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Sakyi v. Estee Lauder Companies, Inc.

United States District Court, District of Columbia

April 25, 2018

PRINCESS SAKYI, individually and on behalf of all others similarly situated, Plaintiff,
v.
ESTÉE LAUDER COMPANIES, INC., et al., Defendants.

          MEMORANDUM OPINION

          BERYL A. HOWELL CHIEF JUDGE.

         The plaintiff, Princess Sakyi, a former cosmetology student at the Aveda Institute in Washington, D.C., filed a three-count complaint against defendants Beauty Basics, Inc., d/b/a Aveda Institutes South (“BBI”), the Estée Lauder Companies, Inc. (“ELC”), and Aveda Corporation (“Aveda”), on behalf of herself and all others similarly situated, alleging that the defendants engaged in unlawful and deceptive trade practices, failed to pay minimum wages, and failed to pay wages in a timely manner by using their students as unpaid employees. Am. Compl. at 2, 8-10, ECF No. 10. Pending before the Court are defendant BBI's Motion to Dismiss and Compel Arbitration (“BBI Mot. Compel”), ECF No. 25, and defendants ELC and Aveda's Motion to Dismiss and Compel Arbitration, or in the Alternative, to Stay (“ELC Mot. Compel”), ECF No. 28. The defendants seek to compel arbitration pursuant to an Arbitration Agreement between the plaintiff and defendant BBI, see BBI Mot. Compel, Ex. 1, Decl. of Kalli Blackwell Peterman (“Peterman Decl.”), Attach. A, Arbitration Agreement & Waiver of Jury Trial (“Agreement”) at 5-6, ECF No. 25-1. For the reasons described below, the defendants' motions are granted.

         I. BACKGROUND

         The defendants have moved to dismiss the complaint and to compel arbitration. The circumstances underlying, and terms of, the Arbitration Agreement will therefore be discussed first, followed by a brief discussion of the plaintiff's claims against the defendants.

         A. The Plaintiff Signs an Arbitration Agreement with BBI

         On March 9, 2016, plaintiff Princess Sakyi enrolled in a cosmetology course offered at defendant BBI's Washington, D.C., location. Peterman Decl. ¶ 9.[1] When the plaintiff enrolled in this course, she signed an Enrollment Agreement as well as an Arbitration Agreement and Waiver of Jury Trial (“Arbitration Agreement” or “Agreement”). Id. ¶ 10. The first paragraph of the Arbitration Agreement states:

Any dispute I may bring against Aveda Institute (the “Institute”), or any of its parents, subsidiaries, officers, directors, or employees, without limitation, or which the Institute may bring against me, no matter how characterized, pleaded or styled, shall be resolved by binding arbitration pursuant to the Federal Arbitration Act, conducted by the American Arbitration Association (the “AAA”), under its Consumer Arbitration Rules (“Consumer Rules”), and decided by a single arbitrator. The arbitration hearing will be conducted in Washington, DC.

         Agreement ¶ 1. The Agreement further provides that neither party would file any lawsuit against the other and that “any suit filed in violation of this provision shall be promptly dismissed in favor of arbitration.” Id. ¶ 3. In addition, the Agreement includes a provision prohibiting class proceedings, in which the plaintiff agreed that “any dispute or claim I may bring shall be brought solely in my individual capacity, and not as a plaintiff or class member in any purported class action, representative proceeding, mass action or consolidated action.” Id. ¶ 5.

         Several other provisions of the Agreement are relevant to this dispute. The Agreement selects the law of the District of Columbia as controlling law, id. ¶ 8, and includes a severability clause stating that “[i]f any paragraph, sub-paragraph, provision, or clause herein is held invalid, said paragraph, sub-paragraph, provision, or clause shall not affect any other paragraph, sub-paragraph, provision, or clause that can have effect without the invalidated paragraph, sub-paragraph, provision, or clause, and thus is severable one from the other, ” id. ¶ 10. The plaintiff signed her initials at the end of each paragraph and also signed and dated the bottom of the Agreement, which is countersigned by a school official. Id. at 5-6.

         B. The Plaintiff's Claims against the Defendants

         BBI is a “nationally accredited private post-secondary institution offering career training in a variety of beauty related fields, including cosmetology.” Peterman Decl. ¶ 2. BBI “regularly receives funds in the form of student loans and grants that are regulated by the Department of Education, ” and “[m]ost of the tuition for BBI's students are [sic] paid by way of a mix of federal student loans and grants, all administered under the Title IV student financial aid statutes” and “related regulations.” Id. ¶ 7. Each student pays “approximately $26, 000 in tuition” for this course. Am. Compl. ¶ 18. In this case, the plaintiff paid “approximately $5, 000 out of pocket and $21, 000 in student loans.” Id.

         As part of the curriculum, and pursuant to cosmetology licensing requirements, “student enrollees provide cosmetology services for paying customers.” Id. ¶ 13. According to the plaintiff, prospective students were told that “supervised students train directly with guests, delivering the trademark difference that defines an AVEDA school, ” id. ¶ 15 (internal quotation marks omitted); that “the one-of-a-kind hands-on experience that they would receive in training at the Aveda Institute would be by licensed educators within a salon environment in which students will learn the latest styles and techniques in haircutting, hair styling and hair coloring, ” id. ¶ 16 (internal quotation marks and alteration omitted); and that “they would receive all the preparation they need to take the state board exam and would receive an ipad [sic] as part of the program, ” id. ¶ 17.

         Nonetheless, the plaintiff's complaint describes how the students were exploited: the students “spent many days not training, but as line employees, performing simple, repetitive tasks for Aveda clients without supervision-such as straightforward nail or hair jobs, ” id. ¶ 19, and did not receive an hourly wage for this work, although they did occasionally receive tips from customers, id. ¶ 20. The students were required to “follow detailed requirements imposed on them by Defendants” and were “subject to grading, discipline and even termination from the program based on Defendants' discretion and/or students' failure to adhere to these requirements (such as rules regarding their contact with customers, the hours they maintain in the salon, and the accurateness of their services).” Id. ¶ 21. According to the plaintiff, “the amount of work that Defendants required her and other students to perform in certain areas far exceeded the requirements of licensure . . . . For example, regulations require 50 hours related to manicure and pedicure for licensure, but Defendants required Plaintiff to perform approximately 180 hours of nail work, during the period from July to September 2016.” Id. ¶ 23. After completing work for their customers, students were also “required” to “show customers the Aveda-branded products that they used on the customers and try to sell the products to customers, ” id. ¶ 24, and were asked to “occasionally fill-in on the retail sales floor, performing general sales and other duties for Defendants unrelated to their degree, ” id. In addition, “[s]taff at the Aveda Institute required Plaintiff and other students to pay out-of-pocket for iPads, which were rarely incorporated in to [sic] their study, ” even though “students had been told that the cost of the iPad would be included in tuition.” Id. ¶ 25.

         The plaintiff contends that because the students were “required to spend so much time in the salon, ” they “did not receive the coursework necessary to be properly prepared for the state board exam.” Id. ¶ 26. The students allegedly raised this concern with the defendants, who provided additional coursework to the students after the course had ended. Id. The plaintiff states that this deficiency “meant that students had to spend additional resources coming to the Institute for weeks after the program was supposed to end and also delay the start of their cosmetology careers.” Id. In fact, the plaintiff avers that “[h]ad Defendants disclosed to Plaintiff and other students the true nature of the Aveda Institute's cosmetology program, including but not limited to the amount of time they would spend on repetitive, comparatively unskilled nail and hair work, the students would have chosen another cosmetology program.” Id. ¶ 27.

         C. Litigation History

         On July 30, 2017, the plaintiff filed a class action complaint against Aveda Institute, Inc. (“AII”), and the Estée Lauder Companies in the Superior Court of the District of Columbia, alleging unlawful and deceptive trade practices in violation of the District of Columbia Consumer Protection Procedures Act (“DCCPPA”), D.C. Code § 28-3901 et seq., failure to pay minimum wage in violation of the District of Columbia Minimum Wage Revision Act (“DCMWRA”), D.C. Code § 32-1001 et seq., and failure to pay all wages earned in a timely manner in violation of the District of Columbia Wage Payment and Collection Act (“DCWPCA”), D.C. Code § 32-1301 et seq. Defs.' Notice of Removal, Ex. 1, Compl. (“Compl.”) at 8-10, ECF No. 1-1. The plaintiff brought this complaint on behalf of herself “and all cosmetology students who have enrolled at the Aveda Institute in Washington D.C.” Id. ¶ 27.

         Regarding the class claims, the complaint alleges that the “critical questions of law and fact common to the Plaintiff Class that will materially advance the litigation are whether Defendants misrepresented and/or omitted material facts about the cosmetology program to Plaintiffs and the class and whether applicable law required Defendants to pay wages to Plaintiffs and the class for work that they performed at the Aveda salon.” Id. ¶ 31. The plaintiff seeks damages and an injunction ordering the defendants to “pay students for work performed in the Aveda salon and change their marketing practices to accurately reflect the nature of work performed in the cosmetology program.” Id. at 11.

         The defendants removed this action to federal court on September 12, 2017. See generally Defs.' Notice of Removal, ECF No. 1. Approximately three weeks later, AII moved to dismiss the claims against it based on a lack of personal jurisdiction. Def. AII Mot. Dismiss (“AII Mot. Dismiss”), Ex. 1, Def. AII Mem. Supp. Mot. Dismiss (“AII Mem.”) at 1, ECF No. 7-1. AII noted that it “does not manage, operate, or have an ownership interest in the Aveda Institute in Washington, D.C., or any school in the District of Columbia, ” id., and that the company instead “owns and operates two cosmetology schools in the United States, which do business as the Aveda Institute of New York and Aveda Institute of Minneapolis, ” which schools are located in New York and Minnesota, respectively, id. at 2. AII merely “has a licensing agreement with Aveda Corporation to use Aveda Institute curriculum and the school name ‘Aveda Institute.'” Id. According to AII, “Plaintiff ha[d] sued the wrong company.” Id. at 1.[2]

         The plaintiff subsequently filed an amended complaint, substituting Aveda Corporation as a defendant in place of AII and also adding BBI as a defendant, Am. Compl. ¶¶ 10-11, but otherwise leaving the substantive allegations of the complaint unchanged. Accordingly, AII's motion to dismiss was denied as moot. Minute Order (Nov. 29, 2017).

         In February 2018, the plaintiff successfully moved, over the defendants' objections, for an extension of time in which to seek class certification. See Order, dated Feb. 6, 2018, ECF No. 23. The next day, on February 7, 2018, BBI requested that plaintiff arbitrate her claims, but the plaintiff refused. Def. BBI Mem. Supp. Mot. Compel (“BBI Mem.”) at 7, ECF No. 25. BBI then moved to compel arbitration of the plaintiff's claims, invoking the Arbitration Agreement signed by the plaintiff upon her enrollment in the cosmetology program. Id. at 1. Two weeks later, ELC and Aveda Corporation similarly moved to compel arbitration, contending that the Arbitration Agreement also encompassed the plaintiff's claims against them, despite the fact that they are not signatories to the Arbitration Agreement. ELC Mot. Compel, Ex. 1, Defs. ELC & Aveda Corp. Mem. Supp. Mot. Compel (“ELC Mem.”) at 1, ECF No. 28-1.

         II. LEGAL STANDARD FOR A MOTION TO COMPEL ARBITRATION

         The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., aims to “reverse the longstanding judicial hostility to arbitration agreements” and to “place arbitration agreements upon the same footing as other contracts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991) (citing Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-20 & n.6 (1985)). The Act reflects “both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract, ” AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1745 (2011) (internal quotation marks and citation omitted), and “strongly favors the enforcement of agreements to arbitrate as a means of securing prompt, economical and adequate solution of controversies, ” Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 479-80 (1989) (internal quotation marks omitted); see also Southland Corp. v. Keating, 465 U.S. 1, 10 (1984) (noting that the FAA “declare[s] a national policy favoring arbitration”). Accordingly, “district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed, ” Dean Witter Reynolds, 470 U.S. at 218 (emphasis in original) (citing 9 U.S.C. §§ 3-4), and “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, ” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); see also Pearce v. E.F. Hutton Grp., 828 F.2d 826, 829 (D.C. Cir. 1987).

         Section 2 of the FAA provides that written agreements to arbitrate disputes arising out of transactions involving commerce “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. Although the FAA is silent regarding the evidentiary standard that a party attempting to avoid compelled arbitration must meet, the D.C. Circuit has instructed that the validity of an unambiguous arbitration agreement is a question of law for the court that may be resolved by summary disposition under the summary judgment standard of Federal Rule of Civil Procedure 56(c). Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008). The normal evidentiary standards under this rule apply such that the “party seeking to stay the case in favor of arbitration bears an initial burden of demonstrating that an agreement to arbitrate was made. This burden does not require the moving party to show initially that the agreement would be enforceable, merely that one existed.” Hines v. Overstock.com, Inc., 380 Fed.Appx. 22, 24 (2d Cir. 2010) (emphasis in original; citations omitted) (citing Almacenes Fernandez, S.A. v. Golodetz, 148 F.2d 625, 628 (2d Cir. 1945)); Aliron Int'l, 531 F.3d at 865 (treating a motion to compel arbitration as a request for “summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate” (internal quotation marks omitted)). “[S]ummary judgment is appropriate only if ‘there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.'” Aliron Int'l, 531 F.3d at 865 (alteration omitted) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986)).

         Under this standard, “the party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000); see also Gilmer, 500 U.S. at 26. Accordingly, “[t]he party opposing arbitration must identify a triable issue of fact concerning the existence of the agreement in order to obtain a trial on the merits of the contract.” Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002). As with summary judgment proceedings, “[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S. at 255; see also Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir. 1992) (noting that the party resisting arbitration “must make at least some showing that under prevailing law, he would be relieved of his contractual obligation to arbitrate if his allegations proved to be true”); Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980) (“The district court, when considering a motion to compel arbitration . . ., should give to the opposing party the benefit of all reasonable doubts and inferences that may arise.”). Nonetheless, “a party cannot avoid compelled arbitration by generally denying the facts upon which the right to arbitration rests; the party must identify specific evidence in the record demonstrating a material factual dispute for trial.” Tinder, 305 F.3d at 735.

         In resolving a motion to compel arbitration, the focus is on the arbitrability of the dispute rather than the dispute itself, Aliron Int'l, 531 F.3d at 865, and accordingly, “a court may not weigh the merits of a grievance when determining whether to compel arbitration, ” Trans World Airlines, Inc. v. Air Line Pilots Ass'n, 172 F.3d 921, 1998 WL 720712, at *1 (D.C. Cir. 1998) (Table); see also United Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564, 568 (1960) (concluding that when parties have agreed to arbitrate, courts “have no business weighing the merits of the ...


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