Nathan A Adams IV is a Partner in Holland & Knight's Tallahassee office
In Degigio v. Crazy Horse Saloon and Restaurant, Inc., No. 17-1145, 2018 WL 456905 (4th Cir. Jan. 18, 2018), the court refused to compel arbitration of the plaintiff's FLSA and South Carolina Payment of Wages Act lawsuit, despite binding arbitration provisions in lease agreements between a club and its dancers entered into three years after the litigation began. The club argued that its motion to compel arbitration was delayed because of parties who had not yet joined the suit. The court disagreed and determined that the club continued to pursue a merits-based litigation strategy by filing motions for summary judgment and opposing class certification and served discovery on the opt-ins even after they had joined the class. "In other words, Crazy Horse did not seek to use arbitration as an efficient alternative to litigation; it instead used arbitration as an insurance policy in an attempt to give itself a second opportunity to evade liability." The court was concerned that ruling for the club would give defendants a perverse incentive to wait as long as possible to compel arbitration, reward the furtive manner in which the agreements to arbitrate were presented to plaintiffs not under the court supervision ordinarily required with respect to contacts between the parties and their respective counsel in like circumstances, and also sanction the arbitration agreements themselves, although they painted a false picture of the plaintiffs' legal posture. They misleadingly suggested that the dancers would be able to keep their tips and flexible work schedule only if they were classified as independent contractors and not employees.
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