United States District Court, E.D. Pennsylvania
STEPHANIE JOSEPH and RYAN RUTHERFORD, on behalf of themselves and similarly situated employees, Plaintiffs,
QUALITY DINING, INC., and GRAYLING CORPORATION, Defendants.
SCHMEHL, J. JLS
who worked as servers at Chili's restaurants operated in
Pennsylvania by Defendants, and who intend to represent a
class of similar plaintiffs, brought suit challenging a
particular tip-pooling practice as in violation of the Fair
Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage
Act (PMWA). Defendants moved to dismiss on the basis of
arbitration agreements signed by Plaintiffs. The Court must
consider several issues: questions related to which agreement
documents actually apply to each lead Plaintiff; whether the
Court or the arbitrator should determine the availability of
class-based arbitration; if that matter is for the Court,
whether class arbitration is available; and what to do about
numerous opt-in plaintiffs if the lead plaintiffs' claims
are dismissed in favor of individual arbitration.
and Procedural Background
the issues at hand concern only the arbitration agreements,
the facts of the underlying claims are not of great
importance. Suffice it to say that Plaintiffs were servers
paid below minimum wage with the difference to be made up by
tips; the tip funds were pooled and shared not only by
servers, but also by employees called
“expediters.” Plaintiffs argue this violated the
FLSA and PMWA because expediters do not have sufficient
interaction with customers.
Plaintiffs Stephanie Joseph and Ryan Rutherford originally
filed in Lehigh County, pursuing only a PMWA claim. After
Defendants removed the action to this Court under the Class
Action Fairness Act, Plaintiffs amended their complaint to
include the FLSA claim. Defendants filed a motion to dismiss
on the basis of signed arbitration agreements. Plaintiffs
then filed forms signed by fifteen additional individuals
(and later a sixteenth) expressing their consent under
Section 16(b) of the FLSA, 29 U.S.C. § 216(b), to become
party plaintiffs in this action. Defendants also filed a
motion regarding their rights to communicate with putative
class members, which the Court has previously resolved. The
Court heard oral argument on the motion to dismiss, and
Plaintiffs have since filed a motion for conditional class
the key issues for the motion to dismiss are currently on
appeal in other cases pending before both the Third Circuit
and the United States Supreme Court. It is not clear if the
Third Circuit is awaiting the Supreme Court's ruling, but
briefing before the Supreme Court has been extended to at
least late July; therefore, because the motion in this case
has already been pending for some time, the Court thinks it
best to issue a ruling now rather than delay further.
seems clear and agreed that the two lead Plaintiffs have
valid arbitration agreements, so their claims must be
dismissed in favor of arbitration. But several legal issues
must be resolved first: Who decides whether Plaintiffs may
proceed as a class in arbitration, the Court or the
arbitrator? If the Court decides, is class arbitration
available or not? And finally, what happens to the claims of
the sixteen opt-in plaintiffs when the lead Plaintiffs'
claims are dismissed?
considering these legal questions, the Court must consider
the threshold factual matter of what agreement documents are
applicable to Plaintiffs, in particular Ms. Joseph.
Defendants have offered copies of both lead Plaintiffs'
two-page arbitration agreements, each of which incorporates
by reference the “Company Rules for the Resolution of
Employment Disputes” (“Rules”). Defendants
have presented a single copy of the latter document.
Plaintiffs argue that because Ms. Joseph's arbitration
agreement has a computer file footer suggesting it is a 2001
version of the agreement and the Rules document Defendants
have offered bears a footer marking it as a September 2002
version, the Court should conclude that Ms. Joseph was shown
a different, earlier version of the Rules, even though she
actually signed in 2009. The issue is important because while
Mr. Rutherford's arbitration agreement (a 2012 version)
expressly calls for only individual arbitration, Ms.
Joseph's does not and can be read to waive class
arbitration only based on the class waiver in the Rules.
enforcement of an arbitration agreement is essentially a
final determination on a factual issue, factual disputes must
be decided by a summary judgment standard or go to a jury.
See Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,
636 F.2d 51, 54 n.9 (3d Cir. 1980). But as the very case
Plaintiffs cite for use of the summary judgment standard
recognizes, “‘an inference based upon ...
speculation or conjecture does not create a material factual
dispute sufficient to defeat entry of summary
judgment.'” Choice v. Option One Mortg.
Corp., No. CIV.A. 02-6626, 2003 WL 22097455, at *4 (E.D.
Pa. May 13, 2003) (quoting Robertson v. Allied Signal,
Inc., 914 F.2d 360, 382 n. 12 (3d Cir. 1990)). Here, the
idea that Ms. Joseph may have agreed to an older
version of the Rules and that such an older version
may not have waived class arbitration is based on
speculation. Plaintiffs's theory does not explain why
Defendants would create a version of the Rules in 2002 but
not be using it seven years later when Ms. Joseph signed her
arbitration agreement; it is at least equally reasonable that
Defendants began using the revised Rules in 2002 along with
the 2001 version of the arbitration agreement until that
document was updated in 2012. And the older version of the
Rules may also have waived class arbitration anyway. Further,
both versions of the arbitration agreement provide that the
employee may inspect the Rules upon request: given that Ms.
Joseph would presumably have been shown the 2002 Rules if she
asked to see them and that the incorporation of the Rules is
valid even if she never read them, see Friedman v.
Yula, 679 F.Supp.2d 617, 624 n.15 (E.D. Pa. 2010), it is
far too speculative to apply to Ms. Joseph an older version
of the Rules that she may have been shown at the
time she signed, that has not been presented, and that may
not even have differed in the relevant respect. It is worth
noting that the present Rules also provide that the version
of the Rules in effect at the time of the demand for
arbitration will apply (Rules at 7-8, para. C1). All things
considered, Plaintiffs have not raised a genuine issue of
fact and the Court will apply the 2002 Rules to Ms.
on to the main legal issues, precedent answers the first
question quite clearly. An issue relating to an arbitration
agreement is presumptively for the court to decide if it is a
“question of arbitrability.” Opalinski v.
Robert Half Int'l Inc., 761 F.3d 326, 330 (3d Cir.
2014) (quoting Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83 (2002). The Third Circuit held in
Opalinski that “whether an agreement provides
for classwide arbitration is a ‘question of
arbitrability' to be decided by the District
Court.” Id. at 332; see also Chesapeake
Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746,
753 (3d Cir.), cert. denied, 137 S.Ct. 40, 196
L.Ed.2d 27 (2016).
presumption that the Court decides a question of
arbitrability can only be overcome if “the parties
clearly and unmistakably provide otherwise.”
Opalinski, 761 F.3d at 330 (quoting Howsam,
537 U.S. at 83). “The burden of overcoming the
presumption is onerous, as it requires express contractual
language unambiguously delegating the question of
arbitrability to the arbitrator. Silence or ambiguous
contractual language is insufficient to rebut the
presumption.” Id. at 335 (citations omitted).
In Chesapeake Appalachia, the Court extensively
analyzed a set of leases and American Arbitration Association
rules, and concluded the presumption was not overcome because
the chain of incorporation by reference was too tenuous and
the relevant language at the end of the chain was
insufficiently concrete. See 809 F.3d at 758-66.
only language in either the arbitration agreements or the
Rules that might indicate a delegation of class availability
to the arbitrator is found in section C8 of the Rules,
“Power of the Arbitrator.” That section provides
The Arbitrator will have all the powers a judge would have in
dealing with any question or dispute that may arise before,
during, and after the arbitration hearing, including but not
limited to issues relating to the validity, enforceability,
formation, or scope of these arbitration provisions, whether
an enforceable arbitration agreement exists between the
parties … or any other matter relating to the
arbitrability of the dispute at issue. … The
Arbitrator will have no power to change the lawful policies
and procedures of the Company (including those ...