Martin J. Walsh v. Arizona Logistics, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MARTIN J. WALSH, Secretary of No. 20-15765

Labor, United States Department of

Labor, D.C. No.

Plaintiff-Appellee, 2:16-cv-04499-

DLR

v.

ARIZONA LOGISTICS, INC., DBA OPINION

Diligent Delivery Systems, an

Arizona corporation; PARTS

AUTHORITY ARIZONA LLC, an

Arizona limited liability company,

Defendants,

and

LARRY BROWNE,

Defendant-Appellant.

Appeal from the United States District Court

for the District of Arizona

Douglas L. Rayes, District Judge, Presiding

Argued and Submitted February 5, 2021

Phoenix, Arizona

Filed May 18, 2021

2 WALSH V. BROWNE

Before: William A. Fletcher, Eric D. Miller, and

Danielle J. Hunsaker, Circuit Judges.

Opinion by Judge Hunsaker

SUMMARY *

Arbitration

The panel affirmed the district court’s denial of an

alleged employer’s motion to compel arbitration, arising

from the Secretary of Labor’s Fair Labor Standards Act

(“FLSA”) enforcement action that sought relief on behalf of

one party to a private arbitration agreement.

The panel held that although the Federal Arbitration Act

favored arbitration agreements, the Supreme Court’s

decision in EEOC v. Waffle House, Inc., 534 U.S. 279, 289

(2002) (holding that the FAA addresses enforceability only

as to the parties to the arbitration agreement), dictated that

the Secretary could not be compelled to arbitrate this case,

even if the employees had agreed to arbitration. As in Waffle

House, the remedial statute at issue here – Sections 16(c) &

17 of the FLSA – unambiguously authorized the Secretary

to obtain monetary relief on behalf of specific aggrieved

employees. There was nothing in either section suggesting

that an arbitration agreement between the parties to the

underlying employment relationship impacted the

Secretary’s enforcement power. Also, there was no dispute

*

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

WALSH V. BROWNE 3

that, like the EEOC in Waffle House, the Secretary was not

a party to the arbitration agreement between the alleged

employer and the employee delivery drivers.

COUNSEL

Christopher M. Mason (argued) and John J. Egbert, Jennings

Strouss & Salmon PLC, Phoenix, Arizona; Kevin H. George,

Kevin H. George & Associates PC, Houston, Texas; for

Defendant-Appellant.

Shelley E. Trautman (argued), Attorney; Rachel Goldberg,

Counsel for Appellate Litigation; Jennifer S. Brand,

Associate Solicitor; Kate S. O’Scannlain, Solicitor of Labor;

Office of the Solicitor, United States Department of Labor,

Washington, D.C.; for Plaintiff-Appellee.

OPINION

HUNSAKER, Circuit Judge:

The question before us is whether a private arbitration

agreement binds the Secretary of Labor when bringing a Fair

Labor Standards Act (FLSA) enforcement action that seeks

relief on behalf of one party to the arbitration agreement

against the other party to that agreement. We conclude that

despite the Federal Arbitration Act’s (FAA) policy favoring

arbitration agreements, the Supreme Court’s decision in

EEOC v. Waffle House, Inc., 534 U.S. 279 (2002), requires

us to answer this question in the negative. Therefore, we

affirm the district court’s denial of the alleged employer’s

motion to compel arbitration.

4 WALSH V. BROWNE

I. BACKGROUND

The Department of Labor brought an enforcement

against Larry Browne and his companies Arizona Logistics

Inc., d/b/a Diligent Delivery Systems, and Parts Authority

Arizona LLC. Only Browne is party to this appeal. The

Secretary alleged that Browne and his entities violated the

FLSA’s minimum wage, overtime, record-keeping, and anti-

retaliation requirements by misclassifying delivery drivers

as independent contractors rather than employees. 1 Browne

moved to compel arbitration of the Secretary’s enforcement

action based on arbitration agreements that he and his

entities entered into with the delivery drivers. The district

court denied Browne’s motion, concluding that the Secretary

cannot be compelled to arbitrate based on the Supreme

Court’s decision in Waffle House. Browne timely appealed,

and we have jurisdiction under 9 U.S.C. § 16(a)(1)(C).

II. DISCUSSION

We review the denial of a motion to compel arbitration

de novo. Blair v. Rent-A-Center, Inc., 928 F.3d 819, 824 (9th

Cir. 2019).

Parties who agree to resolve their disputes through

arbitration can be compelled to follow through with that

agreement. The FAA provides that 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. But the FAA addresses

1

“Employment contracts, except for those covering workers

engaged in transportation, are covered by the FAA.” Waffle House, 534

U.S. at 289 (emphasis added). Whether this exception to the FAA applies

in this case was not raised on appeal, and we express no view on this

issue.

WALSH V. BROWNE 5

enforceability only as to the parties to the arbitration

agreement. Waffle House, 534 U.S. at 289. It does not

provide that agreements to arbitrate are enforceable against

nonparties. And of particular importance here, it does not

address whether a private agreement to arbitrate is

enforceable against a government actor that brings an

enforcement action to vindicate the rights of a party to the

arbitration agreement. Id. The Supreme Court, however,

directly addressed this issue in Waffle House.

In that case, the Equal Employment Opportunity

Commission (EEOC) brought an enforcement action against

Waffle House after it fired an employee who suffered a

seizure at work. Id. at 283–84. The EEOC brought an anti-

discrimination enforcement action on behalf of both the

public interest and the terminated employee—who was not

a party to the action—and sought injunctive relief and

employee-specific monetary relief. Id. Waffle House moved

to compel arbitration of the EEOC’s enforcement action

because it had an arbitration agreement with the terminated

employee who was the subject of the action. Id. at 284.

The Court ruled against Waffle House, holding that the

EEOC could not be compelled to arbitrate. Construing the

remedial statute at issue, the Court noted that the terminated

employee had no authority to control the litigation even

though the EEOC sought monetary relief on his behalf. Id.

at 291. Rather, the EEOC was the “master of its own case,”

id., and the statute “unambiguously authorize[d] [the EEOC]

to proceed in a judicial forum,” id. at 292. The Court further

reiterated its oft-repeated direction that arbitration “is a

matter of consent, not coercion.” Id. at 294 (internal

quotation marks and citation omitted). The EEOC was not

party to Waffle House’s arbitration agreement, and it was not

bound by the agreement because the FAA “does not require

6 WALSH V. BROWNE

parties to arbitrate when they have not agreed to do so.” Id.at

293 (internal quotation marks and citation omitted).

This same reasoning dictates that the Secretary cannot be

compelled to arbitrate this case. As in Waffle House, the

remedial statute at issue here unambiguously authorizes the

Secretary to obtain monetary relief on behalf of specific

aggrieved employees. Section 16(c) of the FLSA authorizes

the Secretary to “bring an action in any court of competent

jurisdiction to recover the amount of unpaid minimum wages

or overtime compensation and an equal amount as liquidated

damages” for any party named in the complaint. 29 U.S.C.

§ 216(c); Donovan v. Univ. of Texas at El Paso, 643 F.2d

1201, 1204 (5th Cir. 1981). Any money the Secretary

recovers on behalf of a specific employee “shall be held in a

special deposit account and shall be paid, on order of the

Secretary of Labor, directly to the employee or employees

affected.” 29 U.S.C. § 216(c). Section 17 of the FLSA

authorizes the Secretary “to seek broad injunctive relief as

well as back wages for all affected employees.” 2 Donovan,

643 F.2d at 1204; 29 U.S.C. § 217. Like the EEOC’s scope

of authority, the Secretary can seek relief under both

sections, see Reich v. Tiller Helicopter Servs., Inc., 8 F.3d

1018, 1033 n.11 (5th Cir. 1993), and there is nothing in

either section suggesting that an arbitration agreement

between the parties to the underlying employment

relationship impacts the Secretary’s enforcement power. See

Waffle House, 534 U.S. at 288.

2

In Waffle House, neither the majority nor the dissent questioned

the EEOC’s ability to seek broad-based injunctive relief in judicial

proceedings despite the employee’s arbitration agreement. 534 U.S.

at 305 (Thomas, J., dissenting). And in this case, it appears that Browne

contests only the Secretary’s authority to seek monetary relief under

Section 16(c). Thus, this case largely turns on Section 16(c).

WALSH V. BROWNE 7

Although the FAA establishes “a liberal federal policy

favoring arbitration agreements,” Moses H. Cone Mem’l

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, (1983), it

does not require arbitration beyond the terms agreed. Waffle

House, Inc., 534 U.S. at 289. To determine the reach of a

particular agreement, we must look to its express terms. Id.;

see also Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621

(2018) (“[The FAA] requires courts ‘rigorously’ to ‘enforce

arbitration agreements according to their terms.’” (quoting

Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 233

(2013))).

There is no dispute that, like the EEOC in Waffle House,

the Secretary is not party to the arbitration agreement

between Browne and his entities and the delivery drivers.

Browne nonetheless argues the Secretary is required to

arbitrate his claims for monetary relief because the delivery

drivers are the intended beneficiaries, and, therefore, the

Secretary is in privity with the delivery drivers. To support

his argument, Browne notes that any sums recovered under

Section 16(c) are secured “on behalf of” and paid “directly

to the employee.” This argument is not persuasive.

Specifically, Browne’s reliance on Chao v. A-One Med.

Servs., Inc., 346 F.3d 908 (9th Cir. 2003), is misplaced. In

that case, we held that res judicata barred the Secretary from

recovering overtime compensation for an employee when

“suing for employee-specific rights of precisely the sort [the

individual employee] already pursued.” Id. at 923. But we

further explained that the Secretary would not have privity

with an employee for res judicata purposes if, for example,

the Secretary sought an injunction to “vindicate broader

governmental interests[,]” not just to recover an employee’s

“individual economic loss.” Id. Thus, it does not

automatically follow that the Secretary shares the interests

8 WALSH V. BROWNE

required for privity with the employees on whose behalf the

Secretary sues. See id.

In Waffle House, the Supreme Court recognized that the

government can vindicate a public interest while also

pursuing employee-specific relief. See 534 U.S. at 296.

Although the Secretary, unlike the EEOC, may not recover

punitive damages under Section 16(c), the Secretary may

still have interests independent of the aggrieved employee

when seeking employee-specific relief, including deterring

other employers from violating the FLSA and protecting

complying employers from unfair wage competition with

noncomplying employers. Simply put, recovering monies

owed to aggrieved individuals does not necessarily indicate

that the Secretary is operating solely for the benefit of those

individuals. Id. at 294–95.

Moreover, the Secretary’s enforcement action, like the

EEOC’s enforcement action, is controlled by the

Secretary—not the delivery drivers. See Waffle House,

534 U.S. at 291 (“If it were true that the EEOC could

prosecute its claim only with [the employee’s] consent, or if

its prayer for relief could be dictated by [the employee], the

[lower] court’s analysis might be persuasive.”). The

Secretary does not need an employee’s consent to bring an

enforcement action. See Reich v. Stewart, 121 F.3d 400, 408

(8th Cir. 1997) (explaining an employee’s consent is not

required for the Secretary to bring a Section 16(c) action, as

Congress deleted such requirement in 1974) (citing Pub. L.

93–259, § 26, 88 Stat. 73). And, once the Secretary files suit,

not only does the employee’s right to sue terminate, but the

employee cannot intervene in the Secretary’s action.

29 U.S.C. § 216(c) (“The right . . . to become a party

plaintiff to any such action[] shall terminate upon the filing

of a complaint by the Secretary . . . .”); see also Marshall v.

WALSH V. BROWNE 9

U.S. Postal Serv., 481 F. Supp. 179, 180 (D.D.C. 1979)

(“The statutory language indicates that employees possess

no right to intervene in a suit brought by the Secretary.”);

Usery v. Bd. of Pub. Educ., Sch. Dist. of Pittsburgh, 418 F.

Supp. 1037, 1038 (W.D. Pa. 1976) (“The plain meaning of

this language is that the employee cannot become a party in

any capacity, including that of an intervenor, once the

Secretary has filed suit.”).

Browne contends that Waffle House is distinguishable

because it is based on the distinct rights and responsibilities

of the EEOC, which the Secretary does not share. Of course,

there are differences between the two agencies, including

differences in their respective enforcement rights. For

example, under the Americans with Disabilities Act and

Title VII, an employee must file a discrimination charge with

the EEOC before filing suit, and the EEOC has exclusive

jurisdiction over the charge for 180 days. See Waffle House,

534 U.S. at 291 (citing 42 U.S.C. § 2000e–5(f)(1)). Under

the FLSA, an employee can file a complaint with the

Secretary, but she can also proceed straight to filing suit in

federal court. See 29 U.S.C. § 216(b). We find this an

immaterial distinction for the question we must answer,

however, because once the Secretary decides to sue (whether

before or after an employee files suit), the Secretary, like the

EEOC, is in “command of the process.” See Waffle House,

534 U.S. at 291. The Secretary controls both the litigation

strategy and disposition of any recovery obtained for the

employee. 29 U.S.C. § 216(c). Under these circumstances,

we see no meaningful way to distinguish Waffle House. See

Am. Airlines, Inc. v. Mawhinney, 904 F.3d 1114, 1120 (9th

Cir. 2018).

10 WALSH V. BROWNE

III. CONCLUSION

Because the Secretary, not the employees on whose

behalf relief is sought, has authority to direct an FLSA

enforcement action, the Secretary cannot be compelled to

arbitrate, even if the employees have agreed to arbitration.

“To hold otherwise would undermine the detailed

enforcement scheme created by Congress simply to give

greater effect to an agreement between private parties that

does not even contemplate the [Secretary’s] statutory

function.” Waffle House, 534 U.S. at 296.

AFFIRMED.