Tae in Kim v. Dongbu Tour & Travel, Inc.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
Nos. 12-3285 and 12-3367
______________
TAE IN KIM;
DAVID D. KIM,
individually and on behalf of all others similarly situated
v.
DONGBU TOUR & TRAVEL, INC;
KYU SUNG CHO,
Appellants
______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 2-12-01136)
District Judge: Hon. William H. Walls
______________
Submitted under Third Circuit LAR 34.1(a)
June 14, 2013
Before: McKEE, Chief Judge, and AMBRO and GREENBERG, Circuit Judges
(Filed: June 19, 2013)
______________
OPINION OF THE COURT
______________
GREENBERG, Circuit Judge
This matter comes on before this Court on consolidated appeals brought by
Dongbu Tour & Travel, Inc. and Kyu Sung Cho, its president (together called “Dongbu”)
from orders in this action that Tae In Kim and David D. Kim, who claim to be Dongbu’s
employees, initiated in the District Court under the Fair Labor Standards Act and the
New Jersey Wage and Hour Law. The Kims are attempting to bring the case as a class
action to include other individuals similarly situated to them.
The appeals are from two orders. 1 The first order from which Dongbu appeals
was entered on July 23, 2012, and denied the Kims’ motion for a preliminary injunction
in which they sought an order restraining Dongbu from retaliating against them for
bringing this action. Though the Kims did not appeal from the July 23, 2012 order, that
order included a provision from which Dongbu appeals prohibiting the parties from
communicating with members of the putative class that the Kims seek to represent until
the resolution of class certification issues. Dongbu’s appeal from the July 23, 2012 order
is docketed as No. 12-3367. The second order from which Dongbu appeals is an order of
July 25, 2012, denying Dongbu’s motion to require that the Kims’ claims be submitted to
arbitration. This appeal is docketed as No. 12-3285.
1
The District Court had jurisdiction under 28 U.S.C. §§ 1331, 1332 and 1367 and 29
U.S.C. § 216(b), and we have jurisdiction over the appeal in No. 12-3285 under 9 U.S.C.
§ 16(a). Dongbu claims that we have jurisdiction in No. 12-3367 under 28 U.S.C. §
1292(a), but we reject this contention. We are exercising plenary review on this appeal.
See Guidotti v. Legal Helpers Debt Resolution, L.L.C., No. 12-1170, ____ F.3d ____,
____, 2013 WL 2302324, at *5 (3d Cir. May 28, 2013).
2
The background of the case is as follows. The Kims were tour guides working in
the Korean tour business. There is a substantial tour business in the United States
catering to Koreans, including both individuals who reside in Korea and individuals of
Korean background who reside in the United States. It appears that tour companies
catering to Koreans seek to engage guides with Korean backgrounds to conduct their
tours and we draw an inference from the Kims’ surnames that they are of that
background. Dongbu, evidently aware of federal and state laws which in various ways
regulate employer-employee relationships in the interest of protecting employees’ rights,
desired to obtain the Kims’ services on an independent contractor basis, a not uncommon
practice among employers who attempt to circumvent such employee protection laws.
Dongbu, in furtherance of its attempt to employ the Kims on an independent
contractor basis, sought to have the Kims form businesses which Dongbu intended would
be deemed to be the Kims’ employers, to the end that Dongbu could contract for the
Kims’ services through the businesses rather than directly with the Kims. Thus, in its
brief Dongbu sets forth that “Tae In Kim and David D. Kim are employees of X Golf,
Inc. (X Golf) and DDK NY, Corp. (DDK NY), respectively . . . .” Appellants’ br. at 35-
36. 2 Dongbu, however, did not sign agreements with the Kims’ businesses. Rather, in an
attempt to separate itself still further from the Kims, Dongbu sought to have the Kims’
2
Sometimes on this appeal Dongbu seems to refer to DDK NY as a corporation but at
other times it seems to regard it as an unincorporated entity. The distinction is not
material to us on this appeal.
3
companies sign what are entitled independent contractor agreements with Guide USA
Inc., an entity that Dongbu describes as a “tour guide management company through
which [the Kims] worked as tour guides on tour programs operated by Dongbu.”
Appellants’ br. at 24. The agreement between DDK NY, David Kim’s company, and
Guide USA contained an arbitration provision providing a procedure for the resolution of
disputes between David Kim and Guide USA. But neither Dongbu nor Tae In Kim was a
party to that agreement. Inasmuch as Tae In Kim did not sign an agreement with Guide
USA and he, like David Kim, did not sign a contract with Dongbu, Dongbu never has
been able to produce in this litigation an agreement in which Tae In Kim agreed in
writing to any provision material to Dongbu’s demand for arbitration.
Notwithstanding Dongbu’s attempt to classify the Kims as independent
contractors with respect to their relationships with Dongbu, the Kims brought this action
against Dongbu claiming to be Dongbu’s employees under the Fair Labor Standards Act
and the New Jersey Wage and Hour Law. The Kims advance substantive claims that we
need not describe in further detail asserting that they were not paid in full for the services
they rendered to Dongbu. Dongbu moved on April 4, 2012, under Fed. R. Civ. P.
12(b)(6) to dismiss the complaint, and then, after the Court denied its motion on June 6,
2012, Dongbu answered the complaint on June 28, 2012, without raising an arbitration
defense.
The Kims by bringing this case hit a raw nerve with Dongbu, which wrote other
tour companies about the litigation in a letter dated March 1, 2012. The Kims viewed the
4
letter as an act of unlawful retaliation against them for bringing this action, and
consequently they filed a motion in the District Court on March 23, 2012, seeking a
preliminary injunction precluding Dongbu from retaliating against them for bringing this
case. The District Court held a hearing on the March 23, 2012 motion on July 5, 2012,
and then denied the motion by order of July 23, 2012, on the ground that the Kims could
not show that there was a likelihood that they would suffer irreparable injury if the Court
denied their motion. The Court, however, entered an order on July 23, 2012, though none
of the parties had sought that order, that “temporarily enjoined [all the parties] from
communicating directly with any member of the putative collective action about this
case” until class certification issues are resolved and a notification plan is approved.
App. at 684.
At the July 5, 2012 hearing in the District Court Dongbu moved to have the Kims’
claims sent to arbitration, the first time that it raised a defense that the Kims agreed to
arbitrate their claims in this case. Though the Kims and Dongbu were not joint parties to
any arbitration agreement, Dongbu claims to be a third-party beneficiary of the
agreement between David Kim and Guide USA to which it claims Tae In Kim also
adhered, at least with respect to its provision for arbitration of disputes. The District
Court denied this motion by order of July 25, 2012, and subsequently denied Dongbu’s
motion for reconsideration of that order.
As we have indicated, Dongbu has filed two appeals. First, Dongbu has appealed
from the order of July 25, 2012, denying Dongbu’s demand that the dispute be arbitrated.
5
Next Dongbu has appealed from the order of July 23, 2012, enjoining the parties from
communicating with class members until resolution of class certification issues. On
November 7, 2012, Dongbu moved in this Court to stay all further proceedings in the
District Court, and on November 27, 2012, we granted that motion under Fed. R. App. P.
8.
The parties raise four issues on this appeal in one or both of their briefs. The first
issue which only Dongbu discusses is whether after Dongbu appealed from the order
denying its motion seeking an order requiring that the parties’ disputes be resolved in an
arbitration proceeding, the proceedings in the case could continue in the District Court or
whether the proceedings in that Court automatically were stayed pending disposition of
the appeal. In this regard we point out that ordinarily an appeal from an order denying a
motion for arbitration divests a district court of jurisdiction over the action that a party
seeks to have submitted to arbitration, and thus the appeal automatically stays
proceedings in the district court. See Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207,
215 n.6 (3d Cir. 2007). But the appeal will not stay the district court proceedings if it is
“frivolous or forfeited.” Id. Dongbu has raised the question of whether a court of
appeals or a district court decides if the appeal is frivolous for jurisdictional purposes
following an appeal from an order denying a motion seeking an order requiring that a
6
case be submitted to arbitration, its contention being that a court of appeals should decide
that question. For the reasons that we will set forth, we do not decide this issue. 3
The second of the four issues is whether under Rule 12(b)(6) the District Court
should have granted the motion to dismiss, but we do not reach this issue on the merits
either as we do not have jurisdiction at this time over the appeal from the order denying
the motion. The third and fourth issues are whether the District Court should have
ordered the case to be submitted to arbitration and whether the District Court should have
entered the July 23, 2012 order precluding the parties from having communications with
members of the class that the Kims seek to represent. We will decide the third issue on
the merits but will dismiss the appeal from the July 23, 2012 order as we do not have
jurisdiction over the appeal from that order.
We deal first with the appeal from the order of July 23, 2012, i.e., the order over
which Dongbu contends that we have jurisdiction under 28 U.S.C. § 1292(a)(1). In
Cohen v. Board of Trustees, 867 F.2d 1455, 1465 (3d Cir. 1989), we explained that “an
injunction for purposes of [an appeal pursuant to 28 U.S.C. §] 1292(a)(1) . . . must . . .
adjudicate some of the relief sought in the complaint.” The July 23, 2012 order, though
reciting that the Court has “enjoined” the parties from engaging in certain
communications, does not address any aspect of the relief that the Kims seek in the
3
When we granted the stay under Fed. R. App. 8 we did not address the “frivolous or
forfeited” jurisdictional question.
7
complaint. It is strictly a case management order, and thus we will dismiss the appeal
from that order. 4
Similarly, we do not consider on the merits the appeal from the denial of
Dongbu’s motion under Rule 12(b)(6) to dismiss the complaint, as we can decide the
question of whether there should be arbitration in this case without addressing the motion
to dismiss and the District Court’s order denying the motion is not in itself appealable at
this time. We also do not decide definitively whether a district court or a court of appeals
decides whether an appeal is frivolous so that the filing of the appeal does not divest the
district court of jurisdiction over proceedings in the pending action in which arbitration is
sought. We see no reason to decide that question because we are holding that the District
Court correctly denied the order seeking arbitration, and this case will continue in the
District Court after we file this opinion and remand the case to that Court. After the
remand, the District Court will have jurisdiction over the case and can make all
appropriate orders and, if necessary, revisit orders that it already has entered. See Fed. R.
Civ. P. 54(b).
Finally, we reach the appeal from the order of July 25, 2012, denying the motion
for arbitration on the merits and will affirm that order for the following reasons. 5
4
We realize that the Kims do not contend that we do not have jurisdiction over the appeal
from the July 23, 2012 order, but we are obliged to consider the jurisdictional issue on
our own initiative. See Three Keys Ltd. v. SR Utility Holding Co., 540 F.3d 220, 225 (3d
Cir. 2008). Of course, the procedural circumstance that the District Court entered the
order at a time that it was considering the Kims’ motion for a preliminary injunction did
not somehow convert the case management order into an appealable injunctive order.
8
Dongbu correctly claims that in some cases a third-party beneficiary of a contract can
enforce an arbitration clause in the contract included for its benefit even though it did not
sign the contract. See E.I. DuPont De Nemours & Co. v. Rhone Poulenc Fiber & Resin
Intermediates, S.A.S., 269 F.3d 187, 195 (3d Cir. 2001). Certainly this is so in collective
bargaining agreements. But Dongbu has not produced any agreement that Tae In Kim
signed containing an arbitration clause. Indeed, in its opening brief Dongbu says
“[a]lthough Appellants are without a copy of the Independent Contractor agreement
which may have been signed by X Golf, Inc. (the direct employer of Tae In Kim), Guide
USA believes that it was signed and in any event Guide USA received Tae In Kim’s
verbal assent to the same Independent Contractor agreement as DKK NY’s version
quoted above.” Appellants’ br. at 23.
Dongbu’s claim that Tae In Kim agreed to arbitrate any dispute that he might have
with Dongbu is devoid of any possible merit, as the District Court plainly believed,
because Dongbu wants us to require him to arbitrate his claims pursuant to an arbitration
clause contained in a contract that it cannot show that he executed or to which he is not a
party on the theory that he orally agreed to be bound by that contract. We find it
extraordinary that Dongbu’s support for its contention that Tae In Kim is bound by his
5
In its brief Dongbu asserts that “the district court erred as a matter of law in failing to
order arbitration where the [Kims] admittedly executed arbitration covenants relating to
their compensation dispute they brought against [Dongbu].” Appellants’ br. at 3. In fact,
however, the Kims deny that they executed any such covenants, as David Kim, who did
execute an agreement providing for arbitration with Guide USA certainly denies that the
agreement somehow obligated him to arbitrate this dispute with Dongbu.
9
alleged consent to such agreement is an allegation in the Kims’ complaint that they were
“required to sign form contracts with Dongbu but are actually Dongbu’s employees as a
matter of law.” Appellants’ br. at 23-24. Yet the contract that David Kim signed was not
with Dongbu, it was with Guide USA and even if Tae In Kim had adhered to the
arbitration clause in the contract, he would not have been agreeing to arbitrate any
dispute with Dongbu. The fact is that insofar as the record on this appeal shows neither
Kim signed any agreement with Dongbu. In these circumstances Tae In Kim – who
Dongbu does not show ever signed any agreement with Dongbu, Guide USA, DDK NY,
or X Golf that contained an arbitration clause, and, indeed, did not sign any agreement at
all with any of these entities – under any conceivable view of the record and the law,
cannot be compelled to arbitrate his claim against Dongbu.
We also point out that there is no provision in his agreement with Guide USA that
David Kim signed that could be deemed as having granted third-party beneficiary rights
to Dongbu to enforce any provision in the agreement, and thus he cannot be compelled to
arbitrate this dispute. The closest such provision would be one dealing with assignments
that provides that “[Guide USA] may freely assign this Agreement, in whole or in part . .
. . This Agreement shall be binding upon and inure to the benefit of the parties’
successors and assigns.” App. at 745. But there is no suggestion in the briefs that Guide
USA assigned the contract to Dongbu or anyone else. Overall, though as we already
have explained, we do not reach the question that Dongbu raises with regard to
determining whether a district court or a court of appeals decides if an appeal is frivolous
10
for jurisdictional purposes under Ehleiter, it is obvious that this appeal from the order
denying arbitration in this case is completely without merit. 6
But there is even a further reason to affirm the order denying arbitration for if
Dongbu could demonstrate that it had a right to submit the Kims’ claims to arbitration,
taking the “case specific” approach that our cases indicate is appropriate, Dongbu waived
any right that it might have had to seek to have the Kims’ claims submitted to arbitration.
See Gray Holdco, Inc. v. Cassady, 654 F.3d 444, 451 (3d Cir. 2011). As we indicated
above, Dongbu without mentioning arbitration moved to dismiss the complaint, a step
that sometimes in itself indicates that if the moving party had a right to have a dispute
submitted to arbitration it has waived that right. See Ritzel Commc’ns, Inc. v. Mid-
American Cellular Tel. Co., 989 F.2d 966, 969-70 (8th Cir. 1993). Dongbu first raised
arbitration as a defense in this case on July 5, 2012, at the hearing on the Kims’
application for a preliminary injunction after the District Court earlier had denied
Dongbu’s motion to dismiss the case on the merits. Thus, significant resources were
expended before Dongbu moved for an order sending the case to arbitration because both
the District Court and the Kims needed to prepare for and participate in the hearing of
6
We would reach this conclusion under any possible standard that could be applicable.
See Guidotti v. Legal Helpers Debt Resolution, L.L.C, No. 12-1170, ____ F.3d ____,
____, 2013 WL 2302324, at *5 (3d Cir. May 28, 2013).
11
July 5, 2012, and both the Court and the Kims engaged in the other proceedings in this
case before that day that we have described. 7
Furthermore, Dongbu is continuing to act inconsistently with its contention that
this case should be submitted to arbitration. See Kawasaki Heavy Indus., Ltd. v.
Bombardier Recreational Prods., Inc., 660 F.3d 988, 995-96 (7th Cir. 2011); see also
Ritzel, 989 F.2d at 969; St. Mary’s Med. Ctr. of Evansville, Inc. v. Disco Aluminum
Prods. Co., 969 F.2d 585, 589 (7th Cir. 1992). In this regard, Dongbu sets forth the three
issues that it believes are being presented on this appeal, one of which is “[w]hether the
district court erred in failing to dismiss [a]ppellees’ complaint because the complaint
failed to state a plausible claim for relief.” Appellants’ br. at 3. Dongbu sets forth this
issue after it claims that the District Court erred in not ordering arbitration. It is therefore
perfectly clear that Dongbu seeks to have this case arbitrated only if it cannot win it by
motion in the District Court or this Court. It is also significant that Dongbu filed an
amended answer on July 19, 2012, in the District Court which included a counterclaim
seeking damages against the Kims, a step hardly consistent with a request for the
submission of the case to arbitration.
7
We realize that Dongbu contends that it did not have the agreement between DDK NY
or David Kim and Guide USA until shortly before the July 5, 2012 hearing and thus was
unaware of the arbitration clause in that agreement. Thus, in its reply brief Dongbu
asserts that “it was not until shortly before the preliminary injunction hearing that
Appellants obtained a copy of one of the Independent Contractor agreements between
plaintiffs and Guide USA, i.e., that was signed by plaintiff David Kim.” Appellants’ rep.
br. at 5. That circumstance is immaterial as surely it was Dongbu’s burden to be aware of
contracts that it claims included provisions for its benefit.
12
We mention one final point. In its brief Dongbu contends that the “district court’s
views are fixed and therefore, on remand, the case should be reassigned to a new judge . .
. .” Appellants’ br. at 54. We see no basis to make such a reassignment and thus we will
deny that request.
For the foregoing reasons, we will dismiss the appeal at No. 12-3367 from the
order of July 23, 2012, and will affirm the order of July 25, 2012, denying Dongbu’s
motion seeking arbitration of this dispute. 8
8
Our opinion should not be overread. We decide only one substantive issue on this
appeal, which is that, regardless of the legal characterization of the relationship between
the Kims and Dongbu, this case will not be submitted to arbitration. Thus, we are not
determining whether the Kims were employees of Dongbu or whether their claims
against Dongbu are meritorious.
13