Acevedo v. Silk Corp.

• Decision Date: 07 April 2017
• Docket Number: Index No. 153421/2016
• Citation: 2017 NY Slip Op 30713 (U)
• Parties: MELISSA ACEVEDO, individually and on behalf of others similarly situated, Plaintiffs, v. SILK CORP. D/B/A HEADQUARTERS; ROGER L. MAROLDA; and ANY OTHER RELATED ENTITIES, Defendants.
• Court: New York Supreme Court

2017 NY Slip Op 30713(U)

MELISSA ACEVEDO, individually and on behalf of others similarly situated, Plaintiffs, v. SILK CORP. D/B/A HEADQUARTERS; ROGER L. MAROLDA;and ANY OTHER RELATED ENTITIES, Defendants.

Index No. 153421/2016

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 35

RECEIVED: April 12, 2017

April 7, 2017

NYSCEF DOC. NO. 20

DECISION/ORDER

MotionSeq. 001

HON. CAROL R. EDMEAD, J.S.C.:

MEMORANDUM DECISION

In this action alleging improper withholding of wages, defendantsSilk Corp. d/b/a Headquarters ("Headquarters") and Roger L. Marolda("Marolda")(collectively, "defendants") move pursuant to CPLR 7503 to compel arbitration of plaintiffs' claims and stay this action.

Factual Background

PlaintiffMelissa Acevedo("Acevedo"), on behalf of herself and others similarly situated, commenced this suit to recover alleged unpaid minimum wages, improperly retained tips, and improperly withheld wages (collectively "plaintiffs") while employed at Headquarters, an adult entertainment establishment operated by Marolda.

According to the Complaint, Headquarters is engaged in the restaurant and hospitality industry as those terms are defined in the Labor Law and implementing regulations.It is alleged that beginning in approximately April 2010 and continuing through the present, defendants have failed to provide the statutory minimum hourly wage to its employees; engaged in a policy and practice of unlawfully demanding, accepting and retaining gratuities received by its employees; engaged in a policy and practice of improperly deducting "fines,""fees," and miscellaneous improper surcharges from its employees' wages, and under the direction of Marolda, instituted this practice of depriving their employees of state mandated compensation for work performed.

Defendants now move to compel Acevedo to arbitrate her claims pursuant to a May 10, 2011"Headquarters Concession Lease Agreement and Release"(the "Agreement").Defendants argue that the broad arbitration clause requires Acevedo to arbitrate "any controversy dispute or claim" between the parties arising out the Agreement (the "Arbitration Clause") and that the subject matter of the claims herein falls within the scope of the Agreement.Further, under Paragraph 17.1 of the Agreement, entitled "No Class Action"(the "Class Action Waiver"), Acevedo waived her right to proceed in a class action, and thus, is incapable of being a representative of a class.

Acevedo opposes the motion, arguing that no binding agreement to arbitrate exists.Neither Marolda, nor a representative of Silk, the corporate defendant, is a party to the Agreement, or signatories to the Agreement.Instead, the Agreement is between Acevedo and "Landlord," defined as "Headquarters NY/Jamey's Restaurant/Hudson's Steakhouse," which are not listed as parties to this action.And neither Marolda nor Silk initialed critical sections that were initialed by Acevedo.

Further, the Agreement is procedurally and substantively unconscionable, and lacks material terms.Acevedo does not recall signing the Agreement, and claims she was not given an opportunity to read it, or told that she could still work at Headquarters if she declined to sign it.Adult entertainment establishments, such as Headquarters, force young, uneducated female entertainers with no bargaining power, such as Acevedo, to sign agreements that waive rights toclass action status, jury trials, and independent contractor status.These inequitable types of agreements, which subject these entertainers to illegal policies and practices, have been held procedurally and substantively unconscionable.The Agreement is substantively unconscionable because, under the Seventh Circuit Court of Appeals' decision, Lewis v. Epic Systems Corp. (823 F.3d 1147[7th Cir2016], cert. granted, 137 S. Ct. 809, 196 L. Ed. 2d 595[2017]), the Class Action Waiver in the Agreement violates Sections 7and8 of the National Labor Relations Act("NLRA").And, the Agreement contains an illusory provision that requires Acevedo to waive all possible claims (including illegal waivers of statutory claims at issue herein), before the entry of any Agreement, for $100.00.The gross omissions as to the identities and parties to the Agreement make the Agreement unreasonably favorable to defendants over Acevedo.

Notwithstanding, the Arbitration Clause does not apply to the unpaid gratuities claim.Unlike the references made to specific statutes such as New York Minimum Wage Law, Article 19 of the Arbitration Clause does not refer to Article 6 of the New York Labor Law under which Acevedo sues for unpaid gratuities.Even so, defendants failed to prove that the work performed by Acevedo falls within the limited beginning and end dates of the Agreement.

In reply, defendants argue that Acevedo does not deny that the Agreement contains her signature or that her signature was obtained by fraud or duress.Defendants are Landlords as defined under the Agreement, and it is undisputed that defendants owned and operated Headquarters.The Agreement was signed by Acevedo, the party to be charged.And, the Agreement is not unconscionable.There is no evidence of high pressure tactics, and the Second and Ninth Circuit Courts of Appeals disagree with the Seventh Circuit Court of Appeals as to class action waivers.And, the Agreement confers benefits upon both defendants and Acevedo.All of Acevedo's claims fall within the broad Arbitration Clause, which survives the termination date of the Agreement.

Discussion

CPLR 7503(a) provides that a "party aggrieved by the failure of another to arbitrate may apply for an order compelling arbitration."Upon a motion pursuant to CPLR 7503, the court's role is to "determine whether the parties agreed to submit their disputes to arbitration, if so, whether the particular dispute comes within the scope of their agreement, and finally whether there has been compliance with any condition precedent to access to the arbitration forum"(Olympia & York OLP Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 214 A.D.2d 509, 626 N.Y.S.2d 69[1st Dept1995], citingMatter of County of Rockland [Primiano Constr. Co.], 51 N.Y.2d 1, 5, 431 N.Y.S.2d 478, 409 N.E.2d 951).As raised by parties herein, the issues are whether there is an enforceable agreement to arbitrate disputes between the parties herein, and if so, whether the claims in this action fall within the scope of any such agreement.

Here, it is uncontested that Acevedo signed the Agreement which contains the following Arbitration Clause and No Class Waiver:

15.1.The parties agree that any controversy dispute or claim between Concessionaire and Landlord arising out of this Lease or any other actions between Landlord, Concessionaire, Club Patrons, or any third parties . . . shall be exclusively submitted and resolved by binding arbitration under the Federal Arbitration Act and in conformity with the rules and procedures of the American Arbitration Association. . . .

* * * * *

17.1 The parties agree that neither party will participate in any class action for the purpose of resolving any disputes between each other instead of individually seeking to litigate or settle such disputes.Without limiting any other provision of this Agreement, this provision shall survive the termination of this Agreement.

Further, that defendants are not named as parties or signatories to the Agreement doesnot, in and of itself, deprive defendants of their right to enforce the Agreement including the Arbitration Clause therein.¹Paragraph 1 of the Agreement, entitled "The Parties," states that "Landlord is the . . . owner and operator of a nightclub including a restaurant and bar located at 552 West 38^th Street, New York, New York. . . ."It is undisputed that defendants own and operate the subject nightclub.And the submissions indicate that they have received direct benefits of the Agreement (see generally, HRH Const. LLC v. Metropolitan Transp. Auth., 33 A.D.3d 568, 823 N.Y.S.2d 140[1^st Dept2006]("A non-signatory to an agreement containing an arbitration clause that has knowingly received direct benefits under the agreement will be equitably estopped from avoiding the agreement's obligation to arbitrate");Oxbow Calcining USA Inc. v. American Indus. Partners, 96 A.D.3d 646, 948 N.Y.S.2d 24[1^st Dept2012]("a nonsignatory may be estopped from avoiding arbitration where it 'knowingly accepted the benefits of an agreement with an arbitration clause'")citingMAG Portfolio Consultant, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58[2d Cir2001]("There are five theories 'for binding nonsignatories to arbitration agreements: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel")).Additionally, the absence of defendants' signatures on the Agreement is inconsequential, given that (1)"[t]here is no requirement [under CPLR 7501] that such a writing must be signed by a party against whom arbitration is sought"(Rudolph & Beer, LLP v. Roberts, 260 A.D.2d 274, 688 N.Y.S.2d 553[1^st Dept1999]) and (2) undisputedly, the Agreement was signed by Acevedo, the party to be charged (Liberty Management & Const. Ltd. v. Fifth Ave. & Sixty-Sixth Street Corp., 208 A.D.2d 73,620 N.Y.S.2d827[1^st Dept1995]("There is no requirement that the writing be signed 'so long as there is other proof that the parties actually agreed on it'[citation omitted]")).

To the degree the Agreement is dated May 10, 2011, and addresses claims between the parties"arising out this Lease or any other actions between Landlord," it cannot be said at this juncture that the Agreement does not apply to period of Acevedo's employment that is the subject of her claims.It is noted that Acevedo's Complaint alleges that she was employed by defendants"in or around Fall 2011"(complaint ¶9) when defendants allegedly violated rights under New York's Labor Law.And, the Arbitration Clause states that " . . . [t]his provision shall...