United States District Court, D. Montana, Billings Division
P. WATTERS United States District Judge
has moved to dismiss Lenhardt's Second Amended Complaint
under Federal Rule of Civil Procedure 12(b)(6), or in the
alternative, to stay the case pending mandatory arbitration.
(Doc. 12). On February 9, 2017, Magistrate Judge Timothy
Cavan issued his Findings and Recommendation recommending
that this Court deny Sysco's motion to dismiss but grant
Sysco's motion to stay pending arbitration. (Doc. 21).
party timely objects to any portion of the magistrate
judge's Findings and Recommendations, the district court
must conduct a de novo review of the portions of the Findings
and Recommendations to which objections are made. 28 U.S.C.
§ 636(b)(1)(C); McDonnell Douglas Corp, v. Commodore
Business Machines, 656 F.2d 1309, 1313 (9th Cir. 1981).
The district court may then "accept, reject, or modify
the recommended decision, receive further evidence, or
recommit the matter to the magistrate with
instructions." 28 U.S.C. § 636(b)(1). The district
court is not required to review the factual and legal
conclusions of the magistrate judge to which the parties do
not object. United States v. Reyna-Tapia, 328 F.3d
1114, 1121 (9th Cir. 2003).
parties filed timely objections and responses to Judge
Cavan's Findings and Recommendation. (Docs. 23-26). After
independently reviewing and considering the filings, this
Court adopts Judge Cavan's findings and recommendations
in part and modifies them in part, as set out below.
was employed by Sysco. (Doc. 1-2, ¶2). During her
employment, Sysco granted Lenhardt certain long term
incentives called restrictive stock units ("RSUs").
(Id. at ¶ 8; Doc. 1-1 at 6-12). In
consideration for the RSUs, Lenhardt agreed to abide by
certain restrictive covenants ("Protective
Covenants") during and after her employment with Sysco.
(Doc. 1-2 at ¶ 8). The Protective Covenants included a
non-compete agreement in which Lenhardt agreed, in pertinent
for a period of one year following the end of [her]
employment with [Sysco], [she] will not: accept a job that
involves, participate in, provide, supervise, or manage . . .
any activities or services for a [c]ompetitor that are the
same as, or similar in function or purpose to those [she]
performed or participated in during the [two years prior to
the end of her employment with Sysco] on behalf of [Sysco].
This restriction is limited to assisting in the business
activities of a [c]ompetitor within the [geographic area
where she worked].
Doc. 1-1 at 22). The Protective Covenants also provide that
all disputes related to enforceability are subject to
mandatory arbitration. (Id.; Doc. 1-1 at 11- 12).
April 7, 2016, Sysco informed Lenhardt by letter
("termination letter") that her job would be
eliminated on July 2, 2016. (Doc. 7 at ¶¶
2, 3; Doc. 15-1). Sysco gave Lenhardt the option of accepting
a new position at Sysco effective July 3, 2016, or accepting
an involuntary severance benefits package ("Severance
Package."). (Doc. 1-2 at ¶¶ 4-5). According to
the termination letter, the Severance Package was conditioned
on Lenhardt executing a "Separation Agreement and
General Release" ("Separation Agreement") at
the time of her termination. (Doc. 7 at ¶ 4). Also,
according to the letter, the Severance Package was
conditioned on Lenhardt's "adherence to her ongoing
obligations to [Sysco], " including adherence to the
non-compete agreement in the Protective Covenants.
(Id. at ¶¶ 5-8). Finally, the termination
letter explained that Lenhardt's severance payment,
included as part of the Severance Package, would "be
made in accordance with the terms of the Sysco Involuntary
Severance Plan" ("Sysco Plan"). Lenhardt chose
the Severance Package, (/at at ¶¶ 14, 16). She did
not, however, execute the Separation Agreement. (Doc. 24 at
filed her original complaint in the Montana Thirteenth
Judicial District on June 27, 2016, prior to the effective
date of her job elimination, seeking adjudication of her
rights with respect to, and relief from, the non-compete
agreement. (See Doc. 5). Sysco interpreted
Lenhardt's lawsuit as a threat to violate the non-compete
agreement and rescinded Lenhardt's Severance Package.
(Doc. 7 at ¶ 10). In response, Lenhardt amended her
complaint and requested the Court enjoin Sysco from (1)
enforcing or threatening to enforce the non-compete agreement
and (2) withholding severance benefits, in addition to
adjudicating the parties rights with respect to the
non-compete agreement. (See gen. id.). She also
seeks to recover payment of the withheld severance benefits
and damages. (Id.).
removed the action to Federal Court on October 24, 2016.
(Doc. 1). Thereafter, Sysco filed the current motion to
dismiss Lenhardt's Second Amended Complaint under Rule
12(b)(6), or in the alternative, to stay the case pending
mandatory arbitration. (Doc. 12). In his Findings and
Recommendations, Judge Cavan determined that because the
Second Amended Complaint did not incorporate or otherwise
refer by reference to the Sysco Plan, he could not consider
it in the motion to dismiss context. (Doc. 21 at 15). Without
the Sysco Plan, Judge Cavan ruled that he did not have enough
information to determine if ERISA preempted Lenhardt's
claims. (Id. at 15). Even assuming he could consider
the Sysco Plan, Judge Cavan determined that Sysco and
Lenhardt's Separation Agreement (which the court also
does not have) superseded the Sysco Plan and represented the
final say on Lenhardt's benefits. Without the Separation
Agreement, Judge Cavan determined the court still lacked the
necessary information to decide whether the agreement
constituted an ERISA plan, so the court could not conclude
that Lenhardt's claims were preempted by ERISA.
(Id. at 18). On that basis, Judge Cavan recommended
denying Sysco's motion to dismiss. (Id.).
Judge Cavan addressed Sysco's alternative argument to
stay the case pending mandatory arbitration. (Id. at
19). Judge Cavan determined that the arbitration clause found
in the Protective Covenants encompassed the non-compete
agreement Lenhardt placed at issue in the Second Amended
Complaint. (Id. at 20). Lenhardt did not argue that
the arbitration agreement was invalid, nor did she argue that
the present dispute was outside the arbitration agreement.
(Id. at 21). Accordingly, Judge Cavan found that
§ 3 of the Federal Arbitration Act mandated that the
court stay the action until the parties arbitrated the
non-compete agreement, and recommended the same.
(Id. at 21).
objection, Sysco argues that Judge Cavan erred by not
considering the Sysco Plan in determining whether ERISA
preempted Lenhardt's claims, (Doc. 24 at 6-9), Sysco also
argues that neither party executed the Separation Agreement,
so it does not supersede the Sysco Plan, and cannot represent
the final agreement between the parties. (Doc. 24 at 11).
Sysco contends that the Court has all ...