Easterday v. United Statespack Logistics, LLC
| Decision Date | 04 December 2020 |
| Docket Number | Civil No. 15-07559 (RBK/AMD) |
| Parties | MICHAEL EASTERDAY, Plaintiff, v. USPACK LOGISTICS, LLC Defendant. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
This matter comes before the Court upon the following motions: (1) Defendant's Motion to Stay (Doc. 206); (2) Defendant's Appeal of Magistrate Judge Decision (Doc. 207); and (3) Plaintiff's Motion to Strike (Doc. 211). For the reasons stated herein, the Motion to Stay is DENIED, and the Motion to Strike is DENIED. The Magistrate Judge decision is VACATED, and the case is REMANDED for further proceedings consistent with this Opinion.
Plaintiff, Michael Easterday, is a former employee of Defendant, US Pack Logistics LLC. (Doc. 1, "Compl.") USPack provides courier services throughout the Northeastern United States for companies selling pharmacy related services to customers in the health care industry. (Id. ¶11.) USPack's delivery drivers report to USPack's warehouse in Moorestown, New Jersey and deliver items to healthcare facilities throughout New Jersey, Pennsylvania, Delaware, New York, and Connecticut. (Id. ¶12.) Plaintiff worked as a delivery driver for Defendant, delivering pharmaceutical products to long term care centers, hospitals, and other medical facilities (Id. ¶¶8, 18.) Plaintiff alleges that Defendant improperly classified him as an independent contractor, subjecting him to improper deductions from his pay and denial of overtime pay. (See, e.g., id. ¶43.) Plaintiff brought the present suit on behalf of himself and a class of similarly situated individuals, alleging causes of action for "Violation of New Jersey Wage Payment Law," "Violation of Overtime Wage and Hour Law," and "Unjust Enrichment." (Id. ¶28.)
Defendant alleges that Plaintiff signed an employment contract (the "Contract") which contains a binding arbitration agreement (the "Arbitration Provision"). Defendant argues that, pursuant to the Arbitration Provision, Plaintiff's action is subject to arbitration, and Plaintiff is disallowed from bringing a class action due to the provision prohibiting class actions ("Class Action Waiver"). (See Doc. 8.)
The Contract contains several relevant provisions. (Doc. 17-2.) First, the Contract contains a general choice of law provision that provides that "[t]his Agreement shall be governed by the laws of the State of New York." (Id. ¶23.) Second, the Contract also contains class action waiver language, stating that "[n]either you or SCI shall be entitled to join or consolidate claims in arbitration by or against other individuals or entities, or arbitrate any claims as a representative member of a class[.]" (Id.) Third, the Arbitration Provision provides that "[a]ll other disputes, claims, questions, or differences . . . shall be finally settled by arbitration in accordance with the Federal Arbitration Act." (Id. ¶26.) Other portions of the Arbitration Provision address the composition of the arbitration panel, discovery, and damages. (See id.) However, the Contract does not specify what law shall apply in the case that the FAA is deemed inapplicable or what law determines the enforceability of the Arbitration Provision. Fourth, the Contract contains a severability clause, which provides that if any portion of the Contract is found to be unenforceable,"said provision or portion thereof shall not prejudice the enforceability of any other provision or portion of the same provision, and instead such provision shall be modified to the least extent necessary to render such provision enforceable while maintaining the intent thereof." (Id. ¶23.)
In November 2015, Defendant first moved to compel arbitration. (Doc. 8.) In response, Plaintiff argued that the Court could not compel arbitration pursuant to the FAA because Plaintiff, as a transportation worker, was subject to the "Section 1 Exemption." (Doc. 9.) Under the FAA's Section 1 Exemption, "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" are exempt from arbitration. 9 U.S.C. § 1. Defendant argued that Plaintiff was not exempt from arbitration under Section 1 because, as an independent contractor, Plaintiff did not fall under the Section 1 Exemption for "employees." (Doc. 42.) Judge Donio could not determine based on the pleadings whether Plaintiff was an independent contractor or an employee. (Id.) Accordingly, Judge Donio denied the Motion to Compel without prejudice and stayed the proceedings pending the outcome of discovery. (See id.) The parties engaged in limited discovery regarding whether Plaintiff was an employee for the purposes of the FAA transportation worker exemption.
The United States Supreme Court's Decision in New Prime Inc.
In 2018, the United States Supreme Court granted cert in New Prime Inc. v. Oliveria, and Judge Donio stayed the case pending the Supreme Court's consideration of the case. (Doc. 155.) The Supreme Court issued a decision in New Prime Inc. on January 15, 2019, determining that the FAA exempts from its coverage contracts of both independent contractors and employees—therefore, finding that a distinction between employees and independent contractors is immaterial. New Prime Inc., 139 S. Ct. 532, 543-44 (2019). On February 27, 2019, Judge Donio held atelephone conference with the parties, in which both parties agreed that the decision in New Prime Inc. resolved whether Plaintiff could be compelled to arbitrate under the FAA. (See Doc. 169, "Telephone Conference Tr." at 5-6.) Thus, Judge Donio determined that New Prime Inc. "resolved the threshold question of whether Plaintiff falls under the FAA exemption" because the "Supreme Court found that the FAA excludes from its coverage contracts such as the one here regardless of the status of the driver as an employee or independent contractor." (Doc. 194, "Order" at 5.) Concluding that Plaintiff was exempt from arbitration pursuant to the FAA, Judge Donio then reopened the case. After supplemental briefing on the issue, Judge Donio denied the renewed request to compel arbitration (Doc. 194), and Defendant appealed. (Doc. 207.)
In the supplemental briefing before Judge Donio, the parties acknowledged an inconsistency within New Jersey appellate courts in an area of law directly affecting the outcome of this case. In Colon v. Strategic Delivery Solutions, LLC, the Appellate Division of the New Jersey Superior Court evaluated whether a group of plaintiffs were required to arbitrate their wage and hour claims. 210 A.3d 932, 933 (N.J. Super. Ct. App. Div. 2019). The plaintiffs had signed arbitration agreements, providing that the parties would arbitrate any disagreements under the FAA. Id. at 939. However, the plaintiffs argued that they were transportation workers engaging in interstate commerce, and therefore, were exempt from arbitration under the FAA. Id. The court considered whether the arbitration agreements could instead be enforced under state law, even though they specifically elected the FAA as the enforcement mechanism. Id. The arbitration provision also stated that "the issue of arbitrability" would be determined by "the law of the state of residence of the vendor[; New Jersey.]" Id. Accordingly, the court concluded that "even ifplaintiffs [we]re exempt under Section one of the FAA, they still [we]re required to arbitrate their claims under the [New Jersey Arbitration Act 'NJAA']." Id.
In contrast, in Arafa v. Health Express Corp., No. A-1862-17T3, 2019 WL 2375387, at *1 (N.J. Super. Ct. App. Div. June 5, 2019) (hereinafter "Arafa I"), a separate panel of the Appellate Division of the New Jersey Superior Court evaluated a nearly identical case but reached an incongruent conclusion. In Arafa I, a plaintiff similarly argued that he could not be forced to arbitrate under the FAA because he was a transportation worker engaging in interstate commerce. Id. The arbitration provision stated that the FAA would apply, and it provided no other mechanism for enforcement in case the FAA was deemed inapplicable. Id. After finding that the plaintiff was a transportation worker engaged in interstate commerce, the court concluded that "the inapplicability of the FAA to the parties' arbitration agreement undermine[d] the entire premise of the contract[.]" Id. at *2. The court found that "[b]ecause the FAA cannot apply to the arbitration, as required by the parties, their arbitration agreement [was] unenforceable for lack of mutual assent." Id. The main difference between the arbitration agreements in Colon and Arafa I was that the agreement in Colon specifically provided that New Jersey state law would determine the issue of arbitrability.
In the Order denying the Motion to Compel Arbitration, Judge Donio concluded that the present case was more similar to Arafa I because the Arbitration Provision did not include an alternative mechanism to compel arbitration if the FAA was deemed inapplicable and did not specify what state laws would determine arbitrability. (Order at 26.) Accordingly, Judge Donio found that because the FAA did not apply, the entire Arbitration Provision was unenforceable for lack of mutual assent. (Id.)
However, on July 14, 2020, the New Jersey Supreme Court issued an opinion in Arafa v. Health Express Corporation, 233 A.3d 495 (N.J. 2020) (hereinafter "Arafa II"), resolving the conflict between Colon and Arafa I. In Arafa II, the New Jersey Supreme Court found that there was no meaningful difference between the arbitration provisions in Arafa I and Colon, holding that it did not matter that the arbitration provision in Arafa I did not elect which state laws would determine arbitrability. Id. at 507. Instead, the Court noted that the NJAA governs "all agreements to arbitrate made on or after ...
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