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Davis v. Macy's Retail Holdings, Inc.

United States District Court, D. Connecticut

September 19, 2018

Andrew Davis, on behalf of himself and all others similarly situated, Plaintiff,
v.
Macy's Retail Holdings, Inc., a/k/a Macy's Inc., Defendant.

          RULING ON DEFENDANT'S MOTION TO STAY PROCEEDINGS AND COMPEL INDIVIDUAL ARBITRATION

          Janet Bond Arterton, U.S.D.J.

         Plaintiff Andrew Davis brings suit against his former employer Macy's Retail Holdings, Inc. individually and as a collective action under the Fair Labor Standards Act, 29 U.S.C. § 216(b), alleging failure to properly compensate Plaintiff and other similarly situated employees for hours worked in excess of 40 hours per week (Count One), and as a class action pursuant to Fed.R.Civ.P. 23(a) and (b)(3) alleging unlawful classification of Plaintiff and the members of the Class as exempt employees and failure to pay proper overtime compensation under the Connecticut Minimum Wage Act, Conn. Gen. Stat. §§ 31-58 (Count Two). Defendant moves [Doc. # 11] to stay all claims and compel individual arbitration based on an arbitration agreement to which Plaintiff and Defendant are parties. Plaintiff opposes [Doc. # 26], maintaining that the arbitration agreement is not valid or enforceable and that any assent to it was induced by fraudulent misrepresentations by Defendant. For the reasons that follow, Defendant's motion is granted.

         I. Background

         Defendant uses a four-step employment dispute resolution program called "Solutions InSTORE." (Ex. 1 (Ripak Decl.) to Def.'s Mot. to Compel Arbitration [Doc. # 12-1] ¶ 9.) The first three steps are internal, but the fourth step is binding arbitration administered by the American Arbitration Association ("AAA"). (Id.) Within thirty days of hire, employees must choose whether they wish to participate in the arbitration step in any future employment disputes. (Id.) If employees want to retain their right to litigate in court, they must complete an election form provided by Defendant and mail it to Solutions InSTORE, postmarked within thirty days of hire. (Id.)

         If employees agree to resolve any future disputes by arbitration under the InSTORE program and relinquish their right to litigate those disputes in court, the employee simply refrains from completing and returning the election form within the thirty-day period. (Id.) At the time of hire, employees electronically sign an acknowledgement form recognizing the parameters and implications of their choice: "I understand that if I do not wish to be covered by Step 4, Arbitration, the only way to notify the Company about my choice is by postmarking my election form within 30 days of hire and mailing it to the Office of Solutions InSTORE." (Ex. B (Acknowledgment Form) to id.) Employees are also provided with materials explaining the arbitration step, including a poster, a training video, a program brochure containing the election form (by which employees make their choice), and the Plan Document, which outlines the rules and procedures of the arbitration step. (Ripak Decl. ¶ 20.)

         Plaintiff electronically signed the acknowledgement form when he was hired, (Ex. 2 (Veeraraghavan Decl.) to Def.'s Mot. to Compel Arbitration [Doc. # 12-1] ¶ 13; Ex. G to Veeraraghavan Decl), but subsequently did not return a completed election form opting out of the arbitration step, (Ripak Decl. 28).

         II. Discussion

         In analyzing whether a contract requires arbitration, "'the court applies a standard similar to that applicable for a motion for summary judgment.'" Schnabel v. Trilegiant Corp., 697 F.3d 110, 113 (2d Cir. 2012) (quoting Bensadoun v. }obe-Riat, 316 F.3d 171, 175 (2d Cir. 2003) (alteration omitted)). It is therefore "proper (and in fact necessary) to consider extrinsic evidence when faced with a motion to compel arbitration ... and if the party seeking arbitration has substantiated the entitlement by a showing of evidentiary facts, the party opposing may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to be tried." Philippe v. Red Lobster Restaurants LLC, No. 15-CV-2080, 2015 WL 4617247, at *2 (S.D.N.Y. Aug. 3, 2015) (internal citations and quotation marks omitted).

         The Federal Arbitration Act ("FAA") states, in relevant part:

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 . . . 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 (1947). A court may not deny arbitration where there is a valid arbitration agreement that covers the asserted claims. Id.; see also Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) ("By its terms, the Act 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" (emphasis in original)). The FAA was designed to "overrule the judiciary's longstanding refusal to enforce agreements to arbitrate" and to "place an arbitration agreement upon the same footing as other contracts, where it belongs." Dean Witter Reynolds, 470 U.S. at 220 (internal quotation marks omitted). The Act articulates a "national policy favoring arbitration," preempting any contradictory state judicial or legislative policy, Perry v. Thomas, 482 U.S. 483, 489 (1987) (quoting Southland Corp. v. Keating, 465 U.S. 1, 10 (1984)), to which due regard must be given by the court in resolving any ambiguities respecting the enforceability or scope of an arbitration agreement, Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 475-76 (1989). Congress articulated this federal policy "to ensure the enforceability, according to their terms, of private agreements to arbitrate." Id. at 476.

         Defendant maintains that the Court should compel arbitration because the InSTORE program materials constitute a valid agreement to arbitrate employment disputes which covers the FLSA and Connecticut Minimum Wage Act claims asserted by Plaintiff.[1] Plaintiff maintains that the purported arbitration agreement is not an enforceable contract and that there exist "such grounds [] at law or in equity for the revocation" of the agreement under the savings clause of the FAA. Specifically, Plaintiff argues that any assent to the agreement was induced by Defendant's fraudulent misrepresentations. Plaintiff does not dispute that the agreement covers the asserted claims. The Court considers each of Plaintiff s arguments in turn.[2]

         A. Validity of the arbitration agreement

         The validity of an arbitration agreement is governed by state contract law principles, First Options of Chi. v. Kaplan, 514 U.S. 938, 944 (1995). "The essential terms of a valid contract are an offer, acceptance of that offer, and consideration." Chiulli v. Chiulli, 127 A.3d 1146, 1151 (Conn. App. Ct. 2015) (internal quotations omitted).

         1. Offer

         Plaintiff argues that the program materials do not constitute a valid offer and are not enforceable because they are confusing, ambiguous, and misleading. (Pl.'s Opp'n to Def.'s Motion [Doc. # 26] at 5-9, 14-17.) Specifically, Plaintiff claims that these program materials are ambiguous as to whether the arbitration step is the automatic conferment of a benefit, exercisable voluntarily by the employee at any time, or an offer of mandatory future arbitration at the irrevocable expense of the employee's ability to bring an action in court. Plaintiff contends that the materials' choice-driven language[3] conflicts with the narrowly prescribed window to preserve legal rights to court proceedings, after which those rights are permanently waived. Plaintiff maintains that the description of the irrevocable waiver of legal rights as an automatic "benefit" misleads the employee as to the nature and consequences of the arbitration step. Plaintiff also argues that this ambiguity should be construed against the drafter, Defendant. See Hartford Elec. Applicators of Thermalux, Inc. v. Alden, 169 Conn. 177, 182 (1975) ("Where there is ambiguity, we must construe contractual terms against the drafter.").

         Plaintiff urges the Court to depart from the voluminous case law enforcing the Macy's arbitration program[4] and instead adhere to Weiss v. Macy's Retail Holdings, Inc., in which the District Court for the Southern District of New York declined to compel arbitration. 265 F.Supp.3d 358, 363 (S.D.N.Y. 2017). That court reasoned that the election form by which the employee may opt out was "counterintuitive, ambiguous, and misleading" and conveys the false impression that by signing the form the employee sacrifices a pre-existing right to arbitration and changes the status quo, when in fact by signing the form the employee preserves a pre-existing right to litigate in court and maintains the status quo. Id.

         After the parties in this case submitted their briefing and after oral argument on the instant motion, the Second Circuit vacated the District Court's holding that the Macy's arbitration agreement was invalid. Weiss v. Macy's Retail Holdings, Inc., No. 17-2219, 2018 WL 3409143 (2d Cir. July 12, 2018). The Second Circuit reasoned that "[a]lthough the somewhat disingenuous references to the 'benefits' of arbitration might better have been avoided, and Macy's would do well to remove the word 'benefits' in the future, neither this unfortunate choice of words nor the remainder of the form renders its meaning incapable of being readily understood." Id. at *2.

         Here, as in Weiss and the many cases enforcing similar arbitration agreements, [5] the InSTORE program materials are consistent and clear with regard to: the time sensitivity of the offer, [6] how to opt out of the arbitration step if the employee so desires, [7] and the resulting permanent relinquishment of legal rights.[8] See, e.g., Tillman's v. Macy's Retail Holdings, Inc., 735 F.3d 453, 459 (6th Cir. 2013) (the InSTORE materials "clearly inform employees of the nature of the agreement"); Allen v. Bloomingdales, Inc., 225 F.Supp.3d 254, 258 (D.N.J. 2016) ("The Court disagrees with Plaintiffs' characterization of the documents as confusing and deceiving. To the contrary, Defendants' documents plainly state the terms of the [InSTORE] Program"). Although the InSTORE program materials emphasize the benefits of arbitration while minimizing the consequences in a manner somewhat akin to an advertisement, and although certain phrases in those materials "might better have been avoide d," Weiss, 2018 WL 3409143 at *2, those rhetorical choices do not render the materials so incomprehensible or ambiguous that they constitute an invalid offer.

         2. ...


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