18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 207 Defendant, an online platform that enabled users to retain the services of household services, misclassified its workers as independent contractors rather than employees, which thereby resulted in minimum wage violations under Massachusetts state law. Defendant moved to dismiss the suit and to compel individual arbitration pursuant to the parties’ Agreement contained in the online application and app. Defendant maintained that Plaintiff had entered into an Agreement to arbitrate in three different instances, including: (i) when she completed the original online application; (ii) when she downloaded the mobile app; and (iii) when she logged- in to the website to obtain her personal records. Plaintiff maintained that under Massachusetts law, she had not entered into the Agreement and that, even if she had, the Agreement could not be enforced to compel arbitration due to the doctrine of unconscionability. The District Court determined that Plaintiff had agreed to arbitrate her claim and rejected her claim that the agreement was unconscionable on the basis that the only provision in the Agreement that she contended was unconscionable was severable and thus did not provide a basis for voiding the Agreement to arbitrate itself. On Plaintiff’s appeal, the First Circuit affirmed the District Court’s order compelling arbitration. Plaintiff argued on appeal that the District Court erred in ruling that, under Massachusetts law, she had entered into an agreement to arbitrate. Applying Massachusetts contract law, the First Circuit concluded that Plaintiff had reasonable notice of the mandatory arbitration provision in the Agreement when she selected "Accept" on the app. Id . at *8. While it was true that only a portion of the Agreement was automatically visible prior to her selecting "Accept," and the term at issue here concerning arbitration did not immediately appear on the screen containing the "Accept" button, the First Circuit determined that it would have been visible by scrolling. Specifically, the First Circuit found it important that the screen displaying the portion of the Agreement that was plainly visible before Plaintiff had selected "Accept" had made clear that additional text further specifying the terms of the Agreement could be viewed by scrolling. Id . at *9. To the extent that Plaintiff argued that, as a matter of law, she did not receive reasonable notice of the term of the Agreement that was at issue because the app did not require her to scroll through its terms prior to selecting "Accept," the First Circuit was unpersuaded because she chose not to review it despite having had an adequate opportunity to do so. As to her unconscionability argument, the only term in the Agreement that Plaintiff identified as being substantively unconscionable was the unilateral modification clause, which purportedly permitted Defendant to modify the terms of the Agreement without notifying Plaintiff or requiring her to accept the changes. Because the basis of her unconscionability challenge was not directed specifically to whether there was an agreement to arbitrate nor did she contend that the modification clause so infected the Agreement such that it could not be severed, the First Circuit found that this contention also failed. For these reasons, the First Circuit affirmed the District Court’s order compelling arbitration and dismissing the putative class action complaint. Ferrell, et al. v. Cypress Environmental Management-TIR LLC, 2021 U.S. App. LEXIS 35345 (10th Cir. Nov. 30, 2021). Plaintiff, an inspector, filed collective action alleging that Defendants failed to pay overtime compensation in violation of the FLSA. Defendants SemGroup Corp. ("SemGroup") and Cypress Environmental Management-TIR, LLC ("Cypress") filed motions to compel arbitration of Plaintiff’s claims, and the District Court denied the motions. On appeal, the Tenth Circuit reversed and remanded the District Court’s rulings. SemGroup, a midstream energy company, transports oil and natural gas through a network of pipelines, and hires service companies to construct and maintain its pipelines. SemGroup contracted with Quantas Pipeline Services ("QPS"), which sub-contracted with Cypress to fulfill the obligations. Plaintiff was employed by Cypress and assigned to perform inspections on one of SemGroup’s pipelines. Plaintiff’s employment agreement with Cypress included an arbitration provision stating that the parties would resolve any “dispute, controversy or claim arising out of or related to in any way to the parties’ employment relationship or termination of that relationship…” to arbitration. Id . at *2. Plaintiff initially only filed suit against SemGroup, which then moved to compel arbitration under a theory of equitable estoppel. Cypress then moved to intervene as a matter of right pursuant to Rule 24(a). The District Court granted the motion on the grounds that Cypress and SemGroup might be joint and severally liable as joint employers under the FLSA. Id . at *3. In analyzing Defendants’ equitable estoppel theory, the District Court applied the two prongs of equitable estoppel, but reasoned that neither justified estopping Plaintiff. On appeal, the Tenth Circuit analyzed the second prong, which applies equitable estoppel "when the signatory raises allegations of substantially interdependent and concerted misconduct by both the non-signatory and one or more of the signatories to the contract.” Id . at *9. The Tenth Circuit held that Cypress was a party to the suit, having intervened based on potential joint and several liability with SemGroup, and therefore Plaintiff’s lawsuit was precisely the type of lawsuit that "concerted misconduct estoppel" was designed to address. Id . at *10-11. Applying these principles to the facts, the Tenth Circuit reasoned that