Hopkins v. New Day Financial
| Decision Date | 14 August 2009 |
| Docket Number | Civil Action No. 07-3679. |
| Citation | 643 F.Supp.2d 704 |
| Parties | Kelly HOPKINS, et al., Plaintiffs, v. NEW DAY FINANCIAL, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Stephen J. Springer, The Law Office of Stephen J. Springer, Philadelphia, PA, for Plaintiffs.
Howard B. Hoffman, Rockville, MD, Jonathan S. Ziss, Seth L. Laver, Margolis Edelstein, Philadelphia, PA, for Defendants.
Before the Court is Defendants' Motion to Dismiss and Compel Arbitration of claims instituted by nine former employees (collectively referred to as "Plaintiffs") of Defendant New Day Financial, LLC ("New Day") (Docket No. 63).1 Plaintiffs instituted this suit against Defendant New Day and two of its executives, Paul Alger and Robert Posner (collectively referred to as "Defendants"), alleging violations of the Federal Fair Labor Standards Act, 29 U.S.C. § 201 et seq. ("FLSA"). In their Motion, Defendants seek to have Plaintiffs' claims arbitrated rather than decided by a jury. For the reasons noted below, the Court will deny the Motion to Dismiss and Compel Arbitration and order a jury trial on the enforceability of arbitration agreements signed by Plaintiffs as a condition of their employment with Defendant New Day (the "Arbitration Agreements").
Plaintiffs were employed as Account Executives for Defendant New Day Financial, LLC ("New Day"). Defendant New Day is a mortgage company which specializes in lending money for the purchase or refinance of residential real estate above the market value of the property itself. In their capacity as Account Executives, Plaintiffs performed inside sales jobs. Plaintiffs allege that they were required to work six days a week and a minimum of 63 hours per week. Plaintiffs further allege that they were not afforded a lunch break and were required to work most holidays. Plaintiffs claim that they were not paid for overtime and their salaries—ranging between $25,000 and $30,000 per year—provided inadequate compensation for the hours worked.
Plaintiffs were required as a condition of employment at New Day to complete certain paperwork and sign various agreements. Included in these papers was an Arbitration Agreement which Defendant New Day required its Account Executives to sign. The pertinent part of the Arbitration Agreement is capitalized in the original and provides:
BY SIGNING BELOW, THE PARTIES ACKNOWLEDGE THAT THEY HAD A RIGHT TO LITIGATE CERTAIN CLAIMS THROUGH A COURT BEFORE A JUDGE OR JURY; AND THAT THEY WILL NOT HAVE THAT RIGHT IF EITHER PARTY ELECTS ARBITRATION PURSUANT TO THIS AGREEMENT, EXCEPT AS PROVIDED HEREIN. THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY WAIVE THEIR RIGHTS TO LITIGATE SUCH CLAIMS UPON ELECTION OF ARBITRATION BY EITHER PARTY. THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE THIS ENTIRE ARBITRATION AGREEMENT, AND THAT THEY ARE ENTERING INTO THIS
ARBITRATION AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS ARBITRATION AGREEMENT. THIS ARBITRATION AGREEMENT PROVIDES ONLY A SUBSTITUTION OF FORUMS, AND INVOLVES NO SURRENDER, BY EITHER PARTY, OF ANY SUBSTANTIVE STATUTORY OR COMMON LAW BENEFIT, PROTECTION, OR DEFENSE.
The Arbitration Agreement does not prevent either "party's use of bankruptcy, replevin, judicial foreclosure, injunction, or any other pre-judgment or provisional remedy relating to or to protect any collateral, trade secrets, contract rights, unfair competition, or security or property interests, now or hereafter owed by either party to the other."
The Arbitration Agreement does place additional restrictions on class actions and joinder providing:
Neither the employer nor New Day shall, without written consent of the other party, have the right to: (1) participate in a class action in court or in arbitration, either as a class representative or a class member including claims arising under the Federal Fair Labor Standards Act, 29 U.S.C. § 201 et seq.; or (2) join or consolidate claims with any other claims asserted by any other person.
Defendant New Day also agreed to advance fees associated with filing and arbitrating any claims subject to the Arbitration Agreement. However, if New Day prevailed in the arbitration, then the employee had to reimburse Defendant New Day for fees it advanced as well as any other fees Defendant New Day was entitled to under law. Nevertheless, if the employee can demonstrate to the "satisfaction of the arbitrator that the employee is of limited financial capacity, then New Day shall pay all fees associated with arbitrating the claim."
On September 4, 2007, Plaintiff Kelly Hopkins and six other former employees filed a collective action pursuant to the FLSA against Defendants New Day, Posner and Alger alleging unfair labor practices, as noted above. Subsequently, two additional former Account Executives, Kristofer Spevak and Andrew Cox, exercised their right under the FLSA to join in the action. Defendants have moved to dismiss the action and compel arbitration or, in the alternative, to stay the action pending resolution of the arbitration. In opposing the Motion, Plaintiffs challenge the validity of the Arbitration Agreements arguing that they signed them under duress and the Agreements are unconscionable. In this regard, the Court makes the following findings as they pertain to each Plaintiff's signing of the Arbitration Agreement.
Plaintiff Kristofer Spevak ("Spevak") signed the Arbitration Agreement after he began his employment at New Day.2 Thirty-one year old Spevak does not have a college degree and previously worked for a Lehigh Valley newspaper.
Defendant Alger had a meeting with Spevak and approximately five other Account Executives in New Day's Conshohocken office on June 22, 2005, six months after Spevak joined Defendant New Day. (Spevak Dep. 55:12-56:15.) At the meeting, the Account Executives were presented with a new compensation plan which changed commissions from a fee-based system to a tier-based system. (Spevak Dep. 56:21-57:11.) In addition to discussing the new compensation plan, Defendant Alger also provided Spevak with a copy of the Arbitration Agreement. Defendant Alger informed the Account Executives that they had only five minutes to sign the Agreement and that no copies could leave the room. (Spevak Dep. 66:1-12.) At no time did anyone from Defendant New Day explain the terms of the Arbitration Agreement and Spevak testified that he did not understand its meaning. (Spevak Dep. 94:17-24; 77:19-78:2.) Defendant Alger simply noted that signing the Arbitration Agreement "was a requirement to stay employed with New Day and receive a paycheck." (Spevak Dep. 95:4-8.) Spevak signed the Arbitration Agreement without counsel, without asking any questions and without receiving a copy. (Spevak Dep. 74:23-76:24.)
Plaintiff Gary Colby became an employee of New Day in late March, 2005. He had a Bachelors of Science Degree in mechanical engineering. (Colby Dep. 25:10-19.) Colby alleges that he signed the Arbitration Agreement about six months after he began working for Defendant New Day. (Colby Dep. 53:19-25; 60:18-21.) Colby had already left his prior job for New Day. (Colby Dep. 47:14-15.) Defendant Alger and Meg Garrett, a human resources representative, presented the Agreement to Colby in the Conshohocken office. (Colby Dep. 61:4-6.) Alger gave Colby forty-five minutes to sign a stack of documents before leaving the room. (Colby Dep. 48:16-18.)
Colby claims he had just enough time to sign everything, but not enough time to read before signing. (Colby Dep. 46:6-16.) He did not ask for more time because, as he testified, "it was sign or leave." (Colby Dep. 47:13-14.) Garrett and Defendant Alger did not offer to answer any questions and no one asked questions. (Colby Dep. 48:19-23.) Colby admitted that he had no questions at the time the documents were presented. He testified that the legal jargon confused him. .) Colby claims that Alger would have looked down on anyone who asked for a copy of the Agreement. (Colby Dep. 61:15-22.) Colby interpreted Defendants Posner's and Alger's frequent statement that "if you are with us, then you're with us, and if you're not, you're not," to really mean that "you should do what management says or management will fire you." .)
Plaintiff Brian J. Smith, Jr. earned a bachelor's degree from Neumann College and sold insurance for Northwestern Mutual before quitting to work at New Day. (Smith Dep. 9:14; 10:14, 19; 25:20-21.) Smith worked for New Day for approximately fifteen to sixteen months. (Smith Dep. 24:1.)
Smith trained in Maryland during his first six to seven weeks before starting his employment in Pennsylvania. (Smith Dep. 26:10; 28:14-15.) Defendant Alger and Christina Akbari ("Akbari"), an employee in Defendant New Day's human resources department, presented the Arbitration Agreement to Smith and five or six other account executives in a conference room in the Pennsylvania office. (Smith Dep. 26:7-9.) Defendant Alger allegedly instructed the group to either sign the Arbitration Agreement or quit. (Smith Dep. 38:16-19.) Defendant Alger and Akbari allowed the group one-half hour to read and sign the Agreement. (Smith Dep. 39:6.) Smith claims that Defendant Alger described the Arbitration Agreement as favorable to the employees because they could settle any dispute with New Day without paying for an attorney. (Smith Dep. 41:15-17, 19-22.)3
On Plaintiff Matt Aden's first day of employment, he was placed in a room in Defendant New Day's Maryland office with other new employees....
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