De Angelis v. Icon Entm't Grp. Inc.
De Angelis v. Icon Entm't Grp. Inc.
Opinion of the Court
I. BACKGROUND
ICON Entertainment Group Inc. operates Kahoots Gentlemen's Club ("Kahoots" or "Club"), an adult entertainment club in Columbus, Ohio. Stephanie De Angelis has brought suit against ICON, its individual owners, and 4522 Kenny Road, LLC, an Ohio Limited Liability Company sharing its principal place of business with Kahoots. (ECF No. 10 at 5). Ms. De Angelis alleges that she performed at Kahoots as a dancer from April 2016 to February 2017. (ECF No. 10 at ¶¶ 30, 32). Ms. De Angelis alleges that Kahoots did not pay its dancers any wages. (Id. at ¶ 1). She avers that, instead, Kahoots misclassified all of its dancers as independent contractors, rather than employees, and that the dancers are only compensated through tips from customers. (Id. at ¶¶ 31, 35). She further alleges that at the end of each night, Kahoots took a cut from all tips made by the dancers, and the dancers were required to divide their tips with other employees. (Id. at ¶¶ 43-44).
Ms. De Angelis signed an agreement titled "Dancer Performance Lease" (the "Agreement") with ICON Entertainment on June 2, 2016. (ECF No. 28-1). The Agreement purported to disclaim any employer-employee relationship between ICON or Kahoots and Ms. De Angelis and instead classify Ms. De Angelis as a performer leasing performance space from Kahoots. (Id. ). The Agreement contains a provision titled "Mandatory Arbitration/Waiver of Class and Collective Actions/Attorney Fees and Costs" which reads in relevant part:
EXCEPT FOR ANY ADMINISTRATIVE PROCEEDINGS THAT ARE NOT LEGALLY BARRED BY THIS
*791PARAGRAPH, ANY CONTROVERSY, DISPUTE, OR CLAIM (IN THIS PARAGRAPH 21, COLLECTIVELY "CLAIM") ARISING OUT OF THIS LEASE OR OUT OF ENTERTAINER PERFORMING AND/OR WORKING AT THE CLUB AT ANY TIME, WHETHER CONTRACTUAL, IN TORT, OR BASED UPON COMMON LAW OR STATUTE, SHALL BE EXCLUSIVELY DECIDED BY BINDING ARBITRATION HELD PURSUANT TO THE FEDERAL ARBITRATION ACT (THE "FAA"). SUCH ARBITRATION SHALL OCCUR IN THE STATE OF NEW YORK, AND SHALL BE ADMINISTERED BY A NEUTRAL ARBITRATOR AGREED UPON BY THE PARTIES, WHO SHALL BE PERMITTED TO AWARD, SUBJECT ONLY TO THE RESTRICTIONS CONTAINED IN THIS PARAGRAPH 21, ANY RELIEF AVAILABLE IN A COURT. THE ARBITRATOR SHALL NOT CONSOLIDATE MORE THAN ONE PERSON'S CLAIM, AND MAY NOT PRESIDE OVER ANY FORM OF REPRESENTATIVE, CLASS, OR COLLECTIVE PROCEEDINGS. IN THE EVENT AN ACTION IS BROUGHT IN ARBITRATION ON BEHALF OF MULTIPLE INDIVIDUALS, THE ARBITRATOR SHALL HAVE ONLY THE AUTHORITY TO DIVIDE THE ACTION INTO INDIVIDUAL PROCEEDINGS; EACH THEN TO BE HEARD BY AN INDIVIDUAL ARBITRATOR. EITHER PARTY MAY REQUEST AN ARBITRATOR EXPERIENCED IN THE ADULT ENTERTAINMENT INDUSTRY. THE PARTIES WAIVE ANY RIGHT TO LITIGATE SUCH CLAIMS IN A COURT OF LAW, AND WAIVE THE RIGHT TO TRIAL BY JURY. THE PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THAT LEVEL OF DUE PROCESS REQUIRED FOR ARBITRATIONS. THE ARBITRATOR'S DECISION SHALL BE FINAL, SUBJECT ONLY TO REVIEW UNDER THE FAA. THE COSTS OF ARBITRATION SHALL BE BORNE EQUALLY BY THE ENTERTAINER AND THE CLUB UNLESS THE ARBITRATOR CONCLUDES THAT A DIFFERENT ALLOCATION IS REQUIRED BY LAW. THE ARBITRATOR SHALL HAVE EXCLUSIVE AUTHORITY TO RESOLVE ANY DISPUTES OVER THE VALIDITY AND/OR ENFORCEABILITY OF ANY PART OF THIS LEASE, INCLUDING THESE ARBITRATION PROVISIONS. ANY AWARD BY THE ARBITRATOR MAY BE ENTERED AS A JUDGMENT IN ANY COURT HAVING JURISDICTION.
(Id. at 5-6, ¶ 21A) (emphasis in original). The Agreement further provides that if "ANY PARTY CHALLENGES, OR IS REQUIRED TO INITIATE PROCEEDINGS TO ENFORCE, THE ARBITRATION REQUIREMENTS OF THIS PARAGRAPH 21, THE PREVAILING PARTY TO SUCH CHALLENGES/ENFORCEMENT PROCEEDINGS SHALL BE ENTITLED TO AN AWARD OF ALL COSTS, INCLUDING REASONABLE ATTORNEY FEES, INCURRED IN LITIGATING SUCH ISSUES. " (Id. at 6, ¶ 21C) (emphasis in original).
Ms. De Angelis filed this lawsuit as a collective and class action against Defendants on October 23, 2017, and filed her First Amended Complaint on January 18, 2018. (ECF Nos. 1, 10). She alleges violations of the Fair Labor Standards Act of 1983 ("FLSA"),
II. LAW & ANALYSIS
A. The Arbitration Agreement
Arbitration "is a matter of contract." First Options of Chicago, Inc. v. Kaplan ,
[F]irst, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.
Stout v. J.D. Byrider ,
In determining whether the parties agreed to arbitrate under the first prong of the Stout test, the Court must apply state law of contract formation. Prachun v. CBIZ Benefits & Ins. Servs., Inc. , No. 2:14-CV-2251,
Where the contract includes a delegation provision, however, the analysis changes. A delegation provision is an "agreement[ ] to arbitrate threshold issues concerning the arbitration agreement." Danley v. Encore Capital Grp., Inc. ,
Kahoots argues that Ms. De Angelis's claims are subject to arbitration and that any threshold questions about the validity of the arbitration agreement must themselves be submitted to an arbitrator under the Agreement's delegation provision. The Agreement's delegation provision reads as follows: "THE ARBITRATOR SHALL HAVE EXCLUSIVE AUTHORITY TO RESOLVE ANY DISPUTES OVER THE VALIDITY AND/OR ENFORCEABILITY OF ANY PART OF THIS LEASE, INCLUDING THESE ARBITRATION PROVISIONS. " (ECF No. 28-1 at 4, ¶ 21A). Ms. De Angelis argues that the delegation clause is not clear and unmistakable. Additionally, Ms. De Angelis argues that the arbitration clause does not cover the dispute at issue.
The Plaintiff challenges the contract as follows: (1) the delegation clause is not clear and unmistakable; (2) the arbitration agreement prevents the Plaintiff from effectively vindicating her rights; (3) the arbitration agreement is void for lack of mutual assent; (4) the claims alleged here "are outside the scope of the arbitration agreement"; (5) non signatories to the agreement cannot enforce the arbitration clause; (6) the arbitration agreement fails for lack of consideration; (7) the arbitration agreement is an attempt at impermissible waiver of rights under the FLSA and the Ohio Constitution; (8) leases cannot support agreements to arbitrate under Ohio law; (9) "the provisions seeking costs are invalid and illegal"; and (10) the arbitration agreement is void as unconscionable. (ECF No. 34 at 2).
In addition to challenging the arbitration agreement, Ms. De Angelis has argued that this Court cannot dismiss Defendants because they are jointly and severally liable as co-conspirators in Doe 1, et al. v. VM3015 Inc., et al. , Case No. 2:18-cv-443 (S.D. Ohio 2018) and that this Court should rule on conditional certification prior to ruling on Defendants' instant motion. This Court rejects both arguments. As this Court previously ruled in De Angelis v. Nolan Enterprises, Inc. , Case No. 2:17-cv-926 (S.D. Ohio 2017), Ms. De Angelis has offered no cases to support her argument that Kahoots's alleged role in an entirely different case should inform the determination of the validity and applicability of the arbitration agreement. This is particularly true where, as here, the Defendants in the VM3015 litigation are not defendants here. As to conditional certification, this Court previously held that it would consider dispositive motions before addressing conditional class certification in the interests of efficiency and judicial economy. See De Angelis v. Nolan Enterprises, Inc. , Case No. 2:17-cv-926 (S.D. Ohio 2017) (ECF No. 55 at 4 n.1).
B. Challenges to the Delegation Clause
Only two of Ms. De Angelis's arguments are specific to the delegation clause: first, *794that Defendants have not specifically identified a delegation clause in the Agreement, and second, that the delegation clause is not clear and unmistakable. The Defendants have specifically identified a delegation clause. They have pointed to Paragraph 21(A) of the Agreement, which states in relevant part: "THE ARBITRATOR SHALL HAVE EXCLUSIVE AUTHORITY TO RESOLVE ANY DISPUTES OVER THE VALIDITY AND/OR ENFORCEABILITY OF ANY PART OF THIS LEASE, INCLUDING THESE ARBITRATION PROVISIONS. " (ECF No. 28 at 8).
Second, Ms. De Angelis alleges that this delegation provision is not a clear and unmistakable delegation of questions of arbitrability. Plaintiff is incorrect. The delegation provision in the Agreement between Plaintiff and Kahoots is similar to the provision that the Supreme Court found clear and unmistakable in Rent-A-Center . There, the provision read, "[t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable." Rent-A-Center ,
C. Challenges Regarding the Scope and Enforceability of the Arbitration Agreement
Once there is a delegation clause, "a court possesses no power to decide the arbitrability issue. That is true even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless." Henry Schein, Inc. v. Archer & White Sales, Inc. , --- U.S. ----,
*795Plaintiff argues that her Ohio minimum wage claims are based on the Ohio Constitution and that the arbitration agreement does not cover state constitutional claims. (ECF No. 34 at 19). This challenge pertains to whether the arbitration agreement is enforceable as to the Ohio minimum wage claims.
Plaintiff argues that despite the delegation clause, this Court must also consider Plaintiff's effective vindication challenge to the arbitration agreement. The effective vindication doctrine voids "arbitration agreements that 'operat[e]...as a prospective waiver of a party's right to pursue statutory remedies.' " Am. Express Co. v. Italian Colors Rest. ,
Several courts have considered effective vindication arguments even when arbitration agreements include delegation clauses. See, e.g. , Doe ,
Ms. De Angelis's additional contract challenges are for the arbitrator to decide. When there is a delegation clause, challenges to the overall contract or to the arbitration agreement do not pertain to the validity of the delegation clause and must be submitted to arbitration. Rent-A-Center, W. ,
*796Plaintiff has also argued that nonsignatories to the Agreement cannot be bound by the arbitration clause. Whether such a challenge must be decided by the Court or an arbitrator is a closer question. Some courts have found that a delegation clause does not clearly and unmistakably show that Plaintiffs agreed to arbitrate arbitrability with nonparties. See, e.g. , Republic of Iraq v. BNP Paribas USA,
There is somewhat of a logical conundrum in finding that Ms. De Angelis must arbitrate the question of whether she agreed to arbitrate against nonsignatories. There is generally a presumption against delegation that may be overcome only with clear and unmistakable evidence; silence or ambiguity is not enough. First Options of Chicago, Inc. ,
But to adjudicate whether Ms. De Angelis is bound to arbitration with parties that she alleges are nonsignatories would be to engage in the type of analysis that the Supreme Court held impermissible in Henry Schein, Inc. v. Archer & White Sales, Inc. There, the Court opined that once the parties have a delegation clause, "a court possesses no power to decide the arbitrability issue," Henry Schein, Inc. ,
Defendants have asked this Court to compel arbitration. The parties have provided for arbitration in New York, but this Court has jurisdiction to compel arbitration only within this district. Inland Bulk Transfer Co. v. Cummins Engine Co. ,
D. Fees and Costs for Enforcing Arbitration
Defendants have also moved for attorneys' fees and costs for their efforts to compel arbitration. The Agreement between Plaintiff and Defendants provides that "IN THE EVENT THAT ANY PARTY CHALLENGES, OR IS REQUIRED TO INITIATE PROCEEDINGS TO ENFORCE, THE ARBITRATION REQUIREMENTS OF THIS PARAGRAPH 21, THE PREVAILING PARTY TO SUCH CHALLENGES/ENFORCEMENT PROCEEDINGS SHALL BE ENTITLED TO AN AWARD OF ALL COSTS, INCLUDING REASONABLE ATTORNEY FEES, INCURRED IN LITIGATING SUCH ISSUES. " (28-1 at 6, ¶ 21C) (emphasis in original). Defendants argue that this provision entitles them to fees associated with enforcing the arbitration clause. Plaintiff argues that this provision cannot be enforced because the FLSA does not authorize such fees and attempts to make a second effective vindication argument. (ECF No. 34 at 30-31). Defendants have responded that the fees provision here is considered separately from the Plaintiff's FLSA claim.
Although under the "American rule," each party pays its own way in litigation, such arrangement can be preempted by contract, even in the FLSA context. See Cook v. All State Home Mortg. ,
But to assess fees before the arbitration agreement is found valid would be to put the cart before the horse. The parties' delegation clause requires that Ms. De Angelis's challenges to the validity of the arbitration agreement be submitted to an arbitrator. It is possible that the arbitrator would find the arbitration agreement invalid. While the delegation clause would still have required the parties to resolve such challenges through arbitration, it would make little sense to grant attorney's fees when the validity of the arbitration agreement has yet to be determined. Cf. Cook v. All State Home Mortg., Inc. ,
III. CONCLUSION
For the foregoing reasons, Defendants' Motion to Dismiss or Stay in Favor of Arbitration and for Attorneys' Fees and Costs is GRANTED IN PART and DENIED IN PART. Finding the Plaintiff's claims to be issues for an arbitrator to decide, this case is hereby STAYED pending arbitration. Defendants' Motion for fees is DENIED WITHOUT PREJUDICE pending the outcome of arbitration.
IT IS SO ORDERED.
Reference
- Full Case Name
- Stephanie DE ANGELIS v. ICON ENTERTAINMENT GROUP INC. d/b/a Kahoots Gentlemen's Club
- Cited By
- 34 cases
- Status
- Published