Coronado ex rel. Situated v. D N. W. Hous., Inc., CIVIL ACTION NO. H-13-2179

PAULITA CORONADO, JURATE KOPECKY, and ENID LOPEZ,Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. D N. W. HOUSTON, INC. D/B/A/ GOLD CUP, W.L. YORK, INC. D/B/A COVERGIRLS, D. HOUSTON, INC. D/B/A TREASURES, A.H.D HOUSTON, INC.D/B/A CENTERFOLDS, ALI DAVARI, AND HASSAN DAVARI, Defendants.

CIVIL ACTION NO. H-13-2179

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

September 30, 2015

MEMORANDUM AND OPINION

The defendants have moved to require 34 of the plaintiffs to arbitrate their FLSA claims because they signed agreements to do so after this suit began. (Docket Entry No. 112). The plaintiffs have responded to the motion to compel, (Docket Entry Nos. 121), and the defendants and intervenors have replied, (Docket Entry Nos. 126). Based on the pleadings, the motions and responses, the parties' arguments, the record, and the applicable law, the court denies the motion to compel arbitration as to 33 of the plaintiffs but grants it as to the one plaintiff who signed a different and enforceable arbitration agreement. The reasons for these rulings are set out below.

I. Background

Paulita Coronado, a dancer at the Gold Cup and Cover Girls Clubs, sued each club and their owners and managers, Ali and Hassan Davari, under 29 U.S.C. §§ 201-219. The two cases were consolidated. (Docket Entry Nos. 1, 24, 31). Two months later, in September 2014, Coronado added two additional clubs, the Davaris owned, Treasures and Centerfolds, as defendants. (Docket Entry No. 91). Coronado alleged that the defendants misclassified her and other dancers as independent contractors rather than as employees and failed to pay federally required wages for the hours they worked. The complaint sought collective-action certification of the following class:

[C]urrent and former exotic entertainers who worked at Gold Cup at any time during the three years before this Complaint was filed up to the present.

(Docket Entry No. 1). The parties agreed to conditional certification and issuance of notice as to the FLSA misclassification and underpayment claims. (Docket Entry No. 27).

Beginning on April 3, 2013, the defendants required dancers to sign a Dancer License and Access Agreement (the "Agreement"). (Docket Entry No. 112, Ex. A). Thirty-three of the plaintiffs signed this Agreement after the lawsuit was filed.¹ (Docket Entry No. 112, Exs. C-K, M-JJ). The Agreement contains the following arbitration provisions:

11. THE DANCER SHALL INDEMNIFY, HOLD HARMLESS AND PAY FOR COVER GIRLS'S DEFENSE FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES OR LIABILITY, INCLUDING ATTORNEYS' FEES, ARISING FROM OR RELATED TO THE DANCER'S RELATIONSHIP WITH COVER GIRLS, INCLUDING LIABILITY ARISING FROM COVER GIRLS'S OWN NEGLIGENCE

12. THIS DANCER LICENSE AND ACCESS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION AND CLASS ACTION WAIVER WHICH AFFECTS YOUR LEGAL RIGHTS. THESE CONDITIONS ARE CONDITIONS TO THE AGREEMENT, WHICH WILL NOT BE REACHED ABSENT YOUR CONSENT AND AGREEMENT TO BOTH PROVISIONS.

13. THE PARTIES, D. N.W. HOUSTON D/B/A GOLD CUP AND THE DANCER WHOSE NAME IS SET FORTH BELOW, AGREE AND COVENANT THAT ANY AND ALL DISPUTES, CLAIMS, OR CONTROVERSIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY MATTER RELATED TO ALLEGED EMPLOYMENT, INDEPENDENT CONTRACTOR, TERMS OF CONDITIONS OF SERVICE OR EMPLOYMENT, OR COMPLIANCE WITH THE FAIR LABOR STANDARDS ACT (THE "FLSA") SHALL BE SUBMITTED TO THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA") OR ITS SUCCESSOR, FOR MEDIATION, AND IF THE MATTER IS NOT RESOLVED THROUGH MEDIATION, THEN IT SHALL BE SUBMITTED TO THE AAA OR ITS SUCCESSOR, FOR FINAL AND BINDING ARBITRATION PURSUANT TO THE ARBITRATION CLAUSE SET FORTH ABOVE . . . EITHER PARTY MAY INITIATE ARBITRATION AT ANY TIME FOLLOWING THE INITIAL MEDIATION SESSION OR 45 DAYS AFTER THE DATE OF FILING THE WRITTEN REQUEST FOR MEDIATION, WHICHEVER OCCURS FIRST . . .

14. ARBITRATION SHALL PROCEED SOLELY ON AN INDIVIDUAL BASIS WITHOUT THE RIGHT FOR ANY CLAIMS TO BE ARBITRATED ON A COLLECTIVE OR CLASS ACTION BASIS OR ON BASES INVOLVING CLAIMS BROUGHT IN A PURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF OTHERS. THE ARBITRATOR'S AUTHORITY TO RESOLVE AND MAKE WRITTEN AWARDS IS LIMITED TO CLAIMS BETWEEN YOU AND W.L. YORK, INC. D/B/A COVER GIRLS ALONE. CLAIMS MAY NOT BE JOINED OR CONSOLIDATED UNLESS AGREED TO IN WRITING BY ALL PARTIES. NO ARBITRATION AWARD OR DECISION WILL HAVE ANY PRECLUSIVE EFFECT AS TO ISSUES OR CLAIMS IN ANY DISPUTE WITH ANYONE WHO IS NOT A NAMED PARTY TO THE ARBITRATION. THE DANCER WHOSE NAME APPEARS BELOW KNOWINGLY AND AFFIRMATIVELY WAIVES ANY RIGHT TO PARTICIPATE IN ANY COLLECTIVE ACTION OR CLASS ACTION COMMENCED OR TO BE COMMENCED IN ANY COURT OF LAW CONCERNING ANY CLAIMS RELATED TO THIS AGREEMENT, TO HER RELATIONSHIP TO COVER GIRLS AS A LICENSEE, OR OTHERWISE AS TO HER LEGAL RELATIONSHIP WITH COVER GIRLS.

(Docket Entry No. 112, Ex. A).

After May 14, 2014, the defendants required all dancers to sign a New Dancer License and Access Agreement (the "New Agreement"). (Docket Entry No. 112, Ex. B). Only one of the plaintiffs signed this New Agreement.² (Docket Entry No. 112, Ex. L). The New Agreement contains the following provisions:

12. THE DANCER SHALL INDEMNIFY, HOLD HARMLESS AND PAY FOR CENTERFOLDS' DEFENSE FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES OR LIABILITY, INCLUDING ATTORNEYS' FEES, ARISING FROM OR RELATING TO THIS AGREEMENT OR THE DANCER'S RELATIONSHIP WITH CENTERFOLDS, INCLUDING LIABILITY ARISING FROM CENTERFOLDS' OWN NEGLIGENCE.

13. ARBITRATION POLICY.

(A) THE PARTIES AGREE THAT ANY AND ALL COVERED DISPUTES, CLAIMS AND CONTROVERSIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND/OR ANY MATTER RELATED TO ALLEGED EMPLOYMENT, ALLEGED TERMS OR CONDITIONS OF EMPLOYMENT, OR ANY ALLEGED RELATIONSHIP OTHER THAN THAT OF A LICENSEE THAT THE DANCER MAY HAVE AGAINST CENTERFOLDS, ITS OWNERS, DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES, OR AGENTS (HEREINAFTER COLLECTIVELY REFERRED TO AS "CENTERFOLDS") OR THAT CENTERFOLDS MAY HAVE AGAINST THE DANCER SHALL BE SUBMITTED EXCLUSIVELY TO AND DETERMINED EXCLUSIVELY BY BINDING ARBITRATION UNDER THE FEDERAL ARBITRATION ACT, 9 U.S.C. § 1 ET SEQ. ("FAA") . . .

(B) "COVERED DISPUTES, CLAIMS, AND CONTROVERSIES" INCLUDE, BUT ARE NOT LIMITED TO, ANY AND ALL DISPUTES, CLAIMS AND CONTROVERSIES THAT AROSE BEFORE AND/OR AFTER THIS ARBITRATION POLICY WENT INTO EFFECT, ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT ("ADEA"), TITLE VII OF THE CIVIL RIGHTS ACT OF 1964 ("TITLE VII"), THE AMERICANS WITH DISABILITIES ACT ("ADA"), THE FAMILY AND MEDICAL LEAVE ACT ("FMLA"), THE FAIR LABOR STANDARDS ACT ("FLSA"), 42 U.S.C. § 1981, INCLUDING AMENDMENTS TO ALL THE FOREGOING STATUTES . . .

(C) ANY AND ALL COVERED DISPUTES, CLAIMS, AND CONTROVERSIES SHALL BE SUBMITTED TO THE AMERICAN ARBITRATION FOR ASSOCIATION (THE "AAA"), OR ITS SUCCESSOR, INITIALLY FOR MEDIATION, THEN IT SHALL BE SUBMITTED TO THE AAA, OR ITS SUCCESSOR, FOR FINAL AND BINDING ARBITRATION . . .

(E) EITHER PARTY MAY INITIATE ARBITRATION WITH RESPECT TO THE MATTERS SUBMITTED TO MEDIATION BY FILING A WRITTEN DEMAND FOR ARBITRATION AT ANY TIME FOLLOWING THE INITIAL MEDIATION SESSION OR 45 DAYS AFTER THE DATE OF FILING THE WRITTEN REQUEST FOR MEDIATION, WHICHEVER OCCURS FIRST . . .

. . .

(I) THE PROVISIONS OF THIS ARBITRATION POLICY MAY BE ENFORCED BY ANY COURT OF COMPETENT JURISDICTION. IF ANY TERM OR PROVISION, OR PORTION OF THIS ARBITRATION POLICY IS DECLARED VOID OR UNENFORCEABLE, IT SHALL BE SEVERED AND THE REMAINDER OF THIS ARBITRATION POLICY SHALL BE ENFORCEABLE. THIS ARBITRATION POLICY MAY BE MODIFIED, IN WHOLE OR IN PART, OR TERMINATED BY CENTERFOLDS ONLY AFTER CENTERFOLDS PROVIDES AT LEAST 30 DAYS WRITTEN NOTICE OF SUCH MODIFICATION OR TERMINATION TO THE DANCER, AND ONLY WITH RESPECT TO CLAIMS SUBMITTED UNDER THE POLICY WHICH ARE RECEIVED AFTER THE EFFECTIVE DATE OF SUCH MODIFICATION OR TERMINATION.

14. WAIVER OF CLASS OR COLLECTIVE CLAIMS.

ARBITRATION SHALL PROCEED SOLELY ON AN INDIVIDUAL BASIS WITHOUT THE RIGHT FOR ANY COVERED DISPUTES, CLAIMS AND CONTROVERSIES TO BE ARBITRATED ON A COLLECTIVE OR CLASS ACTION BASIS OR ON BASES INVOLVING CLAIMS BROUGHT IN A PURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF OTHERS . . .

15. CENTERFOLDS AND THE DANCER AGREE THAT IF, UPON ANY RULING OR DECISION OF AN ARBITRATOR, COURT OR OTHER TRIBUNAL WITH JURISDICTION OVER THE MATTER THAT THE RELATIONSHIP BETWEEN CENTERFOLDS AND THE DANCER IS ONE OF EMPLOYER AND EMPLOYEE, THE DANCER SHALL SURRENDER, REIMBURSE AND PAY TO CENTERFOLDS ALL MONEY RECEIVED BY THE DANCER AT ANY TIME SHE PERFORMED ON THE PREMISES OF CENTERFOLDS. . . .

(Docket Entry No. 112, Ex. B).

The defendants moved to dismiss the 34 plaintiffs' FLSA claims and compel arbitration under 9 U.S.C. § 4. (Docket Entry No. 112). The plaintiffs responded, and the defendants replied. (Docket Entry No. 121, 126).

II. The Legal Standard

The parties agree that the arbitration Agreements are subject to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. The defendants moved to compel arbitration under § 4 of the FAA, which provides that, when a party petitions the court to compel arbitration under a written arbitration agreement, "[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." 9 U.S.C. § 4. The FAA "leaves no place" for the court to exercise discretion. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). The court must order the parties to arbitrate issues covered by a valid arbitration agreement. Id.

A court first determines whether the parties agreed to arbitrate the dispute, which in turn requires two separate determinations: "'(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within...