4th Circuit Finds Club Waived Right To Compel Arbitration
This post has been viewed 2,660 times.
In a recent opinion, the Fourth Circuit cited waiver as its basis to refuse to compel arbitration, but the result seems animated by a sense that the arbitration agreements were unenforceable. Degidio v. Crazy Horse Saloon & Restaurant, Inc., __ F.3d __, 2018 WL 456905 (4th Cir. Jan. 18, 2018).
The case involved a putative collective and class action case by “exotic dancers” at a club in South Carolina, alleging they were wrongly classified as independent contractors and thereby denied minimum wages and other statutory protections. The complaint was filed against the club in August of 2013. [I can’t call it a saloon. We aren’t in the wild west.] At that point, it is undisputed that none of the potential plaintiffs had arbitration agreements with the club.
The club participated in discovery for a year. In November and December 2014, the club obtained arbitration agreements with some of its dancers “as a condition of performing.” In December of 2014, the club moved for summary judgment on the merits, arguing the dancers were properly classified as independent contractors. Then in January of 2015, the club brought a motion to compel arbitration against plaintiffs who had signed arbitration agreements. The district court denied the motion, raising concerns about the enforceability of the arbitration agreements. The club brought a new summary judgment motion on the merits in October of 2015. When that was denied, the club sought additional discovery on the merits, attempted to certify questions to the South Carolina Supreme Court, and then moved to compel arbitration against nine plaintiffs who had opted into the litigation after its last motion. That motion was also denied.
The Fourth Circuit set the stage for its discussion by noting that litigants may waive their rights to arbitration by “substantially utilizing the litigation machinery.” Without citing any further case law about waiver, the opinion proceeded to review the significant extent of the club’s use of “litigation machinery” (summarized above). The court was particularly upset at the apparent gamesmanship:
The only possible purpose of the arbitration agreements, then, was to give [the club] an option to revisit the case in the event that the district court issued an unfavorable opinion [on summary judgment]. In other words, Crazy Horse did not seek to use arbitration as an efficient alternative to litigation; it instead used arbitration as an insurance policy in an attempt to give itself a second opportunity to evade liability.
In response to the club’s argument that it could not have moved to compel arbitration until the entertainers who had actually signed the agreements opted into the case, the court suggested that it should have informed the district court of its intentions so that the court did not waste judicial resources. In addition, the court did not want to “give defendants a perverse incentive to wait as long as possible to compel arbitration.”
Tags:
