William J. Martínez, United States District Judge.
The underlying claims in this lawsuit concern whether a local landmark establishment, Defendant Bavaria Inn Restaurant Inc. d/b/a/Shotgun Willie's ("Shotgun Willie's"), and its owner Defendant Debra Matthews (jointly, "Defendants") improperly classified named Plaintiffs Chada Mantooth, Gale Raffaele, Alexis Nagle, Nicole Bujok ("named Plaintiffs"), in addition to opt-in plaintiffs (jointly, "Plaintiffs") as independent contractors and underpaid Plaintiffs in violation of the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. ("FLSA"), the Colorado Wage Claim Act, Colo. Rev. Stat. §§ 8-4-101 et seq. ("CWCA"), and Colorado common law. (ECF No. 1.)
Defendants moved to compel arbitration. The Court previously granted in part Defendants' motion to compel arbitration (the "Order"). (ECF No. 124.) The Court compelled arbitration but struck certain fee-shifting and arbitrator selection clauses in the parties' arbitration agreements, as well as the cost-shifting clause of the agreements for Bujok, Nagle, Raffaele, and opt-in plaintiff Alexandra Darr. (Id. at 23-24.)
The parties were not wholly satisfied with the Court's resolution of Defendants' motion to compel. Defendants filed a "Motion for Partial Reconsideration" ("Reconsideration Motion") asking the Court to
For the reasons explained below, the Court grants in part Defendants' Reconsideration Motion; grants in part Defendants' Motion to Strike; and grants in part Plaintiffs' Relief Motion in the interest of justice.
The underlying factual basis for these motions is discussed in the Order. Familiarity with that factual background is presumed.
In relevant summary, named Plaintiffs and opt-in plaintiffs Darr and Jessica Lopez signed "Entertainment License Agreements" to work at Shotgun Willie's. These agreements contained an arbitration provision.
On October 16, 2017, Defendants moved to compel "Plaintiffs"—defined as "named Plaintiffs, Alexandra Darr and Jessica Lopez" —to arbitrate their claims.
In its Order, the Court granted in part the motion to compel. (ECF No. 124.) The Court also found that, for Bujok, Darr, Nagle, and Raffaele, arbitration costs would be thousands to tens of thousands of dollars; "the cost-sharing provisions of the arbitration clause would prevent effective vindication of their claims"; and thus the Court severed the cost-sharing provisions for those individuals. (Id. at 16-17.) The Court did not, however, sever the cost-sharing provisions for Mantooth or Lopez because they did not submit evidence of financial hardship. The Court also severed certain fee-shifting provisions and the arbitrator selection clause—a provision that would have allowed Defendants to demand an arbitrator "experienced in the adult entertainment industry"—for named Plaintiffs, Darr, and Lopez because in the Court's view such clauses would have prevented effective vindication of Plaintiffs' rights. (Id. at 14, 19-20.)
Five days after the Court's Order, the Supreme Court issued its opinion in Epic Systems Corporation v. Lewis, resolving the question of whether "employees and employers [should] be allowed to agree that any disputes between them will be resolved through one-on-one arbitration." ___ U.S. ___, 138 S.Ct. 1612, 1619, 200 L.Ed.2d 889 (2018). The Supreme Court held that the National Labor Relations Act, which "secures to employees rights to organize unions and bargain collectively," did not "manifest[ ] a clear intention to displace the Arbitration Act." Id. at 1619, 1632. Thus, the arbitration contracts at issue in Epic—which required employees to arbitrate individually rather than collectively—were to be enforced as written.
Based on Epic, Defendants filed their Reconsideration Motion arguing that Epic eviscerated the effective vindication doctrine. (ECF No. 125.) Defendants asked that the Court revisit its decision to strike the fee- and cost-shifting provisions under the effective vindication doctrine.
Plaintiffs filed their Relief Motion asking the Court to invalidate the cost-sharing requirement for "the remaining Plaintiffs (named Plaintiff Chada Mantooth and opt-in Plaintiffs Ariel Cline, Samantha Hattlestad, Ashley Howard, Jessica Lopez, and Allison Bonham)" as "`similarly situated employees' to the Plaintiffs who previously submitted declarations." (ECF No. 127 at 2.) Plaintiffs attached affidavits from Mantooth, Cline, Hattlestad, Howard, Lopez, and Bonham about their inability to pay arbitration costs. (ECF Nos. 127-1, 127-2, 127-3, 127-4, 127-5 & 127-6.)
Plaintiffs attached two exhibits to their reply in support of their Relief Motion about the expense of arbitration. (ECF Nos. 140-1 & 140-2.) Defendants then filed the Motion to Strike those exhibits and asked that the Court disregard any new arguments that relied on the newly-included information. (ECF No. 142.)
While the Federal Rules of Civil Procedure do not directly provide for a
"Notwithstanding the district court's broad discretion to alter its interlocutory orders, the motion to reconsider `is not at the disposal of parties who want to rehash old arguments.'" Nat'l Bus. Brokers, Ltd. v. Jim Williamson Prods., Inc., 115 F.Supp.2d 1250, 1256 (D. Colo. 2000) (quoting Young v. Murphy, 161 F.R.D. 61, 62 (N.D. Ill. 1995)). "Rather, as a practical matter, to succeed in a motion to reconsider, a party must set forth facts or law of a strongly convincing nature to induce the court to reverse its prior decision." Id. (internal quotation marks omitted and alterations incorporated). Even under this lower standard, "[a] motion to reconsider should be denied unless it clearly demonstrates manifest error of law or fact or presents newly discovered evidence." Id. (alterations incorporated); See Sanchez v. Hartley, 2014 WL 4852251, at *2 (D. Colo. Sept. 30, 2014) (refusing to reconsider an interlocutory order where the defendants did not show "an intervening change in the law, newly discovered evidence, or the need to correct clear error or manifest injustice"). The Court may be guided by Rules 59 and 60 standards in deciding whether to alter or vacate an interlocutory order. Perkins v. Fed. Fruit & Produce Co. Inc., 945 F.Supp.2d 1225, 1232 (D. Colo. 2013).
Before analyzing the parties' motions, the Court addresses two preliminary matters. First, the subject Order directed the Clerk of Court to administratively close this case, subject to reopening for good cause shown after the conclusion of the individual arbitration proceedings. The parties have not specifically requested reopening of the case in their motions currently pending before the Court. Nonetheless, the Court finds that good cause exists for reopening this matter and sua sponte orders that the case be reopened.
Second, the Court clarifies the scope of the initial Order compelling arbitration. On October 16, 2017, Defendants sought to compel "Plaintiffs"—defined as Mantooth, Bujok, Darr, Lopez, Nagle, and Raffaele— to arbitrate their claims.
Defendants ask the Court to reconsider its Order severing the fee- and cost-shifting provisions in light of Epic, issued a mere five days after the May 16, 2018 Order. See Nat'l Bus. Brokers, 115 F.Supp.2d at 1256 ("A motion to reconsider should be denied unless it clearly demonstrates manifest error of law or fact or presents newly discovered evidence." (alteration incorporated)). "An `intervening change in the controlling law' is ... [an] appropriate ground upon which to seek reconsideration." Gomez v. Kroll Factual Data, Inc., 2014 WL 5395099, at *3 (D. Colo. Oct. 22, 2014) (citing Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000)).
Defendants argue that the Epic decision held that
(ECF No. 125 at 2.) According to Defendants, the fee- and cost-shifting provisions do not directly conflict with the FLSA and thus, Defendants argue, the Court should allow an arbitrator to determine if such provisions are enforceable. (Id. at 2, 6.) Defendants misapprehend the scope of Epic and its impact on the effective vindication doctrine.
The Supreme Court has "developed a mechanism—called the effective-vindication rule—to prevent arbitration clauses from choking off a plaintiff's ability to enforce congressionally created rights" and bars applying such clauses only when they operate "to confer immunity from potentially meritorious federal claims." Am. Ex. Co. v. Italian Colors Rest., 570 U.S. 228, 241, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013) (Kagan, J., dissenting). This judicially-created exception to the Federal Arbitration Act ("FAA") allows courts to harmonize the FAA's policy favoring arbitration with other federal statutory rights. Id. at 235-36, 133 S.Ct. 2304 (maj. op.). The doctrine exists to "prevent `prospective waiver of a party's right to pursue statutory remedies.'" Id. at 236, 133 S.Ct. 2304 (quoting Mitsubishi Motors v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). Thus, federal courts generally compel arbitration unless an arbitral forum prevents a prospective litigant from effectively vindicating its statutory cause of action, and as a consequence effectively prevents the federal statute from serving its remedial and deterrent function. Id.; See Bechtold v. Santander Consumer USA, Inc., 2015 WL 5455617, at *1 (D. Colo. July 30, 2015) ("The presumption in favor or arbitration does not control, however, where the terms of an arbitration agreement prevent an individual from effectively vindicating his or her statutory rights." (internal quotation marks omitted)). Likewise, the Tenth Circuit recognizes the FAA's presumption in favor of enforcing arbitration agreements, but
Inability to access a neutral tribunal —whether a court or arbitral panel— prospectively waives that party's right to pursue its statutory remedies. See Italian Colors, 570 U.S. at 236, 133 S.Ct. 2304. As the Court observed in Italian Colors, the effective vindication doctrine "would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights." Id. The Court suggested that the doctrine would also "cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable." Id.; See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 60, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). Such a result is consistent with the FAA's saving clause, which allows a court to refuse to enforce an arbitration agreement "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. See also McMullen v. Meijer, Inc., 355 F.3d 485, 491 (6th Cir. 2004) (holding that the language of the savings clause "sufficiently encompasses the `effective vindication' analysis prescribed by the United States Supreme Court").
In Epic, employees sought to litigate FLSA and state law claims through class or collective actions in federal court, notwithstanding contracts that mandated individualized arbitration of their claims. 138 S.Ct. at 1616. The employees generally argued that the saving clause removes the obligation to enforce arbitration agreements as written when the arbitration agreement violates some other federal law. Id. The employees thus argued that the individualized arbitration provision violated the National Labor Relations Act ("NLRA"), which guarantees workers the right to organize and bargain collectively.
The Court held that the savings clause applies to "defenses that apply to `any' contract," and "by attacking (only) the individualized nature of the arbitration proceedings, the employees' argument seeks to interfere with one of arbitration's fundamental attributes," namely the "traditionally individualized and informal nature of arbitration." Id. at 1622-23. More importantly, the Court found that "[n]othing in our cases indicates that the NLRA guarantees class and collective action procedures, let alone for claims arising under different statutes [here, the FLSA] and despite the express...teachings of the Arbitration Act." Id. at 1628. Because NLRA did not provide a right to collective adjudication of FLSA claims, the NLRA did not override the FAA's general mandate to enforce arbitration agreements as written. The Court held that, under these circumstances, the "arbitration agreements like those before use must be enforced as written" and concluded that the employees could not bring collective FLSA claims in arbitration. Id. at 1632.
The Court recognized, however, that the employees may agree to bilaterally arbitrate disposition of their FLSA claims. Id. at 1632. The decision in Epic merely limited the manner in which such a claim may be brought, not the employees' right to bring substantive FLSA claims in individualized arbitration. See id. at 1626; Werner v. Waterstone Mortg. Corp., 2018 WL 6567081, at *3 (W.D. Wis. Dec. 13, 2018) ("[T]he question in [Epic Systems v.] Lewis was limited to whether the class action waiver in the arbitration agreement was enforceable.").
While Epic broadly favors enforcing arbitration agreements as written,
Nor did Epic undermine the rationale for the effective vindication doctrine, a policy-based exception to the FAA's general approach to favoring arbitration. Rather, in striving to harmonize two federal statutes, namely the NLRA and the FAA, the Court found that the NLRA did "not express approval or disapproval of arbitration" nor "mention class or collective action procedures." Id. at 1625. Thus, the Court merely concluded that the NLRA did not mandate that FLSA claims be decided collectively, the employees could waive their right to pursue claims collectively in arbitration, and the employees could still pursue their statutory rights granted by the FLSA in individual arbitration. Id. at 1632. In other words, the individual arbitration provision at issue did not "choke off" the employees "ability to enforce congressionally created rights." Id.; See Italian Colors, 570 U.S. at 241, 133 S.Ct. 2304.
Moreover, from this Court's review of all cases citing Epic, as well as cases referencing the effective vindication doctrine post-Epic, no court to date has read Epic to abrogate the effective vindication doctrine. Nor have Defendants filed any supplemental authority calling this conclusion into question. Significantly, since the Epic decision, district courts across the country have continued to analyze whether certain provisions of an arbitration agreement would prevent effective vindication of a party's substantive rights. See, e.g., Grigsby v. Income Prop. USA, LLC, 2018 WL 4621766, at *7 (D. Utah Sept. 26, 2018) (refusing to compel arbitration where fee-shifting clause would prevent the plaintiffs from effectively vindicating their RICO claim), appeal filed, No. 18-4143 (10th Cir. Oct. 3, 2018); Clough v. W.-Shamrock Corp., 2018 WL 4183223, at *1 (W.D. Okla. Aug. 31, 2018) (finding that fee-shifting provisions would prevent plaintiff from effectively vindicating her rights).
Other courts have referenced the effective vindication doctrine and assumed its continued existence and viability post-Epic. See Santich v. VCG Holding Corp., 2018 WL 3968879, at *4 (D. Colo. Aug. 20, 2018) (noting that no party objected to the U.S. Magistrate Judge's determination that fee- and cost-shifting provisions precluded the plaintiffs from effectively vindicating their FLSA claims); Keyes v. The Ayco Company, L.P., 2018 WL 6674292, at *6 (N.D.N.Y. Dec. 19, 2018) (the doctrine allows courts to invalidate agreements that prevent effective vindication of federal statutory rights, but not state-law claims); Trout v. Organization Mundial de Boxeo, Inc., 2018 WL 4719104 (D.P.R. Sept. 30, 2018) (plaintiff could effectively vindicate his statutory cause of action in an arbitral forum); Covington v. Kanan Enters., Inc., 2018 WL 4411652, at *1 (N.D. Ohio Sept. 17, 2018) (FLSA claims may be effectively vindicated in an arbitral setting); McLellan v. Fitbit, Inc., 2018 WL 3549042, at *5 (N.D. Cal. July 24, 2018) (recognizing that "effective vindication is a judge-made exception to the FAA" (internal quotation marks omitted)); Buchanan v. Tata Consultancy Servs., Ltd., 2018 WL 3537083, at *8 (N.D. Cal. July 23, 2018); In re Homaidan,
In conclusion, both the text of the Epic decision, as well as the overwhelming weight of subsequent lower-court authority, fail to support Defendants' position on this issue in its Reconsideration Motion. The effective vindication doctrine remains viable after Epic. As discussed in the Order and further discussed below, Plaintiffs have made sufficient financial showings that the burden of fees and costs will effectively and prospectively prevent them from bringing their claims in arbitration. Thus, the Court will not revisit its conclusion that those provisions, as applied to Plaintiffs, prospectively prevent Plaintiffs from effectively vindicating their statutory FLSA rights in arbitration and that severance of those provisions is appropriate in this case.
Defendants raise a question about the scope of the Court's prior Order. The Court ordered that "the fee-shifting provision in the arbitration clause are unenforceable and will be severed" (ECF No. 124 at 14), but later stated that "[a]ny portion of any Agreement that any Plaintiff may have with Defendants is SEVERED to the extent it (a) establishes a fee-shifting obligation different from those established [under the FLSA]" (id. at 23).
The Court previously found that the fee-shifting provisions, which allowed Defendants to recover fees and costs for arbitrating Plaintiffs' FLSA claims, erected a barrier to the effective vindication of Plaintiffs' FLSA claims. It was the Court's intent to sever all fee- and cost-shifting obligations because they prevented effective vindication of Plaintiffs' FLSA claims, but to nonetheless allow Plaintiffs to recover attorneys' fees and costs in the event they are prevailing parties, consistent with the private attorney general enforcement scheme of the FLSA. In other words, the arbitrator will be free to award any manner of relief otherwise available in the federal court litigation of FLSA claims.
Finally, to the extent that Defendants ask the Court to reconsider its prior Order based on arguments other than the Epic decision, Defendants have failed to provide any new facts, law, or circumstances, or argued mistake of law or fact, or otherwise plausibly argued why such relief is appropriate and necessary to effect the interest of justice. See Servants of the Paraclete, 204 F.3d at 1012. Therefore, the remainder of Defendants' Reconsideration Motion is denied.
Plaintiffs ask the Court to sever and strike the cost-shifting provisions of the arbitration clauses for Mantooth and Lopez under same effective vindication analysis that it applied to Bujok, Darr, Nagle, and Raffaele.
Federal Rule of Civil Procedure 60(b) permits the court to relieve a party from a final judgment, order or other proceeding on the grounds of "mistake, inadvertence, surprise, or excusable neglect," or "any other reason that justifies relief." The Court is "mindful that Rule 60(b) `relief is extraordinary and may only be granted in exceptional circumstances.'" Beugler v. Burlington Northern & Santa Fe Ry. Co., 490 F.3d 1224, 1229 (10th Cir. 2007) (citing Amoco Oil Co. v. EPA, 231 F.3d 694, 697 (10th Cir. 2000)). A motion for relief under Rule 60(b) is addressed to the sound discretion of the trial court and generally will not be disturbed except for a manifest abuse of discretion. Zimmerman v. Quinn, 744 F.2d 81, 82 (10th Cir. 1984).
The Court need only analyze Plaintiffs' interest of justice arguments. Rule 60(b)(6) permits a court to grant relief for "any other reason justifying relief." "Rule 60(b)(6) has been described as a `grand reservoir of equitable power to do justice in a particular case.'" Cashner v. Freedom Stores, Inc., 98 F.3d 572, 579 (10th Cir. 1996) (quoting Pierce v. Cook & Co., 518 F.2d 720, 722 (10th Cir. 1975) (en banc)).
The Court finds that it is in the interest of justice, and consistent with the remedial purpose of the FLSA, to resolve FLSA claims on their merits, rather than potentially prevent resolution of those claims because of a plaintiff's inability to pay arbitration costs. The FLSA is a "comprehensive remedial scheme requiring a minimum wage and limiting the maximum number of hours works, absent payment of an overtime wage for all hours worked in excess of the specified maximum number." Lamon v. City of Shawnee, Kan., 972 F.2d 1145, 1149 (10th Cir. 1992). "The prime purpose in enacting the FLSA was to aid the unprotected, unorganized and lowest paid employees who lack sufficient bargaining power to secure for themselves a minimum subsistence wage." Teague v. Acxiom Corp., 2018 WL 3772865, at *2 (D. Colo. Aug. 9, 2018) (internal quotation marks omitted and alterations incorporated). Similar to a number of anti-discrimination and civil rights statutes, the FLSA gives plaintiffs a private right of action to remedy injuries to important personal rights. Turner v. Chipotle Mexican Grill, Inc., 123 F.Supp.3d 1300, 1305 (D. Colo. 2015); See Trainor v. Apollo Metal Specialties, Inc., 318 F.3d 976, 983 (10th Cir. 2002) ("[W]e must be mindful of [antidiscrimination laws'] remedial purposes, and liberally interpret their provisions to that end."). Thus, in the FLSA context, employees can pursue a claim against an employer for unpaid wages and overtime compensation as well as liquidated damages. 29 U.S.C. § 216.
The affidavits submitted by Mantooth and Lopez establish that paying half of the arbitration costs would pose a
Because the Court grants the Relief Motion in the interest of justice, it does not address, nor express any opinion on, the merits of Plaintiffs' alternative excusable neglect and mistake of fact or law arguments.
For the reasons set forth above, the Court ORDERS as follows:
1. The Court DIRECTS the Clerk of Court to reopen the case for good cause shown;
2. Defendants' Motion for Reconsideration is GRANTED IN PART (ECF No. 125) to clarify the scope of the Court's prior Order (ECF No. 124) with respect to the fee-and cost-shifting clauses as follows:
3. Plaintiffs' Motion for Relief (ECF No. 127) is GRANTED IN PART to clarify
4. Defendants' Motion to Strike (ECF No. 142) is GRANTED IN PART, and the attachments to Plaintiffs' reply in support of their Relief Motion are stricken, and the remainder of Defendants' Motion is DENIED;
5. The claims of the named Plaintiffs, as well as of opt-in plaintiffs Darr and Lopez, REMAIN STAYED pending the conclusion of their individual arbitration proceedings. The claims of opt-in plaintiffs Bonham, Cline, Hattlestad, and Howard remain pending before this Court; and
6. Counsel are directed to contact the Chambers of U.S. Magistrate Judge Michael E. Hegarty to set a status conference in this matter on the claims of opt-in plaintiffs Bonham, Cline, Hattlestad, and Howard.
