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Martinez v. Utilimap Corp.

United States District Court, S.D. Illinois

November 21, 2016

CIPRIANO MARTINEZ and PATRICIO DONES, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
UTILIMAP CORP., Defendant.

          MEMORANDUM AND ORDER

          J. PHIL GILBERT DISTRICT JUDGE.

         This matter comes before the Court on the motion of plaintiffs Cipriano Martinez and Patricio Dones to confirm the arbitration clause construction award (Doc. 69). Arbitrator Jeffrey L. Taren issued the award on June 10, 2016, in AAA No. 01-15-0004-6935 (Doc. 69-1). Defendant Utilimap Corporation has responded to the motion (Doc. 71), and the plaintiffs have replied to Utilimap's response (Doc. 72).

         I. Background

         Each plaintiff worked as an at-will employee for Utilimap, a full-service utility inspection company, as an hourly laborer in the Ground Line Treatment Division for about two years. In their work for Utilimap, the plaintiffs dug around utility poles, inspected them and treated them with wood preservatives. They allege various wage and hour violations of Illinois, Maryland and/or federal law.

         The plaintiffs filed this lawsuit in March 2014, and in an order dated June 25, 2015, the Court compelled the parties to arbitrate pursuant to an arbitration agreement each plaintiff signed when he first started working for Utilimap (Doc. 61). That agreement stated, in pertinent part, “Arbitration shall be conducted before an experienced arbitrator chosen by you and Utilimap Corporation and will be conducted under the procedural rules of the American Arbitration Association (‘AAA').” The parties ended up selecting Arbitrator Taren, who rendered a “Partial Final Clause Construction Award” on June 10, 2016. That award construed the arbitration agreement to include “an agreement to submit to binding arbitration, ‘any claims, demand or actions based upon any claim for wages', including any class action wage claims and any collective action wage claims.” Arb. Award at 24. This was despite the arbitration agreement's failure to expressly provide that class or collective actions brought by the plaintiffs were covered by the agreement.

         The plaintiffs ask the Court to confirm this award interpreting the arbitration agreement to cover class and collective disputes (for simplicity's sake, the Court will call these “class” disputes). For its part, Utilimap argues that it never agreed in the arbitration agreement to arbitrate class disputes and that Arbitrator Taren exceeded the scope of the authority given to him in the arbitration agreement by deciding the question, and deciding it wrongly, to boot. It further argues that whether the parties have agreed to class arbitration is a threshold question of arbitrability for a court, not an arbitrator, to decide. It then asks the Court to conduct a de novo review of whether it should be forced to arbitrate the plaintiffs' class dispute. The plaintiffs respond that Utilimap agreed to submit the question of class arbitrability to the arbitrator in an early case management conference, by agreeing to the AAA procedures delegating the question of class arbitrability to the arbitrator, and by failing to object to Arbitrator Taren's consideration of the question. It then notes that Arbitrator Taren's decision should be confirmed because it was a legitimate interpretation of the arbitration agreement.

         II. Analysis

         The Court first addresses the threshold issue of who should decide whether the arbitration agreement covers class disputes, the Court or the arbitrator. If it was for the arbitrator to decide, the Court will then review Arbitrator Taren's construction award to see if it draws its essence from the arbitration agreement. If it was for the Court to decide, the Court will review the question de novo.

         A. Who Decides Whether Class Arbitration is Allowed

         Utilimap argues that Arbitrator Taren exceeded the scope of his power by deciding a question not delegated to him in the arbitration agreement - whether the agreement covers class disputes. See 9 U.S.C. § 10(a)(4) (authorizing court to vacate arbitration award where arbitrator exceeded his power). It characterizes this as an issue of arbitrability, which is presumptively a gateway issue for the Court to decide. See Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003) (plurality opinion). Accordingly, it urges the Court to conduct a de novo review of the question.

         The plaintiffs argue that, even if the question is one of arbitrarily that is presumptively left for the Court, there is sufficient evidence to overcome that presumption in this case. Specifically, it argues Utilimap agreed in an early arbitration management telephone conference to submit the question of the arbitrability of class disputes to the arbitrator for a decision. They also note that Utilimap agreed in the arbitration agreement to use AAA arbitration rules, which contain a rule in employment cases that requires the arbitrator to determine whether class disputes are subject to arbitration. Finally, they argue that Utilimap waived this objection to the arbitrator's deciding the arbitrability question by not raising it in the arbitration itself.

         It is beyond question that parties are only obligated to arbitrate matters they have agreed to arbitrate. AT&T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986); Druco Rests., Inc. v. Steak N Shake Enters., 765 F.3d 776, 781 (7th Cir. 2014). “[A]rbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration.” AT&T Technologies, 475 U.S. at 648-49 (citing Gateway Coal Co. v. United Mine Workers, 414 U.S. 368, 374 (1974)). Consistent with this rule, “a party may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 684 (2010) (emphasis in original).

         While parties may agree in principle to arbitrate, it is often not clear what is covered by that agreement, including whether the agreement covers arbitration of class disputes. As the Court has noted earlier in this case, the Supreme Court has long held that questions of arbitrability are presumed to be allocated to a court as a gateway matter. “Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.” AT&T Technologies, 475 U.S. at 649 (citing United Steelworkers of Am v. Warrior & Gulf Navigation Co., 363 U.S. 574, (1960)); Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83-84 (2002). Those gateway matters generally include whether a specific party is bound by an arbitration clause, whether the clause applied to a certain kind of dispute, id. at 84, and whether a contract was actually formed and is enforceable, Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287, 299-300 (2010). On the other hand, procedural questions like waiver, delay, time limits, notice, laches, estoppel and satisfaction of conditions precedent to arbitration are presumptively for the arbitrator to decide, even though they can effectively close the gate to arbitration. Howsam, 537 U.S.. at 84-85.

         The plaintiffs are correct that neither the Supreme Court nor the Seventh Circuit Court of Appeals has determined conclusively who decides - a court or an arbitrator - whether an arbitration agreement covers class arbitration, that is, whether it is a gateway arbitrability question for a court or a procedural question for an arbitrator. See Stolt-Neilsen, 559 U.S. at 680. Three other Courts of Appeals have held that the class arbitration question is a question of arbitrability presumably for a court to decide, see Dell Webb Cmtys., Inc. v. Carlson, 817 F.3d 867, 875 (4th Cir. 2016), pet. for cert. filed No. 16-137 (U.S. July 26, 2016); Opalinski v. Robert Half Int'l, Inc., 761 F.3d 326, 335 (3d Cir. 2014), cert. denied,135 S.Ct. 1530 (2015); Reed Elsevier, Inc. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013), as has at least one District Court within the Seventh Circuit, see Henderson v. United States Patent Comm'n, Ltd., No. 15 C 3897, 2016 WL 3027895, at *5 (N.D. Ill. May 27, 2016); compare Williams-Bell v. Perry Johnson Registars, Inc., No. 14 C 1002, 2015 WL 6741819, at *6 (N.D. Ill. Jan. 8, 2015) (agreeing with the majority of District Courts in the Northern District of Illinois that the availability of class arbitration is a procedural ...


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