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Wiatrek v. Flowers Foods, Inc.

United States District Court, W.D. Texas, San Antonio Division

June 16, 2018

RICHARD WIATREK, Individually, and on Behalf of all Others Similarly Situated, Plaintiff,
v.
FLOWERS FOODS, INC. and FLOWERS BAKING CO. OF SAN ANTONIO, Defendants.

          ORDER

          XAVIER RODRIGUEZ UNITED STATES DISTRICT JUDGE

         On this date, the Court considered the status of the above-captioned case, including Defendants' Motion to Dismiss (Docket no. 32), Plaintiffs' Motion to Amend Complaint (Docket no. 33), Plaintiffs' Motion to Certify a Rule 23 Class (Docket no. 34), and Plaintiffs' Motion for Sanctions (Docket no. 41). After careful consideration, the Court GRANTS Defendants' motion to compel Plaintiffs who have signed the Arbitration Agreement into arbitration and DENIES Plaintiff's request to sanction Defendants. Further, having reviewed the Scheduling Order and Plaintiff's Motion for Leave to Amend, the motion to amend is GRANTED IN PART and DENIED IN PART, and the related motion to certify a Rule 23 class is DENIED.

         BACKGROUND

         Plaintiff Wiatrek filed this case on August 15, 2017 individually and on behalf of all others similarly situated. Docket no. 1. Plaintiff asserts that Defendants, Flowers Foods, Inc. and Flowers Baking Co. of San Antonio (“FBC”) misclassified him and other distributors with FBC of San Antonio as independent contractor distributors rather than employees and that as a result, Plaintiffs were not paid overtime under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. 2021, et seq. Docket no. 1 ¶¶50-57. This claim was brought as a collective action under the FLSA, pursuant to 29 U.S.C. § 26(b). This Court conditionally certified a class of distributors in San Antonio on February 5, 2018, and thirty-two additional distributors have opted in. The opt-in period has closed.

         Defendants now move to compel arbitration as to twenty-two of the opt-in Plaintiffs. In December 2015, Plaintiffs Steve Aguilar, Pourang Babsharif, John Coburn, Ralph Faykus, Vidal Ferrazas, Jr., Rashaan Frankin, Jeffrey Hamilton, Armando Lopez, Bobby Lopez, Christopher Felix Mejia, Marco Palomo, Andres Razo, Rigoberto Razo, Leonel Rivera, Daniel Sanchez, Humberto Sanchez, Mickey J. Schulm, Benjamin Smith Short III, Juan Vasquez, Tony L. Way, and Carman P. Wadlington entered into amendments to the distributorship agreements with Defendants. Docket no. 32 at 1-2.[1] The Amendment requires individuals to settle claims, disputes, and controversies relating to the distributorship agreement through individual arbitration, effectively waiving any right Plaintiffs might have in a collective or class action. Id. 3-4. The Plaintiffs who signed the Amendment had the choice of receiving $1, 000.00 or purchasing certain products at an additional discount for a one-year period. Id. at 3.

         After signing the Amendment, the above-mentioned Plaintiffs entered into the comprehensive arbitration agreements (“Arbitration Agreements”). The Arbitration Agreements also informed Plaintiffs that claims arising out of their Distributor Contract with Defendants would be subject to arbitration and that they were giving up the right to bring their claims against Defendant as a class or collective action in a court of law or arbitration. Docket no. 32 at 4.

         On May 14, 2018, Defendants filed their motion to dismiss currently before the Court, asking the Court to compel the twenty-two Plaintiffs who signed Arbitration Agreements to proceed with individual arbitration and to dismiss their claims in this litigation with prejudice, except to enforce any arbitration award. Defendants argue that Plaintiffs entered into a valid arbitration agreement, containing a valid delegation clause, and therefore Plaintiffs' claims relating to the Distributor Agreement should be subject to individual arbitration, pursuant to the Amendment and the Arbitration agreement. Docket no. 32 at 8-13.

         On May 23, Plaintiffs filed a Motion for Leave to Amend their Complaint to add certain claims, and a related Motion to Certify a Rule 23 Class for the state-law claims, both of which are opposed. On May 31, Plaintiffs filed a motion requesting sanctions, a temporary restraining order, and a permanent injunction, alleging improper actions by Defendants. Docket no. 41. In the motion, Plaintiffs complain about the manner in which Defendants obtained the Arbitration Agreements and allege that Defendants took deliberate actions to persuade and coerce Plaintiffs from participating in this litigation. Plaintiffs argue that the “in-person solicitation that required Plaintiffs to watch a video presentation regarding all the benefits of working for Flowers, ” followed by an offer of $1000 or an increased profit margin in exchange for waiver of FLSA collective action rights constitutes improper conduct meant to interfere with and discourage participation in these lawsuits. Id. at 4.

         DISCUSSION

         I. Defendants' Motion to Dismiss and Compel Arbitration

         a. Legal Standard

         The Federal Arbitration Act (“FAA”) requires a district court to stay judicial proceedings where a written agreement provides for the arbitration of the dispute that is the subject of the litigation. 9 U.S.C. § 3. “The preeminent concern of Congress in passing the Act was to enforce private agreements into which parties had entered, a concern which requires that [courts] rigorously enforce agreements to arbitrate.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625-26 (1985) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985)) (internal citations omitted). As the Supreme Court emphasizes, “[n]ot only did Congress require courts to respect and enforce agreements to arbitrate; it also specifically directed them to respect and enforce the parties' chosen arbitration procedures.” Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018). Under the FAA, arbitration agreements are “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. Courts may recognize only “generally applicable contract defenses such as fraud, duress, or unconscionability, ” but not defenses that apply only to arbitration. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). Arbitrability is a threshold question.

         In deciding a motion to compel arbitration under the FAA, courts typically conduct a two-part inquiry. First, the court must determine whether the parties agreed to arbitrate, and next the court must determine whether the current dispute falls within the scope of a valid agreement to arbitrate. Edwards v. Doordash, Inc., 888 F.3d 738, 733 (5th Cir. 2018) (citing Klein v. Nabors Drilling USA L.P., 710 F.3d 234, 236 (5th Cir. 2013)). If the party seeking arbitration asserts 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. Doordash, 888 F.3d at 743-44.

         If the court concludes that there is a valid agreement to arbitrate with a delegation clause, and absent a challenge to the delegation clause itself, the court should consider the delegation clause to be valid and compel arbitration, unless a federal statute or policy renders the claims nonarbitrable. JP Morgan Chase & Co. v. Conegie ex re. Lee, 492 F.3d 596, 598 (5th Cir. 2007). The party seeking to invalidate an arbitration agreement bears the burden of establishing its invalidity. Carter v. Countrywide Credit Indus., Inc., 362, F.3d 294, 297 (5th Cir. 2004). The court must resolve uncertainty concerning the arbitrability of claims in favor of arbitration. Id.

         b. Analysis

         The aforementioned Plaintiffs have entered into two agreements relating to arbitration of claims and disputes arising out of their relationship with Defendants: (1) the Amendment to the Distributor Agreement, signed December 2015 and (2) the December 2015 Arbitration Agreement. The Arbitration Agreement contains a delegation clause. Accordingly, the Court will limit its analysis to determining whether the parties entered into a valid arbitration agreement with a valid delegation clause. Plaintiffs do not deny that they signed the Arbitration Agreements. However, Plaintiffs raise two arguments suggesting the Arbitration Agreements are invalid under contract law: (1) the Arbitration Agreements are illusory and (2) the Arbitration Agreements are unconscionable. Docket no. 38 at 6-7, 12-16. Plaintiffs ...


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