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Conde v. 2020 Companies LLC

United States District Court, N.D. California

November 8, 2017

CARLOS CONDE, et al., Plaintiffs,
v.
OPEN DOOR MARKETING, LLC, et al., Defendants.

          ORDER STAYING MOTION TO COMPEL; GRANTING MOTION TO JOIN RE: DKT. NOS. 216, 227

          KANDIS A. WESTMORE, United States Magistrate Judge

         Plaintiffs Shikwana Jennings and Lisa Drake filed this putative class and collective action against Defendants 2020 Communications, Inc. ("2020"), Open Door Marketing, LLC ("Open Door"), Larry Clark, and Jerrimy Farris, alleging violations of the Fair Labor Standards Act ("FLSA") and various California labor laws. (Fourth Amended Compl. ("FAC") ¶¶ 1-2, Dkt. No. 195.) Pending before the Court are the following motions: (1) Defendant 20/20's motion to compel arbitration of opt-in Plaintiffs Nickey Huntley, Karrington Moody, Iris Sims, Makeda Sweeney, and Adrianna Trujillo; and (2) Defendants Open Door's, Clark's, and Farris's motion for joinder to Defendant 2020's motion to compel arbitration. (2020 Mot. to Compel, Dkt. No. 216; Open Door Mot. for Joinder, Dkt. No. 227.)

         Having considered the papers filed by the parties, the relevant legal authority, and the arguments advanced by counsel at the November 2, 2017 hearing, the Court STAYS Defendant 2020's motion to compel arbitration pending the Supreme Court's decision in Ernst & Young LLP v. Morris, Dkt. No. 16-300, and GRANTS the motion for joinder.

         I. BACKGROUND

         A. Factual Background

         Plaintiffs bring the present action on behalf of individuals who worked for Defendants "to promote free cell phones and wireless service plans for low-income individuals who meet the plans' requirements." (FAC ¶ 1.) Plaintiffs allege that they were misclassified as independent contractors, resulting in Defendants failing to pay them minimum wage, overtime, expenses, and all wages due at the time of termination, as well as failing to provide itemized wage statements. (FAC ¶ 2.)

         Until October 2014, Defendant 2020 contracted directly with individuals to promote wireless service plans and cellular phones as "Sales Representatives." (See FAC ¶ 17; Burks Decl. ¶ 2, Dkt. No. 143-7.) To become a Sales Representative, individuals were required to execute a Mutual Arbitration Agreement ("2020 MAA"). (2020 Mot. to Compel at 3.) The 2020 MAA required that all disputes and claims between Sales Representatives and Defendant 2020 -- as well as Defendant 2020's subsidiaries, affiliates, directors, employees, or agents -- be arbitrated. (See Warren Decl., Exh. C ¶ 1, Dkt. No. 216-3.)

         In October 2014, Defendant 2020 and the individual Defendants allegedly "jointly created [Open Door] as a 'spin off' company from 20/20." (FAC ¶ 18.) From that point on, Sales Representatives would contract directly with Defendant Open Door rather than Defendant 2020. Plaintiff alleges that Defendants were engaged in a joint employer relationship during this time. (FAC ¶ 20.) In January 2016, Defendant Open Door began using an independent contractor agreement that includes a mandatory arbitration provision.

         B. Procedural Background

         Plaintiffs filed this action on September 8, 2015. (Compl., Dkt. No. 1.) Following the commencement of this action, the parties filed a series of motions. On October 23, 2015, Plaintiffs filed a motion for notice to be issued to similarly situated employees pursuant to 29 U.S.C. § 216(b). (Dkt. No. 21.) On December 7, 2015, Defendant Open Door filed a motion to compel arbitration and dismiss, or alternatively, stay claims; a motion to dismiss based on forum non conveniens and Rule 12(b)(3); and a motion to dismiss pursuant to Rule 12(b)(6), or alternatively, for a more definite statement pursuant to Rule 12(e). (Dkt. Nos. 49, 50, 51.) Defendant 2020 also filed a motion to dismiss Plaintiffs' complaint, or alternatively, for a more definite statement, as well as a motion to compel arbitration and dismiss, or alternatively, stay claims. (Dkt. Nos. 53, 54.)

         On April 12, 2016, the Court issued an order on the parties' motions. (Ord., Dkt. No. 92.) First, the Court denied the motion to dismiss based on forum non conveniens, finding that the forum selection clause did not apply to the claims asserted in the action. (Id. at 6.) Second, the Court granted Defendant 2020's unopposed motion to compel arbitration of former Plaintiff Carlos Conde. (Id. at 7.) Third, the Court granted Defendant 2020's motion to dismiss on the ground that Plaintiffs failed to "identify the particular conduct attributable for each defendant, " as Plaintiffs instead used the term "Defendants" throughout the complaint, which "failed to give each defendant fair notice of the claims asserted against them and the grounds upon which those claims rest." (Id. at 9-10.) Fourth, the Court granted Defendant Open Door's motion to dismiss as to claims asserted against Defendant Open Door prior to September 2014, and as to claims asserted against Defendants Farris and Clark specifically due to the lack of "any allegations describing what conduct Farris and Clark engaged in that would expose them to liability for the wage and hour violations Plaintiffs allege." (Id. at 10-11.) Finally, the Court held in abeyance Plaintiffs' motion for notice to be issued to similarly situated employees pending the filing of the third amended complaint and the parties' meet and confer on the scope of the class.[1] (Id. at 15.)

         On June 21, 2016, the parties stipulated to the issuance of notice to all individuals who worked for Defendant Open Door "as independent contractors marketing free cell phones and wireless service plans to potential consumers face-to-face in Nevada and California from October 2014 to the present" who had not entered into an arbitration agreement with either Open Door or 2020. (Dkt. No. 104 at 2.) Plaintiffs' counsel would issue notice to these individuals, after which class members would have 60 days to opt into the collective action. (Id. at 2-3.) The parties would then participate in a full-day private mediation. (Id. at 3.) In the interim, the case would be stayed in its entirety, and Plaintiffs' motion for notice would remain held in abeyance. (Id.) On June 28, 2016, the Court granted the stipulation and stayed the case. (Dkt. No. 107.)

         On November 29, 2016, former counsel for Defendants Open Door, Clark, and Farris moved to withdraw as counsel. (Dkt. No. 124.) Through this motion, the Court was notified, for the first time, that the mediation had taken place on November 10, 2016, but was unsuccessful, and that the parties had agreed to lift the stay on November 17, 2016. (Dkt. No. 124-1 ¶¶ 3-4.) The Court ordered the parties to submit a joint status report to explain the status of the case and any pending motions before the Court. After the parties filed their joint status report, the Court lifted the stay and set a case management conference. (Dkt. No. 127.) On January 10, 2017, the Court granted the motion to withdraw as counsel. (Dkt. No. 128.) Defendants Open Door, Clark, and Farris have since obtained counsel. (See Dkt. No. 225.)

         On February 24, 2017, Plaintiffs filed their motion to expand the scope of the collective action to include individuals who signed arbitration agreements with Defendants 2020 and Open Door. (Dkt. No. 139.) Defendant opposed the motion, arguing amongst other things that individuals who signed arbitration agreements were not similarly situated. (Dkt. No. 152 at 13.) On March 1, 2017, Defendant 2020 filed its motion to deny class certification as to individuals who signed arbitration agreements with Defendants. (Dkt. No. 143.) Defendants also filed a motion for judgment on the pleadings as to Plaintiff Jennings's Private Attorneys General Act ("PAGA") claim. (Dkt. No. 144.)

         On April 27, 2017, the Court issued an order disposing of the parties' motions. First, the Court granted in part and denied in part Defendant 2020's motion to deny class certification, finding that the named Plaintiffs lacked typicality to represent individuals who had signed arbitration agreements with Defendant 2020, when Plaintiffs themselves had not. (Dkt. No. 178 at 12.) The Court denied Defendant 2020's motion to deny class certification as to putative class members who signed arbitration agreements with Defendant Open Door; to the extent Defendant 2020 argued that it could rely on this arbitration agreement as a third-party beneficiary and/or on a theory of equitable estoppel, the Court found that Defendant 2020 had "fail[ed] to point to any legal authority or factual evidence in support of this proposition." (Id. at 15.) Second, the Court granted in part and denied in part Plaintiffs' motion to expand the scope of the collective action, finding that Plaintiffs satisfied the limited step one inquiry for conditional certification, but limiting the scope to individuals in California in order to ensure manageability. (Id. at 25.) The Court, however, agreed with Defendants that any notice would need to "reflect the possibility that an opt-in plaintiff will be compelled to arbitrate his or her claims." Finally, the Court denied the motion for judgment on the pleadings, finding that the PAGA notice letter was adequate. (Id. at 28.)

         On August 24, 2017, Defendants filed the instant motion to compel arbitration by opt-in Plaintiffs Huntley, Moody, Sims, Sweeney, and Trujillo. Each of the opt-in Plaintiffs executed consent forms after the parties stipulated to the issuance of notice to individuals who worked for Defendant Open Door but had not entered into arbitration agreements with either Defendant 2020 or Defendant Open Door. (2020 Mot. to Compel at 1.) The parties do not appear to dispute that the five opt-in Plaintiffs at issue had in fact executed the 2020 MAA; thus, none of these individuals should have received the stipulated to notice. (Id.; Plfs.' Opp'n at 1-2, Dkt. No. 219.) On July 17, 2017, Defendant 2020 requested that the five opt-in Plaintiffs arbitrate their claims, attaching copies of the signed MAAs. (Decker Decl. ¶ 3, Dkt. No. 216-1; Plfs.' Opp'n at 2.) Plaintiffs' counsel indicated that they would not agree to arbitrate. (Decker Decl. ¶ 4.) This motion followed.

         On September 7, 2017, Plaintiffs filed their opposition to the instant motion. On September 14, 2017, Defendant 2020 filed their reply brief. (2020 Reply, Dkt. No. 221.) On September 28, 2017, Defendants Open Door, Farris, and Clark filed a motion for joinder to Defendant 2020's motion to compel arbitration, requesting that "any relief ordered by the Court to Defendant 20/20 pursuant to Defendant 20/20's Motion to Compel and Dismiss . . . be ordered in favor of the ODM Defendants as well." (ODM Mot. for Joinder, Dkt. No. 227.) No opposition or reply was filed with respect to the motion for joinder.

         II. LEGAL STANDARD

         Under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of a contract." 9 U.S.C. § 2. "Once the Court has determined that an arbitration agreement relates to a transaction involving interstate commerce, thereby falling under the FAA, the court's only role is to determine whether a valid arbitration agreement exists and whether the scope of the dispute falls within that agreement." Ramirez v. Cintas Corp., No. C 04-281-JSW, 2005 WL 2894628, at *3 (N.D. Cal. Nov. 2, 2005) (citing 9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)).

         III. DISCUSSION

         A. Request to Join

         As an initial matter, Defendants Open Door, Farris, and Clark have requested to join in Defendant 2020's motion to compel arbitration. (ODM Mot. for Joinder.) Plaintiffs did not file an opposition. To the extent Defendants Open Door, Farris, and Clark are seeking to join the motion, Defendants' request is GRANTED as unopposed. This does not, however, mean that Defendants Open Door, Farris, and Clark are necessarily entitled to the same relief as Defendant 2020; instead, that issue requires an analysis of whether the 2020 MAA can be used to compel arbitration of the claims against Defendants Open Door, Farris, and Clark, which is a merits-based issue discussed below.[2]

         B. Motion to ...


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