Michel v. Parts Auth., Inc.

• Decision Date: 26 September 2016
• Docket Number: 15-CV-5730 (ARR)(MDG)
• Parties: MANEIL MICHEL, Plaintiff, v. PARTS AUTHORITY, INC.; MICHIGAN LOGISTICS, INC.; and NORTHEAST LOGISTICS, INC., Defendants.
• Court: U.S. District Court — Eastern District of New York

MANEIL MICHEL, Plaintiff, v. PARTS AUTHORITY, INC.; MICHIGAN LOGISTICS, INC.;and NORTHEAST LOGISTICS, INC., Defendants.

15-CV-5730 (ARR)(MDG)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

September 26, 2016

NOT FOR ELECTRONIC OR PRINT PUBLICATION

OPINION & ORDER

ROSS, United States District Judge:

Defendants moved to dismiss the complaint and compel arbitration. On June 15, 2016, I issued an opinion and order finding that the parties entered into an arbitration agreement, but reserving judgment on the motion to dismiss to allow the parties an opportunity to submit limited briefing on the issue of whether the cost-splitting provisions of the parties' agreement were unconscionable. See Op. & Order, Dkt. #21 ("June 15 Opinion"), at 1. On June 19, 2016, plaintiff filed a motion for leave to appeal the June 15 order pursuant to 28 U.S.C. § 1292(b), and to stay this action and any related arbitration pending the outcome of such an appeal. Pl.'s Mot. for Leave to Appeal, Dkt. #22 ("Pl.'s Mot."). On June 20, 2016, I set a briefing schedule for that motion. Order dated June 20, 2016. I now address both the motion to appeal and whether the cost-splitting provisions of the arbitration agreement are unconscionable. As set forth below, I deny the motion to appeal, stay the case, and compel arbitration.¹

BACKGROUND²

Plaintiff, Maneil Michel, is a former worker for defendants Parts Authority, Inc. ("Parts Authority"), Michigan Logistics, Inc. ("Michigan"), and Northeast Logistics, Inc. ("Northeast"), companies who, among other business, were "engaged in . . . storing and distributing automobile parts and accessories." Compl., Dkt. #1 ("Compl."), ¶ 24. Michel commenced this action on October 2, 2015, principally asserting claims under the New York Labor Law, §§ 191 et seq., and the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 et seq., concerning wages, unpaid overtime, and retaliation.

Northeast "arrang[es] commercial transportation services on behalf of its clients in the automotive industry," including Parts Authority. Decl. of Larry Browne in Supp. of Mot. to Dismiss Pl.'s Compl. and Compel Arbitration, Dkt. #16 ("Browne Decl."), ¶¶ 3, 5. In doing so, Northeast offered "contract engagements to independent third-party transportation providers ('Owner-Operators')." Id. ¶ 3. Michel was a manual laborer for defendants; his duties included "unload[ing], pack[ing], and deliver[ing] auto parts" in New York. Compl. ¶ 28. Michel began working for defendants "around May 2010," id. ¶ 27, and on February 8, 2012, Michel entered into an Owner-Operator agreement with Northeast, see Browne Decl. Ex. A, Dkt. #16-1 ("Owner-Operator Agreement").

On November 26, 2013, Michel and Northeast agreed to an addendum to the Owner-Operator Agreement that provided that disputes arising from the parties' relationship would be submitted to arbitration. See Browne Decl. Ex. B, Dkt. #16-2 ("Arbitration Addendum"). Michel signed both the Owner-Operator Agreement and the Arbitration Addendum. BrowneDecl. ¶ 7.

The Arbitration Addendum provides that "[e]ach party shall pay the fees for its own attorneys, subject to any remedies to which that party may later be entitled under applicable law," and that "[c]osts incidental to the arbitration" will be borne by the parties equally unless otherwise required by law or so determined by the arbitrator. Arbitration Addendum ¶ 3(e). However, the agreement further states that if Michel disputes these costs, he has no obligation to pay them "until, and only if, the Arbitrator determines that [Michel] is responsible for the costs." Id.

DISCUSSION

A. The Applicability of the FAA

Plaintiff first argues that the Arbitration Addendum is unconscionable "because the Federal Arbitration Act specifically excludes and does not require arbitration of plaintiff's claims." Pl.'s Letter in Opp'n to Arbitration ("Pl.'s Letter"), Dkt. #25, at 1. Although the FAA provides that arbitration agreements "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, plaintiff relies on § 1 of the FAA, which "exempts from the FAA . . . contracts of employment of transportation workers." Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 (2001) (citing 9 U.S.C. § 1 ("[N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.")).

As an initial matter, this court permitted further briefing on the limited issue of whether the fee-splitting provisions in the Arbitration Addendum were unconscionable. Plaintiff disingenuously attempts to couch his argument regarding the applicability of the FAA—one that he did not make in response to defendants' initial motion to dismiss—as one relating tounconscionability. I nonetheless address plaintiff's newly-raised argument, as it can be easily set aside.

Plaintiff first relies on a recent opinion in this district, Diaz v. Michigan Logistics, Inc., No. 15-cv-1415, 2016 WL 866330 (E.D.N.Y. Mar. 1, 2016), to argue that workers involved in the transportation of parts involving interstate commerce—such as Michel—are exempt from the FAA's pro-arbitration policy. But Diaz did not make such a finding. As in this case, the parties in Diaz disputed whether plaintiff had entered into an employment agreement with defendants, as plaintiff had alleged in his complaint, or whether instead, plaintiff was an independent contractor, as defendant claimed was evidenced by the parties' agreement. Id. at *4. In Diaz, the court explicitly stated that,

As for Defendants' argument that Plaintiffs do not fall within the § 1 exemption because Plaintiffs were "independent contractors," the Court cannot say, based on the limited record presented, that Plaintiffs were not "employees" subject to a "contract of employment" within the meaning of the FAA. Contrary to Defendants' argument, the economic reality of the parties' relationship—a highly factual question—determines employment status, not a contractual label.

Id. Rather than entangle itself in factual questions requiring discovery, the Diaz court held that "even assuming that Plaintiffs fall within the § 1 exemption (and the FAA does not apply), Plaintiffs' claims are subject to mandatory arbitration under New York arbitration law." Id.

The same is true here. I decline to address whether the parties entered into an employment contract or an independent contractor agreement because, in any event, the parties are compelled to arbitrate their claims. Even assuming the FAA does not apply, New York state law governing arbitration does apply.³ Id. (citing, e.g., Valdes v. Swift Transp. Co., 292 F. Supp.2d 524, 527 (S.D.N.Y. 2003) (holding "that any inapplicability of the FAA would not preclude enforcing the arbitration agreement under state law")); see also O'Dean v. Tropicana Cruises Int'l, Inc., No. 98-cv-4543, 1999 WL 335381, at *1 (S.D.N.Y. May 25, 1999) ("The inapplicability of the FAA does not mean . . . that arbitration provisions in seaman's employment contracts are unenforceable, but only that the particular enforcement mechanisms of the FAA are not available."); Shanks v. Swift Transp. Co., No. L-07-55, 2008 WL 2513056, at *4 (S.D. Tex. June 19, 2008) ("While the FAA does not require arbitration, the question remains whether the exemption of Section 1 operates as a form of reverse preemption, so as to prohibit arbitration of the dispute altogether. Plainly, it does not. The weight of authority shows that even if the FAA is inapplicable, state arbitration law governs."). Because "New York arbitration law does not exempt transportation workers from arbitration," Diaz, 2016 WL 866330, at *4, Michel is compelled to arbitrate his claim regardless of the applicability of the FAA.

Plaintiff argues that New York state law cannot be an alternate ground to compel arbitration because: (1) the FAA preempts New York arbitration law; (2) federal judges do not have authority to compel arbitration pursuant to state law "where there is an equivalent federal law such as the FAA"; (3) the parties' agreement to incorporate the FAA precludes arbitration because the FAA excludes the claims of transportation workers; and (4) New York arbitration law does not favor FLSA claims. Pl.'s Letter at 3-4. These arguments all lack merit and are not supported by citations.

First, I agree with defendants that plaintiff "plays fast and loose with" the two cases upon which he relies to support his claim that the FAA has preempted New York arbitration law: Perryv. Thomas, 482 U.S. 483 (1987) and AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). Defs.' Reply Letter in Supp. of Arbitration, Dkt. #26 ("Defs.' Reply Letter"), at 3. These cases do not stand for that principle. As defendants correctly state, both Perry and Concepcion "involved the preemption of state anti-arbitration rules that conflicted with the FAA policy strongly favoring the arbitral resolution of disputes." Id.; see also Perry, 482 U.S. at 491 ("This clear federal policy places § 2 of the Act in unmistakable conflict with California's § 229 requirement that litigants be provided a judicial forum for resolving wage disputes."); Concepcion, 563 U.S. at 341 (the FAA preempts a California judicial rule regarding the unconscionability of class arbitration waivers). Accordingly, the FAA's preemptive effect in those cases simply does not translate to the instant case.⁴

Next, I disagree that I do not have authority to compel arbitration pursuant to state law, nor does plaintiff cite to any case that stands for such a proposition. See Pl.'s Letter at 3. Nor do I find that, as plaintiff would have it, the FAA is the only statute that governs the parties' agreement simply because the parties cited to it in that agreement. Under this reading, "if the FAA does not apply to his agreement to arbitrate, then no law applies." Defs.' Reply Letter at 4....