United States District Court, N.D. Illinois, Eastern Division
Rashida Ali, Niquela Cole, Kevin Collins, Gary Norman, Lashawnda Renfroe, and Lisa Torry, Plaintiffs,
Vehi-Ship, LLC, Defendant.
MEMORANDUM OPINION AND ORDER
E. Chang United States District Judge
decides the question of who decides? That cryptic question is
central to this case, where the parties dispute whether the
case must be arbitrated instead of litigated in federal
court. The Plaintiffs sue their former employer, Vehi-Ship,
for failing to pay minimum wage and overtime in an alleged
violation of the Fair Labor Standards Act, 29 U.S.C.
§§ 201 et seq. and the Illinois Minimum
Wage Law, 820 ILCS 105/1 et seq., and for deducting
expenses from their wages in alleged violation of the
Illinois Wage Payment and Collection Act, 820 ILCS 115/1
et seq. R. 6, First Am. Compl. Because those
statutes only protect employees, the Plaintiffs
ultimately must prove that they really were employees rather
than independent contractors. But each contract that the
Plaintiffs had with Vehi-Ship says they were independent
contractors. And the form contract has an arbitration clause.
Wanting to enforce the arbitration clause, Vehi-Ship moves to
dismiss the complaint for improper venue under Federal Rule
of Civil Procedure 12(b)(3). R. 19, Def.'s Mot. to
Dismiss. The Plaintiffs say the arbitration clause is
unenforceable and, in any event, inapplicable to their
question is narrow: is it the court or an arbitrator who
should decide the validity and scope of the parties'
arbitration agreement in this case? For the reasons that
follow, the Court concludes that it is a question for the
this is a motion to dismiss under Rule 12(b)(3), the usual
rule applies: all well-pleaded facts in the complaint are
accepted as true. Marzano v. Proficio Mortg. Ventures,
LLC, 942 F.Supp.2d 781, 787 (N.D. Ill. 2013). Vehi-Ship,
as its name suggests, is in the business of moving cars.
First Am. Compl. ¶ 16. The Plaintiffs are former
Vehi-Ship drivers; their job was to drive Vehi-Ship
customers' cars to and from requested destinations.
Id. ¶ 18. From day one on the job, Vehi-Ship
had each Plaintiff sign an “Independent Contractor
Operating Agreement.” Id. ¶ 19. Vehi-Ship
told them to “sign the contact on the spot or they
would not be permitted to start work.” Id.
Each did as they were told. Def.'s Mot. to Dismiss ¶
Vehi-Ship's website says its drivers are at the
“core” of its business, the Plaintiffs say they
were relegated to the periphery. First Am. Compl. ¶ 38.
They allege a catalogue of unfair employment practices that
took place during their time as Vehi-Ship drivers, starting
with Vehi-Ship “intentionally misclassif[ying]”
them as independent contractors when they were really
employees. Id. ¶ 2. The
dollars-and-cents impact is that the Plaintiffs say they were
paid too little: they allege Vehi-Ship did not pay the
minimum wage and overtime that employees are entitled to
under federal and state labor laws. Id.
now, Vehi-Ship's response is that the Plaintiffs have
come to the wrong forum and so the complaint should be
dismissed for improper venue under Rule 12(b)(3). Def.'s
Mot. to Dismiss ¶ 10. Vehi-Ship points to arbitration
and choice-of-venue clauses in the Agreement. Id.
¶ 3. In relevant part, the arbitration clause says that
disputes arising out of the Agreement are subject to
arbitration under the rules of the American Arbitration
9.3 Arbitration. The parties herein agree that any claim,
dispute or controversy arising out of, effecting,
interpreting or purporting to enforce this Agreement, or any
matter in which the breach of this Agreement is alleged, or
the enforcement of any legal or equitable right that
allegedly arising out of or because of this Agreement, shall
be resolved on an individual basis and not as part of any
class action exclusively between Contractor and Company by
submitting the dispute to binding and final arbitration to be
conducted in Dallas County, Texas pursuant to the
Commercial Arbitration rules and procedure as set forth
under American Arbitration Association
(“AAA”) ... .
R. 19-1, Def.'s Mot. to Dismiss, Exh. A, Agreement ¶
9.3 (emphases added). And the choice-of-law and venue clause
9.4 Choice of Law and Venue. This Agreement shall be
governed, construed, and interpreted by the laws of the State
of Texas. Venue for any dispute between the parties shall be
in arbitration in Dallas County, Texas. THE PARTIES EXPRESSLY
AGREE THEY HAVE, BY EXECUTING THIS AGREEMENT, WAIVED THEIR
RIGHTS TO FILE SUIT OR SEEK RELIEF IN ANY STATE COURT,
FEDERAL COURT, OR COURT OF A FOREIGN NATION AND SHALL NOT
JOIN AS A PLAINTIFF IN ANY CLASS ACTION, OR SIMULAR
PROCEDURE, ARISING FROM, OR RELATING TO, THIS AGREEMENT.
Def.'s Mot. to Dismiss, Exh. A, Agreement ¶ 9.4
(capitals in original). The Plaintiffs have two responses to
these clauses. First, they argue that the clauses are
unenforceable because they purport to waive their right to
collective action in violation of the National Labor
Relations Act (NLRA), 29 U.S.C. §§ 151, et
seq. R. 20, Pls.' Resp. Br. at 4. Second, they argue
that even if the arbitration clause survives NLRA scrutiny,
it does not apply because statutory wage claims are beyond
its scope. Id. at 8.
the Federal Arbitration Act (FAA), a written agreement to
arbitrate 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. The FAA
was intended to respect parties' agreements to arbitrate
and “put arbitration on a par with other contracts and
eliminate any vestige of old rules disfavoring
arbitration.” Stone v. Doerge, 328 F.3d 343,
345 (7th Cir. 2003). If contracting parties have a valid
arbitration agreement and if the asserted claims in a lawsuit
are within its scope- and those are the big ifs here-then
arbitration must be enforced. 9 U.S.C. §§ 3-4;
Sharif v. Wellness Int'l Network, Ltd., 376 F.3d
720, 726 (7th Cir. 2004). Where an arbitration clause
requires arbitration outside a federal court's
district-like the one here does, in Texas-a motion to dismiss
for improper venue under Rule 12(b)(3) is the proper
procedural vehicle to enforce arbitration. Faulkenberg v.
CB Tax Franchise Sys., LP, 637 F.3d 801, 808 (7th Cir.
Questions of Arbitrability
is required when (1) there is a valid written agreement to
arbitrate; and (2) the asserted claims fall within the scope
of the arbitration agreement. Zurich Am. Ins. Co. v.
Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005).
The Plaintiffs dispute both: they argue that the
Agreement's arbitration clause is invalid and, in any
event, does not cover their statutory claims. Pls.' Resp.
Br. at 4, 8. In response, Vehi-Ship argues that the
Plaintiffs' invalidity path is blocked by the
Agreement's Independent Contractor clause. R. 21,
Def.'s Reply Br. at 5. That clause, Vehi-Ship's
argument goes, cuts the Plaintiffs off at the pass because it
means that the federal and state statutes invoked by the
Plaintiffs do not protect them, because they are not
employees. Id. at 7-8. A contrary determination that
the Plaintiffs were actually employees would not only
“effect” the Agreement (one of the words used in
the arbitration clause, Def.'s Mot. to Dismiss, Exh. A,
Agreement ¶ 9.3, but “essentially
invalidate” it. Def.'s Reply Br. at 6. Vehi-Ship
thus concludes that the arbitration clause applies because
this is a dispute “effecting” and
“interpreting” the Agreement. Id. at 10.
Vehi-Ship has the better of the argument to the
“perennial question” of the “division of
labor between courts and arbitrators, ” Janiga v.
Questar Capital Corp., 615 F.3d 735, 741 (7th Cir.
2010)-but for a different reason than proffered by Vehi-Ship.
It is for the arbitrator to decide who decides the
Plaintiffs' invalidity and scope arguments not
because these arguments “effect” the Agreement,
because, as is explained below, the parties committed
threshold questions of arbitrability to arbitration.
it is for courts to decide “gateway matters, such as
whether the parties have a valid arbitration agreement at all
or whether a concededly binding arbitration clause applies to
a certain type of controversy.” Green Tree Fin.
Corp. v. Bazzle, 539 U.S. 444, 452 (2003); see also
Granite Rock Co. v. Int'l Bhd. of Teamsters, 561
U.S. 287, 300 (2010) (“[O]ur precedents hold that
courts should order arbitration of a dispute only where the
court is satisfied that neither the formation of the
parties' arbitration agreement nor (absent a
valid provision specifically committing such disputes to an
arbitrator) its enforceability or applicability to the
dispute is in issue.”). In other words, questions of
arbitrability are generally for courts to decide.
AT&T Techs. v. Communs. Workers of Am., 475 U.S.
643, 649 (1986). But the general rule is displaced when there
is “clea[r] and unmistakabl[e] evidence” that the
parties agreed to arbitrate arbitrability. First Options
of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)
(quoting AT&T Techs., 475 U.S. at ...