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Jefferis v. Hallrich Inc.

United States District Court, S.D. Ohio, Western Division

July 31, 2019

MARK JEFFERIS, Plaintiff,
v.
HALLRICH INCORPORATED, et al., Defendants.

          Dlott, J.

          REPORT AND RECOMMENDATION

          KAREN L. LITKOVITZ UNITED STATES MAGISTRATE JUDGE

         Plaintiff Mark Jefferis and putative Opt-In plaintiff Katie Reeder, on behalf of themselves and similarly-situated individuals, bring this action against defendants Hallrich Incorporated ("Hallrich") and A.E. Szambecki alleging claims under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.; the Ohio Constitution, Article II, Section 34a; the Ohio Prompt Pay Act, Ohio Rev. Code § 4113.15; and Ohio Rev. Code § 2307.60. Plaintiffs allege defendants violated federal and state law by failing to adequately reimburse the pizza delivery drivers they employed for delivery-related expenses, thereby failing to pay the legally-mandated minimum wage for all hours worked. This matter is before the Court on defendants' motion to dismiss plaintiffs' class and collective action for lack of subject matter jurisdiction and to compel mediation and arbitration (Doc. 11), plaintiffs' response in opposition (Doc. 14), and defendants' reply memorandum (Doc. 16).[1]

         I. Factual Background

         Defendant Hallrich is a Pizza Hut International Franchisee that operates in several states and employs or employed plaintiffs. Defendant Szambecki is the Chief Executive Officer of Hallrich.

         Plaintiffs are or were employed as pizza delivery drivers for defendants' pizza franchise in Ohio. Plaintiffs were required to maintain and pay for operable, safe, and legally compliant automobiles to use in delivering defendants' pizza and other food items. Plaintiffs alleged they were paid minimum wage or slightly above minimum wage for the hours they worked inside the restaurant. Plaintiffs allege they were paid minimum wage minus a tip credit for the hours they worked while completing deliveries, and they were not reimbursed for their actual expenses or at the Internal Revenue Service standard business mileage rate. Plaintiffs allege that as a result of the automobile and other job-related expenses they incurred as delivery drivers, they were deprived of minimum wages guaranteed to them by the FLSA and Ohio law. (Doc. 1, ¶¶ 51-78).

         During the hiring process at Hallrich, employees are required to electronically sign a "Dispute Resolution Plan" ("the Plan"). The Plan states that "it is intended to create an exclusive mechanism for the final resolution of all Disputes falling within its terms." (Doc. 11-2, Smith Aff., ¶ 12, Ex. 1 at 1, ¶ 1). The Plan states that it applies to "any matter related to the relationship between [Plaintiffs] and The Company, "[2] including any allegations of "wage disputes over compensation, expense reimbursement, [or] wages[.]" (Id. at ¶ 13, Ex. 1 at 2, ¶ 4B4). The Plan outlines a two-step process that an aggrieved party must complete in order to seek recovery for a claim against Hallrich. First, the dispute must be submitted to mediation within six months of the date of the incident giving rise to the dispute. Second, if the dispute is not resolved through mediation, the aggrieved party must initiate arbitration proceedings within 14 days from the date the mediation process has been concluded or within 45 days of the date mediation was requested. Failure of a party to comply with the time limits under the Plan bars relief to the aggrieved party. (Id., Ex. 1 at 3-4, ¶¶ 5-6). The Plan further provides in relevant part:

The Plan shall be the exclusive, final and binding method by which Disputes are resolved. Any proceedings under The Plan shall occur only on an individual basis and not as a class, collective, representative, private attorney general or consolidated action. Consequently, the commencement of proceedings under this Plan shall be a condition precedent to the initiation of any legal action by an Employee against The Company and any such legal action shall be limited to those actions available under [the FAA]. Except as provided herein, the Parties shall have no right to litigate, whether on behalf of or as part of any purported class, collective, representative, private attorney general or consolidated action (collectively referred to as "Class Action"), any Dispute in any other forum.
Furthermore, no Party to this Plan may initiate a Class Action in court or in arbitration in order to pursue any Dispute that is subject to the proceedings under The Plan. Moreover, no Party may join a Class Action or Participate as a member of a Class Action instituted by someone else in court or in arbitration in order to pursue any claims that are subject to proceedings under The Plan. It is the Parties' intent to the fullest extent permitted by law to waive any and all rights to the application of Class Action procedures or remedies with respect to all Disputes subject to this Plan. It is also expressly agreed that any arbitrator adjudicating Disputes under this Plan shall have no power or authority to adjudicate Class Action claims or proceedings. The waiver of Class Action Disputes and proceedings is an essential and material term of the Plan.

(Id., Ex. 1 at 1-2, ¶ 3). The Plan also includes a provision for amendments to the Plan:

1. This Plan may be amended by The Company at any time and from time-to-time. However, no amendment shall apply to a Dispute of which The Company had actual notice on the date of the amendment.
2. No amendment will be effective:
a. Until notice of the amendment is sent to the AAA [American Arbitration Association] and to those Employees described in paragraph 2.E;[3] or
b. As to a Dispute of which The Company had actual notice (by notice of intent to arbitrate or otherwise) on the date of amendment.

(Id., Ex. 1 at 10-11, ¶ 8D). The Plan also provides that it "may be terminated by The Company at any time. However, such termination shall not be effective: 1. Until sixty (60) days after notice of such termination is given to Employees; or 2. As to any Disputes which arose prior to the date of such termination." (Id., at ¶ 8E). Plaintiffs signed the Plan during new employee on boarding at the company. (Id., at ¶¶ 7, 9).

         II. The Parties' Arguments

         Defendants move to compel mediation and arbitration in accordance with the terms of the Plan. Defendants allege that plaintiffs' claims arise from their respective employment with Hallrich, and the Class and Collective Action Complaint alleges workplace-related claims under the FLSA and Ohio law. Defendants contend that because plaintiffs' claims are covered by the Plan, the Court should compel mediation and arbitration and dismiss this lawsuit.

         Plaintiffs oppose defendants' motion to compel mediation and arbitration on three bases: (1) the Plan signed by plaintiffs is an illusory promise, not a contract, and is unenforceable; (2) the Plan attempts to illegally waive the relevant statute of limitations; and (3) the Plan violates the Ohio Constitution, Article II, Section 34a.

         III. Resolution

         The Federal Arbitration Act ("FAA") allows for a "liberal federal policy favoring arbitration agreements." Moses H. Cone Mem 7 Hosp. v. Mercury Consir. Corp., 460 U.S. 1, 24 (1983) (citing 9 U.S.C. §2). See also Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018). The goal of the FAA is to "ensure that private agreements to arbitrate are enforced according to their terms." Volt Info. Scis., Inc. v. Bd. of Tr. of Leland Stanford, Jr. Univ., 489 U.S. 468, 479 (1989). The Supreme Court has emphasized that the FAA "requires courts 'rigorously' to 'enforce arbitration agreements according to their terms, including terms that specify with whom the parties choose to arbitrate their disputes and the rules under which that arbitration will be conducted.'" Epic Sys. Corp., 138 S.Ct. at 1621 (emphasis in original) (quoting American Express Co. v. Italian Colors Restaurant, 570 U.S. 228, 233 (2013)).

         In considering a motion to compel arbitration, courts should "treat the facts as they would in ruling on a summary judgment motion, construing all facts and reasonable inferences that can be drawn therefrom in a light most favorable to the nonmoving party." Great Am, Ins. Co. v. Gemma Power Sys., LLC, No. 1:18-cv-213, 2018 WL 6003968, at *2 (S.D. Ohio Nov. 15, 2018) (quoting Raasch v. NCR Corp.,254 F.Supp.2d 847, 851 (S.D. Ohio 2003)). In order to defeat a motion to compel arbitration, the nonmovant has the burden to "show a genuine [dispute] of material fact as to the validity of the agreement to arbitrate." Danl ...


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