Castaldi v. Signature Retail Servs., Inc.
| Decision Date | 07 January 2016 |
| Docket Number | Case No. 15-cv-00737-JSC |
| Court | U.S. District Court — Northern District of California |
| Parties | PAUL CASTALDI, Plaintiff, v. SIGNATURE RETAIL SERVICES, INC., Defendant. |
In this putative class action, Plaintiff Paul Castaldi ("Plaintiff") contends that his employer, Signature Retail Services, Inc. ("Signature Retail"), failed to pay overtime wages and failed to compensate employees for all hours worked in violation of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 207. (See Dkt. No. 1.) Now pending before the Court is Signature Retail's Motion to Compel Arbitration and Dismiss or Stay Action pursuant to an arbitration agreement under which participating employees and Signature Retail agreed to submit employment-related disputes to binding arbitration. (Dkt. No. 29.) After carefully considering the parties' arguments, and having had the benefit of oral argument on October 15, 2015, and the parties' supplemental briefing on choice-of-law, the Court finds that Illinois law governs the enforceability of the Arbitration Agreement and that under Illinois law the Agreement's internal grievance procedure and cost-splitting provision are substantively unconscionable but nonetheless severable.
Signature Retail is an Illinois corporation engaged in the business of retail merchandising, sales, event marketing, and retail construction services that has several places of business in California. (Dkt. No. 1 ¶ 13.) Plaintiff is a resident of Rhode Island who worked as a Merchandiser for Defendant in the Providence, Rhode Island region and elsewhere between August 2013 and January 2015. (Dkt. No. 1 ¶ 10.)
Before beginning his job with Signature Retail, on August 15, 2013 Plaintiff had a telephone interview with Signature Retail manager Dave Beatty. (Dkt. No. 36-4 ¶ 4; see also Dkt. No. 43 ¶ 3.) During the interview, Plaintiff and Mr. Beatty discussed Plaintiff's relevant experience and work ethic and Defendant's job expectations. (Dkt. No. 36-4 ¶ 4.) Mr. Beatty did not mention or explain arbitration during the call. (Id. ¶ 5.) By the end of the interview, which occurred on a Thursday, Mr. Beatty offered Plaintiff a job as a retail merchandiser starting the following Monday and told him that he would receive hiring documents via email. (Id. ¶¶ 4, 6-7.) Mr. Beatty explained that Plaintiff would have to print, sign, and fax back all of the documents before starting work. (Id. ¶ 6.) Thus, Plaintiff understood that he would have to return the signed documents the next day. (Id. ¶¶ 6-7.)
Plaintiff characterizes the papers as a "stack" that cost him $30.00 to print and fax back to Signature Retail. (Id. ¶ 8.) According to Signature Retail's CFO, the welcome packet that Plaintiff received included: (1) a cover letter; (2) a new hire checklist with boxes to check off indicating the employee's completion of the other required forms; (3) an employment application; (4) a USCIS Form I-9 that the federal government requires for all new employees; (5) an IRS Form W-4 also required by law; (6) the Arbitration Agreement at issue here; (7) an emergency contact information form; (8) an EEO notice from the EEOC; (9) a document with excerpts to Signature Retail's employee handbook; (10) a Direct Deposit authorization form; (11) a summary of benefits; (12) an Affordable Care Act form; (13) a document regarding time and attendance reporting; (14) a document providing instructions for communications setup; (15) a document for reimbursement of employees' personal cell phones; and (16) a 2013 calendar showing pay days and holidays. (Dkt. No. 43 ¶ 3; Dkt. No. 43-1.)1 Plaintiff signed and returned all of thedocuments the following day, including the Arbitration Agreement, which provides in relevant part:
EMPLOYER and EMPLOYEE mutually agree that, to the fullest extent allowed by law, they shall submit all disputes arising out of the EMPLOYER/EMPLOYEE relationship will be conducted in accordance with the procedures, rules and regulations of the American Arbitration Association for a labor/employment dispute. The parties agree that the arbitration procedure is the sole and exclusive remedy for both EMPLOYER and EMPLOYEE. EMPLOYEE understands and agrees that by signing this agreement, EMPLOYEE is waiving his/her rights to have such claims decided by a federal or state agency or court. Claims which shall be decided by mandatory arbitration include, but are not limited to, any contract claims, whether express or implied, written or verbal, any tort claims, any claims of discrimination under federal, state or local statute, ordinance, regulation or rule, any claims for benefits, wages or compensation (except as otherwise provided by the express terms of any applicable benefit plan or as required by applicable law), retaliation claims, harassment claims, claims for compensation under federal, state or local statute, regulation, rule or ordinance, and any other claim under any federal, state or local statute, rule or ordinance whether related directly or indirectly to EMPLOYEE's employment with EMPLOYER. Except as required by law, covered claims include claims which EMPLOYEE may bring in his or her individual capacity or as a class representative or class member in a class action proceeding, or in any other capacity. The parties understand and agree that they are giving up any right to have a covered claim decided by a judge or a jury (see paragraph 4 for claims not covered by this agreement).
(Dkt. No. 32-1 ¶ 2 (emphasis in original.) The Arbitration Agreement further provided that any arbitration shall be governed by the rules and regulations of the American Arbitration Association ("AAA") and shall be conducted in DuPage County, Illinois. (Id. ¶ 6.) The Arbitration Agreement also includes a choice of law clause, which provides that Illinois law will apply to common law claims and Seventh Circuit law will apply to federal anti-discrimination or other federal claims. (Id. ¶ 8.)
The Agreement includes an internal dispute procedure, which requires employees—but not Signature Retail—to report their claims in writing to Signature Retail within 300 days of accrual. (Id. ¶ 5 ().) "Failure to abide by these deadlines forecloses any opportunity to pursue the claim or grievance." (Id.) Whatever statutory limitations period otherwise applies for commencing arbitration. (Id. ¶ 9.)
With respect to payment, under the terms of the Arbitration Agreement, the party bringing the dispute must pay the filing fee. (Id. ¶ 7.) The parties will share the administrative fees equally unless the employee is unable to pay, in which case the arbitrator may make a determination that the fees should be divided in a manner less financially onerous to the employee. (Id.) In all events, each party bears his/its own attorneys' fees and costs unless otherwise required by law. (Id.) Lastly, the Arbitration Agreement contains the following acknowledgement:
EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS THE TERMS AND PROVISIONS OF THIS AGREEMENT. . . . Employee HAS SIGNED THIS AGREEMENT VOLUNTARILY . . . . Employee UNDERSTANDS THAT BY SIGNING THIS AGREEMENT HE/SHE IS GIVING UP RIGHTS TO HAVE ANY COVERED CLAIM DECIDED BY A COURT OR JURY. Employee HAS BEEN GIVEN A FULL AND FAIR OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH PRIVATE LEGAL COUNSEL AND IS OTHERWISE FULLY ADVISED IN THE PREMISES.
(Id. at 3.)
Plaintiff signed and returned the Arbitration Agreement and the other documents. (See id. at 3; see also Dkt. No. 43-2.) However, Plaintiff avers that he did not notice the Arbitration Agreement, which was "somewhere in the middle of the stack" of papers without being flagged or highlighted in any particular way, and has no memory of signing it. (Dkt. No. 36-4 ¶¶ 9-10.) He further avers that he had not heard of arbitration before bringing this lawsuit, and that no one from Signature Retail explained arbitration, provided information about the Federal Arbitration Act ("FAA") or AAA Rules, or explained the effect of the Arbitration Agreement. (Id. ¶ 11.) He asserts that he had no time to speak with family members or anyone else about the documents because he needed to return them the next day and needed the job. (Id. ¶ 7.)
On February 17, 2015, Plaintiff filed the instant collective action complaint alleging violations of the FLSA on behalf of all persons who worked as Merchandisers for Signature Retailsince February 2012. (See Dkt. No. 1 ¶ 12.) The complaint alleges that Signature Retail failed to pay overtime wages and failed to compensate Plaintiff and the other Merchandisers for all hours worked in violation of the FLSA. Signature Retail moves to compel arbitration and to dismiss or stay this action in light of the Arbitration Agreement that Plaintiff signed. (Dkt. No. 29.) The Court heard oral argument on the motion to compel on October 15, 2015. Thereafter, the parties submitted supplemental briefing on the question of choice of law—i.e., which state's law should apply to determine whether the Arbitration Agreement is enforceable. (Dkt. Nos. 52, 53, 54.)
The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 2-16, provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Under the FAA, "arbitration agreements [are] on an equal footing with other contracts," and therefore courts are required to enforce arbitration agreements according to their terms. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 66 (2010). "Like other contracts, however, they may be invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability.'" Id. (internal citations and quotations omitted).
The FAA espouses a general policy...
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