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Media Alerts - Alissa Moon v. Breathless, Inc.-Third Circuit
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August 18, 2017
  Alissa Moon v. Breathless, Inc.-Third Circuit
Headline: Independent contractor's statutory claim for wages trumps arbitration clause because the clause did not clearly and unambiguously signal that she was surrendering her right to pursue statutory claims in court.

Area of Law: Employment, Fair Labor, Arbitration Clauses

Issues Presented: Does the scope of the arbitration clause in a signed employment contract include plaintiff's statutory claims where it does not specify that statutory claims are included?

Brief Summary:
For controversies over arbitration clauses, courts must determine the extent of the clause and then resolve only issues that fall outside of that scope. Here, the clause did not specifically state the types of claims covered and made no mention of any statutory claims, but did make limiting references to contractual disputes. Therefore, the agreement did not clearly and unambiguously signal to plaintiff that she was surrendering her right to pursue statutory claims in court. Because plaintiff relied solely on her statutory - rather than her contractual - rights to recovery, the court allowed her to proceed on her FLSA claims without first seeking arbitration.

Extended Summary:
Appellant, Alissa Moon, signed an Independent Dancer Rental Agreement to rent performance space from Appellee, Breathless Men's Club. The relevant employment provision stated that Moon was an independent contractor and not an employee. The relevant provisions of the arbitration clause stated that disputes arising under the agreement would be resolved by binding arbitration and that - in arbitration - neither party would have the right to litigate in court nor have a trial by jury.

Moon sued the Club for wages and benefits as an employee under the Fair Labor Standards Act, the New Jersey Wage Payment Law, and the New Jersey Wage and Hour Law. The district court granted summary judgment to the Club, holding that Moon's claims fell within the scope of the agreement's arbitration provision.

On appeal, the Third Circuit conducted two inquiries into the scope of the clause: whether the arbitrability of the issue itself was subject to arbitration, and whether the specific claims at issue were within the scope of the clause. Federal courts apply state contract law for matters of contract interpretation, so the Court applied New Jersey contract law to determine the scope of the clause in controversy. The Third Circuit ruled the arbitrability of the issue and Moon's statutory claims both fell outside the scope of the clause.

To answer the first question, the Court found the language insufficient to include arbitrability. Under New Jersey law, there is a presumption that courts must decide whether an issue is arbitratable unless there is clear and unmistakable evidence that the parties agreed otherwise. In the contract at issue, the court found no mention of arbitrability nor the venue for deciding it. Furthermore, the Club conceded to the lower court that courts decide issues of arbitrability. Therefore, the Club did not overcome its presumptive burden and the Court held that it had the power to review the scope of the clause.

To resolve the second question, the Court found the contract's terminology made the arbitration clause applicable only to contract claims, not statutory claims. To encompass statutory rights, an arbitration clause must identify the substantive area it covers, reference the type of claims waived, and explain the difference between arbitration and litigation. The clause at issue only referenced disputes arising under the agreement - not statutory rights. Further, it did not specifically reference claims related to employment or status as an independent contractor. As such, the explanation of arbitration was immaterial because the clause did not appropriately make clear that it applied to statutory claims.

The Club argued that Moon's claim as an employee arose under the agreement because it referred to her as an independent contractor. The court held that, despite the employment provision, Moon's claim for lawful wages and benefits still arose under the FLSA and state statutes, not the agreement itself. Further, the independent contractor label does not preclude a worker from the protection of the Act if the work done follows the usual path of an employee, nor does it change the applicable standards for arbitration clauses.

Find the full opinion at: http://www2.ca3.uscourts.gov/opinarch/163356p.pdf

Panel: Judges Fisher, Hardiman, Greenaway, Jr.

Argument Date: January 18, 2017

Date of Issued Opinion: August 17, 2017

Docket Number: 16-3356

Decided: reversed and remanded

Case Alert Author: Kevin P. McGilloway

Counsel: Jeremy E. Abay, John K. Weston, counsel for Appellant
Marc J. Gross, Justin P. Kobenschlag, counsel for Appellee

Author of Opinion: Judge Greenaway

Circuit: Third Circuit

Case Alert Supervisor: Professor Susan L. DeJarnatt

    Posted By: Susan DeJarnatt @ 08/18/2017 01:30 PM     3rd Circuit  

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