Pugh v. Lady Jane's Haircuts for Men Holding Co.
| Decision Date | 08 March 2023 |
| Docket Number | 3:22-cv-00556 |
| Parties | AUBRAY PUGH, OLIVIA LEES, and CASSIDY ELLIOTT, Plaintiffs, v. LADY JANE'S HAIRCUTS FOR MEN HOLDING COMPANY, LLC; LADY JANE'S MURFREESBORO TN, LLC; and LADY JANE'S NASHVILLE-COOL SPRINGS TN, LLC, MICHIGAN,[1] Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
Before the Court is the Motion to Dismiss or, In the Alternative Motion to Stay and Compel Arbitration (Doc. No. 13) filed by defendants Lady Jane's Haircuts for Men Holding Company LLC, Lady Jane's Murfreesboro TN, LLC (“Lady Jane's Murfreesboro”), and Lady Jane's Nashville-Cool Springs TN, LLC (“Lady Jane's Cool Springs”). (Doc. No. 13.) The plaintiffs do not dispute that they signed contracts containing arbitration provisions but they oppose the motion on the grounds that the underlying arbitration provisions are unenforceable. For the reasons that follow, the defendants' motion to dismiss for lack of subject matter jurisdiction will be denied, but the alternative motion to compel arbitration and stay the case pending such arbitration will be granted.
According to the Complaint initiating this action (Doc. No. 1), the defendants operate over ninety hair salons for men around the country, and they engage hairstylists to perform hairstyling services at these salons. The plaintiffs formerly were engaged as hairstylists at salons operated by Lady Jane's Murfreesboro and/or Lady Jane's Cool Springs. The Complaint alleges that each plaintiff signed an Independent Contractor Agreement (“ICA”) that characterizes them as independent contractors. The plaintiffs contend, however, that they were improperly characterized as independent contractors and were actually employees, as that term is defined by the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 203. All three plaintiffs bring claims for alleged violations of the FLSA's minimum wage and overtime pay provisions; plaintiff Pugh also asserts a claim for retaliatory termination in violation of the FLSA's anti-retaliation provision.
Rather than answering the Complaint, the defendants filed their Motion to Dismiss or, In the Alternative, Motion to Stay and Compel Arbitration and supporting Memorandum (Doc. Nos. 13, 13-1), along with the Declaration of Victoria Franz, the Director of Operations for all three defendants (Doc. No. 13-2). Attached to Franz's Declaration are copies of the ICAs signed by the plaintiffs, each of which contains a paragraph titled “Arbitration” (hereafter, “arbitration agreement” or “arbitration provision”) that (1) requires the plaintiffs and the defendants to use binding arbitration administered by the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules (“AAA Commercial Rules”) to pursue all covered claims, which are defined to include claims relating to the relationship between the parties to the agreement, claims for wrongful discharge and retaliation, and any claims related to wages, overtime, and other remuneration; (2) expressly states that both parties to the ICA waive their right to a jury trial; (3) states that the question of the arbitrability of any claim is to be addressed by the arbitrator; and (4) bars the arbitrator from combining the claims of more than one contractor in any single proceeding.
(Doc. No. 13-2, at 7-8, 14-15, 21-22 (ICA ¶ 11).) The arbitration agreement also provides that the presiding arbitrator “shall apply the substantive law that is applicable to the claims” and has “the power to award all remedies that could be awarded by a court or administrative agency under applicable statutory or common law.” (ICA ¶ 11.) The jury-trial waiver language is in bold-face type. (Id.)
On the basis of the arbitration provision in each plaintiff's IAC, the defendants move the court to dismiss the case for lack of subject matter jurisdiction or, alternatively, to stay the case and issue an order compelling each plaintiff to pursue individual arbitration of her claims. (Doc. No. 13; Doc. No. 13-1, at 2.) The defendants specifically assert that (1) the arbitration agreements are binding and enforceable under Tennessee law or Michigan law, are supported by evidence of an explicit offer and acceptance, consideration, and mutual assent, and clearly apply to the FLSA wage-related and retaliation claims raised in the Complaint; (2) courts within the Sixth Circuit have repeatedly held that FLSA claims may be subject to arbitration; and (3) the plaintiffs clearly waived their right to bring a collective action in one lawsuit or a single arbitration. The defendants further contend that the court should dismiss the Complaint with prejudice. Alternatively, they ask the court to compel arbitration and stay this case pending resolution of the arbitration proceedings.
The plaintiffs, in response, do not deny that they each signed an IAC that contains an arbitration provision. Instead, they argue that the arbitration provision is unenforceable under state law for a variety of reasons, but particularly, because the AAA Commercial Rules incorporate a “cost-splitting rule” that would effectively require the plaintiffs to bear one-half of the costs of arbitration. They contend that the cost-splitting rule was not disclosed to the plaintiffs and has a “chilling effect on vindicating federal rights.” (Doc. No. 18, at 1.) They also argue that, because this cost-splitting requirement was not disclosed to the plaintiffs, there was no mutual assent and meeting of the minds necessary for the formation of a binding contract to arbitrate and that the provision is unconscionable and fails for lack of consideration. They also argue that the IACs are contracts of adhesion that contain other unreasonably harsh terms and, consequently, that the IACs as a whole are unenforceable. They also ask that, if the court compels arbitration, it stay this case instead of dismissing it in its entirety.
The defendants filed a Reply (Doc. No. 24), asserting that the plaintiffs mischaracterize the AAA Commercial Rules and fail to show that arbitration would be prohibitively expensive. Alternatively, they argue that the court can sever any cost-splitting provision. They also dispute the plaintiffs' contention that the arbitration agreement lacks mutual assent or consideration or that it is procedurally or substantively unconscionable.
The Federal Arbitration Act (“FAA”) allows parties to a “contract evidencing a transaction involving commerce” to agree that certain disputes between them arising from such “contract or transaction” will be decided by an arbitrator rather than by a court. 9 U.S.C. § 2. Described by the Supreme Court as the “primary substantive provision” of the FAA, Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), Section 2 further provides that any such agreement to arbitrate “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. This section embodies “a liberal federal policy favoring arbitration.” AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Moses H. Cone, 460 U.S. at 24). The principal purpose of the FAA is to ensure the enforcement of private arbitration agreements according to their terms. The broader purpose of allowing parties to submit grievances to arbitration is to facilitate “efficient, streamlined procedures tailored to the type of dispute” at issue. Id. at 344 (citations omitted); see also Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000) (“The FAA was designed to override judicial reluctance to enforce arbitration agreements, to relieve court congestion, and to provide parties with a speedier and less costly alternative to litigation.”).
At the same time, despite this liberal federal policy favoring arbitration agreements, arbitration is a “matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT & T Techs. v. Commc'ns Workers of Am., 475 U.S. 643, 648 (1986); see also GGNSC Louisville Hillcreek, LLC v. Estate of Bramer, 932 F.3d 480, 485 (6th Cir. 2019) (). When considering a motion to compel arbitration, a district court must determine, as a threshold matter, if the parties agreed to arbitrate. McGee v. Armstrong, 941 F.3d 859, 865 (6th Cir. 2019); Stout, 228 F.3d at 714. The court must “use state law to assess the existence of an agreement.” GGNSC Louisville, 932 F.3d at 485 (citations omitted).
Each IAC contains a clause that states: “Except as provided under Section 11 of this Agreement [the arbitration clause], this Agreement shall be governed by the laws of the State of Michigan without reference to principles of conflict of laws.” (See IAC ¶ 8, Doc. No. 13-2, at 6.) The defendants assert, without highlighting any distinction between Michigan and Tennessee contract law, that the arbitration provisions are enforceable under the laws of both states. (See Doc. No. 13-2, at 9, 10.) Although they cite to two Michigan state court cases, the defendants' Memorandum relies primarily on federal and Tennessee law.
In the absence of any indication of a “real conflict between or among the relevant laws of the various states,” Gov't Employees Ins. Co. v. Bloodworth, No M2003-02986-COAR10CV, 2007 WL 1966022, at *29 (Tenn. Ct. App. June 29, 2007), the court finds it unnecessary to conduct a conflict-of-laws analysis. That is, while the choice of law rules of Tennessee, as the forum state, would apply to resolve whether Michigan's or Tennessee's laws apply to this case, “a conflict between the laws of...
To continue reading
Request your trial