Leonard v. Del. N. Cos. Sport Serv.

• Decision Date: 11 July 2016
• Docket Number: Case No. 4:15 CV 1356 CDP
• Parties: MATTHEW LEONARD, On behalf of himself and all others similarly situated, Plaintiff, v. DELAWARE NORTH COMPANIES SPORT SERVICE, INC., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

MATTHEW LEONARD,On behalf of himself and all others similarly situated, Plaintiff, v. DELAWARE NORTH COMPANIES SPORT SERVICE, INC., Defendants.

Case No. 4:15 CV 1356 CDP

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

July 11, 2016

MEMORANDUM AND ORDER

Plaintiff Matthew Leonard worked at a concession stand owned and operated by defendant Delaware North Companies Sportservice, Inc.,¹ during one baseball game at Busch Stadium. Leonard alleges that although at the time he believed he was serving as a volunteer to raise money for Washington University in St. Louis, he now knows that he should have been compensated as an employee in accordance with the Fair Labor Standards Act and Missouri's statutory minimum wage laws. Before he began the work, Leonard signed a Volunteer Release, Waiver and Indemnification Agreement in which he agreed to submit any dispute arising from his concession stand activities to binding arbitration. DNCShas filed a motion to enforce the arbitration agreement, compel individual arbitration of Leonard's claims, and dismiss this case. After careful consideration, I conclude that the arbitration agreement signed by Leonard is enforceable and that all of his claims in this case are encompassed by that agreement. Therefore, I will grant DNCS' motion to compel and will dismiss Leonard's case without prejudice.

Background

DNCS is a for-profit New York corporation with its principal place of business in Buffalo, New York. A subsidiary of DNCS operates concessions at Busch Stadium in St. Louis, Missouri. On May 8, 2013, Leonard executed a Volunteer Release, Waiver and Indemnification Agreement that stated, in part, as follows:

NOTICE: By signing this Volunteer Release, Wavier, and Indemnification Agreement (the "Agreement"), you waive certain legal rights, including the right to sue. In consideration for being allowed to participate in certain volunteer fund raising and labor activities (the "Activity") at or around Busch Stadium in St. Louis, the Participant agrees as follows:

[ . . . ]

5) ARBITRATION. I agree to submit any dispute arising from the activity to binding arbitration. Each party shall pay its own costs. Arbitration shall be commenced within one (1) year after the date on which any alleged claim first arose. The arbitration proceeding shall proceed exclusively in St. Louis, MO.

6) MISCELLANEOUS. In entering into this Agreement, I am not relying upon any oral or written representations other than what is set forth in this Agreement. The invalidity of any provision of this Agreement shall not affect the enforceability or effectiveness ofany other provision. [ . . . ]

I HAVE READ AND UNDERSTAND THIS AGREEMENT AND I AM AWARE THAT BY SIGNING THIS AGREEMENT I MAY BE WAIVING CERTAIN LEGAL RIGHTS, INCLUDING THE RIGHT TO SUE.

On May 30, 2013, Leonard, along with other volunteers from Washington University, staffed the DNCS concessions stand at Busch Stadium and raised $1,096.57, which was paid by DNCS or its subsidiary to the University. In addition, Leonard and the other volunteers received free admission to Busch Stadium and a free meal during the game.

Based on these activities, Leonard filed a lawsuit against DNCS in Missouri state court. DNCS removed the case to federal court.

In this lawsuit Leonard claims that DNCS improperly treated him as a volunteer when he should have been treated, and compensated as, an employee. He brings his claims as a collective action under the Fair Labor Standards Act and as a class action under Rule 23, Fed. R. Civ. P. He asserts that DNCS often staffs its concessions stands at Busch Stadium with "volunteers" who work to raise money for various non-profit organizations, but who should legally be treated as employees and paid an hourly wage. In Count I Leonard asserts a claim for failure to pay minimum wages under Section 6 of the FLSA. Count II alleges violations of Missouri's minimum wage law. In Count III Leonard brings a claim for unjust enrichment, and in Count IV he asserts a claim for fraud.

At issue now is DNCS's motion to compel arbitration and dismiss this case based on the arbitration provision contained in the agreement set out above.

Legal Standards

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., "establishes a liberal federal policy favoring arbitration." Torres v. Simpatico, Inc., 781 F.3d 963, 968 (8th Cir. 2015) (quoting AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)). "[T]he FAA limits a district court's initial role in any challenge to an arbitration agreement to deciding whether 'the making of the agreement for arbitration or the failure to comply therewith' is at issue." MedCam, Inc. v. MCNC, 414 F.3d 972, 974 (8th Cir. 2005) (quoting 9 U.S.C. § 4). The Court must ask "1) whether the agreement for arbitration was validly made and 2) whether the arbitration agreement applies to the dispute at hand, i.e., whether the dispute falls within the scope of the arbitration agreement." Id.; see also Torres, 781 F.3d at 968.

"Because 'arbitration is a matter of contract,' whether an arbitration provision is valid is a matter of state contract law, and an arbitration provision may be 'invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.'" Torres, 781 F.3d at 968 (quoting Concepcion, 563 U.S. at 339) (internal quotations omitted).Under Missouri law, "arbitration agreements are tested through a lens of ordinary state-law principles that govern contracts, and consideration is given to whether the arbitration agreement is improper in light of generally applicable contract defenses . . . such as fraud, duress, or unconscionability." Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 515 (Mo. 2012) (internal citation omitted). "If a valid and enforceable arbitration agreement exists under state-law contract principles, any dispute that falls within the scope of that agreement must be submitted to arbitration." Torres, 781 F.3d at 968-69 (citing Faber v. Menard, 367 F.3d 1048, 1052 (8th Cir. 2004)).

An arbitration agreement's scope is interpreted liberally, with any doubts resolved in favor of arbitration. MedCam, 414 F.3d at 975. A district court should compel arbitration "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. (internal quotations omitted).

Discussion

Leonard argues the arbitration agreement is invalid and does not apply to his claims. Section 2 of the FAA allows arbitration agreements to be invalidated by generally applicable contract defenses. Concepcion, 563 U.S. at 339; see also 9 U.S.C. § 2. Leonard asserts that the arbitration agreement here is invalid because itis unconscionable under Missouri law² and lacks legal consideration required for the formation of a contract.

Following the United States Supreme Court's decision in Concepcion and the Missouri Supreme Court's decision in Brewer v. Missouri Title Loans, 364 S.W.3d 486 (Mo. 2012), courts in Missouri reviewing an arbitration agreement for unconscionability must focus on alleged unconscionability occurring at contract formation. The United States Court of Appeals for the Eighth Circuit explained the new standard established by these cases in Torres, 781 F.3d at 968-69. The Eighth Circuit explained:

Missouri courts have traditionally viewed unconscionability in the context of procedural unconscionability, i.e., the formalities of making the contract, and substantive unconscionability, i.e., the terms set forth in the contract. But because Concepcion "dictate[d] a review" limited to "whether state law defenses such as unconscionability impact the formation of a contract," the court's analysis would no longer focus on the traditional distinction between procedural and substantive unconscionability and would instead be "limited to a discussion of facts relating to unconscionability impacting the formation of the contract." Brewer v. Missouri Title Loans, 364 S.W.3d 486, 492 n. 3 (Mo. 2012) (emphasis in original). The [Brewer] court went on to instruct that in future cases, Missouri courts "shall limit review of the defense of unconscionability to the context of its relevance to contract formation." Id.

Nevertheless, the Brewer court also noted that "the purpose of the unconscionability doctrine is to guard against one-sided contracts, oppression [,] and unfair surprise," which may "occur during the bargaining process" or when a later dispute reveals "the objectively unreasonable terms." Id. at 492-93. Thus, courts may be called uponto "consider whether the terms of an arbitration agreement are unduly harsh," that is, "whether the contract terms are so one-sided as to oppress or unfairly surprise an innocent party or . . . reflect an overall imbalance in the rights and obligations imposed by the contract at issue." Id. at 489 n. 1. In either event, the court reasoned, "it is at formation that a party is required to agree to the objectively unreasonable terms." Id. at 493.

Id. Although Brewer provided that unconscionability review should be limited to the contract formation stage, that court proceeded to review the substantive terms of the arbitration agreement to determine whether they were so objectively unreasonable that "no person in his senses and not under delusion" would agree to them. Id. at 495. And the Missouri Supreme Court has recently held that a court should look at both the procedural and substantive aspects to determine whether, "considered together, they make the agreement or provision in question unconscionable." Eaton v. CMH Homes, Inc., 461 S.W.3d 426, 433 (Mo. 2015).

Leonard argues that the arbitration provision is procedurally unconscionable because he was never given an opportunity to consult an attorney or negotiate the agreement's terms...