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Abugeith v. Flowers Foods, Inc

United States District Court, S.D. Texas, Houston Division

May 15, 2018

MAJDI ABUGEITH and JIMMY BREWER, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
v.
FLOWERS FOODS, INC. and FLOWERS BAKING CO. OF HOUSTON, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE, UNITED STATES DISTRICT JUDGE.

         Plaintiffs Majdi Abugeith and Jimmy Brewer ("Plaintiffs"), on behalf of themselves and other similarly situated individuals, bring this action against defendants Flowers Foods, Inc. and Flowers Baking Co. of Houston, LLC (collectively "Flowers" or "Defendants") under the Fair Labor Standards Act ("FLSA").[1]Pending before the court is Defendants' Motion to Dismiss or, in the Alternative, to Compel Individual Arbitration ("Defendants' Motion to Dismiss") (Docket Entry No. 5). For the reasons stated below, the court will grant Defendants' Motion to Dismiss.

         I. Background[2]

         Flowers Foods, Inc. ("Flowers Foods") ships bakery and snack products to warehouses. Flowers Baking Co. of Houston is a subsidiary of Flowers Foods that operates one of Flowers Foods' bakeries and several of its warehouses. Defendants market their bakery and snack products to retailers such as Wal-Mart, Target, Dollar General, and other grocery stores and merchants. Plaintiffs and members of the proposed class distribute Defendants' products to Defendants' retail customers and place, remove, and organize Defendants' products on the retailers' shelves. Plaintiffs allege that "[b]ecause they were misclassified as non-employees, Plaintiffs and members of the proposed Federal Collective Group were denied the rights and benefits of employment, including, but not limited to overtime premium wages."[3]

         Plaintiffs executed a distributor agreement and signed Flowers Baking Co. of Houston, LLC ("Company") Amendment to Distributor Agreement ("Amendment").[4] The Amendment contains an arbitration provision that states:

Mandatory and Binding Arbitration: All claims, disputes, and controversies arising out of or in any manner relating to this Agreement or any other agreement executed in connection with this Agreement, or to the performance, interpretation, application or enforcement hereof, including, but not limited to breach hereof and/or termination hereof, which has not been resolved pursuant to any negotiation and mediation provisions in the Agreement or otherwise shall be submitted to individual binding arbitration in accordance with the terms and conditions set forth in the Arbitration such claims, disputes, and controversies as specifically excluded therein.[5]

         Plaintiffs each signed an Arbitration Agreement contained in Exhibit 2 of the Amendment.[6]

         Plaintiffs filed this action on September 29, 2017, seeking overtime wages under the FLSA, liquidated damages, attorney's fees, and costs on behalf of themselves and a putative class of distributors.[7] Defendants-filed a motion pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(3), and 12(b)(6) seeking an order dismissing the lawsuit and requiring Plaintiffs to arbitrate their claims with Defendants.[8]

         II. Analysis

         Defendants argue that because Plaintiffs signed the Amendment and the Arbitration Agreement -- which require mandatory, individual arbitration of the claims and delegate the power to decide questions of arbitrability to the arbitrator -- the court should dismiss Plaintiffs' claims and compel individual arbitration.[9] Plaintiffs respond that the arbitration agreements are illusory and thus invalid, and that the collective action procedure cannot be waived.[10]

         A. Enforceability of the Arbitration Agreement and the Delegation Clause

         1. Applicable Law

         Under the Federal Arbitration Act ("FAA") an arbitration agreement in a contract evidencing a transaction involving interstate commerce is "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. Underlying the FAA is "the fundamental principle that arbitration is a matter of contract." AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1745 (2011) (internal quotation marks omitted); see Washington Mutual Finance Group, LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004) ("The purpose of the FAA is to give arbitration agreements the same force and effect as other contracts --no more and no less.").

         Arbitrability is a threshold question to be determined at the outset, prior to deciding conditional certification. Edwards v. Doordash, Inc., Civil Action No. 17-20082, 2018 WL 1954090, at *3 (5th Cir. April 25, 2018) (citing Reyna v. International Bank of Commerce, 839 F.3d 373, 377-78 (5th Cir. 2016)). In determining whether to enforce an arbitration agreement "[f]irst, the court asks whether there is a valid agreement to arbitrate and, second, whether the current dispute falls within the scope of a valid agreement." Id. (citing Klein v. Nabors Drilling USA L.P., 710 F.3d 234, 236 (5th Cir. 2013)). If the party seeking arbitration argues that there is a delegation clause, the court performs the first step of the analysis to determine if an agreement to arbitrate was formed, then determines if it contains a valid delegation clause. Id. at *3-4.

If there is an agreement to arbitrate with a delegation clause, and absent a challenge to the delegation clause itself, we will consider that clause to be valid and compel arbitration. Challenges to the arbitration agreement as a whole are to be heard by the arbitrator. Arguments that an agreement to arbitrate was never formed, though, are to be heard by the court even where a delegation clause exists. See Kubala v. Supreme Products Services, Inc., 830 F.3d 199, 202 ...

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