Kennedy v. Lady Jane's Haircuts for Men Holding Company, LLC et al

Filing 51

ORDER denying in part and granting in part 21 Defendants' Motion to Dismiss or, in the Alternative, to Stay Action and to Compel Arbitration. Defendants' Motion to Dismiss is DENIED, but Defendants' Motion to Stay Action and Compel A rbitration is GRANTED. This matter shall be STAYED pending arbitration. Accordingly, 25 Defendants' Motion to Stay the Briefing on Plaintiff's Motion to Send FLSA Notice is DENIED as MOOT. Signed by Judge Michael R. Barrett on 9/25/2024. (kkz)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
Tammy Kennedy,
Plaintiff,
v.

Case No. 1:23cv493

Lady Jane's Haircuts for
Men Holding Company, LLC, et al.,

Judge Michael R. Barrett

Defendants.
OPINION & ORDER
This matter is before the Court upon Defendants’ Motion to Dismiss or, in the
Alternative, to Stay Action and to Compel Arbitration. (Doc. 21). Plaintiff has filed a
Response in Opposition (Doc. 34); and Defendants filed a Reply (Doc. 36). Plaintiff also
filed Notices of Supplemental Declarations. (Doc. 41, 42). Defendants then filed a Reply
in Further Support of their Motion to Dismiss and in Opposition to Plaintiff’s Request to
Seek Discovery Related to Ms. Wawrzniak and Ms. Bender’s Arbitration Agreements
(Doc. 43) and a Notice of Supplemental Authority (Doc. 44). Plaintiff filed a Response to
Defendants’ Notice of Supplemental Authority. (Doc. 45).
I.

BACKGROUND

Defendants Lady Jane’s Haircuts for Men Holding Company, LLC; Lady Jane’s
Milford, OH, LLC; Lady Jane’s Clearwater, FL, LLC; Chad Johnson; Tim McCollum; Jesse
Dhillon; Alicia Bunch; Joe Does 1-10; and Doe Corporations 1-10 (collectively “Lady
Jane’s”) operate a men’s-only hair salon with over 100 locations throughout the United
States. (Doc. 1, PageID 2). Plaintiff seeks to represent stylists who have previously
worked at Lady Jane’s locations in Ohio. (Id., PageID 33).

According to the Complaint, Lady Jane’s controls the services stylists can provide,
the prices they can charge, and their work schedules. (Id., PageID 21-23). However,
Lady Jane’s treats stylists as independent contractors, rather than employees, so stylists
are paid a percentage of the final service charge clients pay instead of a direct wage. (Id.,
PageID 21). Plaintiff claims that even though stylists are integral to Defendants’ primary
business, they make less than minimum wage in some or all workweeks and do not
receive overtime pay. (Id., PageID 26).
Plaintiff—on behalf of herself and other stylists who have worked at Lady Jane’s
at Ohio locations—alleges, among other things, minimum-wage-law and overtime-law
violations because Lady Jane’s was an employer that misclassified stylists as
independent contractors. (Id., PageID 33, 40-43). Plaintiff pursues a collective action
under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., (Doc. 1, PageID
33), and also seeks the certification of a class pursuant to Federal Rule of Civil Procedure
23(b)(3). (Id., PageID 35). Several other stylists have filed consents to join this matter.
(See, e.g., Docs. 6-1, 7-1, 8-1, 9-1, 10-1, 11-1).
Lady Jane’s explains that the stylists entered into independent contractor
agreements and agreed to pursue their claims though individual arbitration. (Doc. 21,
PageID 259). Lady Jane’s relies on the arbitration provision contained in the independent
contractor agreement (“Agreement”):
LJ and CONTRACTOR agree to use binding arbitration, instead of going to
court, for any “Covered Claims” that arise or have arisen between
CONTRACTOR and LJ and/or any current or former employee of LJ. The
arbitration proceedings shall be administered by the American Arbitration
Association under its Commercial Arbitration Rules (“Arbitration Rules”) in
effect at the time a demand for arbitration is made, and judgment on the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof . . . . The parties understand and agree that
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arbitration is the only forum for resolving Covered Claims, and that
both parties are waiving the right to a trial before a judge or jury in
federal or state court in favor of arbitration for Covered Claims.
(Doc. 21-1, PageID 286) (emphasis in original). Plaintiff does not deny that she signed
the Agreement. 1

Plaintiff also does not dispute that her claims fall with within the

Agreement’s definition of “Covered Claims.”2
Lady Jane’s maintains that because Plaintiff’s claims are subject to a valid,
enforceable arbitration agreement, this Court lacks jurisdiction. Lady Jane’s asks this
Court to dismiss Plaintiff’s complaint with prejudice, pursuant to Federal Rules of Civil
Procedure 12(b)(1), 12(b)(2), and 12(b)(6), or, in the alternative, to stay the action and
compel individual arbitration. (Id., PageID 255). 3 Plaintiff responds that the arbitration
agreement is unenforceable because it is void as to public policy and it is unconscionable.
II.

ANALYSIS

The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16, codifies “a national policy
favoring arbitration when the parties contract for that mode of dispute resolution.” Preston

Plaintiff did submit the declarations of Marie Wawrzyniak and Elizabeth Bender, who
stated that they did not remember signing the Agreement. (See Docs. 41, 42). However, Lady
Jane has submitted copies of the Agreement electronically signed by Wawrzyniak (Doc. 40-3,
PageID 521) and Bender (Doc. 40-3, PageID 521). Courts in Ohio have “upheld arbitration
agreements executed electronically even where a plaintiff alleges she never signed or
acknowledged an arbitration agreement.” Stephens v. Frisch's Big Boy Restaurants, No. 1:19CV-954, 2020 WL 4754682, at *3 (S.D. Ohio July 30, 2020) (collecting cases), report and
recommendation adopted, No. 1:19CV954, 2020 WL 4748578 (S.D. Ohio Aug. 17, 2020).
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The Agreement provides that it “covers and applies to any and all claims, whether
arising before or after execution of this Agreement, relating to the CONTRACTOR’s relationship
with LJ or the termination of that relationship.” (Doc. 21-1, PageID 287).
2

Lady Jane’s also maintains that if the Court does not order arbitration, the Court should
dismiss Lady Jane’s Clearwater, FL, LLC and the Individual Defendants for lack of personal
jurisdiction. (Doc. 21, PageID 258). Plaintiff concedes Lady Jane’s Clearwater, FL, LLC should
be dismissed for lack of jurisdiction. (Doc. 34, PageID 422).
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v. Ferrer, 552 U.S. 346, 349, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008). Section 2 of the
FAA provides that an agreement to arbitrate “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. Section 4 explains that “[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.” 9 U.S.C. § 4.
“Generally, when asked to compel arbitration under a contract, a court determines
whether the parties agreed to arbitrate their dispute.” Swiger v. Rosette, 989 F.3d 501,
505 (6th Cir. 2021) (citing Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000)). This
limited review involves four tasks:
first, it must determine whether the parties agreed to arbitrate; second, it
must determine the scope of that agreement; third, if federal statutory claims
are asserted, it must consider whether Congress intended those claims to
be nonarbitrable; and fourth, if the court concludes that some, but not all, of
the claims in the action are subject to arbitration, it must determine whether
to stay the remainder of the proceedings pending arbitration.
Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000). “The FAA, however, allows
parties to agree that an arbitrator, rather than a court, will determine ‘ ‘gateway’ questions
of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or whether their
agreement covers a particular controversy.’ ” Swiger, 989 F.3d at 505 (quoting Rent-ACenter, West, Inc. v. Jackson, 561 U.S. 63, 68-69 (2010)).

“Such an agreement,

commonly known as a delegation clause, requires ‘ ‘clear and unmistakable’ evidence
that the parties agreed to have an arbitrator decide’ arbitrability.” Id. (quoting Blanton v.
Domino's Pizza Franchising LLC, 962 F.3d 842, 848 (6th Cir. 2020)). “[A] valid delegation
provision removes judicial purview and transfers the question of arbitrability to an
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arbitrator.” Becker v. Delek US Energy, Inc., 39 F.4th 351, 355 (6th Cir. 2022).
Here, the Agreement states that “any and all disputes concerning the arbitrability
of any claim” will be decided by an arbitrator. (Doc. 21-1, PageID 286). This provision
“clearly and unmistakably” delegates questions of arbitrability to an arbitrator. See McGee
v. Armstrong, 941 F.3d 859, 865-66 (6th Cir. 2019) (quoting Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79, 83 (2002)). In addition, the parties expressly agreed that
“[t]he arbitration proceedings shall be administered by the American Arbitration
Association under its Commercial Arbitration Rules . . . in effect at the time a demand for
arbitration is made.” (Doc. 21-1, PageID 286). It is well-settled that these AAA Rules
“clearly and unmistakably” empower an arbitrator to decide questions of arbitrability.
Blanton v. Domino's Pizza Franchising LLC, 962 F.3d 842, 845 (6th Cir. 2020); see also
Ciccio v. SmileDirectClub, LLC, 2 F.4th 577, 582 (6th Cir. 2021) (“By incorporating the
AAA rules, the parties agreed that an arbitrator would decide gateway questions of
arbitrability.”).
However, the parties do not mention the Agreement’s delegation clause. Instead,
Lady Jane’s asks this Court to find the Agreement’s arbitration provision enforceable.
(Doc. 21, PageID 264-269). Plaintiff also states that the question of arbitrability is for the
Court to decide. (Doc. 34, PageID 405). Therefore, this Court will consider the delegation
argument forfeited and proceed to consider the provision’s enforceability. See Morgan v.
Sundance, Inc., 596 U.S. 411, 419 (2022) (applying general waiver rules to arbitration
agreements); see also Swiger, 989 F.3d at 506 (quoting Danley v. Encore Cap. Grp., Inc.,
680 F. App'x 394, 399 (6th Cir. 2017) (“If a party fails to ‘acknowledge their delegation
provision[ ], let alone challenge [it] (below, or on appeal),’ they forfeit any such

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challenge.”).
In deciding whether the parties agreed to arbitrate, courts apply “ordinary statelaw principles that govern the formation of contracts.” First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). “Therefore, state
law governs ‘generally applicable contract defenses [to an arbitration clause], such as
fraud, duress, or unconscionability.’” Great Earth Companies, Inc. v. Simons, 288 F.3d
878, 889 (6th Cir. 2002) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687,
116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)). In this case, the parties appear to agree that
Ohio law applies in determining whether there is a valid, enforceable arbitration
agreement. 4
Plaintiff does not challenge the formation or existence of the contract between the
parties. There is also no dispute regarding the scope of the arbitration agreement. In
addition, “[i]t is well established that wage-related claims are arbitrable.” Gavin v. Lady
Jane's Haircuts for Men Holding Co., LLC, No. 2:23-CV-12602, 2024 WL 2231667, at *3
(E.D. Mich. May 16, 2024) (citing Ramirez v. Bridgestone Retail Operations, LLC, No. 12cv-14480, 2013 WL 1507221, at *3 (E.D. Mich. Apr. 12, 2013)); see also Gaffers v. Kelly
Servs., Inc., 900 F.3d 293, 296 (6th Cir. 2018) (“And because the FLSA does not ‘clearly
The Agreement contains a forum section clause which states that it “shall be governed
by the laws of the State of Michigan without reference to principles of conflict of laws.” (Doc.
21-1, PageID 265). In Ohio, “[t]he law of the state chosen by the parties to govern their
contractual rights and duties,” unless “the chosen state has no substantial relationship to the
parties or the transaction and there is no other reasonable basis for the parties’ choice” or that
state’s law would be “contrary to a fundamental policy of a state which has a materially greater
interest.” Schulke Radio Prods., Ltd. v. Midwestern Broad. Co., 453 N.E.2d 683, 686 (Ohio
1983). Here, one of the Defendants, Lady Jane’s Haircuts for Men Holding Company, LLC, is
headquartered in Michigan (Doc. 1, PageID 4), but “the Agreements were executed and
performed in Ohio” (Doc. 34, PageID 406). The parties agree there is no apparent conflict
between Ohio and Michigan contract law and have applied Ohio law in their briefs (Doc. 21,
PageID 265; Doc. 34, PageID 406-407). Therefore, the Court does the same.
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and manifestly’ make arbitration agreements unenforceable, we hold that it does not
displace the Arbitration Act's requirement that we enforce the employees' agreements as
written.”). Instead, Plaintiff maintains that the arbitration agreement is unenforceable
because it violates public policy and it is unconscionable.
Plaintiff’s public policy argument rests on a provision in the Agreement which
states that “[t]he arbitrator shall also be bound by any applicable LJ handbooks, rules,
policies and procedures.” (Doc. 21-1, PageID 286). Plaintiff takes the position that this
language binds an arbitrator “to follow Defendants’ rules and procedures as though they
are the law.” (Doc. 34, PageID 408). However, the arbitration agreement also provides:
“In reaching a decision, the arbitrator shall apply the substantive law that is applicable to
the claims.” (Doc. 21-1, PageID 286). Therefore, the fact that the arbitration agreement
also binds arbitrators to any applicable LJ handbooks, rules, policies and procedures
does not make it void as against public policy. Accord Gavin v. Lady Jane's Haircuts for
Men Holding Co., LLC, No. 2:23-CV-12602, 2024 WL 2231667, at *4 (E.D. Mich. May 16,
2024) (reviewing the same language in a nearly identical arbitration agreement). 5
The Court now turns to Plaintiff’s arguments regarding unconscionability. In Ohio,
unconscionability encompasses two separate concepts: (1) individualized circumstances
surrounding each of the parties to a contract such that no voluntary meeting of the minds
was possible, i.e., “procedural unconscionability”; and (2) unfair and unreasonable

Plaintiff also argued that this provision is substantively unconscionable because it
“would allow an employee to waiver his FLSA rights and, instead, be governed by whatever
policies Defendants want.” (Doc. 34, PageID 410). However, based on the additional language
in the arbitration agreement directing the arbitrator to apply the applicable substantive law, the
Court concludes that the arbitration agreement is not substantively unconscionable on this
basis. Accord Gavin v. Lady Jane's Haircuts for Men Holding Co., LLC, No. 2:23-CV-12602,
2024 WL 2231667, at *4 (E.D. Mich. May 16, 2024).
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contract terms, i.e., “substantive unconscionability.”

Eastham v. Chesapeake

Appalachia, L.L.C., 754 F.3d 356, 365 (6th Cir. 2014) (internal quotation marks omitted)
(citing Collins v. Click Camera & Video, Inc., 86 Ohio App. 3d 826, 621 N.E.2d 1294, 1299
(Ohio Ct. App. 1993)). As this Court has explained:
When looking to whether an arbitration agreement is procedurally
unconscionable, courts must generally base their determination on the
totality of the circumstances. Hayes, 908 N.E.2d at 414 (“All of the factors
must be examined and weighed in their totality in determining whether an
arbitration agreement is procedurally unconscionable”). In short,
“[p]rocedural unconscionability ... concerns the formation of the agreement,
and occurs when one party has such superior bargaining power that the
other party lacks a ‘meaningful choice’ to enter into the contract.” Thomas
v. Hyundai, 154 N.E.3d 701, 709 (Ohio Ct. App. 2020) (citing DeVito v.
Autos Direct Online, Inc., 37 N.E.3d 194, 201 (Ohio Ct. App. 2015)).
Hamilton v. Fischer Single Fam. Homes IV, LLC, No. 3:24-CV-101, 2024 WL 3638111,
at *4 (S.D. Ohio Aug. 2, 2024).
Plaintiff claims that the arbitration agreement is unconscionable because it is a
contract of adhesion. Plaintiff explains that the agreement was presented on a “take it or
leave it” basis.

Plaintiff also points out that the employer-employee relationship is

inherently unbalanced and the stylists were coerced into signing the agreements.
However, “by itself, the inability to alter a contract's terms is insufficient to establish
procedural unconscionability.” Hutzell v. Power Home Solar, LLC, No. 1:22-CV-00437,
2024 WL 2291968, at *6 (S.D. Ohio May 21, 2024) (quoting Metro. Prop. & Cas. Ins. Co.
v. Pest Dr. Sys., Inc., No. 3:14-cv-143, 2015 WL 4945767, at *9 (S.D. Ohio Aug. 20,
2015)). Moreover, in Ohio, “[t]he party asserting unconscionability of a contract bears the
burden of proving that the agreement is both procedurally and substantively
unconscionable.” Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 67, 908 N.E.2d 408, 412
(Ohio 2009).

Therefore, Plaintiff has failed to meet her burden to establish both
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procedural and substantive unconscionability.
Finally, Plaintiff claims that the arbitration provision is unenforceable as cost
prohibitive. (Doc. 34, PageID 413). When “a party seeks to invalidate an arbitration
agreement on the ground that arbitration would be prohibitively expensive, that party
bears the burden of showing the likelihood of incurring such costs.” Green Tree Fin.
Corp.-Ala. v. Randolph, 531 U.S. 79, 92 (2000).

Plaintiff explains that the AAA’s

Commercial Arbitration Rules include a cost-splitting provision. Plaintiff maintains that
this provision makes the arbitration cost-prohibitive for a minimum-wage worker to
pursue. (Doc. 34, PageID 413-414). In an almost identical case, another district court
has already concluded that the arbitration agreement is unenforceable insofar as it
incorporates the cost-splitting provision from the AAA Commercial Arbitration Rules.
Pugh v. Lady Jane's Haircuts for Men Holding Co., LLC, 660 F. Supp. 3d 712, 724 (M.D.
Tenn. 2023). However, the district court also found that this provision was severable from
the arbitration agreement, and the AAA Employment Arbitration Rules and Mediation
Procedures governed by default. Id. at 725; see also Gavin, 2024 WL 2231667, at *5
(same). 6

This Court will follow suit.

Therefore, the Court finds the provision

unenforceable and severs the cost-splitting provision.
Having found that Plaintiff’s claims are subject to arbitration and the arbitration
agreement is enforceable, this Court must determine whether it should dismiss Plaintiff’s
claims or enter a stay of the action. The Sixth Circuit has instructed that when one party
requests a stay “a district court should enter a stay in the normal course.” Arabian Motors
Grp. W.L.L. v. Ford Motor Co., 19 F.4th 938, 942 (6th Cir. 2021) (citing 9 U.S.C. § 3). The
The AAA’s Employment Arbitration Rules require employers to pay the fees and costs
of arbitration.
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United States Supreme Court has clarified that “[w]hen a district court finds that a lawsuit
involves an arbitrable dispute, and a party requests a stay pending arbitration, § 3 of the
FAA compels the court to stay the proceeding.” Smith v. Spizzirri, 601 U.S.472, 478
(2024). Lady Jane’s has requested a stay as an alternative to its motion to dismiss. (Doc.
21, PageID 255; Doc. 44, PageID 585). Because the claims against Lady Jane’s are
subject to arbitration, and Lady Jane’s requested a stay, this Court will stay this action
pending arbitration.
III.

CONCLUSION

Based on the foregoing, Defendants’ Motion to Dismiss or, in the Alternative, to
Stay Action and to Compel Arbitration (Doc. 21) is DENIED in PART and GRANTED in
PART. Defendants’ Motion to Dismiss is DENIED, but Defendants’ Motion to Stay Action
and Compel Arbitration is GRANTED. This matter shall be STAYED pending arbitration.
Accordingly, Defendants’ Motion to Stay the Briefing on Plaintiff’s Motion to Send FLSA
Notice (Doc. 25) is DENIED as MOOT.
IT IS SO ORDERED.
/s/ Michael R. Barrett
Michael R. Barrett
United States District Judge

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