Billie v. Coverall N. Am., Inc.

• Citation: 444 F.Supp.3d 332
• Decision Date: 11 March 2020
• Docket Number: CIVIL CASE NO. 3:19-CV-0092 (JCH)
• Parties: Caribe BILLIE and Quincy Reeves, Plaintiffs, v. COVERALL NORTH AMERICA, INC., Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Court (Connecticut)

444 F.Supp.3d 332

Caribe BILLIE and Quincy Reeves, Plaintiffs,

v.COVERALL NORTH AMERICA, INC., Defendants.

CIVIL CASE NO. 3:19-CV-0092 (JCH)

United States District Court, D. Connecticut.

Signed March 11, 2020

Filed March 12, 2020

Richard Eugene Hayber, Hayber, McKenna & Dinsmore, LLC, Hartford, CT, Adelaide Pagano, Shannon Liss-Riordan, Lichten & Liss-Riordan, P.C., Boston, MA, Michael T. Petela, Jr., Hayber, McKenna & Dinsmore, LLC, New Haven, CT, for Plaintiffs.

Norman M. Leon, DLA Piper LLP, Chicago, IL, James Ross Smart, McElroy, Deutsch, Mulvaney & Carpenter, LLP, Southport, CT, Matthew Iverson, DLA Piper LLP, Boston, MA, for Defendants.

RULING ON DEFENDANT'S MOTION TO DISMISS OR TO COMPEL ARBITRATION

Janet C. Hall, United States District Judge

I. INTRODUCTION

Plaintiffs Caribe Billie¹ and Quincy Reeves ("plaintiffs") bring this action against the defendant, Coverall North America, Inc. ("CNA"), alleging that CNA has misclassified them as independent contractors and withheld portions of plaintiffs' wages, in violation of section 31-71e of the Connecticut General Statutes. See Compl. ¶ 37. Pending before the court is CNA's Motion to Dismiss or to Compel Arbitration (Doc. No. 25). In its Motion, CNA seeks to dismiss this case pursuant to Rule 12(b)(2) for lack of personal jurisdiction or Rule 12(b)(6) for failure to state a claim. Alternatively, CNA seeks an order staying this action and compelling arbitration. For the reasons stated below, CNA's Motion is granted in part and denied in part.

II. FACTS

Coverall North America ("CNA") employs cleaning workers across the country to perform cleaning work for commercial customers. Compl. ¶ 15. CNA requires its workers to sign janitorial "franchise" agreements ("JFAs") in order to obtain work. Id. ¶ 16. Plaintiffs Caribe Billie and Quincy Reeves entered into JFAs with R & B Services, Inc. d/b/a Coverall of Connecticut & Westchester ("R & B"), a CNA franchisee operating in the Connecticut area. See Billie Janitorial Franchise Agreement ("Billie JFA") (Doc. No. 27-1); Reeves Janitorial Franchise Agreement ("Reeves JFA") (Doc. No. 27-5); see also Service Franchise Agreement (Doc. No. 28-1).

Pursuant to these contracts, CNA and R & B exercise considerable control over plaintiffs' work. Compl. ¶ 19. For example, CNA and R & B determine what amount to be charged to the customer and the amount paid to the cleaning workers. Id. Furthermore, plaintiffs are classified as "independent contractors" and pay sums of money as "franchise fees" in order to obtain cleaning work. Compl. ¶¶ 17, 18. Plaintiffs must pay both initial and ongoing fees to R & B, a portion of which is then passed directly to CNA. See Plaintiffs' Opposition ("Pl. Opp.") (Doc. No. 38), at 5.

III. STANDARD OF REVIEW

A court must grant a motion to dismiss if it lacks personal jurisdiction over a defendant. Fed. R. Civ. P. 12(b)(2). In a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), a plaintiff bears the burden of "mak[ing] a prima facie showing that jurisdiction exists." SPV Osus Ltd. v. UBS AG, 882 F.3d 333, 342 (2d Cir. 2018). "Prior to discovery, a plaintiff may defeat a motion to dismiss based on legally sufficient allegations of jurisdiction." Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). On a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), all allegations "are to be construed in the light most favorable to the plaintiff." Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013) (internal quotation marks omitted). Similarly, in deciding a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court takes the allegations of a complaint as true and construes them in a manner favorable to the plaintiff. See, e.g., Hoover v. Ronwin, 466 U.S. 558, 587, 104 S.Ct. 1989, 80 L.Ed.2d 590 (1984) ; Phelps v. Kapnolas, 308 F.3d 180, 184 (2d Cir. 2002). Again, the court must draw all reasonable inferences in the plaintiff's favor. See, e.g., Yung v. Lee, 432 F.3d 142, 146 (2d Cir. 2005).

In considering a motion to compel arbitration brought under the Federal Arbitration Act ("FAA"), section 4 of title 9 of the United States Code, the court "applies a standard similar to that applicable for a motion for summary judgment." Bensadoun v. Jobe–Riat, 316 F.3d 171, 175 (2d Cir. 2003) (citations omitted). Specifically, "[t]he party seeking an order compelling arbitration must substantiate" its entitlement to arbitration "by a showing of evidentiary facts that support its claim that the other party agreed to arbitration." D'Antuono v. Serv. Rd. Corp., 789 F. Supp. 2d 308, 319 (D. Conn. 2011) (citing Oppenheimer & Co., Inc. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995) ). "If the party seeking to compel arbitration makes such a showing, the party opposing arbitration may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to be tried as to the making of the arbitration agreement." D'Antuono, 789 F. Supp. 2d at 319-20 (citation and internal quotation marks omitted).

IV. DISCUSSION

A. Personal Jurisdiction

"[I]n resolving questions of personal jurisdiction in a diversity action, a district court must conduct a two-part inquiry." Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). First, the district court must determine whether the state law permits the court's exercise of jurisdiction over the defendants. Brown v. Lockheed Martin Corp., 814 F.3d 619, 631 (2d Cir. 2016). Second, the district court "must assess whether the court's assertion of jurisdiction under these laws comports with the requirements of due process." Metro. Life Ins. Co., 84 F.3d at 567 ; see also Lombard Bros., Inc. v. Gen. Asset Mgmt. Co., 190 Conn. 245, 250, 460 A.2d 481 (1983) ("[The] first inquiry must be whether our long-arm statute authorizes the exercise of jurisdiction under the particular facts of this case. Only if we find the statute to be applicable do we reach the question whether it would offend due process to assert jurisdiction.").

1. Jurisdiction Under Connecticut's Long Arm Statute

Connecticut's Long Arm statute, section 33-929(f) of the Connecticut General Statutes, subjects a foreign corporation to suits in Connecticut as follows:

(1) Out of any contract made in this state or to be performed in this state ... or (4) out of tortious conduct in this state, whether arising out of repeated activity or single acts, and whether arising out of misfeasance or nonfeasance.

Plaintiffs argue that CNA is subject to this court's jurisdiction pursuant to both of these sections.

With regard to section 33-929(f)(1), CNA responds that it is not a party to the contracts at issue – the JFAs. According to CNA, "[t]his defeats jurisdiction under § 33-929(f)(1), as that section does not convey jurisdiction where the defendant is not a party to the contract that gives rise to the cause of action." Defendant's Memorandum in Support ("Def. Mem.") (Doc. No. 26). CNA cites Halo Tech Holdings, Inc. v. Cooper, No. 3:07-CV-489 (AHN), 2008 WL 877156, at *7 (D. Conn. Mar. 26, 2008), in which this court stated that because plaintiff's allegations do "not arise from any contract to which [defendant] was a party ... § 33–929(f)(1) does not support jurisdiction." In Halo, the plaintiffs entered into a contract which was made on the third-party investment bank's letterhead. Id. at *7. The bank did not derive any rights from the contract and was explicitly not bound by its terms. Id.

Here, CNA derives significant benefit from the agreement between plaintiffs and R & B – agreements that CNA itself drafted. See Plaintiffs' Opposition ("Pl. Opp.") (Doc. No. 38), at 8. Under the terms of the contract, CNA has the right to control much of Plaintiffs' conduct. Plaintiffs are bound to abide by the polices and procedures issued by CNA. See Billie JFA § 9(C); Reeves JFA § 9(C). CNA mandates which equipment plaintiffs may use, see Billie JFA § 9(E); Reeves JFA § 9(E), and can modify insurance coverage requirements and policy limits that plaintiffs must carry at any time, see Billie JFA § 14; Reeves JFA § 14. The present Motion—wherein CNA moves this court to enforce the contract's arbitration agreement—further illustrates that, unlike the third party in Halo, CNA derives significant benefit from the JFAs. Furthermore, a portion of the fees that plaintiffs are required to pay R & B flow directly to CNA. See Service Franchise Agreement (Doc. No. 28-1), § 5. Based on CNA's significant benefit arising from the contract that it drafted, and based on the plain reading of section 33-929(f)(1), plaintiffs have made a prima facie showing that CNA is subject to the jurisdiction of this court under Connecticut's long arm statute.²

2. Due Process

The Supreme Court has set out three conditions for the exercise of specific jurisdiction over a nonresident defendant.

First, the defendant must have purposefully availed itself of the privilege of conducting activities within the forum State or have purposefully directed its conduct into the forum State. Second, the plaintiff's claim must arise out of or relate to the defendant's forum conduct. Finally, the exercise of jurisdiction must be reasonable under the circumstances.

Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., ––– U.S. ––––, 137 S.Ct. 1773, 1785-86, 198 L.Ed.2d 395 (2017) (internal citations and quotations omitted).

Plaintiffs have plausibly alleged that CNA has sufficient contacts to satisfy the requirements of due process. Plaintiffs allege that CNA periodically sends its employees to the offices of its master franchisees (such as R & B) and assists with the operation of those franchises. See Service Franchise Agreement (Doc. No. 28-1) ("[CNA] will also periodically visit [R & B]'s office to review the operation and assist [R & B] in developing new marketing and operational techniques."). Furthermore, CNA directly markets...