Some may have thought that once waived, the right to arbitrate is gone forever. No so! The Eleventh Circuit decision in Collado v. J & G Transport, Inc., No. 15-14635 (11th Cir. April 21, 2016) is but the latest example.
In that case, Enrique Callado initially filed a collective action under the Fair Labor Standards Act (FLSA) alleging that J & G Transport, Inc. failed to pay its drivers for working overtime. In June 2014 Collado filed an amended complaint alleging that as a truck driver for J & G he worked approximately 85 hours a week hauling garbage, debris, and mulch. Collado claimed that J & G made its drivers sign an independent contractor agreement in an attempt to circumvent the FLSA’s overtime requirements. He sought compensatory and liquidated damages for himself and similarly situated employees who did not receive overtime pay.
After the close of discovery and near the trial date, Collado moved to file a second amended complaint with new state law claims for breach of contract and quantum meruit. J & G opposed the motion, but the district court granted it. Once the second amended complaint was filed, J & G moved to dismiss the new state law claims or, in the alternative, to compel arbitration of the state claims. The district court denied the motion. See Collado v. J & G Transport, Inc., Case No. 14-80467, Order Denying Defendants’ Motion to Dismiss Counts II and III or in the Alternative, Motion to Compel of October 16, 2015 (S.D. Florida).
The district court found “that despite any changes in the theory of the case and differences in damages and the elements of proof, the equities favor plaintiff. Defendants have failed to show how the new claims of breach of contract and quantum meruit unexpectedly changes the scope or theory of the case.”
The Eleventh Circuit disagreed. It recognized that “[i]n limited circumstances . . . , where a party has waived the right to compel arbitration, an amended complaint can revive that right ‘if it is shown that the amended complaint unexpectedly changes the scope or theory of the plaintiff’s claims,’” citing Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011).
While both parties relied on Krinsk as precedent, it differed factually from Collado. In Krinsk, the plaintiff brought a class action estimating that the class would contain hundreds of members. By litigating, the defendant waived its right to compel arbitration. Later, the plaintiff amended the complaint and expanded the class definition to include thousands or tens of thousands of potential class members; when the defendant filed a motion to compel arbitration, the district court denied it.
The Eleventh Circuit vacated that order, finding that the amended complaint in Krinsk “revived” the defendant’s right to compel arbitration, which had been waived, because the defendant could not have anticipated such a major change in the class definition.
But, unlike Collado, no new claims were pleaded in Krinsk. According to the Collado court, “the substantial change that motivated the Krinsk decision, was instead, the substantial increase in the size of the plaintiff class and the resulting increase in the size of the defendant’s potential liability. The defendant [in Krinsk] had waived the right to arbitrate the claims of hundreds . . . but it had not waived the right to arbitrate the claims of thousands, if not tens of thousands, of plaintiffs.” Collado Op. at 7, citing Krinsk, 654 F.3d at 1198-99, 1204.
In Collado, the change was not in the number of plaintiffs but in the kind of claim brought. The case started as one bringing an FLSA claim; after J & G waived the right to arbitrate, it was amended so the case involved both federal and state claims. The waiver of the right to arbitrate a federal claim, according to the appellate court, “does not extend to later asserted state claims.” Id. at 7. And while some decisions use the term “revival” of a waived right to arbitrate (see Krinsk and the cases it collected at 1202-03), in Collado it was more appropriate to say “there was never a waiver of the right to arbitrate the state claims in the first place.” Id.
The appellate court held that J & G’s waiver of the right to arbitrate Collado’s FLSA claim did “not extend to the state law claims that were pleaded for the first time after J & G had litigated to the point of waiver of the FLSA claims.”
Bottom line: Waiver of the right to arbitrate is a nuanced and fact-driven determination. The amendment of a complaint may cause it to arise anew.