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Santich v. VCG Holding Corp.
Supreme Court of Colorado, En Banc
June 24, 2019
Georgina Santich, Amanda Livingston, Rebecca Rail, Amanda Gabriel, Casandra Windecker, Gale Raffaele, Adrianne Axelson, Amanda Shafer, Brandi Campbell, Penny Watkins, Arielle Mansfield, Emily Bachelder, Amrica Terrell, Melanie Tracy, Ashley Wozneak, Laportia Oakley, Alexis Nagle, Janel Anderson, Porscha Green, Johanna Grissom, Karla Martinez, Amy Glines, Chada Mantooth, Ariel Cline, Alena Bailey, Jessica Saulters-Archuleta, Melissa Chavez, Talita Catto, Megan Fitzgerald, Christina Massaro, Andrea Abbott, Nicole Bujok, Rachel Berry, and Kimberly Hale, all individually and on behalf of all others similarly situated, Plaintiffs
VCG Holding Corp.; Lowrie Management, LLLP; Denver Restaurant Concepts LP d/b/a PT's Showclub; Troy Lowrie; Michael Ocello; Kenkev, II, Inc. d/b/a PT's Showclub Portland; Indy Restaurant Concepts, Inc. d/b/a PT's Showclub Indy; Glenarm Restaurant LLC d/b/a Diamond Cabaret; Glendale Restaurant Concepts, LP d/b/a The Penthouse Club; Stout Restaurant Concepts, Inc. d/b/a La Boheme; and VCG Restaurants Denver, Inc. d/b/a PT's All Nude. Defendants
Certification of Question of Law United States District Court
for the District of Colorado Case No. 17CV00631-RM-MEH
Attorneys for Plaintiffs: Killmer, Lane & Newman, LLP
Mari Newman Liana Orshan Towards Justice David H. Seligman
Attorneys for Defendants: Berg Hill Greenleaf & Ruscitti
LLP Rudy E. Verner Jackson Lewis P.C. Collin O'Connor
Udell Hartford, Connecticut Jackson Lewis P.C. Ryan P.
Lessmann Melisa H. Panagakos Jackson Lewis P.C. Allan S.
Attorneys for Amicus Curiae the Colorado Trial Lawyers
Association: Lowrey Parady, Attorneys at Law Sarah J. Parady
Attorneys for Amici Curiae National Employment Lawyers
Association and Plaintiff Employment Lawyers Association:
Sweeney & Bechtold, LLC Joan M. Bechtold
Under Colorado law, equitable estoppel requires proof of four
elements. One of those elements has long been detrimental
reliance on the words or actions of the party against whom
estoppel is sought. In this case, we accepted jurisdiction
over a certified question of law from the United States
District Court for the District of Colorado that requires us
to determine whether there should be an exception to that
requirement in the context of arbitration
agreements. We hold that Colorado's law of
equitable estoppel applies in the same manner when a dispute
involves an arbitration agreement as it does in other
contexts. Thus, a nonsignatory to an arbitration agreement
can only assert equitable estoppel against a signatory in an
effort to compel arbitration if the nonsignatory can
demonstrate each of the elements of equitable estoppel,
including detrimental reliance.
Facts and Procedural History
In 2017, a group of current and former exotic dancers sued
the owners of clubs where they perform and the club
owners' corporate parent companies in the United States
District Court for the District of Colorado. The plaintiffs
allege in their amended complaint that the defendants acted
in concert to wrongfully deprive the dancers of basic
protections provided by law to employees. The plaintiffs
contend that they have been misclassified as nonemployee
"independent contractors" or "lessees"
pursuant to "Entertainment Lease" agreements that
identify the club-owner defendants as "landlords"
rather than employers. According to the plaintiffs'
pleadings, the club-owner and corporate-parent defendants are
jointly and severally liable for denying the dancers earned
minimum wages and overtime pay, confiscating or otherwise
misallocating their gratuities, charging them fees to work,
and subjecting them to onerous fines.
The club-owner defendants have successfully compelled
arbitration of the plaintiffs' claims based on the
arbitration clause included in the agreements the dancers
signed with the club owners. The corporate-parent defendants
seek to do the same, but because they were not parties to the
agreements or to any other written contract with the dancers,
they have to find a different hook to compel the dancers into
arbitration. They argue that the dancers should be equitably
estopped from litigating their claims against one set of
defendants because they are in compelled arbitration of the
same claims against the other set of defendants.
A federal magistrate judge examined Colorado state contract
law and recommended that the district court accept that
argument and compel the arbitration of the plaintiffs'
claims against the corporate-parent defendants. The
recommendation was predicated, in large part, upon a
prediction that this court would agree with the court of
appeals' decision in Meister v. Stout, 2015 COA
60, 353 P.3d 916. In that case, a division of the court of
appeals concluded that when a signatory to a contract
containing an arbitration clause asserts a claim arising from
that contract against a defendant who was not a party to the
contract, he may be estopped from avoiding arbitration and
instead be compelled to arbitrate by and with the
nonsignatory defendant. Id. at ¶¶ 6,
13-18, 353 P.3d at 919, 920-22. Relying on Meister,
the magistrate judge determined that, although they had not
signed the agreements, the corporate-parent defendants are
entitled to enforce the arbitration provisions against the
plaintiffs because the claims asserted against all defendants
are interdependent and intertwined with duties and
obligations in the Leases. The plaintiffs challenged the
magistrate judge's recommendation, urging the federal
district court to certify to this court the question whether
nonsignatories to an arbitration agreement may invoke the
doctrine of equitable estoppel in the absence of a showing of
The federal district court observed that "[a]s it
currently stands, Meister fails to address the
[reliance] issue and the Court is unclear whether this
element is required under Colorado law . . . [because] there
is no controlling precedent in the decisions of the Colorado
Supreme Court." The district court therefore certified
the question to this court, and we accepted the
certification. See C.A.R. 21.1.
The enforceability of arbitration agreements is governed by
traditional principles of state contract law. Arthur
Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009).
In most instances, only the parties to a contract can compel
arbitration under that contract and only as to another
signatory of the contract. See N.A. Rugby Union LLC v.
U.S. Rugby Football Union, 2019 CO 56, ¶20, ___P.3d
___. If no such agreement exists between particular
litigants, as is the case here, there are certain limited
circumstances in which a nonsignatory to an arbitration
agreement may compel a signatory to arbitrate. Id.
at ¶ 21. These limited circumstances include: "(1)
incorporation of an arbitration provision by reference in
another agreement; (2) assumption of the arbitration
obligation by the nonsignatory; (3) agency; (4)
veil-piercing/alter ego; (5) estoppel; (6)
successor-in-interest; and (7) third-party beneficiary."