Israsena et al v. Chalak M&M AR1 LLC et al
OPINION AND ORDER granting 27 32 Motions to Compel. Signed by Judge J. Leon Holmes on 7/23/2015. (ks)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
ANDREW IRASENA, individually and on
behalf of all others similarly situated; KAYONA
LANGSTON, individually and on behalf of all others
similarly situated; CHAUNCEY DURHAM, individually
and on behalf of all others similarly situated; JAMUSON
SCOTT, individually and on behalf of all others similarly
situated; BRITTANY GOODWIN, individually and
on behalf of all others similarly situated; BARBARA
BLACKFORD, individually and on behalf of all others
similarly situated; JAMES MAYERS, individually
and on behalf of all others similarly situated; JAMES
FEAZELL, individually and on behalf of all others
similarly situated; HALEY O’BRIEN, individually
and on behalf of all others similarly situated; HEATHER
MCKNIGHT, individually and on behalf of all others
similarly situated; SHAQUILLE FIELDS, individually
and on behalf of all others similarly situated; BRANDY
MITCHELL, individually and on behalf of all others
similarly situated; BRIA TUCKER, individually and
on behalf of all others similarly situated; JARED BROWNER,
individually and on behalf of all others similarly situated;
BRANDUN BRADSHAW, individually and on behalf
of all others similarly situated; and AMANDA KING,
individually and on behalf of all others similarly situated
No. 4:15CV00038 JLH
CHALAK M&M AR1 LLC; CHALAK M&M AR2
LLC; CHALAK M&M LLC; and DINO NITHIANANDAN
OPINION AND ORDER
This is a collective action brought by former employees of the Genghis Grill restaurant in
Little Rock, Arkansas, against their employer for violations of the Fair Labor Standards Act. The
plaintiffs allege that Genghis Grill mandated an invalid tip-pooling arrangement and failed to pay
minimum wage for time spent performing non-tip-producing duties. The defendants have filed
motions to compel arbitration with plaintiffs Brandy Mitchell, Amanda King, and Chauncey
Durham. For the reasons explained below, the motions are granted.
In 2014, Genghis Grill instituted a new policy that required newly hired employees to
complete their personnel paperwork online. That paperwork included an arbitration agreement. The
arbitration agreement contained a paragraph that provides, in pertinent part:
6. Costs of Arbitration: Genghis Grill will pay all costs unique to arbitration (as
compared to the costs of adjudicating the same claims before a court or agency),
including the regular and customary arbitration fees and expenses. . . . Each party
shall pay its own attorneys’ fees and any costs that are not unique to the arbitration
(i.e., costs that each party would incur if the claim(s) were litigated in a court or
agency such as costs to subpoena witnesses and/or documents; take depositions and
purchase deposition transcripts; copy documents; etc.). Any dispute as to whether
a cost is unique to arbitration shall be resolved by the arbitrator. The arbitrator may
award reasonable fees and costs or any portion thereof to the prevailing party to the
same extent a court or agency would be entitled to do so, in accordance with
Document #27-1 at 8. The arbitration agreement also contains a provision with the following
8. Modification: This Agreement may be modified or terminated only by a writing
accepted by Employee and signed by a senior officer of Genghis Grill, or by Genghis
Grill after 30 days’ written notice to Employee. Any modification or termination of
this Agreement shall be prospective only and shall not apply to any claims or
disputes that are pending in arbitration or that have been initiated by either party
pursuant to this Agreement prior to the expiration of the 30-day period.
Id. Finally, the agreement contains a forum selection clause, which states that any arbitration
hearing will be held in Dallas, Texas. Id. at 7.
In March 2014, King began working for Genghis Grill. King was issued a unique user name
and password to access Genghis Grill’s electronic portal. On March 24, 2014, King logged on to
the electronic portal, established her electronic signature, and consented to use the portal to review
and execute documents. King then indicated her acceptance of the arbitration agreement by clicking
check boxes next to each numbered paragraph and signing her electronic signature at the end of the
In May 2014 Durham began working at Genghis Grill. Durham was issued a unique user
name and password to the electronic portal. On May 23, 2014, Durham executed the arbitration
agreement by means of the electronic portal in the same manner just described.2
Other current and former Genghis Grill employees brought suit against Genghis Grill for
minimum wage violations under the Fair Labor Standards Act. See Swaney v. M&M Mongolian
LLC, Case No. 4:14-CV-0110 JLH. By October 2014, all defendants in that action accepted
Genghis Grill’s offer of judgment. Shortly thereafter, Genghis Grill also required its then-current
employees to complete the arbitration agreement within one week.
In November 2014, Mitchell, who began working at Genghis Grill in August 2011, was
issued a unique user name and password. On November 4, 2014, she logged on to the electronic
portal and executed the arbitration agreement.3
On January 15, 2015, the plaintiffs brought this action.
Although King states in her declaration that she did not know that the electronic paperwork
contained an arbitration agreement, Genghis Grill has provided King’s electronically signed and
dated copy of the agreement. See Document #32-1 at 9-13.
Although Durham states in his declaration that he does not recall receiving a user name or
password, Genghis Grill has provided Durham’s electronically signed and dated copy of the
agreement. See Document #32-1 at 14-18.
Mitchell states in her declaration that she was required to generate passwords for other
employees and to fill out their electronic paperwork without their knowledge or consent. However,
there is no evidence to indicate that Mitchell filled out paperwork for either King or Durham. To
the contrary, both King’s and Durham’s paperwork had been completed months prior to Mitchell’s
dealings with the paperwork, which took place in November 2014.
Genghis Grill seeks to compel the plaintiffs to arbitrate their claims as outlined in the
A party attempting to compel arbitration must first establish that the dispute
in question falls within the scope of a valid arbitration agreement. In re Oakwood
Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex.1999). If the other party resists
arbitration, the trial court must determine whether a valid agreement to arbitrate
exists. Id.; TEX. CIV. PRAC. & REM. CODE § 171.021. The trial court's
determination of the arbitration agreement's validity is a legal question subject to de
novo review. In re Kellogg Brown & Root, 80 S.W.3d 611, 615 (Tex. App.-Houston
[1st Dist.] 2002, orig. proceeding). If the trial court finds a valid agreement, the
burden shifts to the party opposing arbitration to raise an affirmative defense to
enforcing arbitration. Oakwood, 987 S.W.2d at 573.
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003) (alteration in original).4 Here, the
plaintiffs do not dispute that their claims come within the scope of the arbitration agreement, nor do
they argue that they did not execute the agreement. However, the plaintiffs do seek to block
enforcement of the arbitration agreement, arguing that it is illusory and that enforcement would be
Hence, the plaintiffs bear the burden of proving that the agreement is
The plaintiffs contend that Genghis Grill retains the exclusive right to unilaterally modify
or terminate the arbitration agreement after 30 days’ notice and that the agreement does not contain
a savings clause like that approved in In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002). They
contend that the savings clause here differs from that in Haliburton because it allows Genghis Grill
to modify or terminate the agreement with respect to claims of which it has actual knowledge but
for which arbitration has not been initiated. The plaintiffs further contend that, if Genghis Grill
The parties do not dispute that this action is governed by the Federal Arbitration Act and
the laws of the State of Texas.
desired to bring suit against an employee, nothing in the arbitration agreement would prevent it from
giving notice of termination of the agreement and then bringing suit against him or her after 30 days.
In Halliburton, the Texas Supreme Court found that the employer’s promises in a binding
arbitration agreement were not rendered illusory by its amendment/modification provision because
it included a savings clause stating that “no amendment shall apply to a Dispute of which the
Sponsor [Halliburton] had actual notice on the date of amendment” and that “termination shall not
be effective until 10 days after reasonable notice of termination is given to Employees or as to
Disputes which arose prior to the date of termination.” Id. at 569-70 (alteration in original). Texas
courts have extended Halliburton by upholding arbitration agreements that allow the employer to
amend or terminate the agreement except with respect to disputes in which the arbitration process
has already been initiated. See Nabors Drilling USA, LP v. Pena, 385 S.W.3d 103, 107-09 (Tex.
App. 2012) (holding that an arbitration agreement was enforceable where the inability to modify or
terminate was “limited to disputes where arbitration has been initiated.”); In re Champion
Technologies, Inc., 222 S.W.3d 127, 132 (Tex. App. 2006) (enforcing an arbitration agreement
where the savings clause allowed the employer to amend or terminate the agreement except in case
of a dispute for which arbitration has already been initiated). Furthermore, “[s]ince Halliburton, the
Supreme Court has consistently held that when an arbitration agreement contains a savings clause
that makes any amendment or termination operate prospectively only, it is not an illusory
agreement.” Nabors Drilling, 385 S.W.3d at 107.
Here, the savings clause expressly states that “[a]ny modification or termination of this
Agreement shall be prospective only” and that no modification or termination shall apply to claims
or disputes that have been initiated within 30 days of the employer’s written notice to the employee.
These provisions do not give Genghis Grill“the unilateral, unrestricted right to terminate the
arbitration agreement.” See J.M. Davidson, Inc., 128 S.W.3d at 230 n.2. Therefore, it is not an
The plaintiffs next argue that the agreement is unconscionable for various reasons.
Arbitration agreements are favored under both federal and Texas law. In re Olshan Found. Repair
Co., LLC, 328 S.W.3d 883, 892 (Tex. 2010).
Unconscionable contracts, however—whether relating to arbitration or
not—are unenforceable under Texas law. A contract is unenforceable if, “given the
parties’ general commercial background and the commercial needs of the particular
trade or case, the clause involved is so one-sided that it is unconscionable under the
circumstances existing when the parties made the contract.” FirstMerit Bank, 52
S.W.3d at 757; see also In re Halliburton Co., 80 S.W.3d 566, 571 (Tex. 2002)
(“[S]ubstantive unconscionability . . . refers to the fairness of the arbitration
provision itself.”). Unconscionability is to be determined in light of a variety of
factors, which aim to prevent oppression and unfair surprise; in general, a contract
will be found unconscionable if it is grossly one-sided. See Dan B. Dobbs, 2 Law of
Remedies 703, 706 (2d ed. 1993); see also Restatement (Second) of Contractss [sic]
§ 208, cmt. a (1979) (“The determination that a contract or term is or is not
unconscionable is made in the light of its setting, purpose, and effect. Relevant
factors include weaknesses in the contracting process like those involved in more
specific rules as to contractual capacity, fraud, and other invalidating causes; the
policy also overlaps with rules which render particular bargains or terms
unenforceable on grounds of public policy.”).
In re Poly-America, L.P., 262 S.W.3d 337, 348-49 (Tex. 2008). Furthermore, “[a]n arbitration
agreement covering statutory claims is valid so long as the arbitration agreement does not waive the
substantive rights and remedies the statute affords and the arbitration procedures are fair, such that
the employee may ‘effectively vindicate his statutory rights.’” Id. at 349 (citing Halliburton, 80
S.W.3d at 572).
The plaintiffs first argue that the agreement is unconscionable because it includes a forum
selection clause that requires them to bring their claims in Dallas, Texas. They contend that the
agreement requires the plaintiffs to travel a long distance to arbitrate their claims in Dallas, that this
favors Genghis Grill because it has corporate offices there, and that it makes little sense to arbitrate
there because this action is brought by Arkansas plaintiffs with respect to events occurring at
Genghis Grill’s restaurant in Arkansas. As the plaintiffs argue, every witness and piece of
documentary evidence in the proceeding would relate to the Little Rock, Arkansas restaurant.
Furthermore, they maintain that any witnesses in the case would be outside of the subpoena power
of a Dallas arbitrator, thus making it more difficult for them to present their claims.
Genghis Grill replies, arguing that in In re Odyssey Healthcare, Inc., 310 S.W.3d 419, 422
(Tex. 2010), the Texas Supreme Court enforced a forum selection clause in an arbitration agreement
where the distance between the plaintiff’s residence and the chosen forum was far greater than here.
Furthermore, Genghis Grill argues, the agreement provides a method for the plaintiffs to ask the
arbitrator to shift that cost to the defendants if they can show that it is a cost unique to arbitration.
Contrary to Genghis Grill’s argument, the court in Odyssey Healthcare concluded that
“nothing in the agreement requires the arbitration to occur in Dallas.” Id. Rather, it found that
“[t]he agreement simply provide[d] that (absent agreement otherwise) the arbitrator must be selected
from a Dallas panel of arbitrators.” Id. Furthermore, the agreement in that case contained a
provision that empowered the arbitrator to modify the terms of the agreement if arbitration in Dallas
would result in substantial expense to the plaintiff. Id. at 422-23.
The agreement here has no similar provision. It is true that the agreement contains a
provision that allows the arbitrator to shift to Genghis Grill the plaintiffs’ “costs unique to
arbitration.” However, the agreement defines “costs that are not unique to the arbitration” as “costs
that each party would incur if the claim(s) were litigated in a court or agency such as costs to
subpoena witnesses and/or documents; take depositions and purchase deposition transcripts; copy
documents; etc.” It is by no means obvious that an arbitrator would find that travel costs or costs
pertaining to witnesses or evidence fall under this definition.5
As to the subpoena power, Genghis Grill replies that the arbitrator would have the authority
to subpoena witnesses under the Federal Arbitration Act, and that, in any case, Federal Rule of Civil
Procedure 45(c) places geographical limits on a federal district court’s power to subpoena witnesses
Genghis Grill is correct that the Federal Arbitration Act provides that an arbitrator “may
summon in writing any person to attend before them or any of them as a witness and in a proper case
to bring with him or them any book, record, document, or paper which may be deemed material as
evidence in the case.” 9 U.S.C. § 7; cf. Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 382,
122 S. Ct. 2151, 2168, 153 L. Ed. 2d 375 (2002) (“Arbitrators . . . are often invested with many
powers over the dispute and the parties, including the power to subpoena witnesses and administer
oaths, e.g., Federal Arbitration Act, 9 U.S.C. § 7 . . . .”).
The plaintiffs cite Aral v. EarthLink, Inc., 134 Cal. App. 4th 544, 36 Cal. Rptr. 3d 229
(2005), for the proposition that an arbitration agreement can be rendered unconscionable by
unreasonable geographical barriers. However, Aral held that “a forum selection clause that requires
a consumer to travel 2,000 miles to recover a small sum is not reasonable.” Id. at 561, 36 Cal Rptr.
3d at 241. That case is not persuasive here because the distance between Little Rock, Arkansas, and
Dallas, Texas, is a fraction of that distance.
King and Durham state in their declarations that they simply could not afford to travel to
Dallas to arbitrate. To the extent that the plaintiffs mean to claim unconscionability based on
That this is a definition is indicated by the contract’s use of “i.e.” instead of “e.g.” in the
substantial costs associated with arbitrating in Dallas, they have failed to show sufficient evidence
of costs. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex. 2001) (holding that the party
opposing arbitration must prove a likelihood of incurring substantial costs by presenting specific
information of future costs); Brand FX, LLC v. Rhine, 458 S.W.3d 195, 206 (Tex. App. 2015)
(“Other than Rhine's conclusory assertions that he might incur
substantial costs and expenses if all
parties and witnesses are located outside of New York and if he fails to prevail, there is no record
evidence showing what the costs would be or that those costs would consume his potential
recovery.”). Therefore, the plaintiffs have failed to carry their burden of showing that the forum
selection clause is unconscionable.
The plaintiffs’ second argument for finding the agreement unconscionable is that it forces
them to forego substantive rights and remedies afforded by the Fair Labor Standards Act. The
plaintiffs argue that the arbitration agreement undermines the remedial purpose of the Fair Labor
Standards Act, which is designed to allow low-wage earners to pool resources in order to share costs
to bring claims against their employers. Furthermore, they contend that, under the agreement, they
lose the statutory right to maintain an action in federal or state court as well as the right to
mandatory attorney’s fees that are awarded to prevailing plaintiffs under the Act. See 29 U.S.C. §
216(b) (providing that “[t]he court . . . shall, in addition to any judgment awarded to the plaintiff or
plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”).
Genghis Grill replies that FLSA claims are subject to arbitration and that collective action
waivers are enforceable under the law. Furthermore, Genghis Grill argues that the agreement
provides that “the arbitrator may award reasonable fees and costs or any portion thereof to the
prevailing party to the same extent a court or agency would be entitled to do so, in accordance with
applicable law.” As such, they argue, this provision empowers the arbitrator with the same ability
to award fees as a court would have under the FLSA.
Here also the plaintiffs fail to carry their burden of showing that the arbitration agreement
is unconscionable. Claims brought under the Fair Labor Standards Act may be compelled to
arbitration. Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004).
Furthermore, the plaintiffs’ inability to proceed collectively in arbitration does not deprive them of
substantive rights under the FLSA. Id. at 298. It is true that, unlike the Fair Labor Standards Act,
the agreement here provides that “[e]ach party shall pay its own attorneys’ fees” and allows only that
“[t]he arbitrator may award reasonable fees and costs or any portion thereof to the prevailing party
to the same extent a court or agency would be entitled to do so, in accordance with applicable law”
(emphasis added). Nevertheless, “if Plaintiffs prevail and the arbitrator fails to award the fees, in
contravention of the FLSA to that extent, the arbitration award can be vacated either at the district
court or circuit level.” Carter v. Countrywide Credit Indus., Inc., 189 F. Supp. 2d 606, 619 (N.D.
Tex. 2002); see also Walker v. Countrywide Credit Indus., Inc., Case No. CIV.A.3:03-CV-0684-N,
2004 WL 246406, at *8 (N.D. Tex. Jan. 15, 2004). “[T]he judicial review of arbitral adjudication
of federal statutory employment rights under the FAA . . . ‘must be sufficient to ensure that
arbitrators comply with the requirements of the statute’ at issue.” Carter, 189 F. Supp. 2d at 619
(quoting Williams v. Cigna Fin. Advisors Inc., 197 F.3d 752, 761 (5th Cir. 1999)) (alterations in
Finally, the plaintiffs argue that enforcement of the agreement would result in oppression and
unfair surprise because they were pressured to execute the online paperwork, that it was
nonnegotiable, and that they were never told anything about the arbitration agreement, including that
mandatory arbitration was a term and condition of employment. However, as Genghis Grill
observes, the first line of the arbitration agreement begins with the language, “As a condition of
employment . . . the undersigned employee . . . and Genghis Grill voluntarily and knowingly enter
into this Mutual Arbitration Agreement . . . .” Document #27-1 at 6 (emphasis added). Furthermore,
although Texas law recognizes procedural unconscionability, “which refers to the circumstances
surrounding the adoption of the arbitration provision,” In re Halliburton Co., 80 S.W.3d at 571,
the plaintiffs offer no authority to support their argument that pressure to execute the online
paperwork or the other surrounding circumstances might render the agreement unconscionable. An
employee’s only briefly looking at an agreement and failing to read or understand it does not render
the agreement unconscionable. Id. at 568-69. Nor is a disparity in bargaining power with no
opportunity to negotiate sufficient to render an arbitration agreement unenforceable. Id. at 572.
Here also the plaintiffs have failed to meet their burden of showing that the agreement is
For the reasons explained above, Genghis Grill’s motions to compel arbitration with Brandy
Mitchell, Amanda King, and Chauncey Durham are GRANTED. Documents #27 and #32.
IT IS SO ORDERED this 23rd day of July, 2015.
J. LEON HOLMES
UNITED STATES DISTRICT JUDGE
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