Opinion
Case No. 1:21-cv-21733-KMM
2021-11-10
Mayte FIGUEREDO-CHAVEZ, individually and on behalf of all others similarly situated, Plaintiffs, v. RCI HOSPITALITY HOLDINGS, INC., et al., Defendants.
Brett R. Cohen, Pro Hac Vice, Leeds Brown Law, P.C., Carle Place, NY, Bryan Louis Arbeit, Andrew Ross Frisch, Morgan & Morgan, P.A., Plantation, FL, for Plaintiffs. John B. Gallagher, John B. Gallagher, PA, Fort Laudedale, FL, for Defendants RCI Hospitality Holdings, Inc., Eric Langan. Benjamin W. Allen, Pro Hac Vice, Casey T. Wallace, Pro Hac Vice, Wallace & Allen, LLP, Houston, TX, John B. Gallagher, John B. Gallagher, PA, Fort Laudedale, FL, for Defendant Miami Gardens Square One, Inc.
Brett R. Cohen, Pro Hac Vice, Leeds Brown Law, P.C., Carle Place, NY, Bryan Louis Arbeit, Andrew Ross Frisch, Morgan & Morgan, P.A., Plantation, FL, for Plaintiffs.
John B. Gallagher, John B. Gallagher, PA, Fort Laudedale, FL, for Defendants RCI Hospitality Holdings, Inc., Eric Langan.
Benjamin W. Allen, Pro Hac Vice, Casey T. Wallace, Pro Hac Vice, Wallace & Allen, LLP, Houston, TX, John B. Gallagher, John B. Gallagher, PA, Fort Laudedale, FL, for Defendant Miami Gardens Square One, Inc.
ORDER ON MOTION TO COMPEL ARBITRATION
K. MICHAEL MOORE, UNITED STATES DISTRICT JUDGE
THIS CAUSE came before the Court upon Defendant RCI Hospitality Holdings, Inc., and Defendant Miami Gardens Square One, Inc.’s ("Defendants" or "Tootsie's Cabaret") Motion to Dismiss Pursuant to 9 U.S.C. § 4. ("Mot.") (ECF No. 29). Therein, Defendants seek dismissal of this case and an order by this Court compelling the Parties to submit to arbitration of the above-captioned case. See generally id. Plaintiff, Mayte Figueredo-Chavez ("Plaintiff" or "Figueredo-Chavez"), and the two Opt-in Plaintiffs, Ingrid Sabogal ("Sabogal") and Gloria Coronell ("Coronell") (together, the "Opt-in Plaintiffs") (collectively, "Plaintiffs") filed a response in opposition. ("Resp.") (ECF No. 38). Defendants filed a reply. ("Reply") (ECF No. 42).
I. BACKGROUND
The background facts are taken from the Complaint, ("Compl.") (ECF No. 1-2), and accepted as true for purposes of ruling on the Motion. Bacon v. McKeithen , No. 5:14-CV-37-RS-CJK, 2014 WL 12479640, at *1 (N.D. Fla. Aug. 28, 2014) ("[The Court] must construe all allegations in the complaint as true and in the light most favorable to the plaintiff.").
This case arises from a dispute under the Fair Labor Standards Act of 1938 ("FLSA"). See generally Compl. Plaintiff is an employee of Tootsie's Cabaret, an adult entertainment club that is owned and operated by Defendants. Id. ¶ 1. Plaintiff claims that "Defendants have a longstanding policy of misclassifying their employees as independent contractors." Id. ¶ 2. As a result of this policy, Plaintiff alleges that she was only compensated in the form of tips from club patrons and, therefore, was deprived of compensation under the applicable minimum wage and overtime rate, in violation of the FLSA. Id. ¶¶ 3–4. Plaintiff brings the above-captioned cause as "a collective action to recover the unpaid wages owed to her and all other similarly situated employees, current and former, of Defendants who worked at Tootsie's Cabaret, at any time during the [three-year] period before this Complaint was filed up to the present." Id. ¶ 6. On July 6, 2021, Opt-in Plaintiff Sabogal filed her notice of consent to join this action, and on July 12, 2021, Opt-in Plaintiff Coronell did the same. (ECF Nos. 15,17).
Plaintiff Figueredo-Chavez executed an "Entertainer License Agreement," ("Figueredo-Chavez ELA") (ECF No. 29-4) at 6–7, with Defendant Miami Gardens, which contained an arbitration provision stating, in relevant part:
The parties agree that, pursuant to the Federal Arbitration Act (the "FAA"), any and all disputes ... will be subject to binding arbitration governed and settled by an impartial independent [sic] appointed by the American Arbitration Association, Florida branch, and the determination of the arbitrator shall be final and binding (except to the extent there exists grounds for vacation of an award under applicable arbitration statutes).
...
To the extent allowable by applicable law, the Parties to arbitration shall equally share the costs and expenses charged by the AAA or the arbitrator during the pendency of the arbitration prior to a determination of which is the prevailing party. The Parties agree that any judgment, order, or ruling arising out of a dispute between the Parties shall, to the extent permitted by applicable law, award costs incurred for the proceedings and reasonable attorneys’ fees to the prevailing party.
Figueredo-Chavez ELA at 6–7 (emphasis in original removed) (emphasis added). Opt-in Plaintiff Sabogal's ELA contains an identical provision. See ("Sabogal ELA") (ECF No. 29-2) at 6–7. Opt-in Plaintiff Coronell's ELA contains different language. See ("Coronell ELA") (ECF No. 29-3) at 5–6. The Coronell ELA provides for binding arbitration by an arbitrator appointed by the American Arbitration Association ("AAA"), but does not provide for the sharing of costs during the pendency of the arbitration. See id. Additionally, unlike the Figueredo-Chavez and Sabogal ELAs, the Coronell ELA provides that the "club shall pay all fees charged by the arbitrator." Id. at 7.
On January 25, 2019, Plaintiff Figueredo-Chavez, Opt-in Plaintiff Sabogal, and eleven other entertainers ("claimants") filed arbitration demands with the AAA, alleging unpaid minimum wages, unpaid overtime, and tip disgorgement claims. (ECF No. 29-5). On January 31, 2021, the AAA informed the Parties it would apply the Commercial Arbitration Rules and the Employment Fee Schedule to this dispute. Id. at 1. In so doing, AAA determined that, for each case, the claimant would be responsible for $300.00 of that fee, and Defendant Miami Gardens would be responsible for $1,900.00. Id. Thus, for all thirteen cases, claimants would owe $3,900.00 and Defendant Miami Gardens would owe $24,700.00, in total. Id.
On February 13, 2019, Defendant Miami Gardens objected to the fees, arguing that fees should be evenly split between the Parties, as provided in the ELAs. (ECF No. 29-6) at 3–4. During this time, the AAA held this matter in abeyance pending the outcome of a judicial intervention as to the fee dispute, which Defendant Miami Gardens stated that it intended to seek. (ECF No. 39-1) at 3. Despite the abeyance, the parties continued to communicate with the AAA regarding fee allocation and, on April 3, 2019, the AAA proposed an accommodation: the appointment of a special master to resolve the fee allocation dispute as a threshold issue, upon claimants’ payment of $300.00 per case and Defendant Miami Gardens's payment of $1,100.00 per case—which is 50% of the filing fee. (ECF No. 39-1) at 1. There is no indication that Defendant Miami Gardens has ever sought judicial intervention as to the fee dispute issue, before raising this issue in the instant case. Id.
On February 12, 2021, the AAA informed the Parties that "the filings remain open, and the AAA will continue to hold these matters in abeyance. We ask the parties to keep the AAA apprised of developments in any related court action, as these arbitration cases may not be stayed indefinitely." (ECF No. 38-1) at 1. Additionally, the AAA informed Defendant Miami Gardens that it would decline to administer "future arbitrations" involving Defendant Miami Gardens, but, it may consider accepting newly filed cases at its discretion in the event Defendant Miami Gardens informs the AAA of its intention to comply with the AAA's Employment/Workplace Fee Schedule. Id. Thus, claimant's arbitration demands were subsequently placed in abeyance by the AAA. Id.
In the Complaint, which was filed on May 6, 2021, Plaintiff alleges that the designated arbitration forum—the AAA—is unavailable. Compl. ¶¶ 97–105. Relatedly, Plaintiff alleges that Defendants have waived their right to enforce the agreement to arbitrate because Defendants declined the AAA's offer to appoint a special master to hear their objections as to the AAA's assessment of fees. Id. ¶ 103.
On November 4, 2021, the Court ordered the Parties to show cause "as to whether the AAA is available as an arbitral forum for Plaintiff and any Opt-in Plaintiffs." (ECF No. 43). On November 9, 2021, Plaintiffs filed a letter from the AAA with the Court, stating: "[D]ue to Respondent's non-compliance with our Employment/Workplace Fee Schedule, the AAA declines to administer the above 13 matters and any future matters with Miami Gardens Square One, Inc. d/b/a Tootsie's Cabaret." (ECF No. 43-1).
Now, in instant their Motion, Defendants seek the dismissal of the above captioned cause and an order compelling arbitration by a non-AAA arbitrator. See generally Mot.
II. LEGAL STANDARDS
The Federal Arbitration Act ("FAA") "establishes ‘a liberal federal policy favoring arbitration agreements.’ " Epic Sys. Corp. v. Lewis , ––– U.S. ––––, 138 S. Ct. 1612, 1621, 200 L.Ed.2d 889 (2018) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ) (other citations omitted). The FAA "requires courts ‘rigorously’ to ‘enforce arbitration agreements according to their terms, including terms that specify with whom the parties choose to arbitrate their disputes and the rules under which that arbitration will be conducted.’ " Id. (quoting American Express Co. v. Italian Colors Restaurant , 570 U.S. 228, 233, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013) (emphasis in original)).
Where a party moves to compel arbitration, the FAA directs courts to "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 in arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4.
III. DISCUSSION
There is no dispute in this case that the underlying agreement to arbitration is valid and enforceable. Mot. at 5; see generally Resp. Nor is there any dispute that these claims would be subject to arbitration. Id. Indeed, Plaintiff originally brought her claims before the AAA. (ECF No. 29-5). Rather, the Parties’ main dispute is whether Defendants have waived their right to arbitration. Mot. at 6; Resp. at 4.
Defendants argue that they have not waived their right to arbitration because the AAA wrongfully failed to enforce the fee-splitting provision provided in the ELAs. Mot. at 7–10. Defendants argue that they have taken "every effort to ensure that the provision was enforced as written before the AAA" and, therefore, have not waived their right to arbitration. Id. at 10. Additionally, Defendants argue that the Court should compel arbitration to a private arbitrator of its choosing because the AAA has not adhered to the fee-splitting provision in the ELAs. Id. 10–12.
In response, Plaintiffs contend that Defendants waived their right to arbitration as to Plaintiff Figueredo-Chavez because (1) they have made the designated arbitral forum unavailable by failing to comply with the AAA's rules and procedures governing fee allocation, (2) they have availed themselves of the judicial process to such an extent that they have waived their right to arbitration, (3) they stated in one of their filings that they have elected to waive arbitration. Resp. at 4–5. Plaintiffs cite to a number of cases standing for the proposition that a party waives its right to arbitrate by failing to pay the requisite fees. Id. at 7–8 (citing Freeman v. SmartPay Leasing, LLC , 771 F. App'x 926, 934 (11th Cir. 2019) ; Mason v. Coastal Credit, LLC , No. 3:18-CV-835-J-39MCR, 2018 WL 6620684, at *7 (M.D. Fla. Nov. 16, 2018) ; Garcia v. Mason Cont. Prod., LLC , No. 08-23103-CIV, 2010 WL 3259922, at *4 (S.D. Fla. Aug. 18, 2010) ). With respect to all other potential Opt-in Plaintiffs, Plaintiffs argue that Defendants waived their right to arbitrate because they waited over two years to seek arbitration, following the AAA's determination on the allocation of fees. Id. at 7. Plaintiffs also argue that all entertainers employed by Tootsie's Cabaret have been irreparably harmed by Defendants’ actions rendering the designated arbitral forum unavailable and by the substantial delay of the resolution of their claims. Id. at 8 (citing Freeman , 771 F. App'x at 926 ). Plaintiffs contend that these arguments apply to all entertainers because all entertainers signed the same arbitration provision. Id. at 9.
In reply, Defendants argue that (1) their statement in their earlier filing was taken out of context and does not constitute waiver of their right to arbitrate, (2) Defendants’ litigation conduct in this forum prior to filing this motion is insufficient to constitute waiver as a matter of law, and (3) Defendants have not conducted any action that is inconsistent with the arbitration provision or their arbitration rights, such as by refusing to adhere to the AAA's fee schedule. See generally Reply. Defendants also contend that their request for a non-AAA arbitrator is reasonable because the ELAs’ references to the AAA are not an essential part of the agreement. Id. at 6–7.
The Court need not address all the foregoing arguments because, as set forth below, Defendants have clearly waived their right to arbitrate as to all Plaintiffs, and any other entertainers who may opt into this litigation, by failing to comply with the AAA's rules and procedures governing fee allocation—in contravention of this Court's orders.
The Eleventh Circuit has held that to assess whether a party has waived its contractual right to arbitrate, courts apply a two-part test:
First, [they] decide if, under the totality of the circumstances, the party has acted inconsistently with the arbitration right, and, second, [they] look to see whether, by doing so, that party has in some way prejudiced the other party.
Freeman , 771 F. App'x at 932 (quoting Ivax Corp. v. B. Braun of Am., Inc. , 286 F.3d 1309, 1315–16 (11th Cir. 2002)).
The Court finds Defendants’ failure to pay the requisite fees, which were reduced to 50%, constitutes a waiver of their right to arbitrate under the Figueredo-Chavez ELA. Although the AAA initially required Defendants to pay $1,900, or 82% of each filing fee, the AAA later offered to appoint a special master to resolve the filing fee dispute, as a threshold matter, if Defendants would be willing to pay 50% of the filing fee. (ECF No. 39-1) at 1. Yet, Defendants opted not to pay 50% of the filing fee, as they would have been required to do under the ELA regardless. Rather, they simply did nothing for over two years, until Plaintiff Figueredo-Chavez initiated the above-captioned litigation. Defendants’ failure to comply with the AAA has rendered the selected arbitrator unavailable as to this case, or any other case, involving Tootsie's Cabaret. See (ECF No 44-1) at 1 ("[D]ue to Respondent's non-compliance with our Employment/Workplace Fee Schedule, the AAA declines to administer the above 13 matters and any future matters with Miami Gardens Square One, Inc. d/b/a Tootsie's Cabaret.").
Numerous courts have found that where a party refuses to comply with an arbitrator's policies, they waive their right to arbitrate. Freeman , 771 F. App'x at 934 (finding that by refusing to pay the full filing fee, the defendant "acted inconsistently with and, therefore, waived its contractual right to arbitration"); Mason , 2018 WL 6620684, at *7 ("Plaintiff paid the requisite fee to the AAA, but Defendant did not; as a result of Defendant's non-payment, the AAA declined to administer the case and closed its file. Under the totality of the circumstances, Defendant acted inconsistently with its right to arbitrate. Further, in doing so, Defendant has prejudiced Plaintiff."); Garcia , 2010 WL 3259922, at *4 (finding a party to be in "default" under 9 U.S.C. § 3 due to the party's failure to pay the requisite filing fees).
The Court finds Defendants’ attempts to distinguish these cases to be unpersuasive. For example, Defendants argue that this case is distinguishable from Freeman because, in that case, the arbitration agreement "obligated SmartPay to pay the initial filing fee." Resp. at 5 (citing Freeman , 771 F. App'x at 932–33 ). Yet, here, Defendants abandoned the arbitration after the AAA offered to have the filing fee allocation issue decided by a special master upon Defendants’ payment of 50% of the filing fee—which is 100% of what they owed under the Figueredo-Chavez ELA. Thus, Defendants would have the Court believe that it is consistent with their obligations under the ELA to refuse to pay 50% of the filing fee, when their obligation is to pay 50% of the filing fee. Needless to say, this argument is unconvincing. The Court finds that because Defendants acted inconsistently with their obligations under the Figueredo-Chavez ELA, they have waived their right to arbitrate. Freeman , 771 F. App'x at 934.
Further, the Court finds that Defendants wrongfully withdrew from proceedings before the AAA because any dispute over arbitration fees in this case should have been decided in the agreed-upon arbitral forum: the AAA. Id. ("[A]ny dispute that SmartPay had with the fee-sharing arrangement could and should have been submitted to the arbitrator.").
Defendants argue that the Court could refer this matter to a different, non-AAA arbitrator, and contend that this is a reasonable request because the ELAs’ references to the AAA are not an essential part of the agreement. Mot. at 10–12; Reply at 6–7. This request is improper for two reasons. First, as discussed above, Defendants’ non-compliance with the AAA has resulted in a waiver of their right to arbitration, which applies to non-AAA arbitrators as well. Second, if the Court were to allow Defendants the opportunity to arbitrate before a different arbitrator, it would allow them to access a new arbitral forum in which they could again raise their concerns over the ELA's fee splitting provision—which is a matter that should have been decided by the AAA in the first place. Freeman , 771 F. App'x at 934. Defendants cannot simply withhold compliance from the selected arbitrator because they disagree with its rulings, then come to this Court and have this case referred to a new arbitrator where they can relitigate issues that should have been decided by the AAA to begin with. The Court will not indulge Defendants’ bald attempt to forum-shop their way to a more favorable arbitral forum. See , e.g. , Hernandez v. Acosta Tractors Inc. , 898 F.3d 1301, 1306 (11th Cir. 2018) ("A calculated choice to abandon arbitration after getting adverse rulings from the arbitrator certainly looks like forum shopping. And this type of behavior would surely be a factor the District Court could consider in deciding whether to sanction Acosta by entering a default judgment.").
Relatedly, Defendants rely heavily on De Pombo v. IRINOX N. Am., Inc. , where the Honorable Beth Bloom compelled the parties to arbitration before a non-AAA arbitrator and, in doing so, severed a provision of an arbitration agreement selecting the AAA as the arbitral forum. No. 20-CV-20533, 2020 WL 6290153, at *6 (S.D. Fla. Oct. 27, 2020). In De Pombo , like here, the defendant abandoned the arbitration before the AAA when the AAA refused to apply a fee-splitting arrangement provided in the contract. Id. at *1. Judge Bloom specifically found that the defendant's refusal to participate in the proceedings before the AAA was distinguishable from Acosta Tractors because the defendant did not refuse to pay arbitration fees in bad faith. Id. at *6. De Pombo is highly distinguishable from this case because, here, Defendants refused to submit the fee-splitting issue to an AAA arbitrator, even after the AAA offered to have Defendants pay only 50% of the fee—which is exactly equal to the amount they are obligated to pay under the Figueredo-Chavez ELA. (ECF No. 39-1) at 1. Moreover, on November 4, 2021, Defendants were informed by this Court that "any dispute over arbitration fees in this case is not a matter for the Court and is properly decided by the selected arbitrator" and were ordered to reach out to the AAA to inform them that "this Court has held that any fee-sharing arrangement should have been submitted to the AAA originally." (ECF No. 43) (citing Freeman , 771 F. App'x at 934 ). When Defendants reached out to the AAA, they requested that the AAA abide by the fee-splitting provision, (ECF No. 45-1) at 2, and the AAA responded by informing Defendants that they would be required to pay the balance of filing fees of $20,800 by November 8, 2021, after which an arbitrator would be appointed who could determine Defendants’ share of the filing fees. (ECF No. 45-2 at 1). Yet, inexplicably, rather that submit the fee splitting issue to the AAA, as ordered by this Court, Defendants failed to pay the required filing fees and have now rendered the AAA unavailable as a forum for any arbitrations involving Tootsie's Cabaret, forever. (ECF No. 45-3) at 1. Defendants’ refusal to submit the fee-splitting issue to the AAA, in contravention of this Court's order to do so, renders their actions highly distinguishable from De Pombo because, here, Defendants have acted in bad faith. Accordingly, the Court will not sever the portion of the ELAs selecting the AAA as the arbitral forum.
In sum, in consideration of the totality of the circumstances, the Court finds that Defendants have waived their right to arbitrate because they have acted inconsistently with the arbitration right and, in doing so, prejudiced Plaintiff Figueredo-Chavez. See Freeman , 771 F. App'x at 932.
The Court is also presented with the question of whether Defendants’ waiver of their right to arbitration as to Plaintiff Figueredo-Chavez constitutes waiver as to Opt-in Plaintiffs, or any other entertainers who might join this case. Although this issue has not been addressed directly by the Eleventh Circuit, a district court in the Northern District of Georgia addressed this issue and found an opinion issued by the Sixth Circuit to be persuasive. Prowant v. Fed. Nat'l Mortg. Ass'n , 255 F. Supp. 3d 1291, 1298 (N.D. Ga. 2017) (citing Gunn v. NPC Intern., Inc. , 625 Fed. App'x. 261, 268 (6th Cir. 2015) ). In Prowant , the court stated:
In particular, the Court agrees with Gunn ’s reasoning that all Plaintiffs in this case—both the named Plaintiffs and the nine opt-ins—are similarly situated with respect to the issues posed by Fannie Mae's waiver. Fannie Mae's delay in raising arbitration has similarly affected their ability to move forward as a collective action and to resolve their FLSA claims in an efficient and cost-effective manner. The named Plaintiffs and opt-ins share in this harm, and the harm does not materially change just because the opt-ins joined later on.
Id. Here, the ELAs for Plaintiff and Opt-in Plaintiffs have all have selected the AAA as the agreed upon arbitral forum—which is no longer available due to Defendants’ noncompliance. Thus, the manner in which Defendants failed to cooperate with the AAA affected other entertainers and Opt-in Plaintiffs by foreclosing the AAA as an arbitral forum. See (ECF No 44-1) at 1 ("[D]ue to Respondent's non-compliance with our Employment/Workplace Fee Schedule, the AAA declines to administer the above 13 matters and any future matters with Miami Gardens Square One, Inc. d/b/a Tootsie's Cabaret."). Therefore, it is clear that Opt-in Plaintiffs and, other entertainers employed by Tootsie's Cabaret, are similarly situated with respect the harm and prejudice arising from Defendants’ noncompliance with the AAA. Accordingly, the Court finds that Defendants have waived their right to arbitration as to Opt-in Plaintiffs and other employees who potentially may opt-in to this litigation.
Although the Court finds that Opt-in Plaintiffs are similarly situated with respect to the harm arising from Defendants’ noncompliance with the AAA, the Court does not reach whether their positions, as a general matter, are similar for the purposes of class certification. The Court will address issues relating to conditional class certification in its forthcoming order on Plaintiffs’ Motion for Conditional Class Certification (ECF No. 22).
IV. CONCLUSION
Accordingly, UPON CONSIDERATION of the Motion, the pertinent portions of the record, and being otherwise fully advised in the premises, it is hereby ORDERED AND ADJUDGED that Defendants’ Motion to Dismiss Pursuant to 9 U.S.C. § 4 (ECF No. 29) is DENIED. DONE AND ORDERED in Chambers at Miami, Florida, this 10th day of November, 2021.