Coram ex rel. Situated v. Shepherd Commc'ns, Inc.
| Decision Date | 23 September 2014 |
| Docket Number | CIVIL ACTION NO. 3:14CV-298-JHM |
| Parties | IAN CORAM and GEORGE BRIGHT, On behalf of THEMSELVES and ALL Others Similarly Situated PLAINTIFFS v. SHEPHERD COMMUNICATIONS, INC., TIME WARNER CABLE MIDWEST LLC, and INSIGHT COMMUNICATIONS COMPANY, L.P., DEFENDANTS |
| Court | U.S. District Court — Western District of Kentucky |
This matter is before the Court on Defendant Shepherd Communications, Inc.'s ("Shepherd") [DN 23] and Insight Communications Company, L.P.'s motions to Compel Arbitration [DN 27]. After an amended complaint was filed, the Defendants, including Time Warner Cable Midwest LLC, filed identical motions to compel [DN 39 and 49]. Thus, the motions at DN 23 and 27 are DENIED as MOOT and this opinion shall address the renewed motions at DN 39 and 49.
This action arises out of alleged violations of wage-and-hour laws under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. ("FLSA") by Shepherd, Insight, and Time Warner1 (collectively, "Defendants"). Plaintiffs Ian Coram ("Coram") and George Bright ("Bright") worked for Shepherd, which Insight contracts with to provide cable and internet installation inbusinesses and homes. Plaintiffs Coram and Bright, along with opt-in plaintiffs,2 seek to pursue their claims as a class. However, Defendants contend that the Independent Contractor Services Agreement ("Agreement") signed by Plaintiffs [Coram Contract, DN 23-3; Bright Contract, DN 23-4] not only prohibits class actions but also compels Plaintiffs to arbitrate their claims.
The relevant arbitration clause in this action is contained within Section 15 of the Agreement. Part (a) of Section 15 states as follows:
The parties agree that in the event of any dispute, claim, question, or disagreement (the "Dispute") between them or arising from or relating to this agreement or the breach thereof, the parties hereto shall use their best efforts to settle the Dispute. To this effect, they shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties. If they do not reach such solution within a period of 10 days, then, upon notice by either party to the other, all disputes, claims, questions, or differences shall be finally settled by arbitration administered by the American Arbitration Association . . . .
[Coram Contract, DN 23-3, at 6]. Part (b) provides, in relevant part, as follows:
All parties specifically agree to use this arbitration procedure in place of any rights they otherwise would have had to submit to a court or jury any Dispute between them or arising from or relating to this agreement or the breach thereof. This Section specifically prohibits the Contractor from filing, participating in, or otherwise pursuing a class or collective action involving any claims with United States Department of Labor, the Kentucky Commission on Human Rights, the Kentucky Department of Labor, or any other federal, state or local civil rights or labor agency; claims arising under the Fair Labor Standards Act of 1938, 29 U.S.C. § 201, et seq. . . . .
Id. Based on Section 15 of the Agreement, Defendants seek to dismiss Plaintiffs' Complaint, or alternatively stay this proceeding, and compel arbitration.
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., which generally applies to "a contract evidencing a transaction involving commerce to settle [a controversy] by arbitration,"renders such arbitration agreements "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 Court is to "examine arbitration language in a contract in light of the strong federal policy in favor of arbitration, resolving any doubts as to the parties' intentions in favor of arbitration." Nestle Waters North America, Inc. v. Bollman, 505 F.3d 498, 503 (6th Cir. 2007). However, "the federal policy in favor of arbitration is not an absolute one." Id. at 504 (quoting Albert M. Higley Co. v. N/S Corp., 445 F.3d 861, 863 (6th Cir. 2006)) (internal quotations omitted).
Plaintiffs argue that the arbitration clause of the Agreement is unenforceable based on two grounds. First, Plaintiffs assert that the provision of the arbitration clause, which requires each party to pay for its own attorney's fees, violates the FLSA. Second, Plaintiffs contend that the costs-allocating provision contained in the arbitration section would prevent Plaintiffs from pursuing their claims under the FLSA. In response, Defendants agree that the attorney's fees provision violates the FLSA but explain that it can be severed from the Agreement. As for the costs-allocating section, Defendants argue that Plaintiffs fail to put forth any evidence that allocating costs between the parties would prevent Plaintiffs from pursuing their claims under the FLSA. Alternatively, Defendants believe that this provision can also be severed from the Agreement.
Plaintiffs contend that Section 15(a)( ii) of the Agreement violates the FLSA. The second sentence of Subsection (a)(ii), states, "Each party shall be responsible for its own attorneys' fees." [Coram Contract, DN 23-3, at 6]. Under 29 U.S.C. § 216(b), if a plaintiff prevails in an FLSA action, then "[t]he court in such action shall . . . allow a reasonable attorney's fee to be paid by the defendant, and costs of the action." Defendants agree that the attorney's feesprovision in Section 15(a)(ii) violates § 216(b) and that it is an unenforceable provision. However, Defendants argue that the severability clause contained in Section 14 permits the Court to find Section 15(a)(ii) unenforceable without invalidating the whole Agreement.
Section 14 of the Agreement provides as follows:
The parties agree that if a court of competent jurisdiction determines that any provision of this Agreement is too broad or extensive to permit enforcement to its full extent, then it is the intent of the parties that any such provision shall be enforced to the maximum extent permitted by Kentucky law. The parties also agree that a judicial determination regarding the invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement, which shall continue to be given full force and effect.
[Coram Contract, DN 23-3, at 6]. Due to the policy of favoring arbitration, the Sixth Circuit instructs that "when the arbitration agreement at issue includes a severability provision, courts should not lightly conclude that a particular provision of an arbitration agreement taints the entire agreement." Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 675 (6th Cir. 2003) (citing Great Earth Cos. v. Simons, 288 F.3d 878, 890-91 (6th Cir. 2002)). In fact, "Plaintiffs [do not] dispute that courts in this circuit have regularly severed unlawful costs and fee shifting requirements." (citing Noffsinger-Harrison, 2013WL 499210, *9 (E.D. Tenn. Feb. 7, 2013)). Instead, Plaintiffs assert that the language utilized in Defendants' severability clause forecloses the option of simply severing the attorney's fees' provision and finding the arbitration clause enforceable.
In opposing the application of the severability clause, Plaintiffs focus on the conditional language found in the first part of Section 14, which states that "if a court . . . determines that any provision of this Agreement is too broad or extensive to permit enforcement to its full extent, then . . . any such provision shall be enforced to the maximum extent permitted by Kentucky law." [Coram Contract, DN 23-3, at 6] Plaintiffs argue that since Section 15(a)(ii) cannot beenforced, and Kentucky law prohibits arbitration agreements between employer and employees, then the arbitration agreement cannot be enforced. The Plaintiffs' argument completely ignores the second sentence of Section 14 which is clearly a severability provision. In determining a contract's plain meaning, the court is 'obligated to read the parts of the contract as a whole,' and when possible should embrace an interpretation that 'promote[s] harmony between . . . provisions.'" Nature Conservancy, Inc. v. Sims, 680 F.3d 672, 676 (6th Cir. 2012) (quoting L.K. Comstock & Co. v. Becon Constr. Co., 932 F.Supp. 948, 964 (E.D. Ky. 1994)). As a result, the Court finds that the attorney's fees' provision found in Section 15(a)(ii) is unenforceable as to Plaintiffs' FLSA claim but that the arbitration section remains valid based on the severability clause.
"If . . . the splitting or sharing of the costs of the arbitral forum under a particular arbitration agreement effectively prevents the vindication of a plaintiff's statutory rights, those rights cannot be subject to mandatory arbitration under that agreement." Morrison, 317 F.3d at 658. The Sixth Circuit in Morrison adopted a case-by-case method of analyzing the enforceability of cost-splitting provisions in arbitration agreements. Under this approach, Courts are to deem a cost-splitting provision unenforceable "whenever it would have the 'chilling effect' of deterring a substantial number of potential litigants from seeking to vindicate their statutory rights." Id. at 661. Specifically, the Sixth Circuit provided the following guidance:
[T]he reviewing court should define the class of such similarly situated potential litigants by job description and socioeconomic background. It should take the actual plaintiff's income and resources as representative of this larger class's ability to shoulder the costs of arbitration. . . . In considering the decision-making process of the typical member of a class, it is proper to take into account the typical or average costs of arbitration.
Id. at 663. In addition to considering the fees associated with arbitration, courts must "weigh the...
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