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Krause v. Expedia Group Inc.

United States District Court, W.D. Washington, Seattle

September 17, 2019

LAURIE KRAUSE, on Behalf of Herself And on Behalf of All Others Similarly Situated, Plaintiff,




         Plaintiff Laurie Krause initiated this action against Defendants Expedia Group, Inc. (“Expedia”) and Egencia, LLC (“Egencia”) (collectively “Defendants”) claiming a violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq.[1] In her complaint, Plaintiff claims that Defendants intentionally misclassified her, and others in her position, as independent contractors in order to deny them overtime pay.[2]

         Currently before the Court is Defendants' Motion to Dismiss and/or to Compel Plaintiff to Participate in Arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). Dkt. No. 25. Having reviewed the motion, the opposition thereto, the record for the case, and the relevant legal authorities, the Court will deny the motion to dismiss, but grant the motion to compel arbitration and stay the current proceedings until the completion of arbitration in the parties' chosen venue. The reasoning for the Court's decision follows.


         Plaintiff is a travel consultant, providing customer communications services for Defendants who operate an online travel management company. Dkt. No. 1 at ¶¶ 16, 19. Plaintiff and Defendants, however, have never entered into an employment or independent contractor agreement directly. Dkt. No. 25 at 2. Instead, Defendant Egencia, contracts with WSOL, LLC (“WSOL”), which provides telephone, email, and other contact center and business processing support. Id. at 3. WSOL, in turn, contracts with Plaintiff to provide customer service assistance to travelers in the form of chat, email, and phone. Id. at 3-6. WSOL and Plaintiff have entered into several contracts for this work since 2014. The latest of these agreements is entitled “Independent Contractor Agreement” (“2019 Agreement”) and is accompanied by Schedule A, entitled “Egencia Program: Duties, Terms, and Compensation” (“2019 Schedule A”), both of which were signed on February 26, 2019. Dkt. No. 26-5 (2019 Agreement); Dkt. No. 35-1 (2019 Schedule A).

         An analysis of these contracts is an essential step in resolving the present dispute.

         A. 2012 Master Services Agreement Between Defendants and WSOL

         As mentioned previously, Defendants are engaged in the travel management business and provide booking services for businesses and individuals. Defendants Egencia and Expedia are related companies; Egencia is wholly owned by Expedia, Inc., which is wholly owned by Expedia Group, Inc. Dkt. No. 1 at ¶ 10.

         In October 2012, Defendant Egencia and WSOL entered a Master Services Agreement (“MSA”) whereby WSOL agreed to provide outsourced customer service support to Defendant. Dkt. No. 25 at 3; Dkt. No. 26-1 (MSA). The MSA states that it “is not intended to create any relationship other than Vendor as an independent contractor performing Services covered by this Agreement and Egencia as the Party contracting with Vendor for those services.” Dkt. No. 26-1 at ¶ 20.4. The relationship between Defendant and WSOL is not exclusive, and either company may agree to the same relationship with other companies. Id. at ¶ 20.2.

         B. Plaintiff and WSOL Agreements and Schedules

         Plaintiff began working as a travel consultant for Defendants in July 2014. Dkt. No. 1 at ¶ 28. According to Plaintiff, she communicates with Defendants' customers and answers questions regarding ticket, hotel, and vehicle reservations. Id. at ¶¶ 17-19. But, as previously stated, Plaintiff never directly contracted with Defendants.

         Instead, from 2014 through 2019, Plaintiff signed several agreements and schedules with WSOL. Both parties agree, however, that the current controlling agreement is the 2019 Agreement, even though it was formalized after Plaintiff filed the instant action. See Dkt. No. 25 at 5-6; Dkt. No. 31 at 3.[3] The 2019 Agreement was signed on February 26, 2019 and, at the same time, Plaintiff signed the 2019 Schedule A. Plaintiff, however, states that these documents arrived in separate emails from WSOL's president, indicating that she first received the 2019 Schedule A and then received the 2019 Agreement. See Dkt. No. 43 at ¶¶ 5-6.

         Substantively, the 2019 Agreement establishes the terms of engagement between Plaintiff and WSOL and contains a number of provisions germane to the current motion, including a broad arbitration clause (Section VII “Mutual Arbitration Provision”), see infra at 6 n.6, an indemnification clause (Section VI “Indemnity Provision”), see infra at 6 n.7, a delegation clause[4](Section VII.2 “Delegation Clause”), see infra at 7 n.9, a class action waiver, a choice of law section (Section X “Governing Law Section”), and an integration clause (Section XIV “Entire Understanding Section”). Dkt. No. 26-5. The 2019 Agreement does not specifically reference Defendants. Instead, it outlines Plaintiff's contracted services to WSOL, including that she will be presented with opportunities to work on programs established for the benefit of WSOL's clients. Id. at 2 (Section I.2). When engaged by a specific program, the 2019 Agreement establishes that Plaintiff “agrees to perform the services defined in Schedule A” whose parameters are “established by the client [in this case Egencia], not WSOL.” Id. The 2019 Schedule A, in turn, outlines the duties of a travel agent assisting Egencia customers on the “Egencia Program, ” the term of engagement, the compensation rate, and the provisions for certifying a contractor on the Egencia's systems. Dkt. No. 35-1.

         C. Plaintiff's Claims

         The foundation of Plaintiff's suit is her claim that Defendants violated the FLSA by failing to pay travel consultants overtime wages for work done in excess of 40 hours per week. Dkt. No. 1 at ¶¶ 67-70. She alleges that travel consultants are entitled to overtime wages because they are Defendants' employees. Id. at ¶ 31. Further, Plaintiff claims that the Defendants intentionally misclassified her and other travel consultants as independent contractors in order to avoid paying them overtime wages. Id. at ¶¶ 47, 48, 51.


         Plaintiff proffers two arguments in opposition to Defendants' motion: (1) the 2019 Agreement, including the agreement to arbitrate, is unenforceable as unconscionable because the Indemnification Provision is an illegal fee-shifting provision that deprives her of substantive and overtime rights under the FLSA, Dkt. No. 31 at 4-10, and (2) even if a valid arbitration clause exists, Defendants may not enforce it as nonsignatories to the 2019 Agreement, id. at 10-16.[5]

         A. Enforceability of the Mutual Arbitration Provision

         In response to Defendants' evocation of the Mutual Arbitration Provision, [6] Plaintiff claims that the Provision is invalid as unconscionable because, as Plaintiff interprets the Indemnification Provision, [7] “[e]ven if Defendants lose in arbitration, Defendants are still entitled to recover from Plaintiff their attorneys' fees and costs.” Id. at 5.[8]

         To Plaintiff's attack on the Mutual Arbitration Provision, Defendants reply that the parties have agreed to delegate questions of arbitrability to the arbitrator to decide, not the Court, through the Delegation Clause.[9] See Dkt. No. 34 at 3-4. Plaintiff counters Defendants' reliance on the Delegation Clause by claiming that it too is invalid based on the same fee-shifting objections to the Indemnity Provision. Dkt. No. 42 at 2. As she explains, “the illegal indemnity provision applies to all disputes between the Parties, including to those subject to the delegation clause.” Id. Thus, the question for the Court is whether the Court or an arbitrator may determine the validity of the Mutual Arbitration Provision given the Delegation Clause assigning that question to the arbitrator. The Court concludes that questions of arbitrability raised by the Plaintiff go to the contract as a whole and are therefore for the arbitrator to decide.

         The FAA provides that any arbitration clause within its scope “shall be valid, irrevocable, and enforceable, ” 9 U.S.C. § 2, and permits a party “aggrieved by the alleged . . . refusal of another to arbitrate, ” id. at § 4, to “petition any federal district court for an order compelling arbitration in the manner provided for in the agreement, ” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).

         “Like other contracts, ” however, arbitration clauses “may be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability.'” Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 68 (2010) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). A plaintiff seeking to invalidate an arbitration clause must be attacking the validity of ...

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