A recent Fifth Circuit decision continues the trend of courts rejecting putative class and collective actions where absent class members are subject to arbitration agreements.
Exotic dancers sued A&D Interests, Inc. (doing business as the “Heartbreakers Gentlemen’s Club”) in a putative Fair Labor Standards Act collective action for allegedly misclassifying the club’s dancers as independent contractors. In re A&D Ints., Inc., – F. 4th –, 2022 WL 1315465 (5th Cir. May 3, 2022). The plaintiffs and potential opt-ins had entered into arbitration agreements (1) specifying that arbitration would be on an individual basis and (2) waiving class action participation. The district court nevertheless granted the plaintiffs’ motion to proceed with the collective action and issuance of notice because (1) the club had not moved to compel arbitration and (2) the agreements did not mention collective (as opposed to class) actions.
The club petitioned the Fifth Circuit for writ of mandamus, arguing that the district court’s order contravened In re JPMorgan Chase & Co., 916 F.3d 494, 501 (5th Cir. 2019), which held that “district courts may not send notice to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action.” A split panel of the Fifth Circuit agreed, reasoning that the plaintiffs’ agreements to submit disputes to individual arbitration foreclosed collective actions even if the class action waivers did not. The majority also rejected the district court’s (and the dissent’s) view that the relevant clauses should “lie dormant until a party moves to compel arbitration,” and further noted that the club did attempt to enforce the arbitration agreements by opposing the collective action.
Concluding that “the district court clearly and indisputably erred” in approving notice to opt-in plaintiffs who would be contractually barred from participating in a collective action, the majority granted the club’s petition. In re A&D reaffirms the potential of arbitration agreements as an effective defense against class and collective actions – one that defendants may be able to invoke without even moving to compel arbitration of the named plaintiff’s claims.