United States District Court, D. Nevada
ORDERALLOWINGLIMITED DISCOVERYON DEFENDANTS'
MOTIONTOCOMPEL ARBITRATION (ECF NO. 55)
P. GORDON UNITED STATES DISTRICT JUDGE.
Kellogg Company and Kellogg Sales Company (collectively,
Kellogg) move to compel plaintiff Brian Smith to arbitrate
his Fair Labor Standards Act (FLSA) claim for unpaid overtime
wages pursuant to an agreement between the parties (the
“Incentive Agreement”). Smith opposes this
motion, arguing the arbitration provision of the agreement is
unenforceable because it contains an illegal waiver of
collective and class actions.
the Federal Arbitration Act, arbitration agreements
“shall be 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. My role
in ruling on a motion to compel arbitration is limited. I
must determine (1) whether there is a valid agreement to
arbitrate, and (2) whether the agreement covers the dispute.
Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir.
2015). If these conditions are satisfied, I have no
discretion and must compel arbitration. See Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). The
parties dispute the enforceability of the arbitration
Morris v. Ernst & Young, the Ninth Circuit held
that conditioning employment on signing an arbitration
agreement with a collective action waiver violates § 7
of the National Labor Relations Act (NLRA). 834 F.3d 975, 990
(9th Cir. 2016). In Johnmohammadi v. Bloomingdale's,
Inc., the Ninth Circuit held that such a waiver is
enforceable if the employee is given the option to opt out of
arbitration “free of any express or implied threats of
termination or retaliation.” 755 F.3d 1072, 1075 (9th
Cir. 2014); see also Id. at 1077 (holding the
employee had “freely elected” to individually
arbitrate employment-related disputes without coercion from
Bloomingdale's and thus the agreement did not violate the
NLRA). The court also stated that an offer of “conduct
immediately favorable to employees” might violate the
NLRA if it is undertaken “with the express purpose of
impinging upon its employees' freedom of choice in
deciding whether to waive or retain their right to
participate in class litigation.” Id. at 1076
(internal quotation omitted).
enforceability of the arbitration provision at issue in this
case hinges in the first instance on determining whether
signing the Incentive Agreement was a condition of
Smith's continued employment with Kellogg, as argued by
Smith, or a condition of receiving incentive and severance
benefits for which Smith would have been otherwise
ineligible, as argued by Kellogg. If Smith's employment
was conditioned on agreeing to individual arbitration, the
agreement could still be enforceable if he was given a
meaningful opportunity to opt out of arbitration or the
waiver. See, e.g., Bradford v. Flagship Facility
Servs. Inc., No. 17-CV-01245-LHK, 2017 WL 3130072, at *5
(N.D. Cal. July 24, 2017) (“District courts in the
Ninth Circuit applying Morris and
Johnmohammadi have held that the NLRA does not
render a class and collective action waiver unenforceable if
the employee had a meaningful opportunity to opt out of the
collective and class action waiver or the arbitration
agreement.” (internal quotation omitted)). If
Smith's employment was not conditioned on agreeing to
individual arbitration, enforceability depends on whether
Kellogg offered the incentive and severance benefits with the
intent to coerce Smith into giving up his right to pursue
contends that had he not signed the agreement containing the
arbitration provision, he would have been terminated, in
violation of Morris. Smith also argues that he could
not opt out of the arbitration provision and still receive
the offered incentive and severance benefits, which he argues
violates Johnmohammadi. Finally, he argues that
Kellogg admitted to offering the benefits to induce Smith to
waive his right to concerted activity.
asserts that Smith was not required to sign the agreement
(and could have revoked his agreement within seven days of
signing) and had he signed it, he would not have lost his
job. Furthermore, Kellogg argues that it is not prohibited
from conditioning a severance package on, among other things,
a collective action waiver in an arbitration agreement. With
regard to inducing a collective action waiver, Kellogg argues
that Smith has offered no evidence to support his contention
regarding its intentions.
remains unclear from the parties' briefing whether the
arbitration agreement is enforceable and thus whether I must
compel arbitration. I therefore will order limited discovery
aimed at fleshing out the issues the parties have raised.
THEREFORE ORDERED that the parties shall conduct limited
discovery related to the enforceability of the arbitration
and waiver provisions, including the following questions: (1)
Did any employee offered the Incentive Agreement refuse to
sign? If so, what result? (2) Were employees who did not sign
the Incentive Agreement eligible for any other severance
benefits? (3) Did Kellogg affirmatively communicate to
employees regarding repercussions to their employment status
if they did not sign the Incentive Agreement? (4) Is there
evidence that Kellogg offered the incentive and severance
benefits for the express purpose of limiting employees'
freedom of choice regarding participation in collective or
class actions? (5) Did any employees revoke their agreement?
If so, what result?
FURTHER ORDERED that the parties may serve each other with
written discovery requests regarding these issues. Responses
will be due within 14 days of service unless
otherwise agreed to by the parties or ordered by the court.
The parties can stipulate to or petition the court for