Court Opinion

ID: 903557
Source: CourtListenerOpinion
Date Created: 2013-06-19 20:04:15.970331+00
Date Added: 2024-06-11T15:09:27.998751
License: Public Domain

NOT PRECEDENTIAL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.

                       DONGBU TOUR & TRAVEL, INC;
                            KYU SUNG CHO,

                                                            Appellants
                                 ______________

                 On Appeal from the United States District Court
                          for the District of New Jersey
                           (D.C. Civ. No. 2-12-01136)
                     District Judge: Hon. William H. Walls
                                 ______________

                   Submitted under Third Circuit LAR 34.1(a)
                                June 14, 2013

   Before: McKEE, Chief Judge, and AMBRO and GREENBERG, Circuit Judges

                               (Filed: June 19, 2013)
                                 ______________

                           OPINION OF THE COURT
                               ______________

GREENBERG, Circuit Judge
       This matter comes on before this Court on consolidated appeals brought by

Dongbu Tour & Travel, Inc. and Kyu 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 and 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 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 retaliating against them for

bringing this action. Though the Kims did not appeal from the July 23, 2012 order, that

order included a provision 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 appeals is an order of

July 25, 2012, denying Dongbu’s motion to require that the Kims’ claims be submitted to

arbitration. This appeal is docketed as No. 12-3285.

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 exercising 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).

                                             2
       The background of the case is as follows. The Kims were tour guides working in

the Korean tour business. There 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 United States. It appears that tour companies

catering to Koreans seek to engage guides with Korean backgrounds to conduct their

tours and we draw an inference from the Kims’ surnames that they are of that

background. Dongbu, evidently aware of federal and state laws which in various ways

regulate employer-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 circumvent such employee protection laws.

       Dongbu, in furtherance of its attempt to employ the Kims on an independent

contractor basis, sought to have the Kims form businesses which Dongbu intended would

be deemed to be the Kims’ employers, to the end that Dongbu could contract for the

Kims’ services through the businesses rather than directly with the Kims. 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 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’

2
 Sometimes on this appeal Dongbu seems to refer to DDK NY as a corporation but at
other times it seems to regard it as an unincorporated entity. The distinction is not
material to us on this appeal.

                                             3
companies sign what are entitled independent contractor 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 contained an arbitration provision providing 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. Inasmuch as Tae In Kim did not sign an agreement 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.

       Notwithstanding 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 Jersey Wage and Hour Law. The Kims advance substantive claims 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 dismiss 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, which wrote other

tour companies about the litigation in a letter dated March 1, 2012. The Kims viewed the

                                              4
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

preliminary injunction precluding Dongbu from retaliating against them for bringing this

case. The District Court held a hearing on the March 23, 2012 motion on July 5, 2012,

and then denied the motion by order of July 23, 2012, on the ground that the Kims could

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, though none

of the parties had sought that order, that “temporarily enjoined [all the 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 Kims’

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 not joint parties to

any arbitration agreement, Dongbu claims to be a third-party beneficiary of the

agreement between David Kim and Guide USA to which it claims Tae In Kim also

adhered, at least with respect to its 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.

                                               5
Next Dongbu has appealed from the order of July 23, 2012, enjoining the parties from

communicating 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 this appeal in one or both of their briefs. The first

issue which only Dongbu discusses is whether after Dongbu appealed from the order

denying its motion seeking an order requiring that the parties’ disputes be resolved in an

arbitration proceeding, the proceedings in the case could continue in the District Court or

whether the proceedings in that Court automatically were stayed pending disposition of

the appeal. In this regard we point out that ordinarily an appeal from an order denying a

motion for arbitration divests a district court of jurisdiction over the action that a party

seeks to have submitted to arbitration, and thus the appeal automatically stays

proceedings in the district court. See Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207,

215 n.6 (3d Cir. 2007). But the appeal will not stay the district court proceedings if it is

“frivolous or forfeited.” Id. Dongbu has raised the question of whether a court of

appeals or a district court decides if the appeal is frivolous for jurisdictional purposes

following an appeal from an order denying a motion seeking an order requiring that a

                                               6
case be submitted to arbitration, its contention 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 issues 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 issues are whether the District Court should have

ordered the case to be submitted to arbitration and whether the District Court should have

entered 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 dismiss the appeal from the July 23, 2012 order as we do not have

jurisdiction over the appeal from that order.

       We deal 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). In

Cohen v. Board of Trustees, 867 F.2d 1455, 1465 (3d Cir. 1989), we explained that “an

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” jurisdictional question.

                                                7
complaint. It is strictly a case management order, and thus we will dismiss 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 addressing the motion

to dismiss and the District Court’s order denying the motion is not in itself appealable at

this time. We 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

Court correctly denied 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 orders 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 that order for the following reasons. 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 order into an appealable injunctive order.

                                              8
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. DuPont De Nemours & Co. v. Rhone Poulenc Fiber & Resin

Intermediates, S.A.S., 269 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 Tae 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 have

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 orally 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 they brought against [Dongbu].” Appellants’ br. at 3. In fact,
however, the Kims deny that they executed any such covenants, as David Kim, who did
execute an agreement providing for arbitration with Guide USA certainly denies that the
agreement somehow obligated him to arbitrate this dispute with Dongbu.

                                              9
alleged consent to such agreement is an allegation in the Kims’ complaint that they were

“required to sign form contracts 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 contract, 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 any agreement with Dongbu. In these circumstances 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 arbitrate 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 Agreement shall be binding upon and inure to the benefit of the parties’

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 question that Dongbu raises with regard to

determining whether a district court or a court of appeals decides if an appeal is frivolous

                                             10
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 indicate 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 moved 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, 969-70 (8th Cir. 1993). Dongbu first raised

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 merits. Thus, significant resources were

expended before Dongbu moved for an order sending the case to arbitration because both

the District Court and the Kims needed to prepare for and participate in the hearing of

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).

                                             11
July 5, 2012, and 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’ br. 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. It is also significant that Dongbu filed an

amended answer on July 19, 2012, in the District Court which included a counterclaim

seeking damages against the Kims, a step hardly consistent with a request for the

submission of 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 its 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 David Kim.” Appellants’ rep.
br. at 5. That circumstance is immaterial as surely it was Dongbu’s burden to be aware of
contracts that it claims included provisions for its benefit.

                                              12
       We mention 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 we will

deny that request.

       For the foregoing reasons, we will dismiss the appeal at 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 issue on 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 were employees of Dongbu or whether their claims
against Dongbu are meritorious.

                                                13