The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ERIC HOLTS, on behalf of himself CIVIL ACTION
and of all others similarly situated
v. NO. 19-13546
TNT CABLE CONTRACTORS, INC., ET AL. SECTION "F"
ORDER AND REASONS
Before the Court is TNT Cable Contractors, Inc.’s motion to
compel arbitration and stay litigation. For the reasons that
follow, the motion is GRANTED.
Background
This Fair Labor Standard Act collective action arises out of
claims by technicians that their joint employers failed to pay
them overtime wages.
TNT Cable Contractors, Inc. and Udeo Services One, Inc.
provide telecommunication and installation services for
residential and commercial clients. Since March 2019, Eric Holts
has worked as a technician for TNT and Udeo. Holts’ primary duties
include driving to TNT’s warehouse to pick up supplies and
equipment along with a list or route of customers requiring
installation service that day; driving to the customers’ home or
1
business to install or repair equipment; calling customers to
confirm appointments; attending meetings as required by TNT and
Udeo; submitting electronic information regarding completed jobs
at the end of each day; returning to TNT’s office at the end of
the day if necessary.
On March 13, 2019, Holts and Udeo executed a Contractor
Arbitration Agreement, which broadly requires Holts and Udeo to
arbitrate “any and all claims of employment, joint employment, co-
employment, discrimination...,” as well as “any and all claims
arising out of any other local, state or federal statute,
regulation or policy relating to the rights of Contractors,
Employees, or Joint Employees such as those relating, but not
limited to payment of wages, fringe benefits, work hours,
employment classification, joint employment..., including but not
limited to...the Fair Labor Standards Act.”
In May 2019, Udeo and TNT entered into an Independent
Contractor Agreement, which references the parties’ own
arbitration agreement, which requires Udeo and TNT to “bring all
claims subject to arbitration in one arbitration proceeding” and
to submit all “covered claims” to arbitration. “Covered claims”
are broadly defined as including “but...not limited to, all claims
related to work performed under the Independent Contractor
Agreement...and specifically including any claim or cause of
2
action alleging [Udeo] w[as] improperly or insufficiently paid
wages under the Fair Labor Standards Act..., regardless of whether
those claims arose or accrued prior or subsequent to [Udeo]
entering into this Arbitration Agreement.”
On November 11, 2019, Holts sued TNT and Udeo, alleging that
he and other technicians regularly work more than 40 hours per
week, and that the defendants are joint employers that failed to
pay overtime wages to him and other technicians. The lawsuit was
filed as a collective action under the FLSA. It is alleged that
Udeo is a subcontractor of TNT, but that the entities are “joint
employers,” which “have been an enterprise[;]” “control[] and
supervise[] the work performed by” Holts and similarly situated
individuals; determine the technicians’ pay rate, wage deductions,
direction to work locations; and direct the specifics of Holts’
installation jobs. TNT and Udeo pay Holts and the putative class
members a set amount per job, regardless of the time spent working.
Holts alleges that he and the other technicians regularly work
over 40 hours per week, and that TNT and Udeo’s failure to pay
overtime violates the FLSA.
On January 9, 2020, Holts voluntarily dismissed his claims
without prejudice as to Udeo, perhaps recognizing that he agreed
to arbitrate his FLSA claims. TNT now seeks an order compelling
arbitration and requests that this litigation be stayed.
3
I.
A.
There is a “strong federal policy in favor of enforcing
arbitration agreements.” Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 217 (1985). Section 2 of the Federal Arbitration Act
provides that
[a] written provision in ... a 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 at law or
in equity for revocation of any contract.
9 U.S.C. § 2. Consistent with this strong presumption in favor of
arbitration, the FAA requires district courts to “compel
arbitration of otherwise arbitrable claims, when a motion to compel
arbitration is made.” Sedco, Inc. Petroeleos Mexicanos Mexican
Nat’l Oil Co., 767 F.2d 1140, 1147 n.20 (5th Cir. 1985). Section
3 of the FAA states:
If any suit or proceeding be brought in any of the courts
of the United States upon any issue referable to
arbitration. . . the court. . . shall on application of
one of the parties stay the trial of the action until
such arbitration has been had in accordance with the
terms of the agreement. . . .
9 U.S.C. § 3. This mandatory provision calls for a stay or
dismissal of the proceedings at the request of a party if the
dispute is referred to arbitration. Tittle v. Enron Corp., 463
F.3d 410, 417 n.6 (5th Cir. 2006); Alford v. Dean Witter Reynolds,
4
Inc., 975 F.2d 1161, 1164 (5th Cir. 1992). If the Court is
satisfied that the parties agreed to arbitrate their dispute, the
Court “shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement.” 9
U.S.C. § 4.
Courts undertake a two-step inquiry when considering motions
to compel arbitration. Washington Mut. Finance Group v. Bailey,
364 F.3d 260, 263 (5th Cir. 2004). The first step requires a
finding that the parties agreed to arbitrate the dispute at issue.
Id.1 Second, upon such a finding, the Court must consider whether
any federal statute or policy renders the claims nonarbitrable.
Bailey, 364 F.3d at 263.
B.
A litigant who is not a party to an arbitration agreement may
invoke arbitration under the FAA and the relevant agreement if the
relevant state contract law allows the litigant to enforce the
1 The first determination itself has two parts: “(1) whether there
is a valid agreement to arbitrate between the parties; and (2)
whether the dispute in question falls within the scope of that
arbitration agreement.” Webb v. Investacorp, Inc., 89 F.3d 252,
257-58 (5th Cir. 1996). While state law governs the first
consideration, in which the federal policy favoring arbitration
does not apply, see Am. Heritage Life Ins. Co. v. Lang, 321 F.3d
533, 537-38 (5th Cir. 2003), “due regard must be given to the
federal policy favoring arbitration, and ambiguities as to the
scope of the arbitration clause itself must be resolved in favor
of arbitration.” Webb, 89 F.3d at 258.
5
agreement. Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631
(2009). Traditional state law principles such as estoppel allow
a contract to be enforced by or against non-signatories. Id.
(quotation omitted). Indeed, federal courts have recognized five
traditional bases for binding non-signatories to the arbitration
agreements of others. Thomson-CSF, S.A. v. American Arbitration
Ass’n, 64 F.3d 773, 766 (2d Cir. 1995). These bases include: “1)
incorporation by reference; 2) assumption; 3) agency; 4) veil-
piercing/alter ego; and 5) estoppel.” Id. The Fifth Circuit has
adopted the doctrine of equitable estoppel, allowing “a non-
signatory to a contract with an arbitration clause to compel
arbitration.” Grigson v. Creative Artists Agency, L.L.C., 210 F.3d
524, 527 (5th Cir. 2000).
“[A] party to an arbitration agreement[,]” like Holts, “may
be equitably estopped from litigating its claims against non-
parties in court and may be ordered to arbitration.” Brown v.
Pacific Life Ins. Co., 462 F.3d 384, 398 (5th Cir. 2006). When
intertwined claims are present, a non-signatory like TNT may compel
arbitration:
(1) when the signatory to a written agreement
containing an arbitration clause must rely on the terms
of the written agreement in asserting its claims against
a non-signatory; or (2) when the signatory raises
allegations substantially interdependent and concerted
misconduct by both the non-signatory and one or more
signatories to the contract.
6
Id. (citing Grigson v. Creative Artists Agency, LLC, 210 F.3d 524,
528 (5th Cir. 2000)).2 The Fifth Circuit in Grigson observed that
equitable estoppel “is much more readily applicable when the case
presents both independent bases,” but the court underscored that
determining whether to apply equitable estoppel to evaluate
whether a non-signatory may compel arbitration in the intertwined
claims context turns on the facts of each case and further observed
that fairness is the “linchpin” for equitable estoppel. See
Grigson, 310 F.3d at 527-28 (embracing the intertwined claims test
of equitable estoppel formulated by the Eleventh Circuit in MS
Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999),
abrogated on other grounds, Arthur Andersen LLP v. Carlisle, 556
U.S. 624, 631 (2009)). This rule “makes sense because the parties
resisting arbitration had expressly agreed to arbitrate claims of
the very type that they asserted against the nonsignatory.” Bridas
2 The first Grigson basis, or the direct benefits rationale, is
met when “each of the signatory's claims makes reference to or
presumes the existence of the agreement.” Palmer Ventures LLC v.
Deutsche Bank AG, 254 Fed. Appx. 426, 431 (5th Cir. 2007)(citing
Grigson, 210 F.3d at 527). “[E]quity does not permit a signatory
to hold a non-signatory liable on the basis of the agreement
containing the arbitration clause while denying the effect of the
arbitration clause to the non-signatory.” Id. (citing Grigson, 210
F.3d 528). The second basis, the substantially interdependent
claims rationale, requires more than just intertwining facts
between the claims against signatories and non-signatories. Id. at
432. “The standard is ‘substantially concerted and interdependent
misconduct . . . .’” Id. (quoting Grigson, 210 F.3d at 527).
7
S.A.P.I.C. v. Gov't of Turkm., 345 F.3d 347, 361 (5th Cir.2003);
see Ryan v. Thunder Restorations, Inc., No. 09-3261, 2011 WL
2680482, at *8 (E.D. La. July 8, 2011).
In other words, arbitration may be compelled by a non-
signatory under equitable estoppel where the claims are
“inextricably tied.” See Gautier v. Bactes Imaging Solutions,
LLC., No. 18-1435, 2018 WL 4095153, at *4 (E.D. La. Aug. 28,
2018)(granting non-signatory defendant’s motion to compel
arbitration under equitable estoppel given that the plaintiff’s
claims against the signatory defendant were predicated on the
claims against the non-signatory defendant). In Hill v. G E Power
Systems, Inc., 282 F.3d 343, 349 (5th Cir. 2002), the Fifth Circuit
found that the second basis of the test was met where it was
alleged that two companies worked in tandem to misappropriate trade
secrets and fraudulently induce a party to contract with them.
Such conduct met the standard of “interdependent and concerted
misconduct.” Id.
II.
Holts and Udeo are the only signatories to the Contractor
Arbitration Agreement; TNT is a non-signatory. Nevertheless, TNT
seeks to compel arbitration of Holts’ FLSA claims because of the
intertwined, indeed identical, nature of the claims. Because Holts
fails to distinguish Udeo’s and TNT’s alleged wrongdoing in his
8
complaint, and specifically alleges that they jointly employed him
and jointly failed to pay him overtime, TNT submits that Holts
should be compelled to arbitrate his claims against TNT along with
his claims against Udeo under the doctrine of equitable estoppel.
The Court agrees.
In his complaint, Holts alleges that “Defendants were joint
employers of the Plaintiff within the meaning of the FLSA.
Defendants do not act entirely independent of each other and are
not completely dissociated with respect to the employment of the
Plaintiff.” Holts himself does not distinguish TNT’s wrongdoing
in allegedly failing to pay overtime in any way from the alleged
wrongdoing of Udeo. Holts’ FLSA claims are based on identical
facts. Equitable estoppel requires “substantially interdependent
and concerted misconduct” by both the signatory and the non-
signatory. Here, the allegations against TNT and Udeo cannot be
separated. By failing to differentiate between the wrongdoing by
each defendant, Holts alleges interdependent claims. Fairness --
the “linchpin” of equitable estoppel -- militates against
arbitrating Holts’ claims against Udeo while litigating his
identical claims against TNT. Grigson, 210 F.3d at 528.
Arbitrating claims against Udeo while litigating claims against
TNT could yield inconsistent results, waste time and resources,
and thwart federal policy favoring arbitration.
9
Analogous case literature reinforces the conclusion that
TNT’s motion to compel arbitration should be granted. For example,
TNT invokes Henry v. New Orleans Saints, No. 15-5971, 2016 WL
2901775 (E.D. La. 2016). There, the plaintiff sued the Saints,
Tom Benson, and Gayle Benson asserting causes of action under the
FLSA for failure to pay overtime wages. Id. at *1. All three
defendants moved to compel arbitration based on the arbitration
agreement between the plaintiff and the Saints. The plaintiff
contested the Bensons’ motion to compel because the Bensons were
non-signatories to the arbitration agreement. Another Section of
this Court disagreed, finding instead that the intertwined claims
rationale applied because the plaintiff had alleged substantially
interdependent and concerted misconduct against the Bensons and
the Saints and that all of the defendants were his “employer” under
the FLSA. Id. at *12. “Given the relatedness of the claims
collectively asserted against the Defendants,” the Court reasoned,
“the arbitration agreement can be invoked by all Defendants,
including the Bensons.” Id. at *13.
So, too, here. Holts characterizes TNT and Udeo as “joint-
employers,” just like how Henry characterized the Saints and the
Bensons collectively as his employers. Holts’ claims against the
arbitration signatory, Udeo, and non-signatory, TNT, are
interdependent (if not identical) like the ones alleged by Henry
10
against the signatory, the Saints, and non-signatories, the
Bensons, given that they arise out of the alleged joint employment
arrangement. As the Court noted in Henry, federal policy favoring
arbitration would not be fulfilled if the Court denied the motion
to compel arbitration of Holts’ claims against TNT. Allowing Holts
to pursue his identical claims against TNT and Udeo in separate
forums would be unfair and could lead to inconsistent results.3
Holts opposes TNT’s motion to compel arbitration because TNT
is a non-signatory to his arbitration agreement with Udeo and
because his allegation that Udeo and TNT are joint employers is
insufficient to render the claims interdependent. However, it is
not simply the plaintiff’s own nomenclature that indicates
interdependence. Holts himself fails to distinguish the alleged
wrongdoing between the two parties and alleges that neither party
acted fully independently of the other. The plaintiff’s own
factual allegations that TNT and Udeo jointly or indivisibly failed
to pay overtime wages compel a finding that the claims are
intertwined. Holts also seeks to avoid arbitration by asserting
that each employer must meet the “economic realities test” the
claims cannot be considered intertwined. This argument is a red
3 It is also noteworthy that any cross-claims or disputes between
Udeo and TNT concerning Holts’ FLSA claims must be submitted to
arbitration under the Udeo-TNT independent contractor agreement.
11
herring. The Court’s task here is limited to determining whether
the equitable estoppel doctrine applies to permit TNT to compel
Holts’ claims to arbitration; the Court need not resolve the merits
of the plaintiff’s FLSA claims here or the relationship among each
of the parties by resort to the contract governing Holts and Udeo’s
relationship or the contract governing Udeo’s and TNT’s
relationship. That each alleged employer must meet the economic
realities test4 does not alter the fact that Holts identically
alleges failure to pay overtime wages against his “joint employers”
-- the signatory and non-signatory to the arbitration agreement
governing Holts’ claims.
TNT can compel arbitration because Holts alleges
“substantially interdependent and concerted misconduct” between
Udeo, a signatory, and TNT, a non-signatory. The allegations
include substantially interdependent and concerted misconduct
where, as here, the claims against the non-signatory defendant
depend in some way on the acts of the signatory defendant. Had
TNT been a signatory to Holts’ agreement with Udeo, the claims
against it would fall within the scope of the arbitration
4 The economic realities test is applied to determine whether a
party is an “employer” within the meaning of the FLSA. Gray v.
Powers, 673 F.3d 352, 354 (5th Cir. 2012). Under this test, courts
define employer broadly and those with operational control over
employees may be individually liable. Orozo v. Plackis, 757 F.3d
445, 448 (5th Cir. 2014).
12
agreement. Given the relatedness of the claims collectively
asserted against Udeo and TNT, TNT is entitled to compel
arbitration under the doctrine of equitable estoppel. Just like
his claims against Udeo, Holts must submit his claims against TNT
to arbitration.
Accordingly, IT IS ORDERED: that the defendant’s motion to
compel arbitration and stay litigation is GRANTED. The Clerk of
Court shall stay and administratively close this case, to be
reopened if necessary after arbitration is completed.
New Orleans, Louisiana, March 4, 2020
sy “fue
UNITED STATES DISTRICT JUDGE
13