MEMORANDUM OF DECISION
Arbitration is currently one of the most important issues in the federal courts. During October Term 2009, the United States Supreme Court decided a total of ninety-two merits cases,
see Final Stats OT09,
SCOTUSblog.com, http://www.
The case pending before this Court presents difficult questions regarding the formation and enforceability of an arbitration agreement in a unique factual context. According to Plaintiffs, Defendants Service Road Corp. (“Service Road”) and Cousin Vinnie’s Back Room, Inc. (“Cousin Vinnie’s”) own and operate the Gold Club and the Gold Club Connection — together, “the Clubs” — in Groton, Connecticut. 1 The Gold Club is a bar that features topless female dancers as entertainment; the Gold Club Connection is an nightclub that features fully nude female dancers as entertainment. Plaintiffs Dina Nicole D’Antuono, Ramona P. Cruz, and Karen Vilnit are exotic dancers who have performed at the Clubs — the Court uses the phrase exotic dancers throughout this Memorandum of Decision because that is the phrase that Plaintiffs use to describe their occupation in the Complaint. See Compl. [doc. # 1] ¶ 1. When they performed at the Clubs, Plaintiffs were classified as tenants who rented performance space from the Clubs. See Tab 1 to First Genna Deck [doc. # 13-1] at 5. They allege that they were really the Clubs’ employees, and they seek both unpaid wages under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and other damages under Connecticut employment laws.
Service Road and Vinnie’s have filed a Motion to Dismiss and/or Stay this Action; to Compel Arbitration; and to Strike Class and Collective Action Allegations [doc. # 12] from Plaintiffs’ Complaint [doc. # 1]. For the reasons set forth below, Defendants’ motion is GRANTED IN PART and DENIED IN PART. The Court DENIES Defendants’ motion insofar as it seeks an
I.
The Court sets forth only those facts that are necessary for purposes of resolving the pending motion. According to Plaintiffs’ Complaint as well as various declarations filed in opposition to the pending motion, Ms. D’Antuono performed at the Clubs from December 2007 until February 2010, see D’Antuono Deck [doc. # 26-2] ¶ 1; Ms. Cruz performed at the Clubs from August 2008 until December 2008, see Cruz Deck [doc. # 26-4] ¶ 1; and Ms. Vilnit performed at the Clubs from December 2007 until November 2009, see Vilnit Deck [doc. # 26-3] ¶ 1. Defendants assert in support of the pending motion that it is their “normal business practice to have [every exotic dancer] execute a ... Lease” setting forth the terms of the relationship between the exotic dancer and the Clubs. First Genna Deck [doc. # 13-1] ¶ 6. Defendants further claim that it is their policy to always “explain to the [exotic dancer] that [the Lease] ... governs the relationship between [the exotic dancer] and the [C]lubs.” Bergeron Deck [doc. # 38-1] ¶ 4.
Ms. D’Antuono, who began performing at the Clubs in December 2007, signed an “Entertainment Lease” (“Lease”) on November 4, 2008. Tab 1 to First Genna Deck [doc. # 13-1] at 5, 8. However, according to Ms. D’Antuono’s declaration, November 4, 2008 was the first day that anyone at the Clubs ever asked her to sign a Lease. See D’Antuono Deck [doc. # 26-2] ¶ 5. On that date, during the middle of Ms. D’Antuono’s performance shift, manager Miranda Bergeron asked Ms. D’Antuono to accompany her to the Clubs’ office to update her paperwork. See id. Ms. Bergeron told Ms. D’Antuono that the Lease stated that Ms. D’Antuono was a subcontractor of the Clubs and worked for herself. See id. ¶ 6. Ms. D’Antuono signed the Lease and left the office to continue performing within five minutes after she arrived. See id. ¶ 8.
Ms. Vilnit, who also began performing at the Clubs in December 2007, signed the same form Lease on September 17, 2008, about two months before Ms. D’Antuono. See Tab 1 to First Genna Deck [doc. # 13-1] at 10, 13. According to Ms. Vilnit, September 17, 2008 was the first day that anyone at the Clubs ever asked her to sign a Lease. See Vilnit Deck [doc. #26-3] ¶¶ 4-7. On that date, during the middle of Ms. Vilnit’s performance shift, Ms. Berger-on asked Ms. Vilnit to accompany her to the Clubs’ office to complete tax-related paperwork. See id. ¶¶ 4-5. Ms. Bergeron presented Ms. Vilnit with the Lease, and Ms. Vilnit signed it quickly and left the office to continue performing within five minutes after she arrived. See id. ¶ 7.
Defendants contend that Ms. Cruz never actually performed at the Clubs, and point out that she is named as a plaintiff in several similar cases pending before other courts, some involving the same plaintiffs’ lawyers. See Bergeron Decl. [doc. # 38-1] ¶ 10 (asserting that no one at the Clubs remembers Ms. Cruz). To the extent that there is a dispute about whether Ms. Cruz actually performed at the Clubs, that dispute is not related to the pending motion, but instead goes to the merits of this case. For the time being, the Court need not consider whether she actually performed at the Clubs for a brief period at the end of 2008, as she alleges.
Defendants have not provided the Court with any admissible materials that contradict Ms. D’Antuono’s and Ms. Vilnit’s accounts of the circumstances under which they signed the Lease. Ms. Bergeron recalls presenting copies of the Lease to Ms. D’Antuono and Ms. Vilnit, and while she insists that it was not her intention to present the Lease in a “rushed or coercive manner,” she does not contest that both signed the Lease within five minutes after she first showed it to them. Bergeron Decl. [doc. # 38-1] ¶¶ 5-7. Paul Genna, an officer of Service Road and Cousin Vinnie’s, recalls that he received a telephone call from one of his managers asking if Ms. Vilnit could have permission to take a copy of the Lease home before she signed it, so that she could have an attorney review it. See Second Genna Decl. [doc. # 38-2] ¶ 4. Mr. Genna recalls that he told the manager that Ms. Vilnit could indeed take the Lease home if she wished, but does not recall whether Ms. Vilnit actually took the Lease home. See id. Mr. Genna’s recollection is not inconsistent with Ms. Berger-on’s or Ms. Vilnit’s declaration. See Vilnit Decl. [doc. # 26-3] ¶ 7.
Neither Ms. Bergeron nor Mr. Genna contests that Ms. D’Antuono and Ms. Vilnit were first shown the Lease and were first asked to sign the Lease nearly after a year after they first began performing at the Clubs. Mr. Genna baldly asserts that the Clubs had a policy of not permitting any exotic dancer to perform unless she first agreed to the terms of the Lease. See First Genna Decl. [doc. # 13-1] ¶ 6. But Defendants have not introduced any materials to show how the Clubs went about obtaining exotic dancers’ consent to the terms of the Lease. There is no evidence that, for example, a copy of the Lease was posted in the exotic dancers’ dressing room, or that the text of the Lease was included in any handbook or other document that was provided to new exotic dancers when they first arrived at the Clubs. Thus, Defendants’ assertion that their “normal business practice” was to have all exotic dancers sign copies of the Lease, First Genna Decl. [doc. # 13-1] ¶ 6, is not consistent with any of the specific factual assertions made by either Plaintiffs or Defendants. The only concrete factual allegations before the Court show that the Clubs allowed at least two exotic dancers to perform for a year before showing them a copy of the Lease or asking them to sign a copy of the Lease, and that one exotic dancer who performed at the Clubs for several months never signed the Lease.
The Lease also contains an arbitration clause on the last page. See id. at 8. Most of the arbitration clause is either in boldface type, in capital letters, or underlined — sometimes all three. See id. The Court reproduces the arbitration clause in its entirety below:
21. Arbitration/Attorney Fees and Costs/Waiver of Class Action. ANY CONTROVERSY, DISPUTE, OR CLAIM ARISING OUT OF THIS LEASE OR OTHERWISE OUT OF ENTERTAINER PERFORMING AT THE PREMISES OF THE CLUB, SHALL BE EXCLUSIVELY DECIDED BY BINDING ARBITRATION UNDER THE FEDERAL ARBITRATION ACT, IN CONFORMITY WITH RULES AND PROCEDURES AS ESTABLISHED BY THE AMERICAN ARBITRATION ASSOCIATION AND AS MAY BE MODIFIED BY ANY STATE ARBITRATION ACT. Any judgment or award may be entered in any court having jurisdiction thereof.
Any judgment, order, or ruling arising out of a dispute between the parties shall award costs incurred for the proceedings and reasonable attorney fees to the prevailing party.
ENTERTAINER AGREES THAT ALL CLAIMS BETWEEN HER AND THE CLUB WILL BE LITIGATED INDIVIDUALLY AND THAT SHE WILL NOT CONSOLIDATE OR SEEK CLASS TREATMENT FOR A CLAIM. ENTERTAINER FURTHER AGREES NOT TO COMMENCE ANY ACTION, SUIT OR ARBITRATION PROCEEDING RELATING, IN ANY MANNER WHATSOEVER, TO THIS LEASE OR TO HER PERFORMING AT THE PREMISES OF THE CLUB, MORE THAN SIX MONTHS AFTER SHE LAST PERFORMED AT THE PREMISES, AND FURTHER AGREES TO WAIVE ANY STATUTE OF LIMITATIONS TO THE CONTRARY.
This paragraph 21 survives termination of this Lease.
Id. The blank spaces provided for the exotic dancer’s signature and for the signature of the Clubs’ representative appear only a few lines below the arbitration clause. See id.
The Lease also contains a comprehensive severability clause on the final page. The Court the severability clause in its entirety below:
20. Severability. In the event that any term, paragraph, subparagraph, or portion of this Lease is declared to be illegal or unenforceable, this Lease shall, to the extent possible, be interpreted as if that provision was not a part of this Lease; it being the intent of the parties that any illegal or unenforceable portion of this Lease, to the extent possible, be severable from this Lease as a whole. However, in the circumstance of a judicial, arbitration, or administrative determination that the business relationship between Entertainer and the Club is something other that that of landlord and tenant, Entertainer and the Club shall be governed by the provisions of subparagraph 12C.
Id. As the severability clause is also on the last page of the Lease, the blank spaces provided for the exotic dancer’s signature and for the signature of the Clubs’ representative appear only a few lines below the severability clause. See id.
Plaintiffs filed their Complaint in this Court on January 6, 2011. Their primary allegation, as the Court has already mentioned, is that they were employees rather than tenants or independent contractors when they performed at the Clubs, and were therefore owed the minimum wage. See Compl. [doc. # 1] ¶ 14. They also appear to believe that the provision of the Lease that requires them to repay the fees they received from the Clubs customers if a court finds them to have been employees of the Clubs violates Connecticut law. See Mem. in Opp’n [doc. # 26] at 28. However, that particular issue is not specifically raised in the Complaint. 3
Defendants filed the pending Motion to Dismiss and/or Stay this Action; to Compel Arbitration; and to Strike Class and Collective Action Allegations on January 28, 2011. After the motion was filed, the Second Circuit issued its decision in
In re American Express Merchants’ Litigation (“American Express II”),
At oral argument, the Court attempted to clarify Defendants’ position regarding whether they planned to enforce two of the three features of the arbitration clause Plaintiffs take issue with: the cost- and fee-shifting provision, and the provision requiring that all arbitration claims be brought no later than six months after a dancer’s final performance at the Clubs.
II.
At the outset, the Court must consider the issue of subject-matter jurisdiction. Defendants argued in passing in their memorandum in support of the pending motion that because Ms. D’Antuono, Ms. Cruz, and Ms. Vilnit have agreed to arbitrate any disputes with Defendants, this Court lacks subject-matter jurisdiction over the federal law and state law claims in Plaintiffs’ Complaint. See Mem. in Supp. [doc. # 13] at 5-6. Defendants’ argument regarding subject-matter jurisdiction is baseless.
As a general matter, the FAA does not grant subject-matter jurisdiction to federal district courts. It does, however, provide that “[a] party aggrieved by the alleged failure ... of another to arbitrate under a written agreement may petition any United States district court which, save for such agreement, would have [subject-matter] jurisdiction ... in a civil action ... arising out of the controversy between the parties,” for an order compelling arbitration. 9 U.S.C. § 4. Under that provision, a party that wishes to have an arbitration agreement enforced may instate a federal court proceeding and ask the court to require the other party to comply with the agreement.
See, e.g., Carrington Capital Management, LLC v. Spring Investment Service, Inc.,
This case does not implicate that particular provision. It was Plaintiffs — who do not believe that the arbitration agreement at issue here is enforceable — who initiated this case by filing their Complaint. This Court has subject-matter jurisdiction over the federal law claims in that Complaint pursuant to 28 U.S.C. § 1331, and subject-matter jurisdiction over the state law claims in that Complaint pursuant to 18 U.S.C. § 1367(a). While the FAA may require the Court to enforce the disputed arbitration agreement as a matter of contract,
see
9 U.S.C. § 2, Defendants have provided no authority to support the proposition that a valid arbitration agreement divests a federal court of its subject-matter jurisdiction. It would be odd if a valid arbitration agreement could have that effect, as “arbitration is simply a [private] matter of contract between the parties.”
Stolt-Nielsen,
The Court notes that at oral argument, Plaintiffs’ counsel suggested that this action could not have initially been brought in state court because it involves a federal law claim. That suggestion is also erroneous. As a general matter, state courts and federal courts have concurrent jurisdiction over all federal law claims, and FLSA claims are no different. See 29 U.S.C. § 216(b) (providing that an FLSA claim can be maintained “in any Federal or State court of competent jurisdiction”). A plaintiff may sue on a federal law claim either in federal court or state court. That said, if Plaintiffs had filed this action in state court, Defendants may or may not have elected to exercise their right remove the case to federal court pursuant to 28 U.S.C. § 1441(a).
III.
The FAA “reflects the fundamental principle that arbitration is a mat
It is well settled that “whether parties have agreed to ‘submit[ ] a particular dispute to arbitration is typically an issue for judicial determination.’ ”
Granite Rock,
The standard this Court must apply when reviewing a motion to compel arbitration is essentially the same standard that the Court applies when it reviews a motion for summary judgment.
See Bensadoun v. Jobe-Riat,
This Court does not need to hold an evidentiary hearing to resolve purely legal issues that are raised in the context of a motion for summary judgment.
See DaimlerChrysler Insurance Co. v. Pambianchi,
IV.
The issues in this case relate to both the formation of an agreement to arbitrate,
see Granite Rock,
The enforceability-related issues, on the other hand, were at the outset significantly more difficult. Plaintiffs object to three specific features of the Lease’s arbitration clause. First, in light of the potential costs associated with arbitration before the American Arbitration Association (“AAA”) and the allegedly low amount of damages they each seek individually, they object to the provision of the arbitration clause that purports to waive Plaintiffs’ right to proceed against Defendants via collective actions and class actions. See Tab 1 to First Genna Decl. [doc. # 13-1] at 8.
(“ENTERTAINER AGREES THAT ALL CLAIMS BETWEEN HER AND THE CLUB WILL BE LITIGATED INDIVIDUALLY AND THAT SHE WILL NOT CONSOLIDATE OR SEEK CLASS TREATMENT FOR A CLAIM.”).
Second, they object to the cost- and fee-shifting provision in the arbitration clause.
See id.
(“Any judgment, order, or ruling arising out of a dispute between the parties shall award
Plaintiffs argue that those three features, taken together, require the Court to invalidate the arbitration agreement and instead allow them to proceed in a collective or class action in this Court. While an arbitration clause is generally severable from the contract in which it appears,
see Granite Rock,
Of course, it may be permissible for a court to invalidate some non-essential provisions in an arbitration agreement, sever those provisions, and require arbitration under a modified agreement. The Supreme Court’s decision in
Stolt-Nielsen S.A. v. AnimalFeeds International Corp.,
Plaintiffs rely on both state law and federal law to support their position. As the Court explains in further detail in the discussion below, there is virtually no Connecticut case law to support Plaintiffs’ views. But there are many, many federal law precedents — and in particular, Second Circuit precedents — that support Plaintiffs’ position in this case. In
American Express II,
the Second Circuit established a standard under which district courts may invalidate arbitration agreements containing collective and class action waiver provisions on a case-by-case basis.
See
The Court knows of no cases from inside the Second Circuit or elsewhere in which a class action waiver provision, a cost- and fee-shifting provision, and a provision altering the statute of limitations were combined in one arbitration agreement. The fact that the arbitration clause at issue here combined some of the features which led the Second Circuit to strike down the arbitration agreement in American Express II with some of the different features which caused the Second Circuit considerable concern in Ragone make this a particularly difficult case.
Further complicating matters, just days before the oral argument in this case, the United States Supreme Court issued its decision in
AT & T Mobility,
— U.S. -,
A.
The Court begins with the parties’ disputes over the formation of the arbitration agreement at issue in this case.
See Granite Rock,
1.
In their briefs, Ms. D’Antuono and Ms. Vilnit seemingly concede that they accepted the terms of the arbitration clause. After all, they both signed the Lease, and the arbitration clause was on the same page as each of their signatures. At oral argument, however, Plaintiffs’ counsel suggested for the first time that some of her arguments regarding Ms. D’Antuono’s and Ms. Vilnit’s obligations actually pertain to the formation of the arbitration agreement, rather than the enforceability of the arbitration agreement. The Court largely disagrees with Plaintiffs’ counsel’s re-characterization of her arguments, but Plaintiffs counsel is correct in one respect. To the extent that Ms. D’Antuono and Ms. Vilnit argue that they were mislead about the content of the documents they signed and rushed into signing the documents,
In Connecticut, the fact that a party signed a written agreement is usually conclusive evidence of contract formation. “The general rule is that where a person of mature years, who can read and write, signs or accepts a formal written contract affecting his pecuniary interests, it is his duty to read it, and notice of its contents will be imputed to him if he negligently fails to do so.”
Ursini v. Goldman,
Because Ms. D’Antuono and Ms. Vilnit did not rely on the
Ursini v. Goldman
exception until they filed their surreply brief, and did not characterize their argument as a factual argument about the formation of an agreement until oral argument, it appears that Ms. D’Antuono and Ms. Vilnit may have waived that argument. Assuming, however, that Plaintiffs did not waive that argument, the Court still concludes that the declarations in the record from Ms. D’Antuono and Ms. Vilnit are not sufficient to raise genuine issues of material fact as to the essential elements of contract formation under Connecticut law, which again are a valid offer and a valid acceptance.
See Auto Glass Express,
The declarations from Ms. D’Antuono and Ms. Vilnit establish that Ms. Bergeron told Ms. D’Antuono that the agreement provided that Ms. D’Antuono worked for herself and that the Clubs needed a copy for their files,
see
D’Antuono Decl. [doc. # 26-2] ¶ 6; and that Ms. Bergeron told Ms. Vilnit that the agreement was tax-related.
See
Vilnit Deck [doc. # 26-3] ¶ 5. Although those statements were incomplete, they were both true enough. No reasonable jury could conclude from the declarations that Ms. Bergeron was sufficiently misleading as to the content of the Lease to negate Ms. D’Antuono’s and Ms. Vilnit’s acceptance of the terms of the Lease, particularly in light of the fact that both Ms. D’Antuono and Ms. Vilnit had the opportunity to read the Lease. Although both declarations indicate that Ms. Berger-on told Ms. D’Antuono and Ms. Vilnit that they needed to sign the Lease,
see
D’Antuono Deck [doc. # 26-2] ¶ 7; Vilnit Deck [doc. # 26-3] ¶ 5, neither declaration indicates that Ms. Bergeron required an immediate signature, and neither shows that she in any way attempted to dissuade either Ms. D’Antuono and Ms. Vilnit from reading the Lease.
See Delk,
Plaintiffs’ counsel’s other arguments with regard to Ms. D’Antuono and Ms. Vilnit relate not to the factual issue of whether an agreement to arbitrate was formed, but to the legal issue of whether Ms. D’Antuono’s and Ms. Vilnit’s agreement with Defendants is enforceable.
See
9 U.S.C. § 2;
American Express II,
In any case, the First Circuit’s rule by its terms applies only to discrimination claims implicating the 1991 Civil Rights Act, and not to FLSA claims.
See Rosenberg,
2.
The only remaining dispute relating to the formation of an agreement to arbitrate is about Ms. Cruz. With regard to Ms. D’Antuono and Ms. Vilnit, there has never been any dispute that Defendants carried their initial burden of “substantiat[ing their] entitlement [to arbitration] by a showing of evidentiary facts.”
Oppenheimer & Co.,
Under Connecticut law, even when parties have not entered into a written contract, a legally binding agreement may be inferred from the parties’ conduct when that conduct shows a tacit understanding, in the light of all of the surrounding circumstances.
See, e.g., Sandella v. Dick Corp.,
In this case, Defendants have not introduced any evidence that could permit a jury to reasonably infer that Ms. Cruz consented to the terms of the Lease, let alone the arbitration agreement. Defendants’ counsel has asserted in a reply brief that the Lease “was written and disseminated throughout” the Clubs and that Ms. Cruz therefore must have implicitly assented to the arbitration provision. Defs.’ Reply [doc. #38] at 22. If there were evidence that the Lease was posted in the Clubs, or that copies of the Lease were given to all new exotic dancers upon arrival, then it might be possible to infer an agreement from such a circumstance.
See Brown,
In fact, the only evidence before the Court indicates that Defendants often waited quite a long time before presenting new exotic dancers with copies of the Lease. According to both Ms. D’Antuono,
see
D’Antuono Deck [doc. # 26-2] ¶ 5, and Ms. Vilnit,
see
Vilnit Deck [doc. #26-3] ¶¶ 4-7, Defendants waited until nearly a year after Ms. D’Antuono and Ms. Vilnit started performing at the Clubs to show them the Lease. Ms. Cruz only performed at the Clubs for a few months. Thus, the only reasonable inference the Court can draw based on the evidence is that Ms. Cruz never saw the Lease and had no opportunity to consent to it, or to the arbitration agreement. The Court cannot compel Ms. Cruz to arbitrate her claims against Defendants unless she in fact agreed to arbitration,
see Stolt-Nielsen,
B.
Having determined that the facts before the Court permit no reasonable conclu
With regard to both state law and federal law, Plaintiffs’ central argument is that the arbitration clause cannot be enforced because it requires each Plaintiff to proceed in an individual arbitration, and forbids them from bringing collective actions or class actions. At oral argument, Plaintiffs counsel backed away from the state law argument, in light of the United States Supreme Court’s recent holding in AT & T Mobility that the FAA preempts state law rules conditioning the enforceability of arbitration agreements on the availability of class arbitration procedures. See 131 5. Ct. at 1744. However, Plaintiffs did not abandon their state law argument entirely. The Court thus considers both their state law argument and their federal law argument below. After setting forth the relevant Connecticut law — or rather, the lack thereof — the Court will examine the possible impact of AT & T Mobility on that state law. See id. at 1740.
1.
As the Court has already mentioned, the FAA permits federal courts to invalidate arbitration agreements based on “generally applicable contract defenses, such as fraud, duress, or unconseionability.”
Rent-A-Center,
a.
Under Connecticut law, it is “well established ‘that contracts that violate public policy are unenforceable.’ ”
Hanks v. Powder Ridge Restaurant Corp.,
The Court need not decide at this time whether the entire Lease is void as against public policy under Connecticut law. “[A]s a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract.”
Buckeye Check Cashing,
b.
“The purpose of the doctrine of unconscionability is to prevent oppression and unfair surprise.”
Cheshire Mortgage Service, Inc. v. Montes,
First, Plaintiffs have not shown that the arbitration clause is procedurally
But Plaintiffs’ assertion that the arbitration clause was hidden in a maze of fine print is simply not true. The arbitration clause was printed on the last page of a four-page Lease, the same page on which both Ms. D’Antuono and Ms. Vilnit signed their names.
See
Tab 1 to First Genna Decl. [doc. # 13-1] at 8. The arbitration clause was written in ordinary-size type, in bold, capital letters, and underlined.
See id.
It could hardly have been any less hidden.
See, e.g., Palacios v. Boehringer Ingelheim Pharmaceuticals, Inc.,
No. 10-22398-Civ-UU, Slip. Op. at 5 (S.D.Fla. Apr. 18, 2011) (applying Connecticut contract law and finding that an arbitration clause in a nine-page employment contract was not hidden);
Van Voorhies,
In the Court’s view, Plaintiffs’ procedural unconscionability argument comes down to nothing more than a claim that the parties had unequal bargaining power — as reflected by the fact that the Lease was a take-it-or-leave-it form contract — and that Defendants did not specifically direct Plaintiffs’ attention to the arbitration clause in the Lease. As this Court has previously had occasion to recognize,
see DaimlerChrysler Insurance,
Second, Plaintiffs have not shown that the arbitration clause is substantively unconscionable under Connecticut law. It
Plaintiffs have not cited any cases in which the Connecticut Supreme Court, applying Connecticut law, has suggested that collective action or class action waivers, cost- or fee-shifting provisions, or provisions shortening the statute of limitations, whether or not they are part of an arbitration clause, might be substantively unconscionable. In addition, Plaintiffs have not cited
any
case in which the Connecticut Supreme Court or the Connecticut Appellate Court, applying Connecticut law, has struck down either some portion of any arbitration agreement or an entire arbitration agreement as substantively unconscionable. Indeed, in the only case the Court knows of in which the Connecticut Supreme Court considered whether an arbitration agreement was substantively unconscionable, the Connecticut Supreme Court applied New York contract law and concluded that the agreement at issue was not substantively unconscionable.
See Hottle v. BDO Seidman LLP,
The portions of Plaintiffs’ briefs discussing substantive unconscionability are filled with references to cases involving other states’ contract law,
see, e.g., Kristian v. Comcast Corp.,
While California courts have tended to look upon arbitration agreements with disfavor,
see Discover Bank v. Superior Court,
If the Court were to accept Plaintiffs’ argument that the arbitration clause is substantively and procedurally unconscionable as a matter of Connecticut law, the Court would have to confront a problem that the parties did not brief and did not address at oral argument. As the Court has already discussed, the Connecticut Supreme Court has never indicated that collective action and class action waivers, cost- and fee-shifting provisions, or provision shortening the statute of limitations can render an arbitration agreement unenforceable. But the California Supreme Court held in
Discover Bank v. Superior Court
that class action waivers can render arbitration agreements invalid as a matter of state law under some circumstances.
See
If the Court were to conclude — based on nothing more than a guess, as the Connecticut Supreme Court has never considered the issue — that arbitration agreements that include collective action and class action waivers, cost- and fee-shifting provisions, provision shortening the statute of limitations, or some combination of the
The Court notes that at oral argument, Plaintiffs’ counsel conceded the reasoning of
AT & T Mobility
indicates that federal law trumps state substantive unconscionability principles as applied to arbitration agreements, but suggested that the decision does not impact state procedural unconscionability principles. But the
AT & T Mobility
decision explicitly refuses to draw the distinction Plaintiffs’ counsel suggests.
See
2.
While the “generally applicable contract defenses,”
Rent-A-Center,
There is considerable uncertainty surrounding the precise metes and bounds of the federal common law of arbitrability. As the Court explains below, the notion that there is such a thing as a federal common law of arbitrability emerged from language two United States Supreme Court cases.
See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
a.
At one time, following the Second Circuit’s decision in
American Safety Equipment Corp. v. J.P. Maguire & Co.,
Under the
Mitsubishi Motors
framework, federal statutory claims are generally arbitrable unless Congress’s intention to protect against waiver of the right to litigate in court is “deducible from [the statute’s] text or legislative history.”
Id.; see also Gilmer v. Interstate/Johnson Lane Corp.,
While
Mitsubishi Motors
primarily provides a test for determining whether Congress intended to preclude arbitration of specific statutory claims, a single footnote in
Mitsubishi Motors
suggests that federal courts might in some circumstances have power to strike down arbitration agreements even absent any evidence of congressional intent to preclude arbitration.
See
The United States Supreme Court’s statement in the
Mitsubishi Motors
footnote does not specify whether the source of law that could permit a court to strike down such an agreement is state contract law — in that case, the Puerto Rico’s contract law — or some federal law source.
See
However, six years after it first stated that
Mitsubishi Motors
absolutely forbids the use of broad public policy considerations to strike down arbitration agreements,
see id.,
the Second Circuit relied for the first time on the
Mitsubishi Motors
footnote. In
Roby v. Corporation of Lloyds,
The United States Supreme Court’s decision in
Green Tree Financial Corp-Alabama v. Randolph,
As a technical matter, the standard that the United States Supreme Court set forth in the closing paragraphs of its decision in
Green Tree Financial
was also dicta, as it contemplated alternative circumstances that were not presented in the case.
See, e.g., National Aeronautics and Space Administration v. Nelson,
— U.S. ——,
The Second Circuit was one of the last of the federal Courts of Appeal to follow the
Green Tree Financial
standard.
See American Express I,
Much of the Second Circuit’s reasoning in
American Express I
involved a straightforward application of the
Green Tree Financial
standard. The Second Circuit reasoned that the United States Supreme Court’s decision in
Green Tree Financial
was controlling, to the extent that it stated
In some respects, however, the Second Circuit’s reasoning in
American Express I
went farther than the United States Supreme Court’s reasoning in
Green Tree Financial.
The final pages of the decision include a section entitled “Two Caveats.”
Id.
at 320. In that section, the Second Circuit indicated that, in determining whether a class action waiver provision in an arbitration agreement is or is not enforceable, federáis courts should look to a wide variety of circumstances “including], but ... not limited to, the fairness of the provisions, the cost to an individual plaintiff of vindicating the claim when compared to the plaintiffs potential recovery, the ability to recover attorneys’ fees and other costs and thus obtain legal representation to prosecute the underlying claim, the practical affect that waiver will have on a company’s ability to engaged in unchecked market behavior, and related public policy concerns.”
American Express I,
While the Second Circuit concluded in American Express I that the class action waiver provision in the contract was not enforceable, it declined to decide whether its invalidation of that specific provision required invalidation of the entire arbitration clause. The Second Circuit reasoned that it did not need to determine whether the class action waiver provision was severable from the arbitration agreement since the defendants had indicated before the district court judge that they might not seek to enforce the arbitration agreement in the event that a court were to strike down the class action waiver provision. See id. at 321. Thus, the Second Circuit resolved the appeal by remanding the case to the district court in order to permit the defendants to voluntarily withdraw their motion to compel arbitration. See id. at 321.
In
Ragone,
a decision that came only a few months after
American Express I,
the Second Circuit expanded even further on that earlier decision’s reasoning.
See Ragone,
The Second Circuit declined to decide whether the two offending provisions did or did not make the arbitration clause unconscionable because the employer had agreed not to enforce those two provisions in arbitration.
See id.
at 124 (“We believe that New York law would allow for the enforcement of the arbitration agreement as modified by the defendants’ waivers.”). Nevertheless, just as the final pages of the Second Circuit’s decision in
American Express I
included a “Two Caveats” section,
In that section in
Ragone,
the Second Circuit indicated that it agreed to require arbitration “with something less than robust enthusiasm.”
Id.
The Second Circuit cited the United States Supreme Court’s
Mitsubishi Motors
footnote, and reasoned that the federal common law of arbitrability empowered federal courts to strike down as contrary to federal policy any arbitration agreement that effectively served as a prospective waiver of any party’s right to pursue statutory remedies.
See Ragone,
The Second Circuit strongly indicated that if the television studio had not agreed to waive enforcement of the two offending provisions, it might well have invalidated the arbitration clause in the plaintiffs employment contract. See id. at 125 (“Had the defendants attempted to enforce the arbitration agreement as originally written it is not clear that we would hold in their favor.”). The Second Circuit explained that “the arbitration agreement signed by Ragone includes both a ninety-day statute of limitations for filing an arbitration claim and a fee-shifting provision that requires that fees be awarded to the prevailing party.” Id. at 125-26. The Second Circuit expressed tentative agreement with the plaintiff that the two provisions, taken together, “would significantly diminish a litigant’s rights under Title VII.” Id. at 126. It indicated that “had defendants not waived enforcement, it is at least possible” that it would have voided the entire arbitration agreement as inconsistent with the FAA. Id.
In spite of the Second Circuit’s hint to the defendants in
American Express I,
the defendants in
American Express I
decided not to voluntarily withdraw their motion to compel arbitration. Instead, they petitioned the United States Supreme Court for a writ of certiorari.
See
Petition for Writ of Certiorari,
Italian Colors,
In the meantime, after the Second Circuit issued its decisions in
American Express I
and
Rag one,
but while the
American Express I
defendants’ petition for a writ of certiorari was pending, the United States Supreme Court issued a decision in
Stolt-Nielsen. See
It is possible to read Stolt-Nielsen as rather strongly indicating that arbitration agreements that contain class action waiver provisions are fully enforceable under federal law. The plaintiffs in Stolt-Nielsen had argued before the arbitrators that an agreement to use class action procedures should be inferred from the parties’ arbitration agreement, since an arbitration agreement that did not so provide would be either void against public policy or unconscionable. See id. at 1768. The arbitrators’ decision to infer such a provision appeared to have rested on the plaintiffs’ public policy argument — although, as the United States Supreme Court later pointed out, the arbitrators did not specify the ground of their decision, nor whether it rested on federal law or state law. See id. at 1768. Contrary to that decision, the United States Supreme Court reasoned that parties who agree to arbitration may freely elect to limit available arbitration procedures, and that courts and arbitrators alike must honor such agreements. See id. at 1774-75.
In light of the intervening decision in
Stolt-Nielsen,
the United States Supreme Court granted the
American Express I
defendant’s petition for a writ of certiorari, and vacated and remanded the Second Circuit’s
American Express I
decision for further consideration.
See Italian Colors,
Fensterstock
was the first case in which the Second Circuit had an opportunity to construe the meaning of the United States Supreme Court’s decision in
Stolt-Nielsen. See
The Second Circuit reasoned that
StoltNielsen
stood for the proposition that “the FAA embodies a preference not so much for arbitration as for the enforcement of arbitration agreements.”
Fensterstock,
The Second Circuit’s decision on remand in
American Express II
took its cue from
Fensterstock.
After reconsidering its decision in light of
Stolt-Nielsen,
the Second Circuit panel that decided
American Express I
reaffirmed its earlier decision.
See American Express II,
Stolt-Nielsen states that parties cannot be forced to engage in a class arbitration absent a contractual agreement to do so. It does not follow, as Amex argues, that a contractual clause barring class arbitration is per se enforceable. Indeed, our prior holding focused not on whether the plaintiffs’ contract provides for class arbitration, but on whether the class action waiver is enforceable when it would effectively strip plaintiffs of their ability to prosecute alleged antitrust violations.
The reasoning of
American Express II
is just as expansive as the reasoning of
American Express I.
Like
American Express I, see
b.
The United States Supreme Court has not overruled
American Express II, Ra-gone,
or any of the other cases adopting as a federal common law rule that courts may refuse to enforce arbitration agreements when, under the circumstances, they prevent plaintiffs from effectively vindicating their federal statutory rights.
See Green Tree Financial,
AT & T Mobility
contains the most thorough analysis the United States Supreme Court has yet provided regarding the meaning of 9 U.S.C. § 2, which provides that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
Id.
As set forth in
AT & T Mobility,
that provision was designed to overcome the “judicial hostility towards arbitration ... [that] had manifested itself in ‘a great variety’ of ‘devices and formulas’ declaring arbitration
against public policy.”
As the Court has already discussed, the United States Supreme Court’s holding in AT & T Mobility was quite limited. The precise question presented in the case was whether California’s Discover Bank rule, which “classified] most collective-arbitration waivers in consumer contracts as unconscionable” was preempted by the FAA. Id. The United States Supreme Court ultimately held that that California’s Discover Bank rule was preempted — even though it appeared on its face to be a generally applicable contract law rule — because it was “applied in a fashion that disfavor[ed] arbitration.” Id. at 1747. 11
The Court recognizes that the United States Supreme Court’s holding in
AT & T Mobility
only implicated federal preemption of a particular state law rule. But the Court knows of no principled reason why federal law rules that have essentially the same purpose and effect as the
Discover Bank
rule would continue to be permissible after
AT & T Mobility. See id.
at 1753
That said, there are some caveats in the United States Supreme Court’s decision in
AT & T Mobility
that could conceivably be read as vindicating decisions like
American Express II.
To be clear, none of the three opinions in
AT & T Mobility
cites either
Green Tree Financial
or the
Mitsubishi Motors
footnote. That said, in response to the dissenters’ argument that class proceedings were necessary under the circumstances presented in the case to allow the plaintiffs to prosecute their small-dollar claims,
see AT & T Mobility,
This Court has doubts about the continuing validity of
Ragone.
Because the Second Circuit decided that case before the Supreme Court’s decisions in
Stolt-Nielsen
and
AT & T Mobility,
the panel that decided the appeal in that case did not have the benefit of the Supreme Court’s reasoning in those two cases. However, the Court remains obligated to follow
Ragone
here, and
Ragone
could hardly be any clearer. It strongly indicates that when a plaintiff seeks to vindicate federal statutory rights, an arbitration clause that both requires the plaintiff to pay the defendants’ costs and fees if she does not prevail
and
contractually shortens the statute of limitations on the plaintiffs federal law claim cannot be enforced.
See Ragone,
Furthermore, even if
Ragone
did not indicate that those two provisions, when combined, can have the effect of preventing a plaintiff from vindicating important federal statutory rights, this Court would likely hold that the FLSA’s statute of limitations cannot be contractually shortened. As the Ninth Circuit has recognized in a line of cases that this Court finds persuasive, the FLSA’s statute of limitations provision,
see
29 U.S.C. § 255, is part and parcel of a federally-guaranteed substantive right.
See Davis v. O’Melveny & Myers,
In any event, however, Defendants have unconditionally conceded that they will not seek to enforce either the cost- and fee-shifting provision or the statute of limitations provision in the Lease.
See
Notice [doc. # 52],
Ragone
holds that when a defendant agrees not to enforce such offending provisions, a district court may require arbitration in light of the defendant’s concession.
See
Plaintiffs’ counsel believes that Defendants should be required to make their concession with regard to
every
exotic dancer who ever signed the Lease.
See
Mot. for Clarification [doc. # 53] at 1-2. Plaintiffs’ counsel also suggests that this Court should issue a notice to other exotic dancers so that they may attempt to intervene in this case
before
the Court decides Defendants’ pending motion.
See id.
at 2. The Court believes that Plaintiffs’ counsel’s position is inconsistent with
Ragone,
which also appears to have involved a form employment contract.
See
That said, the Court’s decision here is in the public record, and the Court believes that it has strongly indicated that it is only enforcing the arbitration clause in the Lease because of Defendants’ concession. Plaintiffs’ counsel is free to share the Court’s decision with other exotic dancers who may wish to bring claims against Defendants, and is free to cite this Court’s decision in other cases before this Court or before other district court judges. Plaintiffs’ counsel is free to cite the Second Circuit’s strong language in Ragone in any other cases she files against Defendants, although she neglected to do so in her briefs in this case. The Court hopes that in light of this decision, Defendants will agree to the same concession they eventually made in this case, even though they may not by bound to do so. The Court hopes that Defendant will not put either cost- and fee-shifting provisions or statute of limitations shortening provisions into their contracts in the future.
This Court has some doubt about
American Express II
in light of
AT & T Mobility,
but again, the Court remains obligated to apply
American Express II.
The rule set forth by the Second Circuit in
American Express II
is that “a party seekfing] to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive ... bears the burden of showing the likelihood of incurring such costs.”
American Express II,
As this Court reads
American Express II,
the decision requires this Court to inquire into whether it is economically feasible for Plaintiffs to proceed in individual arbitrations, rather than a collective or class action in federal court, given all of the procedural features that are specified in the arbitration clause in the Lease.
See
In addition to
American Express II,
Plaintiffs rely on a recent district court decision from within the Second Circuit invaliding an arbitration agreement under the
American Express II
rule.
See Sutherland v. Ernst & Young, LLP,
By contrast to the plaintiffs in
American Express II
and
Sutherland,
Plaintiffs here have not shown any likelihood that they will incur prohibitively high costs if this Court enforces the arbitration clause, including the provision banning col
Plaintiffs argue that they may not recover the full amount they seek, particularly if Defendants are able to prevail on possible counterclaims against Plaintiffs to recover fees paid directly to Plaintiffs by the Clubs’ clients. But the
American Express II
test requires this Court to look into Plaintiffs “potential recovery,”
As to the expense of bringing individual arbitration actions, Plaintiffs initially submitted various declarations and materials regarding the cost arbitration before the AAA, suggesting that the cost of an individual arbitration could approach $60,000.
See
Tab 2 to Churchill Decl. [doc. # 26-1] at 2; Tab 1 to Liss-Riordan Decl. [doc. #26-6]. But in their briefs and at oral argument, Defendants conceded that because this case involves employment-related claims, the AAA Employment Rules will apply.
See
Defs.’ Reply [doc. # 38] at 14. Under the AAA Employment Rules, Defendants must bear the costs of arbitration above an initial $175 filing fee.
See
Tab 1 to Genna Decl. [doc. # 39-7];
see also Cooper v. MRM Investment Co.,
Thus, it appears that each Plaintiffs potential recovery is at least $20,000 — including double damages under the FLSA—
plus
costs and attorney fees, and that each Plaintiffs total out-of-pocket costs will be only a $175 filing fee plus attorney fees. Defendants have also conceded that they will not seek to recover fees and costs from Mr. D’Antuono and Ms. Vilnit in the
V.
In sum, the Court concludes that there is no genuine dispute that Ms. D’Antuono and Ms. Vilnit agreed to arbitration and that Ms. Cruz did not; that the arbitration agreement in the Lease is neither substantively nor procedurally unconscionable under Connecticut law; and that in light of Defendants’ concessions regarding certain provisions in the arbitration agreement and the amount of damages that Ms. D’Antuono and Ms. Vilnit seek individually, Plaintiffs cannot carry their burden under
American Express II
of showing a likelihood that requiring arbitration will deprive them of any opportunity to vindicate their federal statutory rights. See
As a result of the Court’s decision, Plaintiffs’ Motion for Clarification [doc. # 53] is DENIED as moot. That said, the Court has not dismissed Ms. Cruz’s claim and has stayed, rather than dismissed, Ms. D’Antuono’s and Ms. Vilnit’s claims. This case will thus remain pending on the Court’s docket. If other plaintiffs file complaints against the same Defendants in the District of Connecticut, and those plaintiffs raise substantially the same issues that are raised in this case, those plaintiffs make seek to have their complaints considered by this Court, rather than by a different judge, in the interests of justice and convenience, and also to avoid conflicting results.
IT IS SO ORDERED.
Notes
. In their memorandum in support of the pending motion, Defendants point out that Plaintiffs have sued the wrong defendants, in that Service Road and Cousin Vinnie’s own and operate the Clubs’ Hartford locations, not the Clubs' Groton locations. See Mem. in Supp. [doc. #13] at 1 n. 1. Two different companies controlled by the same individuals, C & G of Groton, Inc. and RCG of Groton, Inc., actually own the Clubs’ Groton locations. See id. But Defendants do not argue that Plaintiffs’ mistake requires dismissal of this case. Plaintiffs may amend their Complaint to name the correct Defendants. See Fed.R.Civ.P. 15(a)(2) (“The court should freely give leave [to amend] when justice so requires.”).
. As the Court pointed out at oral argument, Ms. D'Antuono and Ms. Vilnit could have argued that the Lease does not preclude them from suing Defendants in federal court for violations of federal or state labor laws that occurred before Ms. D’Antuono and Ms. Vilnit signed the Lease and after the Lease ended. But that argument was nowhere to be found in Ms. D’Antuono’s and Ms. Vilnit’s briefing. Furthermore, their counsel made no attempt whatsoever to press that argument even when the Court suggested it to her at oral argument.
. The Complaint also repeatedly indicates that the Lease misclassified Plaintiffs as independent contractors. See Compl. [doc. # 1] ¶ 1. It says nothing about the fact that Plaintiffs were actually considered tenants according to the terms of the Lease, not independent contractors.
. Parties may contract to have the very issue of arbitrability decided by an arbitrator, rather than a court.
See Shaw Group, Inc. v. Triplefine International Corp.,
. Plaintiffs’ counsel suggested for the first time at oral argument that because Ms. Cruz did not agree to arbitration, she may be able to bring a collective action or class action on behalf of Ms. D'Antuono, Ms. Vilnit, and others even if they are bound by the arbitration clause. The Court does not reach that argument, which was never presented in any written brief, but notes that FLSA collective or class actions máy only proceed on an opt-in basis. See 29 U.S.C. § 216(b) (“No employee shall be a party plaintiff to any ... action [to recover damages under the FLSA] unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.”).
. They could not have prevailed even if they did. Duress consists in either physical or other improper threats which leave a person with no other choice but to manifest assent. See Restatement (Second) of Contracts § 174, 175 (1981). There is nothing at all in the record before the Court to suggest that Ms. D’Antuono or Ms. Vilnit signed the Lease under duress.
. As the Court has already indicated, there is no merit to Ms. D’Antuono’s and Ms. Vilnit’s argument that the Court should overlook their negligence in failing to read the Lease and arbitration agreement. That argument relates to the formation of the agreement, not to the procedural unconscionability issue.
. In
Fensterstock v. Education Finance Partners,
the Second Circuit held that the FAA did not preempt California’s
Discover Bank
rule.
See Fensterstock,
. As the Court previously noted,
AT & T Mobility
directly overruled the Second Circuit's
. To be precise, only two of the three Second Circuit judges who decided
American Express I
participated in the case on remand, as then-Judge Sonia Sotomayor was a member of the original panel before she became an Associate Justice.
See American Express II,
. As commentators have already pointed out, the United States Supreme Court's interpretation of the FAA in AT & T Mobility is just that — an interpretation of a statute. Editorial, Carving Out Class-Action Exceptions, L.A. Times, May 17, 2011, http://www.latimes. com/news/opmiorVopinionla/la-edclassaction-20110517,0,7127456.story. Congress is free to override the United States Supreme Court's interpretation of the FAA if it wishes to do so.