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Herzfeld v. 1416 Chancellor, Inc.

United States District Court, E.D. Pennsylvania

July 22, 2015

JESSICA HERZFELD, on behalf of herself and all others similarly situated
1416 CHANCELLOR, INC. d/b/a THE GOLD CLUB, and DOES 1 through 10, inclusive.


MARK A. KEARNEY, District Judge.

Compelling parties to arbitrate wage collective and class action claims requires evidence of an arbitration clause covering the claims which is not procedurally and substantively unconscionable. Although Plaintiff began performing as an exotic dancer at Defendant's location in 2006, Defendant can now only produce a 2013 agreement which includes an arbitration clause. After discovery, extensive briefing and oral argument, we conclude there is no clear and convincing evidence of an arbitration agreement between these parties before 2013. The 2013 arbitration clause facially governs a wage dispute between "both" signatories after August 30, 2013. Based on facts developed in court-ordered discovery, however, we cannot enforce this 2013 arbitration clause. The 2013 arbitration clause is substantively unconscionable as it eliminates Plaintiff's ability to pursue a statutory collective action and class action in arbitration as a matter of law and, most telling, does so without an express waiver or even a mention of representative actions from which a court may imply notice and waiver. Plaintiff also adduced enough evidence of procedural unconscionability to invalidate the arbitration clause including a "take-it-or-leave-it" requirement to be signed one night seven years into the relationship between parties of significantly disparate bargaining position after Plaintiff already paid to use the Defendant's stage. Upon close examination of the issues of law and finding no genuine issue of material fact relating to the controlling questions of law, we deny Defendant's motion to compel arbitration in the accompanying Order.

I. Undisputed Material Facts [1]

While attending college from sometime in 2006 until April 2014, Plaintiff Jessica Herzfeld performed as an exotic dancer at the Gold Club in Philadelphia, owned by Defendant 1416 Chancellor, Inc. ("Gold Club") (ECF Doc. No. 41-5, p. 5, No. 44-5, p.2).

Plaintiff begins performing at the Gold Club in 2006

The parties agree Herzfeld began performing at the Gold Club in 2006, but cannot find any document with an arbitration provision signed by her. Absent Herzfeld's signature on a document, Gold Club cites its standard procedures claiming, upon hiring a new performer, it provided him or her with a packet of documents to sign (ECF Doc. No. 41-3, p. 6). The packet included: an "Entertainer Information Sheet"; a "Commitment to a Drug Free Environment"; "Stage Rental License Agreement"; and an "Entertainer's Rules, Regulations, and Proper Conduct." Id. The "Stage Rental License Agreement" in the alleged packet contains an arbitration clause. (ECF Doc. No. 41-7, p. 12).

After her 2006 audition, Herzfeld recalls a manager giving her only one document to sign and could not recall its content. (ECF Doc. No. 44-1, p. 5). Gold Club managers Weinerman and Maker could not recall giving her paperwork. (ECF Doc. No. 44-3, p. 17; ECF Doc. No. 44-2, p. 14). Neither party can locate any document she signed. (ECF Doc. No. 41-1, p. 26). Herzfeld continued to perform at The Gold Club. The Gold Club claims a 2009 flood destroyed the document. (ECF doc. No. 41-8, p. 16-17).[2] Nonetheless, Herzfeld continued working at Gold Club for four years after the flood without signing any agreement. (ECF Doc. No. 44-5, p. 2). Herzfeld also performed at other clubs including, "Oasis, " in 2009 or 2010, and "Delilah's" in 2012. (ECF Doc. No. 41-5, No. 2).

Herzfeld signs an arbitration provision in August 2013.

On August 30, 2013, Herzfeld worked a night shift at the Gold Club. (ECF Doc. No. 44-1, p. 8). Although the exact details as to timing are disputed, either immediately before or during this shift the Defendant's representative Kristin Angelucci gave Herzfeld a new "Stage Rental License Agreement" ("2013 Agreement"), with an arbitration clause. Herzfeld testified if she did not then sign the 2013 Agreement, she could not continue working. (ECF Doc. No. 44-5, p. 3). Herzfeld already paid for stage time for this evening and anytime spent reviewing the document reduced her pre-paid time on the stage. Herzfeld testifies asked to take the 2013 Agreement home, but Ms. Angelucci refused the request at management's instruction. (ECF Doc. No. 44-1, p. 16).

Herzfeld signed the "Entertainer's Rules, Regulations, and Proper Conduct" document, stating she "[a]cknowledge[d] reading all the rules and regulation and will follow them, " including:

4. There is $6.00 administrative fee (house fee). If you show up on time for your scheduled shift you will be rewarded by only paying $6.00. If you work 7-12 or 9-2 the house fee is $11.00.
* * *
7. The DJ tip is at minimum $10.00. If you work a split shift you split the tip. If you work a double shift you tip double. Anything over the minimum is greatly appreciated.
* * *
15. If you arrive 60 minutes past the start of your shift the Stage Rental Fee will increase $25.00. If you are 1 hour 45 minutes past your shift the Stage Rental Fee will be $50.00.

(ECF Doc. No. 41-2, p. 4, ¶¶ 4, 7, 15).

The Arbitration Clause in the 2013 Agreement ("2013 arbitration clause") provides:

16. If any dispute arises out of this agreement it shall be settled by arbitration in accordance with the rules and regulations of the American arbitration association in Philadelphia by a sole arbitrator made available through the American arbitration association which shall be final and conclusive and binding upon both parties. Licensor and licensee shall each pay their own costs and expenses of abrasion including but not limited to their own respective attorneys face if any.

(ECF Doc. No. 41-2, p. 2, ¶ 16)(typographical errors in original). Herzfeld read and signed the 2013 Agreement. (ECF Doc. No. 44-1, p. 13). Herzfeld's mother, an attorney, later reviewed the 2013 Agreement. Herzfeld continued working until April 2014.

II. Analysis

Herzfeld, on behalf of herself and all others similarly situated, filed suit under the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. §§ 201, et seq., seeking: (i) unpaid minimum wages for hours worked for which Defendant failed to pay the mandatory minimum wage; (ii) unpaid overtime wages for hours worked in access of forty in a work week; and (iii) liquidated damages. (ECF Doc. No. 1, ¶ 10). In addition, Herzfeld seeks to bring a class action on behalf of all dancers performing at the Gold Club in Pennsylvania to hold Gold Club liable under the Pennsylvania Minimum Wage Act of 1968, 43 P.S. §§ 331.101, et seq, the Pennsylvania Wage Payment and Collection Law, 43 P.S. §§ 260.1, et seq., and Pennsylvania common law. (ECF Doc. No. 1, ¶ 8).

Gold Club moves to compel arbitration directing Herzfeld to pursue all claims through arbitration, or alternatively, stay this proceeding on those claims not referred to arbitration. We granted the parties limited discovery on arbitrability.[3]

The Federal Arbitration Act ("FAA") governs questions of arbitrability. Quilloin, 673 F.3d at 228. The FAA requires arbitration in accordance with the terms of the agreement if the making, or failure to comply with, the arbitration agreement is not an issue. 9 U.S.C. § 4. However, the court must look to the relevant state law of contracts, here Pennsylvania, in deciding whether an arbitration agreement is valid under the FAA. Spinetti v. Service Corp Intern, 324 F.3d 212, 213 (3rd Cir. 2003) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, (1995)). State contract principles also generally determine whether an arbitration agreement is unenforceable based on any of the "applicable contract defenses, such as fraud, duress, or unconscionability" Quilloin, 673 F.3d at 229 (quoting AT&T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 1745-46 (2011)). The Supreme Court distinguishes between challenges to the contract in general and challenges to the arbitration provision specifically. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). An arbitrator decides challenges to the validity of the contract as a whole. Id. at 445. The court decides specific challenges to the arbitration clause. Id. Here, the Court may decide the issue since the parties currently dispute only the arbitration provision.

A. There is no evidence of an arbitration agreement before August 30, 2013.

Gold Club seeks to enforce arbitration from the 2006 beginning of Herzfeld's performing arguing alternatively the "lost document" doctrine or the 2013 Agreement retroactively applies. Neither argument succeeds in ...

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