Prowant v. Federal National Mortgage Ass'n

255 F. Supp. 3d 1291, 2017 WL 2378016, 2017 U.S. Dist. LEXIS 86092
CourtDistrict Court, N.D. Georgia
DecidedMay 31, 2017
DocketCIVIL ACTION NO. 1:14-CV-3799-AT
StatusPublished
Cited by1 cases

This text of 255 F. Supp. 3d 1291 (Prowant v. Federal National Mortgage Ass'n) is published on Counsel Stack Legal Research, covering District Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Prowant v. Federal National Mortgage Ass'n, 255 F. Supp. 3d 1291, 2017 WL 2378016, 2017 U.S. Dist. LEXIS 86092 (N.D. Ga. 2017).

Opinion

ORDER

Amy Totenberg, United States District Judge

Defendant’s Motion to Compel Arbitration of Opt-Ins’ Claims [Doc. 57] is before the Court. Specifically, Defendant Federal National Mortgage Association (“Fannie Mae”) seeks to compel the arbitration of claims for nine individuals who consented to join this Fair Labor Standards Act (“FLSA”) case on April 15, 2016. Fannie Mae does not seek anew to compel arbitration of the FLSA claims brought by the two named Plaintiffs, Teri Prowant and Tamara Mitchell-Johnson, or the one individual who opted in earlier, Clifton Holland.

This is not the first time Fannie Mae has raised the issue of arbitrability and, in doing so, halted all proceedings on the Plaintiff employees’ FLSA claims. The Court’s prior order (Doc. 51) lays out the background facts in more detail, but here they are in a nutshell:

In May 2014, the two named Plaintiffs brought them FLSA claims against Fannie [1293]*1293Mae in a JAMS arbitration forum on behalf of themselves and other “similarly situated” employees. They claimed Fannie Mae had violated the FLSA’s overtime provisions. The arbitrator adjudicated the ease for several months, during which time Fannie Mae filed an answer, the parties held a preliminary scheduling conference, and the parties briefed the issue of whether Fannie Mae’s dispute resolution policy (“DRP”) allowed for class claims. But on November 25, 2014, after the arbitrator had set a hearing to address the class claims issue, Fannie Mae suddenly halted the arbitration by filing the current case. Fannie Mae sought a declaratory judgment that its DRP did not allow Plaintiffs to arbitrate their claims as a class and that only this Court (not an arbitrator) could decide whether the DRP allowed class arbitration. Fannie Mae also asked for an injunction to stop the underlying arbitration. Up to this point, Fannie Mae had never raised the argument that the arbitrator could not decide the issue of class arbitrability.

The Court stayed the underlying JAMs proceedings while it resolved the class arbitration issue before it. Only one individual,- Clifton Holland, had filed a written consent to join the underlying arbitration before Fannie Mae filed the current action. The Court-ordered stay meant that no other individuals could opt into the underlying arbitration, and it was unclear whether Plaintiffs’ FLSA claims would eventually proceed in the JAMS arbitration forum or in federal court. Right around this time, the parties also entered into a stipulation after Plaintiffs raised the concern that the statute of limitations would meanwhile run <on potential opt-in members’ claims. The parties agreed, among other things, to toll the statute of limitations on putative opt-in members’ claims until the Court’s decision on the issue of class arbitration.

Fannie Mae (in’ the position of plaintiff at the time) then moved for summary judgment. The employee Plaintiffs (in the position of defendants at the time) filed three counterclaims, asserting: (1) that Fannie Mae had waived the DRP by filing the current action, (2) that Fannie Mae had materially breached .the DRP by filing the current action, and (8) that, if the Court found either waiver or breach of the DRP, it should allow their “FLSA Individual and Collective Action Overtime Claims” to proceed in this action. (Doc. 19.) The employee Plaintiffs subsequently moved for summary judgment as well.

On March 22, 2016, with the' parties’ motions for summary, judgment fully briefed, the Court referred the parties to mediation. Mediation was scheduled for April 26, 2016. On April 15th, Plaintiffs filed a notice of opt-in consents for the newly added nine opt-ins.1 (Doc. 48.) Seven of the nine opt-ins had signed the DRP, and two of them had signed the DRP as well as Fannie Mae’s new Arbitration Agreement, effective as of January 2015.2 The parties’ counsel then attended mediation on April 26th, which failed, and they so notified the Court sometime later after additional negotiation efforts.

On September 21, 2016, the Court found that Fannie Mae had waived and breached the DRP by filing the current action and therefore granted'summary judgment on [1294]*1294the employee Plaintiffs’ (then the defendants’) counterclaims. (Doc. 51.) In particular, the Court found that both elements of the waiver test were satisfied: (1) Fannie Mae substantially participated in litigation to the point that it was inconsistent with its right to arbitrate; and.(2) Fannie Mae prejudiced the Plaintiffs by delaying the arbitration proceedings and causing them to incur litigation expenses. The Court also found that Fannie Mae breached its arbitration contract with the Plaintiffs by seeking judicial determination of whether the DRP provided for class claims when the DRP delegated that question to the arbitrator. The Court emphasized the “undisputed purpose” of Fannie Maé’s filing the current action in federal court was to halt the arbitral process, strip the arbitrator of the authority to decide whether the agreement authorized" class claims, and in turn strip the Plaintiffs of their ability to bring class claims. (Id, at 19-20.) It further noted that the prejudicial delay was “particularly egregious under the specific circumstances of this arbitration agreement,” since the DRP authorized employee claimants to file suit in federal court after the conclusion of arbitration. (Id. at 21.). In sum, the Court, held that , the DRP was waived, breached, and rescinded and the case should proceed in federal court with Counterclaim 3 — the Plaintiffs’ (then the defendants’) underlying FLSA claim — as the only claim left in this case. (Id. at 30.) The Court therefore directed the Clerk to re-caption the case to switch the employees, Prowant et al, to Plaintiffs and Fannie Mae to Defendant.

Per the Court’s Order, Plaintiffs then filed an Amended Complaint stating their FLSA claims on behalf of themselves and others, similarly situated. Fannie Mae timely filed its Answer, including the affirmative defense that any putative opt-ins were still bound to arbitrate based on their individual arbitration agreements with Fannie Mae. Then, on December 1, 2016, Fannie Mae filed the current motion to compel arbitration for the- nine opt-ins. The Court held a hearing on the motion on February 8, 2017, during which both sides had an opportunity for oral argument.

For the reasons stated below, the Court DENIES Fannie Mae’s Motion to Compel Arbitration of Opt-ins’ Claims [Doc. 57].

I. LEGAL STANDARD

Fannie Mae moves to compel arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 2, 3, and 4 and supporting case law. Section 2 of the FAA provides that agreements to arbitrate are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of/any contract.” The Supreme Court has interpreted Section 2 of the FAA as “reflecting both a liberal federal policy favoring arbitration ... and the fundamental principle that arbitration is a matter of contract.” AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (internal quotation marks omitted).

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Cite This Page — Counsel Stack

Bluebook (online)
255 F. Supp. 3d 1291, 2017 WL 2378016, 2017 U.S. Dist. LEXIS 86092, Counsel Stack Legal Research, https://law.counselstack.com/opinion/prowant-v-federal-national-mortgage-assn-gand-2017.