Carter v. Countrywide Credit Industries, Inc.

Decision Date06 March 2002
Docket NumberNo. CIV.A. 301CV1182M.,CIV.A. 301CV1182M.
Citation189 F.Supp.2d 606
PartiesLoy CARTER, Geoff Burkhart, Heather Young, and Deborah Robinson, on behalf of themselves and all others similarly situated, Plaintiffs, v. COUNTRYWIDE CREDIT INDUSTRIES, INC., Countrywide Home Loans, Inc., and Full Spectrum Lending, Inc., Defendants.
CourtU.S. District Court — Northern District of Texas

David L. Leon, Lawrence S. Homer, Leon & Homer, Dallas, TX, Karen K. Fitzgerald, Kleiman, Lawrence, Baskind & Fitzgerald, Dallas, TX, Ann E. Hinds, Caryl L. Bois, Sigrid, McCawley, Noies, Schiller & Flexner, Hollywood, FL, for Plaintiffs.

Ruth Ann Norton Danield, Bryan D. Perkins, Connie K. Wilhite, Gibson, McClure, Wallace & Daniels, Dallas, TX, for Defendants.

MEMORANDUM ORDER AND OPINION

LYNN, District Judge.

On November 13, 2001, Defendants filed a Motion to Compel Arbitration and to Dismiss or Stay Proceedings. After having considered the Motion, as well as the Response and Reply thereto, the parties' arguments as presented at the Court's January 28, 2002 hearing on the issue, and the supplemental briefing requested by the Court, the Court is of the opinion that the Motion should be GRANTED, for the reasons stated below.

I. Background

Plaintiffs, past employees of Defendants, Countrywide Credit Industries and two of its subsidiaries, Countrywide Home Loans and Full Spectrum Lending, brought this action on behalf of themselves and all others similarly situated in an attempt to recover overtime compensation allegedly due under the provisions of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, from Defendants. On November 13, 2001, Defendants moved to compel Plaintiffs to submit the FLSA claims to arbitration in conformance with certain arbitration agreements allegedly entered into between the named Plaintiffs and the Defendants as a condition of Plaintiffs' employment with Defendants.

Defendants request the Court to enforce the arbitration agreements by requiring the Plaintiffs to submit their FLSA claims to binding arbitration. Defendants have submitted copies of documents entitled "Mutual Agreement to Arbitrate Claims with Defendants" that were signed by all of the named Plaintiffs and all of the opt-in Plaintiffs, except for one individual, Lisa Barnett. The agreements, phrased identically, provide that "claims for wages or other compensation due" shall be submitted to arbitration. Defendants argue that the Federal Arbitration Act (FAA) mandates that the Court regard these arbitration agreements as "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.

II. Are FLSA Claims Subject to Arbitration?
A. Barrentine

In response to Defendants' Motion, Plaintiffs argue that case law requires that Plaintiffs be allowed a judicial forum for litigation of rights arising under the FLSA, and that this requirement cannot be waived by agreement of the parties to submit the claim to arbitration. For this proposition, Plaintiffs rely primarily upon the arbitration analysis within Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981), a case in which the Supreme Court was called on to decide "whether an employee may bring an action in federal district court[] alleging a violation of the minimum wage provisions of the [FLSA] after having unsuccessfully submitted a wage claim based on the same underlying facts to a joint grievance committee pursuant to the provisions of his union's collective-bargaining agreement [CBA]." Id. at 729, 101 S.Ct. 1437. The Court ultimately held that an employee did not waive his right to bring an FLSA claim because he had previously submitted a grievance based on breach of the CBA to labor arbitration pursuant to the procedures outlined in the CBA. Id. at 745, 101 S.Ct. 1437. The Court came to this conclusion based on three principle premises: (a) that FLSA rights are nonwaivable; (b) that an arbitration clause in a CBA should not be given a high level of deference because the CBA was negotiated by a labor union and because the grievance will be processed by the union, thereby leaving open the possibility that the union will sacrifice the individual worker's rights for the good of the collective body; and (c) that labor arbitration cannot provide a satisfactory resolution to FLSA claims. With respect to the nonwaivable nature of FLSA claims, the Court explained that

[t]his Court's decisions interpreting the FLSA have frequently emphasized the nonwaivable nature of an individual employee's right to a minimum wage and to overtime pay under the Act. Thus, we have held that FLSA rights cannot be abridged by contract or otherwise waived because this would "nullify the purposes" of the statute and thwart the legislative policies it was designed to effectuate.

Id. at 740, 101 S.Ct. 1437. In reference to the regard courts should give to arbitration clauses within CBAs, the Court stated,

[t]here are two reasons why an employee's right to a minimum wage and overtime pay under the FLSA might be lost if submission of his wage claim to arbitration precluded him from later bringing an FLSA suit in federal court. First, even if the employee's claim were meritorious, his union might, without breaching its duty of fair representation, reasonably and in good faith decide not to support the claim vigorously in arbitration. Wage and hour disputes that are subject to arbitration under a collective-bargaining agreement are invariably processed by unions rather than by individual employees. Since a union's objective is to maximize overall compensation of its members, not to ensure that each employee receives the best compensation deal available, a union balancing individual and collective interests might validly permit some employees' statutorily granted wage and hour benefits to be sacrificed if an alternative expenditure of resources would result in increased benefits for workers in the bargaining unit as a whole.

Id. at 742, 101 S.Ct. 1437 (citations omitted).

The Court's decision also focused on the limited authority of labor arbitrators to resolve disputes, their lack of knowledge of the law, and their inability to grant a wide range of relief. The Court first noted that "a substantial proportion of labor arbitrators are not lawyers ... and this is particularly true with respect to most members of joint grievance committees, who are drawn from the ranks of the management and union leadership;" labor arbitrators' competence lies in "the law of the shop, not the law of the land." Id. at 743 & n. 21, 101 S.Ct. 1437. Furthermore, "even though a particular arbitrator may be competent to interpret and apply statutory law, he may not have the contractual authority to do so." Id. at 744, 101 S.Ct. 1437. The Court continued, "[a]n arbitrator's power is both derived from, and limited by, the collective-bargaining agreement..... His task is limited to construing the meaning of the [CBA] so as to effectuate the collective intent of the parties." Id. Moreover, "arbitrators very often are powerless to grant the aggrieved employees as broad a range of relief [as courts]." Id. at 745, 101 S.Ct. 1437. The FLSA allows courts to award actual and liquidated damages, reasonable attorney's fees, and costs. "An arbitrator, by contrast, can award only that compensation authorized by the wage provision of the [CBA]." Id. Thus, the Court concluded:

In sum, the FLSA rights petitioners seek to assert in this action are independent of the collective-bargaining process. They devolve on petitioners as individual workers, not as members of a collective organization. They are not waivable. Because Congress intended to give individual employees the right to bring their minimum-wage claims under the FLSA in court, and because these congressionally granted FLSA rights are best protected in a judicial rather than an arbitral forum, we hold that petitioners' claim is not barred by the prior submission of their grievances to the contractual dispute-resolution procedures.

Id. at 745, 101 S.Ct. 1437.

Plaintiffs rely on the arbitration analysis within Barrentine for the proposition that FLSA claims may not be submitted to arbitration pursuant to an arbitration agreement entered into by an employee and his employer. Plaintiffs' invocation of Barrentine for this purpose, however, is inapposite. In examining Barrentine, it becomes clear that the Court in that case is only addressing labor arbitration-a different animal from commercial arbitration. Labor arbitration takes place when a provision of a collective-bargaining agreement (CBA) is violated. The labor arbitrator, often not one skilled in the law, has power to resolve an employee's complaint that an employer has failed to perform a contractual provision within the CBA. The labor arbitration proceeding focuses solely on the contractual rights of the employee under the CBA, not on any statutorily created rights granted to the employee. Thus, although a circumstance such as nonpayment of overtime wages may give rise to a violation both of the CBA (because the CBA might contain a provision requiring the employer to pay all overtime wages due) and a violation of the FLSA, only the contractual claim can be resolved in the labor arbitration provided for in the CBA. If the Court had held in Barrentine that an employee's agreement to labor arbitration under the CBA for a contractual violation waived the employee's right to also pursue the statutory violation, it would have eliminated the employee's ability to use the statute at all.1 A fair reading of the actual analysis of Barrentine is that labor arbitration under a CBA does not preclude the employee's subsequent assertion of her statutory FLSA rights. Its holding is not applicable in the context of submission of an employee's FLSA claims to commercial arbitration pursuant to a contract executed between the individual employee (as...

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