United States District Court, D. Colorado
CHADA MANTOOTH, GALE RAFFAELE, ALEXIS NAGLE, and NICOLE BUJOK, individually and on behalf of all others similarly situated, Plaintiffs,
BAVARIA INN RESTAURANT, INC., d/b/a Shotgun Willie's, and DEBRA MATTHEWS, Defendants.
ORDER GRANTING IN PART DEFENDANTS' RENEWED MOTION
TO COMPEL INDIVIDUAL ARBITRATION AND DISMISS OR STAY
William J. Martinez United States District Judge
Chada Mantooth, Gale Raffaele, Alexis Nagle, and Nicole Bujok
(“Plaintiffs”) allege that Defendants Bavaria Inn
Restaurant Inc. d/b/a Shotgun Willie's (“Shotgun
Willie's”) and its owner Debra Matthews
(“Matthews”) (jointly, “Defendants”)
improperly classified Plaintiffs as independent contractors
and violated the Fair Labor Standards Act, 29 U.S.C.
§§ 201 et seq. (“FLSA”), the
Colorado Wage Claim Act, Colo. Rev. Stat. §§
8-4-101 et seq. (“CWCA”), and Colorado
common law. (ECF. No. 1.) Currently before the Court are four
motions, including Defendants' Renewed Motion to Compel
Individual Arbitration and Dismiss or Stay Proceedings
(“Motion to Compel”). (ECF No. 57.) Defendants
argue that the terms of contracts between Plaintiffs and
Shotgun Willie's and the Federal Arbitration Act, 9
U.S.C. §§ 1 et seq., require Plaintiffs to
bring their claims in individual arbitration proceedings.
reasons explained below, the Court grants in part
Defendants' Motion to Compel. The Court finds that
Plaintiffs' claims must be submitted to individual
arbitration, although certain provisions of the arbitration
clause must in the interest of justice be severed. Because
this dispute must be submitted to arbitration, the Court
denies the other pending motions, ECF Nos. 43, 44, and 83, as
moot. However, with respect to ECF No. 43, Plaintiffs'
Expedited Motion to Proceed as a Conditional Collective
Action, Provide Notice, and Toll All Statutes of Limitations,
dismissal is without prejudice to the refiling of the motion
if there is a legal basis to do so after the disposition of
are four individuals who, on behalf of themselves and those
similarly situated, sued Defendants for violations of the
FLSA, the CWCA, and Colorado common law. (ECF No. 1.) In
their Complaint, Plaintiffs allege that Defendants-an adult
entertainment club and its owner-improperly classified them
as independent contractors rather than employees.
Specifically, Plaintiffs allege that, because they were
actually employees and not independent contractors,
Defendants violated the FLSA and CWCA by failing to pay a
proper minimum wage or overtime, requiring that Plaintiffs
share tips, charging fees for Plaintiffs to work at Shotgun
Willie's, and charging Plaintiffs “inappropriate
fines.” (ECF No. 1 ¶¶ 110, 116-120, 128,
not alleged in the Complaint, both parties acknowledge in
their briefing that Plaintiffs signed “Entertainment
License Agreements” (“Agreements”). (ECF
Nos. 57 & 86.) These Agreements disclaim any
employer-employee relationship and classify Plaintiffs as
licensees. (ECF No. 57-2 ¶ 13.C.)
Agreements also contain an arbitration provision
(“arbitration clause”), written in bold and all
capital letters, that commits the parties to arbitrate
“any controversy, dispute, or claim . . . arising out
of this agreement.” (Id. ¶
The parties also delegate exclusive authority regarding
arbitrability to an arbitrator: “The arbitrator shall
have exclusive authority to resolve any disputes over the
validity and/or enforceability of any part of this agreement,
including this paragraph 22 to arbitrate any and all
claims.” (“delegation clause”)
(Id. ¶ 22.A.)
parties also agreed to certain terms related to the
arbitrator and costs of the arbitration. The arbitration
“shall be administered by a neutral arbitrator agreed
upon by the parties.” (Id. ¶ 22.A.) The
only other condition for selecting the arbitrator is that
either party may “request an arbitrator experienced in
the adult entertainment industry.” (Id. ¶
22.A.) The arbitration clause also contains four provisions
concerning the cost and fees arising out of the arbitration:
• “The costs of the arbitration shall be borne
equally by the entertainer and the club unless the arbitrator
concludes that a different allocation is required by
law.” (Id. ¶ 22.A.)
• “In the event that any party challenges, or is
required to initiate proceedings to enforce, the arbitration
requirements of this paragraph 22, the prevailing party to
such challenges and/or enforcement proceedings shall be
entitle to an award of all costs, including actual and
reasonable attorney fees, incurred in litigation such
issues.” (Id. ¶ 22.D.)
• “Any ruling arising out of a claim between the
parties shall, to the extent not precluded by applicable law,
award costs incurred for the proceedings and reasonable
attorney fees to the prevailing party.” (Id.
• The arbitrator “shall be permitted to award,
subject only to the restrictions contained in this paragraph
22, any relief available in a court.” (Id.
than two months after Plaintiffs filed their Complaint (ECF
No. 1), in late June 2017, Defendants moved to compel
arbitration. (ECF No. 23.) Before this Court ruled on the
motion, the parties agreed to limited discovery regarding the
formation of the Agreements. (ECF No. 34.) The Court granted
an unopposed request to defer briefing and consideration of
the initial motion to compel and denied that motion without
prejudice, subject to later re-filing. (ECF No. 38.) In
October 2017, Defendants renewed their motion to compel (ECF
No. 57), and it is that motion which is now before the Court.
to § 2 of the Federal Arbitration Act
(“FAA”), a written agreement to submit a
controversy to arbitration “shall be valid,
irrevocable, and enforceable.” 9 U.S.C. § 2.
Congress enacted the FAA to statutorily enshrine a
“liberal federal policy favoring arbitration” in
response to judicial hostility to arbitration agreements.
AT&T Mobility LLC v. Concepcion, 563 U.S. 333,
339 (2011); see also Hall Street Assocs. LLC v. Mattel,
Inc., 552 U.S. 576, 581 (2008). An arbitration agreement
stands on equal footing with other contracts and a court is
required to enforce such an agreement according to its terms.
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63
(2010). Such an agreement is generally enforced as written,
“save upon such grounds as exist at law or in equity
for the revocation of any contract.” 9 U.S.C. § 2.
Grounds for invalidation of an arbitration agreement include
contract defenses, such as fraud, duress, or
unconscionability. Rent-A-Center, 561 U.S. at 68.
Court looks to Colorado contract law to determine whether an
arbitration agreement is enforceable. THI of New Mexico
at Hobbs Center, LLC v. Patton, 741 F.3d 1162, 1167
(10th Cir. 2014) (stating that an arbitration can be voided
on state law grounds for revoking a contract). Colorado
courts consider the following to decide whether a contract or
provisions thereof are unconscionable:
(1) the use of a standardized agreement executed by parties
of unequal bargaining power; (2) the lack of an opportunity
for the customer to read or become familiar with the document
before signing it; (3) the use of fine print in the portion
of the contract containing the provision in question; (4) the
absence of evidence that the provision was commercially
reasonable or should reasonably have been anticipated; (5)
the terms of the contract, including substantive fairness;
(6) the relationship of the parties, including factors of
assent, unfair surprise, and notice; and (7) the
circumstances surrounding the formation of the contract,
including setting, purpose, and effect.
Bernal v. Burnett, 793 F.Supp.2d 1280, 1286 (D.
Colo. 2011) (citing Davis v. M.L.G. Corp., 712 P.2d
985, 991 (Colo. 1986)). The Davis factors, so named
for the Colorado Supreme Court case which set forth the
relevant factors to be considered on this issue, require both
procedural and substantive unconscionability for a contract
to be unenforceable. Vernon v. Qwest Commc'ns.
Int'l, Inc., 857 F.Supp.2d 1135, 1157 (D. Colo.
to an arbitration agreement must specifically contest the
formation of the arbitration clause; a challenge to the
contract as a whole is not sufficient.
Rent-A-Center, 561 U.S. at 72 (“[U]nless
[plaintiff] challenged the delegation provision specifically,
we must treat it as valid under § 2 [of the FAA], and
must enforce it under §§ 3 and 4, leaving any
challenge to the validity of the Agreement as a whole for the
arbitrator.”); Prima Paint Corp. v. Flood &
Conklin Mfg. Co., 388 U.S. 395, 404 (1967). If the party
opposing arbitration does not specifically challenge the
validity of the arbitration provision and the contract
contains a savings clause, the agreement to arbitrate may be
severed from the remainder of an otherwise-unenforceable
contract. Rent-A-Center, 561 U.S. at 70-71; see
Santich v. VCG Holding Corp., 2017 WL 4251944 (D. Colo.
Sept. 26, 2017). “[D]oubts are to be resolved in favor
of arbitrability.” Coors Brewing Co. v. Molson
Breweries, 51 F.3d 1511, 1514 (10th Cir. 1995).
arbitration agreement may delegate issues of arbitrability to
an arbitrator. Rent-A-Center, 561 U.S. at 68-69
(“We have recognized that parties can agree to
arbitrate ‘gateway' questions of
‘arbitrability, ' such as whether the parties have
agreed to arbitrate or whether their agreement covers a
particular controversy.”). A so-called
“delegation clause” is “simply an
additional, antecedent agreement the party seeking
arbitration asks the federal court to enforce, ” and is
generally enforced as any other arbitration agreement under
the FAA. Id. at 70. As with challenges to an
arbitration clause, a party resisting delegation of
arbitrability must specifically direct arguments at the
delegation clause; otherwise the argument is for the
arbitrator to resolve. See Id. at 72. However,
rather than resolving all doubts in favor of arbitrability, a
court “should not assume that the parties agreed to
arbitrate arbitrability unless there is clear and
unmistakable evidence that they did so.” First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995)
(internal citations omitted). The “clear and
unmistakable” standard applies to the parties'
intent to arbitrate, not the validity of the agreement.
See Rent-A-Center, 561 U.S. at 69 n.1.
addition to considering contract defenses, a court must also
evaluate whether arbitration will allow for effective
vindication of a party's claims. Nesbitt v. FCHN,
Inc., 811 F.3d 371, 376-77 (10th Cir. 2016); Sanchez
v. Nitro-Lift Techs, L.L.C., 762 F.3d 1139, 1149 (10th
Cir. 2014). If the terms of the arbitration clause would
prevent a party's effective vindication of its claims, a
court may strike the portion which prevents effective
vindication and compel arbitration on the remaining terms.
Pollard v. ETS PC, Inc., 186 F.Supp.3d 1166, 1176-78
(D. Colo. 2016). If the party resisting arbitration argues
that the cost of arbitration would prevent effective
vindication, that party has the burden to show that
arbitration would be “prohibitively expensive.”
Sanchez, 762 F.3d at 1149.
Court will first consider who has the power to
decide whether the dispute is arbitrable. See Belnap v.
Iasis Healthcare, 844 F.3d 1272, 1281 (10th Cir. 2017)
(“[T]he question of who should decide
arbitrability precedes the question of whether a
dispute is arbitrable.”) (emphasis in original). Based
on the plain language of the Agreements, the parties clearly
and unmistakably intended to delegate arbitrability to the
arbitrator. See Rent-A-Center, 561 U.S. at 69 n.1;
Santich, 2017 WL 4251944, at *4. Despite
Plaintiffs' arguments that the Agreements are
unconscionable, as will be discussed in greater detail below,
the Court finds that Plaintiffs do not specifically attack
the delegation clause, and therefore, it is the arbitrator
who must resolve any challenge to the enforceability of the
Agreements. See Rent-A-Center, 561 U.S. at 72.
However, the Court also finds that several provisions of the
arbitration and delegation clauses prevent Plaintiffs'
effective vindication of their statutory rights in
arbitration. Because the Agreements contain a severability
clause, the Court finds that the invalid portions are
severable from the arbitration clause.
for the reasons explained below, the Court strikes from the
arbitration clause the fee-shifting provisions, the
cost-sharing requirement for certain Plaintiffs, and the
industry expert arbitrator selection requirement. Subject to
the severance of these provisions, all disputes regarding the
validity of the contracts, unconscionability, and the class
action waiver are properly delegated to the arbitrator to
decide the arbitrability of the claim. Finally, the Court
also finds that nonsignatory Defendant Matthews may compel
deciding any issues of the arbitrability of the dispute, the
Court must first consider who should decide
questions of arbitrability. Belnap, 844 F.3d at 1281
(“The question of who should decide arbitrability
precedes the question of whether a dispute is
arbitrable.”). The Court first considers whether the
parties evinced a clear and unmistakable intent to delegate
validity disputes to the arbitrator. First Options of
Chicago, 514 ...