Court Opinion

ID: 4687826
Source: CourtListenerOpinion
Date Created: 2021-05-18 17:00:46.741506+00
Date Added: 2024-06-11T08:04:43.895938
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MARTIN J. WALSH, Secretary of            No. 20-15765
Labor, United States Department of
Labor,                                      D.C. No.
                   Plaintiff-Appellee,   2:16-cv-04499-
                                              DLR
                  v.

ARIZONA LOGISTICS, INC., DBA               OPINION
Diligent Delivery Systems, an
Arizona corporation; PARTS
AUTHORITY ARIZONA LLC, an
Arizona limited liability company,
                           Defendants,

                 and

LARRY BROWNE,
            Defendant-Appellant.

      Appeal from the United States District Court
               for the District of Arizona
      Douglas L. Rayes, District Judge, Presiding

        Argued and Submitted February 5, 2021
                  Phoenix, Arizona

                   Filed May 18, 2021
2                      WALSH V. BROWNE

      Before: William A. Fletcher, Eric D. Miller, and
           Danielle J. Hunsaker, Circuit Judges.

                  Opinion by Judge Hunsaker

                          SUMMARY *

                           Arbitration

    The panel affirmed the district court’s denial of an
alleged employer’s motion to compel arbitration, arising
from the Secretary of Labor’s Fair Labor Standards Act
(“FLSA”) enforcement action that sought relief on behalf of
one party to a private arbitration agreement.

    The panel held that although the Federal Arbitration Act
favored arbitration agreements, the Supreme Court’s
decision in EEOC v. Waffle House, Inc., 534 U.S. 279, 289
(2002) (holding that the FAA addresses enforceability only
as to the parties to the arbitration agreement), dictated that
the Secretary could not be compelled to arbitrate this case,
even if the employees had agreed to arbitration. As in Waffle
House, the remedial statute at issue here – Sections 16(c) &
17 of the FLSA – unambiguously authorized the Secretary
to obtain monetary relief on behalf of specific aggrieved
employees. There was nothing in either section suggesting
that an arbitration agreement between the parties to the
underlying employment relationship impacted the
Secretary’s enforcement power. Also, there was no dispute

    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                    WALSH V. BROWNE                        3

that, like the EEOC in Waffle House, the Secretary was not
a party to the arbitration agreement between the alleged
employer and the employee delivery drivers.

                        COUNSEL

Christopher M. Mason (argued) and John J. Egbert, Jennings
Strouss & Salmon PLC, Phoenix, Arizona; Kevin H. George,
Kevin H. George & Associates PC, Houston, Texas; for
Defendant-Appellant.

Shelley E. Trautman (argued), Attorney; Rachel Goldberg,
Counsel for Appellate Litigation; Jennifer S. Brand,
Associate Solicitor; Kate S. O’Scannlain, Solicitor of Labor;
Office of the Solicitor, United States Department of Labor,
Washington, D.C.; for Plaintiff-Appellee.

                        OPINION

HUNSAKER, Circuit Judge:

    The question before us is whether a private arbitration
agreement binds the Secretary of Labor when bringing a Fair
Labor Standards Act (FLSA) enforcement action that seeks
relief on behalf of one party to the arbitration agreement
against the other party to that agreement. We conclude that
despite the Federal Arbitration Act’s (FAA) policy favoring
arbitration agreements, the Supreme Court’s decision in
EEOC v. Waffle House, Inc., 534 U.S. 279 (2002), requires
us to answer this question in the negative. Therefore, we
affirm the district court’s denial of the alleged employer’s
motion to compel arbitration.
4                      WALSH V. BROWNE

                      I. BACKGROUND

    The Department of Labor brought an enforcement
against Larry Browne and his companies Arizona Logistics
Inc., d/b/a Diligent Delivery Systems, and Parts Authority
Arizona LLC. Only Browne is party to this appeal. The
Secretary alleged that Browne and his entities violated the
FLSA’s minimum wage, overtime, record-keeping, and anti-
retaliation requirements by misclassifying delivery drivers
as independent contractors rather than employees. 1 Browne
moved to compel arbitration of the Secretary’s enforcement
action based on arbitration agreements that he and his
entities entered into with the delivery drivers. The district
court denied Browne’s motion, concluding that the Secretary
cannot be compelled to arbitrate based on the Supreme
Court’s decision in Waffle House. Browne timely appealed,
and we have jurisdiction under 9 U.S.C. § 16(a)(1)(C).

                        II. DISCUSSION

    We review the denial of a motion to compel arbitration
de novo. Blair v. Rent-A-Center, Inc., 928 F.3d 819, 824 (9th
Cir. 2019).

    Parties who agree to resolve their disputes through
arbitration can be compelled to follow through with that
agreement. The FAA provides that arbitration agreements
“shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2. But the FAA addresses

    1
        “Employment contracts, except for those covering workers
engaged in transportation, are covered by the FAA.” Waffle House, 534
U.S. at 289 (emphasis added). Whether this exception to the FAA applies
in this case was not raised on appeal, and we express no view on this
issue.
                    WALSH V. BROWNE                         5

enforceability only as to the parties to the arbitration
agreement. Waffle House, 534 U.S. at 289. It does not
provide that agreements to arbitrate are enforceable against
nonparties. And of particular importance here, it does not
address whether a private agreement to arbitrate is
enforceable against a government actor that brings an
enforcement action to vindicate the rights of a party to the
arbitration agreement. Id. The Supreme Court, however,
directly addressed this issue in Waffle House.

    In that case, the Equal Employment Opportunity
Commission (EEOC) brought an enforcement action against
Waffle House after it fired an employee who suffered a
seizure at work. Id. at 283–84. The EEOC brought an anti-
discrimination enforcement action on behalf of both the
public interest and the terminated employee—who was not
a party to the action—and sought injunctive relief and
employee-specific monetary relief. Id. Waffle House moved
to compel arbitration of the EEOC’s enforcement action
because it had an arbitration agreement with the terminated
employee who was the subject of the action. Id. at 284.

     The Court ruled against Waffle House, holding that the
EEOC could not be compelled to arbitrate. Construing the
remedial statute at issue, the Court noted that the terminated
employee had no authority to control the litigation even
though the EEOC sought monetary relief on his behalf. Id.
at 291. Rather, the EEOC was the “master of its own case,”
id., and the statute “unambiguously authorize[d] [the EEOC]
to proceed in a judicial forum,” id. at 292. The Court further
reiterated its oft-repeated direction that arbitration “is a
matter of consent, not coercion.” Id. at 294 (internal
quotation marks and citation omitted). The EEOC was not
party to Waffle House’s arbitration agreement, and it was not
bound by the agreement because the FAA “does not require
6                       WALSH V. BROWNE

parties to arbitrate when they have not agreed to do so.” Id.at
293 (internal quotation marks and citation omitted).

    This same reasoning dictates that the Secretary cannot be
compelled to arbitrate this case. As in Waffle House, the
remedial statute at issue here unambiguously authorizes the
Secretary to obtain monetary relief on behalf of specific
aggrieved employees. Section 16(c) of the FLSA authorizes
the Secretary to “bring an action in any court of competent
jurisdiction to recover the amount of unpaid minimum wages
or overtime compensation and an equal amount as liquidated
damages” for any party named in the complaint. 29 U.S.C.
§ 216(c); Donovan v. Univ. of Texas at El Paso, 643 F.2d
1201, 1204 (5th Cir. 1981). Any money the Secretary
recovers on behalf of a specific employee “shall be held in a
special deposit account and shall be paid, on order of the
Secretary of Labor, directly to the employee or employees
affected.” 29 U.S.C. § 216(c). Section 17 of the FLSA
authorizes the Secretary “to seek broad injunctive relief as
well as back wages for all affected employees.” 2 Donovan,
643 F.2d at 1204; 29 U.S.C. § 217. Like the EEOC’s scope
of authority, the Secretary can seek relief under both
sections, see Reich v. Tiller Helicopter Servs., Inc., 8 F.3d
1018, 1033 n.11 (5th Cir. 1993), and there is nothing in
either section suggesting that an arbitration agreement
between the parties to the underlying employment
relationship impacts the Secretary’s enforcement power. See
Waffle House, 534 U.S. at 288.

    2
      In Waffle House, neither the majority nor the dissent questioned
the EEOC’s ability to seek broad-based injunctive relief in judicial
proceedings despite the employee’s arbitration agreement. 534 U.S.
at 305 (Thomas, J., dissenting). And in this case, it appears that Browne
contests only the Secretary’s authority to seek monetary relief under
Section 16(c). Thus, this case largely turns on Section 16(c).
                    WALSH V. BROWNE                         7

    Although the FAA establishes “a liberal federal policy
favoring arbitration agreements,” Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, (1983), it
does not require arbitration beyond the terms agreed. Waffle
House, Inc., 534 U.S. at 289. To determine the reach of a
particular agreement, we must look to its express terms. Id.;
see also Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621
(2018) (“[The FAA] requires courts ‘rigorously’ to ‘enforce
arbitration agreements according to their terms.’” (quoting
Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 233
(2013))).

    There is no dispute that, like the EEOC in Waffle House,
the Secretary is not party to the arbitration agreement
between Browne and his entities and the delivery drivers.
Browne nonetheless argues the Secretary is required to
arbitrate his claims for monetary relief because the delivery
drivers are the intended beneficiaries, and, therefore, the
Secretary is in privity with the delivery drivers. To support
his argument, Browne notes that any sums recovered under
Section 16(c) are secured “on behalf of” and paid “directly
to the employee.” This argument is not persuasive.
Specifically, Browne’s reliance on Chao v. A-One Med.
Servs., Inc., 346 F.3d 908 (9th Cir. 2003), is misplaced. In
that case, we held that res judicata barred the Secretary from
recovering overtime compensation for an employee when
“suing for employee-specific rights of precisely the sort [the
individual employee] already pursued.” Id. at 923. But we
further explained that the Secretary would not have privity
with an employee for res judicata purposes if, for example,
the Secretary sought an injunction to “vindicate broader
governmental interests[,]” not just to recover an employee’s
“individual economic loss.” Id. Thus, it does not
automatically follow that the Secretary shares the interests
8                    WALSH V. BROWNE

required for privity with the employees on whose behalf the
Secretary sues. See id.

     In Waffle House, the Supreme Court recognized that the
government can vindicate a public interest while also
pursuing employee-specific relief. See 534 U.S. at 296.
Although the Secretary, unlike the EEOC, may not recover
punitive damages under Section 16(c), the Secretary may
still have interests independent of the aggrieved employee
when seeking employee-specific relief, including deterring
other employers from violating the FLSA and protecting
complying employers from unfair wage competition with
noncomplying employers. Simply put, recovering monies
owed to aggrieved individuals does not necessarily indicate
that the Secretary is operating solely for the benefit of those
individuals. Id. at 294–95.

     Moreover, the Secretary’s enforcement action, like the
EEOC’s enforcement action, is controlled by the
Secretary—not the delivery drivers. See Waffle House,
534 U.S. at 291 (“If it were true that the EEOC could
prosecute its claim only with [the employee’s] consent, or if
its prayer for relief could be dictated by [the employee], the
[lower] court’s analysis might be persuasive.”). The
Secretary does not need an employee’s consent to bring an
enforcement action. See Reich v. Stewart, 121 F.3d 400, 408
(8th Cir. 1997) (explaining an employee’s consent is not
required for the Secretary to bring a Section 16(c) action, as
Congress deleted such requirement in 1974) (citing Pub. L.
93–259, § 26, 88 Stat. 73). And, once the Secretary files suit,
not only does the employee’s right to sue terminate, but the
employee cannot intervene in the Secretary’s action.
29 U.S.C. § 216(c) (“The right . . . to become a party
plaintiff to any such action[] shall terminate upon the filing
of a complaint by the Secretary . . . .”); see also Marshall v.
                     WALSH V. BROWNE                          9

U.S. Postal Serv., 481 F. Supp. 179, 180 (D.D.C. 1979)
(“The statutory language indicates that employees possess
no right to intervene in a suit brought by the Secretary.”);
Usery v. Bd. of Pub. Educ., Sch. Dist. of Pittsburgh, 418 F.
Supp. 1037, 1038 (W.D. Pa. 1976) (“The plain meaning of
this language is that the employee cannot become a party in
any capacity, including that of an intervenor, once the
Secretary has filed suit.”).

    Browne contends that Waffle House is distinguishable
because it is based on the distinct rights and responsibilities
of the EEOC, which the Secretary does not share. Of course,
there are differences between the two agencies, including
differences in their respective enforcement rights. For
example, under the Americans with Disabilities Act and
Title VII, an employee must file a discrimination charge with
the EEOC before filing suit, and the EEOC has exclusive
jurisdiction over the charge for 180 days. See Waffle House,
534 U.S. at 291 (citing 42 U.S.C. § 2000e–5(f)(1)). Under
the FLSA, an employee can file a complaint with the
Secretary, but she can also proceed straight to filing suit in
federal court. See 29 U.S.C. § 216(b). We find this an
immaterial distinction for the question we must answer,
however, because once the Secretary decides to sue (whether
before or after an employee files suit), the Secretary, like the
EEOC, is in “command of the process.” See Waffle House,
534 U.S. at 291. The Secretary controls both the litigation
strategy and disposition of any recovery obtained for the
employee. 29 U.S.C. § 216(c). Under these circumstances,
we see no meaningful way to distinguish Waffle House. See
Am. Airlines, Inc. v. Mawhinney, 904 F.3d 1114, 1120 (9th
Cir. 2018).
10                  WALSH V. BROWNE

                   III. CONCLUSION

    Because the Secretary, not the employees on whose
behalf relief is sought, has authority to direct an FLSA
enforcement action, the Secretary cannot be compelled to
arbitrate, even if the employees have agreed to arbitration.
“To hold otherwise would undermine the detailed
enforcement scheme created by Congress simply to give
greater effect to an agreement between private parties that
does not even contemplate the [Secretary’s] statutory
function.” Waffle House, 534 U.S. at 296.

     AFFIRMED.