexander M. Sugerman–Brozan, Krakow & Souris, LLC, Joseph L. Sulman, Law Office of Joseph L. Sulman, Esq., Boston, MA, Jerald R. Cureton, Cureton Caplan P.C., Mount Laurel, NJ, Anthony L. Marchetti, Marchetti Law, P.C., Cherry Hill, NJ, Michelle Odio, Zarco Einhorn Salkowski & Brito P.A., Miami, FL, Jennifer L. Sullivan, Office of the Attorney General, Worcester, MA, for Plaintiffs.

Lisa S. Core, Michael D. Vhay, DLA Piper Rudnick Gray Cary U.S. LLP, Paul S. Ham, Matthew J. Iverson, DLA Piper U.S. LLP, Harold L. Lichten, Lichten & Liss–Riordan, P.C., Boston, MA, John F. Dienelt, Piper Rudnick LLP, Washington, DC, Norman Mitchell Leon, DLA Piper LLP, Chicago, IL, for Defendant.

MEMORANDUM AND ORDER

WILLIAM G. YOUNG, District Judge.

I. INTRODUCTION

The named Plaintiffs (the “Plaintiffs”) are current and former franchisees of CoverallNorth America, Inc. (“Coverall”), a company that provides janitorial services through franchise agreements with individuals. See Third Am. Compl. ¶ 1, ECF No. 79. The Plaintiffs pled six causes of action on their own behalf and on behalf of all “similarly situated individuals,” including breach of contract, deceptive trade practices, and violation of state wage and labor laws. See Third Am. Compl. 12–15.

The Supreme Judicial Court of Massachusetts having authoritatively determined that Coverall's Massachusetts “franchises” are in fact employers of Coverall, Awuah v. Coverall North America Inc., 460 Mass. 484, 952 N.E.2d 890 (2011), this Court, on September 22, 2011, certified a class of all individuals who have owned a Coverall franchise and performed work for Coverall customers in Massachusetts at any time since February 15, 2004, who have not signed an arbitration agreement or had their claims previously adjudicated. Tr. Status Conference (certifying the class) 2–3, ECF No. 365.

There is presently a dispute between the parties as to the scope of the class. Pls.' Mot. Ct. Ruling Scope Class & Mem. Supp. (“Pls.' Mot.”) 1 n. 1, ECF No. 391. Particularly, the parties dispute whether thirty individuals who obtained Coverall franchise by signing consent to transfer agreements (“Consent to Transfer”) belong to the certified class. Id. As a result, those individuals did not receive the class notice. Id. The Plaintiffs filed the current Motion for Court Ruling on Scope of Class and Memorandum in Support thereof asking the Court to determine that the individuals who have purchased their Coverall franchises through certain Consent to Transfer agreements are in the class. Id. at 2.

A. Background

Coverall franchises commercial janitorial cleaning businesses. The Coverall franchises can be obtained in two ways: first, by signing a so called Janitorial Franchise agreement with Coverall; ¹ the second way to obtain a franchise by way of transfer—by signing a Consent to Transfer agreement (persons obtaining franchise in this way are called the “Transferees”). The parties to the Consent to Transfer agreement are Coverall, the franchisee, and the Transferee. See Defs.' Resp. Pls.' Mot. Ct. Ruling Scope Class (“Coverall's Resp.”), Ex. A, Tabs 1–30, Consent to Transfer agreements provided by Coverall, ECF No. 397–2—397–31. Pursuant to a typical Consent to Transfer agreement, the Transferee purchases a Coverall janitorial franchise from a current franchisee, the current franchisee agrees to sell the franchise, and Coverall consents to franchisee's sale of the franchise to the Transferee. Id.

The Consent to Transfer agreements do not contain an arbitration clause. The only reference therein to the underlying Janitorial Franchise Agreement, which does contain an arbitration clause, is the following: “Transferee ... shall succeed to all of Franchisee's rights and obligations under Franchisee's Janitorial Franchise Agreement.” ²Id. The Plaintiffs argue that the Transferees are not bound by the arbitration clause contained in the Janitorial Franchise Agreement because Coverall “has produced no evidence that any of these Transferees themselves signed any document with an arbitration clause or were even shown any arbitration clause.” Pls.' Mot. 2. Accordingly, the Plaintiffs contend that these individuals are within the class certified by the Court on September 22, 2011. Id.

Coverall argues that the language in the Consent to Transfer agreements is sufficient to bind the Transferees to all rights and obligations contained in the Janitorial Franchise agreement, including the arbitration clause. Coverall's Resp. 2. Further, Coverall explains that every Transferee signed a Guaranty to the Coverall Janitorial Franchise Agreement under which he guaranteed to Coverall “performance of all responsibilities, duties, indebtedness and obligations of the Franchisee under the Agreement ...” Id. Also, prior to executing their Consent to Transfer agreements, fifteen of the thirty Transferees received from Coverall a copy of its Franchise Offering Circular which included a complete exemplar of Coverall's Franchise Agreement. Id.

II. ANALYSIS

The issue before this Court is whether the Transferees who signed the Consent to Transfer agreements did manifest mutual intent to the arbitration clause contained in the Janitorial Franchise agreement. In other words, the issue concerns whether there is a binding arbitration agreement at all, e.g., are nonsignatories to the Janitorial Franchise Agreement bound by the arbitration clause contained in this agreement? If the answer is yes, these workers presently are outside the scope of the certified class because the certified class contains only the workers who have not signed an arbitration agreement.

A. Threshold Legal Matters

1. Choice of Law

The Consent to Transfer agreements do not contain a choice of law clause. Article 23 of the Janitorial Franchise Agreement states that “[a]greement shall be interpreted and governed by the laws of the state in which the Franchise granted herein is located.” 10/13/11 Ex. & Witness List, Ex. 2, Janitorial Franchise Agreement (not submitted electronically). Because the class certified by this Court includes only those individuals who have owned a Coverall franchise and performed work for Coverall customers only in Massachusetts, Massachusetts law is applicable. In their briefs, the parties do not dispute the application of Massachusetts law.

2. Arbitrability

The Court first addresses the question presented by Coverall. Coverall argues that even were there a legal or factual basis for the Plaintiffs' motion, the issue of the validity or existence of the arbitration agreements between Coverall and the Transferees is one that must be decided by an arbitrator. Coverall's Resp. 10.

Arbitration is contractual by nature—“a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). Thus, while there is a strong and “liberal federal policy favoring arbitration agreements,” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 625, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (quotations omitted), such agreements must not be so broadly construed as to encompass parties that were not intended to be bound by the original contract. See Green Tree Fin. Corp.–Ala. v. Randolph, 531 U.S. 79, 91, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (holding that although the Federal Arbitration Act “directs courts to place arbitration agreements on equal footing with othercontracts ... it does not require parties to arbitrate when they have not agreed to do so”); EEOC v. Waffle House, Inc., 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) (“[W]e do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated”) (citing Volt Info. Scis., Inc. v. Board of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)); McDonnell Douglas Fin. Corp. v. Pennsylvania Power & Light Co., 858 F.2d 825, 831 (2d Cir.1988) (“Federal policy alone cannot be enough to extend the application of an arbitration clause far beyond its intended scope.”) (citing Fuller v. Guthrie, 565 F.2d 259, 261 (2nd Cir.1977)).

A gateway dispute about whether the parties are bound by a given arbitration clause raises a question of “arbitrability.” First Options v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). The question of arbitrability is a decision for the court “[u]nless the parties clearly and unmistakably provide otherwise.” Id. (holding that a court should decide whether the arbitration contract bound parties who did not sign the agreement); see John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546–547, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) (holding that a court should decide whether an arbitration agreement survived a corporate merger and bound the resulting corporation); Microchip Technology Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed.Cir.2004) (holding that it is up to a court to determine whether a nonsignatory successor corporation was bound by an arbitration agreement signed by its predecessor); Fluehmann v. Associates Fin. Servs., No. CIV.A. 01–40076–NMG, 2002 WL 500564,...