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Mitchell v. Cambridge Franchise Holdings LLC

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

January 15, 2020




         This matter is before the Court on a Motion to Compel Arbitration and Dismiss or, Alternatively, to Stay Action Pending Arbitration (“Motion to Compel Arbitration”) filed by Defendants Cambridge Franchise Holdings, LLC and Nashville Quality, LLC (collectively “Defendants”). [R. 6] Plaintiff Kathy Mitchell (“Mitchell”) filed a response. [R. 11] Defendants replied. [R. 14] This matter is now ripe for decision. For the reasons stated herein, Defendants' Motion to Compel Arbitration is GRANTED.

         I. Background

         Plaintiff Kathy Mitchell originally filed this action in Jefferson Circuit Court alleging that Defendants violated Kentucky and federal law in their employment practices at the Burger King restaurant where she worked. [R. 1-2 pp. 1-2] Defendants own, operate, and franchise Burger King restaurants, including the one at which Plaintiff worked. [Id. pp. 2-3] After removing the present action, Defendants moved to dismiss this action or stay its resolution pending arbitration based on an arbitration agreement that the Defendants claim that Plaintiff electronically signed. [R. 6] The relevant section of the Arbitration Agreement (“Arbitration Agreement” or “Agreement”) provides that:

Any controversy, dispute or claim arising out of or relating to your employment with the Company, any employment agreement or contract between you and the Company, the conditions and terms of your employment with the Company, the termination of your employment with the Company, all events related thereto, this Agreement, and any other controversy, dispute or claim between you and the Company, its parent entities, subsidiaries and affiliates (and its and their current and former members, partners, officers, directors, employees and agents, whether acting in their individual capacity or their capacity on behalf of the Company or its parent entities, subsidiaries and affiliates), shall be settled by final and binding arbitration administered by the American Arbitration Association . . . in accordance with its Employment Arbitration Rules and Mediation Procedures . . . that are in effect at the time the mediation commences.

[R. 6-2 Ex. 3] Defendants claim that Plaintiff signed this Agreement electronically by accessing it through her on-line Human Resource Information System (“HRIS”) account, where employees could log on to check pay statements and access other company documents and information. [R. 6-2 ¶ 16; R. 14 p. 3; R. 14-1 ¶ 5] Defendants provided a copy of the Agreement, digitally signed, that reads in bold at the bottom of each page, “Digitally signed by Kathy Mitchell on 6/25/2018 1:04PM.” [R. 6-2 Ex. 3] Plaintiff responded that she never signed the Agreement in any form, nor had she ever “seen any document indicating that there was any arbitration agreement . . . .” [R. 11-1 pp. 2-3] Defendants claim that Plaintiff received multiple emails notifying her of the Agreement, that she could not have accessed anything in her HRIS account without first seeing and accepting the terms of the Agreement, and that the fact that she digitally signed other agreements in her HRIS account on the same day and in the same manner proves that she signed the Arbitration Agreement. [R. 14 pp. 4-6; R. 14-1 p. 2] Defendants further contend that an arbitration agreement need not even be signed to be valid, and Plaintiff consented to its terms by continuing her employment with Defendants after receiving notice of the Agreement. [R. 14 pp. 6-7]

         II. Analysis

         The Federal Arbitration Act (“FAA”) was enacted “to ensure judicial enforcement of privately made agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219 (1985). The statute “embodies [a] national policy favoring arbitration . . . .” Richmond Health Facilities v. Nichols, 811 F.3d 192, 195 (6th. Cir. 2016) (citing Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007)). The FAA applies to written agreements to arbitrate disputes that arise out of contracts involving transactions in interstate commerce.[1]Under its terms, such agreements “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. The FAA “leaves no place for the exercise of discretion by a district court, but instead mandates that a district court shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Byrd, 470 U.S. at 218 (emphasis in original).

         When a party invokes the FAA and asks a federal court to dismiss or stay a case and compel arbitration, the Court must determine whether the parties agreed to arbitrate the dispute at issue. Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000). This requires an examination of the contract language in light of the strong federal policy favoring arbitration, resolving any ambiguities in the contract or doubts as to the parties' intentions in favor of arbitration. Id. Courts should engage in the following four-step inquiry: (1) determine whether the parties agreed to arbitrate; (2) determine the scope of that agreement; (3) if federal statutory claims are asserted, the Court must consider whether Congress intended those claims to be non-arbitrable; and (4) if the Court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration. Id. Plaintiff does not dispute the latter three steps in the arbitration inquiry. Instead, she argues only that there was no agreement to arbitrate in the first place because she never signed the Agreement or otherwise consented to its terms.

         Arbitration agreements are fundamentally contracts. As such, courts must “review the enforceability of an arbitration agreement according to the applicable state law of contract formation.” Seawright, 507 F.3d at 972. In Kentucky, like in all jurisdictions, a contract requires both parties to agree to be bound by it for it to be enforceable. See David Roth's Sons, Inc. v. Wright & Taylor, Inc., 343 S.W.2d 389, 391 (Ky. 1976). A digital signature demonstrates that intent. See McCoy v. Cambridge Franchise Holdings, LLC, No. 3:18-CV-00856-GNS, 2019 WL 4280597, at *2 (W.D. Ky. Sept. 10, 2019); Wilson v. CPB Foods, LLC, No. 3:18-CV-014-CHB, 2018 WL 6528463, at *3-4 (W.D. Ky. Dec. 12, 2018); Seeds v. Sterling Jewelers, Inc., No. 3:17-CV-718-CHB, 2018 WL 5892368, at *4 (W.D. Ky. Nov. 9, 2018); Rodriguez v. Cracker Barrel Old Country Store, Inc., No. 2:17-CV-20 (WOB-CJS), 2017 WL 6349173, at *4-5 (E.D. Ky. Dec. 12, 2017); Braxton v. O'Charley's Restaurant Props., LLC, 1 F.Supp.3d 722, 726-28 (W.D. Ky. 2014); Polly v. Affiliated Comput. Servs., Inc., No. 10-135-ART, 2011 WL 93715, at *2-3 (W.D. Ky. Jan. 11, 2011).

         Under the FAA, the party seeking to compel arbitration must first make a prima facie showing of the existence of a valid agreement to arbitrate. Arnold v. Owensboro Health Facilities, L.P., No. 4:15-cv-00104-JHM, 2016 WL 502061, at *3 (W.D. Ky. Feb. 8, 2016) (citing MHC Kenworth-Knoxville/Nashville v. M & H Trucking, LLC, 392 S.W.3d 903, 906 (Ky. 2013)). A party can make its prima facie showing by providing copies of a written, signed agreement to arbitrate. Id. Defendants have provided a copy of the Arbitration Agreement with Plaintiff's digital signature. [R. 6-2 Ex. 3] Moreover, in affidavits from Tammy Owens, the Vice President of Human Resources for Cambridge Franchise Holdings, they have explained in detail the process by which the Agreement was signed. [R. 6-2; 14-1] On June 12, 2018, Tammy Owens sent an email to all employees informing them that she would be uploading the Arbitration Agreement to HRIS and that they had until June 22, 2018 to log in and electronically agree to its terms. [R. 6-2 p. 2; Id. Ex 1] The next day, the Agreement was uploaded to HRIS, triggering a second company-wide email notification sent to all employees at the email addresses provided by employees when they on-boarded. [R. 6-2 p. 3] Employees could access the Agreement through their online HRIS accounts, which were password protected by self-created unique personal identification numbers (“PIN”). [Id.] To sign the Agreement, employees had to log into their HRIS accounts and enter their unique PIN. [Id. p. 4] Defendants' records indicate that Plaintiff digitally signed the Agreement on June 25, 2018 at 1:04pm, and this digital signature appears at the bottom of each page of the Agreement. [Id.; see also R. 6-2 Ex. 3 PageID# 82-85] Defendants have clearly satisfied their prima facie burden. See Arnold, 2016 WL 502061, at *3 (finding that defendant had met the prima facie burden by providing a copy of the signed arbitration agreement).

         To avoid arbitration, Plaintiff must demonstrate that the validity of the Agreement is “in issue” by showing there is a genuine issue of material fact as to the validity of the Agreement, a showing that mirrors the summary judgment standard. Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002); see also Freeman v. Easy Mobile Labs, Inc., No. 1:16-CV-00018-GNS, 2016 WL 4479545, at *1 (W.D. Ky. Aug. 24, 2016) (citing Arnold v. Rent-a-Center, Inc., No. 11-18-JBC, 2011 WL 1810145, at *2 (E.D. Ky. May 12, 2011) (“This court will treat the motion to compel arbitration as one for summary judgment . . . .”)). To do this, Plaintiff must present sufficient evidence that, when viewed in the light most favorable to her, would permit “a reasonable finder of fact [to] conclude that no valid agreement to arbitrate exists.” Id.

         Plaintiff submitted a sworn declaration in which she claims that she did not sign the Agreement and was not presented the Agreement in any form-in person, online, by email, or by physical mail. [R. 11 p. 2; R. 11-1] Whether a plaintiff's sworn declaration denying that he or she signed an arbitration agreement can be, on its own, sufficient to create a genuine issue of material fact as to the validity of that agreement is unclear, particularly in light of the FAA's national policy favoring arbitration. Compare Braxton v. O'Charley's Restaurant Props., LLC, 1 F.Supp.3d 722, 727 (W.D. Ky. 2014) (citing Mazera v. Varsity Ford Management Servs., LLC, 565 F.3d 997, 1001 (6th Cir. 2009)) (noting that in Mazera, the Sixth Circuit, in dicta, quoted the Third Circuit's position that in most cases an unequivocal denial accompanied by supporting affidavits is sufficient to create a genuine issue of material fact, but that a party's “naked assertion” is insufficient), with Aldrich v. University of Phoenix, Inc., No. 3:15-cv-578-JHM, 2016 WL 915287, at *10 (W.D. Ky. March 4, 2016) (holding that “[p]laintiffs must present some form of evidence other than their ‘own statements'” to create a genuine issue of material fact regarding the formation of an arbitration agreement), and McCoy v. Cambridge Franchise Holdings, LLC, No. 3:18-cv-856-GNS, 2019 WL 4280597, at *3 (W.D. Ky. Sept. 10, 2019) (holding that an agreement that was digitally signed through the plaintiff's online employment account was sufficient evidence that the plaintiff had agreed to arbitrate despite plaintiff's sworn declaration denying signing any such agreement).

         However, a plaintiff cannot avoid arbitration by simply “denying facts upon which the right to arbitration rests[, ]” but must have sufficient evidence to raise a factual issue regarding the validity of the agreement. Aldrich, 2016 WL 915287, at *9-10 (citing Tinder v. PinkertonSecurity, 305 F.3d 728, 735 (7th Cir. 2002); Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 41, 55 (3d. Cir. 1980)). A plaintiff does this by identifying ...

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