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Burks v. Wal-Mart Stores, Inc.

United States District Court, Seventh Circuit

September 5, 2013

TWANDA D. BURKS et al., Plaintiffs,
v.
WAL-MART STORES, INC. et al. Defendants.

MEMORANDUM OPINION

MARY M. ROWLAND, Magistrate Judge.

The Court now considers Plaintiffs' Motion for Limited Discovery on the Issue of Arbitration Agreements. (Dkt. 60). For the reasons articulated below, the Court grants the motion in part and denies it in part.

I. BACKGROUND

Plaintiffs are a group of temporary workers who were hired out to various employers, including Wal-Mart, by a staffing agency called Labor Ready. Plaintiffs bring this action against Labor Ready and Wal-Mart alleging violations of the Fair Labor Standards Act, the Illinois Wage Payment and Collection Act, the Illinois Minimum Wage Law, and the Illinois Day and Temporary Labor Services Act. Specifically, Plaintiffs allege that Labor Ready and Wal-Mart failed to pay minimum wage, failed to compensate them for all time and overtime worked, failed to pay them a minimum of four hours on days when they were contracted to work, and failed to provide employment and wage payment notices. (Dkt. 1 ¶¶ 29-52, 62-94, 102-07).

Rather than answer Plaintiffs' complaint, Labor Ready, relying on an arbitration clause contained in the employment agreements it entered into with each Plaintiff, filed a motion to compel arbitration. (Dkt. 56). Wal-Mart then joined in that motion arguing that, although it was not a signatory to the arbitration agreements, the claims alleged against Wal-Mart and Labor Ready are so legally and factually intertwined that Plaintiffs should be compelled to arbitrate against Wal-Mart as well. (Dkt. 59). Wal-Mart also argues that it should be permitted to enforce Labor-Ready's arbitration agreements as a third-party beneficiary. ( Id. ) Plaintiffs seek limited discovery in order to oppose Labor Ready's and Wal-Mart's motions to compel arbitration. (Dkt. 60). On May 28, 2013, Plaintiffs served each defendant with approximately 12 pages of interrogatories, requests to admit, and document requests. Labor Ready and Plaintiffs were able to agree concerning the propriety of certain requests. (Dkt. 74 at 5). The discovery requests still in dispute relate to the following topics:

1. General employment records for each Plaintiff (employment notices, work applications, wage records, time records, work verification forms);
2. Information concerning employment benefits provided to Plaintiffs by either Labor Ready or Wal-Mart; and
3. Information concerning Plaintiffs' applications and eligibility for unemployment benefits.

For reasons described in greater detail below, the Court grants Plaintiffs' requests in part and denies them in part.

II. LEGAL STANDARD

The Federal Arbitration Act ("FAA") directs courts to "rigorously enforce" arbitration agreements according to their terms. 9 U.S.C. § 2. The only way to avoid a motion to compel arbitration is to challenge the validity of the arbitration agreement itself. Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002). Although the FAA does not expressly identify the evidentiary standard a party seeking to avoid arbitration must meet, courts have analogized the standard to that required of a party opposing summary judgment under Rule 56(e) of the Federal Rules of Civil Procedure: the party seeking to remain in federal court must demonstrate that there is a genuine issue of material fact as to the validity of the arbitration clause. See Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 129-30 (2d Cir. 1997); Great W. Mortg. Corp. v. Peacock, 110 F.3d 222, 231 n. 36 (3d Cir. 1997); Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir. 1992).

Limited discovery may be necessary before a court can rule on a properly contested motion to compel arbitration. E.g., Pohlman v. NCR Corp., No. 12 CV 6731, 2013 WL 3776965, at *1 (N.D. Ill. July 17, 2013) (denying without prejudice motion to compel arbitration because "there was insufficient evidence at that time... to conclude that a valid enforceable agreement to arbitrate exists as a matter of law"). This makes sense because, even if the responding party has a good faith basis to claim that the arbitration agreement is unenforceable, he may need additional evidence to meet the burden described above ( i.e., create a genuine issue of material fact). E.g., Deputy v. Lehman Bros., Inc., 345 F.3d 494, 511 (7th Cir.2003) (holding that the defendant "must be given the opportunity to conduct limited discovery on the narrow issue concerning the validity of [the plaintiff's] signature" in arbitration agreement).

In this case, Plaintiffs challenge the enforceability of the arbitration agreement by arguing that it lacked consideration.[1] In determining whether the parties entered into a valid arbitration agreement, the court applies state law that governs the formation of contracts. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Penn v. Ryan's Family Steak Houses, Inc., 269 F.3d 753, 758-59 (7th Cir. 2001). Under Illinois law, "an offer, an acceptance ...


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