Braxton et al v. O'Charley's Restaurant Properties, LLC
Filing
11
MEMORANDUM AND OPINION by Senior Judge Thomas B. Russell on 2/13/2014; re 4 MOTION to Dismiss and Petition to Compel Arbitration and Stay Proceedings filed by O'Charley's Restaurant Properties, LLC ; an appropriate order shall issuecc:counsel (KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CIVIL ACTION NO. 5:13-CV-00130-TBR
MALISA BRAXTON, et al.
Plaintiffs
v.
O’CHARLEY’S RESTAURANT PROPERTIES, LLC
Defendant
MEMORANDUM OPINION
This matter is before the Court upon Defendant O’Charley’s Restaurant
Properties, LLC’s “Motion to Dismiss and Petition to Compel Arbitration and Stay
Proceedings.”
(Docket No. 4.) Plaintiffs Malisa Braxton, Darla Bailey, and Lisa
Colburn have responded, (Docket No. 8), Defendant has replied, (Docket No. 9), and
Plaintiffs have filed their Surreply, 1 (Docket No. 10). This matter now is ripe for
adjudication.
For the reasons that follow, Defendant’s Motion to Dismiss will be
GRANTED.
BACKGROUND
Plaintiffs are all former employees of Defendant, O’Charley’s Restaurant
Properties, LLC (O’Charley’s), who worked at the O’Charley’s restaurant on Fort
Campbell Boulevard in Hopkinsville, Kentucky.
Plaintiffs allege they each were
wrongfully terminated by O’Charley’s for asserting their rights to worker’s
1
Joint Local Rule 7.1 does not provide for the filing of a surreply, and, as a matter of practice, parties
who wish to file a surreply generally seek leave of Court to do so. Honaker v. Innova, Inc., 2007 WL
1217742, at *1 (W.D. Ky. Apr. 23, 2007). No such request was filed in this case. Nonetheless, Defendant
has filed no objection, and the Court, in its discretion, will consider Plaintiffs’ Surreply.
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compensation benefits. 2 Plaintiffs originally filed suit in Christian Circuit Court on July
9, 2013, (Docket No. 1-1), and O’Charley’s timely removed Plaintiffs’ lawsuit to this
Court on August 9, 2013, (Docket No. 1).
At the time each of the Plaintiffs was hired, O’Charley’s had in place an
arbitration agreement.
That agreement provides that claims arising out of an
employee’s employment with O’Charley’s or the termination of employment must be
submitted to a neutral arbitrator for a final and binding determination. (Docket No. 4-1,
at 3-4.) O’Charley’s has submitted sworn declarations by Alan Parrino, O’Charley’s
regional human resources manager, (Docket No. 4-1), and by Doris Meador, a human
resources information systems analyst for O’Charley’s, (Docket No. 4-2). Parrino states
that all O’Charley’s employees are required to execute the arbitration agreement as a
condition of their employment and are not permitted to continue with O’Charley’s newhire orientation program until they express their consent to the terms of that agreement.
(Docket No. 4-1, at 1-2.) Parrino further states that all hourly employees are provided a
copy of O’Charley’s “Hourly Policy and Procedures Handbook” (Handbook), which
reflects that employees are required to execute an arbitration agreement as a condition
of employment. (Docket No. 9-1, at 1.) Under the heading “Mediation & Arbitration,”
that Handbook specifically states: “As a condition of employment, all team members
must sign an Arbitration Agreement.” (Docket No. 9-1, at 6.) Meador similarly avers
that all new hires are required to review various employment-related documents,
2
Although Plaintiffs state in their Response that they “were terminated from their employment with
O’Charley’s following claims for worker’s compensation,” (Docket No. 8-1, at 1), their Complaint
mentions only that Plaintiff Bailey “was fired from her employment” and that Plaintiffs Braxton’s and
Colburn’s “hours were cut,” (Docket No. 1-1, at 9-11).
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including the arbitration agreement, and are not permitted to continue with orientation
until they consent to the terms of the arbitration agreement. (Docket No. 4-2, at 2.)
Upon hire, each new employee is set up in O’Charley’s “human resources information
system” with a unique employee identification number and a unique password
consisting of a combination of parts of the employee’s social security number and last
name. (Docket No. 4-2, at 2.) The new hire’s review of these employment-related
documents is done electronically through O’Charley’s human resources information
system, and the new hire electronically expresses his or her consent to the arbitration
agreement by clicking a button stating “I Agree” to the terms of that agreement.
(Docket No. 4-1, at 2.) According to Meador, the employee’s only choice is to click “I
Agree” or exit the program. (Docket No. 4-2, at 2.) Once an employee clicks “I
Agree,” an electronic signature is captured as a record of the employee’s consent to the
agreement.
(Docket No. 4-2, at 2.)
In conjunction with Meador’s declaration,
O’Charley’s has submitted computer printouts indicating that each Plaintiff
electronically signed the arbitration agreement along with various other employment
documents, such as direct-deposit forms and W-4 tax forms. (See Docket Nos. 4-2, at
7-13.) These printouts also reflect that each Plaintiff received and consented to the
terms of the Handbook. (See Docket No. 4-2, at 9, 11, 13.)
Plaintiffs each have submitted sworn affidavits denying that they signed any
arbitration agreement with O’Charley’s, electronically or otherwise. (Docket Nos. 8-2,
at 1; 8-3, at 1; 8-4, at 1). By way of argument, Plaintiffs further insist that they were
unaware of the arbitration agreement and, at least implicitly, seem to maintain that they
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were never informed that their continued employment bound them to arbitration.
(Docket No. 10, at 3.)
DISCUSSION
O’Charley’s moves the Court to dismiss this action under Fed. R. Civ. P. 12 or,
in the alternative, to compel arbitration and stay these proceedings pending the outcome
of such arbitration pursuant to 9 U.S.C. §§ 3–4. Thus, the principal issue that must be
resolved is whether the arbitration agreement at issue is enforceable against the
Plaintiffs.
Congress enacted the United States Arbitration Act of 1925, more commonly
referred to as the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1–16, in response to the
common law hostility toward arbitration and the refusal of many courts to enforce
arbitration agreements. The United States Supreme Court has since interpreted the FAA
as codifying “a national policy favoring arbitration when the parties contract for that
mode of dispute resolution.” Preston v. Ferrer, 552 U.S. 346, 349 (2008). The Supreme
Court has further stated that the FAA’s underlying purpose is to put arbitration
agreements “upon the same footing as other contracts.” EEOC v. Waffle House, Inc.,
534 U.S. 279, 289 (2002) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20, 24 (1991)). The FAA establishes a procedural framework applicable in both federal
and state courts, and also mandates that substantive federal arbitration law be applied in
both. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995); Southland Corp.
v. Keating, 465 U.S. 1, 16 (1984).
Whereas § 2 of the FAA mandates enforcement, § 3 permits a party seeking to
enforce an arbitration agreement to request that litigation be stayed until the terms of the
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arbitration agreement have been fulfilled. 9 U.S.C. §§ 2–3. Section 4 goes on to
provide the mechanism by which a party may petition a court to compel arbitration:
A party aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement for arbitration may
petition any United States district court . . . for an order directing
that such arbitration proceed in the manner provided for in such
agreement. . . . The court shall hear the parties, and upon being
satisfied that the making of the agreement for arbitration or the
failure to comply therewith is not in issue, the court shall make
an order directing the parties to proceed to arbitration in
accordance with the terms of the agreement. . . . If the making of
the arbitration agreement or the failure, neglect, or refusal to
perform the same be in issue, the court shall proceed summarily
to the trial thereof.
Id. § 4. Thus, before compelling arbitration, the Court “must engage in a limited review
to determine whether the dispute is arbitrable.” Masco Corp. v. Zurich Am. Ins. Co.,
382 F.3d 624, 627 (6th Cir. 2004) (quoting Javitch v. First Union Sec., Inc., 315 F.3d
619, 624 (6th Cir. 2003)). Such review, the Sixth Circuit advises, requires the Court to
determine first whether “a valid agreement to arbitrate exists between the parties,” and
second whether “the specific dispute falls within the substantive scope of the
agreement.” Id. (quoting Javitch, 315 F.3d at 624). Plaintiffs do not appear to argue
that their claims fall outside the scope of the arbitration agreement; rather, at issue here
is whether a valid and enforceable arbitration agreement exists between Plaintiffs and
O’Charley’s.
Plaintiffs unequivocally deny entering into any arbitration agreement with
O’Charley’s and insist that no such agreement ever was made. Because the formation
of the arbitration agreement is at issue, Plaintiffs urge that the issue of arbitration must
be determined by a jury. (See Docket No. 8-1, at 4-5.) Accordingly, the Court must
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determine whether Plaintiffs and O’Charley’s actually agreed to arbitrate their disputes
via the arbitration agreement.
“Because arbitration agreements are fundamentally
contracts,” the Court must “review the enforceability of an arbitration agreement
according to the applicable state law of contract formation.” Seawright v. Am. Gen. Fin.
Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007) (citing First Options of Chi., Inc. v.
Kaplan, 514 U.S. 938, 943-44 (1995)). In Kentucky, as in all jurisdictions, a contract is
only enforceable if both parties agree to be bound by it. See, e.g., David Roth’s Sons,
Inc. v. Wright & Taylor, Inc., 343 S.W.2d 389, 391 (Ky. 1976). Contracting parties
typically manifest their agreement by signing the contract; however, “Kentucky courts
will also enforce unsigned arbitration agreements where the parties have indicated
acceptance of the contract through their actions.” Polly v. Affiliated Computer Servs.,
Inc., 2011 WL 93715, at *2 (E.D. Ky. Jan. 11, 2011) (citing Sweeney v. Theobald, 128
S.W.3d 498, 501 (Ky. Ct. App. 2004)); see also Parts Depot, Inc. v. Beiswenger, 170
S.W.3d 354, 362-63 (Ky. 2005) (discussing how an employer’s offer for a unilateral
contract, which was embodied in a written personnel policy, can become binding “once
it is accepted by the employee through his continuing to work.” (citations omitted)).
This is consistent both with the text of § 2 of the FAA, which requires only that
arbitration agreements be in writing, and with the approach taken by the Sixth Circuit
and other circuit courts. See Seawright, 507 F.3d at 978 (“[A]rbitration agreements
under the FAA need to be written, but not necessarily signed.”); accord Caley v.
Gulfstream Aero. Corp., 428 F.3d 1359, 1369 (11th Cir. 2005) (“We readily conclude
that no signature is needed to satisfy the FAA’s written agreement requirement.”);
Tinder v. Pinkerton Sec., 305 F.3d 728, 736 (7th Cir. 2002) (“Although § 3 of the FAA
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requires arbitration agreements to be written, it does not require them to be signed.”);
Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2nd Cir. 1987) (“[W]hile the
[FAA] requires a writing, it does not require that the writing be signed by the parties.”)
Here, O’Charley’s has come forward with some evidence showing that Plaintiffs
each agreed to the arbitration agreement: Parrino’s and Meador’s affidavits, which state
that new employees are required to electronically sign the arbitration agreement in order
to continue with the orientation program; Meador’s affidavit, which explains how new
employees are assigned unique employee identification numbers and passwords, and the
process by which new employees electronically review and sign the arbitration
agreement; computer printouts reflecting that each of the Plaintiffs signed the arbitration
agreement with her unique password; and computer printouts indicating that each
Plaintiff received the Handbook, which also advised employees about the arbitration
agreement. Nonetheless, each Plaintiff firmly maintains that she never signed any
arbitration agreement relating to her employment at O’Charley’s. Plaintiffs also have
submitted the affidavit of Stevie Taylor, another former O’Charley’s employee, in which
Taylor states that, like the Plaintiffs, she never signed any arbitration agreement with
O’Charley’s. (Docket No. 8-5, at 1.)
Before compelling arbitration, the Court must “be[] satisfied that the making of
the agreement for arbitration . . . is not in issue.” 9 U.S.C. § 4. “In order to show that
the validity of the agreement is ‘in issue,’ the party opposing arbitration must show a
genuine issue of material fact as to the validity of the agreement to arbitrate.” Great
Earth Cos. v. Simmons, 288 F.3d 878, 889 (6th Cir. 2002). That is, she must come
forward with sufficient evidence that, when viewed in the light most favorable to her,
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would permit “a reasonable finder of fact [to] conclude that no valid agreement to
arbitrate exists.” Id. The Sixth Circuit addressed this very question in Mazera v. Varsity
Ford Management Services, LLC, and, in dicta, quoted approvingly the Third Circuit’s
position that “[a]n unequivocal denial that the agreement had been made, accompanied
by supporting affidavits . . . should be sufficient to require a jury determination on
whether there had in fact been a meeting of the minds.” 565 F.3d 997, 1001 (6th Cir.
2009) (alteration in original) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,
636 F.2d 51, 55 (3d Cir. 1980)). In the present case, and in spite of the compelling
evidence produced by O’Charley’s, the Plaintiffs’ unequivocal denials that they signed
the arbitration agreement would appear to satisfy this showing by raising a genuine
issue of material fact whether an agreement was, in fact, made.
However, even assuming that Plaintiffs did not electronically sign the arbitration
agreement, they each manifested their assent to that agreement in other ways. As noted
above, under Kentucky law, a party can be bound to a contract, even in the absence of a
signature, when her actions indicate acceptance of the contract’s terms. See, e.g., Polly,
2011 WL 93715, at *2; Sweeney, 128 S.W.3d at 501. The arbitration agreement at issue
here opens with the statement: “In consideration of O’Charley’s Inc. providing
Employee with an application for employment, or an offer of employment or further
employment by O’Charley’s Inc., and the compensation and job benefits that Employee
has and/or will receive from O’Charley’s Inc., . . . and the mutual promises made by
Employee and O’Charley’s Inc. herein, the undersigned Employee hereby agrees to the
following . . . .” (Docket No. 4-1, at 3 (emphasis added).) The language “further
employment” in the arbitration agreement here is akin to the “continued employment”
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language in the arbitration agreements in Seawright v. American General Financial
Services, Inc., 507 F.3d at 972-74, and Polly v. Affiliated Computer Services, Inc., 2011
WL 93715, at *3-4, in which the Sixth Circuit and the Eastern District of Kentucky,
respectively, concluded that although the plaintiff had not formally signed the
arbitration agreement, her continued employment constituted her assent to the
agreement’s terms. 3 Moreover, while Plaintiffs adamantly deny signing the arbitration
agreement, they do not deny that they reviewed it or were aware of its terms. 4 (See
Docket Nos. 8-2, at 1; 8-3, at 1; 8-4, at 1.) Nor do they deny or dispute that they
received a copy of the Handbook, which expressly states: “As a condition of
employment, all team members must sign the Arbitration Agreement.” (See Docket
Nos. 8-2, at 1; 8-3, at 1; 8-4, at 1; 9-1, at 6.) Furthermore, despite its limited relevance
to whether Plaintiffs assented to the arbitration agreement, see Polly, 2011 WL 93715,
at *4, Taylor, the other former O’Charley’s employee, similarly does not deny reviewing
or being aware of the arbitration agreement, nor does she deny having received a copy
of the Handbook. (See Docket No. 8-5, at 1.)
The Sixth Circuit and Eastern District of Kentucky have held that an employee
assented to an arbitration agreement, even without a signature, in circumstances similar
to those here. See Seawright, 507 F.3d at 972-74, 978-79; Polly, 2011 WL 93715, at *4.
3
Although Seawright dealt with whether, in absence of a signature, continuing employment
constituted assent under Tennessee law, see 507 F.3d at 973, as the Eastern District of Kentucky observed
in Polly, “Tennessee law . . . like Kentucky law, recognizes that action in conformity with a contract can
constitute assent to the contract,” 2011 WL 93715, at *2.
4
By way of argument, in their Surreply, Plaintiffs state that they were not aware of the existence of
the arbitration agreement. (Docket No. 10, at 3.) However, this assertion is not supported by their
affidavits, in which each Plaintiff merely states that she did not sign any such agreement. (See Docket
Nos. 8-2, at 1; 8-3, at 1; 8-4, at 1.)
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O’Charley’s has produced sufficient evidence that Plaintiffs were informed of the
arbitration agreement, were allowed an opportunity to review it, and were informed that
they must agree to its terms as a condition of their employment. The arbitration
agreement, which Plaintiffs do not deny reviewing or being aware of, clearly states that
each employee must agree to its terms “[i]n consideration of . . . an application for
employment, or an offer of employment or further employment by O’Charley’s Inc.,
and the compensation and job benefits that [she] has and/or will receive from
O’Charley’s Inc.” (Docket No. 4-1, at 3.) The Handbook, which Plaintiffs also do not
deny receiving or being aware of, similarly highlights, in no uncertain terms, that “[a]s a
condition of employment, all team members must sign the Arbitration Agreement.”
(Docket No. 9-1, at 6.) It is not disputed that Plaintiffs continued their employment at
O’Charley’s or that they continued to receive compensation and/or other benefits from
O’Charley’s. 5
Accordingly, the Court finds that the Plaintiffs’ actions constituted assent to the
arbitration agreement and its mandatory arbitration requirement. The Court further
finds that the arbitration agreement is valid and enforceable under the FAA, regardless
whether it was ever signed by Plaintiffs. See Seawright, 507 F.3d at 978. As such, to
the extent Plaintiffs wish to pursue their claims against O’Charley’s, they must do so in
accordance with that agreement.
5
According to their Complaint, Plaintiff Braxton continued her employment with O’Charley’s for
“seven years” and Plaintiff Bailey for continued hers for “over two years.” (Docket No. 1-1, at 9-10.)
The Complaint also states that Plaintiff Colburn was injured while working at O’Charley’s in March
2013, (Docket No. 1-1, at 11), which, taken with the evidence of record showing that she was hired in
August 2009, (Docket No. 4-2, at 2, 13), means that Plaintiff Colburn continued her employment with
O’Charley’s for at least three-and-a-half years.
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A final consideration is whether the Court should dismiss this action or, instead,
stay these proceedings pending arbitration. Several circuit courts, focusing on the
language of § 3 of the FAA, have held that it is proper for a court to retain jurisdiction
by staying the pending litigation until the arbitration is concluded.
See Lloyd v.
Hovensa, LLC, 369 F.3d 263 (3d Cir. 2004); Adair Bus. Sales, Inc. v. Blue Bird Corp.,
25 F.3d 953 (10th Cir. 1994). However, other circuit courts, focusing instead on the
underlying policies set forth by the Supreme Court and Congress, have held that a court
may dismiss the action before it if all the claims in the suit will be referred to
arbitration. See Choice Hotels Int’l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707
(4th Cir. 2001); Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161 (5th Cir. 1992);
Sparling v. Hoffman Constr. Co., 864 F.2d 635 (9th Cir. 1988). The Sixth Circuit
appears to follow the latter approach. Ozormoor v. T-Mobile USA, Inc., 345 F. App’x
972, 975 (6th Cir. 2009) (“[Plaintiff] challenges the dismissal of his suit, asserting that 9
U.S.C. § 3 requires district courts to stay suits pending arbitration rather than dismiss
them. We have already rejected that argument.”); Hensel v. Cargill, Inc., 198 F.3d 245,
1999 WL 993775, at *4 (6th Cir. 1999) (unpublished table decision) (“Under § 3 of the
FAA, if any separate claim is referable to arbitration, then a stay of proceedings on the
remaining claims is mandatory. However, litigation in which all claims are referred to
arbitration may be dismissed.”); see also Green v. Ameritech Corp., 200 F.3d 967, 973
(6th Cir. 2000) (quoting Alford, 975 F.2d at 1164, for the proposition that “[t]he weight
of authority clearly supports dismissal of the case when all of the issues raised in the
district court must be submitted to arbitration”). Numerous district courts in this circuit,
relying on Ozormoor, have dismissed actions where all claims are subject to arbitration.
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E.g., Cox v. Gen. Elec. Co., 2013 WL 3811762, at *4 (S.D. Ohio July 22, 2013); Kovac
v. Superior Dairy, Inc., 930 F. Supp. 2d 857, 865 (N.D. Ohio 2013); Braverman Props.,
LLC v. Boston Pizza Rests., LP, 2011 WL 2551189, at *4 (W.D. Mich. June 27, 2011).
Here, Plaintiffs do not argue that their claims fall outside the substantive scope of the
arbitration agreement. Therefore, because the Court is satisfied that all of the Plaintiffs’
claims are subject to arbitration, it will dismiss this action, rather than stay these
proceedings pending arbitration.
CONCLUSION
Having considered the parties’ respective arguments and being otherwise
sufficiently advised, for the foregoing reasons, the Court will GRANT O’Charley’s
Motion to Dismiss and DISMISS Plaintiffs’ Complaint. Because O’Charley’s has
moved to compel arbitration only if this matter is stayed, the Court finds no reason to
necessarily compel arbitration at this time; however, should Plaintiffs wish to pursue
their claims further, they must do so through arbitration in accordance with the terms of
the arbitration agreement. An appropriate Order shall issue concurrently with this
Opinion.
Date:
cc:
February 13, 2014
Counsel
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