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Davis v. Red Eyed Jack's Sports Bar, Inc.

United States District Court, S.D. California

May 9, 2018

CIERRA DAVIS, on behalf of herself and on behalf of other current and former employees similarly situated et al., Plaintiffs,
v.
RED EYE JACK'S SPORTS BAR, INC., a Nevada Corporation doing business as Cheetahs Gentleman's Club, doing business as Cheetahs Nightclub, et al., Defendants.

          ORDER: (1) DENYING DEFENDANTS' MOTION TO COMPEL ARBITRATION; (2) GRANTING IN PART DEFENDANTS' REQUEST FOR STAY

          Hon. Roger T. Benitez, United States District Judge.

         Before this Court is Defendant Red Eye Jack's Sports Bar, Inc. (“Cheetahs”) and Suzanne Coe's motion to compel arbitration and stay action as to Plaintiff Cierra Davis (“Davis”), [1] which Defendant Rich Buonantony joins. (Docket Nos. 32, 34.) The motion is fully briefed. For the reasons set for below, the Defendants' motion to compel arbitration is DENIED, and Defendants' request to stay the action is GRANTED in part.

         BACKGROUND[2]

         Defendant Cheetahs is an all-nude strip club. It is open seven days a week, from 12:00 p.m. to 2:00 a.m. At all relevant times, Defendants Suzanne Coe (“Coe”) and Rich Buonantony (“Buonantony”) owned, operated, controlled, and/or managed Cheetahs. Davis alleges Coe and Buonantony are alter egos of Cheetahs, and that Buonantony is also a managing agent of Cheetahs.

         In June 2014, Cheetahs hired Davis as an adult entertainer or dancer. Davis worked at Cheetahs “about seven days per week, from approximately 6:00 p.m. to 2:00 a.m.” (TAC ¶ 8.) Davis alleges Defendants “refused to compensate [her] as a dancer for her time working at the club. Among other things, [she] never received minimum wage or any other compensation from Cheetahs.” (Id.) Davis generated income solely through tips and/or gratuities received from patrons when she performed dance services.

         In essence, Davis alleges Defendants misclassified, and continue to misclassify “all of their employees who work as adult entertainers, including [Davis], as ‘independent contractors.'” (Id. ¶ 23.) “As a result of this uniform misclassification, [Davis] and [her] fellow dancers were denied minimum wages required under the FLSA and the California Labor Code and, therefore, suffered injury and incurred financial loss.” (Id.) Davis also alleges Cheetahs wrongfully required her to pay “a daily ‘house fee' simply for showing up for work, ” wrongfully “skimmed” her tips and gratuities by requiring her to pay “fees or tip-out a substantial percentage of all [her] daily earnings to ‘the DJ' and/or ‘door' and/or ‘manager, ” and failed to provide her meal and rest breaks. (Id. ¶¶ 26-30.) Approximately 20% of Davis's tips and gratuities “go back to Cheetahs.” (Id. ¶ 33.)

         Davis asserts these facts give rise to claims against Defendants for: (1) violation of 29 U.S.C. § 206(a) (failure to pay minimum wage under the FLSA); (2) violation of multiple sections of the California Labor Code for failure to pay wages, overtime, provide adequate rest and meal breaks, and reimbursement of necessary work expenditures; and (3) conversion.

         Defendants move for arbitration on the grounds that Davis agreed to submit the claims she alleges in the TAC to binding arbitration. Davis responds that Ninth Circuit authority requires the Court find the arbitration agreement upon which Defendants rely is invalid and unenforceable.

         LEGAL STANDARD

         Section 2 of the Federal Arbitration Act (“FAA”) states that:

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. Section 2 demonstrates “‘a national policy favoring arbitration of claims that parties contract to settle in that manner.” Preston v. Ferrer, 552 U.S. 346, 352-53 (2008) (citing Southland Corp. v. Keating, 465 U.S. 1, 10 (1984)).

         Under Section 3 of the FAA, where an issue involved in a suit or proceeding is referable to arbitration under an agreement in writing, the district court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement . . . .” 9 U.S.C. § 3. The language is mandatory, and district courts are required to order arbitration on issues as to which an arbitration agreement has been signed. Kilgore v. KeyBank, N.A., 718 F.3d 1052, 1058(9th Cir. 2013) (citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)). The role of the district court is “limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).

         An agreement to arbitrate is “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. Under California law, the elements of a valid contract are (1) parties capable of contracting; (2) mutual consent; (3) a lawful object; and (4) consideration. Cal. Civ. Code § 1550. However, a court will not enforce an otherwise valid ...


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