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Wilson v. Starbucks Corp.

United States District Court, E.D. Kentucky, Central Division, Lexington

July 2, 2019

MELISSA WILSON, Plaintiff,
v.
STARBUCKS CORPORATION, Defendant.

          MEMORANDUM OPINION AND ORDER

          Joseph M. Hood, Senior U.S. District Judge

         Melissa Wilson, a former Starbucks employee, filed this lawsuit claiming that Starbucks unlawfully interfered with her attempt to claim leave under the Family Medical Leave Act (“FMLA”) and then terminated her employment because she used FMLA leave.

         Starbucks moved to dismiss this action and compel arbitration based on the mandatory arbitration provision in Wilson's employment contract with Starbucks. In response, Wilson argues that the arbitration agreement violates K.R.S. § 336.700, which prohibited employers from conditioning employment on an employee's agreement to arbitrate. In support of her argument, Wilson cites Northern Kentucky Area Development District v. Snyder, in which the Kentucky Supreme Court held that K.R.S. § 336.700 was not preempted by the Federal Arbitration Act (“FAA”) because K.R.S. § 336.700(2) “is not an anti-arbitration clause provision-it is an anti-employment discrimination provision.” 570 S.W.3d 531, 537 (Ky. 2018).

         At first blush, this action appears to be a complex dispute about whether the mandatory arbitration provision in the Starbucks employment contract violates Kentucky law. The recent enactment of Kentucky Senate Bill 7, however, nullified the Kentucky Supreme Court decision in Snyder and allows employers to retroactively and prospectively require employees to agree to mandatory arbitration provisions as a condition of future or continued employment. As a result, the mandatory arbitration provision in the employment contract is retroactively valid under Kentucky law and Starbucks's motion to dismiss [DE 6], most appropriately construed as a motion for summary judgment, is GRANTED and this action is DISMISSED WITHOUT PREJUDICE.

         I. Factual and Procedural Background

          Plaintiff Melissa Wilson worked as a barista at Starbucks. Wilson's employment agreement with Starbucks contained a mandatory arbitration agreement. [DE 6-1 at 15, Pg ID 57]. Specifically, the parties agreed “to use binding individual arbitration to resolve any ‘Covered Claims.'” [Id.]. The arbitration agreement included a delegation clause that provided that “the Arbitrator- and not a court or agency-shall have exclusive authority to resolve any dispute regarding the formation, interpretation, applicability, enforceability, or implementation of this Agreement.” [Id.]. The Agreement also excluded certain claims, such as “claims for which this Agreement would be void as a matter of law, ” and “actions to enforce this Agreement, compel arbitration, or enforce or vacate an arbitrator's award under this Agreement.” [Id.].

         Wilson initially filed this lawsuit in Woodford Circuit Court alleging FMLA interference and retaliation. [DE 1-1]. Starbucks removed the action to this Court based on arising under jurisdiction. [DE 1].

         In lieu of filing an answer, Starbucks moved to dismiss and compel arbitration. [DE 6]. Wilson responded in opposition. [DE 7]. And Starbucks replied. [DE 8]. As a result, this matter is ripe for review.

         II. Standard of Review

          A. Appropriate Procedural Vehicle to Consider Motions to Compel Arbitration

         Recently, this Court engaged in a detailed analysis of the most appropriate procedural vehicle for considering motions to dismiss to compel arbitration under Rule 12(b) of the Federal Rules of Civil Procedure. FCCI Ins. Co. v. Nicholas Cty. Library, No. 5:18-cv-038-JMH, 2019 WL 1234319, at *2-6 (E.D. Ky. March 15, 2019). That analysis need not be replicated here.

         Motions to dismiss based on mandatory arbitration provisions are most appropriately considered as motions to dismiss for failure to state a claim upon which relief may be granted under Rule 12(b)(6). That does not end the analysis here, however, because both parties have submitted matters outside the pleadings pertaining to the mandatory arbitration provision. Federal Rule of Civil Procedure 12(d) provides that, “[i]f, on a motion under Rule 12(b)(6) . . ., matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.” As such, Starbucks's motion to dismiss to compel arbitration must be considered as a motion for summary judgment under Rule 56.

         B. Summary Judgment Standard

         Summary judgment is appropriate only when no genuine dispute exists as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A material fact is one “that might affect the outcome of the suit under governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party has the burden to show that “there is an absence of evidence to support the nonmoving party's case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). “A dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Smith v. Perkins Bd. of Educ., 708 F.3d 821, 825 (6th Cir. 2013) (internal quotations omitted). The Court construes the facts in the light most favorable to the nonmoving party and draws all reasonable inferences in the non-moving party's favor. See Anderson, 477 U.S. at 248; Hamilton Cty. Educ. Ass'n v. Hamilton Cty. Bd. of Educ., 822 F.3d 831, 835 (6th Cir. 2016).

         III. Analysis

         At this juncture, there are three primary issues the Court must address. Initially, the Court must determine what impact, if any, the delegation clause and claim exclusion clause in the arbitration agreement has on this Court's authority to decide initial questions of the applicability and enforceability of the arbitration agreement. Next, assuming the Court may decide the arbitrability issue, the Court must determine whether the arbitration agreement in the employment contract violates Kentucky law. Finally, if the parties must submit their disputes to arbitration, the Court must determine whether to stay the action pending arbitration or whether to dismiss the action from the Court's active docket.

         A. Impact of Delegation Provision

          The arbitration agreement in the Starbucks employment contract contains a delegation provision. This provision states, “Except as provided below, Starbucks and I agree that the Arbitrator-and not a court or agency-shall have exclusive authority to resolve any dispute regarding the formation, interpretation, applicability, enforceability, or implementation of this Agreement, including any claim that all of part of this Agreement is void or voidable.” [DE 6-1 at 15, Pg ID 57].

         Since arbitration is a matter of contract, “a party cannot be required to submit to arbitration any dispute which he [or she] has not agreed [] to submit.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). Still, “parties may agree to have an arbitrator decide not only the merits of a particular dispute but also ‘“gateway” questions of “arbitrability, ” such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.'” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 529 (2019) (quoting Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68-69 (2010)). Thus, when the parties' arbitration agreement delegates arbitrability question to an arbitrator, courts must respect the parties' contractual delegation. Henry Schein, 139 S.Ct. at 531; see also AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649-650 (1986).

         Initially, the delegation provision in the Starbucks employment contract appears to require submission of questions or applicability and enforceability of the arbitration provision to the arbitrator. But “courts ‘should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.'” Henry ...


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