385 F. Supp. 3d 557
E.D. Ky.2019Background
- Melissa Wilson, a former Starbucks barista, signed an employment agreement (July 2017) containing a mandatory individual arbitration provision and a delegation clause assigning arbitrability to the arbitrator.
- The arbitration clause also excluded "actions to enforce this Agreement, compel arbitration, or enforce or vacate an arbitrator's award" and excluded "claims for which this Agreement would be invalid as a matter of law."
- Wilson sued in state court asserting FMLA interference and retaliation; Starbucks removed to federal court and moved to dismiss/compel arbitration.
- Both parties submitted materials outside the pleadings, so the court treated the motion as one for summary judgment under Rule 56.
- Kentucky had previously prohibited conditioning employment on an agreement to arbitrate (K.R.S. § 336.700(2)); the Kentucky Supreme Court in Snyder upheld that statute against FAA preemption.
- Kentucky Senate Bill 7 (enacted Mar. 25, 2019; effective June 27, 2019) amended K.R.S. 336.700 to permit employers to require arbitration agreements prospectively and retroactively; the court applied this changed Kentucky law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court or the arbitrator decides arbitrability | Wilson: delegation clause should not oust court absent clear and unmistakable evidence | Starbucks: delegation clause delegates gateway questions to arbitrator | Court: ambiguity between delegation and exclusion clauses means no clear delegation; court decides initial arbitrability questions |
| Whether agreement is invalid under Kentucky law because employment was conditioned on arbitration | Wilson: K.R.S. § 336.700(2) made such conditioning unlawful when she signed, so agreement is invalid | Starbucks: Snyder was subject to legislative change; statute now allows conditioning and is retroactive | Court: Senate Bill 7 amended K.R.S. 336.700 and, with retroactive effect, validates the arbitration agreement; enforceable |
| Whether FMLA entitles plaintiff to a jury trial that defeats arbitration waiver | Wilson: FMLA provides a jury trial right | Starbucks: FMLA does not prohibit arbitration or waiver of jury; parties can waive jury absent a controlling statute | Court: Wilson knowingly waived jury trial in the employment agreement; waiver valid |
| Whether case should be stayed or dismissed pending arbitration | Wilson: (did not request stay) | Starbucks: asked to compel arbitration and dismiss or stay | Court: All claims are arbitrable and neither party sought a stay; action dismissed without prejudice |
Key Cases Cited
- Howsam v. Dean Witter Reynolds, 537 U.S. 79 (gateway arbitrability can be contractually assigned to arbitrator)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (parties may delegate arbitrability to arbitrator; delegation requires clear and unmistakable evidence)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (courts must enforce clear delegation clauses)
- Snyder v. Northern Kentucky Area Dev. Dist., 570 S.W.3d 531 (Ky. 2018) (Kentucky held K.R.S. § 336.700(2) not preempted by FAA)
- Seawright v. American Gen. Fin. Servs., 507 F.3d 967 (FMLA claims may be subject to arbitration)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (individuals may waive judicial forum and jury trials in absence of contrary statute)
- Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (limits on legislative reopening of final judgments)
- Green v. Ameritech Corp., 200 F.3d 967 (dismissal appropriate when all claims are arbitrable)