Conners v. Gusano's Chi. Style Pizzeria

• Decision Date: 09 March 2015
• Docket Number: No. 14–1829.,14–1829.
• Citation: 779 F.3d 835
• Parties: Jacqueline L. CONNERS, individually and on behalf of all others similarly situated; Rachel Hobbs, individually and on behalf of all others similarly situated; Blaire Larson, individually and on behalf of all others similarly situated; Maria Campanelli, individually and on behalf of others similarly situated; Katey Tiller, individually and on behalf of all others similarly situated; Sarina Ellis, individually and on behalf of others similarly situated; Cecilie Washburn, individually and on behalf of all others similarly situated; Whitney Koch, individually and on behalf of all others similarly situated; Lacie Morgan, individually and on behalf of all others similarly situated, Plaintiffs–Appellees v. GUSANO'S CHICAGO STYLE PIZZERIA, doing business as Kennedy's Pizzeria Inc.; Catfish Pies Inc.; Crazy Pies Inc.; Fayetteville Pies Inc.; Gusano's Chicago Style Pizzeria of Bella Vista Inc., Defendants–Appellants. Hendrix Brands Inc., Defendant Pizza Profits Inc.; Show Me Pies Inc.; Ben Bisenthal; Clearwater Social Club Inc., doing business as Gusano's Chicago Style Pizzeria of Conway # 1 Inc.; Three Buddies Incorporated, Defendants–Appellants Timothy Chappell, Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

779 F.3d 835

Jacqueline L. CONNERS, individually and on behalf of all others similarly situated; Rachel Hobbs, individually and on behalf of all others similarly situated; Blaire Larson, individually and on behalf of all others similarly situated; Maria Campanelli, individually and on behalf of others similarly situated; Katey Tiller, individually and on behalf of all others similarly situated; Sarina Ellis, individually and on behalf of others similarly situated; Cecilie Washburn, individually and on behalf of all others similarly situated; Whitney Koch, individually and on behalf of all others similarly situated; Lacie Morgan, individually and on behalf of all others similarly situated, Plaintiffs–Appellees

v.GUSANO'S CHICAGO STYLE PIZZERIA, doing business as Kennedy's Pizzeria Inc.; Catfish Pies Inc.; Crazy Pies Inc.; Fayetteville Pies Inc.; Gusano's Chicago Style Pizzeria of Bella Vista Inc., Defendants–Appellants.

Hendrix Brands Inc., Defendant

Pizza Profits Inc.; Show Me Pies Inc.; Ben Bisenthal; Clearwater Social Club Inc., doing business as Gusano's Chicago Style Pizzeria of Conway # 1 Inc.; Three Buddies Incorporated, Defendants–Appellants

Timothy Chappell, Defendant.

No. 14–1829.

United States Court of Appeals, Eighth Circuit.

Submitted: Jan. 14, 2015.

Filed: March 9, 2015.

Matthew Scott Jackson, argued, Fayetteville, AR (Ashley Welch Hudson, Samantha B. Leflar, on the brief), for appellants.

Timothy A Steadman, argued, Little Rock, AR (John Holleman, Maryna O. Jackson, on the brief), for appellees.

Before RILEY, Chief Judge, BEAM and COLLOTON, Circuit Judges.

Opinion

RILEY, Chief Judge.

After Jacqueline Conners filed this Fair Labor Standards Act (FLSA) collective action, see 29 U.S.C. § 216(b), against her former employer and a number of associated entities (collectively, Gusano's Pizza), several of these entities implemented a new arbitration policy applicable to their current employees, which required all employment-related disputes between the current employees and Gusano's Pizza to be resolved though individual arbitration. Citing public policy reasons, the district court declared the arbitration policy unenforceable insofar as it could prevent current employees of these restaurants from joining this collective action. On interlocutory appeal, we conclude former employees like Conners lack standing under Article III of the United States Constitution to challenge the arbitration agreement, which applied only to current employees. We vacate the district court's order and remand the case to the district court.

I. BACKGROUND

A. Facts

On January 2, 2014, Conners, a former server at a Gusano's Pizza restaurant, filed this collective action on behalf of herself and other current and former Gusano's Pizza restaurant servers, alleging the employees were subjected to illegal tip pooling in violation of the FLSA. Several other former employees soon opted into the action.

A month later, the Gusano's Pizza restaurants each implemented a new arbitration policy in the form of an agreement¹ that purports to bind all current employees who did not opt out of the arbitration agreement. At the top of the first page of each arbitration agreement, the following text appears:

This Agreement to Arbitrate Disputes (called the “Agreement”) is a contract between you and [employer name]. The Agreement sets out your rights and the rights of [employer name] in connection with the resolution of employment-related disputes. You have the right to ask independent advisors of your choice, including lawyers, to explain this Agreement to you if that is your choice, but you are not required to do so.

The agreement goes on to explain its scope, the required procedures for invoking arbitration, the effect the agreement will have on the employee's ability to pursue relief in court, the right of every employee to opt out of the agreement free of retaliation, and how to opt out effectively. Along with the arbitration agreement, each employee received an opt-out form and an explanatory memorandum from the restaurant's general manager. The memorandum is a two-page document, describing the agreement's fundamental terms in plain English. The memorandum specifically explains that one effect of the agreement, should an employee not opt out, is to prevent the employee from joining Conners in the present collective action.

B. Procedure

Shortly after Gusano's Pizza began introducing the new agreement to its current employees, Conners and the other plaintiffs—who at that time were all former employees, not subject to the agreement (collectively, former employees)—filed an “emergency motion to prohibit improper communications with putative class members,” in which the former employees asked the district court, among other matters, to (1) “invalidat[e] the [arbitration] agreement as it applies to the claims in this litigation,” (2) “prohibit[ ] the named defendants from communicating with represented opt-in plaintiffs and putative class members regarding the subject matter of this litigation,” and (3) “authoriz[e] Plaintiffs to issue a Court-approved corrective notice at the named defendants' expense.” Simultaneously, in another emergency motion, the former employees also sought conditional class certification. The district court denied both motions but avoided ruling definitively on the substance of the first motion, scheduling a hearing “to determine whether there has been improper communications with the putative class members and whether defendants' communications with putative class members should be enjoined or curtailed.”

Throughout the hearing, the district court explained its primary concern with this case is the “disincentive to plaintiffs' lawyers in bringing these types of cases.” The district court feared employers would “jump in real quick” “every time somebody gets ready to get a class going” “and give [its employees] arbitration agreements and cut the plaintiffs off at the knees.” “[A]s a policy concern,” the district court questioned whether it “should engage in allowing disincentives to class actions” that might make it infeasible to pursue legitimate claims with small payouts. Upon hearing the evidence and arguments, the district court deferred its final conclusion, stating it needed to reexamine the filings and law before reaching a decision. Several days later, the district court granted the former employees' “motion for a temporary injunction ... for the reasons stated during the ... temporary injunction hearing and to prevent a chilling effect on future collective actions under the [FLSA].” The district court concluded its one-page written order by “enjoin[ing Gusano's Pizza] from enforcing the arbitration agreement against any plaintiffs who choose to join this action.”

Gusano's Pizza timely filed this interlocutory appeal, asserting appellate jurisdiction under 28 U.S.C. § 1292(a)(1).

II. DISCUSSION

A. Appellate Jurisdiction

Before all else, we must address our jurisdiction to decide this appeal. See Kreditverein der Bank Austria Creditanstalt fur Niederösterreich und Bergenland v. Nejezchleba, 477 F.3d 942, 945 (8th Cir.2007). “[T]he courts of appeals shall have jurisdiction of appeals from ... [i]nterlocutory orders of the district courts of the United States ... granting ... injunctions.” 28 U.S.C. § 1292(a)(1).

Although the district court understood the former employees' motion as one for a “temporary injunction,” held a “temporary injunction hearing,” and “enjoined [Gusano's Pizza] from enforcing the arbitration agreement,” the former employees now contend the district court's order was not truly an “injunction” within the meaning of § 1292(a)(1). They instead propose that the district court “merely exercised its discretion ... to control the conduct and progress of this litigation”—an act not immediately appealable. See, e.g., McLaughlin Gormley King Co. v. Terminix Int'l Co., 105 F.3d 1192, 1194 (8th Cir.1997) (concluding that despite the district court's label of “injunction,” the order at issue “look[ed] very much like a nonappealable order controlling the conduct and progress of litigation before the court”). The former employees are right to look beyond the district court's label, see, e.g., id., but here, the label appears well-chosen, and the substance of the court's order confirms § 1292(a)(1)'s applicability.

The Supreme Court has explained § “1292(a)(1) ... provide[s] appellate jurisdiction over orders that grant or deny injunctions and orders that have the practical effect of granting or denying injunctions and have ‘serious, perhaps irreparable, consequence.’ ” Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 287–88, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988) (emphasis added) (quoting Carson v. Am. Brands, Inc., 450 U.S. 79, 84, 101 S.Ct. 993, 67 L.Ed.2d 59 (1981) ). Applying this rule, we have held an order denying a motion to compel arbitration was immediately appealable under § 1292(a)(1), reasoning,

“Orders denying arbitration do have an injunctive effect and have serious, perhaps irreparable, consequence. The order is injunctive because it enjoins proceedings in another tribunal. It has serious consequences because of the irreparable harm that exists when arbitration is denied ab initio. If a party must undergo the expense and delay of trial before being able to appeal, the advantages of arbitration—speed and economy—are lost forever.”

Nordin v. Nutri/System, Inc., 897 F.2d 339, 342 (8th Cir.1990) (alteration omitted) (quoting Kan. Gas & Elec. Co. v. Westinghouse Elec. Corp., 861 F.2d 420, 422 (4th Cir.1988) ). The district court's order here has the same “injunctive effect,” id., because it prevents Gusano's Pizza from using its agreement with current employees to relocate a dispute to an arbitral forum. Like Nordin, the district court's order “enjoining” the arbitration agreement's enforcement as to current employees “can only be effectively challenged on immediate appeal because the advantages of arbitration will...