Gillespie v. Cracker Barrel Old Country Store Inc.

Decision Date12 November 2021
Docket NumberCV-21-00940-PHX-DJH
PartiesAshley Gillespie, et al., Plaintiffs, v. Cracker Barrel Old Country Store Incorporated, Defendant.
CourtU.S. District Court — District of Arizona

Diane J. Humetewa, United States District Judge

Pending before the Court are Plaintiffs' Motion for Conditional Certification (Doc. 8) and Defendant's Motion to Compel Arbitration (Doc. 21).[1] In addition, Plaintiffs have filed a Motion to Strike an attachment to Defendant's Motion to Compel Arbitration (Doc. 30). Defendant has filed a Response (Doc. 37), but Plaintiffs have not filed a Reply. The Court will now issue its decisions.

I. Background

Plaintiffs are current and former employees of Defendant Cracker Barrel Old Country Store Incorporated (Cracker Barrel). They allege Cracker Barrel violated provisions of the Fair Labor Standards Act (“FLSA”) that govern wages for tipped employees such as servers. (Doc. 1 at ¶ 1). Plaintiffs now seek to conditionally certify this matter as a collective action under the FLSA. (Doc. 8 at 2). If granted, this certification would result in ‘the sending of court-approved written notice' to workers who may wish to join the litigation as individuals.” Campbell v. City of Los Angeles, 903 F.3d 1090, 1101 (9th Cir. 2018) (quoting Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 75 (2013)). Cracker Barrel argues the named Plaintiffs are obligated to arbitrate their claims under an arbitration agreement (the “Agreement”) that Plaintiffs signed during their employee training. (Doc. 21 at 2). Cracker Barrel seeks to compel arbitration before any notice is sent. (Id.)

II. Whether the Motion to Compel Arbitration is Premature

The parties dispute whether the Court may address the Motion to Compel before the Motion for Conditional Certification. This posture is one in which many courts have previously found themselves. Some courts in the Northern District of California have decided to consider motions to compel arbitration after a class has been conditionally certified. See Saravia v. Dynamex, Inc., 310 F.R.D. 412, 424 (N.D. Cal. 2015) (“The decisions that have addressed that issue have all found that the issue of the enforceability of arbitration clauses related to the merits of the case and therefore should be dealt with in phase two.”); Shaia v. Harvest Mgmt. Sub LLC, 306 F.R.D. 268, 276 (N.D. Cal. 2015) (“The question whether certain employees are precluded from participating as members of the collective action by virtue of the arbitration/settlement agreements is not properly before the court at this first stage of the certification.”).

Courts in the District of Arizona have, primarily for reasons of judicial economy, routinely considered motions to compel arbitration before motions for conditional certification. “Despite the lenient first-step inquiry when deciding to certify a collective action, Courts in this District have not permitted collective certification to proceed, and will dismiss the action, where ‘the Plaintiff and opt-in Plaintiffs are not capable of representing the class because the claims are wholly subject to arbitration.' Cabanillas v. 4716 Inc., 2021 WL 3773765, at *6 (D. Ariz. Aug. 25, 2021) (citing Bufford v. VXI Glob. Sols. LLC, 2021 WL 229240, at *8 (D. Ariz. Jan. 22, 2021)).

Ultimately, district courts have the inherent authority to manage their dockets and courtrooms with a view toward the efficient and expedient resolution of cases.” Dietz v. Bouldin, 136 S.Ct. 1885, 1892 (2016). Using their discretion, it seems the various district courts in this posture have proceeded by weighing the liberal standards for granting conditional certification against the judicial resources that may be needlessly expended if an arbitration agreement is enforceable.

Here, as will be further explained below, the named Plaintiffs in this action are bound by the Agreement. However, at least a few of the opt-in Plaintiffs are not subject to the Agreement. For example, Plaintiff has produced affidavits from two opt-in Plaintiffs who were minors when they worked for Cracker Barrel and claim their minor status voids any arbitration agreement. (Doc. 29-2). Cracker Barrel does not dispute that arbitration agreements with minors can be voided. Therefore, at least two of the opt-in Plaintiffs are not subject to arbitration. Although Plaintiffs should be afforded an opportunity to conditionally certify a class that is not subject to the Agreement, the Court will enforce the Agreement as it pertains to those Plaintiffs who are. Therefore, the Court will deny the Motion for Conditional Certification without prejudice with leave to refile for Plaintiffs to propose a class that is not bound by the Agreement.

The Court will now address Cracker Barrel's Motion to Compel Arbitration.

III. Enforceability of Arbitration Agreements

The Federal Arbitration Act (“FAA”) codified “the liberal federal policy favoring arbitration . . . .” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). It states [a] written provision in any . . . contract evidencing a transaction involving commerce 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. When presented with a motion to compel arbitration, a court's review is limited to determining (1) whether the agreement is valid and (2) whether the agreement encompasses the dispute. Samson v. NAMA Holdings, LLC, 637 F.3d 915, 923 (9th Cir. 2011). In addressing these issues, courts are required to adopt a rule of contract construction favoring arbitration. Kuehner v. Dickinson & Co., 84 F.3d 316, 319 (9th Cir. 1996), as amended (July 5, 1996). In addition, “the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 91 (2000). If a valid agreement exists encompassing the dispute, then courts are called to “rigorously enforce” the arbitration agreement. Id. (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985). In addition, if a court enforces an arbitration agreement, the court “may either stay the action or dismiss it outright when . . . the court determines that all of the claims raised in the action are subject to arbitration.” Johnmohammadi v. Bloomingdale's, Inc., 755 F.3d 1072, 1074 (9th Cir. 2014).

Cracker Barrel argues the four named Plaintiffs are subject to the Agreement because it is valid and encompasses the claims at issue. (Doc. 21 at 2-5). Plaintiffs do not dispute that the Agreement, if valid, would encompass their claims. However, Plaintiffs challenge the Agreement's validity on the grounds that it is substantively and procedurally unconscionable. First, Plaintiffs argue that the Agreement is invalid under the effective vindication doctrine. (Doc. 29 at 5). Second, Plaintiffs argue the Agreement's confidentiality requirement is unenforceable. (Id. at 13). Third, Plaintiffs argue the Agreement violates Arizona law. (Id.) Finally, Plaintiffs argue the Agreement is procedurally unconscionable. (Id. at 17). The Court addresses each argument in turn.

a. Whether the Effective Vindication Doctrine Invalidates the Agreement

Plaintiffs argue the Court should invalidate the Agreement because it does not guarantee that the prevailing party will be entitled to an award of attorney fees and costs. Normally, prevailing plaintiffs in an FLSA action are entitled to such an award. 29 U.S.C. § 216(b). Plaintiffs argue certain provisions of the Agreement grant the arbitrator discretion to award fees, which presents the possibility that their right to attorney fees and costs might not be vindicated through arbitration. (Doc. 29 at 9).

Plaintiffs ask the Court to adopt the “effective vindication” doctrine as articulated by the Tenth Circuit. See Nesbitt v. FCNH, Inc., 811 F.3d 371, 376 (10th Cir. 2016). This doctrine, originally developed from Supreme Court dictum, invalidates arbitration agreements on public policy grounds when an agreement waives a party's right to pursue statutorily guaranteed remedies. Id. at 377 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985)). Here, because the Agreement does not require the arbitrator to award attorney fees and costs if Plaintiffs were to prevail, Plaintiffs claim their statutory rights will not be adequately vindicated by the Agreement, and it should therefore be found invalid. Cracker Barrel argues it is unnecessary to decide whether to employ the effective vindication doctrine because Plaintiffs' statutory rights to attorney fees and costs are not at risk. (Doc. 39 at 8).

The Agreement states an “Arbitrator may award any relief to either party to which Cracker Barrel or [the employee] may be entitled by law.” (Doc. 21-3 at 4). Plaintiffs interpret this to mean the arbitrator wields the discretion to award FLSA fees and costs. Cracker Barrel, however, cites several cases in which courts have interpreted similar langue to mean the arbitrator shall issue an award when the underlying statutory right requires one. See Bell v. Ryan Transp. Serv., Inc., 176 F.Supp.3d 1251, 1260 (D. Kan. 2016) ([C]ourts have uniformly rejected this argument [that the arbitrator may decline to issue an attorney fee award under the FLSA] for various reasons, including the persuasive reason that such language simply contemplates those statutes which allow but do not require an award of fees.”); Smith v. Vmware, Inc., 2016 WL 54120 at *6 (N.D. Cal. Jan. 5, 2016) (construing “may” as requiring an arbitrator...

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