McGrew v. VCG Holding Corp.

• Decision Date: 27 March 2017
• Docket Number: CIVIL ACTION NO. 3:16–CV–00397–TBR
• Parties: Melissa MCGREW, et al., Plaintiffs v. VCG HOLDING CORP., et al., Defendants
• Court: U.S. District Court — Western District of Kentucky

244 F.Supp.3d 580

Melissa MCGREW, et al., Plaintiffs

v.VCG HOLDING CORP., et al., Defendants

CIVIL ACTION NO. 3:16–CV–00397–TBR

United States District Court, W.D. Kentucky, Louisville Division.

Signed March 27, 2017

Harold L. Lichten, Thomas Fowler, Lichten & Liss–Rordan, PC, Boston, MA, Trent R. Taylor, Barkan Meizlish Handelman Goodin DeRose Wentz, Columbus, OH, for Plaintiffs.

Allan S. Rubin, Paul A. Caligiuri, Jackson Lewis, PC, Southfield, MI, Katharine C. Weber, Jackson Lewis PC, Cincinnati, OH, for Defendants.

Memorandum Opinion and Order

Thomas B. Russell, Senior Judge

Plaintiffs Melissa McGrew, Sarah Gunter, and Kristina Dunlap were all at one time exotic dancers at PT's Showclub in Louisville, Kentucky. They allege that Defendants, the club's owners and operators, misclassified them as independent contractors rather than employees, paid them less than minimum wage, and deducted certain fees and penalties from their paychecks, all in violation of federal and state law. On behalf of themselves and other similarly-situated dancers, Plaintiffs seek back pay, restitution, civil penalties, costs, and attorney's fees. Defendants contend that Plaintiffs' claims are all subject to arbitration on an individual, non-class basis because each Plaintiff signed multiple arbitration agreements while she was employed at PT's Showclub. In turn, Plaintiffs claim that the arbitration agreements are unenforceable because Plaintiffs were intoxicated when the agreements were executed, and because managers provided Plaintiffs with little or no time to read and consider the agreements.

Defendants filed the instant motion, asking this Court to dismiss Plaintiffs' suit pursuant to Federal Rule of Civil Procedure 12(b), or in the alternative, to compel arbitration of Plaintiffs' individual claims and to dismiss Plaintiffs' class and collective action claims. [DN 8.] Plaintiffs responded, [DN 17], and Defendants replied, [DN 26]. Fully briefed, this matter is ripe for adjudication. For the reasons that follow, the Court finds that Plaintiffs' claims are all subject to arbitration on an individual,non-class basis. Accordingly, Defendants' motion to compel arbitration and dismiss [DN 8] is GRANTED.

I. Facts and Procedural History

PT's Showclub is an adult entertainment venue located in Louisville, Kentucky. [DN 1 at 6.] Among other things, the "entertainment" includes performance by exotic dancers. [Id. ] At various times between 2004 and 2015, Plaintiffs Melissa McGrew, Sarah Gunter, and Kristina Dunlap worked as dancers at PT's Showclub. As a condition of their employment, Defendants required Plaintiffs to execute documents called "Entertainment Leases." The lease agreements vary somewhat in form, but each provides that Plaintiff is an independent contractor, and that all disputes between the parties must be resolved through binding arbitration on an individual, non-class basis.

Plaintiff McGrew began working at PT's Showclub in April 2004, and worked there intermittently through 2014. During her tenure, she executed six separate Entertainment Leases. See [DN 8–2 at 21, 39, 51, 59, 113, 128.]¹ Each lease agreement contained an arbitration provision identical or materially similar to the provision below, taken from McGrew's first agreement:

21. Arbitration/Attorney Fees and Costs/Waiver of Class Action.

ANY CONTROVERSY, DISPUTE, OR CLAIM ARISING OUT OF THIS LEASE OR OTHERWISE OUT OF ENTERTAINER PERFORMING AT THE PREMISES OF THE CLUB, SHALL BE EXCLUSIVELY DECIDED BY ARBITRATION UNDER THE FEDERAL ARBITRATION ACT, IN CONFORMITY WITH THE RULES AND PROCEDURES AS ESTABLISHED BY THE AMERICAN ARBITRATION ASSOCIATION AND AS MAY BE MODIFIED BY ANY STATE ARBITRATION ACT. Any judgment or award may be entered in any court having jurisdiction thereof.

Any judgment, order, or ruling arising out of a dispute between the parties shall award costs incurred for the proceedings and reasonable attorney fees to the prevailing party.

ENTERTAINER AGREES THAT ALL CLAIMS BETWEEN HER AND THE CLUB WILL BE LITIGATED INDIVIDUALLY AND THAT SHE WILL NOT CONSOLIDATE OR SEEK CLASS TREATMENT FOR ANY CLAIM. ENTERTAINER FURTHER AGREES NOT TO COMMENCE ANY ACTION, SUIT OR ARBITRATION PROCEEDING RELATING, IN ANY MANNER WHATSOEVER, TO THIS LEASE OR TO HER PERFORMING AT THE PREMISES OF THE CLUB, MORE THAN SIX MONTHS AFTER SHE LAST PERFORMED AT THE PREMISES, AND FURTHER AGREES TO WAIVE ANY STATUTE OF LIMITATIONS TO THE CONTRARY.

This paragraph 21 survives termination of this Lease.

[Id. at 23–24 (emphasis in original).] McGrew also signed a document entitled "BUSINESS STATUS SELECTION BY ENTERTAINER ," stating her preference to be treated as an "Independent Professional Entertainer" rather than an employee. [Id. at 12–14.]

Plaintiff Dunlap began working at PT's Showclub in 2010, signing her first Entertainment Lease on March 24 of that year. [Id. at 75.] Her last lease agreement is dated December 12, 2011. [Id. at 136.] Dancers at PT's are required to renew their leases on a yearly basis, so according to Defendants, Dunlap could not have worked at PT's more recently than 2012. [Id. at 5.] All told, Dunlap signed five lease agreements, each containing an arbitration provision. See [id. at 75, 86, 93, 102, 136.]²

Plaintiff Gunter signed three Entertainment Leases, on May 17, 2007, November 13, 2014, and April 16, 2015, respectively. [Id. at 31, 150, 160.]³ Each agreement contains an arbitration provision. The 2015 iteration of her agreement also contains clauses stating that "[t]he costs of arbitration shall be borne equally by the entertainer and the club unless the arbitrator concludes that a different allocation is required by law," [id. at 164 (emphasis removed) ] (the "cost-sharing provision"), and that "[a]ny ruling arising out of a claim between the parties shall, to the extent not precluded by law, award costs incurred for the proceedings, including reasonable attorney fees, to the prevailing party," [id. (emphasis removed) ] (the "fee-shifting provision"). Like McGrew, Gunter signed a form indicating her preference to be treated as an "Independent Professional Entertainer." [Id. at 16–18.]

Although Defendants classified Plaintiffs as independent contractors, Plaintiffs claim that as a matter of economic reality, they were in fact employees. See [DN 1 at 6–9.] Particularly, Plaintiffs state that Defendants set Plaintiffs' rate of pay and work schedules, told Plaintiffs how they must appear and dress while dancing, and exerted supervisory control over their performances. [Id. at 6–8.] Despite this control, Plaintiffs say, Defendants failed to pay Plaintiffs an hourly wage. [Id. at 8.] Instead, Plaintiffs were paid per dance. [Id. at 9.] Because of this payment scheme, and because Defendants deducted certain fees and penalties from Plaintiffs' paychecks, Plaintiffs' aver that their weekly compensation routinely fell below the federal and state minimum wage. [Id. ] Each Plaintiff claims that on multiple occasions, she worked thirty hours during a week but was paid only ten dollars. [Id. ]

On behalf of themselves and a proposed class of similarly-situated dancers, Plaintiffs filed the instant suit. All three Plaintiffs claim that Defendants violated certain provisions of Kentucky's wage-and-hour laws by deducting certain sums from their paychecks, paying them below the state minimum wage, requiring them to participate in illegal tip pools, and failing to pay them in full within eighteen days of their last working day. [Id. at 11–15.] Plaintiffs McGrew and Gunter further allege that Defendants violated the Fair Labor Standards Act by misclassifying them as independent contractors rather than employees and by compensating them below the federal minimum wage.⁴ [Id. at 12–13.] By virtue of Defendants' unlawful actions, Plaintiffs claim, they and their proposed class members are entitled to restitution, back pay, statutory damages, costs, and attorney's fees. [Id. at 16.]

In response, Defendants moved to compel arbitration and dismiss Plaintiffs' complaint. See [DN 8.] Their precise arguments are detailed below, but broadly, Defendants believe that Plaintiffs are bound by the arbitration provisions contained in their lease agreements. Plaintiffs responded, [DN 17], and Defendants replied, [DN 26]. Additionally, Plaintiffs filed a motion for leave to file a sur-reply, [DN 28], to which Defendants responded, [DN 29]. Plaintiffs' motion [DN 28] is GRANTED, and the Court will consider Plaintiffs' tendered sur-reply in ruling upon Defendants' motion to dismiss.

After Defendants' motion to compel arbitration and dismiss was fully briefed, but before the Court issued its ruling, Plaintiffs filed a motion for conditional certification of their proposed class under the FLSA. See [DN 31.] Defendants responded to Plaintiffs' conditional certification motion with a motion of their own, asking the Court to stay Plaintiffs' motion until the Court ruled upon Defendants' motion to compel arbitration and dismiss. See [DN 32.] After responses and replies, [DN 33; DN 34], this matter is ripe for adjudication.

II. Standard of Review

The Federal Arbitration Act provides that a written agreement to arbitrate disputes arising out a contract involving interstate commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. A party seeking to enforce an arbitration agreement may request that litigation be stayed until the terms of the arbitration agreement have been fulfilled. Id. § 3. Upon such application, "[t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." Id. § 4.

Before compelling arbitration, the Court "must engage in a limited review to determine whether the dispute is arbitrable."...