Hensley et al v. S.G.T., Inc. et al

Filing 27

ORDER granting in part and denying in part Defendants' Motion to Compel Arbitration 6 , 14 . They are GRANTED as to Plaintiffs Twana S. Mitchell and Nikkea S. Wilson and DENIED as to Plaintiff E'Lise Z. Hensley. Plaintiffs Mitchell and Wilson are DISMISSED from this action and must submit their FLSA claims to arbitration on an individual basis. Signed by Judge Richard W. Story on 8/5/2015. (cem)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
E’LISE Z. HENSLEY, TWANA S.
MITCHELL, and NIKKEA S.
WILSON,
Plaintiffs,
v.
S.G.T., INC., et al.,
Defendants.

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CIVIL ACTION NO.
1:15-CV-00077-RWS

ORDER
This case comes before the Court on Defendants’ Motions to Compel
Arbitration [6, 14]. After reviewing the record and conducting an evidentiary
hearing, see 9 U.S.C. § 4, the Court enters the following Order.
Background
Plaintiffs brought this action under the Fair Labor Standards Act
(“FLSA”), 29 U.S.C. § 201 et seq., to recover unpaid minimum and overtime
wages. Defendants include the owners and managers of the nightclub Pleasers.
Plaintiff E’lise Z. Henlsey worked as a dancer at Pleasers from approximately

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June 2011 until August 2014, when the club burned down.1 Plaintiff Twana S.
Mitchell was also a dancer from about November 2009 until August 2014.
Plaintiff Nikkea S. Wilson worked as a bartender at Pleasers from March 2011
until August 2014.
Defendants seek to compel arbitration based on an arbitration agreement
they say Plaintiffs agreed to by either signing or continuing to work once
Plaintiffs were advised of the new arbitration policy. Plaintiffs deny that they
entered into a valid arbitration agreement.
The Court finds that in February 2014, Defendants sought to implement
a new arbitration policy for its dancers that required the dancers and Pleasers to
submit covered claims (including FLSA claims) to arbitration on an individual
basis. (See Dkt. [6-1] at 6.) On February 14, 2014, manager Jason Dorsey
called Mitchell into his office to meet with her about the arbitration policy.
Nobody else was in the office. Mitchell stated that the meeting lasted just a
few seconds, while Dorsey testified that he met with each dancer for three to
six minutes. In any event, the meeting was brief. Dorsey told Mitchell to sign

1

The Court does not decide whether Plaintiffs were employees or independent
contractors.
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a piece of paper that was on the edge of his desk. The single page was the last
of a three-page arbitration agreement. The final page contained the following
paragraphs in bold caps:
AS TO ENTERTAINERS OR OTHER INDEPENDENT
CONTRACTORS OF PLEASERS: THE SUBMISSION OF AN
APPLICATION, AUDITION AS AN ENTERTAINER,
ACCEPTANCE AS AN ENTERTAINER OR THE
CONTINUATION BY YOU AS AN ENTERTAINER SHALL BE
DEEMED TO BE ACCEPTANCE OF THIS AGREEMENT. NO
SIGNATURE SHALL BE REQUIRED FOR THE AGREEMENT
TO BE APPLICABLE. THE MUTUAL OBLIGATIONS SET
FORTH IN THIS AGREEMENT SHALL CONSTITUTE A
CONTRACT BETWEEN YOU AND PLEASERS BUT SHALL
NOT CHANGE YOUR CONTRACTUAL RELATIONSHIP
TERMINABLE AT WILL BY EITHER PARTY WITH OR
WITHOUT NOTICE TO THE OTHER PARTY, OR ANY TERM
OF ANY OTHER CONTRACT OR AGREEMENT BETWEEN
PLEASERS AND YOU. THIS AGREEMENT SHALL
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN YOU
AND PLEASERS FOR THE RESOLUTION OF COVERED
CLAIMS.
I ACKNOWLEDGE RECEIPT OF THIS ARBITRATION POLICY
AND AGREEMENT–ENTERTAINERS.
(Dkt. [6-1] at 8.)
Dorsey told Mitchell she was required to sign it but did not tell her if
there were any consequences of refusing to sign. However, Mitchell testified
that she heard a piece of paper was circulating and that the dancers needed to
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sign it or they would be “let go.” She signed the paper, conceding she did not
read the contents and did not care what they said. She did not receive a copy to
take with her.
Hensley never met with Dorsey. She testified that she was approached in
the changing room by a bartender known as Star, another Plaintiff in this action
whose legal name is Nikkea S. Wilson. Wilson told Hensley that she needed to
sign a document or would get in trouble. Hensley refused and was not told
what the document was, although she believes it was the arbitration agreement.
Wilson later testified that the document was not an arbitration policy at all but
was an employee handbook. While Dorsey testified that he met with Hensley
about the arbitration policy, he acknowledged that Hensley did not sign the
agreement and that he told her she was not required to sign it. There is no
evidence Hensley read the document. So, even if Hensley and Dorsey actually
met, the Court finds that Hensley never signed the arbitration agreement, did
not receive a copy of it, did not know its terms, and believed there were no
consequences of not signing it.
By August 2014, Pleasers decided to implement an arbitration agreement
applicable to all employees, including bartenders like Wilson. Wilson did not
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meet with Dorsey until August 21, 2014, a few of days before Pleasers burned.
Wilson went back to Dorsey’s office during her shift to get change for her
customers. At that time, Dorsey asked her to sign a document. He told her she
had to sign it or she would not have a job. When she signed, she was only
given the final page and did not know what arbitration was. Before leaving
Dorsey’s office, Dorsey gave her two or three pages of the agreement. She
returned to work the next day, which was her last before Pleasers burned down.
Discussion
I.

The Federal Arbitration Act
The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., “embodies a

‘liberal federal policy favoring arbitration agreements.’ ” Hill v. Rent-ACenter, Inc., 398 F.3d 1286, 1288 (11th Cir. 2005) (quoting Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Furthermore,
“courts have consistently found that claims arising under federal statutes may
be the subject of arbitration agreements and are enforceable under the FAA.”
Weeks v. Harden Mfg. Corp., 291 F.3d 1307, 1313 (11th Cir. 2002).
Arbitration agreements are “valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of the contract.” 9
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U.S.C. § 2. The FAA “give[s] arbitration agreements the same force and effect
as other contracts,” and “state law generally governs whether an enforceable
contract or agreement to arbitrate exists.” Caley v. Gulfstream Aerospace
Corp., 428 F.3d 1359, 1367-68 (11th Cir. 2005). Under the FAA, “as a matter
of federal law, any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp., 460 U.S. at 2425.
II.

Analysis
Plaintiffs argue that they did not enter into arbitration agreements

because Defendants did not make a definite offer and Plaintiffs never
communicated acceptance of the agreement. Moreover, Plaintiffs assert that
the arbitration agreements are procedurally and substantively unconscionable.
The Court first analyzes whether Defendants made, and Plaintiffs accepted, any
offer before turning to unconscionability.
A.

Offer and Acceptance

Under Georgia law, “[a] definite offer and complete acceptance, for
consideration, create a binding contract.” Moreno v. Strickland, 567 S.E.2d 90,
92 (Ga. Ct. App. 2002). “An offer may be accepted . . . either by a promise to
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do the thing contemplated therein, or by the actual doing of the thing. The
offer must be accepted in the manner specified by it; and if it calls for a
promise, then a promise must be made; or if it calls for an act, it can be
accepted only by the doing of the act.” Id. (internal quotation marks omitted).
In that regard, “Georgia courts have held that an employee can accept new
terms of employment of which the employee is aware by remaining in
employment.” Caley, 428 F.3d at 1374 (citing Fletcher v. Amax, Inc., 288
S.E.2d 49, 51 (Ga. Ct. App. 1981)).
1.

Mitchell

Mitchell briefly met with Dorsey, and she admits signing the contract.
She stated Dorsey did not explain what the agreement was, but she further
admits she did not care. She was also aware that an agreement was circulating
and that dancers were required to sign it to keep their jobs. So, she signed it
without reading and kept working.
“A person is bound by any contract he signs without reading unless he
can show: (1) an emergency at the time of signing that would excuse his failure
to read; (2) the other party misled him by an artifice or device which prevented
him from reading; or (3) a fiduciary or confidential relationship existed on
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which he relied in not reading the contract.” Stamps v. JFB Props., LLC, 694
S.E.2d 649, 651 (Ga. 2010).
Mitchell does not show any of the above factors were present. The only
possible factor at issue is that Defendants misled her to prevent her from
reading the agreement. Even assuming Dorsey did not explain the terms of the
agreement, Mitchell admits she chose not to read the contract and did not care
what the contents were. Moreover, Plaintiffs acknowledge that the fact they
were presented with the final page of the agreement, standing alone, does not
defeat the contract. (Pls.’ Resp., Dkt. [13] at 6.) The Court therefore finds that
Defendants offered and Mitchell accepted the contract because she signed it
and Defendants did not mislead her to prevent her from reading it.2
2.

Hensley

Hensley denies ever meeting with Dorsey about an arbitration agreement.
Hensley never signed the agreement and testified that she never received a
copy of it, either. In fact, the only time she thought she might have been
2

There was testimony regarding the amount of alcohol each Plaintiff had
consumed when she was asked to sign the agreement. Each Plaintiff stated she either
had a modest amount to drink or could function well with the amount she consumed
during her shifts. As a result, the Court finds that alcohol consumption does not
impact whether Plaintiffs validly entered into an arbitration agreement.
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presented with an arbitration agreement (by Wilson, the bartender), it turned
out the document was an employee handbook. Based on Hensley’s testimony,
the Court finds that she did not receive a copy of the arbitration agreement and
never had an opportunity to review it. And even if she met with Dorsey, he
acknowledges telling her she did not have to sign the agreement but did not
explain that she could be bound by continuing her employment. Thus, the
Court finds that Hensley did not know the terms of the arbitration policy and
did not know that continued employment could constitute acceptance despite
her refusal to sign it. Accordingly, the Court finds that Defendants have failed
to carry their burden to show that Hensley unequivocally accepted the
arbitration agreement.
3.

Wilson

Wilson signed the arbitration agreement in her meeting with Dorsey, and
she received a copy to take home with her. While she was only presented the
last page of the agreement at the time she signed it, as explained above, there is
no evidence Defendants misled her or would have prevented her from reading
the rest of the agreement if she had asked to. The final page stated the
agreement was an arbitration agreement, and it also expressly stated that
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continued employment would constitute acceptance. She was then given two
or three pages of the three-page agreement to take with her, providing her
further opportunity to review the agreement.
Wilson then came to work the following day. Continuing to work was
an express method of acceptance. Courts have upheld arbitration agreements
when the agreement “expressly established that the proper manner of accepting
its terms was continued employment.” Caley, 428 F.3d at 1374. Consequently,
because Wilson both signed the agreement and continued her employment at
Pleasers, the Court finds that she accepted the arbitration agreement. The
Court turns to the question of unconscionability.
B.

Unconscionability

For a contract to be found unconscionable under Georgia law, there
generally must be both procedural and substantive unconscionability. See, e.g.,
NEC Techs., Inc. v. Nelson, 478 S.E.2d 769, 773 n.6 (Ga. 1996) (“[T]o tip the
scales in favor of unconscionability, most courts seem to require a certain
quantum of procedural plus a certain quantum of substantive
unconscionability.”); Gordon v. Crown Cent. Petroleum Corp., 423 F. Supp.
58, 61 (N.D. Ga. 1976) (holding unconscionability to require both “an absence
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of meaningful choice on the part of one of the parties together with contract
terms which are unreasonably favorable to the other party”). In assessing
procedural unconscionability, courts consider factors such as “the age,
education, intelligence, business acumen and experience of the parties, their
relative bargaining power, the conspicuousness and comprehensibility of the
contract language, the oppressiveness of the terms, and the presence or absence
of a meaningful choice.” NEC Techs., 478 S.E.2d at 771-72 (citations
omitted). To determine substantive unconscionability, “courts have focused on
matters such as the commercial reasonableness of the contract terms, the
purpose and effect of the contract terms, the allocation of risks between the
parties and similar public policy concerns.” Id. at 772 (citations omitted).
Georgia law sets a high bar for the finding of unconscionability. As the
Georgia Supreme Court has explained, “[a]n unconscionable contract is such
an agreement as no sane man not acting under a delusion would make, and that
no honest man would take advantage of.” R. L. Kimsey Cotton Co., Inc. v.
Ferguson, 214 S.E.2d 360, 363 (Ga. 1975) (internal quotation marks and
citation omitted). Similarly stated, “[u]nconscionable conduct must ‘shock the
conscience.’ ” Mitchell v. Ford Motor Credit Co., 68 F. Supp. 2d 1315, 1318
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(N.D. Ga. 1998) (quoting BMW Fin. Servs., N.A. v. Smoke Rise Corp., 486
S.E.2d 629 (Ga. Ct. App. 1997)).
Given the high bar for finding unconscionability, the Court concludes
that the agreements at issue here were neither substantively nor procedurally
unconscionable. The arbitration agreement is plainly not substantively
unconscionable, and Plaintiffs do not appear to argue that it is. Notably, both
parties are required to submit their claims to arbitration, although even a lack
of mutuality would not render an arbitration agreement unconscionable. See
Caley, 428 F.3d at 1378. Because a contract must be both substantively and
procedurally unconscionable, the lack of substantive unconscionability alone
defeats Plaintiffs’ argument.
Even if the agreement were substantively unconscionable, the Court
further finds that the process by which Plaintiffs consented to the agreements
was not unconscionable. The Court recognizes that Plaintiffs lacked legal and
business training and lacked equal bargaining power with their employers. As
Plaintiffs testified, they needed their jobs. Still, courts have held that disparity
in bargaining power is often present in the employment context and is not
sufficient to show unconscionability unless circumstances show that it is
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extremely one-sided. See id. at 1377. In Caley v. Gulfstream Aerospace Corp.,
for instance, the Eleventh Circuit upheld an arbitration agreement even when
the agreement was announced as a new condition of employment, thus giving
employees two options: “(1) continue in employment, thereby accepting the
[arbitration agreement], or (2) terminate employment.” Id. at 1375. The
Eleventh Circuit found that such bargaining disparity was not procedurally
unconscionable. Id. at 1377. What is more, Georgia courts hold that “lack of
sophistication or economic disadvantage of one attacking arbitration will not
amount to unconscionability.” Saturna v. Bickley Const. Co., 555 S.E.2d 825,
827 (Ga. Ct. App. 2001). And, while Dorsey did not explain much if anything
about the arbitration agreements during the meetings, Mitchell and Wilson
were not prevented from reading the agreements, and the terms of acceptance
were conspicuous on the signature page. Although the Court recognizes
Plaintiffs’ arguments that the circumstances surrounding the execution of these
agreements were perhaps rushed, lacking in explanation, and less than
straightforward, in light of the evidence and case law on unconscionability, the
circumstances were not so egregious as to be unconscionable.
Finally, Plaintiffs contend that the timing of Defendants’ adoption of the
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new arbitration policy on February 14, 2014, rendered the agreements
procedurally unconscionable. Plaintiffs state that Defendants instituted the
new policy days after Defendants answered a separate but related collective
action against them. See Cook v. S.G.T., Inc., No. 1:13-cv-03518-RWS
(answer filed Feb. 10, 2014). The Court confronted a similar issue in
Stevenson v. Great American Dream, Inc., No. 1:12-CV-3359-TWT, 2014 WL
3519184 (N.D. Ga. July 15, 2014). In Stevenson, the plaintiffs argued that an
arbitration agreement was unconscionable because it was executed during the
pendency of a collective action. Id. at *1. The Court disagreed, reasoning:
“Regardless of whether there is a pre-existing collective action, the effect of the
arbitration agreement is the same: it prevents the signatory from litigating her
FLSA claim in a judicial forum.” Id. The Court concluded that the timing of a
collective action did not impact the unconscionability analysis. Id. The Court
agrees with Stevenson. Plaintiffs fail to show that the circumstances and
timing of the arbitration agreements amount to unconscionability.
In sum, the Court finds that the arbitration agreements are neither
substantively nor procedurally unconscionable, and Plaintiffs Mitchell and
Wilson are required to submit their claims to arbitration.
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Conclusion
For the foregoing reasons, Defendants’ Motions to Compel Arbitration
[6, 14] are GRANTED in part and DENIED in part. They are GRANTED
as to Plaintiffs Mitchell and Wilson and DENIED as to Plaintiff Hensley.
Plaintiffs Mitchell and Wilson are DISMISSED from this action and must
submit their FLSA claims to arbitration on an individual basis.
SO ORDERED, this 5th day of August, 2015.

________________________________
RICHARD W. STORY
United States District Judge

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