Johnson v. Long John Silver's Restaurants, Inc.

Decision Date07 June 2004
Docket NumberNo. 3:01-1526.,3:01-1526.
Citation320 F.Supp.2d 656
PartiesKevin JOHNSON, on behalf of himself and all others similarly situated, Plaintiff, v. LONG JOHN SILVER'S RESTAURANTS, INC., Defendant.
CourtU.S. District Court — Middle District of Tennessee

Morris Reid Estes, Jr., Tanya B. Spavins, Stewart, Estes & Donnell, Nashville, TN, for Kevin Johnson, on behalf of himself and all others similarly-situated, plaintiff.

John K. Walkup, Wyatt, Tarrant & Combs, Nashville, John F. Dienelt, Piper, Marbury, Rudnick & Wolfe, LLP, Washington, DC, for Long John Silver's Restaurants, Inc., defendant.

MEMORANDUM

WISEMAN, District Judge.

Pending before the Court are the following four motions: Defendant Long John Silver's Inc.'s ("Defendant" or "LJS") Motion to Compel Arbitration (Doc. No. 27-1), Defendant's Motion for Stay of this Litigation (Doc. No. 27-2), Plaintiff Kevin Johnson's ("Plaintiff" or "Mr. Johnson") Motion to Rescind Defendant's Arbitration Agreements (Doc. No. 68-1), and Plaintiff's Motion for a Case Status Conference (Doc. No. 135). Before addressing these motions, the Court will first provide an overview of the procedural posture of this case.

I. Procedural Background

Mr. Johnson alleges that LJS violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216(b). Mr. Johnson worked as an Assistant General Manager and as a General Manager for LJS in Missouri from September 1998 through November 2000. During that time, Plaintiff was classified as an executive employee and was therefore exempt from the FLSA overtime pay requirements. However, as a condition of his employment, Plaintiff was required to comply with LJS's Restitution Policy. Under the Restitution Policy, any employee found responsible for a money or property loss was required to reimburse LJS through a payroll deduction. Plaintiff filed this suit, on behalf of himself and other unnamed plaintiffs, alleging that Defendant's restitution policy violated the FLSA.

At some point near the beginning of this litigation, LJS informed Mr. Johnson, through his attorney, that he had signed an agreement to arbitrate as a condition of his employment. (April 16, 2004 Hr'g at 37-38.) As a result, the parties began settlement negotiations and entered a joint stay and tolling agreement, providing that the statute of limitations would be tolled with respect to all putative class members.1 (Doc. No. 6.) Settlement talks failed, but the tolling agreement remained in place. At the Initial Case Management Conference, the Magistrate Judge determined that the principle issue before the Court was whether arbitration should be compelled. (Doc. No. 26.) The Magistrate Judge stayed all discovery, except that relating to the arbitration issue. Likewise, the Magistrate Judge concluded that the Court would not take up any issues regarding court supervised notice to class members until the arbitration issue had been resolved, reasoning that no prejudice to the class would result because of the tolling agreement.

As the litigation in this Court continued, Plaintiff's counsel filed the same complaint, but with different named plaintiffs, before the American Arbitration Association and requested a class arbitration (Erin Cole and Nick Kauffman, et al. v. Long John Silver's, Inc, et al.). This Court then held a Status Conference in the original lawsuit. LJS represented to the Court that it had requested AAA to stay arbitration pending the outcome of the case in Federal court, but the AAA took the position that, in the absence of an agreement between the parties, it would proceed with arbitration. (February 24, 2004 Hr'g at 3.) The Court noted the contradictory nature of Plaintiff's position, both resisting arbitration in this Court and then requesting arbitration with the AAA, but ultimately concluded that this Court had no power to enjoin the AAA and that this Court would retain the case and determine whether Mr. Johnson entered into an agreement to arbitrate. (Feb. 24 Hr'g at 2, 16-17, 28.) The Court held a hearing on April 16, 2004 to resolve the question, which will now be addressed below.

II. Defendant's Motion to Compel

Defendant's Motions to Compel and to Stay Litigation and Plaintiff's Motion to Rescind Defendant's Arbitration Agreements all can be decided with the resolution of one issue. The issue is whether Mr. Johnson entered into a contract with LJS to arbitrate his claims. See Burden v. Check Into Cash of Kentucky, LLC, 267 F.3d 483, 487 (6th Cir.2001) ("Under the FAA, a district court's consideration of a motion to compel arbitration is limited to determining whether the parties entered into a valid agreement to arbitrate, and does not reach the merits of the parties' claims"); Fazio v. Lehman Bros., 340 F.3d 386 (6th Cir.2003) (appropriate areas of inquiry for a district court include whether the parties agreed to arbitrate, including any neutral basis for invalidating an arbitration agreement, and whether Congress intended the claim to be nonarbitrable). When analyzing a Motion to Compel Arbitration, a court must consider whether the statutory claim is generally subject to arbitration. Floss v. Ryan's Family Steak Houses, Inc., 211 F.3d 306, 311 (6th Cir.2000). If the statutory claim is subject to arbitration, a court then considers whether the parties have executed a valid arbitration agreement and, if so, whether the claim falls within the scope of that agreement. Id. at 311-312.

A. FLSA Claims Are Generally Subject to Arbitration

The Federal Arbitration Act ("FAA") provides that a contractual provision to arbitrate is valid and enforceable, unless "such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. It is now well settled that "statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). However, not all statutory claims are amenable to mandatory arbitration; Congress may mandate a judicial forum or there may be an inherent conflict between arbitration and the underlying purposes of the statute. See id.

The Sixth Circuit recently considered a case factually similar to this one, where the issue was whether to compel arbitration in an FLSA case. See id. at 309. The Sixth Circuit, in addressing an agreement to arbitrate in a FLSA case, found the arbitration agreement invalid for vagueness, but discussed whether FLSA claims could be subject to arbitration generally. See Floss, 211 F.3d at 313. The Court stated:

Though a claim under the FLSA certainly serves a purpose beyond providing relief to an individual claimant, we fail to see how the broader policies furthered by such a claim are hindered when that claim is resolved through arbitration ... [there is] no compelling reason for drawing a distinction between these statutes [that the Supreme Court has already held are subject to arbitration] and the FLSA.

Id. at 313.2 At least three other Federal Courts of Appeals have subjected FLSA claims to arbitration. See, e.g. Adkins v. Labor Ready, Inc., 303 F.3d 496, 506 (4th Cir.2002) (finding that FLSA claims can properly be resolved in mandatory arbitration proceedings); Bailey v. Ameriquest Mortgage Co., 346 F.3d 821 (8th Cir.2003) (same); Horenstein v. Mortgage Market, Inc., 9 Fed.Appx. 618, 619, 2001 WL 502010 at *2 (9th Cir.2001) (same).

Nowhere in the FLSA does Congress mandate a judicial forum. Moreover, the Sixth Circuit stated in Floss that FLSA claims can be resolved by arbitration. Therefore, the Court finds that the claim in this case is subject to arbitration.

B. The Existence of a Contract

When a statutory claim is not exempt from arbitration, a court must consider whether the parties have executed a valid arbitration agreement and, if so, whether the claim falls within the scope of that agreement. Floss, 211 F.3d at 311-312. Neither party contests that a FLSA claim falls within the scope of the Agreement. In order to determine whether there is a valid agreement to arbitrate, courts employ traditional principles of state contract law. See 9 U.S.C. § 2. Because the outcome of this issue is so fact specific, the Court will next set forth the proof offered at the April 16, 2004 hearing.

i. Proof at April 16, 2004 Hearing

The facts are relatively simple and undisputed. When Mr. Johnson was hired by LJS and continuing through the present, LJS required all employees to submit employment disputes to arbitration. A booklet describing the dispute resolution program, the Real Resolution Solution Program ("RRSP") was contained in a packet of materials given to new employees. (See Def.'s Mot. to Compel, Attach Ex. A-1 ("Booklet"), at 1.) Deborah Siewing, the district manager who hired Mr. Johnson, testified that the RRSP was contained in the policies and procedures manual, a copy of which is located in every restaurant. At the back of the RRSP booklet, there was a tear-out Real Resolution Solution Agreement ("RRSA") with a signature line acknowledging the terms of the RRSP. Every employee was required to sign the RRSA; LJS, however, has been unable to produce an agreement signed by Mr. Johnson.

Mr. Johnson testified that he submitted an application for employment to LJS and was hired as an assistant manager during a telephone interview by Ms. Siewing. Mr. Johnson testified that he later met Ms. Siewing at the `Parker Road' LJS restaurant to "fill out some paperwork." (Apr. 16 Hr'g at 7.) The meeting took place during normal business hours and lasted approximately twenty minutes. Ms. Siewing testified that her standard orientation procedure was inter alia to open the package of new employee materials, provide an overview of the documents, ask the employee to read and review the forms, leave the employee to complete the forms, return and confirm that all forms were completed and signed, and finally to provide the...

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