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Tassy v. Lindsay Entertainment Enterprises, Inc.

United States District Court, W.D. Kentucky, Louisville

April 2, 2019

GLORIA TASSY, individually and on behalf of all similarly situated, PLAINTIFF
v.
LINDSAY ENTERTAINMENT ENTERPRISES, INC., DEFENDANTS

          MEMORANDUM & OPINION

          Thomas B. Russell, Senior Judge.

         This matter is before the Court upon Defendant's Motion to Stay Proceedings and Compel Arbitration pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 3. (R. 9). An evidentiary hearing was held on June 7, 2018 to resolve the threshold issue of whether Plaintiff, Gloria Tassy, entered into an arbitration agreement with the Defendant, Lindsay Entertainment Enterprises, Inc. (R. 59). The Parties have completed post-hearing briefing. (R. 65-68). Being otherwise sufficiently advised, for the reasons set forth below, the Defendant's Motion to Stay Proceedings and Compel Arbitration is DENIED.

         BACKGROUND

         Gloria Tassy is an exotic dancer. (R. 1). She worked at the Godfather gentlemen's club in Louisville, Kentucky from 2014 to 2016. (Id.). Lindsay Entertainment Enterprises operates the Godfather. (Id.). Lindsay Entertainment Enterprises classifies its dancers, including Tassy, as independent contractors. (Id.). As such, Lindsay Entertainment Enterprises never paid Tassy, or any of its other dancers a “direct wage.” (Id.). Instead, Tassy and the other dancers were paid a certain percentage of the tips they earned from customers. (Id.).

         Claiming that she was an employee entitled to a minimum wage under the Fair Labor Standards Act (FLSA), Tassy sued Lindsay Entertainment Enterprises, individually and on behalf of those similarly situated, in February of 2016. (Id.). Claiming that Tassy had executed an arbitration agreement, Lindsay Entertainment Enterprises moved to stay the proceedings and compel arbitration pursuant to § 3 of the Federal Arbitration Act. (R. 9). Tassy responded that she never entered into an arbitration agreement with Lindsay Entertainment Enterprises. (R. 17-1). Thus, the Court found there to be a factual dispute as to the arbitration agreement's existence and determined an evidentiary hearing to be necessary. (R. 24). Prior to holding the evidentiary hearing, the Court conditionally certified Tassy's FLSA collective action class on March 9, 2017. (R.33). Then, with leave to refile, the Court denied Lindsay Entertainment Enterprises' Motion to Stay Proceedings and Compel Arbitration. (R. 39).

         On March 23, 2017 Lindsay Entertainment Enterprises appealed the Court's conditional class certification and the Court's ruling on its Motion to Stay Proceedings and Compel Arbitration. On February 22, 2018, the Sixth Circuit dismissed Lindsay Entertainment Enterprises' appeal from the Court's conditional class certification. (R. 46). However, the Sixth Circuit vacated this Court's ruling on Lindsay Entertainment Enterprises' Motion to Stay Proceedings and Compel Arbitration. (Id.). In remanding for further proceedings, the Sixth Circuit instructed the Court to “promptly determine whether the Parties agreed to arbitrate.” (Id.). Accordingly, the Court set an evidentiary hearing for May 9, 2018. (R. 55). The sole issue to be decided by that evidentiary hearing was whether Gloria Tassy agreed to arbitrate. However, due to a scheduling conflict, the Court had no choice but to push the hearing back. (R. 58).

         On June 7, 2018 the hearing finally occurred. (R. 59). At the hearing, the Court heard testimony from Tammy Sloss, Jason Crosby, and Scott Lindsay on behalf of the Defendant. On behalf of the Plaintiff, the Court heard from Gloria Tassy, Melissa McGrew, and Karen Mead. At the hearing's close, the Court set a post-hearing briefing schedule for the Parties. (R. 61, Hr'g Tr., p. 123). The Court also instructed the parties to notify the Court when the post-hearing briefing had been completed and the matter was ripe for adjudication. (Id.). However, the parties failed to do so. In addition, CM-ECF has a program where anyone can see a pending motions report. It is supposed to show all pending motions in an active case before the Court. This was a briefing schedule, which did not appear on the pending motions lists. Frankly, this, combined with the Court's own oversight, has again caused this threshold issue to languish on the docket for longer than it should have. The Court accepts its share of the responsibility for the oversight, and albeit overdue, now sets about resolving the issue of whether Tassy agreed to arbitrate.

         DISCUSSION

         Lindsay Entertainment Enterprises' Motion to Stay Proceedings and Compel Arbitration turns upon one threshold issue: whether Gloria Tassy agreed to arbitrate.[1] If she did not, Lindsay Entertainment Enterprises' Motion must be denied. At least regarding this threshold issue, the parties' arguments are not complicated.[2] Tassy claims that she never signed an agreement containing an arbitration clause. (R. 10, pp. 2, 5-6; R. 17-1, p. 1; R. 21, p. 4). On the other hand, Lindsay Entertainment Enterprises claims that she did. (R. 9-1, p. 6; R. 13, pp. 2-4; R. 18, pp. 3-5). Lindsay Entertainment Enterprises claims that pursuant to its standard practice, prior to working, all their dancers sign lease agreements that contain an arbitration clause. (R. 9-2, p. 2; R. 13-1, pp. 1-2). However, Lindsay Entertainment Enterprises is unable to produce such paperwork for Tassy because it was allegedly lost in a flood caused by a rusted-out water heater in the backroom where Tassy's paperwork was stored. (R. 61, Hr'g Tr., pp. 55, 68-70). Lindsay Entertainment Enterprises claims further that, even if Tassy never signed the lease agreement containing the arbitration clause, Tassy accepted the terms of that lease agreement by acting in accordance with the agreement's terms and continuing her employment. (R. 65).

         Because arbitration agreements are, in essence, contracts, Kentucky law guides the Court's inquiry into the question of contract formation. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009); Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007). In Kentucky, as in all jurisdictions, a contract is only enforceable if both parties agree to be bound by it. See, e.g., David Roth's Sons, Inc. v. Wright & Taylor, Inc., 343 S.W.2d 389, 391 (Ky. 1976). According to Kentucky law, the initial burden of proving an agreement's existence rests with the party seeking to enforce arbitration. Louisville Peterbilt, Inc. v. Cox, 132 S.W.3d 850, 857 (Ky. 2004). Furthermore, while there is a strong presumption in favor of enforcing valid arbitration clauses, that presumption is not applicable when determining whether an arbitration agreement exists in the first place. See Clowdis v. Colo. Hi-Tec Moving & Storage, Inc., Civil Action No. 11-cv-00036-CMA-KMT, 2011 U.S. Dist. LEXIS 137380, at *10 (D. Colo. Nov. 3, 2011) (citing Dumais v. Am. Golf Corp., 299 F.3d 1216, 1220 (10th Cir. 2002)) (“However, when the parties dispute the existence of a valid arbitration agreement, there is no presumption in favor of arbitration.”). Having considered the testimony and evidence given at the evidentiary hearing in its entirety, the Court finds that Lindsay Entertainment Enterprises failed to carry its burden.

         A. Lindsay Entertainment Enterprises has Failed to Establish that Tassy Signed a Lease Agreement Containing an Arbitration Clause.

         First, the Court is unconvinced that Tassy signed a lease agreement containing an arbitration clause. Lindsay Entertainment Enterprises points to two things to prove that she did- the testimony of their three witness at the evidentiary hearing and Lindsay Entertainment Enterprises' standard practices as described by those same witnesses. (R. 65). The Court will address each.

         There were three witness who testified that Tassy signed a lease agreement containing an arbitration clause: Tammy Sloss, Jason Crosby, and Scott Lindsay. (See R. 61, Hr'g Tr.). The Court finds all three witness' testimony problematic. Starting with Sloss, the Court will address each witness's testimony and its corresponding problems.

         Sloss is a Lindsay Entertainment Enterprises employee. (R. 61, Hr'g Tr., p. 47). She started working for the Godfather in 1998. (Id.). Since that time, she has left the Godfather at various times for numerous reasons, including to serve jail-time for drug-crimes. (R. 61, Hr'g Tr., p. 52). While employed at the Godfather, Sloss has done everything from dancing, to waitressing, to administrative work. (R. 61, Hr'g Tr., p. 47). Sloss's administrative duties include, hiring and firing dancers, ...


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