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Cobble v. 20/20 Communications, Inc.

United States District Court, N.D. Texas

February 23, 2018

JAMES COBBLE, et al., Plaintiffs,
20/20 COMMUNICATIONS, INC., Defendant.



         This civil action is before the Court on multiple motions filed by the parties. These are: (1) defendant's Motion to Dismiss or, in the Alternative, Transfer Venue [Doc. 5]; (2) defendant's Motion for Sanctions Pursuant to 28 U.S.C. § 1927 [Doc. 7]; (3) defendant's Motion to Transfer the Claims of the Opt-In Plaintiffs [Doc. 46]; (4) defendant's Motion for Rule 16 Conference and for a Stay of Discovery and Other Pretrial Deadlines [Doc. 55]; (5) defendant's Supplemental Motion to Transfer the Claims of the Opt-In Plaintiffs [Doc. 66]; and (6) plaintiff James Cobble's[1] Expedited Motion to Conditionally Certify Collective Action and Facilitate Notice to Potential Opt-In Plaintiffs [Doc. 71].

         The Court previously referred motions (3), (4), (5) and (6) above to United States Magistrate Judge Clifton L. Corker for his consideration [Docs. 58, 76-77]. On November 2, 2017, Magistrate Judge Corker entered a Report and Recommendation (the “R&R”), in which he recommends that the Court grant motions (3) and (5), transfer this action to the United States District Court for the Northern District of Texas, and deny motions (4) and (6) as moot. Pursuant to 28 U.S.C. § 636(b)(1)(C), the parties had fourteen days from service of the R&R in which to file any objections. Plaintiff timely filed several objections to the R&R on November 16, 2017 [Doc. 87], to which defendant responded [Doc. 88]. For the reasons explained below, the Court will adopt the recommendations of the R&R in whole and transfer the claims of all plaintiffs to the Northern District of Texas.

         I. Background

         A. Factual History

         This case concerns allegations of unpaid overtime wages under the federal Fair Labor Standards Act (the “FLSA”), 29 U.S.C. §§ 201-19. Plaintiff seeks to represent all similarly situated Field Sales Managers (the “FSMs”) whom defendant employed in the past three years to service its account with Samsung Electronics America, Inc., and to whom it allegedly failed to pay overtime wages [Doc. 1 ¶¶ 1-2]. Plaintiff's complaint asserts that defendant employed hundreds of FSMs who worked over forty hours per week but did not receive sufficient overtime pay [Id. ¶¶ 28-29].

         The heart of the present dispute is, however, identifying the proper forum for this action. Defendant submits that, as a condition of employment, all FSMs signed various employment agreements (the “Agreements”) [Doc. 6 p. 2]. One of these was a Mutual Arbitration Agreement (the “MAA”), which allegedly requires the FSMs to submit all non-excepted disputes to arbitration [Id.]. The MAA also contains a waiver of the FSMs' right to bring a collective action [Id. at 2-3]. Defendant notes that the MAA provides a mechanism for employees to opt out of the agreement by delivering a completed opt-out form to the Director of Human Resources within fifteen days of receipt of the MAA [Id. at 3 (citing Doc. 6-2 ¶ 10)]. Defendant submits that none of the FSMs involved in this litigation ever completed this procedure [Id.].

         Defendant further submits that the Agreements contain a provision selecting Texas law to govern and fixing venue in Tarrant County, Texas [Id. at 13]. These choice of law and forum selection clauses reside in a document distinct from the MAA (the “Employment Agreement”), but are expressly made applicable to all of the Agreements [Doc. 6-3 pp. 19- 20]. The sample Employment Agreement provided by defendant states as follows:

These Agreements shall be governed by the laws of the State of Texas, notwithstanding the application of any choice of law principles. The Mutual Arbitration Agreement shall be governed by the Texas Arbitration Act and the Federal Arbitration Act. Any litigation or proceeding that may be brought by either party involving the enforcement of these Agreements or the rights, duties, or obligations of any party to these Agreements shall be brought exclusively in Tarrant County in the state of Texas. [The FSM] hereby consents to jurisdiction and venue in Tarrant County, Texas as consideration for these Agreements.

[Doc. 6-3 p. 20]. Defendant asserts that all plaintiffs here signed identical choice of law and forum selection clauses at the time they began their employment.

         Defendant has, however, been able to produce signed Agreements for only some of the FSMs. Specifically, defendant has produced Agreements for many of the opt-in plaintiffs, but not for others and not for plaintiff Cobble [See Id. at 2 n.2; Docs. 47-2-47-16; Docs. 66-1-66-3]. Defendant explains that many of the original images of the electronic Agreements-including the MAAs and Employment Agreements-were lost after defendant's business relationship with its former onboarding software vendor, Enwisen, ended [Doc. 6 p. 2 n.2]. But defendant asserts that it would have been impossible for any putative plaintiff to have completed the hiring process without executing the Agreements, given the nature of the onboarding software in use at the time [Id. at 2]. Indeed, according to defendant, a prospective employee who tried to complete the onboarding process without signing the Agreements would have received an error message and could not have moved forward in the process [Id. (citing Doc. 6-3 ¶ 13)].

         Defendant has provided the declaration of Director of Human Resources Chian Burks to substantiate this explanation [Doc. 6-3]. Burks explains that, to apply to work for defendant, an FSM would have had to submit an application through the Enwisen portal and provide an email address [Id. ¶ 3]. If defendant decided to hire her, the FSM would then have received an email with a link to the Enwisen onboarding portal and a unique username and password [Id. ¶ 4]. Once the FSM logged in, the onboarding software would have prompted her to complete a series of steps, including reviewing and acknowledging the Agreements [Id. ¶ 6]. For the Employment Agreement in particular, the FSM was required to scroll through the entire document and sign her name in the empty box next to the words “Employee Signature” [Id. ¶ 7]. The FSM could not advance to the next step without doing so [Id.]. The onboarding software would fill in the date of execution field, mark the document as “Signed Electronically, ” and save a copy in PDF format [Id. ¶ 8]. The FSM was also given an opportunity to save or print a copy [Id. ¶¶ 7, 10]. Burks further explains that defendant ended its use of the Enwisen software in late 2015, after which Enwisen stored electronic copies of past Agreements “for only a relatively short window of time” [Id. ¶ 12]. Burks thus avers that, while defendant no longer has access to plaintiff's original Agreements, he did complete the onboarding process [Id. ¶¶ 11, 13].

         Plaintiff denies that he ever signed an MAA, noting that defendant has been unable to produce the original, signed documents [Doc. 16 pp. 5-7]. Defendant has also been unable to produce the email that defendant allegedly would have sent to him with links to the onboarding documents [Id. at 6]. Plaintiff asserts that this shows no such email was ever sent, as defendant admits that several of its human resources personnel would have been copied on the email [Id.]. Plaintiff has also submitted a sworn declaration in which he states that he: (1) was never given nor signed an MAA; (2) has searched his email but has been unable to find an email from defendant containing an MAA; and (3) was never told that his employment was governed by an arbitration agreement [Doc. 16-1 ¶¶ 8-10]. This declaration does not, however, address the Employment Agreement or the choice of law and forum selection clauses. Furthermore, none of the opt-in plaintiffs have submitted declarations or other evidence denying they consented to the Agreements.

         B. Procedural History

         According to defendant, plaintiff and his counsel have repeatedly engaged in forum shopping to attempt to evade the Agreements' arbitration, class action, and forum selection provisions [Doc. 6 p. 3]. Defendant asserts that plaintiff's counsel originally filed a class action complaint on behalf of all FSMs in the Middle District of Florida, but then dismissed the case after defendant's counsel brought the MAA to plaintiff's counsel's attention [Vine v. 20/20 Commc'ns, Inc., No. 2:15-cv-687, Doc. 9 (M.D. Fla. Dec. 7, 2015)]. Plaintiff's counsel then filed a complaint with the National Labor Relations Board, where the parties stipulated that all of defendant's employees had to sign an MAA through the Enwisen onboarding portal before being hired [Doc. 6 pp. 3-4; Doc. 6-4 ¶¶ 5-6]. Next, plaintiff's counsel filed eighteen separate, but substantively identical arbitrations on behalf of various FSMs, including plaintiff [Doc. 6 p. 4]. According to defendant, plaintiff's counsel later amended these submissions to assert collective action claims, contrary to the MAA [Id.]. Defendant believes this was an attempt to sidestep the American Arbitration Association (“AAA”)'s threshold review for collective action waivers [Id. at 4-5].

         Defendant then brought suit in the Northern District of Texas, asking that court to enjoin the FSMs from pursuing class arbitration [20/20 Commc'ns, Inc. v. Blevins, No. 4:16-cv-810-Y, Doc. 1 (N.D. Tex. Aug. 31, 2016)]. Defendant asserts that plaintiff here and his co-defendants in that action specifically admitted to having signed MAAs and to having instituted arbitration proceedings because the MAAs required them to do so [No. 4:16-cv-810-Y, Doc. 11 pp. 2-4]. Around the same time, plaintiff's counsel filed a class action in the Northern District of Illinois, asserting the same claims as in the pending arbitrations [Richmond v. 20/20 Commc'ns, Inc., No. 1:16-cv-6051, Doc. 1 (N.D. Ill. June 9, 2016)]. Defendant believes this was an attempt to take advantage of recent Seventh Circuit case law on the enforceability of class action waivers [Doc. 6 p. 5]. Defendant then moved for the Northern District of Illinois to transfer the case to the Northern District of Texas, relying on the Agreements' forum selection clause [No. 1:16-cv-6051, Doc. 46]. The court granted this motion, finding that the forum selection clause was enforceable and applied to the plaintiffs' FLSA claims [No. 1:16-cv-6051, Doc. 82].

         Following transfer, the plaintiffs in the Richmond case voluntarily dismissed the action [Richmond v. 20/20 Commc'ns, Inc., No. 4:16-cv-994-Y, Doc. 90 (N.D. Tex. Dec. 9, 2016)]. Plaintiff Cobble's arbitration had remained pending before the AAA during this time period, with little progress made [Doc. 6 p. 6].[2] Finally, after more than a year of arbitration proceedings, plaintiff unilaterally withdrew his arbitration submission and filed a complaint in this Court, seeking identical relief [Doc. 1].

         Plaintiff casts this procedural history in a different light. Plaintiff submits that he only sought arbitration in the first place because defendant's counsel told his counsel that he had signed an MAA [Doc. 16 p. 5]. Plaintiff notes that, in a cover letter to his arbitration submission, he requested that the AAA reject the filing for lack of jurisdiction if defendant did not produce a signed arbitration agreement within twenty days [Id.].[3] Plaintiff submits that the AAA did not ask defendant to produce an arbitration agreement for five months, at which time defendant's counsel admitted it could not locate plaintiff's Agreements [Id. at 5-6]. Plaintiff further asserts that, after he amended his arbitration submission to add collective action claims, defendant failed to ever respond to the amended submission [Id. at 7]. Instead, defendant responded by seeking declaratory and injunctive relief in the Northern District of Texas [See No. 4:16-cv-810-Y, Doc. 1]. Defendant later filed motions for a preliminary injunction and temporary restraining order in that case, which plaintiff opposed [No. 4:16-cv-810-Y, Docs. 5, 27, 33, 39]. The Northern District of Texas denied both motions, defendant filed an interlocutory appeal, and the parties are currently litigating that appeal before the Fifth Circuit [No. 4:16-cv-810-Y, Docs. 35, 52-53]. Plaintiff submits that the arbitration proceedings were “essentially held in abeyance” during these federal court proceedings, until plaintiff withdrew his arbitration submission and filed this action [Doc. 16 pp. 9-10].

         Defendant responded to plaintiff's complaint in this action by moving the Court to dismiss and compel arbitration or, in the alternative, to transfer the case to the Northern District of Texas [Doc. 5]. Defendant has also filed a motion for sanctions under 28 U.S.C. § 1927, based on the alleged litigation conduct described above [Doc. 7]. On July 3, 2017, defendant moved to transfer the claims of all opt-in plaintiffs to the Northern District of Texas based on the forum selection clause [Doc. 46]. Defendant later filed a supplemental motion seeking the same relief with regard to additional opt-in plaintiffs who had joined the suit in the interim [Doc. 66]. Defendant also moved for a stay of discovery pending a ruling on its motions to dismiss or transfer venue [Doc. 55].

         Then, on August 18, plaintiff moved the Court to conditionally certify this matter as a collective action and to order that notice be sent to potential opt-in plaintiffs, pursuant to 29 U.S.C. § 216(b) [Doc. 71]. The Court referred several of these motions [Docs. 46, 55, 66, 71] to Magistrate Judge Corker for his consideration [Docs. 58, 76-77]. Next, on August 31, defendant moved to stay briefing of plaintiff's conditional certification motion until the Court rules on defendant's dispositive motions [Doc. 78]. On October 11, this Court entered an order granting defendant's motion to stay, finding that principles of judicial economy favored resolution of the arbitration and venue-transfer issues before resolution of the conditional certification issue [Doc. 85].

         Magistrate Judge Corker then entered his R&R on November 2 [Doc. 86]. The R&R recommends that the Court grant defendant's motion to transfer the opt-in plaintiffs' claims, transfer this entire action to the Northern District of Texas, and deny the remaining referred motions as moot [Id. at 11]. Magistrate Judge Corker relies on the “unrebutted sworn testimony” of Chian Burks to find that all plaintiffs-both those for whom defendant can produce signed Agreements and those for whom it cannot-executed a forum selection clause [Id. at 5]. Magistrate Judge Corker also finds that this clause is enforceable in light of recent Supreme Court and Sixth Circuit case law [Id. at 5-7 (citing Atl. Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Tex., 134 S.Ct. 568 (2013); Wong v. PartyGaming Ltd., 589 F.3d 821 (6th Cir. 2009))]. Finally, Magistrate Judge Court rejects plaintiff's arguments that the Agreements are procedurally and substantively unconscionable under state or federal law, that transfer would be inefficient and inequitable, and that the forum selection clause does not apply to this action [Id. at 7-11]. Plaintiff timely filed multiple objections to the R&R [Doc. 87], to which defendant replied [Doc. 88].

         This Court held a hearing on January 11, 2018, to address defendant's motions to transfer, the recommendations of the R&R, and plaintiff's objections to the R&R [Doc. 89]. The Court had previously informed the parties that, at this hearing, they should be prepared to: (1) discuss the proper scope of the Court's review in deciding whether to transfer the claims of some or all plaintiffs; and (2) present any additional evidence or argument they wish for the Court to consider in making this decision. At this hearing, only defendant offered additional evidence for the Court to consider. Specifically, defendant sought to admit live witness testimony from Chian Burks, as well as copies of several email communications between defendant's human resources personnel and plaintiff Cobble. These emails tend to show that plaintiff did, in fact, receive an email with links to the Enwisen portal and that he eventually completed the onboarding process.

         Plaintiff objected that, under Sixth Circuit precedent, the Court must consider only the existing record in deciding whether to transfer this action. Plaintiff also objected to the emails on the ground that defendant had not produced-or even suggested the existence of-these documents until one hour before the hearing. Defendant's counsel explained that, speaking with Burks that morning, she had learned of the possible existence of these documents. Burks then contacted her fellow human resources personnel, who located and sent these documents to Burks within a few hours. The Court permitted defendant to offer these documents into evidence, but reserved decision on plaintiff's scope of review, prejudice, authenticity, and hearsay objections.

         II. Standard of Review

         The district court must conduct a de novo review of those portions of a magistrate judge's report and recommendation to which a party objects, unless the objections are frivolous, conclusory, or general. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3); Smith v. Detroit Fed'n of Teachers, Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987); Mira v. Marshall, 806 F.2d 636, 637 (6th Cir. 1986). “[A]bsent compelling reasons, ” parties may not “raise at the district court stage new arguments or issues that were not presented to the magistrate.” Murr v. United States, 200 F.3d 895, 902 n.1 (6th Cir. 2000); see also Marshall v. Chater, 75 F.3d 1421, 1426-27 (10th Cir. 1996) (“[I]ssues raised for the first time in objections to the magistrate judge's recommendation are deemed waived.”). After conducting the necessary review, the district court “may accept, reject, or modify, in whole or in part, the [magistrate judge's] findings or recommendations.” § 636(b)(1).

         As for the merits of defendant's motions to transfer venue, 28 U.S.C. § 1404(a) provides that, “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” A district court has broad discretion in considering a § 1404(a) motion to transfer. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988); accord Kerobo v. Sw. Clean Fuels, Corp., 285 F.3d 531, 537 (6th Cir. 2002). Transfer of venue under § 1404(a) requires a two-step analysis. The court must first decide whether the claim at issue could be properly brought in the transferee district, on both venue and jurisdictional grounds. See § 1404(a). The court must next balance all of the relevant public and private factors to decide whether the litigation in question would proceed more conveniently and whether the interests of justice would be better served through transfer to a different forum. Stewart Org., 487 U.S. at 29. The movant bears the burden of proving both the existence of a proper alternative venue and that the “convenience of the parties and witnesses, and the interest of justice[, ] warrant transfer.” McKee Foods Kingman v. Kellogg Co., 474 F.Supp.2d 934, 936 (E.D. Tenn. 2006); see also United States v. Cinemark USA, Inc., 66 F.Supp.2d 881, 887 (N.D. Ohio 1999) (noting that the relevant considerations under § 1404(a) “include the plaintiff's choice of forum, location of documents, convenience of witnesses, possibility of prejudice in either forum, and the practical problems associated with trying the case expeditiously and inexpensively”).

         But this analysis changes when a valid forum selection clause is present. In Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, the Supreme Court made clear that “[w]hen the parties have agreed to a valid forum selection clause, a district court should ordinarily transfer the case to the forum specified in that clause.” 134 S.Ct. at 581. “Only under extraordinary circumstances unrelated to the convenience of the parties should a § 1404(a) motion be denied” when such a clause is present. Id. The reason for this is that that the overriding consideration under ...

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