Teschenborf v. RIIS, LLC et al

Filing 18

MEMORANDUM AND ORDER DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION [DOC. 12]. Signed by District Judge Avern Cohn. (MVer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

ANN TESCHENDORF,
Plaintiff,
v.

Case No. 17-13967

RIIS, LLC and
GODFREY NOLAN,

HON. AVERN COHN

Defendants.
___________________________________/
MEMORANDUM AND ORDER DENYING DEFENDANTS’ MOTION TO COMPEL
ARBITRATION (Doc. 12)1
I.

INTRODUCTION

This is a Fair Labor Standards Act, 29 U.S.C. § 201 et seq., and breach of
contract case. Plaintiff Ann (Teschendorf) is suing her former employer RIIS, LLC (RIIS)
and RIIS owner Godfrey Nolan. Teschendorf says that RIIS withheld payment of wages
and commissions, clawed back commissions, and retaliated against her for complaining
about her right to be paid. Teschendorf’s complaint is in five counts:
Count I: Failure to Pay Wages under the FLSA
Count II: Retaliation in Violation of the FLSA
Count III: Breach of Contract

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Although originally scheduled for hearing, upon review of the parties' papers the Court
deems this matter appropriate for decision without oral argument. See Fed. R. Civ. P.
78(b); E.D. Mich. LR 7.1(f)(2).

Count IV: Action for Accounting
Count V: Quantum Meruit
(Doc. 1). Teschendorf asks for recovery of unpaid wages, unpaid overtime wages,
liquidated damages, attorney’s fees, and a judgment compelling defendants to prepare
an accounting.
Now before the Court is RIIS’ motion to compel arbitration (Doc. 12), to which
Teschendorf has responded (Doc. 15) and RIIS has replied (Doc. 16). For the reasons
that follow, RIIS’ motion is DENIED.
II.

BACKGROUND

Teschendorf worked as a commissioned salesperson at RIIS from 2009 until her
termination on November 17, 2017.
1.
On March 14, 2016, RIIS Human Resources Manager Danielle Bates (Bates)
emailed all RIIS employees a copy of the updated RIIS Employee Handbook
(Handbook). Bates’ email read:
Attached you will find the updated RIIS handbook. We have made some
improvements so I encourage you to read the handbook in its entirety. Below you
will find a list of the policies that received the biggest makeover.
(Doc. 12-3). Bates then listed six changes that were made to the Handbook. She said
nothing about an arbitration agreement. At the end of the email, Bates wrote:
***Due to the number of changes RIIS has made to the handbook we are asking
every employee to acknowledge that we have updated the current handbook and
you understand the changes. You can do this by replying to this email with the
word agree by Thursday, March 31st.
(Id.) (emphasis in original). On March 24, 2016, Bates sent another email stating:

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Reminder*** Please email back “agree” to me by March 31st. If you have any
questions on the updated handbook I would be happy to talk with you anytime.
(Id.). Teschendorf did not respond to Bates’ email, so Bates sent her a third email on
April 4, 2016, stating:
I did not receive your acknowledgement of the handbook, please send that in
today. Just reply “agree” stating you understand the changes and have received
the updated handbook.
(Id.). That same day, Teschendorf responded to Bates’ email with the word “agree.”
(Id.).
2.
One of the changes made to the Handbook was the addition of an arbitration
agreement entitled “Contract Between Employee and RIIS, LLC and Acknowledgement
and Acceptance of Employee Handbook.” (Doc. 12-2). The arbitration agreement
provides in relevant part:
I, the undersigned employee, in consideration of my employment or continued
employment, hereby acknowledge and agree to the following:
I hereby acknowledge that I have received a copy of the employee handbook of
RIIS, L.l.C. (the "Company") dated xxxxxxxxxxx (the "Handbook"), and that the
Handbook does not create a contract between me and the Company. The
Company policies may be unilaterally changed by the Company at any time.
I agree that if a dispute arises concerning my employment with and/or
termination . . . including but not limited to, any claim for wages or fringe benefits,
claims of breach of contract, wrongful discharge, tort claims, invasion of privacy,
slander, defamation, and/or any statutory claim including but not limited to
discrimination or other violation under . . . Fair Labor Standards Act . . . shall be
through the procedures and policies of the American Arbitration Association
utilizing a single arbitrator. I hereby waive my right to adjudicate any claim
against the Company Parties before any federal or state court or agency. I
hereby also expressly waive my right to bring any action or claim under this
Agreement as a member of any purported class or representative proceeding.
This Contract applies to all claims whether brought during my employment with
Company or at any time after termination of employment with Company.

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(Doc. 12-2) (emphasis added). Teschendorf did not sign the arbitration agreement. RIIS
says Teschendorf assented to the changes in the Handbook by responding to Bates’
email with the word “agree.”
III.

LEGAL STANDARD

Under the Federal Arbitration Act (FAA), an arbitration agreement “shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. In deciding whether to enforce an arbitration
agreement, a court must first determine “whether a valid agreement to arbitrate exists.”
Glazer v. Lehman Bros., 394 F.3d 444, 450 (6th Cir. 2005). Such is done by applying
“ordinary state-law principles that govern the formation of contracts.” Id. (quoting
Fazio v. Lehman Bros., 340 F.3d 386, 393 (6th Cir. 2003)).
IV.

ANALYSIS

The arbitration agreement at issue here does not constitute a binding contract,
foremostly because it explicitly states that “the Handbook does not create a contract
between me and the Company.” Courts have declined to enforce arbitration agreements
that specifically state they do not form a contract between the employer and employee.
Hergenreder v. Bickford Senior Living Grp., LLC, 656 F.3d 411, 418 (6th Cir. 2011);
Heurtebise v. Reliable Bus. Computers, 452 Mich. 405, 414 (1996); cf. Seawright v. Am.
Gen. Fin. Servs., Inc., 507 F.3d 967, 979 (6th Cir. 2007).
Further, “an illusory promise arises when a promisor retains the right to decide
whether or not to perform the promised act.” Floss v. Ryan's Family Steak Houses, Inc.,
211 F.3d 306, 315 (6th Cir. 2000). Here, because the Handbook provides that “[t]he

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Company policies may be unilaterally changed by the Company at any time,” RIIS’
promise is illusory and unenforceable.
Thus, although Teschendorf typed the word “agree” to Bates’ request for
agreement “that we have updated the current handbook and you understand the
changes,” she agreed to a document that did not contain a contractual obligation to
pursue arbitration before filing a lawsuit.
V.

CONCLUSION

For the reasons described above, RIIS is not entitled to the enforcement of its
arbitration agreement. The case will proceed in this Court.

SO ORDERED.

S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE
Dated: April 18, 2018
Detroit, Michigan

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