Court Opinion

ID: 6337552
Source: CourtListenerOpinion
Date Created: 2022-05-04 00:00:35.265753+00
Date Added: 2024-06-11T09:24:47.265900
License: Public Domain

Case: 22-40039       Document: 00516304963           Page: 1      Date Filed: 05/03/2022

              United States Court of Appeals
                   for the Fifth Circuit                                     United States Court of Appeals
                                                                                      Fifth Circuit

                                                                                    FILED
                                                                                 May 3, 2022
                                     No. 22-40039                              Lyle W. Cayce
                                                                                    Clerk

   In re A&D Interests, Incorporated, doing business as
   Heartbreakers Gentleman’s Club; Mike Armstrong;
   Peggy Armstrong,

                                                                           Petitioners.

                           Petition for a Writ of Mandamus
                         to the United States District Court
                          for the Southern District of Texas
                                 USDC No. 3:20-CV-8

   Before Smith, Higginson, and Willett, Circuit Judges.
   Per Curiam:
          A&D Interests, Incorporated (doing business as the “Heartbreakers
   Gentlemen’s Club”), Mike Armstrong, and Peggy Armstrong, petition us for
   a writ of mandamus. They argue that the district court 1 should not have
   certified a Fair Labor Standards Act collective action comprised of “exotic”
   dancers who had worked at Heartbreakers in the last three years. We must
   decide whether the district court’s decision to send notice to potential opt-in
   plaintiffs who signed arbitration agreements ran afoul of our holding in In re
   JPMorgan Chase & Co., 916 F.3d 494, 499 (5th Cir. 2019). And, if the district

          1
            This matter was decided by the magistrate judge, to whom the parties jointly
   ceded authority per 28 U.S.C. § 636(c).
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   court did err, we must also decide whether Petitioners have cleared the
   remaining hurdles for mandamus relief. For the following reasons, we grant
   Petitioner’s motion.
                                               I
           Respondent Stacey Kibodeaux worked as an exotic dancer for
   Petitioners in Dickinson, Texas. She alleges that Petitioners unlawfully
   misclassified her (along with all other exotic dancers) as an independent
   contractor, resulting in Petitioners’ unlawfully withholding wages she was
   due in violation of the Fair Labor Standards Act (“FLSA”). 28 U.S.C. § 203
   et seq. Shortly after Kibodeaux filed her complaint, three other former
   dancers joined the lawsuit. The plaintiffs moved the district court to certify
   the case as an FLSA “collective action” comprised of dancers who worked
   at Heartbreakers in the preceding three years.
           The district court granted Kibodeaux’s motion for “conditional
   certification.” Kibodeaux v. A&D Ints., Inc., No. 3:20-CV-00008, 2020 WL
   6292551 (S.D. Tex. Oct. 27, 2020) (“Kibodeaux I”), order vacated on
   reconsideration, 2021 WL 6344723 (S.D. Tex. Mar. 4, 2021). Petitioners
   moved the district court for permission to seek interlocutory review of that
   order, which the district court denied. Petitioners then petitioned us for a
   writ of mandamus. We denied that petition. 2
           While the first mandamus action was pending, we decided Swales v.
   KLLM Transport Services, L.L.C., which did away with conditional
   certification in FLSA cases. 985 F.3d 430, 436 (5th Cir. 2021). In light of this
   change in the law, the district court vacated its conditional certification order

           2
              As our dissenting colleague notes, this petition involves the same legal question
   as another petition we denied two years ago in this same litigation. But no party argues that
   our prior decision bars Petitioners from raising the same argument under the doctrines of
   res judicata, the law of the case, or any other ground.

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   and ordered the parties to conduct preliminary discovery. Armed with new
   discovery, the district court granted the plaintiffs’ motion for certification
   and issuance of notice. Kibodeaux v. A&D Ints., Inc., No. 3:20-CV-008, 2022
   WL 92856 (S.D. Tex. Jan. 10, 2022) (“Kibodeaux II”). Petitioners then filed
   a second mandamus petition asking us to vacate the district court’s order
   certifying the collective action. To facilitate orderly appellate review, the
   district court stayed its order certifying the collective action pending
   resolution of this petition.
                                          II
          When deciding whether mandamus is warranted, “[w]e ask (1)
   whether the petitioner has demonstrated that it has ‘no other adequate
   means to attain the relief [it] desires’; (2) whether the petitioner’s ‘right to
   issuance of the writ is clear and indisputable’; and (3) whether we, in the
   exercise of our discretion, are ‘satisfied that the writ is appropriate under the
   circumstances.’” In re Itron, Inc., 883 F.3d 553, 567 (5th Cir. 2018) (quoting
   Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367, 380–81 (2004)).
                                          A
          The first requirement is that the error must be “truly ‘irremediable
   on ordinary appeal.’” JPMorgan, 916 F.3d at 499 (quoting In re Depuy
   Orthopaedics, Inc., 870 F.3d 345, 350 (5th Cir. 2017)). While “[t]hat is a high
   bar,” Petitioners meet it. Id. (quoting Depuy, 870 F.3d at 352–53) (alteration
   in original). In JPMorgan we held that orders facilitating notice to potential
   opt-in plaintiffs (called “conditional certification” before Swales) meet this
   requirement because the issue will be moot after notice is sent. See id.; see also
   In re Citizens Bank, N.A., 15 F.4th 607, 621 (3d Cir. 2021) (noting that
   mandamus was the only remedy to address a district court’s pretrial error in
   an FLSA opt-in collective action). The same is true here. Because this issue

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   will become moot before Petitioners can file an appeal, the first requirement
   is met.
                                           B
             The second requirement is that we “must be satisfied that the writ is
   appropriate under the circumstances.” JPMorgan, 916 F.3d at 499 (quoting
   Cheney, 542 U.S. at 380). This generally means that the moving party must
   show that “the issues implicated have ‘importance beyond the immediate
   case.’” Id. (quoting In re Volkswagen of Am., Inc., 545 F.3d 304, 319 (5th Cir.
   2008) (en banc)). We also consider “such factors as the need for judicial
   neutrality and the avoidance of rulings that unnecessarily stimulate
   litigation.” In re Spiros Partners, Ltd., 816 F. App’x 985, 987 (5th Cir. 2020)
   (per curiam).
             The question of whether district courts may send notice of a collective
   action to plaintiffs who have signed arbitration agreements was important
   enough in JPMorgan to justify mandamus relief. 916 F.3d at 499–500. It
   remains important. Federal district courts have splintered over the issue, see
   id. at 499 n.6, and permitting district courts to ignore JPMorgan’s clear
   holding would sow needless confusion. Ensuring judicial neutrality and
   preventing district courts from needlessly stirring up litigation is good cause
   for a writ to issue. See In re Spiros Partners, Ltd., 816 F. App’x at 987.
                                           C
             Finally, mandamus is only appropriate if Petitioners can show a
   “‘clear and indisputable’ right to the writ.” In re Am. Lebanese Syrian
   Associated Charities, Inc., 815 F.3d 204, 206 (5th Cir. 2016) (quoting Cheney,
   542 U.S. at 380). It is not enough for Petitioners to show that the district
   court erred or abused its discretion. Id. Rather, they must show that the
   district court clearly and indisputably erred such that “there has been a

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   usurpation of judicial power.” JPMorgan, 916 F.3d at 500 n.8 (quoting Will,
   389 U.S. at 95).
           Petitioners argue that the district court erred by “certifying” 3 the
   collective action runs afoul of our holding in JPMorgan that district courts
   may not issue notice to potential plaintiffs who have signed valid, enforceable
   arbitration agreements. 4 The relevant language in JPMorgan is, “district
   courts may not send notice to an employee with a valid arbitration agreement
   unless the record shows that nothing in the agreement would prohibit that
   employee from participating in the collective action.” 916 F.3d at 501.
           The district court held that while it would be a “rare case in which a
   district court issues notice to a group of plaintiffs who have executed
   agreements calling for arbitration,” “this is one of those atypical cases.”
   Kibodeaux I, 2020 WL 6292551, at *5. The district court found that this case
   was atypical because while the arbitration agreement mandated that all claims
   (including FLSA claims) be resolved by arbitration, the agreement went on
   to say that no disputes between them may be handled through class action
   lawsuits. Id. at 3. This case involves a “collective action” not a class action,
   and the two mechanisms have important differences—chief among them
   being that plaintiffs must opt into collective actions, while members of a Rule
   23 class action are bound unless they opt out. See, e.g., Genesis Healthcare

           3
              We use the word “certification” for simplicity. But as we noted in Swales “the
   word ‘certification,’ much less ‘conditional certification,’ appears nowhere in the FLSA.”
   985 F.3d at 434. When we speak of certification, we are really referring to the district
   court’s exercise of its discretionary authority to oversee the notice and opt-in process—a
   process that differs in important ways from the certification of a Rule 23 class action. See
   id. at 435.
           4
           Petitioners also argue that the district court erred by authorizing notice to parties
   who were not “similarly situated,” misapplying our holding in Swales. Because we find that
   mandamus relief is appropriate based on Petitioners’ first theory, we need not reach this
   issue.

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   Corp. v. Symczyk, 569 U.S. 66, 74 (2013) (noting that “Rule 23 actions are
   fundamentally different from collective actions under the FLSA”); Swales,
   985 F.3d at 435. And because of this difference, the district court found that
   the arbitration agreement bar on participating in class actions did not bar
   dancers from participating in collective actions. 5
           This was in error. Mindful of the Supreme Court’s instruction that
   courts must “rigorously enforce agreements to arbitrate,” we look to the text
   of the arbitration agreement. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213,
   221 (1985). The arbitration agreement contains three separate provisions that
   govern how disputes between the parties would be handled. The first says
   that the parties “agree that any controversy or claim [between them] . . . shall
   be resolved by arbitration.” Kibodeaux I, 2020 WL 6292551, at *3. 6 The
   second says that “the only parties to the arbitration shall be [Petitioners] and
   [the individual dancer].” Id. (second alteration in original). The third says
   that “any dispute between them shall not be the subject of a class action
   lawsuit or arbitration proceeding.” Id. While the district court correctly
   noted that the third clause does not bar potential plaintiffs from joining the
   collective action, that still leaves the other two clauses. Both make it equally
   impossible for potential opt-in plaintiffs who signed arbitration agreements

           5
             Our dissenting colleague cites Vine v. PLS Financial Servs., Inc. for the proposition
   that class or collective action waivers are in effect conditional, only effective after a party
   moves to compel arbitration. 807 F. App’x 320, 328 (5th Cir. 2020) (per curiam)
   (unpublished). Not so. Vine held that a party who waived an arbitration clause also waived
   a class action waiver because the two were intertwined. See id. Indeed, Vine provides
   support for our holding. We agree that a party gives up “their right to participate in a class
   action by virtue of their agreement to resolve disputes exclusively through individual
   arbitration.” Id. The same logic holds here. By agreeing to individual arbitration,
   Respondents agreed not to participate in collective and class actions.
           6
             Quotations from the arbitration agreement have been placed in normal typeface
   rather than all caps for ease of reading.

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   to participate in a collective action in federal court. The first clause dictates
   that any dispute must be before an arbitrator, and not a court—including of
   course a federal district court. And the second clause dictates that the dispute
   must be an individual, one-on-one arbitration. That second clause rules out
   collective actions, class actions, joinder, and any other similar mechanism for
   joining multiple parties together. See, e.g., Szilassy v. Ameriprise Fin. Servs.,
   Inc., No. 07-CV-80559, 2007 WL 9677242, at *1 (S.D. Fla. Aug. 2, 2007)
   (arbitration agreement prevented plaintiffs from participating in a FLSA
   collective action in federal court). Even if the third clause left the door open
   to collective actions, the other two clauses slam that door shut.
          Indeed, the district court seems to have recognized that these two
   clauses bar potential plaintiffs from joining the collective action. See
   Kibodeaux I, 2020 WL 6292551, at 5 (noting that the plaintiffs could pursue a
   collective action “at least for the time being”). But it justified sending notice
   to plaintiffs who signed admittedly valid arbitration agreements because
   Petitioners have not yet moved to compel arbitration. The district court
   reasoned that “[t]he parties can certainly waive or renounce their right to
   insist upon arbitration,” and that it could send notice despite an apparently
   valid arbitration agreement until Petitioners moved to compel arbitration.
   Kibodeaux I, 2020 WL 6292551, at *3. But that would be true even if the
   arbitration agreement explicitly forbade participation in collective actions.
   The district court did not explain why an anti-collective action clause would
   have deserved respect, while other clauses that have the same effect lie
   dormant until a party moves to compel arbitration. The difference between
   the first, second, and third clauses—all of which have the same legal effect
   here—is a distinction without a difference.
          Worse still, we rejected this exact argument in JPMorgan. That
   district court similarly reasoned that “even if [the petitioner] was correct that
   notice may not be sent to individuals who signed arbitration agreements and

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   thus might be compelled to arbitrate, ‘the Court cannot determine that there
   is no possibility that putative class members will be able to join the suit until
   Defendant files a motion to compel arbitration against specific individuals.’”
   JPMorgan, 916 F.3d at 498. We responded that the failure of the petitioner
   to compel arbitration did not matter. Id. at 503 n.19. 7 Nor should it matter—
   far from waiving their right to enforce the arbitration agreement, Petitioners
   have attempted to enforce it by opposing certification. Instead, a district
   court’s focus should be on whether those receiving notice will be able to
   “ultimately participate in the collective [action].” Swales, 985 F.3d at 441
   (emphasis added) (quoting Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 502
   (2016)). Issuing notice to those who will not ultimately be able to participate
   “‘merely stirs up litigation,’ which is what Hoffmann-La Roche flatly
   proscribes.” Id. (citing Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 170
   (1989)).
          In sum, the district court apparently recognized that the arbitration
   agreement would prevent the opt-in plaintiffs from ultimately participating
   in the collective action, but approved class notice anyways. This was not
   merely an erroneous exercise of discretion. In light of JPMorgan, it was wrong
   as a matter of law. Because the district court clearly and indisputably erred,
   mandamus relief is appropriate.
          The petition for writ of mandamus is GRANTED.

          7
           In his twenty-page January 10, 2022, order that is under review, the magistrate
   judge—remarkably—never even mentioned our controlling decision in JPMorgan.

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   Stephen A. Higginson, Circuit Judge, dissenting:
           With respect, I dissent because I do not see that this lower court—
   devotedly applying our JPMorgan 1 decision two years ago in Kibodeaux I 2 and
   then, in the decision on review, equally devotedly applying Swales 3—has
   been shown to have clearly and indisputably erred.
           Preliminarily, to my eye, the petition we grant today is
   indistinguishable from the one our court denied two years ago in this same
   litigation. Our court’s assessment then was searching, not only at the panel
   stage but also in our consideration of the petition for rehearing en banc, to
   which we ordered a response. It is difficult to see indisputable error justifying
   this “drastic and extraordinary remedy,” JPMorgan, 916 F.3d at 499, when
   a previous panel and, on request, review by the full court found none.
           More importantly, not only was mandamus denied in JPMorgan, 916
   F.3d at 505, but that case, significantly, involved an agreement that explicitly
   precluded collective actions, which the agreement here does not.
           Relatedly, the potential plaintiffs here, unlike in JPMorgan, only
   waived their right to bring a collective action if their disputes are channeled
   to arbitration. 4 Cf. Vine v. PLS Financial Servs., Inc., 807 F. App’x 320, 328

           1
               In re JPMorgan Chase & Co., 916 F.3d 494 (5th Cir. 2019).
           2
            Kibodeaux v. A&D Interests, Inc., No. 3:20-CV-00008, 2020 WL 6292551 (S.D.
   Tex. Oct. 27, 2020).
           3
               Swales v. KLLM Transp. Servs. L.L.C., 985 F.3d 430 (5th Cir. 2021).
           4
             This is evident from the two provisions in the agreement on which the majority
   focuses: (1) “[The parties] agree that any controversy or claim arising out of or relating to
   this contract or relationship between the parties . . . shall be resolved by arbitration,” and
   (2) “The only parties to the arbitration shall be [Petitioners] and [the individual dancer].”
   (emphasis added). As the majority notes, the third clause governing disputes between the
   parties does not bar collective actions.

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   (5th Cir. 2020) (per curiam) (affirming the district court’s determination that
   “a class action waiver in the middle of an arbitration provision” was not “an
   independently effective waiver of the right to pursue a class action outside of
   the arbitration context”). As of yet, Petitioners have not moved to compel
   arbitration and the district court has not addressed whether Petitioners
   waived their right to do so or whether the arbitration agreements are
   enforceable. Cf. id. JPMorgan did not hold that notice should never be sent
   to potential plaintiffs who might, at some point, be compelled to arbitrate,
   and if the case here proceeds, as it has, in federal court, “nothing in the
   agreement would prohibit [the potential plaintiffs] from participating in the
   collective action.” JPMorgan, 916 F.3d at 503. No one would disagree that
   wronged employees should receive notice under the FLSA that their
   employer might have violated their federally protected rights unless they are
   prohibited from participating in the collective action.
          In sum, at this stage, none of the three clauses of the arbitration
   agreement prohibits potential plaintiffs from participating in a collective
   action. Therefore, the district court’s decision to grant the motion for
   certification and issuance of notice was not error, let alone indisputable error.

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