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Timestamp: 2019-04-22 04:19:06+00:00

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FindACase | Mantooth v. Bavaria Inn Restaurant Inc.
Mantooth v. Bavaria Inn Restaurant Inc.
BAVARIA INN RESTAURANT, INC., d/b/a Shotgun Willie's, and DEBRA MATTHEWS, Defendants.
Plaintiffs Chada Mantooth, Gale Raffaele, Alexis Nagle, and Nicole Bujok (“Plaintiffs”) allege that Defendants Bavaria Inn Restaurant Inc. d/b/a Shotgun Willie's (“Shotgun Willie's”) and its owner Debra Matthews (“Matthews”) (jointly, “Defendants”) improperly classified Plaintiffs as independent contractors and violated the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (“FLSA”), the Colorado Wage Claim Act, Colo. Rev. Stat. §§ 8-4-101 et seq. (“CWCA”), and Colorado common law. (ECF. No. 1.) Currently before the Court are four motions, including Defendants' Renewed Motion to Compel Individual Arbitration and Dismiss or Stay Proceedings (“Motion to Compel”). (ECF No. 57.) Defendants argue that the terms of contracts between Plaintiffs and Shotgun Willie's and the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., require Plaintiffs to bring their claims in individual arbitration proceedings.
For the reasons explained below, the Court grants in part Defendants' Motion to Compel. The Court finds that Plaintiffs' claims must be submitted to individual arbitration, although certain provisions of the arbitration clause must in the interest of justice be severed. Because this dispute must be submitted to arbitration, the Court denies the other pending motions, ECF Nos. 43, 44, and 83, as moot. However, with respect to ECF No. 43, Plaintiffs' Expedited Motion to Proceed as a Conditional Collective Action, Provide Notice, and Toll All Statutes of Limitations, dismissal is without prejudice to the refiling of the motion if there is a legal basis to do so after the disposition of the arbitration.
Less than two months after Plaintiffs filed their Complaint (ECF No. 1), in late June 2017, Defendants moved to compel arbitration. (ECF No. 23.) Before this Court ruled on the motion, the parties agreed to limited discovery regarding the formation of the Agreements. (ECF No. 34.) The Court granted an unopposed request to defer briefing and consideration of the initial motion to compel and denied that motion without prejudice, subject to later re-filing. (ECF No. 38.) In October 2017, Defendants renewed their motion to compel (ECF No. 57), and it is that motion which is now before the Court.
Pursuant to § 2 of the Federal Arbitration Act (“FAA”), a written agreement to submit a controversy to arbitration “shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. Congress enacted the FAA to statutorily enshrine a “liberal federal policy favoring arbitration” in response to judicial hostility to arbitration agreements. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011); see also Hall Street Assocs. LLC v. Mattel, Inc., 552 U.S. 576, 581 (2008). An arbitration agreement stands on equal footing with other contracts and a court is required to enforce such an agreement according to its terms. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010). Such an agreement is generally enforced as written, “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Grounds for invalidation of an arbitration agreement include contract defenses, such as fraud, duress, or unconscionability. Rent-A-Center, 561 U.S. at 68.
(1) the use of a standardized agreement executed by parties of unequal bargaining power; (2) the lack of an opportunity for the customer to read or become familiar with the document before signing it; (3) the use of fine print in the portion of the contract containing the provision in question; (4) the absence of evidence that the provision was commercially reasonable or should reasonably have been anticipated; (5) the terms of the contract, including substantive fairness; (6) the relationship of the parties, including factors of assent, unfair surprise, and notice; and (7) the circumstances surrounding the formation of the contract, including setting, purpose, and effect.
Bernal v. Burnett, 793 F.Supp.2d 1280, 1286 (D. Colo. 2011) (citing Davis v. M.L.G. Corp., 712 P.2d 985, 991 (Colo. 1986)). The Davis factors, so named for the Colorado Supreme Court case which set forth the relevant factors to be considered on this issue, require both procedural and substantive unconscionability for a contract to be unenforceable. Vernon v. Qwest Commc'ns. Int'l, Inc., 857 F.Supp.2d 1135, 1157 (D. Colo. 2012).
Challenges to an arbitration agreement must specifically contest the formation of the arbitration clause; a challenge to the contract as a whole is not sufficient. Rent-A-Center, 561 U.S. at 72 (“[U]nless [plaintiff] challenged the delegation provision specifically, we must treat it as valid under § 2 [of the FAA], and must enforce it under §§ 3 and 4, leaving any challenge to the validity of the Agreement as a whole for the arbitrator.”); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967). If the party opposing arbitration does not specifically challenge the validity of the arbitration provision and the contract contains a savings clause, the agreement to arbitrate may be severed from the remainder of an otherwise-unenforceable contract. Rent-A-Center, 561 U.S. at 70-71; see Santich v. VCG Holding Corp., 2017 WL 4251944 (D. Colo. Sept. 26, 2017). “[D]oubts are to be resolved in favor of arbitrability.” Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir. 1995).
An arbitration agreement may delegate issues of arbitrability to an arbitrator. Rent-A-Center, 561 U.S. at 68-69 (“We have recognized that parties can agree to arbitrate ‘gateway' questions of ‘arbitrability, ' such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.”). A so-called “delegation clause” is “simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, ” and is generally enforced as any other arbitration agreement under the FAA. Id. at 70. As with challenges to an arbitration clause, a party resisting delegation of arbitrability must specifically direct arguments at the delegation clause; otherwise the argument is for the arbitrator to resolve. See Id. at 72. However, rather than resolving all doubts in favor of arbitrability, a court “should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (internal citations omitted). The “clear and unmistakable” standard applies to the parties' intent to arbitrate, not the validity of the agreement. See Rent-A-Center, 561 U.S. at 69 n.1.
In addition to considering contract defenses, a court must also evaluate whether arbitration will allow for effective vindication of a party's claims. Nesbitt v. FCHN, Inc., 811 F.3d 371, 376-77 (10th Cir. 2016); Sanchez v. Nitro-Lift Techs, L.L.C., 762 F.3d 1139, 1149 (10th Cir. 2014). If the terms of the arbitration clause would prevent a party's effective vindication of its claims, a court may strike the portion which prevents effective vindication and compel arbitration on the remaining terms. Pollard v. ETS PC, Inc., 186 F.Supp.3d 1166, 1176-78 (D. Colo. 2016). If the party resisting arbitration argues that the cost of arbitration would prevent effective vindication, that party has the burden to show that arbitration would be “prohibitively expensive.” Sanchez, 762 F.3d at 1149.
The Court will first consider who has the power to decide whether the dispute is arbitrable. See Belnap v. Iasis Healthcare, 844 F.3d 1272, 1281 (10th Cir. 2017) (“[T]he question of who should decide arbitrability precedes the question of whether a dispute is arbitrable.”) (emphasis in original). Based on the plain language of the Agreements, the parties clearly and unmistakably intended to delegate arbitrability to the arbitrator. See Rent-A-Center, 561 U.S. at 69 n.1; Santich, 2017 WL 4251944, at *4. Despite Plaintiffs' arguments that the Agreements are unconscionable, as will be discussed in greater detail below, the Court finds that Plaintiffs do not specifically attack the delegation clause, and therefore, it is the arbitrator who must resolve any challenge to the enforceability of the Agreements. See Rent-A-Center, 561 U.S. at 72. However, the Court also finds that several provisions of the arbitration and delegation clauses prevent Plaintiffs' effective vindication of their statutory rights in arbitration. Because the Agreements contain a severability clause, the Court finds that the invalid portions are severable from the arbitration clause.
Accordingly, for the reasons explained below, the Court strikes from the arbitration clause the fee-shifting provisions, the cost-sharing requirement for certain Plaintiffs, and the industry expert arbitrator selection requirement. Subject to the severance of these provisions, all disputes regarding the validity of the contracts, unconscionability, and the class action waiver are properly delegated to the arbitrator to decide the arbitrability of the claim. Finally, the Court also finds that nonsignatory Defendant Matthews may compel arbitration.

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