Lockard et al v. EYM King of Kansas, LLC et al

Filing 18

MEMORANDUM AND ORDER granting 12 Motion to Compel Arbitration. See Order for details. Signed by Chief District Judge Julie A Robinson on 09/12/2017. (cv)

Case 2:17-cv-02181-JAR-JPO Document 18 Filed 09/12/17 Page 1 of 11

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
JAMES LOCKARD, on behalf of himself and all
others similarly situated,
Plaintiff,
Case No. 17-2181-JAR-JPO
v.
EYM KING OF KANSAS, LLC, and EYM
GROUP, INC.,
Defendants.

MEMORANDUM AND ORDER
Plaintiff James Lockard brings this action on behalf of himself and others similarly
situated, alleging unlawful wage practices under the Fair Labor Standards Act (“FLSA”) against
Defendants EYM King of Kansas LLC and EYM Group, Inc. (collectively “EYM”) at their
Burger King restaurants. Before the Court is Defendants’ Motion to Compel Arbitration and to
Stay this Action (Doc. 12). The motion is fully briefed and the Court is prepared to rule. As
described more fully below, the Court grants Defendants’ motion.
I.

Background
On September 24, 2016, EYM hired Plaintiff, who worked at several Burger King stores

in the Kansas City area. That same day, Plaintiff signed an Arbitration Agreement that was
included in the EYM King of Kansas, LLC Hourly Management Policies and Procedures
(“Handbook”). The Handbook is a thirty-three page consecutively-paginated document that
includes eighteen separate policies and procedures that each contains its own signature block. It
makes clear that it is not an employment agreement. The first item in the Handbook is an
Election and Arbitration Agreement (“Arbitration Agreement”), which states, in relevant part:

Case 2:17-cv-02181-JAR-JPO Document 18 Filed 09/12/17 Page 2 of 11

a) Mutual Promises to Resolve Claims by Binding Arbitration:
I recognize that disputes may arise between the Company (or one
of its affiliates) and me during or after my employment with the
Company. I understand and agree that any and all such disputes
that cannot first be resolved through the Company’s internal
dispute resolution procedures or mediation must be submitted to
binding arbitration.
I acknowledge and understand that by signing this Agreement I am
giving up the right to a jury trial on all of the claims covered by
this Agreement in exchange for eligibility for the Plan’s medical,
disability, dismemberment, death and burial benefits and in
anticipation of gaining the benefits of a speedy, impartial,
mutually-binding procedure for resolving disputes.
This agreement to resolve claims by arbitration is mutually binding
upon both me and the Company (and its affiliates), and it binds and
benefits our successors, subsidiaries, assigns, beneficiaries, heirs,
children, spouses, parents and legal representatives.
....
The types of claims covered by this Agreement include, but are not
limited to, any and all:
Claims for wages or other compensation; claims for breach of any
contract, covenant, or warranty (express or implied);
....
Claims for a violation of any other federal, state or other
governmental law, statute, regulation or Ordinance . . . .
....
d) Complete Agreement: The Arbitration Procedures in Section
IX of the Summary Plan description (and also in section I,
paragraph B of the Plan) are incorporated by reference hereto, and
made part of this Agreement the same as if they were all written
here. This Agreement, together with the incorporated Arbitration
Procedures in Section IX of the Summary Plan Description, is the
complete agreement between the company and me. It takes the
place of any oral understanding about arbitration, but other written
agreements, policies or procedures may also require me to arbitrate
any disputes that I may have with the Company.
I am not relying on any statements, oral or written, on the subject,
effect, enforceability or meaning of this Agreement, except as

2

Case 2:17-cv-02181-JAR-JPO Document 18 Filed 09/12/17 Page 3 of 11

specifically stated, in this Agreement. If any provision of this
agreement is determined to be void or otherwise unenforceable, in
whole or in part, such determination shall not affect the validity of
the remainder of this Agreement.
e) Not An Employment Agreement: Neither this Agreement, the
Plan nor the Summary Plan Description shall ever be construed to
create any contract of employment, express or implied. This
agreement, the Plan or the Summary Plan description do not in any
way alter the at-will status of my employment with the Company.
f) Ratification for Modification or Revocation: I agree that each
and every time that I receive Plan benefits, or have Plan benefits
paid to a medical provider on my behalf, I ratify and reaffirm this
Agreement the same as if I had signed this Agreement again on the
date the benefits were paid.
g) Requirements for Modification or Revocation: This
agreement will survive the termination of my employment with the
Company. This agreement can only be revoked (except as
provided in the paragraph below) or modified by a writing signed
by both me and the Company’s authorized representative that
specifically states an intent to revoke or modify this Agreement,
and this requirement of a signed writing cannot itself be waived
except by such a signed writing.
....
I have read the Election and Arbitration Agreement and have been
given the opportunity to clarify any questions regarding its
contents. By signing this Election and Arbitration Agreement, I,
the undersigned employee of EYM KING OF KANSAS, LLC
elect to participate in the EYM KING OF KANSAS, LLC
Employee Injury Benefit Plan (hereinafter “the Plan”), and agree to
each of the terms contained in the Election and Arbitration
Agreement and the Plan.1
Plaintiff signed and dated the Arbitration Agreement on September 24, 2016, on page 6 of the
Handbook.
Plaintiff never received, nor was offered participation or eligibility in the EYM King of
Kansas, LLC Employee Injury Benefit Plan, referenced in the Arbitration Agreement. Section
1

Doc. 11-1 at 3–5.

3

Case 2:17-cv-02181-JAR-JPO Document 18 Filed 09/12/17 Page 4 of 11

IX of the Summary Plan description has not been provided to Plaintiff. He never received
benefits from that Plan. Because Plaintiff was unfamiliar with the EYM King of Kansas, LLC
Employee Injury Benefit Plan and its Summary Plan Description, Plaintiff’s counsel asked
Defendants’ counsel to provide copies of these documents. In response to this request,
Defendants’ counsel provided three separate documents: (1) “Synopsis of Coverage Accidental
Medical and Accidental Death & Dismemberment Benefit” statement issued to EYM King, LP;2
(2) “Group Policy Providing Accident & Health Benefits Non-Participating” issued
to EYM King, LP;3 and (3) a second “Group Policy Providing Accident & Health Benefits NonParticipating” issued to EYM King, LP.4 None of these documents are the EYM King of
Kansas, LLC Employee Injury Benefit Plan or the Summary Plan Description for the EYM King
of Kansas, LLC Employee Injury Benefit Plan. None of these documents contain arbitration
procedures that could be incorporated by reference into the Arbitration Agreement. When
Plaintiff’s counsel asked Defendants’ counsel for the specifically referenced and incorporated
agreements, Defendants’ counsel responded: “the plans I sent you are the ones that are in
existence, regardless of how it may have been referred to in the arbitration agreement.”5
On page 31 of the Handbook, after the eighteen separate policies and procedures, is an
Acknowledgement of Receipt of Hourly Management Policies and Procedures, which contains
another signature block. It states that “By my signature below, I acknowledge that I have
received, read and understand the Hourly Management Policies and Procedures, have been given
the opportunity to ask questions, have received clarification, and understand for the following

2

Doc. 16-3.

3

Doc. 16-4.

4

Doc. 16-5.

5

Doc. 16-6.

4

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contents,” the first of which is the Arbitration Agreement, which includes an itemized list of the
sections included in that agreement. It then states on page 33:
I understand that EYM King of Kansas, LLC.’s policies and
procedures may change from time to time at EYM King of Kansas,
LLC ’s sole discretion with or without notice to me, and that the
revised information may supersede, modify, or eliminate existing
policies. I acknowledge that all changes to the Hourly Management
Policies and Procedures will be binding upon me as of the effective
date of those changes whether or not my signature confirming
notice is required.6
Plaintiff signed this acknowledgement, in addition to the eighteen other separate policies he was
required to sign in the Handbook.
Plaintiff brings this putative collective action under the FLSA, to include: “All current
and former hourly employees of EYM King of Kansas LLC and EYM Group, Inc., whose
timecards were altered and/or who were not paid overtime premium pay for overtime hours.”
Plaintiff alleges that EYM requires its employees to split workweeks at more than one restaurant,
but will only pay overtime if the employee exceeds forty hours in a workweek at one location.
Also, Plaintiff alleges that EYM alters its employees’ time clock paperwork for the purpose of
paying employees for less that the hours they actually worked.
II.

Discussion
While the interpretation of contracts—including arbitration agreements—is generally a

matter of state law, the Federal Arbitration Act (“FAA”) imposes certain rules beyond those
normally found in state contract law.7 The FAA applies to written arbitration agreements in any

6

Doc. 16-1 at 33.

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 681 (2010) (citing Arthur Anderson LLP v.
Carlisle, 556 U.S. 624, 629–30 (2009); Perry v. Thomas, 482 U.S. 483, 493 n.9 (1987); Volt Info. Scis., Inc. v. Bd.
of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)).
7

5

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contract “evidencing a transaction involving commerce.”8 Congress designed the FAA “to
overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate” and, by enacting
the FAA, created “a liberal federal policy favoring arbitration agreements.”9 Under the FAA, a
court should compel arbitration if it finds that (1) a valid arbitration agreement exists between
the parties, and (2) the dispute before it falls within the scope of the agreement.10
“If a contract contains an arbitration clause, a presumption of arbitrability arises,
particularly if the clause in question contains . . . broad and sweeping language.”11 However, the
presumption of arbitrability disappears when the parties dispute whether there is a valid and
enforceable arbitration agreement in the first place.12 Whether a party agreed to arbitration is a
contract issue, which means that arbitration clauses are only valid if the parties
intended to arbitrate.13 No party can be compelled to submit a dispute to arbitration without
having previously agreed to so submit.14 Courts apply state-law principles in deciding whether
parties agreed to arbitrate.15 Here, neither party disputes that Kansas contract law applies.
Plaintiff argues that the Arbitration Agreement is invalid for three reasons: (1) the
Arbitration Agreement is one part of the Handbook, which contains a conflicting revocation and
modification clause, rendering the Arbitration Agreement illusory; (2) there was no meeting of
the minds as to the arbitration procedures that would apply since the Employee Injury Benefit
8

9 U.S.C. § 2.

9

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).

10

9 U.S.C. §§ 2–3.

11

ARW Expl. Corp. v. Aguirre, 45 F.3d 1455, 1462 (10th Cir. 1995); see also Bellman v. i3Carbon, LLC,
563 F. App’x 608, 613 (10th Cir. 2014).
Bellman, 563 F. App’x at 613 (citing Dumais v. Am. Golf Corp., 299 F.3d 1216, 1220 (10th Cir. 2002);
Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 779 (10th Cir.1998)).
12

13

Ragab v. Howard, 841 F.3d 1134, 1137 (10th Cir. 2016) (citing United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 582 (1960)).
14

Id.

15

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).

6

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Plan’s Summary Description does not exist, and was not provided to Plaintiff; and (3) the
Arbitration Agreement is unenforceable for lack of consideration. The Court addresses each in
turn.
A.

Whether the Arbitration Agreement is Illusory

Plaintiff first argues that the Arbitration Agreement is illusory based on the provision in
the acknowledgement and receipt section of the Handbook that any part of the Handbook can be
modified or revoked by Defendants at any time with or without notice. Plaintiff is correct that in
the Tenth Circuit, “an arbitration agreement allowing one party the unfettered right to alter the
arbitration agreement’s existence or scope is illusory.”16 Here, while the parties agree that the
modification provision in the Arbitration Agreement itself is permissible, they dispute the
significance of the provision on page 33 of the Handbook. Plaintiff contends that since it
conflicts with the modification provision in the Arbitration Agreement, it renders the contract
ambiguous and thus, the Court must construe the contract against EYM, as the drafter.17
Defendants contend that the Arbitration Agreement is a separate, stand-alone agreement that
requires a writing signed by both parties in order to modify or revoke. Moreover, Defendant
points to the acknowledgement of receipt, which includes a list of the policies and procedures the
employee has read and understands. In addition to listing the Arbitration Agreement, it lists the
various subparts of that agreement, including the revocation and modification section.

16

Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2002).

See id. at 1218–19 (“we interpret the ambiguity created by the Handbook’s conflicting provisions as
allowing American Golf to change the arbitration provision at will.”); see also Barnes v. Securitas Sec. Systems
USA, Inc., No. 05-2264-JWL, 2006 WL 42233, at *4 (D. Kan. Jan. 6, 2006) (applying Dumais to find arbitration
agreement in employee handbook illusory because the acknowledgement of receipt allowed the employer to modify
any provision of the handbook other than the at-will employment policy at any time without notice). In Dumais and
Barnes, the employee handbook did constitute an employment contract, and therefore it controlled over other
documents signed by the parties. Id. at *4 (discussing Dumais, 299 F.3d at 1219).
17

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The Court agrees that the Arbitration Agreement is separate and distinct from the
Handbook. The Arbitration Agreement does not allow Defendants to unilaterally modify or
revoke; in fact, the Arbitration Agreement specifically provides that any modification or
revocation be made in writing and signed by both parties. The Arbitration Agreement was
signed separately, and contains a merger clause.18 In signing the Handbook’s receipt, Plaintiff
acknowledged reading and agreeing to not only the Arbitration Agreement, but the provision
within that agreement on revocation and modification. The Court therefore finds that the
Arbitration Agreement controls that question and Defendants may not unilaterally modify or
revoke the Arbitration Agreement.19 Thus, the Arbitration Agreement is not illusory.
Even if the Court agreed that the two provisions created an ambiguity that the Court must
construe against the drafter, the Court would decline to decide the issue. Plaintiff’s argument
depends on his contention that the Arbitration Agreement is part of a larger contract—the
Handbook—and he relies on language outside the confines of the Arbitration Agreement to
argue that the contract as a whole is ambiguous. The United States Supreme Court and the
Tenth Circuit counsel that such a claim must be resolved by the arbitrator and not by the Court.20
B.

Whether there was a Meeting of the Minds on Essential Terms

Next, Plaintiff challenges whether there was a meeting of the minds when the parties
entered into the Arbitration Agreement, an issue that goes to whether a valid and enforceable
agreement to arbitrate was reached in the first place, which is properly before the Court. Under
Doc. 11-1 (“I am not relying on any statements, oral or written, on the subject, effect, enforceability or
meaning of this Agreement, except as specifically stated, in this Agreement.”).
18

19

See Clutts v. Dillard’s, Inc., 484 F. Supp. 2d 1222, 1226 (D. Kan. 2007).

20

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967); Buckeye Check Cashing, Inc.
v. Cardegna, 546 U.S. 1204, 1210 (2006) (“a challenge to the validity of the contract as a whole, and not
specifically to the arbitration clause, must go to the arbitrator.”); In re Cox Enters., Inc. Set-top Cable Tele. Box
Antitrust Litig., 835 F.3d 1195, 1211–12 (10th Cir. 2016) (finding argument that contract is illusory goes to the
contract as a whole where it is based language outside of the arbitration provision).

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Kansas law, there must be a meeting of the minds on all essential elements of the contract.21 For
there to be a meeting of the minds, “there must be a fair understanding between the parties which
normally accompanies mutual consent and the evidence must show with reasonable definiteness
that the minds of the parties met upon the same matter and agreed upon the terms of the
contract.”22 “Generally, courts seek to uphold arbitration agreements even where the contract
provisions are somewhat uncertain and indefinite.”23
Plaintiff argues that there could be no meeting of the minds because the Arbitration
Agreement does not set forth any arbitral procedures since the EYM King of Kansas, LLC
Employee Injury Benefit Plan Summary Description, which was incorporated by reference into
the Arbitration Agreement, was never provided to Plaintiff, and in fact does not appear to exist.
Defendants reply that the lack of arbitral procedures in the Arbitration Agreement does not
invalidate the agreement. The Court agrees. Plaintiff cites no authority for the proposition that
arbitration procedures are essential terms of a contract to arbitrate, for which there must be a
meeting of the minds. The FAA contemplates that there may be agreements that do not provide
for the appointment of an arbitrator, and in such a case, the Court may designate an arbitrator
upon application of the parties.24 Once an arbitrator is selected by the Court, the arbitrator can
decide the other procedural aspects of the arbitration.25 Several courts have determined that the
failure to specify arbitration procedures in an otherwise enforceable arbitration agreement does

21

Albers v. Nelson, 809 P.2d 1194, 1198 (Kan. 1991).

22

Sidwell Oil & Gas, Inc. v. Loyd, 630 P.2d 1107, 1113 (Kan. 1981) (quoting Steele v. Harrison, 552 P.2d
957, 962 (Kan. 1976)).
23

Heartland v. Premier, Ltd. v. Grp. B & B, LLC, 31 P.3d 978, 981 (Kan. Ct. App. 2001) (quoting City of
Lenexa v. C.L. Fairley Constr. Co., 777 P.2d 851, 854 (1989)).
24

9 U.S.C. § 5.

25

See, e.g., Badinelli v. Tuxedo Club, 183 F. Supp. 3d 450, 455 (S.D.N.Y. 2016).

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not render the contract unenforceable.26 The Court finds that the arbitration procedures in this
case were not essential terms of the contract about which the parties were required to have a
meeting of the minds. As such, Defendants’ failure to incorporate by reference the correct
document that included the governing arbitration procedures does not affect the validity of the
agreement to arbitrate. The Arbitration Agreement otherwise evidences that the parties intended
to form a binding agreement to arbitrate.
C.

Consideration

Finally, Plaintiff argues that the Arbitration Agreement is invalid for lack of
consideration. Plaintiff contends that because the Arbitration Agreement twice states that the
consideration for Plaintiff’s agreement to arbitrate is his eligibility for and participation in the
EYM King of Kansas, LLC Employee Injury Benefit plan, and this plan does not exist, the
Arbitration Agreement fails for lack of consideration.
To be sure, under Kansas law a contract must be supported by adequate consideration.27
“A promise is without consideration when the promise is given by one party to another without
anything being bargained for and given in exchange for it.”28 Here, the Arbitration Agreement
provided that Plaintiff is “giving up the right to a jury trial on all of the claims covered by this
Agreement in exchange for eligibility for the Plan’s medical, disability, dismemberment, death
and burial benefits and in anticipation of gaining the benefits of a speedy, impartial, mutuallybinding procedure for resolving disputes.”29 A mutual promise to arbitrate constitutes valid

26

Id.; Daskalakis v. Forever 21, Inc., No. 15-CV-1768, 2016 WL 4487747, at *4 (S.D.N.Y. August 25,
2016); see Hooters of Am. v. Phillips, 39 F. Supp. 2d 582, 606–07 (D.S.C. 1998) (applying South Carolina law, and
stating: “In the orthodox situation the content of arbitration rules would not constitute a material term of the
agreement because such rules would address merely procedural matters of the forum.”).
27

Varney Business Servs., Inc. v. Pottroff, 59 P.3d 1003, 1014 (Kan. 2002).

28

Id. (citing 2 Corbin on Contracts § 5.20 (rev. ed. 1995)).

29

Id. at 11-1.

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consideration.30 Defendants agreed to submit any claims against Plaintiff to arbitration. Thus,
assuming as true Plaintiff’s contention that he is neither eligible for nor a participant in
Defendants’ various benefit plans, Defendants still provided consideration in the form of a
mutual promise to arbitrate. As such, the Arbitration Agreement is not unenforceable for lack of
consideration.
III.

Conclusion
The Court concludes that a valid arbitration agreement exists between the parties in this

matter. Plaintiff does not dispute that his FLSA claims are within the scope of the Arbitration
Agreement. Because Plaintiff’s claims are “for wages or other compensation,” and are based on
the violation of a federal statute, they fall within the scope of the Arbitration Agreement. Thus,
Defendants’ motion to compel arbitration must be granted.
IT IS THEREFORE ORDERED BY THE COURT that Defendants’ Motion to
Compel Arbitration and to Stay this Action (Doc. 12) is granted. This case is hereby stayed
pending arbitration. The parties shall file a status report no later than December 29, 2017
advising the Court whether the arbitration proceeding is ongoing, and whether a date has been set
for the proceeding.
IT IS SO ORDERED.
Dated: September 12, 2017
S/ Julie A. Robinson
JULIE A. ROBINSON
UNITED STATES DISTRICT JUDGE

30

See, e.g., Pennington v. Northrop Grumman Space & Mission Sys. Corp., 269 F. A’ppx 812, 819 (10th
Cir. 2008); Felling v. Hobby Lobby, Inc., No. 2005 WL 928641, at *4 (D. Kan. Apr. 19, 2005).

11