Rose v. NEW DAY FINANCIAL, LLC
816 F. Supp. 2d 245
D. Maryland2011Background
- Plaintiffs are Maryland residents and former Account Executives for New Day; Stuart is a New York resident and also an Account Executive.
- Plaintiffs allege they were required to work at least 65 hours per week without overtime, violating FLSA and Maryland wage laws.
- Each plaintiff signed an arbitration agreement as a condition of employment, with minimal time to review and no copies provided afterward.
- Arbitration agreements prohibit class actions and joinder, require binding arbitration, and provide fee-shifting by the employee unless the employer can show inability to reimburse.
- The agreements designate the FAA as governing, and the last-act binding moment occurred in Maryland for most signatories; one plaintiff may have signed in Pennsylvania.
- Nine former employees previously sued New Day in Pennsylvania alleging FLSA violations; Hopkins v. New Day Financial informed the issue of unconscionability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice-of-law governing formation of the arbitration agreement | Maryland law governs for most signatories; Pennsylvania law may govern Schneider. | Apply Pennsylvania law uniformly as the place of signing; Pennsylvania law governs unconscionability. | Maryland law governs formation for most, Pennsylvania law governs for Schneider; Maryland law applied overall to validity. |
| Whether the arbitration agreements are unconscionable | Maryland and Pennsylvania unconscionability standards diverge; agreements are procedurally and substantively unconscionable, especially class-action waiver. | Arbitration agreements were freely signed; no mutual overreaching; class-action waiver valid under Maryland law. | Maryland law governs unconscionability; the agreement is procedurally and substantively unconscionable due to class-action waiver, but the court ultimately enforces the agreement. |
| Effect of Hopkins v. New Day Financial collateral estoppel | Hopkins precludes relitigation of unconscionability and enforcement issues. | Issues/standards differed; collateral estoppel does not apply because governing law and facts differ. | Collateral estoppel does not bar relitigation; issues are not identical due to differing governing law and standards. |
| Mutuality and access to courts as substantive unconscionability | Arbitration disproportionately restricts employee access and lacks mutuality; class-action waiver is unfair. | Frequent employer access to court does not render arbitration inferior; mutuality not required to be identical. | Arbitration is enforceable; unequal access does not render agreement unconscionable under FAA. |
Key Cases Cited
- Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir.2002) (class-action waivers may be enforceable in adhesion agreements under Fourth Circuit)
- Walther v. Sovereign Bank, 386 Md. 412 (Md. 2005) (procedural and substantive unconscionability; class-action waivers may be enforceable when freely signed)
- Hopkins v. New Day Financial, 643 F. Supp. 2d 704 (E.D. Pa. 2009) (unconscionability issues litigated; informs collateral estoppel analysis)
- Hammersmith v. TIG Ins. Co., 480 F.3d 220 (3d Cir.2007) (conflict-of-laws analysis for contract formation and choice-of-law in arbitration)
- AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (U.S. 2011) (federal substantive law of arbitrability; enforcement of arbitration contracts under FAA)