Bille v. Coverall North America, Inc.
3:19-cv-00092
| D. Conn. | Mar 12, 2020Background
- Plaintiffs Caribe Billie and Quincy Reeves (janitorial workers) sue Coverall North America, Inc. (CNA) alleging misclassification as independent contractors and unlawful wage deductions under Connecticut law.
- Plaintiffs signed janitorial franchise agreements (JFAs) with R & B Services, a CNA master franchisee; CNA drafted the contracts, exerts operational control, and receives a portion of franchise fees.
- CNA moved to dismiss for lack of personal jurisdiction and for failure to state a claim, and alternatively moved to stay litigation and compel arbitration.
- Both named plaintiffs executed post-assignment documents (amendments, guarantees, releases) containing broad arbitration clauses and delegation provisions covering arbitrability.
- Plaintiffs challenged jurisdiction, pleaded that CNA implemented/benefitted from the fees, and argued the arbitration/delegation clauses were procedurally and substantively unconscionable (cost-splitting, fee-shifting, confidentiality), and that CNA’s motion to compel was premature.
- The court denied CNA’s jurisdictional and Rule 12(b)(6) dismissal motions, concluded Connecticut long-arm and due-process requirements were met, but granted CNA’s motion to compel arbitration and stayed the case pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction under Conn. long-arm | CNA is not a party to the plaintiffs’ JFAs; therefore no jurisdiction | CNA drafted the JFAs, benefits from them, and has forum contacts in CT | Court: jurisdiction proper under §33-929(f)(1); due process satisfied (specific contacts, forum interest) — 12(b)(2) denied |
| Failure to state a claim (wage-law liability) | Plaintiffs allege CNA misclassified workers and funneled fees; CNA liable | CNA argues it has no connection to fees (R & B, not CNA) | Court: plaintiffs plausibly alleged CNA’s role and receipt of fees; 12(b)(6) denied |
| Existence/scope of arbitration agreement | Plaintiffs do not dispute scope but argue premature to compel arbitration | CNA: plaintiffs and guarantors agreed broadly to arbitrate disputes with CNA | Court: parties agreed to arbitrate claims with CNA (amendments/releases include CNA); arbitration compelled |
| Enforceability of delegation clause / unconscionability (costs, fee-shifting, confidentiality) | Clauses are adhesive, obscure, and substantively unfair (cost-splitting deters vindication; fee-shifting; confidentiality) | Clauses are clear, not procedurally unconscionable; costs speculative; AAA hardship and other limits; federal policy favors arbitration; delegation clause governs arbitrability | Court: delegation clause governs arbitrability; plaintiffs failed to show procedural unconscionability or that costs/terms render clause substantively unconscionable; arbitration enforced and case stayed |
Key Cases Cited
- Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S. Ct. 1773 (2017) (framework for specific jurisdiction and relatedness requirement)
- Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560 (2d Cir. 1996) (two-part personal jurisdiction inquiry in diversity cases)
- Charles Schwab & Co. v. Bank of Am., 883 F.3d 68 (2d Cir. 2018) (reasonableness factors in specific jurisdiction analysis)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (arbitration policy and scope; doubts resolved for arbitration)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (delegation clauses can assign arbitrability to arbitrator if clearly and unmistakably agreed)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (strong federal policy favoring arbitration; enforce arbitration agreements despite some state-law defenses)
- Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79 (2000) (party alleging arbitration costs preclude vindication bears burden of showing likelihood of prohibitive costs)
- Smith v. Mitsubishi Motors Credit of America, Inc., 247 Conn. 342 (1998) (Connecticut unconscionability framework: procedural and substantive factors)