In an unpublished decision, the Ninth Circuit recently affirmed a California district court’s denial of a motion to compel arbitration.
The case involves claims brought by a putative class action of exotic dancers under the Fair Labor Standard Act. The defendant SFBSC Management, LLC (“BSC”) made a motion to compel arbitration of the labor claims. The district court denied the motion, and BSC appealed.
The Ninth Circuit held that BSC was not a party to the performer contracts and failed to establish that it has standing to enforce the arbitration clause. BSC argued that alter ego or agency allegations in the complaint conclusively establish its non-party standing for purposes of arbitration. The Court noted that BSC had the burden under the Federal Arbitration Act (the “FAA”) to show the existence of a valid, written agreement to arbitrate and that the agreement to arbitrate encompasses the dispute at issue. The Ninth Circuit stated that while plaintiffs’ complaint contained allegations that BSC acted as “agent” of the nightclubs and that BSC managed the clubs, BSC denied those allegations in its answer, and submitted evidence contradicting plaintiffs’ allegations. Thus, the Court found that under these circumstances, plaintiffs’ allegations in the complaint do not conclusively establish BSC’s standing to compel arbitration. The Court also noted that BSC’s own evidence failed to establish it had a principal-agent relationship with the nightclubs (or vice versa), or that it was an alter ego of the nightclubs. Thus, the Ninth Circuit affirmed the district court’s decision, denying the motion to compel arbitration.
Roes v. SFBSC Management, LLC, No. 3:14-cv-03616 (9th Cir. July 28, 2016).