Saravia v. Dynamex, Inc.
2015 U.S. Dist. LEXIS 136516
N.D. Cal.2015Background
- Plaintiff Juan Saravia, a Spanish-speaking delivery driver in California, contracted with Dynamex as an alleged independent contractor under form agreements (2011 and 2012) and challenges classification and pay under the FLSA.
- Saravia signed form contracts presented in English on the day told to sign; Dynamex knew Saravia had limited English proficiency and did not provide translations or explain arbitration terms.
- The 2011 agreement expressly delegated arbitrability to arbitration; the 2012 agreement incorporated the AAA Commercial Arbitration Rules and designated Dallas, Texas, as the arbitration forum; both contained cost-splitting/fee provisions and a fee-shifting term.
- Dynamex moved to compel arbitration and stay litigation; Saravia moved for conditional certification of an FLSA collective to facilitate notice to similarly situated drivers.
- Court applied California substantive law (not Texas) to defenses because California has greater interest and Texas law conflicted with California public policy on unconscionability and arbitration cost shifting.
- Court denied Dynamex’s motion to compel arbitration (found delegation and arbitration clauses unconscionable as applied to Saravia) and conditionally certified a limited collective of delivery drivers who performed deliveries in California, with modifications to notice and opt-in procedures.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state law choice-of-law clause (Texas) governs unconscionability challenge | Saravia: California law applies to defenses; California has overriding interest | Dynamex: Enforce Texas choice-of-law in agreements | Court: California law governs because conflict with Texas and California has materially greater interest |
| Whether arbitrability was delegated to arbitrator | Saravia: delegation (and its incorporation) is unenforceable as presented to him | Dynamex: 2011 clause expressly delegates; 2012 incorporation of AAA rules delegates arbitrability | Court: Delegation clauses unenforceable as applied — court decides arbitrability |
| Whether arbitration clauses (including forum and fee provisions) are enforceable | Saravia: clauses procedurally and substantively unconscionable given oppression, surprise, prohibitive Texas forum, cost-splitting, and fee-shifting | Dynamex: Saravia was a sophisticated, well-paid contractor; costs not prohibitive | Court: Arbitration clauses unenforceable as applied (procedural surprise/oppression + substantive one-sidedness and deterrence of FLSA vindication) |
| Conditional certification of FLSA collective and notice scope | Saravia: drivers performed similar duties, signed similar independent-contractor agreements, lacked wage/overtime protections — lenient standard supports conditional certification for California drivers | Dynamex: material individual differences in business models, pay structures, and agreements defeat collective certification | Court: Conditional certification granted in part — limited to delivery drivers who performed deliveries in California; notice to be modified and opt-in period set at 60 days |
Key Cases Cited
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (arbitrability gateway issues belong to court unless clearly delegated)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (delegation clause may be invalid if unconscionable; delegation is severable)
- Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83 (California framework for procedural and substantive unconscionability of arbitration agreements)
- Nagrampa v. MailCoups, Inc., 469 F.3d 1257 (forum selection and prohibitive costs can render arbitration clauses unenforceable)
- Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069 (incorporation of AAA rules can constitute clear and unmistakable delegation)
- In re Vortex Fishing Sys., Inc., 277 F.3d 1057 (choice-of-law analysis and enforcement of contractual choice-of-law provisions)
- Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (judicial facilitation of notice in collective actions under FLSA)
- Torres-Lopez v. May, 111 F.3d 633 (multi-factor independent contractor test under Ninth Circuit)