2013 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit

6-19-2013 

# T a e Kim v . D on g bu T our & T r a vel I nc

P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al
D ock e t N o . 12-3285

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w . v i l l a no v a . e du/thir dc ir c uit_2013/655NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

______________ Nos. 12

- 3285 and 12

- 3367

______________

TAE IN KIM; DAVID D. KIM, individually and on behalf of all others similarly situated

v. D ONGBU TOUR & TRAVEL , INC; KYU SUNG CHO, Appellants

______________ On Appeal from the United States District Court for t he D istrict of New Jersey

(D.C. Civ. No. 2

- 1 2

- 0 1136 ) District Judge: Hon

. William H. Walls

______________ Submitted under Third Circuit LAR 34.1(a) June 14, 2 013 Before: McKEE, Chief Judge , and AMBRO and GREENBERG, Circuit Judges (Filed: June 19, 2013 )

______________ OPINION OF THE COURT

______________
GREENBERG , Circuit Judge2 This matter comes on before this Court on consolidated appeals brought by Dongbu Tour & Travel, Inc. and K yu Sung Cho , its president (together called “Dongbu”) from orders in this action that Tae In Kim and David D. Kim , who claim to be Dongbu’s employees , initiated in the District Court under the Fair Labor Standards Act an d the New Jersey Wage and Hour Law

. The Kims are attempting to bring the case as a class action to include other individuals similarly situated to them. The appeals are from two orders. 1

1 The District Court had jurisdiction under 28 U.S.C. §§ 1331, 1332 and 1367 and 29 U.S.C. § 216(b) , and we have jurisdiction over the appeal in No. 12

- 3285 under 9 U.S.C. § 16(a). Dongbu claims that we have jurisdiction in No. 12

- 3367 under 28 U.S.C. § 1292(a) , but we reject this contention. We are exercisin g plenary review on this appeal. See Guidotti v. Legal Helpers Debt Resolution, L.L.C. , No. 12

- 1170, ____ F.3d ____, ____, 2013 WL 2302324, at *5 (3d Cir. May 28, 2013). The first order from which Dongbu appeals was entered on July 23 , 2012, and denied the Kims ’ motion for a preliminary injunction in which they sought an order restraining Dongbu from retaliat ing against them for bringing thi s action. Th ough the Kims did not appeal from the July 23, 2012 order, that order included a pr ovision from which Dongbu appeals prohibiting the parties from communicating with members of the putative class that the Kims seek to represent until the resolution of class certification issues . Dongbu’s appeal from the July 23, 2012 order is docketed as No. 12

- 3367. The second order from which Dongbu appeal s i s an order of July 25, 2012, denying Dongbu’s motion to require that the Kim s ’ clai ms be submitted to arbitration. This appeal is docketed as No. 12

- 3285

.3 The background of the case is as foll ows. The Kims were tour guides working in the Korean tour business. T here is a substantial tour business in the United States catering to Koreans , including both individuals who reside in Korea and individuals of Korean background who reside in the Unite d States. It appears that tour companies catering to Koreans seek to engage guides with Kore an backgrounds t o conduct their tours and we draw an inference from the Kims’ surnames that they are of that background. Dongbu, evidently aware of federal and st ate law s which in various ways regulate e mployer

- employee relationships in the interest of protecting employees’ rights, desired to obtain the Kims’ services on an independent contractor basis, a not uncommon practice among employers who attempt to circumv ent such employee protecti on laws. Dongbu, in furtherance of its attempt to employ the Kims on an independent contractor basi s, sought to have the Kims form bu sinesses which Dongbu intended would be deemed to be the Kims’ employers , to the end that Dong bu could contract for the Kims’ services through the businesses rather than directly with the Kim s. Thus, in its brief Dongbu sets forth that “Tae In Kim and David D. Kim are employees of X Golf, Inc. (X Golf) and DDK NY, Corp. (DDK NY), respectively . . . .” Appellants’ br. at 35

- 36. 2

2 Sometimes on this appeal Dongbu seems to refer to DDK NY as a corporation but at oth er times it seems to regard it a s an unincorporated entity. The distinction is not material to us on this appeal. Dongbu , however, did not sign agreements with the Kims’ businesses . Rather, in an attempt to separate itself still further from the Kims , Dongbu sought to have the Kims’4 companies sign what are entitled independent contra ctor agreements with Guide USA
Inc. , an entity that Dongbu describes as a “tour guide management company through which [the Kims] worked as tour guides on tour programs operated by Dongbu.” Appellants’ br. at 24. The agreement between DDK NY , David Kim ’s company , and Guide USA con tained an arbitration provision provid ing a procedure for the resolution of disputes between David Kim and Guide USA

. But neither Dongbu nor Tae In Kim was a party to that agreement. I nasmuch as Tae In Kim did not sign an agree ment with Guide USA and he, like David Kim, did not sign a contract with Dongbu, Dongbu never has been able to produce in this litigation an agreement in which Tae In Kim agreed in writing to any provision material to Dongbu’s demand for arbitration.
Notw ithstanding Dongbu’s attempt to classify the Kims as independent

contractors with respect to their relationships with Dongbu , the Kims brought this action against Dongbu claiming to be Dongbu’s employees under the Fair Labor Standards Act and the New Jerse y Wage and Hour Law . The Kims advance substantive claim s that we need not describe in further detail asserting that they were not paid in full for the services they rendered to Dongbu

. Dongbu moved on April 4, 2012, under Fed. R . Civ. P. 12(b)(6) to dism iss the complaint , and then, after the Court denied its motion on June 6,
2012 , Dongbu answered the complaint on June 28, 2012, without raising an arbitration defense

. The Kims by bringing this case hit a raw nerve with Dongbu , wh ich wrote other

tour co mpanies about the litigation in a letter dated March 1, 2012

. The Kims view ed the5 letter as an act of unlawful retaliation against them for bringing this action , and consequently they filed a motion in the District Court on March 23, 2012, seeking a preli minary injunction precluding Dongbu from retaliating against them for bringing this

case . The District Court held a hearing on th e March 23, 2012 motion on July 5, 2012 , and then denied th e motion by order of July 23, 2012, on the ground that the Kim s cou ld not show that there was a likelihood that they would suffer irreparable injury if the Court denied their motion . The Court, however, entered an order on July 23, 2012, th ough none of the part ies had sought that order, that “temporarily enjoined [all th e parties] from communicating directly with any member of the putative collective action about this

case ” until class certification issues are resolved and a notification plan is approved

. App. at 684. At the July 5, 2012 hearing in the District Court Dongbu moved to have the K ims’ claims sent to arbitration, the first time that it raised a defense that the Kims agreed to arbitrate their claims in this case. Though the Kims and Dongbu were no t joint parties to any arbitration agreement, Dongbu claims t o be a third

- party beneficiary of the agreement between David Kim and Guide USA to which it claims Tae In Kim also

a dhered , at least with respect to i t s provision for arbitration of disputes. The District Court denied this motion by order of July 25, 2012 , and subsequently denied Dongbu’s motion for reconsideration of that order

. As we have indicated , Dongbu has filed two appeals. First, Dongbu has appealed from the order of July 25, 2012, denying Dongbu’s demand that the dispute be arbitrated

.6 Next D ongbu has appealed from the order of July 23, 2012, enjoining the parties from

com municating with class members until resolution of class certification issues . On November 7, 2012, Dongbu moved in this Court to stay all further proceedings in the District Court , and on November 27, 2012, we granted that motion under Fed

. R

. App

. P

. 8. The parties raise four issues on th is appeal in one or both of the ir briefs

. The first issue which only Dongbu discusses is whether after Dongbu appealed from the order den ying its motion seeking an order requiring that the parties’ disputes be resolved in an arbitration proceeding, the proceedings in the case could continue i n the District Court or whether the proceedings in th at Court automatically were stayed pending disp osition of the appeal

. In this regard we point out that o rdinarily an appeal from an order denying a motion for arbitration divests a district court of jurisdiction over the action that a party seek s to have submitted to arbitrat ion , and thus the appeal a utomatically stays proceedings in th e district court. See Ehleiter v. Gr apet re e Shores, Inc

. , 482 F.3d 207, 215 n.6 (3d Cir. 2007 ). But the appeal will not stay the district court proceedings if i t is “frivolous or forfeited.” Id

. Dongbu has raise d the question of whether a court of appeals or a district court decides if the appeal is frivolous for jurisdictional purposes following an appeal fr om an order denying a motion seeking an order requiring that a7 case be submitted to arbitration , its conten tion being that a court of appeals should decide that question . For the reasons that we will set forth, we do not decide this issue

. 3
The second of the four issue s is whether under Rule 12(b)(6) the District Court should have granted the motion to dismiss , but we do not reach this issue on the merits either as we do not have jurisdiction at this time over the appeal from the order denying the motion

. The third and fourth issue s are whether the District Court should have ordered the case to be submitted to arbitration and whether the District Court should have

enter ed the July 23, 2012 order precluding the parties from having communications with members of the class that the Kims seek to represent . We will decide the third issue on the merits but will dismi ss the appeal from the July 23, 2012 order as we do not have jurisdiction over th e appeal from that order

. We d eal first with the appeal from the order of July 23, 2012 , i.e. , the order over which Dongbu contends that we have jurisdiction under 28 U.S.C. § 1292(a)(1)

. I n Cohen v. Board of Trustees , 867 F.2d 145 5, 1465 (3d Cir. 1989), we explained that “a n injunction for purposes of [ an appeal pursuant to 28 U.S.C. § ] 1292(a)(1) . . . must . . . adjudicate some of the relief sought in the complaint.” The July 23, 2012 order , though reciting that the Court has “enjoined” the parties from engaging in certain communications , does not address any aspect of the relief that the Kims seek in the

3 When we granted the stay under Fed. R. App. 8 we did not address the “frivolous or forfeited” juri sdictional question.8 complaint. It is strictly a case management order , and thus we will di sm iss the appeal from that order

. 4 Similarly , we do not consider on the merits the appeal from the denial of Dongbu’s motion under Rule 12(b)(6) to dismiss the complaint , as we can decide the question of whether there should be arbitration in this case without addressi ng the motion to dismiss and the District Court’s order denying the m otion is not in itself appealable at this time. W e also do not decide definitively whether a district court or a court of appeals decides whether an appeal is frivolous so that the filing of the appeal does not divest the district court of jurisdiction over proceedings in the pending action in which arbitration is sought . We see no reason to decide that question because we are holding that the District
Cou rt correctly de nied the order seeking arbitration , and this case will continue in the District Court after we file this opinion and remand the case to that Court. After the remand, the District Court will have jurisdiction over the case and can make all appropriate orde rs and, if necessary, revisit orders that it already has entered. See Fed. R. Civ. P. 54(b)

. Finally, we reach the appeal from the order of July 25, 2012, denying the motion for arbitration on the merits and will affirm t hat order for the following rea sons. 5

4 We realize that the Kims do not contend that we do not have jurisdiction over the appeal from the July 23, 2012 order , but we are obliged to consider the jurisdictional issue on our own initiative. See Three Keys Ltd. v. SR Utility Holding Co. , 540 F.3d 220, 225 (3d Cir. 2008). Of course, the procedural circumstance that the District Court entered the order at a time that it was considering the Kims’ motion for a preliminary injunction did not somehow convert the case management or der into an appealable injunctive order.9 Dongbu correctly claims that in some cases a third

- party beneficiary of a contract can enforce an arbitration clause in the contract included for its benefit even though it did not sign the contract. See E.I. Du P ont De Nemours & Co. v. Rhone Poule nc Fiber & Resin Intermediates, S.A.S. , 26 9 F.3d 187, 195 (3d Cir. 2001). Certainly this is so in collective bargaining agreements. But Dongbu has not produced any agreement that Tae In Kim signed containing an arbitration clause. Indeed, in its opening brief Dongbu says “[a]lthough Appellants are without a copy of the Independent Contractor agreement which may have been signed by X Golf, Inc. (the direct employer of Tae In Kim), Guide USA believes that it was signed and in any event Guide USA received T ae In Kim’s verbal assent to the same Independent Contractor agreement as DKK NY’s version quoted above.” Appellants’ br. at 23. Dongbu’s claim that Tae In Kim agreed to arbitrate any dispute that he might hav e with Dongbu is devoid of any possible merit , as the District Court plainly believed , because Dongbu wants us to require him to arbitrate his claims pursuant to an arbitration clause contained in a contract that it cannot show that he executed or to which he is not a party on the theory that he oral ly agreed to be bound by that contract. We find it extraordinary that Dongbu’s support for its contention that Tae In Kim is bound by his

5 In its brief Dongbu asserts that “the district court erred as a matter of law in failing to order arbitration where the [Kims] admittedly executed arbitration covenants relating to their compensation dispute t he y brought against [Dongbu].” Appellants’ br. at 3. In fact, however, the Kims deny that they executed any such covenant s , as David Kim , who did execute a n agreement providing for arbitration with Guide USA certainly denies that the agreement somehow obli gated him to arbitrate this dispute with Dongbu

.10 alleged consent to such agreement is an allegation in the Kims’ complaint that they were “required to sign form contr acts with Dongbu but are actually Dongbu’s employees as a matter of law.” Appellants’ br. at 23

- 24. Yet the contract that David Kim signed was not with Dongbu, it was with Guide USA and even if Tae In Kim had adhered to the arbitration clause in the cont ract , he would not have been agreeing to arbitrate any dispute with Dongbu . The fact is that insofar as the record on this appeal shows neither Kim signed an y agreement with Dongbu. In these circumstanc es Tae In Kim

– who Dongbu does not show ever signed any agreement with Dongbu, Guide USA, DDK NY, or X Golf that contained an arbitration clause, and, indeed , did not sign any agreement at all with any of these entities

– under any conceivable view of the record and the law , cannot be compelled to arbitrat e his claim against Dongbu. We also point out that there is no provision in his agreement with Guide USA that David Kim signed that could be deemed as having granted third

- party beneficiary rights to Dongbu to enforce any provision in the agreement , and thus he cannot be compelled to arbitrate this dispute. The closest such provision would be one dealing with assignments that provides that “[Guide USA] may freely assign this Agreement, in whole or in part . . . . This Agreeme nt shall be binding upon an d in ure to the benefit of the pa rties’ successors and assigns.” App. at 745. But there is no suggestion in the briefs that Guide USA assigned the contract to Dongbu or anyone else. Overall, though as we already have explained, we do not reach the questi on that Dongbu raises with regard to determining whether a district court or a court of appeals decid es i f an appeal is frivolous11 for jurisdictional purposes under Ehleiter , it is obvious that this appeal from the order denying arbitration in this case is completely without merit

. 6 But there is even a further reason to affirm the order denying arbitration for if Dongbu could demonstrate that it had a right to submit the Kims’ claims to arbitration , taking the “case specific” approach that our cases indicat e is appropriate , Dongbu waived any right that it might have had to seek to have the Kims’ claims submitted to arbitration

. See Gray Holdco, Inc. v. Cassady , 654 F.3d 444, 451 (3d Cir. 2011). As we indicated above, Dongbu without mentioning arbitration m oved to dismiss the complaint, a step that sometimes in itself indicates that if the moving party had a right to have a dispute submitted to arbitration it has waived that right

. See Ritzel Commc’ns, Inc. v. Mid

American Cellular Tel. Co. , 989 F.2d 966, 9 69

- 70 (8th Cir. 1993). Dongbu first rais ed arbitration as a defense in this case on July 5, 2012, at the hearing on the Kims’ application for a preliminary injunction after the District Court earlier had denied Dongbu’s motion to dismiss the case on the m erits . Thus, significant resources were expended before Dongbu moved for an order sending the case to arbitration because both the District Court and the Kim s needed to prepare for and participate in the hearing o f

6 We would reach this conclusion under any possible standard that could be applicable. See Guidotti v. Legal Helpers Debt Resolution, L.L.C , No. 12

- 1170, ____ F.3d ____, ____, 2013 WL 2302324, at *5 (3d Cir. May 28, 2013).12 July 5, 2012, a nd both the Court and the Kims engaged in the other proceedings in this

case before that day that we have described

. 7 Furthermore, Dongbu is continuing to act inconsistently with its contention that this case should be submitted to arbitration. See Kawasaki Heavy Indus

. , Ltd. v. Bombardier Recreational Prods

. , Inc. , 660 F.3d 988, 995

- 96 (7th Cir. 2011); see also Ritzel , 989 F.2d at 969; St . Mary’s Med

. Ctr

. of Evansville, Inc. v. Disco Aluminum Prods

. Co

. , 969 F.2d 585, 589 (7th Cir. 1992 )

. In this regard, Dongbu sets forth the three issues that it believes are being presented on this appeal , one of which is “[w]hether the district court erred in failing to dismiss [a] ppellees’ complaint because the complaint failed to state a plausible claim for relief.” Appellants’ b r. at 3. Dongbu sets forth this issue after it claims that the District Court erred in not ordering arbitration. It is therefore perfectly clear that Dongbu seeks to have this case arbitrated only if it cannot win it by motion in the District Court or this Court

. I t is also significant that Dongbu filed an amended answer on July 19, 2012, i n the District Court which includ ed a counterclaim seeking damages against the Kim s, a step hardly consistent with a request for the submission o f the case to arbitration.

7 We realize that Dongbu contends that it did not have the agreement between DDK NY or David Kim and Guide USA until shortly before the July 5, 2012 hearing and thus was unaware of the arbitration clause in that agreement. Thus, in i ts reply brief Dongbu asserts that “it was not until shortly before the preliminary injunction hearing that Appellants obtained a copy of one of the Independent Contractor agreements between plaintiffs and Guide USA, i.e., that was signed by plaintiff Davi d Kim.” Appellants’ rep. br. at 5. That circumstance is immaterial as surel y it was Dongbu’s burden to be aware of contracts that it claims included provisions for its benefit.13 We m ention one final point. In its brief Dongbu contends that the “district court’s views are fixed and therefore, on remand, the case should be reassigned to a new judge . . . .” Appellants’ br. at 54. We see no basis to make such a reassignment and thus w e will deny th at request. For the foregoing reasons , we will dismiss the appeal a t No. 12

- 3367 from the order of July 23, 2012, and will affirm the order of July 25, 2012, denying Dongbu’s motion seeking arbitration of this dispute. 8

8 Our opinion should not be overread . We decide only one substantive issu e o n this appeal , which is that , regardless of the legal characterization of the relationship between the Kims and Dongbu , this case will not be submitted to arbitration. Thus, we are not determining whether the Kims we re employees of Dongbu or whether th eir claims against Dongbu are meritorious.