666 F. App'x 124
3rd Cir.2016Background
- Jessica Herzfeld worked as an exotic dancer at the Gold Club (2006–2014) and signed a stage-rental/lease agreement in 2006 (lost) and another in 2013.
- The 2013 Stage Rental/License Agreement described the relationship as non-employment, granted a license to use the stage, and contained an arbitration clause limited to disputes “arising out of this agreement.”
- Herzfeld sued the Gold Club on behalf of herself and a class for wage-and-hour violations under the FLSA and Pennsylvania wage statutes after leaving the club.
- The Gold Club moved to compel arbitration, arguing the leases’ arbitration clauses cover Herzfeld’s claims; the District Court denied the motion.
- On appeal, the Third Circuit affirmed, holding Herzfeld’s statutory wage claims do not arise out of the lease and thus are not subject to the arbitration clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a valid arbitration agreement binds Herzfeld | Herzfeld argues her wage claims are statutory and independent of the lease; they do not fall under the lease arbitration clause | Gold Club contends arbitration clauses in the leases (2006 and 2013) require arbitration of disputes including wage claims | Held: Whether the parties have a valid agreement was a District Court finding; appellate court affirmed on ground that the arbitration clause does not cover statutory wage claims (claims do not arise out of the lease) |
| Whether Herzfeld’s FLSA/state claims “arise out of” the lease | Herzfeld: claims arise from statutory employment law, not contractual lease terms | Gold Club: claims are tied to the contractual relationship and therefore subject to arbitration | Held: Claims are statutory and determined by economic realities, not lease terms; they do not arise out of the agreement, so arbitration clause inapplicable |
| Applicability of lost 2006 lease arbitration clause (lost instrument rule) | Herzfeld: Gold Club failed to prove the lost 2006 lease contained an arbitration clause by clear and convincing evidence | Gold Club: company policy and testimony support that the 2006 lease had similar arbitration language | Held: District Court found Gold Club did not meet lost instrument rule burden; appellate court said even if that were error, arbitration would still not apply because claims do not arise from the leases |
| Retroactive application of 2013 arbitration clause to pre-2013 claims | Herzfeld: 2013 clause cannot retroactively cover 2006–2013 period | Gold Club: 2013 clause should apply to entire employment history | Held: District Court rejected retroactive application; appellate court affirmed outcome without resolving retroactivity because claims are outside lease scope |
Key Cases Cited
- Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013) (standard for resolving motion to compel arbitration after discovery)
- Puleo v. Chase Bank USA, N.A., 605 F.3d 172 (3d Cir. 2010) (two-step inquiry whether arbitration clause exists and covers dispute)
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (U.S. 2003) (arbitrability issues and scope analysis)
- Bell v. Se. Pa. Transp. Auth., 733 F.3d 490 (3d Cir. 2013) (FLSA claims independent of collective-bargaining agreement may avoid arbitration)
- Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697 (U.S. 1945) (employees cannot waive statutory FLSA rights by contract)
- Coventry v. U.S. Steel Corp., 856 F.2d 514 (3d Cir. 1988) (contracts do not necessarily preclude statutory claims independent of agreement)