Mantooth v. Bavaria Inn Restaurant, Inc.
Mantooth v. Bavaria Inn Restaurant, Inc.
Opinion of the Court
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,
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 *1167revisit its decision to sever provisions under the effective vindication doctrine based on the Supreme Court's decision in Epic Systems Corporation v. Lewis , --- U.S. ----,
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.
I. BACKGROUND & PROCEDURAL HISTORY
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.
• "The costs of the arbitration shall be borne equally by the entertainer and the club unless the arbitrator concludes that a different allocation is required by law." (Id. ¶ 22.A.)
• "In the event that any party challenges, or is required to initiate proceedings to enforce, the arbitration requirements of this paragraph 22, the prevailing party to such challenges and/or enforcement proceedings shall be entitled to an award of all costs, including actual and reasonable attorney fees, incurred in litigation such issues." (Id. ¶ 22.D.)
• "Any ruling arising out of a claim between the parties shall, to the extent not precluded by applicable law, award costs incurred for the proceedings and reasonable attorney fees to the prevailing party." (Id. ¶ 22.E.)
• The arbitrator "shall be permitted to award, subject only to the restrictions contained in this paragraph 22, any relief available in a court." (Id. ¶ 22.A.)
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. ----,
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.)
II. LEGAL STANDARD
While the Federal Rules of Civil Procedure do not directly provide for a *1169motion to reconsider an interlocutory ruling, district courts have broad discretion to reconsider their interlocutory rulings before the entry of judgment. See Rimbert v. Eli Lilly & Co. ,
"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. ,
III. ANALYSIS
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.
*1170Nos. 12, 15, 16 & 17.) Because Defendants moved for arbitration only as to Mantooth, Bujok, Darr, Lopez, Nagle, and Raffaele, the Court's corresponding Order therefore applies only to those individuals, and does not apply to Bonham, Cline, Hattlestad, and Howard.
A. Defendants' Motion to Reconsider
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 ,
Defendants argue that the Epic decision held that
unless a provision in an arbitration agreement directly conflicts with the express language of a statute, it must be enforced as written. Hence, the Supreme Court has now implicitly, if not directly, rejected the imposition of policy-based reasons for invalidating provisions in arbitration agreements such as the "effective vindication of rights" doctrine.
(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.
1. 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. ,
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 ,
2. Supreme Court's Decision in Epic
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.
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."
The Court recognized, however, that the employees may agree to bilaterally arbitrate disposition of their FLSA claims.
*11723. Impact of Epic on the Effective Vindication Doctrine
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."
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 ,
Other courts have referenced the effective vindication doctrine and assumed its continued existence and viability post- Epic . See Santich v. VCG Holding Corp. ,
*1174In 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.
2. Clarifying Scope of the Order
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 ,
B. Plaintiffs' Relief Motion
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. ,
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. ,
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. ,
The affidavits submitted by Mantooth and Lopez establish that paying half of the arbitration costs would pose a *1176significant financial burden, such that they would be unable to pursue their claims against Defendants in arbitration.
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.
IV. CONCLUSION
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:
a. Any portion of any Agreement allowing fee- and cost-shifting is SEVERED, except that the arbitrator may award attorneys' fees and costs as authorized by federal law;
b. Any portion of any Agreement that Plaintiffs Bujok, Darr, Nagle, and Rafaele may have with the Defendants is SEVERED to the extent that it establishes an obligation to split the costs of arbitration equally between
c. The remainder of Defendants' Motion is DENIED;
3. Plaintiffs' Motion for Relief (ECF No. 127) is GRANTED IN PART to clarify *1177the severance of the fee- and cost-splitting clauses as follows:
a. Any portion of any Agreement that Plaintiffs Mantooth or Lopez may have with Defendants is SEVERED to the extent that it establishes an obligation to split the costs of arbitration equally between Plaintiffs and Defendants; and
b. The remainder of Plaintiffs' Motion is DENIED;
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.
The arbitration provisions in the operative versions of each agreement signed by the named Plaintiffs are identical. (ECF Nos. 57-2, 57-4, 57-8 & 57-10.) Defendants also imply that Darr and Lopez had identical arbitration agreements, although those agreements are not before the Court. (ECF No. 57 at 2 n.2.) Plaintiffs do not appear to dispute that implicit claim. (See generally ECF No. 82.) Thus, for purposes of analysis, the Court will assume that the arbitration clauses in the contracts of the named Plaintiffs, Darr, and Lopez are identical.
The named Plaintiffs in this action are Mantooth, Bujok, Nagle, and Raffaele.
It should be noted that Defendants do not seek reconsideration of the portion of the Court's Order severing the arbitrator selection clause, even though it was severed under the same effective vindication rationale as the fee- and cost-shifting provisions.
Defendants' motion to compel was, in fact, a renewed motion to compel. Defendants initially moved to compel arbitration on June 26, 2017. On July 19, 2017, the Court denied Defendants' initial motion without prejudice subject to later refiling after limited, expedited discovery. (ECF No. 38.) The renewed motion to compel was not a replica of the prior motion. Defendants added to their definition of "Plaintiffs" both Darr and Lopez, who filed notices of consent to join on July 12, 2017, and September 5, 2017, respectively, after Defendants' initial motion to compel. (ECF Nos. 32 & 42.)
Bonham filed a notice of consent to join on May 18, 2017. (ECF No. 16.) Cline filed a notice of consent to join on May 17, 2017. (ECF No. 15.) Hattlestad filed a notice of consent to join on June 5, 2017. (ECF No. 17.) Howard filed a notice of consent to join on May 15, 2017. (ECF No. 12.)
At least one court post-Epic has questioned the underlying premise that arbitration provides real benefits in the employment contexts: "scholars have continued to test those assumptions and have seemingly unsettled the notion that arbitration is superior or even sufficiently comparable to litigation. There is certainly some data suggesting that the arbitral forum's downsides may outweigh its benefits, as least for vulnerable workers." Styczynski v. MarketSource, Inc. ,
See also Castillo v. CleanNet USA, Inc. ,
The FLSA provides that a court "shall...allow a reasonable attorney's fee to be paid by the defendant, and costs of the action" to a prevailing plaintiff.
Plaintiffs also seek to strike the cost-shifting clauses for Bonham, Cline, Hattlestad, and Howard. However, as discussed above, Defendants' motion to compel, and the Court's Order granting in part that motion, did not apply to these opt-in plaintiffs. The Court will not decide matters not properly before the Court, and declines to express any opinion on whether the cost-shifting provisions should be struck for those four individuals.
Defendants contend that Rule 60(b) is inapplicable to Plaintiffs' Relief Motion. As a technical matter, Defendants are correct, but not in a way that favors them. On a motion for reconsideration of an interlocutory order, the Court has broad discretion to alter its prior orders and, while not bound by the strictures of Rules 59 and 60, may look to them for guidance. See Spring Creek ,
In their reply in support of the Relief Motion, Plaintiffs submit two exhibits regarding the cost of arbitration, which are the subject of Defendants' Motion to Strike. (ECF Nos. 140-1, 140-2 & 142.) Defendants alternatively move to file a sur-reply. (ECF No. 142.) The Court has already credited Plaintiffs' evidence and found that arbitration costs range from "thousands to tens of thousands of dollars, to 'fifty times the basic costs of litigating in a judicial, rather than arbitral forum.' " (ECF No. 124 at 15 (citing ECF No. 86 at 12) (emphasis in original).) The Court sees no reason to revisit that finding, even though Defendants question its premise in their response to the Relief Motion. Thus, the Court need not rely on the exhibits because it has already found the cost of arbitration to be much greater than the cost of litigating before this Court. In addition, because the exhibits were attached to Plaintiffs' reply brief, Defendants have not had an opportunity to respond to the arguments that depend on these exhibits, and thus seek to exclude them from the Court's consideration. Because of the belated inclusion of these exhibits and because the Court's decision today does not rely on them, the Court grants Defendants' Motion to Strike (ECF No. 142). Because the Court grants the primary relief Defendants request, the Court denies the alternative relief requested.
Reference
- Full Case Name
- Chada MANTOOTH, Gale Raffaele, Alexis Nagle, and Nicole Bujok, Individually and on Behalf of All Others Similarly Situated v. BAVARIA INN RESTAURANT, INC., d/b/a Shotgun Willie's, and Debra Matthews
- Cited By
- 13 cases
- Status
- Published