Total Quality Logistics, LLC v. Traffic Tech, Inc.

District Court, S.D. Ohio·Decided February 22, 2022·No. 1:21-cv-00714·Unknown

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

TOTAL QUALITY LOGISTICS, : Case No. 1:21-cv-714 : Plaintiff, : Judge Timothy S. Black : vs. : : TRAFFIC TECH, et al., : : Defendants. :

ORDER DENYING PLAINTIFF’S MOTION TO COMPEL ARBITRATION (Doc. 22)

This civil case is before the Court on Plaintiff’s motion (Doc. 22) to compel arbitration on the question of whether TQL committed improper pay practices and the parties’ responsive memoranda (Docs. 28 and 29). I. BACKGROUND Plaintiff Total Quality Logistics, LLC (“TQL”) is an Ohio limited liability company. (Doc. 3 at ¶2). TQL provides third-party logistics services to customers across the continental United States. (Id.). Defendant Traffic Tech Inc. (“Traffic Tech”) is an Illinois limited liability corporation in the same industry. (Id. at ¶3). Defendant Nickolas Dugger is a former employee of TQL. (Id. at ¶¶4). Dugger worked for TQL in Florida from January 6, 2020 to September 24, 2021 in the positions of Logistics Account Executive Trainee and Logistics Account Executive. (Id. at ¶¶ 4, 14). Dugger signed TQL’s non-compete agreement. Specifically, he agreed, for a period of a year after leaving TQL, to neither work for a competitor nor solicit clients of

TQL. (See “Confidentiality Agreement and Restrictive Covenant,” Doc. 3-1, hereafter, “the non-compete”). Dugger also signed a dispute resolution and arbitration agreement (“DRA”) (Doc. 22-1). In the DRA, both Dugger and TQL agreed to let the other submit “any and all legal claims” to arbitration. (Id. at PageID# 352). The DRA states that “[l]egal claims shall include any and all of the Parties' rights, causes of action, or claims against or between one another that arise out of or in any way relate to Employee's

employment with Employer, unless otherwise excluded in this [DRA].” (Id. at PageID# 353). The exclusions are explicitly set forth in section 1.B of the DRA. There, the DRA states that “legal claims” do not include “claims for a declaratory judgment, injunctive relief, or any other causes of action relating in any way to the Employee [non-compete].” (Id.).

Dugger left TQL and joined Traffic Tech. (See Dugger Declaration, Doc. 7-1). His largest client at TQL, United Pipe, one way or another, became his largest client at Traffic Tech. (Id. at ¶21). After discovering Dugger’s employment with Traffic Tech, TQL moved for a temporary restraining order (“TRO”) and a preliminary injunction in state court. (Doc. 4). Defendants removed to federal court. (Doc. 1). The Court held a

conference and ordered the parties to submit further briefing on the request for a TRO. In the TRO briefing, TQL argued Dugger had violated his reasonable non- compete, and had, or inevitably would, disclose trade secrets. (Docs. 4 and 13). TQL also argued for injunctive relief based on a tortious interference claim. (Doc. 4 at PageID# 156). Both Dugger and Traffic Tech raised issues with the reasonableness of the non-compete. (Docs. 7 and 8). Individually, Dugger put forth an unclean hands

defense. (Doc. 7). Dugger specifically contended that TQL had misclassified him and underpaid him in violation of the FLSA. (Id. at PageID# 172). Dugger argued that, without clean hands of its own, TQL could not avail itself of this Court’s equitable powers to enter injunctive relief. (Id.). Responding to this unclean hands argument, TQL made two discrete rebuttals. First, TQL argued state law did not permit an unclean hands defense where the

underlying claim—in TQL’s mind, an FLSA lawsuit—could be asserted in its own case for damages. (Doc. 13 at PageID# 245). Second, TQL argued that Dugger simply had not established the necessary elements of the unclean hands defense. (Id.). The Court entered a limited TRO. (Doc. 15). The TRO restricts Dugger from working with United Pipe and other former customers he serviced at TQL. (Id.). But the

TRO does not enjoin him from his employment with Traffic Tech generally. (Id. at 23). On the other hand, the Court found that TQL had not demonstrated a likelihood of success on its trade secret and tortious interference claims. (Id.). The Court also made preliminary determinations on the question of the unclean hands defense to injunctive relief. (Id. at 20). First, Dugger could at least attempt to show

TQL’s unclean hands. (Id. at 21). Because TQL sought this Court’s powers under Rule 65 of the Federal Rules of Civil Procedure, TQL could not summarily foreclose an “unclean hands” defense based on state law. (Id. at 22 (citing S. Milk Sales, Inc. v. Martin, 924 F.2d 98, 102 (6th Cir. 1991)). Second, the Court found that Dugger had as of yet failed to establish TQL’s unclean hands based on the rigorous standard for meeting that defense. (Doc. 15 at 22).

After the Court entered the TRO, the parties entered expedited discovery ahead of briefing on the preliminary injunction. They quickly came to an impasse. Among other disputes, as is most relevant here, Dugger had propounded discovery seeking information related to his unclean hands defense. Those requests sought documents pertaining to misclassification of Dugger as a trainee. TQL objected that these discovery requests were irrelevant and that they sought “sensitive” or “confidential” information.1 The

Court scheduled an informal discovery conference for January 18, 2022, wherein the parties spoke to their respective positions. In a written Order dated January 21, 2022, the Court significantly limited discovery on the unclean hands issue but allowed Dugger to go forward with some unclean hands requests, as pruned by the Court. (Doc. 21). The parties quickly apprised

the Court of further discovery disputes. On January 27, 2022, the Court set another conference for January 31, 2022. In the intervening period, on January 28, 2022, TQL filed the present motion to compel arbitration and for a stay. (Doc. 22). Importantly, the motion to compel arbitration seeks to send a narrow part of the conflict to arbitration. (Id.) As TQL characterizes it, the issue of “improper pay

practices” ought to go to arbitration while the parties move forward on the preliminary injunction before this Court. Of course, by seeking to arbitrate “improper pay practices,”

1 These arguments were made in non-record letter statements sent to the Court ahead of an informal discovery conference. TQL’s motion effectively seeks to end this Court’s consideration of Dugger’s unclean hands defense to the preliminary injunction. This is because Dugger’s unclean hands

defense to the injunction is premised on the notion that TQL misclassified and underpaid him.

II. STANDARD OF REVIEW “Under the Federal Arbitration Act, 9 U.S.C. § 2, a written agreement to arbitrate disputes which arise[ ] out of a contract involving transactions in interstate commerce … ‘shall be valid, irrevocable and enforceable’” save any reason in law or equity to the contrary. Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000) (quoting 9 U.S.C. § 2). A strong presumption in favor of arbitration applies but only if the parties have a valid

agreement to arbitrate. “When deciding whether the parties agreed to arbitrate a certain matter ... courts generally ...

Free access — add to your briefcase to read the full text and ask questions with AI

Total Quality Logistics, LLC v. Traffic Tech, Inc., (S.D. Ohio 2022).

Total Quality Logistics, LLC v. Traffic Tech, Inc. (Total Quality Logistics, LLC v. Traffic Tech, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

At&T Technologies, Inc. v. Communications Workers
475 U.S. 643 (Supreme Court, 1986)
First Options of Chicago, Inc. v. Kaplan
514 U.S. 938 (Supreme Court, 1995)
Circuit City Stores, Inc. v. Adams
532 U.S. 105 (Supreme Court, 2001)
Johnson Associates Corp. v. HL Operating Corp.
680 F.3d 713 (Sixth Circuit, 2012)
Textileather Corporation v. GenCorp Inc.
697 F.3d 378 (Sixth Circuit, 2012)
HCRI TRS ACQUIRER, LLC v. Iwer
708 F. Supp. 2d 687 (N.D. Ohio, 2010)
Dominish v. Nationwide Insurance
2011 Ohio 4102 (Ohio Supreme Court, 2011)
Frida Sirota v. NECC Telecom
310 F. App'x 804 (Sixth Circuit, 2009)
Prudential Ins. v. Joyce Building Realty Co.
56 N.E.2d 168 (Ohio Supreme Court, 1944)
Henry Schein, Inc. v. Archer & White Sales, Inc.
586 U.S. 63 (Supreme Court, 2019)
Kevin McGee v. Thomas Armstrong
941 F.3d 859 (Sixth Circuit, 2019)
Prudential Insurance v. Joyce Building Realty Co.
65 N.E.2d 516 (Ohio Court of Appeals, 1943)
Stout v. J.D. Byrider
228 F.3d 709 (Sixth Circuit, 2000)
United States v. Berkeley Heartlab, Inc.
225 F. Supp. 3d 460 (D. South Carolina, 2016)