JONATHAN GOODMAN, Magistrate Judge.
Defendant Fly Low, Inc. moves to compel arbitration against opt-in claimants
Plaintiffs are dancers who are suing Defendants for, among other things, minimum wage and overtime violations arising from their work
After this action was filed (April 8, 2014), Defendants began requiring all dancers to sign arbitration agreements. [ECF Nos. 78, pp. 23-24; 89-1, pp. 4-5]. In theory, these arbitration agreements would prevent dancers from opting into this lawsuit, or any other similar lawsuit. If a dancer refused to sign the arbitration agreement, then she was not allowed to perform at KOD. [ECF Nos. 78, pp. 23-24; 89-1, pp. 5-6].
In the ruling on Plaintiffs' motion for temporary restraining order and preliminary injunction, the Undersigned "decline[d] to find, at th[e] time, that all of KOD's arbitration agreements are per se unenforceable." Espinoza v. Galardi S. Enter., Inc., No. 14-21244, 2014 WL 6473236, *8 (S.D. Fla. Nov. 18, 2014). Instead of making a blanket determination, the Undersigned opted instead to "examine the enforceability of the arbitration agreement on an individualized basis when, and if, defendants move to compel arbitration against an opt-in dancer who has signed such an agreement." Id. Defendant now moves to compel arbitration against four opt-in claimants who signed the agreement. [ECF Nos. 166; 168]
Plaintiffs oppose the motion. [ECF No. 172]. Plaintiffs contend that Defendants' dissemination of these post-lawsuit agreements (and the subsequent attempt to enforce the agreements against these four opt-in claimants) is an impermissible attempt to interfere with the proposed class.
Section 3 of the Federal Arbitration Act ("FAA"), requires that a court, upon motion by a party to an action in federal court, stay the action if it involves an "issue referable to arbitration under an agreement in writing." 9 U.S.C. § 3. The FAA mandates that a contract clause requiring the parties to "submit to arbitration an existing controversy arising out of such a contract . . . shall be valid, irrevocable and enforceable[.]" 9 U.S.C. § 2. "A prime objective of an agreement to arbitrate is to achieve `streamlined proceedings and expeditious results.'" Preston v. Ferrer, 552 U.S. 346, 357-58 (2008) (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 633 (1985).
Congress enacted the FAA to "declare `a national policy favoring arbitration of claims that parties contract to settle in that manner.'" Vaden v. Discover Bank, 556 U.S. 49, 58 (2009) (quoting Preston v. Ferrer, 552 U.S. 346, 353 (2008)). The Supreme Court has interpreted this to mean that courts must "rigorously enforce" arbitration agreements. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219 (1985).
In the context of a collective action, there are two general, and different, ways in which a court may declare invalid, or not enforce, arbitration agreements entered into by plaintiffs (and potential class members) after the action was initiated. First, a court may find the arbitration agreements unconscionable, procedurally or substantively. Abdul-Rasheed v. KableLink Commc'ns, LLC, No. 8:13-CV-879-T-24 MAP, 2013 WL 6182321, at *3 (M.D. Fla. Nov. 25, 2013) (denying FLSA defendants' motion to compel arbitration because, in part, the court found the arbitration agreements procedurally and substantively unconscionable). Second, a court may exercise its collective action managerial responsibilities by refusing to enforce the arbitration agreements as a way to correct defendants' pre-certification misconduct. Billingsley v. Citi Trends, Inc., 560 F. App'x 914, 919, 922-24 (11th Cir. 2013) (affirming district court's decision to not enforce arbitration agreements on the ground that it was a proper exercise of district court's responsibility to manage collective actions).
Here, Plaintiffs have not argued that KOD's arbitration agreements are procedurally or substantively unconscionable. Rather, they have argued that the Court should exercise its discretion to manage this collective action and declare invalid and not enforce KOD's arbitration agreements. Accordingly, the Court is focusing solely on that issue and makes clear that nothing in this Order relates to any finding that the arbitration agreements at issue are, or are not, unconscionable.
The FLSA permits a plaintiff to bring a collective action on behalf of himself and other similarly-situated employees. See 29 U.S.C. § 216(b). The purposes of § 216(b) collective actions are "(1) reducing the burden on plaintiffs through the pooling of resources, and (2) efficiently resolving common issues of law and fact that arise from the same illegal conduct." Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1264-65 (11th Cir. 2008) (citing Hoffman La Rouche, Inc. v. Sperling, 492 U.S. 165, 170 (1989)).
An FLSA class action, unlike a Federal Rule of Procedure 23 class action, includes only those plaintiffs who affirmatively opt into the action by filing their consent in writing with the court in which the action is brought. See 29 U.S.C. § 216(b). Consequently, the benefits of a collective action "depend on employees receiving accurate and timely notice . . . so that they can make informed decisions about whether to participate." Rojas v. Garda CL Se., Inc., 297 F.R.D. 669, 673 (S.D. Fla. 2013) (citing Hoffman-La Rouche, 493 U.S. at 170).
As the Eleventh Circuit explained, "[b]ecause formal notice to putative FLSA collective members is provided after conditional certification has been approved by the district court, pre-certification, ex parte communication with putative FLSA collective members about the case has an inherent risk of prejudice and opportunities for impropriety." Billingsley, 560 F. App'x at 921. As such, trial courts have considerable discretion to "facilitat[e] notice to potential plaintiffs" and "broad authority" to exercise control over the collective action and to govern the conduct of counsel and parties in the collective action, so as to avoid any "such prejudice and impropriety and to ensure the potential plaintiffs have a fair opportunity to opt-in to a FLSA collective action." Id. (citing Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 (1981); Hoffmann-La Roche, 493 U.S. at 169-71; Kleiner v. First Nat'l Bank of Atlanta, 751 F.2d 1193, 1200 (11th Cir. 1985)).
Using that broad and considerable discretion, other courts have refused to enforce arbitration agreements foisted on potential FLSA plaintiffs where the agreements were confusing, misleading, coercive, and clearly designed and implemented to unfairly thwart potential FLSA plaintiffs' ability to opt-in. Billingsley, 560 F. App'x at 919, 922-24 (affirming district court's decision to not enforce arbitration agreements on the ground that it was a proper exercise of district court's responsibility to manage collective actions); Carter v. Doll House II, Inc., 69 F.Supp.3d 1351 (N.D. Ga. 2014) (exercising discretion and refusing to enforce strip club's arbitration agreements to prevent unfairness and confusion);
Plaintiffs do not contend that the arbitration agreements at issue here are unconscionable (and, in fact, go out of their way to emphasize this by including a section headlined "Unconscionability Analysis Not Implicated"). [ECF No. 172, pp. 5-6]. Instead, Plaintiffs exclusively invoke the Court's authority to police collective actions by "prevent[ing] confusion and unfairness" and "ensur[ing] that the potential plaintiffs have a fair opportunity to opt-in to [this] FLSA collective action." Billingsley, 560 F. App'x at 921.
While collective actions "serve an important function in our system of civil justice," they simultaneously present "opportunities for abuse as well as problems for courts and counsel in the management of cases." Gulf Oil Co. v. Bernard, 452 U.S. 89, 99-100 (1981) (discussing Federal Rule of Civil Procedure 23 class actions); see Hoffmann-La Roche, 493 U.S. at 171 (1989) (extending Gulf Oil to collective actions). Specifically, FLSA collection actions "depend on employees receiving accurate and timely notice concerning the pendency of the collective action, so that they can make informed decisions about whether to participate." Id. at 170. "Because formal notice to putative FLSA collective members is provided after conditional certification has been approved by the district court, pre-certification, ex parte communication with putative FLSA collective members about the case has an inherent risk of prejudice and opportunities for impropriety." Billingsley, 560 F. App'x at 921 (emphasis added). Cf. Kleiner, 751 F.2d at 1203 (In a Rule 23 class action, the Eleventh Circuit found that "[u]nsupervised, unilateral communications with the plaintiff class sabotage the goal of informed consent by urging exclusion on the basis of a one-sided presentation of the facts, without opportunity for rebuttal. . . . Concomitantly, a solicitations scheme relegates the essential supervision of the court to the status of an afterthought.")
"To avoid such prejudice and impropriety and to ensure the potential plaintiffs have a fair opportunity to opt-in to a FLSA collective action, the district court has the discretion to facilitat[e] notice to potential plaintiffs and broad authority to exercise control over the collective action and to govern the conduct of counsel and parties in the collective action." Billingsley, 560 F. App'x at 921 (citing Gulf Oil, 452 U.S. at 100 (class actions); Hoffmann-La Roche, 493 U.S. at 169-71 (affirming the power of district courts to exercise control over collective actions)) (internal quotations omitted). "A district court's authority to control counsels' conduct in a § 216(b) collective action includes the authority to prevent confusion and unfairness concerning an FLSA collective action." Id. (citing Hoffmann-La Roche, 493 U.S. at 169-71).
In Billingsley, the defendant implemented a retroactive arbitration policy after an FLSA lawsuit was filed (and contemporaneous to the court's scheduling of the collective action certification process), which targeted potential members of the collective action. 560 F. App'x at 917-19. In particular, the defendant held two-on-one private, backroom meetings with putative collective action claimants, where the potential claimants were presented with an arbitration agreement to sign that was a condition of their continued employment. Id. at 918-19. The district court found the meetings to be "highly coercive" and interrogation-like." Id. at 919. Furthermore, the district court concluded that the defendant's roll-out of the arbitration policy "was a hurried reaction specifically targeted at curtailing [the] litigation." Id. Accordingly, the district court invoked its broad authority to manage parties and counsel in an FLSA collective action, determining that the defendant's conduct undermined the court's authority to manage the collective action and correcting the effect of the defendant's improper conduct by refusing to enforce the arbitration agreements. Id. at 922.
The Billingsley court deemed the defendant's efforts to impose arbitration agreements "confusing, misleading, coercive, and clearly designed to thwart unfairly the right of [potential claimants] to make an informed choice as to whether to participate in [the] FLSA collective action." Id. Not every one of those elements is present here.
First, as the Undersigned previously concluded in the Order on Plaintiffs' motion for temporary restraining order and preliminary injunction, "the Court does not find the arbitration agreements misleading or confusing. . . . KOD's arbitration agreements are not in condensed type space. They are easily understood, as evidenced by [now-terminated Plaintiff Shanice Bain's] understanding of the agreement after reading it. And they require any dancer to sign the agreement before becoming effective." 2014 WL 6473236, at *8.
Second, "based on . . . [the] testimony [of three Plaintiffs at the evidentiary hearing], the Court cannot say . . . that KOD has implemented the arbitration agreements in an `interrogation-like' manner, like in Billingsley." Id. As described above, in Billingsley, the defendant rolled out the arbitration policy with intimidating backroom meetings targeted only at potential class members. 560 F. App'x at 918-19. "Here, it appears that dancers were given an opportunity to read the agreement without being led into back rooms or with KOD managers or employees hovering over them. Indeed, [Plaintiff Seleta] Stanton was able to take the agreement to the dressing room, and she read it in privacy. [Plaintiff Tiffany] Thompson was permitted to take pictures of the agreement so that she could send it to an attorney." Espinoza, 2014 WL 6473236, at *8.
Despite the absence of an interrogative, intimidating atmosphere and any confusion inherent in the agreement, Defendants' arbitration policy was clearly coercive and admittedly designed to undermine this litigation. While Defendants decry the absence of affidavits or other evidence of an intimidating process of arbitration implementation,
First, like in Billingsley and Abdul-Rasheed,
As the Undersigned noted above, Defendants' General Manager affirmed at the evidentiary hearing that this was the policy. [ECF No. 78, p. 24].
While the Court previously abstained from ruling on the per se unenforceability of the arbitration agreements partially because of a lack of pinpoint specificity on the timing of Defendants' arbitration policy formulation and rollout, which clouded the issue of Defendants' intent, the record is now clear on Defendants'
The district court in Carter inferred the defendants' intent (i.e. interfering with the ongoing collective action) by chronology alone. 69 F. Supp. 3d at 1358 ("Given the timing of the Agreement (post-filing, pre-certification), its immediate implementation (the Agreement applies if a dancer continues to work at Stilettos), and its repressive terms (retroactive application, waiver of claims not brought to arbitration, and a prohibition of collective action), the Court finds that it has been designed to unfairly thwart Carter's and potential opt-in plaintiffs' rights."). The Eleventh Circuit vacated the district court's ruling solely on the basis of that court's inferences made from an insufficient factual record. 608 F. App'x at 904. Unlike the trial court in Carter, the Undersigned did not need to make inferences concerning Defendants' intent; Defendants clearly
Defendants point to Geter v. Galardi S. Enter., Inc.
Likewise, in Stevenson, where a district court in the Northern District of Georgia enforced arbitration agreements signed by dancers after an FLSA collective action was underway, the court addressed a separate issue than the one at issue here. 2014 WL 186101.
As noted above, there are two ways in which a court may declare invalid, or not enforce, arbitration agreements entered into by potential class members after the action was initiated. In the first approach (the one that Plaintiffs explicitly declined to invoke [ECF No. 172, pp. 5-6]), a court may find the arbitration agreements unconscionable, procedurally or substantively. Abdul-Rasheed, 2013 WL 6182321, at *3. In Stevenson, the district court addressed only this first test, the unconscionability argument, concluding that, under Georgia law, the arbitration agreements in question were not unconscionable. 2014 WL 186101, at *2-3. Unconscionability is not at issue here.
Accordingly, to "prevent confusion and unfairness" and "ensure that the potential plaintiffs have a fair opportunity to opt-in to [this] FLSA collective action," the Court will exercise its managerial powers. Billingsley, 560 F. App'x at 921 (citations omitted). Thus, the Court refuses to enforce the arbitration agreements [ECF Nos. 166-1; 166-2; 166-3; 168-1] against opt-in claimants Moore, Hargraves, Wright and Delgado.
The Undersigned hereby
[ECF No. 78, p. 24].
[ECF No. 78, p. 65 (testimony of Plaintiff Stanton)].