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Gundrum v. Cleveland Integrity Services, Inc.

United States District Court, W.D. Wisconsin

January 31, 2017

ERIC GUNDRUM and MICHAEL KING, individually and on behalf of those similarly situated, Plaintiff,


          WILLIAM M. CONLEY, District Judge.

         In this lawsuit, plaintiffs Eric Gundrum and Michael King bring a putative collective action under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq., against defendant Cleveland Integrity Services, Inc. ("Cleveland"). Plaintiffs allege that Cleveland underpaid them and other similarly situated employees overtime as required by the FLSA. This opinion addresses defendant's threshold motion to transfer this case to the District Court for the Northern District of Oklahoma pursuant to a forum selection clause contained in an arbitration agreement between the parties (dkt. #18), which plaintiffs oppose on the basis that the arbitration agreement is illegal and unenforceable. Because plaintiffs have failed to establish that the forum selection clause is invalid for the reasons explained below, defendant's motion will be granted.


         Defendant Cleveland is incorporated in Oklahoma and has its headquarters in Cleveland, Oklahoma. (Compl. (dkt. #1) ¶ 6.) Cleveland is in the business of "providing third party inspection services for the construction and maintenance of oil and natural gas transmission, midstream and gathering lines, facility construction, meter runs and many other types of oil and gas construction throughout the United States." (Id. at ¶ 5.) Plaintiffs Gundrum and King are both residents of Nevada who were employed by Cleveland as "pipeline inspectors." (Id. at ¶¶ 3, 4.) Both plaintiffs worked in Wisconsin and Illinois as part of something called the "Line 66 Pipeline Project."[1] (Id. at ¶ 19.)

         Although they "routinely worked between six (6) days to seven (7) days per week and typically more than ten (10) hours per day, up to fifteen (15) hours, " plaintiffs allege that Cleveland willfully ignored its obligation to compensate them properly for overtime. (Id. at ¶¶ 28, 33.) Instead, plaintiffs allege, Cleveland used a "daily rate compensation system that did not take into account all hours worked in a workweek or overtime hours." (Id. at ¶ 25.) Cleveland denies plaintiffs' allegations.

         Plaintiffs have moved for conditional certification of a collective FSLA action under 29 U.S.C. § 216(b) (dkt. #6), but before determining whether conditional certification is appropriate, the court must first address defendant's motion to transfer this case to the Northern District of Oklahoma as called for by a forum selection clause in the arbitration agreement signed by plaintiffs at the outset of their employment. By signing Cleveland's "Agreement to Arbitrate Disputes, " plaintiffs Gundrum and King agreed to "submit to binding arbitration any dispute, claim or controversy arising from [their] employment with Cleveland Integrity Services, Inc., including, but not limited to, ... all employment disputes, including, but not limited to, those arising under. . . [the] FLSA[.]" (Def.'s Exs. (dkt. ##21-1, 23).) The arbitration agreements further state that "[a]ny Arbitration shall be conducted by one (1) arbitrator under the rules of the American Arbitration Association and shall be held at the offices of Cleveland Integrity Services, Inc. of Cleveland, Oklahoma." (Id.)


         The U.S. Supreme Court recently clarified that "the appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens, " which is codified in 28 U.S.C. § 1404(a) "for the subset of cases in which the transferee forum is within the federal court system[.]" Atl. Marine Constr. Co. v. U.S. Dist. Ct.for the W. Dist. of Tex., 571 U.S.__, 134 S.Ct. 568, 580 (2013). The Court also clarified that the § 1404(a) analysis must be adjusted when a valid forum selection clause is the basis for a motion to transfer; specifically, (1) "the plaintiff's choice of forum merits no weight, " (2) the parties' private interests are immaterial and (3) the court should not weigh the transferee court's familiarity with the law that would be determined by the transferor court's choice of law rules, since those rules will not be transferred along with a § 1404(a) transfer. Id. at 581-82.

         Consequently, "[w]hen the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause. Only under extraordinary circumstances unrelated to the convenience of the parties should a § 1404(a) motion be denied." Id. at 581 (footnote omitted).

         In support of its transfer motion, defendant also points to Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Lauer, 49 F.3d 323 (7th Cir. 1995), which held that when "the location of arbitration is preordained, " motions to compel arbitration under § 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4, must be brought in the district where arbitration is to take place. Id. at 327 (citing Lawn v. Franklin, 328 F.Supp. 791, 793 (S.D.N.Y. 1971) ("The proper District within which the petition for [a § 4] order should be filed is the District where the 'proceedings' by virtue of the contract of the parties are to take place.")); see also Daniels v. Painter, Case No. 15-CV-1334, 2016 WL 3034246, at *5 (granting the defendants' § 1404(a) motion to transfer the case to the Central District of California pursuant to arbitration agreements providing for exclusive arbitration in Los Angeles, despite the plaintiffs' challenge to the scope of the arbitration clause). Here, the Seventh Circuit's Merrill Lynch decision, therefore, would appear to dictate a direct transfer to the Northern District of Oklahoma.

         Plaintiffs oppose defendant's motion to transfer on the grounds that the Atlantic Marine, Merrill Lynch and Daniels decisions are all factually distinguishable because the validity of the forum selection clauses in those cases was not in dispute.[2] Plaintiffs assert that here, in contrast, Cleveland's arbitration agreement is "illegal and unenforceable on its face, " in light of the Seventh Circuit's decision in Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016). In Lewis, the Seventh Circuit affirmed the district court's denial of defendant Epic's motion to compel arbitration, holding that "[b]ecause it precludes employees from seeking any class, collective, or representative remedies to wage-and-hour disputes, Epic's arbitration provision violates Sections 7 and 8 of the NLRA [("National Labor Relations Act")]." Id. at 1161.

         Here, in contrast, Cleveland's arbitration agreement contains no term precluding class or collective remedies. Even so, plaintiffs contend that the holding in Lewis applies here because Cleveland argued in a motion to compel individual arbitration in a similar collective action in the District of Kansas, that the same arbitration language at issue here "does not provide for class or collective actions, [so] none are permitted[, ]"[3] (Pis.' Opp'n Br. (dkt. #31) at 4-5.)

         Under this interpretation, plaintiffs argue, the arbitration agreement is unlawful, because "[t]he [National Labor Relations] Board [("NLRB")] has held in a number of cases that the maintenance of a mandatory arbitration agreement is unlawful, even if it is silent regarding class or collective claims, if the employer has applied the agreement to preclude employees from pursuing employment-related claims on a class or collective basis in any forum." Rim Hosp. & Nelson Chico, an Individual, Case 21-CA-137250, 2016 WL 3626603 (N.L.R.B. Div. of Judges June 15, 2016) (collecting cases); see also Haynes Bldg. Servs., LLC & J. Tadeo Gomez-Flores, 363 N.L.R.B. No. 125, at *4 (2016) ("[W]e find that by threatening to compel arbitration on an individual rather than a class or collective basis, the Respondent has applied the Notice to Applicant and Arbitration Agreement to restrict Section 7 rights, in violation of Section 8(a)(1)[.]").

         In other words, plaintiffs contend that Cleveland's attempt to read an implied collective action waiver into its arbitration agreement in the District of Kansas litigation violates the NLRA. As such, that reading would also run afoul of the savings clause of the FAA, which "provides that any written contract 'evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist ...

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