Nemecek v. Finger One, Inc. ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 BRYANA NEMECEK, an individual, Case No.: 3:20-cv-00048-DMS-LL NICOLE BONDER, an individual, on 12 behalf of herself and all those similarly ORDER GRANTING DEFENDANTS’ 13 situated, MOTION TO COMPEL ARBITRATION AND DENYING 14 Plaintiffs, DEFENDANTS’ MOTION TO 15 v. STRIKE PLAINTIFF’S COLLECTIVE CLAIMS 16 FINGER ONE, INC., dba GOLDFINGERS GENTLEMEN’S 17 CLUB, a California corporation; AARON 18 GOLDBERG, an individual; 19 Defendants. 20 21 22 Before the Court is Defendants’ Motions to Compel Arbitration and Strike Plaintiffs’ 23 Collective Claims. (ECF No. 15, 21.) Plaintiffs filed a response and Defendants filed a 24 reply. For the following reasons, the Court grants Defendant’s Motion to Compel 25 Arbitration and denies Defendant’s Motion to Strike. 26 / / / 27 / / / 28 1 I. 2 BACKGROUND 3 This case arises out of Plaintiffs’ collective action complaint for damages against 4 Defendants Finger One, Inc. and Aaron Goldberg for failure to pay wages and tips. 5 (Complaint (“Compl.”), ECF No. 1, ¶¶ 2-3.) Plaintiffs Bryana Nemecek and Nicole 6 Bonder are former exotic dancers/entertainers at Goldfinger’s Gentlemen’s Club 7 (“Goldfinger’s”) in San Diego, California. (Id. at ¶ 14; Notice of Consent Form, ECF No. 8 5.) Goldfinger’s is owned and operated by Defendants Finger One, Inc. and Aaron 9 Goldberg (collectively “Defendants”). Plaintiffs claim that Goldberg is liable as an 10 “employer” or “joint employer” in addition to Finger One, Inc. because he allegedly 11 executed the compensation and payment policies for dancers. (Compl. at ¶¶ 16-17.) 12 The parties entered into two separate contracts regulating Plaintiffs’ employment. 13 First, Plaintiffs and Defendants entered into an Independent Contractor Agreement (“IC 14 Agreement”), which includes the following provision: 15 Arbitration Agreement. Performer agrees that any claims, disputes or matters arising out of or relating to this Agreement shall be decided solely through 16 arbitration, in connection with the arbitration agreement that is attached hereto 17 and incorporated herein. 18 19 (Ex. 1 to Umber Decl. (“IC Agreement”), ECF No. 21-3, at ¶ 19; Ex. 1 to Umber 20 Decl. ECF No. 12-3, at ¶ 19.) The parties also entered into a separate “Arbitration 21 Agreement,” in which the parties “mutually consent[ed] to resolution by finding and 22 binding arbitration of all claims or controversies … arising out of Contractor’s contractual 23 relationship (or termination thereof) with the Company or statutory claims.” (Ex. 2 to 24 Umber Decl. (“Arbitration Agreement”), ECF No. 21-4, ECF No. 12-4, at ¶ 1.) The 25 Agreement also mandates that all claims under the Agreement “be brought in an individual 26 capacity, and shall not be brought as a plaintiff… or class member in any purported class 27 or representative proceeding.” (Id. at ¶ 3.) The Agreement applies to “claims for 28 misclassification of Contractor as an employee,” among other claims. (Id. at ¶1.) 1 On January 7, 2020, Plaintiff Bryana Nemecek filed a complaint against Defendants 2 alleging: (1) Failure to Pay Minimum Wage, in violation of 29 U.S.C. § 206 and Cal. Lab. 3 Code §§ 1194, 1197; (2) Failure to Pay Overtime Wages, in violation of 29 U.S.C. § 207 4 and Cal. Lab. Code §§ 510, 1194, and 1197; (3) Unlawful Taking of Tips, in violation of 5 29 U.S.C. § 203; (4) Failure to Furnish Accurate Wage Statements, in violation of Cal. 6 Lab. Code § 226; (5) Waiting Time Penalties under Cal. Lab. Code §§ 201-203; (6) Failure 7 to Indemnify Business Expenses in violation of Cal. Lab. Code § 2802; (7) Compelled 8 Patronization of Employer and/or Other Persons in violation of Cal. Lab. Code § 450; and 9 (8) Unfair Competition in violation of Cal. Bus. & Prof. Code §§ 17200, et seq. Nicole 10 Bonder filed a notice of consent to sue form on January 28, 2020. (ECF No. 5.) 11 Defendants filed motions to compel arbitration against Bryana Nemecek and Nicole 12 Bonder (“Plaintiffs”) and to strike the collective action in its entirety pursuant to Federal 13 Rules of Civil Procedure, Rule 12(f). (Motion to Compel Bryanna Nemeck (ECF No. 12), 14 Motion to Compel Nicole Bonder (ECF No. 21) (Collectively, “Def’s Mot.”)). 15 II. 16 DISCUSSION 17 Defendants contend Plaintiffs entered into a valid arbitration agreement, and as such, 18 all collective claims must be stricken, the individual claims must be arbitrated, and the 19 action must be dismissed with prejudice. Plaintiffs do not dispute the validity of the 20 arbitration agreement but contend the action must be stayed rather than dismissed. 21 A. Motion to Compel Arbitration 22 The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., governs the enforcement 23 of arbitration agreements involving interstate commerce. Am. Express Co. v. Italian Colors 24 Rest., 570 U.S. 228, 232–33 (2013). “The overarching purpose of the FAA … is to ensure 25 the enforcement of arbitration agreements according to their terms so as to facilitate 26 streamlined proceedings.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011). 27 “The FAA ‘leaves no place for the exercise of discretion by the district court, but instead 28 mandates that district courts shall direct the parties to proceed to arbitration on issues as to 1 which an arbitration has been signed.’” Kilgore v. KeyBank, Nat. Ass’n, 718 F.3d 1052, 2 1058 (9th Cir. 2013) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 3 (1985)) (emphasis in original). Accordingly, the Court’s role under the FAA is to 4 determine “(1) whether a valid agreement to arbitrate exists, and if it does, (2) whether the 5 agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 6 207 F.3d 1126, 1130 (9th Cir. 2000). If both factors are met, the Court must enforce the 7 arbitration agreement according to its terms. Here, the parties do not dispute the validity 8 of the arbitration agreement or whether it applies to the claims at issue. Accordingly, 9 Defendants’ motion to compel arbitration is granted. 10 Nevertheless, the parties dispute whether the case should be dismissed or stayed 11 pending arbitration. Section 3 of Title 9 of the United States Code discusses stays of 12 proceedings when the issue is referable to arbitration: 13 If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such 14 arbitration, the court in which such suit is pending, upon being satisfied that 15 the issue involved in such suit or proceeding is referable to arbitration under 16 such an agreement, shall on application of one of the parties stay the trial of 17 the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in 18 proceeding with such arbitration. 19 20 The Ninth Circuit has clarified that this section “gives a court authority, upon application 21 by one of the parties, to grant a stay pending arbitration,” but does not “limit the court’s 22 authority to grant a dismissal.” Sparling v. Hoffman Constr. Co, Inc., 864 F.2d 635, 638 23 (9th Cir. 1988) (affirming district court’s dismissal of action under Rule 12(b)(6) because 24 plaintiffs agreed to arbitrate relevant claims). 25 Plaintiffs request that the Court stay the proceedings in accordance with the statute, 26 while defendants contend the Court has authority to dismiss the case under Sparling. 27 Plaintiffs contend the Court must stay the proceedings because “[s]ettlement of an FLSA 28 claim requires either approval by a district court or supervision by the Secretary of Labor.” 1 (Mot. at 3) (quoting A-ROO Distributing of California LLC v. Kloosterman, No. 18-cv- 2 1291 DMS (JLB), 2018 WL 6262940, at *1 (S.D. Cal. Oct. 1, 2018) (Sabraw, J.)). 3 Accordingly, Plaintiffs contend FLSA settlements can only be resolved with approval from 4 the U.S. Secretary of Labor or the district court. See also Lynn’s Food Stores, Inc. v. United 5 States, 679 F.2d 1350 (11th Cir. 1982); 29 U.S.C. § 216(b). Defendants disagree. 6 Notwithstanding the parties’ arguments about who may approve FLSA settlements, 7 the text of the statute is clear: The Court “shall on application of one of the parties stay the 8 trial of the action until such arbitration has been had[.]” 9 U.S.C. § 3 (emphasis added). 9 Accordingly, the Court need not decide whether a stay is mandatory to allow the court to 10 approve the terms of the settlement. Although Defendants argue Sparling permits the court 11 to dismiss, rather than stay, the action, it does not mandate the Court do so. Rather, 12 Sparling allows the Court to exercise discretion in deciding whether to stay or dismiss the 13 action. See 864 F.2d at 638. Accordingly, the matter will be stayed pending the outcome 14 of arbitration. 15 B. Motion to Strike 16 Defendants also move to strike Plaintiffs’ claims from the complaint pursuant to 17 Rule 12(f) of the Federal Rules of Civil Procedure. Rule 12(f) states that a district court 18 “may strike from a pleading an insufficient defense or any redundant, immaterial, 19 impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). The district court has discretion 20 when deciding whether to strike a part of the complaint. See Federal Sav. & Loan Ins. 21 Corp. v. Gemini Mgmt., 921 F.2d 241, 244 (9th Cir. 1990). “The function of a 12(f) motion 22 to strike is to avoid the expenditure of time and money that must arise from litigating 23 spurious issues by dispensing with those issues prior to trial.” Whittlestone, Inc. v. Handi- 24 Craft Co., 618 F.3d 970, 973 (9th Cir. 2010). Accordingly, a court’s interpretation of a 25 12(f) motion begins with a determination of whether the material the party seeks to strike 26 is: (1) an insufficient defense; (2) redundant; (3) immaterial; (4) impertinent; or (5) 27 scandalous. Id. at 973–74. 28 1 Defendants contend the Court should grant their motion to strike because of the 2 || Supreme Court’s ruling in Epic Systems v. Lewis. There, the Supreme Court held that class 3 || and collective action waivers do not violate the National Labor Relations Act and must be 4 |/enforced as written under the FAA. Epic Sys. v. Lewis, 138 S. Ct. 1612, 1632 (2018). 5 || Because the arbitration agreement here includes such a provision, Defendants request that 6 || the Court “strike all collective claims brought by Plaintiff.” (Mot. at 13-14.) Plaintiffs do 7 ||not oppose Defendants’ motion to strike, but the Court is unpersuaded that a motion to 8 || strike is the appropriate method for dispensing these claims. Defendants’ sole rationale for 9 || striking Plaintiffs’ class claims is that the arbitration agreement bars them. However, 10 || Defendants fail to provide a reason for striking the claims in accordance with Rule 12(f). 11 ||They do not explain how the claims involve an insufficient defense, or are redundant, 12 ||immaterial, impertinent, or scandalous. See Whittlestone, 618 F.3d at 973-74. Defendants’ 13 || motion to strike is therefore denied. 14 III. 15 CONCLUSION 16 For the foregoing reasons, Defendants’ motion to compel arbitration is granted and 17 Defendants’ motion to strike is denied. The Court stays the litigation to permit an 18 || arbitrator to decide the questions of arbitrability, and then, if permissible to arbitrate the 19 substantive claims. Within 14 days of the completion of the arbitration proceedings, the 20 || parties shall jointly submit a report advising the Court of the outcome of the arbitration, 21 || and request to dismiss the case or vacate the stay. 22 IT IS SO ORDERED. 23 Dated: July 23, 2020 2 ns ym. L4\ Hon. Dana M. Sabraw 25 United States District Judge 26 27 28