Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-05003/USCOURTS-cand-3_14-cv-05003-9/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 15:2(a) Fair Labor Standards Act

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

JUAN SARAVIA, individually and on

behalf of all others similarly situated,

Plaintiff,

 v.

DYNAMEX, INC., DYNAMEX FLEET

SERVICES, LLC, DYNAMEX

OPERATIONS EAST, LLC, and

DYNAMEX OPERATIONS WEST, LLC,

Defendants. /

No. C 14-05003 WHA

ORDER RE DEFENDANTS’

MOTION TO COMPEL

ARBITRATION AND

PLAINTIFF’S MOTION TO

CONDITIONALLY CERTIFY

COLLECTIVE ACTION

INTRODUCTION

In this putative wage-and-hour collective action under the Fair Labor Standards Act,

plaintiff claims that he and other similarly-situated delivery drivers were misclassified as

independent contractors and thereby denied minimum wage and overtime pay. Defendants

jointly move to enforce arbitration clauses in the agreements that form the basis for plaintiff’s

claims. Plaintiff moves for conditional certification of the collective action for the purpose of

facilitating notice. For the reasons stated below, defendants’ motion to compel arbitration is

DENIED, and plaintiff’s motion for conditional certification is GRANTED IN PART AND DENIED

IN PART.

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 In addition to Dynamex West, Saravia has named as defendants Dynamex, Inc., Dynamex

Operations East, LLC, and Dynamex Fleet Services, LLC as defendants (collectively “Dynamex”), although his

contractual relationship was with Dynamex West only.

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STATEMENT

Plaintiff Juan Saravia is a native of El Salvador who lives in Richmond, California. 

Saravia speaks and reads Spanish, and speaks and reads only limited English. At all material

times, Saravia operated a business that provided delivery services using trucks that he owned

pursuant to contractual agreements with delivery logistics and brokering companies. Saravia ran

his business with the assistance of several additional drivers and helpers, whom he paid directly. 

At first, Saravia ran his business as a sole proprietorship and used the fictitious business name

“JJ Express.” In 2009, he registered JJ Express as a limited liability company. 

In 2010, defendant Dynamex Operations West, LLC, acquired an account that Saravia

had been working on pursuant to a contract with a different company.1

 Dynamex did not,

itself, own delivery vehicles as part of its business. Rather, it offered logistical consulting and

warehouse management systems, and entered into contracts with “transportation service

providers,” such as Saravia, in order to provide transportation services to its clients (Tuggle

Decl. ¶ 4). 

Although Saravia may have been able to continue working on other accounts with the

prior company, he elected to follow the work from that particular account to Dynamex West. 

He then entered into the first of three agreements to work out of the Hayward Branch of

Dynamex West. That agreement was called an “Independent Contractor Operating Agreement.” 

Saravia avers that a representative from Dynamex West presented the agreement to him without

explaining its contents and simply directed him where to sign and fill in information. Saravia

did not ask for a copy of the 2010 agreement in Spanish or ask to take an opportunity to have the

agreement translated, but Dynamex did not offer to give him an advance copy either. Saravia

says he signed quickly because he believed other drivers might be vying for the same work,

although he was never told that such pressure existed (Saravia Dep. at 101). He was given a

copy of the agreement after it was executed but never had it translated (id. at 100–03). Because

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the 2010 agreement was not in effect during the applicable limitations period, it is not at issue in

this litigation except to the extent it informs the interpretation of subsequent agreements. 

In 2011, Saravia executed a second “Independent Contractor Operating Agreement” with

Dynamex West. He avers that a representative of Dynamex West called him into the office

during a work day, that presented him with the agreement in English, and directed him to the

locations on the agreement to initial and sign. Although the representative from Dynamex West

who presented the agreement to Saravia spoke some Spanish, Saravia did not ask the

representative to explain any of the provisions, nor did he take any opportunity to have the

agreement translated. No one presented Saravia with a copy of the agreement before he signed

it, although Saravia never asked for one. Saravia’s only understanding of the substance of the

2011 agreement was that “once [he] signed it, [he] would continue to keep on working” and that

he needed to renew his 2010 agreement (id. at 109–14). 

In 2012, Saravia sought to expand his business with Dynamex West by including a

second truck, to be driven by his brother (id. at 115). The parties dispute whether Saravia asked

someone at Dynamex whether he could expand or whether Dynamex pressured him to expand,

but Saravia undertook the expansion in order “to see if [he] could get more money” (id. at 126). 

George Chin, a Dynamex representative, claims that he met with Saravia and his bilingual

helper, Rudy Santa Maria, and explained that expansion involved multiple steps including

obtaining proof of JJ Express’s Federal Employee Identification Number from the Internal

Revenue Service, obtaining additional liability insurance, and converting the contractual

relationship to one between JJ Express and Dynamex West, rather than between Saravia and

Dynamex West (Chin Dep. at 52, 55–56). Chin recalls meeting with Saravia numerous times

throughout that multi-step process. Saravia only recalls meeting with Chin once, and he insists

he was alone at that meeting. Nevertheless, Saravia does not dispute that he had to fill out

several forms and provide certain information in order to bring in his second truck, or that the

process took several months before his second truck was approved for use by Dynamex (Saravia

Dep., Exhs. 20, 25).

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Several weeks after Saravia began this process, he executed a “Transportation Services

Master Agreement” (Tuggle Decl., Exh. B). Chin presented that agreement to Saravia in an

electronic form displayed on a computer monitor and scrolled through the agreement. Chin

prompted Saravia to sign the agreement using a stylus on an electronic pad. Saravia received no

copy of the agreement until after he signed it. Although Chin avers that he had a practice to read

the terms of an agreement out loud to the person executing it, he does not specifically recall

doing so for Saravia (Chin Dep. at 84–87). 

Dynamex terminated its relationship with Saravia in 2012. Saravia claims “they fired

[him] because [he] refused to do another route after 5:00 p.m.” (Saravia Dep. at 116). The tax

documents that Saravia has produced demonstrate that he earned more than $120,000 per year,

although that does not account for the expenses that he was personally responsible for, such as

paying his helpers and drivers and maintaining his vehicle (Saravia Dep. at 139–41, Exh. 26). 

Saravia has not kept good records of his expenses, but his tax documents show that his actual net

earnings were between $30,000 and $50,000 per year (Konecky Decl., Exh. 7).

Saravia seeks to represent a collective action of delivery drivers whom Dynamex has

classified as independent contractors. Dynamex enters into agreements with individuals and

companies, which it calls “transportation service providers.” Those agreements govern the terms

on which the transportation service providers work with Dynamex’s clients. Although the

transportation service providers operate according to numerous different business models from

sole proprietors to corporations with five or more vehicles, the agreements are all based on

templates. Certain terms in the agreements based on those templates, such as pay scale and the

specific category of delivery services provided varied from service provider to service provider. 

The templates themselves have also changed over time, notably including an overhaul in 2013,

although the 2013 agreement has not rolled out in Massachusetts or California, where statewide

class actions are already pending. Nevertheless, many of the substantive terms are consistent.

Pursuant to these agreements, drivers all have the same basic duties of performing local

deliveries according to the terms and logistics set by Dynamex. Drivers generally use

Dynamex’s proprietary mobile tracking application in order to communicate with Dynamex’s

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central dispatching for information such as routing. They are subject to a similar set of

deductions from their income in order to pay certain expenses. All of the agreements classified

transportation service providers as independent contractors and did not provide benefits such as

overtime or minimum wages (Leveridge Dep. 34, 69, 105, 186, 246; Saravia Decl. ¶¶ 16–19;

Santos Decl. ¶ 17; Valdez Decl. ¶ 16).

Dynamex moves to enforce arbitration clauses in Saravia’s 2011 and 2012 agreements

and to stay the litigation pending an arbitrator’s determination of the arbitrability of the

underlying claims. Saravia moves to conditionally certify the collective action in order to

facilitate notice. This order follows full briefing and oral argument on both motions, as well as

limited discovery and supplemental briefing pertaining to whether the parties intended to

delegate the issue of arbitrability to arbitration.

ANALYSIS

1. DYNAMEX’S MOTION TO COMPEL ARBITRATION.

Defendants’ motion to compel arbitration is governed by the Federal Arbitration Act. 

9 U.S.C. 1, et seq. The FAA requires the resolution of two “gateway” issues: (1) whether a

valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the

dispute at issue. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002). If a valid

arbitration clause exists, arbitration is mandatory unless the party resisting arbitration can prove

a defense to enforcement of the agreement, such as unconscionability. Pinnacle Museum Tower

Association v. Pinnacle Market Development (US), LLC, 55 Cal. 4th 223, 235 (2012). 

Each of the three agreements between Saravia and Dynamex West included arbitration

provisions. The provisions in the 2010 and 2011 agreements were identical. They provided

(Tuggle Decl., Exh. A ¶ 19):

All disputes and claims arising under, out of, or relating to this

Agreement . . . including the arbitrability of disputes between the

parties, shall be fully resolved by arbitration in accordance with

Texas’s Arbitration Act and/or the Federal Arbitration Act. Any

Arbitration between the parties will be governed by the

Commercial Arbitration Rules of the American Arbitration

Association (“the Rules”). The parties specifically agree that no

dispute may be joined with the dispute of another and agree that

class actions under this arbitration provision are prohibited. . . . 

The place of the arbitration herein shall be Dallas, Texas. . . . The

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parties agree that the arbitration fees shall be split between the

parties, unless CONTRACTOR shows that the arbitration fees will

impose a substantial financial hardship on CONTRACTOR . . . .

The 2012 agreement provided (id., Exh. B ¶ 27):

In the event of any dispute that may arise between the parties

regarding services and performance hereunder, and as a condition

precedent to any other remedy herein, the parties agree to:

A. Initially, and as soon as practicable, meet and confer with each

other . . . ;

B. In the event that such voluntary efforts are not successful in

resolving the dispute, submit the matter to arbitration in

accordance with the Texas Arbitration Act and/or the Federal

Arbitration Act. Any Arbitration between the parties will be

governed by the Commercial Arbitration Rules of the American

Arbitration Association (“the Rules”). The parties specifically

agree that no dispute may be joined with the dispute of another and

agree that class actions under this arbitration provision are

prohibited. . . . The place of the arbitration herein shall be Dallas,

Texas. . . . The parties agree that the arbitration fees shall be split

between the parties.

Each of the three agreements also included choice-of-law provisions designating Texas

law.

Saravia’s claims are based on the 2011 and 2012 agreements (the 2010 agreement was

not in effect within the applicable statute of limitations period). Dynamex moves to enforce the

arbitration provisions in the 2011 and 2012 agreements.

A. Choice Of Law.

Although the Federal Arbitration Act governs the enforcement of an arbitration clause,

such enforcement may be defeated by defenses to the enforcement of a contract. Saravia

contends that the arbitration provisions in the 2011 and 2012 agreements are unenforceable

because they were unconscionable. Thus, substantive contract law applies to Saravia’s

opposition to the enforcement of the arbitration provisions in those agreements.

Both the 2011 and the 2012 agreements included choice-of-law provisions applying the

substantive law of Texas to those agreements (Tuggle Decl., Exh. A ¶ 17; Exh. B ¶ 24). A

district court applies the choice-of-law principles of the state in which it sits. Bassidji v. Goe,

413 F.3d 928, 933 (9th Cir. 2005). Under California law, a contractual choice-of-law provision

should be enforced if: (i) the chosen state’s law has a “substantial relationship” to the parties or

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the transaction, (ii) the forum state has no “fundamental policy” that is inconsistent with the

chosen state’s law, and (iii) even if such a fundamental conflict exists, the provision should

nevertheless be enforced unless the forum state has a “materially greater interest” in the

resolution of the matters at issue. In re Vortex Fishing Sys., Inc., 277 F.3d 1057, 1069 (9th Cir.

2001). The parties agree that the first prong is met because Dynamex West is headquartered in

Texas. See Peleg v. Neiman Marcus Grp., Inc., 204 Cal. App. 4th 1425, 1445–46 (2012). 

As to the second prong, there are several material differences between California and

Texas law pertaining to the enforceability of the arbitration provisions at issue here. California

public policy holds that the imposition of substantial forum fees is grounds for invalidating an

arbitration agreement, even though such fees could be overturned through judicial review, while

Texas law finds an arbitrator’s ability to shift costs is sufficient to protect a party’s rights. 

Compare Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal. 4th 83, 110 (2000), with

In re Poly-Am., L.P., 262 S.W.3d 337, 357 (Tex. 2008). Similarly, California law does not

permit enforcement of arbitration agreements even after multiple defects have been severed

because such an agreement “indicate[s] a systematic effort to impose arbitration . . . as an

inferior forum that works to the employer’s advantage.” Armendariz, 24 Cal. 4th at 124. By

contrast, Texas law would enforce such a provision as long as “the parties would have entered

into the agreement absent the unenforceable provisions.” D.R. Horton-Texas, Ltd. v. Drogseth,

2013 WL 3377121, at *4 (Tex. App., July 3, 2013). In light of these differences, this order finds

that Texas law conflicts with fundamental aspects of California’s substantive law pertaining to

unconscionability. Douglas v. U.S. Dist. Court for Cent. Dist. of California, 495 F.3d 1062,

1067 (9th Cir. 2007). Furthermore, this order finds that California has a materially greater

interest than Texas in adjudicating this dispute inasmuch as plaintiff is located in California, and

the agreements at issue were executed and performed in California, while Texas’s only interest

in the dispute arises out of the fact that one of the defendants is headquartered there. Id. at 1067,

n.2. Accordingly, California law governs Saravia’s defenses to the enforcement of the

arbitration provisions in the 2011 and 2012 agreements.

B. Whether The Court Can Decide Arbitrability.

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The determination of whether an arbitration clause is valid, applicable, and enforceable is

reserved to the district court unless “the parties clearly and unmistakably provide[d] otherwise,”

such as by delegating the issue of arbitrability to arbitration. AT&T Technologies, Inc. v.

Communications Workers of America, 475 U.S. 643, 649 (1986). Even if a delegation of

arbitrability is clear and unmistakable it may be found unenforceable if the delegation itself is

unconscionable. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 71–74 (2010). Dynamex

contends that both the 2011 and the 2012 agreements clearly and unmistakably delegated the

issue of arbitrability to an arbitrator.

The 2011 agreement expressly committed all disputes “including the arbitrability of

disputes between the parties” to arbitration (Tuggle Decl., Exh. A ¶ 19). Saravia does not

contest that this is a clear and unmistakable delegation of arbitrability to arbitration. The 2012

agreement, however, did not include such an express delegation clause. Instead, that agreement

incorporated the Commercial Arbitration Rules of the American Arbitration Association. Rule

7(a) of the AAA rules provides, “[t]he arbitrator shall have the power to rule on his or her own

jurisdiction, including any objections with respect to the existence, scope, and validity of the

arbitration agreement or to the arbitrability of any claim or counterclaim.” That agreement also

included a severability clause that contemplated the possibility that a court, rather than an

arbitrator, could determine arbitrability: “Should any part of this Agreement for any reason be

declared by any court of competent jurisdiction to be invalid . . .” (Tuggle Decl., Exh. B ¶ 25).

“[V]irtually every circuit to have considered the issue has determined that incorporation

of the [AAA rules] constitutes clear and unmistakable evidence that the parties agreed to

arbitrate arbitrability,” at least where the parties are sophisticated. Oracle America, Inc. v.

Myriad Group A.G., 724 F.3d 1069, 1074 (9th Cir. 2013). Our court of appeals has not resolved

whether such a delegation can be clear and unmistakable even where one party is not

sophisticated.

This order need not resolve whether incorporation of the AAA rules is clear and

unmistakable on these facts, however, as it finds that the delegation clauses in both the 2011 and

2012 agreements were unenforceable. Under California law, a delegation clause must be both

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procedurally and substantively unconscionable in order to be found invalid, though the

agreements are evaluated on a sliding scale, which disregards the need to show procedural

unconscionability in proportion to the harshness of the substantive terms. Armendariz v.

Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 114 (2000). “In other words, the

more substantively oppressive the contract term, the less evidence of procedural

unconscionability is required to come to the conclusion that the term is unenforceable, and vice

versa.” Ibid. Because a delegation clause is severable from a broader arbitration provision, it

must be found unconscionable independent of the other substantive terms of an arbitration

provision. Rent-a-Center, 561 U.S. at 71–74. This order finds that even the delegation

provisions were procedurally and substantively unconscionable as applied to Saravia.

(1) Procedural Unconscionability.

Procedural unconscionability refers to oppression or surprise. Armendariz, 24 Cal.4th at

114. Oppression is shown by “an inequality of bargaining power that results in no real

negotiation and an absence of meaningful choice.” Flores v. Transamerica HomeFirst, Inc., 93

Cal. App. 4th 846, 853 (2001). Unfair surprise relates to “the extent to which the supposedly

agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party

seeking to enforce the disputed terms. Armendariz, 25 Cal. 4th at 114. 

Both the 2011 and 2012 agreements were form contracts, nearly identical to those

presented to other drivers at the same time, that Saravia was tersely instructed to sign. The

agreements were written in English although Dynamex knew that Saravia’s comprehension of

English was limited. Saravia received the agreements on the day they were to be executed, not

sooner, and he was given no opportunity to re-negotiate any provisions. Dynamex never

provided Saravia with a copy of the AAA rules that were to govern any arbitration pursuant to

these agreements (and that form the sole basis for delegating arbitrability under the 2012

agreement). Even if, as Dynamex contends, Saravia could have sought to negotiate the terms of

either agreement, including any agreement to delegate arbitrability, without adversely affecting

his employment, the circumstances of the execution of those agreements were so oppressive that

any such opportunity was meaningless.

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Moreover, this order finds that the delegation clauses in the 2011 and 2012 agreements

constituted an unfair surprise exacerbating the procedural unconscionability. Nothing in the text

of the agreements called Saravia’s attention to the dispute resolution provisions. Those

provisions were formatted identically to the rest of the provisions in the arguments, and they lay

buried in the middle of more than ten pages of mostly boilerplate language. No one at Dynamex

explained any provision of the agreement to Saravia, much less explained the significance of the

rights affected by the delegation or arbitration provisions. It is true that Saravia could have had

his copy of the 2010 agreement translated before executing the 2011 agreement, which included

similar terms, but nothing alerted Saravia to the fact that any terms deserved a special degree of

attention, which would have prompted him to seek a translation. The 2012 agreement contained

very different language (and served a different purpose overall) from the prior agreements, so

such a translation may not have even put Saravia on notice of the arbitration clause therein,

much less the effect of incorporation of the AAA rules.

This order finds that Dynamex presented the delegation provision in the 2011 agreement

and the incorporation of the delegation provision in the AAA rules in the 2012 agreement to

Saravia in an oppressive manner and those provisions constituted unfair surprises in the

respective agreements, all amounting to procedural unconscionability. 

(2) Substantive Unconscionability.

The Supreme Court has held that a party resisting a delegation clause cannot defeat that

clause with a challenge directed only to the agreement as a whole, since the delegation clause

would be severable from that agreement. Rent-A-Center, 561 U.S. at 72. Nevertheless, even if

the issue of arbitrability was delegated to resolution through arbitration, that limited proceeding

would still be subject to certain place and manner provisions in the agreement. Thus, this order

considers the substantive fairness of those provisions and finds they were unconscionable as

applied to Saravia.

Substantive unconscionability concerns how one-sided a bargain is. Armendariz, 24 Cal.

4th at 114. A delegation clause that lacks mutuality without a reasonable justification is

sufficient to find unconscionability. Id. at 117–18. 

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Both of Saravia’s 2011 and 2012 agreements with Dynamex agreements require that any

arbitration proceedings, including those assessing the arbitrability of Saravia’s claims, occur in

Dallas, Texas, and that those proceedings will be governed by the AAA rules. Although Saravia

resides over a thousand miles from Dallas, Dynamex West’s headquarters are located in Dallas. 

Our court of appeals has found that designating a forum “so prohibitively costly to [a plaintiff]

that [he would be] precluded from participating in the proceeding,” such as designating Boston,

while the plaintiff lives in California, is unenforceable, particularly in light of procedural

unconscionability. Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1289 (9th Cir. 2006). 

Dynamex claims that Saravia was earning over $120,000 per year through his business at

the time he executed either of the 2011 or 2012 agreements, so he cannot claim that the cost of

travel and lodging in Texas or the opportunity cost for days spent not working would be a

hardship. Yet, Dynamex does not dispute the fact that Saravia’s actual net income must account

for the significant expenses he had to pay from that gross sum, including paying his own helpers

and substitute drivers. Thus, this order finds, particularly in light of the procedural

unconscionability discussed above, the designation of Dallas as the forum for arbitration,

including pertaining to arbitrability, is unconscionable, as it would require Saravia to incur a

prohibitive cost in order to enforce his rights under those agreements.

Moreover, both agreements required Saravia to pay half of the arbitral fees. “[W]hen an

employer imposes mandatory arbitration as a condition as employment, the arbitration agreement

or arbitration process cannot generally require the employee to bear any type of expense that the

employee would not be required to bear if he or she were free to bring the action in court.” 

Armendariz, 24 Cal. 4th at 110–11. Here, even to resolve the question of arbitrability, Saravia

would be responsible for substantial filing fees, final fees, and costs such as arbitrator

compensation, which he would not face in court. 

Finally, Saravia would face the possibility of having to pay attorney’s fees to Dynamex if

he lost at arbitration, even as to the limited issue of arbitrability. Saravia would not face such a

risk if he is permitted to vindicate his rights to be free from an unconscionable contract in court. 

Under California law, the presence of multiple unconscionable provisions in an

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arbitration clause suggest that the overall intention of the arbitration agreement was to force

employees into unfair arbitration. Armendariz, 24 Cal. 4th at 124–25. Severing the

unenforceable provisions of an arbitration clause (or as here, a delegation clause) would allow an

employer to draft one-sided agreements and then whittle down to the least-offensive agreement if

faced with litigation, rather than drafting fair agreements in the first instance. Multiple aspects

of the delegation clause are problematic, and curing any of those problems would require

redrafting that clause. This order finds, in light of the multiple aspects of procedural

unconscionability presented by the execution of both agreements, those bases for substantive

unconscionability are sufficient to render the delegation clause of the 2011 agreement and the

incorporation of the AAA rules in the 2012 agreement unenforceable. Thus, the issue of

arbitrability must be decided by the Court.

C. Whether The Arbitration Clause Is Enforceable.

The same bases for finding the delegation clauses procedurally and substantively

unconscionable, discussed above, apply to the broader arbitration clauses in Saravia’s 2011 and

2012 agreements. Additionally, a fee-shifting provision, although not per se unconscionable,

may be unenforceable as contrary to public policy if it “impedes the vindication” of unwaivable

statutory rights, such as rights under the FLSA. Nagrampa, 469 F.3d at 1285. The FLSA itself

provides for an award of attorney’s fees to a prevailing plaintiff in order to insure effective

access to the judicial process, but the arbitration provisions in the 2011 and 2012 agreements

both entitle the prevailing party to recovery attorney’s fees regardless of whether the party is the

plaintiff or the defendant. This order finds that the imposition of these fees are effective

deterrents to Saravia’s pursuit of his rights against Dynamex under the FLSA and further

demonstrate the substantive unconscionability of arbitration in this context. Thus, the arbitration

clauses in Saravia’s agreements with Dynamex are unenforceable. Dynamex’s motion to compel

arbitration and stay this action is hereby DENIED.

2. SARAVIA’S MOTION TO CONDITIONALLY CERTIFY COLLECTIVE ACTION.

A. Conditional Certification.

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Saravia has moved for conditional certification of the proposed collective action in order

to facilitate notice to the potential members of the collective. Collective actions under the FLSA

are governed by Section 216(b) of the United States Code, which provides, in relevant part:

An action to recover the liability prescribed in either of the

preceding sentences may be maintained against any employer

(including a public agency) in any Federal or State court of

competent jurisdiction by any one or more employees for and in

behalf of himself or themselves and other employees similarly

situated. No employee shall be a party plaintiff to any such action

unless he gives his consent in writing to become such a party and

such consent is filed in the court in which such action is brought.

Neither the FLSA nor our court of appeals has defined “similarly situated,” within the context of

the FLSA.

District courts have significant discretion in implementing Section 216(b) to facilitate

notice to potential opt-in plaintiffs. Hoffman-La Roche v. Sperling, 493 U.S. 165, 169 (1989). 

A majority of district courts in our circuit employ a two-step approach to collective actions. 

E.g., Leuthold v. Destination America, Inc., 224 F.R.D. 462, 466–67 (N.D. Cal. Aug. 16, 2004)

(Judge Vaughn Walker). In the first step of this approach, the issue is whether the putative

collective should be given notice of the action. This determination “is usually made under a

fairly lenient standard and typically results in conditional class certification.” Ibid. The second

stage occurs when discovery is complete and the case is ready to be tried. The party opposing

collective certification may then move for decertification. Ibid. 

Because the instant action is in the first stage, this order will not address the factors

needed to determine the propriety and scope of the collective action during the second stage. 

Certification is called “conditional” during the first stage because the opposing party could

always (successfully) move for decertification. At this stage, district courts simply evaluate

whether there is “some factual basis beyond the mere averments in their complaint for the class

allegations.” Adams v. Inter-Con Sec. Sys., Inc., 242 F.R.D. 530, 536 (N.D. Cal. Apr. 11, 2007)

(Judge Marilyn Patel).

This order finds that Saravia has met this lenient standard. Saravia has submitted

evidence that the delivery drivers had similar duties in that they performed local deliveries to

Dynamex’s customers pursuant to terms negotiated by Dynamex. They signed agreements that

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classified them as independent contractors, had no specific end date, and did not include

overtime or minimum wage protections. Finally, the drivers were responsible for paying many

of their own expenses. Those similarities are supported not only by Saravia’s own declaration

and the terms of his agreements with Dynamex, but also on the deposition testimony of

Dynamex’s 30(b)(6) witness and the declarations of several opt-in plaintiffs. Those similarities

demonstrate that there is some factual basis for Saravia’s collective-wide allegations that

Dynamex misclassified its delivery drivers as independent contractors and improperly denied

them minimum wages and overtime pay.

Notwithstanding these similarities, Dynamex argues that there are numerous material

differences among the service providers that would be covered by Saravia’s proposed definition

and that conditional certification is inappropriate. Specifically, Dynamex points out that even

agreements that followed the same template as Saravia’s included different pay structures, such

as a straight commission, a per-route fee, or some combination of the two (Tuggle Decl., Exhs

A–D). Furthermore, Dynamex points out that it overhauled the template for its agreements with

drivers in 2013 (including an opt-out provision for the arbitration clause and altering the timing

and requirements for termination, among other substantive differences), although Saravia’s

relationship with Dynamex was terminated before it rolled out that template. The 2013 template

is now in place across Dynamex’s footprint, with the exception of Massachusetts and California.

Similarly, many of the standard operating procedures that Saravia contends governed all

Dynamex delivery drivers were not in place until after Saravia’s termination, and some of them

only applied to drivers subject to certain state or federal regulations. Finally, Dynamex contends

that its over five thousand transportation service providers operate according to a wide variety of

business models from part-time sole proprietors to multi-vehicle corporations, and that many of

them bear “Hallmark Characteristic[s] of Bona Fide Independent Contractor Status” such as

accepting work from competitors, having the right to decline assignments, and utilizing their

own employees and subcontractors (e.g., Fisher Decl. ¶ 3; Pippen Decl. ¶ 2l McCaffery Decl. ¶

3; Carson Decl. ¶ 13; Walter Decl. ¶¶ 4–5). 

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Dynamex claims that conditional certification is inappropriate in light of these

differences between Saravia and many of the transportation service providers he seeks to

represent. Dynamex notes that the determination of whether an individual is an independent

contractor is a many-factor test that considers:

(1) the degree of the alleged employer’s right to control the manner

in which the work is to be performed; (2) the alleged employee’s

opportunity for profit or loss depending upon his managerial skill;

(3) the alleged employee’s investment in equipment or materials

required for his task, or his employment of helpers; (4) whether the

service rendered requires a special skill; (5) the degree of

permanence of the working relationship; (6) whether the service

rendered is an integral part of the alleged employer’s business;

(7) ownership of property or facilities when work occurred; and

(8) whether responsibility under the contracts between a labor

contractor and an employer passes from one labor contractor to

another without material changes.

Torres-Lopez v. May, 111 F.3d 633, 646 (9th Cir. 1997). Thus, Dynamex argues, the

determination of whether its delivery drivers were misclassified is a fact-intensive determination. 

Dynamex cites Pfaahler v. Consultants for Architects, Inc., No. 99-cv-6700, 2000 WL 198888

(N.D. Ill., Feb. 8, 2000) (Judge Suzanne Conlon), for the contention that significant individual

differences among members of a putative collective is fatal to conditional certification in a

misclassification case. Although that decision denied conditional certification, that was because

the plaintiff made no showing that the “potential claimants performed the same type of duties as

himself, or that they could be classified as ‘independent contractors.’” Id. at *2. The only

similarities identified by the plaintiff therein were the number of hours worked, the procedures

for interviews, and the system for paycheck disbursement, which were not probative of the

nature of the putative collective members’ employment, which was the touchstone of the

collective allegations. Here, Saravia has provided substantial evidence of similarities among

transportation service providers such as their duties, the degree of oversight, and the lack of

overtime and minimum wage protections, all of which plainly do pertain to the nature of

employment. That showing is sufficient at this phase.

In Silverman v. SmithKline Beecham Corp., No. 06-cv-7272, 2007 WL 6344674 (C.D.

Cal., Oct. 15, 2007) (Judge Dale Fischer), conditional certification was denied because the

members of the putative collective worked in eight different business units that operated in

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different ways, and the plaintiff failed to provide any evidence that the alleged similarities were

common across the different business units. Here, although Dynamex’s transportation services

providers used different business models and pay structures, they performed the same duties,

they were all subject to agreements based on the same templates, they were all classified as

independent contractors, and they were subject to the same standard operating procedures. This

is readily distinguishable from the facts in Silverman. That decision is unpersuasive.

The remainder of the decisions that Dynamex cites were decided under the more stringent

standards of Rule 23 class actions or phase two of FLSA collective actions, not the lenient

standard applicable here. Those decisions are inapposite to a motion to certify the collective at

phase one.

Dynamex also argues that even if Saravia can ultimately prove that the members of the

collective were misclassified, individualized issues of the extent, if any, of damages will still

need to be resolved. In particular, some drivers may not have worked overtime at all, and yet

may be included in the collective. Dynamex points out that the Supreme Court has granted

certiorari in Tyson Foods v. Bouaphakeo, 765 F.3d 791 (8th Cir. 2014), in which the dissenting

opinion expressed concerns about certifying a collective that included uninjured employees. 

Even if the Supreme Court’s grant of certiorari was persuasive authority, the Eighth Circuit’s

decision pertained to a rejection of a motion to decertify at phase two of an FLSA action. The

issue of whether the collective includes some members not entitled to damages is best resolved

at the second phase, with the benefit of discovery, not the lenient first phase.

One issue, however, is worth addressing at this phase, namely, the arbitration clauses in

each collective member’s agreements with Dynamex. Although this order determined that the

arbitration provisions in Saravia’s agreements with Dynamex West were unenforceable, that

finding was based on facts that may have been unique to Saravia, such as Dynamex’s knowledge

that he did not speak English and the terseness of the presentation of the agreements. No district

court in our circuit has denied conditional certification on the basis that some members of the

proposed collective may be subject to valid and enforceable arbitration clauses. The decisions

that have addressed that issue have all found that the issue of the enforceability of arbitration

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clauses related to the merits of the case and therefore should be dealt with in phase two. See

Shaia v. Harvest Management Sub LLC, 306 F.R.D. 268 (N.D. Cal., Apr. 13, 2015) (Chief Judge

Phyllis Hamilton); Deatrick v. Securitas Security Services USA, Inc., No. 13–cv–05016,

2014 WL 5358723 (N.D. Cal., Oct. 20, 2014) (Judge Jon Tigar); Boyd v. Bank of America Corp.,

No. 13-cv-0561, 2013 WL 6536751 (C.D. Cal., Dec. 11, 2013) (Judge David Carter). So too

here. 

 Although this order only finds the delegation clauses and arbitration clauses unenforceable

as they applied to Saravia and given the procedure in which they were presented to Saravia, that

does not foreclose the possibility that those provisions would be found unenforceable for the

entire collective action, or for some segment of it. Discovery may reveal a mechanism for

addressing the arbitration clauses on a collective-wide basis, such as by sub-dividing the

collective action based on the procedure by which the agreements were presented. Thus, it

would be premature to assume that the issue of arbitration will be unmanageable at this phase,

rather than reserving it for a motion for decertification, as other courts have done. 

Nevertheless, it is necessary to limit the scope of the collective action to account for the

challenge of dealing with the delegation and arbitration clauses on a collective-wide basis. 

Accordingly, this order finds it is appropriate to certify a collective action only of those

transportation service providers that performed deliveries in California. This limited scope will

ensure that the arbitration clauses are subject to only one state’s laws, which will facilitate

collective-wide treatment. Similarly, by limiting the scope of the collective to a smaller set of

Dynamex’s locations, the differences among the company’s treatment of delivery drivers will be

minimized. Finally, because the 2013 template has not rolled out in California yet, the

differences between the provisions of that agreement and the agreements to which Saravia

agreed will not present further variations among the collective action. 

Subject to that limitation, it is appropriate to conditionally certify the collective action for

the purpose of facilitating notice.

B. Form of Notice.

Saravia seeks to notify the following drivers of this action, so that they may opt-in.

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All individuals who have personally made one or more deliveries

for Dynamex in the United States, and (1) whom Dynamex has

purported to classify as an independent contractor through a

written contract (the validity of which Plaintiffs challenge here);

(2) whose vehicles used for the deliveries are registered in a

Dynamex database accessible by Dynamex’s Compliance

Department; and (3) who make their deliveries out of an operating

location at which Dynamex has a physical presence, at any time

beginning three years before the filing of this Complaint.

The collective action claims do not arise from deliveries unless a

member of the collective personally made the delivery for

Dynamex.

As noted above, the scope of this notice must be limited to those delivery drivers that

performed deliveries in California. Dynamex has raised several objections to Saravia’s proposed

form of notice, but has not offered a counter-proposal. Dynamex asks for an opportunity to brief

those issues more fully, as it focused its opposition brief on the issue of certification. Dynamex

should have substantiated its arguments in its opposition to Saravia’s motion. Saravia has also

noted that he is open to meeting and conferring with Dynamex over submitting a joint proposed

form of notice. This order addresses the objections to the extent they have been explained in

Dynamex’s brief. 

Dynamex argues that the notice addresses “delivery drivers,” which includes a broader set

of individuals than the proposed definition of the collective action, specifically because it could

be read to include employees and subcontractors of the entities that directly contracted with

Dynamex, who were not parties to the independent contractor agreements. Subcontractors and

employees of the entities who contracted with Dynamex are not similarly situated to Saravia, and

the notice must be modified to more clearly draw that distinction. 

Specifically, the preamble of the notice should be modified from “If you are or were a

delivery driver for . . .” to “If you are or were a delivery driver pursuant to an independent

contractor agreement with . . .” Under the section “What Are My Choices?” the proposed notice

reads, “If you personally made one or more deliveries for Dynamex in the United States as an

independent contractor . . .” That should be modified to read “If you personally made one or

more deliveries for Dynamex in the United States pursuant to an independent contractor

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agreement . . .” The remaining references to “Delivery Drivers” are appropriate, inasmuch as

they are already sufficiently qualified by the surrounding language regarding misclassification.

Dynamex argues that the notice states that the suit was brought by “a group of current and

former Dynamex delivery drivers,” rather than an individual former driver. Dynamex is correct;

the proposed notice should be modified to accurately reflect the fact that the only lead plaintiff is

an individual former Dynamex delivery driver.

Dynamex argues that the footer on the proposed notice, which reads, “**NOTE** Return

the enclosed Consent to Join form as soon as possible if you wish to preserve your rights and to

be included in this case” misrepresents the effect of failing to opt-in. Specifically, the footer

does not clarify that the only right forfeited by failing to opt-in is the right to join this particular

collective. This order finds this footer is inappropriate and unnecessary and shall be removed

from the notice to the collective. The footer shall be modified to read, “**NOTE*** Return the

enclosed Consent to Join form as soon as possible if you wish to be included in this case.”

Dynamex argues that the opt-in period should be reduced from the ninety days proposed to

sixty days. In light of the reduction in the scope of the collective action discussed above, the

opt-in period shall be reduced to sixty days.

Dynamex argues that the notice does not adequately put potential opt-in plaintiffs on notice

that they may ultimately be excluded from the collective if the arbitration provisions in their

agreements with Dynamex are enforceable or if the collective action is decertified for other

reasons. The “Why Did I Get This Notice?” section already specifies that this order grants

“conditional certification.” That is sufficient to put potential opt-ins on notice that the collective

action may ultimately be de-certified.

The notice must, however, be modified to reflect the possibility that an opt-in plaintiff will

be compelled to arbitrate his or her claims. The following shall be appended to the third bullet

point on the front page of the proposed notice, which describes Dynamex’s position in the

litigation:

Dynamex also contends that any disputes relating to its

independent contractor agreements must be resolved in arbitration,

rather than a court. The Court has ruled against this position as to

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the lead plaintiff Juan Saravia, but the issue will have to be

litigated as to each opt-in.

The same language should be added to the end of the “What Is the Lawsuit About?” section. 

Dynamex argues that the proposed notice does not adequately describe “discovery,” when

informing potential collective members that they may be subject to discovery. Specifically,

Saravia’s proposed notice reads: 

Your decision to submit a Consent to Join Form does not

necessarily determine whether or not you will be required to

participate in discovery during the case. Discovery might be taken

from both those who submit a Consent to Join form as well as

those who do not.

That sentence shall be modified to read: 

Your decision to submit a Consent to Join Form does not

necessarily determine whether or not you will be required to

submit evidence or provide testimony during the case. Evidence

and testimony might be taken from both those who submit a

Consent to Join Form as well as those who do not. 

Finally, Dynamex argues that the notice should inform potential members of the collective

that they may be subject to counterclaims and that any recovery may be offset by a pro rata share

of counsel fees. The “What Happens If I Join?” section of the proposed notice shall be modified

to include a notice of those possibilities. Dynamex did not offer any legal theory for its

contention that members of the collective could be liable for its attorney’s fees if the collective

does not prevail. That is a scare tactic and should not be reflected in the notice.

By OCTOBER 12, Saravia shall file a new proposed form of notice consistent with this

order, including the modifications discussed immediately above as well as the modifications

limiting the collective action to only those delivery drivers that performed deliveries in

California. 

The parties shall meet and confer regarding the selection of a third party administrator and

shall file a joint plan for distribution by OCTOBER 26. Notice shall be by first class mail and by

e-mail and shall be sent by DECEMBER 7.

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CONCLUSION

For the reasons stated above, defendants’ motion to compel arbitration is DENIED. 

Plaintiff’s motion to conditionally certify the collective action is GRANTED IN PART AND

DENIED IN PART.

IT IS SO ORDERED.

Dated: October 6, 2015. 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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