Canales v. Lepage Bakeries Park Street LLC
| Decision Date | 30 March 2022 |
| Docket Number | Civil Action No. 1:21-cv-40065-ADB |
| Citation | 596 F.Supp.3d 261 |
| Parties | Margarito V. CANALES and Benjamin J. Bardzik, Plaintiffs, v. LEPAGE BAKERIES PARK STREET LLC, CK Sales Co., LLC, and Flowers Foods, Inc., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Benjamin C. Rudolf, Murphy & Rudolf, LLP, Worcester, MA, for Plaintiffs.
Frederick B. Finberg, Peter Bennett, The Bennett Law Firm, P.A., Portland, ME, for Defendants.
MEMORANDUM AND ORDER DENYING DEFENDANTS’ MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO COMPEL ARBITRATION
Margarito V. Canales ("Canales") and Benjamin J. Bardzik ("Bardzik," collectively, "Plaintiffs") brought this action against Lepage Bakeries Park Street, LLC ("Lepage"), CK Sales Co., LLC ("CK Sales"), and Flowers Foods, Inc. (together with Lepage and CK Sales, "Defendants"), alleging that Defendants deliberately misclassified them as independent contractors in violation of Massachusetts law and thereby withheld wages and overtime compensation. See [ECF No. 1 ("Compl.")]. Currently before the Court is Defendants’ motion to dismiss, or, in the alternative, compel arbitration pursuant to the Federal Arbitration Act ("FAA"). [ECF No. 9]. For the reasons set forth below, the motion is DENIED with leave to file a renewed motion to dismiss.
The Court draws the following facts from the complaint and the materials filed in connection with Defendants’ motion to dismiss or compel arbitration. See Cullinane v. Uber Techs., Inc., 893 F.3d 53, 55 (1st Cir. 2018).
Defendants manufacture, sell, and distribute baked goods throughout Massachusetts. [Compl. ¶¶ 8–9; ECF No. 10-1 ¶¶ 2–4]. To carry out their operations, Defendants use a "direct-store-delivery" system in which "independent distributors" purchase distribution rights to deliver products and stock shelves at stores along particular routes. [Compl. ¶¶ 9, 11; ECF No. 10-1 ¶ 3]. Defendants classify these individuals as independent contractors. [Compl. ¶ 11].
Prior to April 2018, Plaintiffs worked as delivery drivers for Defendants. [Compl. ¶ 12]. In late 2017, Defendants’ representatives approached Plaintiffs and told them that their delivery route would be purchased soon. [Id. ¶ 14]. Plaintiffs were under the impression that they would be terminated unless they purchased the route themselves and became independent distributors. [Id. ¶ 15]. According to Plaintiffs, Defendants falsely told them that Massachusetts law required them to purchase distribution rights for a minimum of three territories in order to become independent distributors. [Id. ¶¶ 16–17].
In June 2018, Plaintiffs, through their distribution company, T&B Dough Boys Inc. ("T&B"),1 signed a contract with Defendants ("Distributor Agreement"), [ECF No. 10-3 (copy of Distributor Agreement)], to purchase the distribution rights for three routes, [Compl.¶ 21; ECF No. 10-1 ¶ 5]. The Distributor Agreement incorporates a separate exhibit requiring T&B, including its owners, to arbitrate disputes with Defendants arising out of their business relationship (the "Arbitration Agreement"). [ECF No. 10-3 at 27–29]. The Arbitration Agreement states that:
[t]he parties agree that any claim, dispute, and/or controversy except as specifically excluded herein, that either DISTRIBUTOR (including its owner or owners) may have against COMPANY (and/or its affiliated companies and its and/or their directors, officers, managers, employees, and agents and their successors and assigns) or that COMPANY may have against DISTRIBUTOR (or its owners, directors, officers, managers, employees, and agents), arising from, related to, or having any relationship or connection whatsoever with the Distributor Agreement between DISTRIBUTOR and COMPANY ("Agreement"), including the termination of the Agreement, services provided to COMPANY by DISTRIBUTOR, or any other association that DISTRIBUTOR may have with COMPANY ("Covered Claims") shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act ( 9 U.S.C. §§ 1, et seq. ) ("FAA") in conformity with the Commercial Arbitration Rules of the American Arbitration Association ("AAA" or "AAA Rules"), or any successor rules, except as otherwise agreed to by the parties and/or specified herein.
[ECF No. 10-3 at 27]. The Arbitration Agreement also states that "[a]ll Covered Claims against COMPANY must be brought by DISTRIBUTOR on an individual basis only and not as a plaintiff or class member in any purported class, collective, representative, or multi-plaintiff action." [Id. ]. The "Covered Claims" that must be submitted to arbitration include "any claims challenging the independent contractor status of DISTRIBUTOR" and "claims alleging that DISTRIBUTOR was misclassified as an independent contractor." [Id. at 28]. Finally, the Arbitration Agreement includes a delegation clause that provides that "[a]ny issues concerning arbitrability of a particular issue or claim under this Arbitration Agreement (except for those concerning the validity or enforceability of the prohibition against class, collective, representative, or multi-plaintiff action arbitration and/or applicability of the FAA) shall be resolved by the arbitrator, not a court." [Id. ]. Although the Distributor Agreement is signed on behalf of T&B, Canales and Bardzik each also signed a Personal Guaranty, [ECF No. 10-3 at 25–26], certifying that each of them, as individuals, "agrees and acknowledges he/she is subject to" the Arbitration Agreement in the Distributor Agreement, [ECF No. 10 at 3–4; ECF No. 10-3 at 25–26]. In July 2019, Plaintiffs, through T&B, purchased a fourth distribution route, T&B signed another Distributor Agreement (with an identical Arbitration Agreement), and Plaintiffs submitted a business plan in connection with that purchase. [ECF No. 10-1 ¶ 7; ECF No. 10-4; ECF No. 10-5]. In October 2020, Plaintiffs arranged for CK Sales to buy back the fourth territory they purchased in July 2019 and then purchased a different territory. [ECF No. 10-1 ¶ 5].
In connection with that purchase, T&B again signed another Distributor Agreement with an Arbitration Agreement and submitted another business plan. [ECF Nos. 10-6, 10-7].
Since signing the Distributor Agreements, Plaintiffs represent that they have worked an average of sixty to eighty hours a week but have not been properly compensated and have been forced to pay various expenses, including delivery driver payments, delivery truck payments, insurance payments, gas and maintenance, "shrink charges" for missing or damaged goods, and "stale charges" for baked goods that have been returned as stale. [Compl. ¶¶ 23–28; ECF No. 19 ¶¶ 4, 6; ECF No. 20 ¶¶ 4, 6]. Plaintiffs also aver that they spend a minimum of fifty hours per week driving on two delivery routes and another twenty to thirty hours supervising other drivers who work their other delivery routes. [ECF No. 19 ¶¶ 4–6; ECF No. 20 ¶¶ 4–6]. Though Plaintiffs state that they spend the vast majority of their time driving or supervising drivers, the Distributor Agreements do not require the Plaintiffs to perform any driving themselves. [ECF No. 10-3 at 16 ()]. A declaration from a LePage employee describes Plaintiffs as having significant other responsibilities beyond driving, including "hiring employees at their discretion to run their four territories; identifying and engaging potential new customers; developing relationships with key customer contacts; ordering products based on customer needs; servicing the customers in their territory, stocking and replenishing product at the customer locations; removing stale product; and other activity necessary to promote sales, customer service and otherwise operate their independent business." [ECF No. 10-1 ¶ 10].
Plaintiffs filed their eight-count complaint on June 17, 2021, alleging violations of the Massachusetts Wage Act, Mass. Gen. Laws ch. 149 §§ 148, 148B ; the Massachusetts Minimum Fair Wage Law, Mass. Gen. Laws ch. 151 §§ 1, 1A ; unjust enrichment; fraud/misrepresentation; breach of contract; and breach of the implied covenant of good faith and fair dealing. [Compl. ¶¶ 40–59]. On August 13, 2021, Defendants filed a motion to dismiss, or, in the alternative, to compel arbitration pursuant to the FAA, [ECF No. 9], which Plaintiffs opposed on September 10, 2021, [ECF No. 16]. Plaintiffs moved to supplement the record on September 29, 2021 and then filed supplemental affidavits regarding the nature of their work for Defendants. [ECF Nos. 17, 19, 20]. Defendants replied to Plaintiffs’ supplemental materials on October 5, 2021. [ECF No. 24].
The FAA " ‘embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts.’ " Soto-Fonalledas v. Ritz-Carlton San Juan Hotel Spa & Casino, 640 F.3d 471, 474 (1st Cir. 2011) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) ). According to the FAA, "[a] written provision in ... a contract ... to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The party that seeks to compel arbitration is the one that bears the burden of proving "that a valid agreement to arbitrate exists, the movant has a right to enforce it, the other party is bound by it, and that the claim asserted falls within the scope of the arbitration agreement." Oyola v. Midland Funding, LLC, 295 F. Supp. 3d 14, 16–17 (D. Mass. 2018) (citing Bekele v. Lyft, Inc., 199 F. Supp. 3d 284, 293 (D. Mass. 2016), aff'd, 918 F.3d 181 (1st Cir. 2019) ).
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