Weckesser v. Knight Enters. S.E., LLC

• Decision Date: 07 January 2017
• Docket Number: Civil Action No. 2:16–cv–02053–RMG
• Citation: 228 F.Supp.3d 561
• Parties: Patrick WECKESSER, on behalf of himself and all others similarly situated, Plaintiff, v. KNIGHT ENTERPRISES S.E., LLC, Defendant.
• Court: U.S. District Court — District of South Carolina

228 F.Supp.3d 561

Patrick WECKESSER, on behalf of himself and all others similarly situated, Plaintiff,

v.KNIGHT ENTERPRISES S.E., LLC, Defendant.

Civil Action No. 2:16–cv–02053–RMG

United States District Court, D. South Carolina, Charleston Division.

Signed January 7, 2017

Ashley Long Falls, Joseph Scott Falls, Falls Legal, Charleston, SC, for Plaintiff.

Debbie Whittle Durban, Matthew Adams Abee, Nelson Mullins Riley And Scarborough, Columbia, SC, for Defendant.

Order

Richard Mark Gergel, United States District Court Judge

Plaintiff Patrick Weckesser works as cable installation technician for Defendant Knight Enterprises S.E., LLC, a limited liability company incorporated in South Carolina that does business in the southeast. Members of the putative class Plaintiff seeks to represent have also worked for Defendant in the past several years. Plaintiff has filed a complaint alleging that Defendant inappropriately classified him as an independent contractor instead of an employee and, as a result, denied him overtime and other wages he was entitled to in violation of the Fair Labor Standards Act ("FLSA") and the South Carolina Payment of Wages Act ("SCPWA"). (Dkt. No. 1 at 1–2.) This matter is before the Court on Defendant's motion to dismiss and compel arbitration. (Dkt. No. 6.) For the reasons set forth herein, the Court DENIES Defendant's motion to compel arbitration and DENIES Defendant's motion to dismiss.

I. Facts

On September 11, 2015, Plaintiff and Defendant executed an Independent Contractor Services Agreement (the "Services Agreement"). (Dkt. No. 6–2.) Plaintiff signed the Services Agreement for himself, and Brian Vaughn signed the Services Agreement on behalf of Defendant. Brian Vaughn is the Director of Compliance and Risk Management for Defendant, Defendant's parent company (Jeffry Knight, Inc., based in Florida), and Jeffry Knight, Inc.'s other subsidiaries. (Dkt. No. 15–1 at 2.) On the same day, Plaintiff executed a separate Arbitration Rider and Class Action Waiver (the "Arbitration Agreement") with "Jeffry Knight, Inc. d/b/a/ Knight Enterprises." Jeffry Knight, Inc. is the only legal entity that appears on the Arbitration Agreement, both in the first paragraph of the Arbitration Agreement and under the signature line at the end. (Dkt. No. 6–3.) Defendant's name ("Knight Enterprises S.E., LLC") does not appear anywhere in the Arbitration Agreement.¹ Brian Vaughn signed the Arbitration Agreement on behalf of Jeffry Knight, Inc.²

II. Legal Standard

a. Motion to Compel Arbitration

The Federal Arbitration Act ("FAA") provides that a written agreement to arbitrate in any contract involving interstate commerce or a maritime transaction "shall be valid, irrevocable and enforceable" unless there are grounds for revocation in law or equity. 9 U.S.C. § 2 ; Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765. A litigant can compel arbitration under the FAA if the litigant can demonstrate: " ‘(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction ... to interstate or foreign commerce, and (4) the failure, neglect or refusal of the [party] to arbitrate the dispute.’ " Am. Gen. Life & Accident Ins. Co. v. Wood , 429 F.3d 83, 87 (4th Cir. 2005) (quoting Adkins v. Labor Ready, Inc. , 303 F.3d 496, 500–01 (4th Cir. 2002) ). If a valid arbitration agreement exists and covers the claims at issue, this Court has "no choice but to grant a motion to compel arbitration." Adkins , 303 F.3d at 500 (4th Cir. 2002). Whether the parties agreed to arbitrate a particular dispute is a question of state law governing contract formation. First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).

b. Motion to Dismiss or Stay Proceedings

The FAA requires a court to stay "any suit or proceeding" pending arbitration of "any issue referable to arbitration under an agreement in writing for such arbitration, and "[t]his stay-of-litigation provision is mandatory." Adkins , 303 F.3d at 500 ; see also 9 U.S.C. § 3. But the Fourth Circuit has also held that if all of the claims asserted in a complaint are subject to arbitration, dismissal of the complaint is "an appropriate remedy." Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc. , 252 F.3d 707, 709–10 (4th Cir. 2001). The Fourth Circuit has acknowledged the inconsistency between its opinions on this issue. Aggarao v. MOL Ship Mgmt. Co. , 675 F.3d 355, 376 n.18 (4th Cir. 2012) ("There may be some tension between our decision ... indicating that a stay is required when the arbitration agreement ‘covers the matter in dispute’—and Choice Hotels —sanctioning dismissal ‘when all of the issues presented ... are arbitrable.’ "). At present, in this Circuit a district court must stay an action pending arbitration of any arbitrable claims, with the exception that it may instead dismiss an action if all claims asserted are arbitrable.

III. Discussion

a. Existence of a Valid Arbitration Agreement

Defendant has moved to compel arbitration in this case, and Plaintiff and Defendant dispute whether the two parties have executed a valid arbitration agreement that Defendant can rely on to compel arbitration.³ Plaintiff argues simply that he executed the Arbitration Agreement with "Jeffry Knight Inc. d/b/a Knight Enterprises" (Defendant's parent company) but has not entered any arbitration agreement with the Defendant (Knight Enterprises S.E., LLC). Defendant argues that a mere clerical error caused "S.E., LLC" to be omitted from Defendant's name in the Arbitration Agreement, which should not invalidate the agreement. (Dkt. No 15–1 at 2.)

When the parties dispute whether a valid arbitration agreement exists, any ambiguities must be resolved against the drafter —which, in the labor context, will always be against the employer and in favor of the employee.⁴ Kristian v. Comcast Corp. , 446 F.3d 25, 35 (1st Cir. 2006). While there is a presumption in favor of arbitration, this presumption disappears when the parties dispute the existence of a valid arbitration agreement. See Am. Heritage Life Ins. v. Lang, 321 F.3d 533, 537–38 (5th Cir. 2003) ; Dumais v. Am. Golf Corp. , 299 F.3d 1216, 1220 (10th Cir. 2002).

Defendant has urged this court not to overlook two key principles of contract interpretation under South Carolina law. The first principal is that a misnomer does not invalidate an agreement. Defendant is correct that a simple misnomer or misspelling does not necessarily invalidate an agreement, but, to support this proposition, Defendant relies on a case in which the court determined that it could construe the misnomer to mean the name of the corporation because the name actually listed was not even a legal entity . Cobb & Seal Shoe Store v. Aetna Ins. Co. , 78 S.C. 388, 58 S.E. 1099, 1099 (1907) ("Evidence that there was no such legal entity as Cobb & Seals, and that the defendant's agent, before issuing the policy, knew the property was owned by the corporation, Cobb & Seal Shoe Store, tended strongly to show the failure to use the true corporate name in the policy was a mere inadvertence, and that "Cobb & Seals," in the contract, meant the corporation."). The entity listed on the Arbitration Agreement in this case, "Jeffry Knight, Inc.," is a legal entity—it is, in fact, Defendant's Florida-based parent company.

Defendant relies on a second case in which the South Carolina Court of Appeals held that "an insurer shall not be permitted to avoid liability on an insurance policy because of an incorrect naming of the insured." S.C. Ins. Co . v. Price , 315 S.C. 212, 432 S.E.2d 508, 508 (App. 1993). In Price , the South Carolina Insurance Company (SCIC) issued a policy in the name of one of three siblings who owned a building together in a partnership. When the building burned down, SCIC claimed it was only responsible for one-third of the value of the building since only one brother was listed on the policy. The Court of Appeals held that SCIC could not avoid liability when it had "received full premiums [that were] paid on the partnership's account." Id. at 509. The holding in Price does not advance Defendant's argument. First, Plaintiff does not seek to avoid liability for anything by pursuing its FLSA claims in federal court. Second, and a point the Court will address in more detail below, Plaintiff has not received any benefit from the Arbitration Agreement analogous to the insurance premiums SCIC received in Price.

The second principal of contract interpretation in South Carolina that Defendant has raised is the rule that "where instruments are executed at the same time, by the same parties, for the same purpose, and in the course of the same transaction, the courts will consider and construe the instruments together." Klutts Resort Realty, Inc. v. Down'Round Dev. Corp ., 268 S.C. 80, 232 S.E.2d 20, 24 (1977). The Arbitration Agreement in this case was executed at the same time and in the course of the same transaction as the Services Agreement. As established above, however, the Arbitration Agreement was not executed by the same parties. The Arbitration Agreement and the Services Agreement also do not have the same purpose. The Services Agreement outlines the nature and scope of the work Plaintiff would perform in exchange for compensation. The Arbitration Agreement is a separate contract with the sole purpose of laying out the contours of dispute resolution. Courts have found that contracts have the same purpose when, for example, both provide for compensation for a project. Sentry Eng'g & Const., Inc. v. Mariner's Cay Dev. Corp. , 287 S.C. 346, 338 S.E.2d 631, 633–34 (1985) (Construing contracts together when "[t]he two documents refer to different components of the contract's price term: payment for actual work and payment for profit. Under the Klutts test, the purpose of both is the...