Boswinkle v. Navajo Express, Inc.

• Decision Date: 07 September 2021
• Docket Number: Civil Action 20-cv-3325-WJM-NYW
• Parties: TIMOTHY BOSWINKLE, and MICHAEL GATES, et al., individually and on behalf of all others similarly situated, Plaintiffs, v. NAVAJO EXPRESS, INC., Defendant.
• Court: U.S. District Court — District of Colorado

TIMOTHY BOSWINKLE, and MICHAEL GATES, et al., individually and on behalf of all others similarly situated, Plaintiffs, v. NAVAJO EXPRESS, INC., Defendant.

Civil Action No. 20-cv-3325-WJM-NYW

United States District Court, D. Colorado

September 7, 2021

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION TO

DISMISS DEFENDANT'S COUNTERCLAIM AND TO STAY PROCEEDINGS

JUDGE WILLIAM J. MARTÍNEZ

Before the Court is PlaintiffsTimothy Boswinkle(“Boswinkle”) and Michael Gates's (“Gates”), individually and on behalf of all others similarly situated, (“jointly “Plaintiffs”), Motion to DismissDefendantNavajo Express, Inc.'s (“Defendant” or “Navajo”) Counterclaim and to Stay Proceedings (“Motion”).(ECF No. 16.)Defendant filed a response in opposition (ECF No. 24), and Plaintiffs replied (ECF No. 26).^[1] For the following reasons, the Motion is granted in part and denied in part.

I.BACKGROUND AND PROCEDURAL HISTORY

This civil action is one of two civil actions initiated by Plaintiffs, “Lease-Operators” who haul shipments of goods across the country, against Defendant, a Denver-based trucking company that ships perishable and dry goods throughout the United States.(ECF No. 5 ¶¶ 1, 5-7, 15-17;ECF No. 16at 1-2;ECFNo. 16-1.)Plaintiffs initiated both civil actions in the District Court for the County of Denver(the “Denver District Court”)-the first filed on or about September 9, 2020 requesting declaratory relief (the “Declaratory Action”), and the second filed on or about September 10, 2020, requesting individual and class-wide relief for Defendant's alleged violations of the Colorado Wage Claim Act and related federal statutes as well as other state law causes of action (the “Wage Action”).(ECF No. 1;ECF No. 5;ECF No. 16at 1-2;ECFNo. 16-1.)

The Declaratory Action requests that the Court declare illegal and unenforceable two provisions in the leasing and operating agreement (the “2020 Contract”) entered between Plaintiffs and Navajo.(ECFNo. 16-1.)Those two provisions provide: (1) that all Lease-Operators are independent contractors, not employees, of Navajo and “agree to defend, indemnify, and hold harmless [Navajo] from all reasonable attorneys' fees and litigation expenses [Navajo] incurs in defending against any suits, actions, or administrative proceedings” brought by Lease-Operators in unsuccessfully challenging their classification as independent contractors (the “Loser Pays Provision”); and (2) that all Lease-Operators waive their right to initiate, join, remain in, or otherwise participate in any class, collective, consolidated, or representative action(s) brought against Navajo, including those brought under federal and state law or the Fair Labor Standards Act(the “Class Waiver Provision”).(ECF No. 16-1 ¶¶ 4-5, 24-25, 35-36.)The Declaratory Action remains pending, and the Denver District Court recently denied Navajo's request to stay the Declaratory Action in favor of the Wage Action and denied Plaintiffs' motion for judgment on the pleadings.(ECFNo. 26-1;ECFNo. 28-1.)

The Wage Action alleges that Defendant previously designated Plaintiffs as “Company Drivers” and classified them as employees of Defendant.(ECF No. 5 ¶¶ 5- 6, 13-17.)But in 2019, Defendant required Plaintiffs to sign the 2020 Contract that designated Plaintiffs as Lease-Operators and reclassified them as independent contractors, subject to new pay structures.(SeeId. at 5-6, 13-21.)Further, Defendant allegedly informed Plaintiffs(and other Lease-Operators) that due to a “payroll glitch”Plaintiffs had purportedly been overpaid, and as a result Plaintiffs would now be required to reimburse Defendant for the overpayments, with Defendant making deductions from Lease-Operators' weekly paychecks.(SeeId.¶¶ 22-36.)

Based on the reclassification of Plaintiffs(and others similarly situated) and the weekly paycheck reductions, Plaintiffs initiated the Wage Action and assert individual and potential class and collective claims for violations of the Truth-in-Leasing regulations, 49 C.F.R. § 376.12, (“Counts I and II”); declaratory relief regarding the 2019 lease under Colorado Revised Statutes §§ 13-51-101, et seq., (“Count III”); breach of contract as to the 2020 lease (“Count IV”); violations of the Colorado Consumer Protection Act, Colorado Revised Statutes §§ 6-1-101, et seq., (“Count V”); violations of the Colorado Wage Claim Act, Colorado Revised Statutes §§ 8-4-101, et seq., (“Count VI”); as well as an individual claim by Gates for violations of the Fair Labor Standards Act,29 U.S.C. §§ 201, et seq., (“Count VII”).(SeeECF No. 5.)Defendant removed the Wage Action to the United States District Court for the District of Colorado pursuant to 28 U.S.C. §§ 1331and1367 on November 6, 2020.(ECF No. 1.)

In its Answer to the Wage Action Complaint, the operative pleading in this civil action, Defendant asserts a counterclaim against Plaintiffs for declaratory judgment that: (1) the 2020 Contract, which includes the Loser Pays Provision and Class Waiver Provision, is valid and enforceable; (2) the 2020 Contract prohibits Plaintiffs from representing a class in the Wage Action; (3) the 2020 Contract entitles Defendant to recover its costs and fees in the Wage Action should Plaintiffs fail to demonstrate they are misclassified as independent contractors; and (4) any additional relief deemed just and proper.(ECF No. 10at 40-43.)

On December 18, 2020, Plaintiffs filed the instant Motion, arguing that the Court should dismiss Defendant's counterclaim under the Brillhart/Mhoon doctrine because the counterclaim is a “mirror image” of the claim being litigated in the Declaratory Action in the Denver District Court, and thus the best procedure is to allow the Declaratory Action to proceed without federal court intervention.(ECF No. 16at 5-12.)SeeBrillhart v. Excess Ins. Co. of Am., 316 U.S. 491(1942);State Farm Fire and Cas. Co. v. Mhoon, 31 F.3d 979(10th Cir.1994).Relatedly, Plaintiffs request that the Court stay this civil action (the Wage Action) pending the Denver District Court's disposition of the Declaratory Action.(Id. at 12-15.)Defendant opposes the Motion, arguing that Brillhart/Mhoon does not warrant dismissal of Defendant's counterclaim, and that a stay is not warranted because the specific claims in this Wage Action will proceed regardless of what comes of the Declaratory Action or the request to dismissDefendant's counterclaim.(ECF No. 24.)

The undersigned referred that portion of the Motion requesting a stay to United States Magistrate Judge Nina Y. Wang.(ECF No. 25.)On January 28, 2021, Judge Wang issued an order granting a stay of proceedings pending the undersigned's disposition of the motion to dismiss portion of the Motion.(Id. at 9.)Thus, the Court now considers whether to dismiss Defendant's counterclaim and whether to stay this action pending resolution of the Declaratory Action in state court.

II.ANALYSIS

A.Motion to DismissDefendant's Counterclaim

The Declaratory Judgment Act provides, in pertinent part, that “[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought . . . .”28 U.S.C. § 2201(a).The Court“is not obliged to entertain every justiciable declaratory claim brought before it.”Mhoon, 31 F.3d at 982.

Accordingly, the Tenth Circuit has explained that the Brillhart/Mhoon doctrine provides the district court with discretion under the Declaratory Judgment Act to decline to declare the rights of litigants in federal court when a similar state court action exists, as articulated in Brillhart, 316 U.S. at 494-95, with the five factors articulated in Mhoon, 31 F.3d at 983, guiding the district court's discretion.SeeUnited States v. City of Las Cruces, 289 F.3d 1170, 1180-83(10th Cir.2002).

The factors a court should consider when determining whether to exercise jurisdiction over a declaratory judgment claim include:

[1] whether a declaratory action would settle the controversy;

[2] whether it would serve a useful purpose in clarifying the legal relations at issue; [3] whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race to res judicata”; [4] whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and [5] whether there is an alternative remedy which is better or more effective.

Mhoon, 31 F.3d at 983.

The Court has carefully considered all of the Mhoon factors but only discusses them here to the extent necessary to rule on that portion of the Motion requesting dismissal of the counterclaim.It is clear that Defendant's counterclaim involves identical issues as those pending before the Denver District Court in the Declaratory Action.Denver District Court Judge J. Eric Elliff emphasized as much in his order denying Defendant's motion to stay the Declaratory Action, stating:

I am satisfied, based on my review of the motion, briefs, and case file, that I should exercise my discretion by not staying this case pending resolution of the related federal case.Not only was [the Declaratory Action] first filed, it raises threshold declaratory issues of state law on which the [Wage Action] seems to depend.Moreover, the federal case itself began as a state case and was removed to federal court by Defendant.That removal, contrary to Defendant's argument, did not in my judgment change the state-law-based nature of those threshold issues.Moreover, as a practical matter, it

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