Green v. XPO Last Mile, Inc.

• Decision Date: 30 November 2020
• Docket Number: No. 3:19-cv-01896 (JAM),3:19-cv-01896 (JAM)
• Citation: 504 F.Supp.3d 60
• Parties: Leon GREEN and Waldo Tejada, individually and on behalf of all others similarly situated, Plaintiffs, v. XPO LAST MILE, INC., Defendant.
• Court: U.S. District Court — District of Connecticut

504 F.Supp.3d 60

Leon GREEN and Waldo Tejada, individually and on behalf of all others similarly situated, Plaintiffs,

v.XPO LAST MILE, INC., Defendant.

No. 3:19-cv-01896 (JAM)

United States District Court, D. Connecticut.

Signed November 30, 2020

Benjamin Weber, Harold L. Lichten, Zachary L. Rubin, Lichten & Liss-Riordan, P.C., Boston, MA, for Plaintiffs.

Adam Lewis Lounsbury, Jackson Lewis, PC, Richmond, VA, Carolyn A. Trotta, David R. Golder, Jackson Lewis PC, Hartford, CT, for Defendant.

ORDER DENYING MOTION TO COMPEL ARBITRATION

Jeffrey Alker Meyer, United States District Judge

Arbitration is a creature of contract law. "Because arbitration is based on a contractual relationship, a party who has not consented cannot be forced to arbitrate a dispute." Bd. of Educ. of the Town of New Milford v. New Milford Educ. Ass'n , 331 Conn. 524, 541, 205 A.3d 552 (2019).

This case involves important questions of arbitration contract law arising in the context of a class action lawsuit by two delivery drivers—Leon Green and Waldo Tejada—against XPO Last Mile, Inc., a company that specializes in merchandise deliveries. Green and Tejada claim that XPO failed to treat them as employees for purposes of Connecticut's wage law.

XPO now moves to compel arbitration. It does so on the basis of arbitration clauses that are set forth within certain delivery service contracts entered into between XPO and limited liability companies owned by Green and Tejada. According to XPO, these arbitration clauses are personally binding on Green and Tejada so that they must arbitrate their personal claims against XPO.

I do not agree. In light of well-established principles of corporate and agency law, I conclude that Green and Tejada are not parties to the agreements that they signed with XPO in their capacity as agents of limited liability companies. I further conclude that Green and Tejada are not otherwise estopped from declining to arbitrate their claims with XPO. Accordingly, I will deny XPO's motion to compel arbitration.

BACKGROUND

XPO is a national logistics company that serves as a kind of delivery middle-man for merchandise companies like Lowe's, Ikea, and Amazon. As a third-party logistics provider and freight forwarder, it contracts with the big box stores for the delivery of goods, then in turn contracts with motor carriers to ship the goods to the customers who have ordered them.¹

Green and Tejada filed this class action complaint arising from their work as delivery drivers for XPO in Connecticut.² They allege that, notwithstanding XPO's effort to categorize them as independent contractors, XPO exercises such a high degree of oversight and control over their daily work activities that they should be deemed employees with full entitlement to the benefits that employees enjoy under Connecticut's statutory wage payment law.³ In particular, they allege that XPO deducts certain expenses from the compensation it pays drivers (e.g. , for insurance and uniforms) while also compelling its drivers to assume certain expenses (e.g. , for vehicle maintenance and fuel costs)—and that XPO as their employer should assume these costs rather than imposing them on its employees.⁴

Count One of the complaint alleges that XPO made unlawful wage deductions in violation of Conn. Gen. Stat. § 31-71e.⁵ Count Two alleges a common law claim for unjust enrichment.⁶ The complaint seeks injunctive relief and damages.⁷

XPO has moved to compel arbitration. It relies on arbitration clauses that are set forth in the terms of certain Delivery Service Agreements that it entered into in connection with the delivery services furnished by Green and Tejada.

The record includes three such Delivery Service Agreements. The first is between XPO and an entity named "Lg Family Llc," and this agreement is signed by a representative of XPO and by Green as "Business Owner" for "Lg Family Llc."⁸ The second and third agreements are between XPO and entities named "TEJADA EXPRESS LLC" and "Tejada Express trucking LLC," and they are signed by representatives of XPO and by Tejada as "Business Owner" for both "TEJADA EXPRESS LLC" and "Tejada Express trucking LLC."⁹ According to XPO, it has paid more than $3 million to these three limited liability companies (LLCs) for delivery services performed by at least 15 drivers and helpers.¹⁰

Except for the names of each LLC, the terms of the Delivery Services Agreements have identical terms. The agreements specify the responsibilities of each party, while using terms to implicitly and explicitly disavow the existence of any employer-employee relationship between XPO and the LLCs or the employees of the LLCs.¹¹ The agreements also disclaim the existence of any agency relationship between the parties.¹²

Referring to each of the LLCs generically as a "Contract Carrier," each of the Agreements states that it is "binding upon the Parties and their respective successors and assigns, but Contract Carrier's obligations under this Agreement are not assignable without the prior written consent of XPO Last Mile."¹³ Apart from any successors or assignees, the Agreements do not purport to be binding on any third party including on any owner, agent, or employee of any of the contracting parties.

Each Agreement also includes arbitration clauses. These clauses state in relevant part that "[t]he parties agree that any demand, assertion, or claim or cause of action for money, property, enforcement of a right, or equitable relief, including but not limited to allegations of misclassification or wage and hour violations ... arising out of or relating to the Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association (‘AAA’) under its Commercial Arbitration Rules."¹⁴

DISCUSSION

XPO has moved to compel arbitration. When deciding a motion to compel arbitration, courts apply a "standard similar to that applicable for a motion for summary judgment." Nicosia v. Amazon.com, Inc. , 834 F.3d 220, 229 (2d Cir. 2016). Courts must "consider all relevant, admissible evidence submitted by the parties and contained in pleadings, ... together with ... affidavits," and must "draw all reasonable inferences in favor of the non-moving party." Ibid.

Because XPO claims that plaintiffs as transportation workers are required to engage in arbitration, the parties agree that any arbitration requirement is governed by the Connecticut Arbitration Act rather than by the Federal Arbitration Act. See New Prime Inc., v. Oliveira , ––– U.S. ––––, 139 S. Ct. 532, 536, 202 L.Ed.2d 536 (2019) (discussing scope of transportation worker exemption under the Federal Arbitration Act); Waithaka v. Amazon.com, Inc. , 966 F.3d 10, 16-26 (1st Cir. 2020) (applying federal transportation worker exemption to arbitration involving "last mile" delivery workers).

The Connecticut Arbitration Act provides in relevant part:

An agreement in any written contract ... to settle by arbitration any controversy thereafter arising out of such contract, or out of the failure or refusal to perform the whole or any part thereof ... or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit ... shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally.

Conn. Gen. Stat. Ann. § 52-408.

A motion to compel arbitration requires a court to consider at the outset whether the parties have actually agreed to arbitrate. See, e.g. , Starke v. SquareTrade, Inc. , 913 F.3d 279, 288 (2d Cir. 2019). Because arbitration is a creature of contract, I must consider whether—as a matter of Connecticut contract law—the parties to this lawsuit have agreed to arbitration. Still, because arbitration issues present themselves in similar contexts under both the Federal Arbitration Act and the Connecticut Arbitration Act, a court that seeks to discern the contours of Connecticut law in the arbitration context should do so while cognizant that Connecticut courts in turn often look to federal decisions for guidance. See, e.g. , Nussbaum v. Kimberly Timbers, Ltd. , 271 Conn. 65, 73 n.6, 856 A.2d 364 (2004) (comparing Connecticut Arbitration Act to Federal Arbitration Act and stating that "[i]n construing a Connecticut statute that is similar to federal law, we are guided by federal case law").

As an initial matter, XPO argues that it is not for me but for an arbitrator to decide if the parties agreed to arbitration, because the Delivery Service Agreements expressly delegate to the arbitrator "exclusive authority to resolve any dispute relating to the formation" of the arbitration agreement.¹⁵ I do not agree. As the Connecticut Supreme Court has made clear, "because an arbitrator's jurisdiction is rooted in the agreement of the parties ... a party who contests the making of a contract containing an arbitration provision cannot be compelled to arbitrate the threshold issue of the existence of an agreement to arbitrate. Only a court can make that decision." Nussbaum , 271 Conn. at 72-73, 856 A.2d 364.

XPO's contrary argument errantly relies on precedent involving delegation to an arbitrator of arbitrability (i.e. , whether an arbitration agreement that the parties have formed extends to a particular claim) rather than formation (i.e. , whether there was any agreement at all among the parties to arbitrate). But the Second Circuit has explained that while parties may "agree to arbitrate ... whether the arbitration clause applies to a particular dispute, or whether it is enforceable, parties may not delegate to the arbitrator the fundamental question of whether they formed the agreement to arbitrate in the first place." Doctor's Assocs., Inc. v. Alemayehu , 934 F.3d 245, 251 (2d Cir. 2019).

This is because "[a]n agreement that has not been properly formed is not merely an unenforceable contract; it is not a contract at...