Bynum v. Maplebear Inc.
Filing
34
MEMORANDUM & ORDER granting defendant's 10 Motion to Compel Arbitration. The case is stayed pending arbitration pursuant to section 3 of the FAA. Defendant shall promptly file an arbitration demand with JAMS in New York. If JAMS is unwill ing to accept the arbitration in New York for any reason, either party shall by letter notify the court. The court will then set a trial date. The parties and JAMS are requested to take appropriate prompt steps to determine whether the arbitration can go forward. Ordered by Judge Jack B. Weinstein on 2/12/2016. (Barrett, C)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
MEMORANDUM & ORDER
MELODY BYNUM,
15-CV-6263
Plaintiff,
– against –
MAPLEBEAR INC., d/b/a INSTACART,
Defendant.
Parties
Appearances
Melody Bynum
represented by Abdul Karim Hassan
Abdul Hassan Law Group, PLLC
215-28 Hillside Avenue
Queens Village, NY 11427
718-740-1000
Fax: 718-740-2000
Email: abdul@abdulhassan.com
Maplebear Inc.
doing business as
Instacart
represented by Alice Keeney Jump
Reavis Parent Lehrer LLP
41 Madison Avenue
41st Floor
New York, NY 10010
Email: ajump@rpl-law.com
Benjamin W. Berkowitz
Nikki Vo
Ryan Wong
Keker & Van Nest LLP
633 Battery Street
San Francisco, CA 94111
Email: bberkowitz@kvn.com
Email: nvo@kvn.com
Email: rwong@kvn.com
JACK B. WEINSTEIN, Senior United States District Judge:
Table of Contents
I.
Introduction .......................................................................................................................... 2
II.
Factual and Procedural Background .................................................................................... 3
A. Parties ................................................................................................................................... 3
1. Defendant Instacart .......................................................................................................... 3
2. Plaintiff Melody Bynum................................................................................................... 4
B. Agreement between Bynum and Instacart ........................................................................... 4
1. Application Process .......................................................................................................... 4
2. HelloSign.......................................................................................................................... 5
3. Parties’ Obligations .......................................................................................................... 5
4. Arbitration Agreement ..................................................................................................... 6
5. Severability....................................................................................................................... 7
6. Governing Law ................................................................................................................. 7
C. Defendant’s Motion to Compel Arbitration ......................................................................... 7
III.
Law....................................................................................................................................... 8
A. Federal Arbitration Act ........................................................................................................ 8
B. Valid Arbitration Agreement ............................................................................................. 10
C. Arbitrability of Statutory Claims ....................................................................................... 12
IV.
Application of Law to Facts ............................................................................................... 13
A. Valid Arbitration Agreement ............................................................................................. 13
1. Consent to Arbitrate ....................................................................................................... 13
2. Venue and Unconscionability ........................................................................................ 15
a)
Venue .......................................................................................................................... 15
b)
Unconscionability ....................................................................................................... 16
B. Arbitrability of FLSA Claims ............................................................................................ 18
1. FLSA Claims are Arbitrable .......................................................................................... 18
2. Impact of Cheeks v. Freeport Pancake House ............................................................... 21
C. Scope of Arbitration Agreement ........................................................................................ 22
1
V.
Conclusion ......................................................................................................................... 23
I.
Introduction
This case asks the question whether the court can sever unconscionable portions of an
arbitration agreement with respect to venue and assessments of legal fees and costs and then order
arbitration under the purged agreement. This memorandum and order supports an affirmative
answer.
Plaintiff Melody Bynum initiated this action against defendant Maplebear Inc., doing
business as Instacart (“Instacart”), on October 30, 2015. Alleged is that she was misclassified as
an independent contractor and was not paid overtime wages in violation of the Fair Labor
Standards Act (“FLSA”) and New York Labor Law (“NYLL”). See generally Compl., Oct. 30,
2015, ECF No. 1 (“Compl.”).
On December 15, 2015, defendant moved to compel arbitration. See Notice of Def.’s Mot.
to Compel Arbitration, Dec. 15, 2015, ECF No. 10. It argues that there is a valid arbitration
agreement between the parties which requires plaintiff to resolve her wage claims through binding
arbitration administered by JAMS (a national private organization providing arbitration services).
See generally Mem. of Law in Supp. of Def.’s Mot. to Compel Arbitration, Dec. 15, 2015, ECF
No. 13 (“Def.’s Mem.”).
Plaintiff opposes the motion. She contends that FLSA claims are not arbitrable. She seeks
additional time to complete discovery on whether there was a valid arbitration agreement. See
generally Pl.’s Mem. of Law in Opp. to Def.’s Mot. to Compel Arbitration, Jan. 5, 2016, ECF No.
29 (“Pl.’s Mem.”).
An evidentiary hearing was conducted on February 8, 2016. See Hr’g Tr., Feb. 8, 2016
(“Hr’g Tr.”). Following the parties’ stipulation to sever the arbitration agreement’s venue and fee2
related clauses, defendant’s motion to compel was orally granted.
Federal law requires
enforcement of valid agreements to arbitrate. Without the objectionable venue and fee provisions,
the arbitration agreement entered into between the parties is valid.
Plaintiff’s testimony as well as the available documentation shows that she received, read
and signed the employment contract, which included an agreement to arbitrate. Plaintiff has not
argued that she did not understand what she read, or that she did not provide the signature on the
contract. She had a reasonable opportunity to examine the arbitration agreement and understand
it; there was no overreaching by defendant in presenting the arbitration clause to her.
Plaintiff’s dispute over wages and the terms of her employment falls within the broad scope
of the arbitration agreement. For the reasons stated on the record and in this memorandum, the
case is stayed pending arbitration in New York in accordance with section 3 of the Federal
Arbitration Act (“FAA”).
II.
Factual and Procedural Background
A.
Parties
1. Defendant Instacart
Instacart is a technology company founded in 2012 and headquartered in San Francisco,
California. Decl. of Heather Wake in Supp. of Def.’s Mot. to Compel Arbitration, Dec. 15, 2015,
ECF No. 11 (“Wake Decl.”), at ¶ 2. Through the use of a “communications and logistics platform,”
Instacart “facilitate[s] connections between customers who wish to purchase grocery items and
individuals who are willing to shop for the groceries and/or deliver the groceries to the customers
(called ‘Personal Shoppers’).” Id. at ¶ 3. The Instacart platform is used in several cities including
San Francisco, Denver, Philadelphia, and New York. Id. at ¶ 5. Instacart has operated in New
York since March 2014. Id.
3
Customers can create a user account with Instacart and place an online order for groceries
from retail stores such as Safeway, PETCO, Costco, Whole Foods Market, and others. Id. at ¶ 6.
They can also specify whether they want the groceries delivered and the time for delivery. Id.
Instacart’s proprietary communications and logistics technology then connects customers with
Personal Shoppers, who are tasked with completing the order. Id. at ¶ 7.
2. Plaintiff Melody Bynum
Plaintiff Melody Bynum is a resident of Queens County, New York. Compl. at ¶ 7.
According to the complaint, she worked for defendant as a Personal Shopper from October 2014
to on or about October 7, 2015, performing delivery work within New York. Id. at ¶¶ 11-12.
B.
Agreement between Bynum and Instacart
Plaintiff entered into an Independent Contractor Agreement (“Agreement”) with Instacart
on October 15, 2014, after applying for the position of Personal Shopper through the Instacart
website. Wake Decl. at ¶¶ 9, 12, Ex. A.
1. Application Process
In order to become a Personal Shopper, an applicant clicks on a link available on the front
page of the Instacart website which says “Become a Shopper.” Id. at ¶ 8. Clicking on the “Become
a Shopper” link takes the applicant to the application section of Instacart’s website.
The
application includes a description of a Personal Shopper’s expected tasks (purchasing or delivering
groceries, or both), required qualifications, an overview of the application process, and a link that
says “Apply Now!” to begin the application. Id. Each applicant is required to electronically sign
an Independent Contractor Agreement as part of his or her application. Id. at ¶ 9, Ex. A.
4
2. HelloSign
HelloSign, an electronic signature service, manages Instacart’s Independent Contractor
Agreements with Personal Shoppers. Id. at ¶ 10. According to defendant, HelloSign uses IP
addresses and other identifying data to maintain a time-stamped audit trail that tracks when each
Personal Shopper applicant receives, views, and submits each Agreement. Id. An applicant is
permitted to electronically sign the Agreement after passing various security measures. Id.
HelloSign’s website represents that the company complies with the U.S. Electronic Signature in
Global and National Commerce Act of 2000 (“E-SIGN”) regarding electronic signatures and
transmissions. Id. at ¶ 11.
It is argued by defendant, without contradiction, that according to HelloSign’s audit data,
Bynum reviewed the Agreement on three separate days—October 9, 14, and 15, 2014—prior to
signing it. See id. at Ex. A, Audit Trail. After signing the Agreement and submitting her
application, plaintiff received a copy of her completed application, including the signed
Agreement. Id. at ¶ 13. She then began performing Personal Shopper services for Instacart. Id.
at ¶ 14.
3. Parties’ Obligations
According to the Agreement, a Personal Shopper is engaged by Instacart to perform
“[s]hopping and delivery services” for its customers. Id. at Ex. A, § 1 and Ex. A. Personal
Shoppers are paid by Instacart pursuant to the following fee schedule:
For each “batch” of orders picked, contractor will receive the greater
of $5 (five dollars) per batch or 50 (fifty) cents per item picked.
Contractor will receive an additional commission of $5 per order
delivered. Contractor will also receive an additional twenty five
cents per batch if he or she wears an “Instacart” shirt while picking
the batch and delivering all orders comprised of that batch. The
contractor will be charged $0.25/batch for use of the app.
5
Id. at Ex. A, § 2 and Ex. A. Under section 2 of the Agreement, Personal Shoppers “shall be
responsible for all expenses incurred or necessary in the performance of [shopping and delivery
services], including but not limited to telephone, mailing, and travel expenses.” Id. at Ex. A, § 2.
4. Arbitration Agreement
The Agreement contains a section entitled “DISPUTE RESOLUTION.” See id. at Ex. A,
§ 7. Section 7.1 states:
Following the full opportunity to discuss and negotiate over this
dispute resolution procedure, the Parties agree that to the fullest
extent permitted by law, any controversy, dispute or claim arising
out of or relating to the Services performed by the Contractor, this
Agreement, the breach, termination, interpretation, enforcement,
validity, scope and applicability of any such agreement, or any
allegations of discrimination or harassment on any basis under
federal, state, or local law, which could otherwise be heard before
any court of competent jurisdiction (a “Dispute”), shall be submitted
to and determined exclusively by binding arbitration. The Parties
agree that a Dispute arising under any law that requires resort to an
administrative agency may be brought before such agency as
permitted by law, and that after exhaustion of administrative
remedies, the Parties must pursue such Dispute through this binding
arbitration procedure to the fullest extent permitted by law.
Id. at Ex. A, § 7.1.
The Agreement provides that arbitration shall be administered by JAMS at its San
Francisco office “pursuant to its Employment Arbitration Rules and Procedures and subject to
JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness . . . that are
in effect when arbitration is demanded.” See id. at Ex. A, § 7.2 and Ex. B. The Agreement requires
the parties to “equally advance all of the arbitrator’s expenses and fees” and allows the arbitrator
to “award fees and costs to the prevailing party.” Id. at Ex. A, § 7.3. Pursuant to section 7.2, “[i]n
the event of any conflict between the [JAMS] Rules and this Agreement, this Agreement shall
apply.” Id. at Ex. A, § 7.2.
6
According to section 7.4 of the Agreement, California substantive law applies to the
arbitration proceedings as well as to a review of any award, except where federal law controls:
The Parties agree that the enforceability of this Agreement shall be
governed by the Federal Arbitration Act (9 U.S.C. § 2), and
acknowledge that Company’s business and the nature of
Contractor’s services involve interstate commerce. The arbitrator
shall apply California substantive law to the proceeding, except for
any claim to which Federal substantive law would apply. The
Parties each expressly waive the right to a jury trial and agree
that the arbitrator’s award shall be final and binding on the
Parties. Any Action to review the arbitration award for legal error
or to have it confirmed, corrected or vacated shall be decided
pursuant to California law and shall be filed and maintained in a
California state court of competent jurisdiction.
Id. at Ex. A, § 7.4 (bold type in original).
5. Severability
A severability provision is included:
If any provision of this Agreement, or any part thereof, be declared
or determined by any arbitrator or court to be illegal, invalid or
unenforceable and are therefore stricken or deemed waived, the
remainder of the provision and the Agreement shall nonetheless
remain binding in effect, and shall be interpreted in a way to achieve
the goals or intent of the stricken or waived provisions to the extent
such interpretation is consistent with applicable law.
Id. at Ex. A, § 10.
6. Governing Law
Under section 13, the Agreement is to be construed in accordance with California state law.
Id. at Ex. A, § 13.
C.
Defendant’s Motion to Compel Arbitration
Defendant contends that the parties entered into a valid arbitration agreement under the
FAA and that the present dispute falls within its scope. According to defendant, because every
cause of action in plaintiff’s complaint arises out of, or relates to, her activities as a Personal
7
Shopper, plaintiff breached the arbitration agreement by initiating the instant suit. See Def.’s
Mem., at 6-7. Defendant seeks an order: (1) compelling arbitration of plaintiff’s claims; (2)
dismissing or staying the present action pending completion of arbitration; and (3) staying all
further proceedings pending resolution of defendant’s motion to compel arbitration. Id. at 8.
Plaintiff argues that Congress did not intend for FLSA claims to be arbitrable and more
information is needed to determine whether the parties entered into a valid electronic arbitration
agreement.
See Pl.’s Mem., at 3-10.
Defendant opposes plaintiff’s request for additional
discovery, contending that Ms. Bynum “has failed to offer any facts or evidence . . . that the
agreement is invalid or that she did not intend to be bound by it.” Def.’s Reply in Supp. of Mot.
to Compel Arbitration, Jan. 19, 2016, ECF No. 31 (“Def.’s Reply Mem.”), at 10.
III.
Law
A.
Federal Arbitration Act
The question of whether the parties entered into a valid arbitration agreement is governed
by the FAA. See, e.g., Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001); Sinnett v. Friendly
Ice Cream Corp., 319 F. Supp. 2d 439, 443 (S.D.N.Y. 2004); Cobarruviaz v. Maplebear, Inc., No.
15-CV-697, 2015 WL 6694112 (N. D. Cal., Nov. 3, 2015) (reviewing the enforceability of an
identical arbitration agreement with reference to the FAA). Chapter two of the FAA provides for
enforceability:
A written provision in any . . . contract evidencing a transaction
involving commerce to settle by arbitration a controversy thereafter
arising out of such contract or transaction, or the refusal to perform
the whole or any part thereof, or an agreement in writing to submit
to arbitration an existing controversy arising out of such a contract,
transaction, or refusal, 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 (emphasis added).
8
The FAA “leaves no place for the exercise of discretion by a district court, but instead
mandates that district courts shall direct the parties to proceed to arbitration on issues as to which
an arbitration agreement has been signed.” Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d
840, 844 (2d Cir. 1987) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985))
(emphasis in original). The Supreme Court has interpreted the FAA broadly, finding a “liberal
federal policy favoring arbitration agreements[.]” Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24 (1983); see also Southland Corp. v. Keating, 465 U.S. 1, 10 (1984) (“In
enacting § 2 of the federal Act, Congress declared a national policy favoring arbitration and
withdrew the power of the states to require a judicial forum for the resolution of claims which the
contracting parties agreed to resolve by arbitration.”); Shearson/Am. Exp., Inc. v. McMahon, 482
U.S. 220, 226-27 (1987) (“The Arbitration Act thus establishes a ‘federal policy favoring
arbitration,’ requiring that ‘we rigorously enforce agreements to arbitrate.’”) (internal citations
omitted); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 345 (2011) (“[O]ur cases place it
beyond dispute that the FAA was designed to promote arbitration.”).
Arbitration “is a matter of contract.” AT&T Mobility LLC, 563 U.S. at 339 (citing Rent-ACenter, West, Inc. v. Jackson, 130 S. Ct. 2772, 2776 (2010)). When enforcing an arbitration
agreement, “as with any other contract, the parties’ intentions control.” Stolt–Nielsen S.A. v.
AnimalFeeds Int’l Corp., 559 U.S. 662, 682 (2010) (internal quotation marks and citations
omitted). Courts may only compel arbitration of “those disputes . . . that the parties have agreed
to submit” to arbitration. Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 302 (2010)
(internal quotation marks and citations omitted) (alteration in original). If the parties intended to
arbitrate a dispute, courts are generally required to “enforce [such] agreements . . . according to
9
their terms.” CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012); Cohen v. UBS Fin.
Servs., Inc., 799 F.3d 174, 177 (2d Cir. 2015).
If a court is satisfied that a matter is arbitrable under an arbitration agreement, section 3 of
the FAA provides for a stay of legal proceedings. 9 U.S.C. § 3; see also Genesco, 815 F.2d at 844.
Pursuant to section 4 of the FAA, a court is to compel arbitration if there has been a “failure,
neglect, or refusal of another to arbitrate under a written agreement for arbitration.” 9 U.S.C. § 4;
Sinnett, 319 F. Supp. 2d at 443 (quoting Genesco, 815 F.2d at 844).
In order to determine whether proceedings should be stayed or dismissed in favor of
arbitration, a court must assess: “(1) whether the parties agreed to arbitrate; (2) whether the asserted
claims fall within the scope of the arbitration agreement; (3) if federal statutory claims are at issue,
whether Congress intended such claims to be non-arbitrable; and (4) if only some of the claims are
arbitrable, whether to stay the balance of the proceedings pending arbitration.” Id.; see also JLM
Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 169 (2d Cir. 2004).
B.
Valid Arbitration Agreement
Section two of the FAA allows courts to deny enforcement of an arbitration agreement
“upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.
Whether a valid arbitration agreement exists is a question of state contract law. Sinnett, 319 F.
Supp. 2d at 443-44 (“[W]hen determining whether a contract to arbitrate has been established for
the purposes of the FAA, federal courts should apply ‘ordinary state-law principles that govern the
formation of contracts’ to decide ‘whether the parties agreed to arbitrate a certain matter.’”)
(quoting First Options, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)); Gold v. Deutsche
Aktiengesellschaft, 365 F.3d 144, 149 (2d Cir. 2004) (“Whether one can be bound by an arbitration
clause is usually determined by looking at generally accepted principles of contract law.”)
10
(citations omitted); see also Bell v. Cendant Corp., 293 F.3d 563, 566 (2d Cir. 2002) (“[T]he
ultimate question of whether the parties agreed to arbitrate is determined by state law.”).
According to general principles of contract law, “a party is bound by the provisions of a
contract that he signs, unless he can show special circumstances that would relieve him of such an
obligation.” Genesco, 815 F.2d at 845. “[T]he party resisting arbitration bears the burden of
proving that the claims at issue are unsuitable for arbitration.” Green Tree Fin. Corp.-Ala. v.
Randolph, 531 U.S. 79, 91 (2000); Cobarruviaz, 2015 WL 6694112 at *6 (“Because
unconscionability is a contract defense, the party asserting the defense bears the burden of proof.”)
(internal quotation marks and citations omitted).
The Agreement in the instant case provides that it shall be construed in accordance with
California state law.
It is enforceable unless a contract defense generally available under
California law applies, including unconscionability. Cobarruviaz, 2015 WL 6694112 at *6 (“[I]n
California, the courts may refuse to enforce an arbitration agreement if [it] is unconscionable, as
unconscionability is a general contract defense.”) (citations omitted).
Cobarruviaz involved the same defendant as the present case, the same arbitration
agreement, California law as operative, and a similar factual pattern. Its basic analysis is adopted
in the instant case.
Pursuant to § 1670.5(a) of California’s Civil Code:
If the court as a matter of law finds the contract or any clause of the
contract to have been unconscionable at the time it was made the
court may refuse to enforce the contract, or it may enforce the
remainder of the contract without the unconscionable clause, or it
may so limit the application of any unconscionable clause as to
avoid any unconscionable result.
Cal. Civ. Code § 1670.5(a) (West).
11
A contract provision is unconscionable if it was both procedurally and substantively
unconscionable when made: “the core concern . . . is the absence of meaningful choice on the part
of one of the parties together with contract terms which are unreasonably favorable to the other
party.” Cobarruviaz, 2015 WL 6694112 at *6 (citing Sonic–Calabasas A, Inc. v. Moreno, 311
P.3d 184 (Cal. 2013)) (internal quotation marks omitted); cf. Berkson v. Gogo LLC, 97 F. Supp.
3d 359, 391 (E.D.N.Y. 2015) (To characterize a term as unconscionable “requires a showing that
the contract was both procedurally and substantively unconscionable when made—i.e., some
showing of an absence of meaningful choice on the part of one of the parties together with contract
terms which are unreasonably favorable to the other party.”) (internal quotation marks and
citations omitted); 8 Williston on Contracts § 18:9 (4th ed. 2015) (same).
C.
Arbitrability of Statutory Claims
The federal policy favoring arbitration extends to the enforcement of agreements to
arbitrate claims founded on statutory rights. See Shearson/Am. Exp., Inc., 482 U.S. at 226 (“This
duty to enforce arbitration agreements is not diminished when a party bound by an agreement
raises a claim founded on statutory rights.”); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20, 26 (1991) (“It is by now clear that statutory claims may be the subject of an arbitration
agreement, enforceable pursuant to the FAA.”). “Absent a well-founded claim that an arbitration
agreement resulted from the sort of fraud or excessive economic power that would provide grounds
for the revocation of any contract, the Arbitration Act provides no basis for disfavoring agreements
to arbitrate statutory claims by skewing the otherwise hospitable inquiry into arbitrability.”
Shearson/Am. Exp., Inc., 482 U.S. at 226 (internal quotation marks and citations omitted).
The enforceability mandate of the FAA may be overridden by a showing of a contrary
congressional command—a party opposing arbitration bears the burden of demonstrating that
12
Congress intended to preclude a waiver of judicial remedies for the particular statutory rights at
issue. Id.; Gilmer, 500 U.S. at 35 (concluding that Congress did not intend to preclude arbitration
of claims arising under the Age Discrimination in Employment Act; age discrimination claim was
subject to compulsory arbitration pursuant to arbitration agreement).
IV.
Application of Law to Facts
A.
Valid Arbitration Agreement
1. Consent to Arbitrate
Defendant contends that the parties entered into a valid arbitration agreement under the
FAA and the present dispute falls within its scope. According to defendant, plaintiff reviewed and
signed the Agreement, which included a binding arbitration clause. The available audit trail shows
that she reviewed the Agreement on multiple dates. She then electronically signed the Agreement
using HelloSign; her signature is binding and enforceable. See Def.’s Mem., at 11-12.
In her opposition to defendant’s motion to compel, plaintiff has not challenged the validity
of the arbitration agreement. Instead, she has requested more time and additional discovery to
determine whether there was a valid “meeting of the minds,” because the Agreement was between
“[p]laintiff and a computer.” Pl.’s Mem., at 9. Although the Agreement references the parties’
“full opportunity to discuss and negotiate over th[e] dispute resolution procedure,” plaintiff states
that “it seems [the Agreement] was nothing more than an adhesion ‘contract’ without any
negotiation over its terms.” Pl.’s Mem., at 10; see also Wake Decl., at Ex. A, § 7. She also
indicates that there are “no sworn statements, explanations, or other discovery from Hellosign”
regarding whether its processes comply with the relevant electronic signature requirements and
argues that “there is no reliable evidence that” plaintiff actually received the JAMS rules and
conditions. Pl.’s Mem., at 9.
13
While the contract signed by plaintiff appears to be one of adhesion—it was offered on a
take-it-or-leave-it basis and, despite language suggesting otherwise, there does not appear to have
been any actual opportunity to discuss or negotiate its terms—plaintiff did have a full opportunity
to review its contents. Ms. Bynum testified that the full employment contract was sent to her
personal email address and that she “probably read most of it,” although she did not presently
“recall the arbitration section.” Hr’g Tr., at 15:13-21. The arbitration clause was included in the
employment contract. In order to get to the signature page, plaintiff had to scroll through the entire
contract, including the arbitration clause:
MS. WAKE: [The contract] is a multipage document, so they would
have to go through the document and the arbitration clause is within
the document. It’s not on the first page.
THE COURT: Can you skip the agreement and go to signing?
MS. WAKE: No, you have to scroll down through the entire
agreement to get to the signature page.
THE COURT: Is that right?
THE PLAINTIFF: Like I said, I don’t recall exactly.
THE COURT: But you don’t disagree that you had the opportunity
and had to scroll down to get to the signing page?
THE PLAINTIFF: Well, you can, in any document, you can scroll
through the entire document and just skip whatever you want if you
choose to.
[…]
THE COURT: But there was no shortcut, you had to scroll through?
THE PLAINTIFF: I believe so, yeah.
Id. at 18:8-19:1; contra Berkson, 97 F. Supp. 3d at 403-04 (finding that plaintiff Berkson was not
aware of the terms he was binding himself to when the relevant terms of use were made available
through a hyperlink near a sign-in button; Gogo did not have a practice of emailing or mailing the
contents of the “terms of use” to its customers and plaintiff Berkson never had a hard copy in his
possession to refer to).
14
Plaintiff does not claim that there was any language or educational barrier that stopped her
from understanding the contract. See Hr’g Tr., at 19:5-10. After having the opportunity to read
and review it, plaintiff signed the Agreement. Absent any showing of fraud, duress, or other
wrongful conduct, the Agreement, including its arbitration clause, is valid and binding on the
parties.
2. Venue and Unconscionability
Although plaintiff is a resident of Queens, New York and performed services for defendant
within New York, the arbitration agreement provides that arbitration shall be conducted at the
JAMS offices in San Francisco, California. See Wake Decl., at Ex. A, § 7.2. It also provides that
the parties are to equally advance fees and costs and allows the arbitrator to award legal fees and
costs to the prevailing party. Id. at Ex. A, § 7.3. A worker such as plaintiff would be forced out
of the game by fear of a financial cost that her opponent could easily absorb.
While plaintiff has not claimed—as she might have under Cobarruviaz—that the cost of
arbitration would render the arbitration agreement invalid, she has argued that the provisions
relating to venue and fees would force her to “pay more to arbitrate her claims than her claims are
worth.” Pl.’s Mem., at 4.
a) Venue
Pursuant to 28 U.S.C. § 1404(a), a court may transfer a case to an appropriate venue not
unduly burdensome to the parties and witnesses. See 28 U.S.C. § 1404(a) (“For the convenience
of parties and witnesses, in the interest of justice, a district court may transfer any civil action to
any other district or division where it might have been brought or to any district or division to
which all parties have consented.”). To the extent that the arbitration clause provides for
arbitration in San Francisco—a city never visited by plaintiff and thousands of miles away from
15
where she resides and where she performed services for defendant pursuant to the Agreement—it
violates applicable federal policy in regards to venue and is invalid. The provision is particularly
inappropriate in the present case since the defendant and JAMS are present in New York.
At the February 8, 2016 hearing, the parties stipulated that the provision relating to choice
of venue is severable. They agreed that venue is appropriate in New York rather than in California.
See Hr’g Tr., at 5:22-24, 6:6-10. The contract clause requiring arbitration to be carried out in San
Francisco is, accordingly, stricken, in light of the parties’ stipulation. If an arbitration goes
forward, it is to be carried out by JAMS in New York where it has an office. See id.
b) Unconscionability
The provisions requiring the parties to equally advance fees and allowing the arbitrator to
award legal fees and costs to the prevailing party are unconscionable under applicable California
law. The contract provides that California law governs. See Wake Decl., at Ex. A, § 13. Identical
clauses were deemed unconscionable and severed by the court in Cobarruviaz. See Cobarruviaz,
2015 WL 6694112 at *7-8. There, the Northern District of California considered an arbitration
agreement like the one presently at issue, except that venue was not a concern in that case since
the plaintiff brought the suit in San Francisco. See id. at *7 (finding that the forum selection clause
requiring arbitration in San Francisco was not substantively unconscionable and noting that
“[w]hile a different calculus should arguably apply to an employment dispute . . . wherein an
employee may claim undue burden resulting from a distant forum, here, [p]laintiffs have chosen
to file the instant lawsuit in San Francisco.”).
The arbitration agreement’s fee-related clauses conflict with the otherwise applicable
JAMS Minimum Standards which provide, in relevant part:
An employee’s access to arbitration must not be precluded by the
employee’s inability to pay any costs or by the location of the
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arbitration. The only fee that an employee may be required to pay
is JAMS’ initial Case Management Fee. All other costs must be
borne by the company, including any additional JAMS Case
Management Fee and all professional fees for the arbitrator’s
services. In California, the arbitration provision may not require an
employee who does not prevail to pay the fees and costs incurred by
the opposing party.
Wake Decl., at Ex. A, Ex. B, Minimum Standard 6. These Minimum Standards “apply to
arbitrations based on pre-dispute agreements that are required as a condition of employment.” Id.
at Ex. A, Ex. B. They provide that “JAMS will administer mandatory arbitrations in employment
cases only if the arbitration provision complies with JAMS Minimum Standards.” Id. (emphasis
added). Yet, section 7.2 of the arbitration agreement in the instant case provides that “[i]n the
event of any conflict between the [JAMS] Rules and this Agreement, this Agreement shall apply.”
Id. at Ex. A, § 7.2.
In Cobarruviaz—a similar FLSA suit brought against the same defendant as in the instant
case—the district court for the Northern District of California ordered defendant to file an
arbitration demand with JAMS to determine whether JAMS would be willing to accept the
arbitration. JAMS replied that “the arbitration agreement as written does not comply with the
Minimum Standards. Therefore, JAMS has determined that it will administer the cases only if the
parties, by agreement or waiver, amend the arbitration agreement to comply with the Minimum
Standards.” Cobarruviaz, 2015 WL 6694112 at *3 (emphasis added). In that case, the plaintiffs
did not agree to modify or waive the offending contract terms. Id. The court severed the
conflicting fee-related provisions as unconscionable and only then did it compel the parties to
arbitrate. See id. at *8 (“Both the FAA and California law favor severance when the contract is
not ‘permeated’ with unconscionability. No such permeation exists here. Moreover, there is a
severance clause in the Agreements. The offending provisions may easily be grammatically
severed without reforming the Agreements.”).
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In the instant case, the parties agreed to strike the two conflicting fee-related provisions:
MR. BERKOWITZ: I would certainly agree . . . Instacart intends to
pay the arbitrator’s fees, and I certainly agree with the striking of the
fee splitting provision. The prevailing party provision, we have no
objection to it being struck.
THE COURT: All right. So those they’ll strike. Will you agree to
striking those two, if I order arbitration?
MR. HASSAN: Yeah, I believe they’re invalid, Your Honor. They
should be stricken.
THE COURT: All right. So those are stricken by stipulation.
Hr’g Tr., at 8:2-14.
Without the objectionable venue, fee splitting and fee sharing clauses, the arbitration
agreement is valid and enforceable.
B.
Arbitrability of FLSA Claims
Plaintiff in the present case contends that FLSA claims are non-arbitrable as a matter of
law. She argues that: (1) Congress intended FLSA claims to be non-arbitrable; and (2) FLSA
claims are not subject to arbitration under the decision of the Court of Appeals for the Second
Circuit in Cheeks v. Freeport Pancake House Inc., 796 F.3d 199 (2d Cir. 2015). See Pl.’s Mem.,
at 3-9. For the reasons stated below, plaintiff’s claims are without merit.
1. FLSA Claims are Arbitrable
Plaintiff rests on the Supreme Court’s decision in Barrentine v. Arkansas-Best Freight Sys.,
Inc., 450 U.S. 728 (1981) in support of her argument that FLSA claims are not arbitrable. In that
case, the Court held that petitioners’ minimum wage claims under the FLSA were not barred by
the prior submission of the petitioners’ grievances to a joint committee pursuant to the provisions
of a collective bargaining agreement. The Court differentiated between collective rights arising
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under a collective bargaining agreement and individual rights under a federal statute. See
Barrentine, 450 U.S. at 737-46.
Barrentine has been distinguished from cases involving the arbitrability of individual
statutory claims. See, e.g., Gilmer, 500 U.S. 20 at 33-35. First, Barrentine was not decided under
the FAA so the statute’s “liberal policy favoring arbitration” was not at issue. See id. at 35.
Second, Barrentine involved arbitration in the context of a collective bargaining agreement, where
the claimants were represented by their unions; the relevant concern was the tension between
collective representation and individual statutory rights. Id. The Court did not rule on whether
individual FLSA claims could be arbitrated pursuant to a private agreement between an individual
employee and employer.
Repeatedly it has been found that individual agreements to arbitrate FLSA claims are
enforceable. For example, in Ciago v. Ameriquest Mortgage Co. the District Court for the
Southern District of New York explained:
Plaintiff argues that the Arbitration Agreement is invalid because
“an employee cannot be held to have waived a judicial forum as
guaranteed by the FLSA.” Plaintiff does not, however, point to
anything in the text of the FLSA that indicates Congress intended to
preclude compulsory arbitration of FLSA claims nor does she
establish that there is an “‘inherent conflict’ between arbitration and
the” policies underlying the FLSA. In Gilmer the Supreme Court
held that claims under the Age Discrimination and Employment Act
(“ADEA”) may be subject to compulsory arbitration. . . . [B]ecause
of the similar remedial purpose and enforcement mechanisms shared
by the ADEA and FLSA, the reasoning in Gilmer dictates that
claims under the FLSA may also be subject to compulsory
arbitration provisions.
Plaintiff cites Barrentine v. Arkansas–Best Freight, 450 U.S. 728,
101 S. Ct. 1437, 67 L.Ed.2d 641 (1981), and Tran v. Tran, 54 F.3d
115 (2d Cir. 1995), in support of her contention that FLSA claims
are nonarbitrable. In these cases, the Supreme Court and the Second
Circuit held that an arbitration provision in a collective bargaining
agreement did not preclude an individual union member from
bringing a claim against his employer under the FLSA.
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The present case involves an individual agreement to arbitrate, not
a provision within a collective bargaining agreement; it is,
therefore, distinguishable from Barrentine and Tran because
different prudential considerations apply to collective bargaining.
Specifically, the Court in Barrentine appeared concerned with the
fact that the union might not pursue the individual member’s FLSA
claims through the arbitration process for strategic reasons. This
consideration is simply not applicable here. Accordingly, we
conclude that Congress has not evinced an intention to preclude
arbitration of FLSA claims.
Ciago v. Ameriquest Mortg. Co., 295 F. Supp. 2d 324, 332 (S.D.N.Y. 2003) (citations omitted;
emphasis added); Adkins v. Labor Ready, Inc., 303 F.3d 496, 506 (4th Cir. 2002) (distinguishing
Barrentine in a case involving an individual agreement to arbitrate because Barrentine “was
limited to the case of collective-bargaining arbitration and was thus rooted in substantive concerns
that simply do not apply” out of the collective bargaining context); Sutherland v. Ernst & Young
LLP, 726 F.3d 290 (2d Cir. 2013) (finding that an employee can waive his or her ability to proceed
collectively under the FLSA in an arbitration agreement); Bailey v. Ameriquest Mortg. Co., 346
F.3d 821, 824 (8th Cir. 2003) (compelling arbitration of FLSA claims); Patterson v. Raymours
Furniture Co., 96 F. Supp. 3d 71 (S.D.N.Y. 2015) (same); LaVoice v. UBS Fin. Servs., Inc., No.
11-CV-2308, 2012 WL 124590, at *9 (S.D.N.Y. Jan. 13, 2012) (same); Steele v. L.F. Rothschild
& Co., Inc., 701 F. Supp. 407, 408 (S.D.N.Y. 1988) (staying FLSA suit pending arbitration).
Sutherland is the leading Second Circuit case addressing the arbitrability of FLSA claims.
Both sides rely upon it. In that case the question was whether the FLSA barred the waiver of
collective action through individual agreements to arbitrate; plaintiff argued that enforcing the
arbitration provision in her employment contract would prevent her from “effectively vindicating”
her rights under the FLSA and NYLL, because she would not be allowed to pursue the claims
collectively through litigation. See Sutherland, 726 F.3d at 294-295. The Court of Appeals for
the Second Circuit reiterated the liberal federal policy in favor of arbitration. Id. at 295. It found,
20
following the Supreme Court’s decision in Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304
(2013), that the plaintiff’s argument “that proceeding individually in arbitration would be
‘prohibitively expensive’ is not a sufficient basis to invalidate the class-action waiver provision at
issue.” Id. at 299.
The decisions of the Supreme Court, as well as of courts both within and outside this circuit,
indicate that valid arbitration agreements subjecting individual FLSA claims to arbitration must
be enforced in accordance with the FAA. The Supreme Court has declared: “‘[b]y agreeing to
arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it
only submits to their resolution in an arbitral, rather than a judicial, forum.’” Gilmer, 500 U.S. at
26 (quoting Mitsubishi Motors Corp. v. Soler Chrysler—Plymouth, Inc., 473 U.S. 614, 628
(1985)); see also Circuit City Stores, Inc., 532 U.S. at 123. Where the arbitration procedure
provided would be unfair to the worker, the court may, as in this case, take into account protective
equities and law due to the plaintiff under the FLSA.
2. Impact of Cheeks v. Freeport Pancake House
Plaintiff argues that the decision of the Court of Appeals for the Second Circuit in Cheeks
v. Freeport Pankcake House Inc.—holding that FLSA claims cannot be settled without the
approval of a court or the United States Department of Labor—lends support to its claim that FLSA
claims are not arbitrable because: (1) an arbitrator is not obliged to protect the “public’s interest in
FLSA compliance” but is “only obligated to serve the private interests of the parties based on their
arbitration agreement;” (2) “the costs of arbitration offset[] and therefore result[] in waiver of
Plaintiff’s FLSA protected wages;” and (3) arbitration of FLSA claims should not be allowed in
this case “because of the confidentiality of the arbitration proceedings under JAMS’ rules.” Pl.’s
Mem., at 7-8.
21
In Cheeks, the Second Circuit addressed the question in an interlocutory appeal of whether
parties may settle FLSA claims with prejudice without court approval or Department of Labor
supervision. Cheeks, 796 F.3d at 201. The court concluded that “stipulated dismissals settling
FLSA claims with prejudice require the approval of the district court or the [Department of Labor]
to take effect.” Id. at 206. No question regarding the arbitrability of FLSA claims was raised.
Plaintiff’s reference to the Second Circuit’s decision in Cheeks is therefore misplaced. That
decision does not bear on the arbitrability of FLSA claims.
C.
Scope of Arbitration Agreement
The remaining question to be decided is whether plaintiff’s claims fall within the scope of
the arbitration agreement.
According to defendant, all of plaintiff’s causes of action—
misclassification as a non-employee and failure to pay overtime wages under the FLSA and
NYLL—arise out of, or relate to, the “Services performed by the Contractor” and are covered by
the Agreement’s arbitration clause. “Services” is defined in the Agreement as “Shopping and
delivery services for customers of Company.” Wake Decl., at Ex. A, § 1 and Ex. A.
Plaintiff cannot argue that her FLSA claims do not fall within the scope of the Agreement’s
arbitration clause. The arbitration agreement includes broad language, stating that “the Parties
agree that to the fullest extent permitted by law, any controversy, dispute, or claim arising out of
or relating to the Services performed by the Contractors . . . shall be submitted to arbitration.” Id.
at Ex. A, § 7.1.
The present dispute centers on whether plaintiff should be deemed an employee of
defendant rather than an independent contractor, and whether she worked overtime hours and is
entitled to overtime wages under the FLSA and NYLL. The dispute “arises out of” or relates to
the services performed by plaintiff; it requires inquiring into the nature of plaintiff’s employment
22
and whether she was afforded proper compensation. Plaintiff’s claims fall within the scope of the
arbitration agreement.
V.
Conclusion
Plaintiff had a reasonable opportunity to examine and understand the arbitration clause
included in the employment contract that she reviewed and signed. The arbitration agreement’s
provisions on venue, fee sharing, and fee splitting are not enforceable and are severed pursuant to
the parties’ stipulation. Without the objectionable clauses, the arbitration agreement is valid and
enforceable. There is no merit to plaintiff’s claim that FLSA claims are per se non-arbitrable, and
the present dispute falls within the broad language of the arbitration agreement.
Defendant’s motion to compel arbitration is granted. There appears to be no reason for
new discovery on the issue of arbitrability. The case is stayed pending arbitration pursuant to
section 3 of the FAA.
Defendant shall promptly file an arbitration demand with JAMS in New York. If JAMS is
unwilling to accept the arbitration in New York for any reason, either party shall by letter notify
the court. The court will then set a trial date. The parties and JAMS are requested to take
appropriate prompt steps to determine whether the arbitration can go forward.
SO ORDERED.
/s/ Jack B. Weinstein
Jack B. Weinstein
Senior United States District Judge
Dated: February 12, 2016
Brooklyn, New York
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