Bille v. Coverall N. Am.
| Decision Date | 16 March 2022 |
| Docket Number | CIVIL 3:19-CV-00092 (JCH) |
| Court | U.S. District Court — District of Connecticut |
| Parties | CARIBE BILLIE, ET AL. Plaintiffs, v. COVERALL NORTH AMERICA Defendants. |
RULING ON PLAINTIFFS' MOTION TO LIFT THE STAY (DOC. NO. 54)
Plaintiffs Caribe Billie (“Billie”) and Quincy Reeves (“Reeves”) bring this action against the defendant, commercial cleaning services provider Coverall North America, Inc., (“Coverall”), alleging that Coverall misclassified them as independent contractors and withheld portions of their wages under section 31-71e of the Connecticut General Statutes. By a Ruling dated March 12 2020, this court stayed the plaintiffs' action and compelled arbitration. See Ruling (Doc. No. 51). Now before this court is the plaintiffs' Motion to Lift the Stay (Doc. No. 54). For the reasons stated below, the plaintiffs' Motion is granted in part.
The plaintiffs, janitorial workers who entered into “franchise agreements” with Coverall, filed this case as a putative class action in January 2019. See Compl. (Doc. No. 1). In their Complaint, the plaintiffs contended that Coverall wrongfully classified them as independent contractors rather than employees and denied them wages owed under Connecticut law.[1]
Coverall moved to dismiss the plaintiffs' claims or to compel arbitration on the basis of arbitration agreements in the plaintiffs' Franchise Agreements and subsequent releases and amendments (collectively, “Agreements”). See Coverall Mot. to Dismiss or Compel (Doc. No. 25).[2] In opposition, the plaintiffs objected on a number of grounds, including the enforceability of cost-splitting provisions in the Agreements. See Billie v. Coverall N. Am., Inc., 444 F.Supp.3d 332, 349 (D. Conn. 2020) (hereinafter “Billie I”) (docketed as Ruling (Doc. No. 51)). The provisions, which the plaintiffs argued were unconscionable, required that the plaintiffs pay all arbitration filing fees while the parties split the remaining costs. Id. At oral argument, counsel for Coverall represented that his client would not seek to enforce some of the cost splitting measures, including an attorneys' fee provisions in Reeves' Agreement. See id. at 351 n. 7. In March 2020, this court granted Coverall's Motion to Compel Arbitration. See id. at 355. In its Ruling, the court held that the plaintiffs “failed to meet their burden of establishing substantive unconscionability as to the cost-sharing provision.” Billie I, 444 F.Supp.3d at 351.
After the court's Ruling, Billie and Reeves, as well as a third individual, Veronica Flores, separately filed claims against Coverall before the American Arbitration Association (“AAA”). See Pls.' Mem. in Support of Mot. to Lift the Stay at 1 (Doc. No. 54-1) ( ). The three arbitrations proceeded as follows.
Billie's Arbitrator found that the cost-splitting provision in his Agreement was unenforceable, ordering Coverall to pay the costs of arbitration. See Pls.' Mem. at 1 n. 1. Billie's arbitration is ongoing, but any decision issued in his arbitration will have no preclusive effect on those of Reeves or Flores. See Billie Agreement at ¶ 21(A)(11) (Doc. No. 27-1) (“A decision by the arbitrator . . . against either Coverall or Franchisee shall be confidential . . . and may not be used collaterally against either of them in existing or subsequent litigation or arbitration . . . .”).
Flores, who is not a named plaintiff in this case, [3] was ordered to make a $2, 500 deposit before the Arbitrator would consider the enforceability of the cost-splitting provision in her Agreement. See Liss-Riordan Decl. at Exs. B, I. Because Flores was unable to pay the required deposit, the Arbitrator informed her that he would close her case within 30 days of January 21, 2021. See Id. at Ex. B. Her arbitration has since been closed. See Pls.' Mem. at 7.
At the outset of Reeves' arbitration, Reeves and Coverall sparred over which set of procedural rules would govern the dispute: the AAA Employment Arbitration Rules or the AAA Commercial Arbitration Rules. Under the Employment Arbitration Rules, the filing fee for individuals is capped at $300, and all expenses are borne by the employer. See Employment/Workplace Fee Schedule (“Employment Fee Schedule”), available at: https://www.adr.org/employment. By contrast, under the Commercial Arbitration Rules, the claimant bears the filing fee, which begins at a minimum of $925, while the parties split the remaining costs. See Commercial Arbitration Rules and Mediation Procedures Administrative Fee Schedules (“Commercial Fee Schedule”), available at: http://info.adr.org/feeschedule/.
Initially, the AAA indicated that it would apply the Employment Fee Schedule, holding the employer or company responsible for arbitrator compensation. See Liss-Riordan Decl. at Ex. A. Coverall objected to the use of the Employment Fee Schedule, and the AAA reversed itself and decided to apply the Commercial Fee Schedule and Rules. Id. Under Rule 53 of the Commercial Rules, Reeves was obligated to pay the filing fee, while Rule 54 mandated that the two parties split most remaining expenses equally. See American Arbitration Association Commercial Arbitration Rules and Mediation Procedures (“Commercial Rules”).[4]
Following the AAA's decision to apply the Commercial Rules, Reeves applied for and the AAA awarded a Financial Hardship Fee Waiver. See Liss-Riordan Decl. at Ex. A. However, while the waiver mitigated some of the costs of arbitration, it did “not affect any obligation to pay arbitrator compensation”, leaving Reeves responsible for half of the arbitrator's fees. Id.
Once an Arbitrator had been assigned to his case, Reeves again challenged the application of the Commercial Rules, arguing that the Employment Fee Schedule should govern his dispute. See id. at Ex. F. Both parties briefed the issue of cost-sharing. See id. at ¶ 4. Reeves submitted a financial affidavit attesting that he was struggling financially due to the pandemic and would not be able to afford thousands of dollars in arbitrator expenses. See Kurtz Decl. at Ex. A ¶¶ 5-6. He attached his fee waiver application, on which he listed $1, 861 of gross pay or wages, $1, 130.74 of post-tax monthly take-home pay, unemployment insurance of $568 per week, and $15, 578 in self-employment income through auto sales from the year prior. Id. at Ex. A. He also noted that his wife makes approximately $36, 000 per year as a medical assistant, and he reported $12, 446.67 in cash or checking accounts. Id. He noted that his adult son had been laid off from his part time job and was living at home.
The Arbitrator denied Reeves' Motion on December 8, 2020, determining that Reeves had not provided sufficient evidence to show that he was unable to pay, that the cost sharing provision was unconscionable, or that the Employment Rules rather than the Commercial Rules should apply to the arbitration. See Liss-Riordan Decl. at Ex. F. Thus, the Commercial Rules continued to govern Reeves' arbitration, requiring him to pay one-half of the Arbitrator's fees. Id.
Soon thereafter, Reeves was billed $3, 937.50 for his share of the arbitrator's fees. See id. at Ex. G. AAA contacted both Reeves and Coverall on December 4, 2020, to report that it had not received the $3, 937.50 deposit from Reeves or a $2, 562.50 deposit from Coverall to cover the Arbitrator's compensation. Id. Six days later, Reeves' counsel emailed Coverall's counsel and the AAA, stating that Reeves could “not afford the arbitrator fees for this arbitration so he [would] not be continuing the arbitration.” See Kurtz Decl. at Ex. B. The case was terminated without a decision on the merits on January 6, 2021. See Liss-Riordan Decl. at Ex. H.
In connection with the present Motion to Lift the Stay, Reeves has submitted a new Affidavit to this court detailing household finances for himself, his wife, and his two children. See Reeves Aff. (Doc. No. 56). Reeves reports earning around $1, 700-1, 800 per month from Coverall, although many of his accounts were suspended due to the COVID-19 pandemic. Id. at ¶¶ 4-5, Ex. A. During the pandemic, he received unemployment benefits of $586 per week through July 2020. Id. at ¶ 6. His wife earns approximately $36, 000 per year as a medical assistant, and she also owns an auto repair business, which Reeves reports operated at a loss in 2019 and 2020. Id. at ¶¶ 8-10, Ex. B. Reeves and his wife hold a joint bank account which has a balance of around $11, 000. In addition, he holds a personal bank account with a balance of around $1, 000, and his wife holds an account with approximately $3, 110.13. Id. at ¶ 11. The only other assets that Reeves reports are $1, 962.64 in stocks. Id. at ¶ 12. His wife holds a retirement account totaling $6, 240.10. Id.
Reeves' new Affidavit also reports his expenses, including monthly expenses of $1, 050 for rent, $100 for internet, $125 for car insurance, and $500-600 for family groceries. Id. at ¶¶ 13-16. Furthermore, Reeves owes approximately $5, 000 in debt. Id. at ¶ 17. Thus, Reeves reports a net worth of approximately $8, 963, aggregating his individual bank account, his shared bank account, and his stocks, subtracting his debt, and excluding his wife's bank account or retirement savings. His family's monthly expenses appear to roughly match Reeves' monthly income.
Article III, § 2 of the Constitution “limits the jurisdiction of federal courts to ‘Cases' and ‘Controversies.'” Lujan v. Defenders of Wildlife, 504 U.S. 555, 559. Constitutional standing developed “to ensure that federal courts do not exceed their authority as it has been traditionally understood” by...
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