Plaintiff wins arbitration dispute, with fascinating twist

The Second Circuit has held that a trial is necessary to determine whether an employee personally signed an arbitration agreement that would take her class action lawsuit out of the federal courts, or whether the employer faked her signature. 

The case is Barrows v. Brinker Restaurant Corp., issued on May 31. After plaintiff's employment with Chili's restaurant ended, she filed a lawsuit alleging wage and hour violations under state and federal law. This was a putative class action, which would involve other employees who suffered the same labor law violations. The employer moved to compel arbitration, claiming that plaintiff signed an arbitration agreement at the outset of her employment. It produced such an agreement with plaintiff's electronic signature. The district court in Albany granted the motion to compel arbitration, ruling that plaintiff did not corroborate her claim that she never signed that document.

The Court of Appeals reverses, finding that a factual dispute exists as to whether plaintiff, or some kind of company shenanigans, signed the arbitration agreement. Her affidavit stated in detail that she never signed it, she did not own a computer that would have enabled her to sign it, and she instead signed all company documents at the outset of her employment by hand. That's enough, say the Court of Appeals (Calabresi, Lohier and Lynch), to create a factual dispute. For the employer's part, it submitted declarations from management and HR that no one at the company had completed the plaintiff's electronic signature. But that is just management's side of the story. Since plaintiff disputes that in detail, the issue is for the factfinder. 

The holding in this case is not that remarkable, as it applies settled law that trial courts must view disputed evidence in the light most favorable to the nonmoving party, in this case, plaintiff. Other cases have resolved when signature-dispute cases like this must go to arbitration. What interests me about the case are two things, and I will save the best for last:

First, the fact that defendant filed a motion to compel arbitration and was willing to defend the trial court's ruling in the Court of Appeals means that management will spend as much money as necessary to both arbitrate this case and keep it away from the courts. Why? Because arbitration is viewed as a more favorable forum for employment disputes, and the arbitration agreement may have a provision that prohibits class actions, requiring plaintiff to only litigate her claim, which on its own may not be that lucrative. Also, arbitration discovery is not as extensive as court discovery, as the cases are usually expedited and the parties have to take fewer depositions, a limitation that favors the employer which controls more witnesses than the plaintiff. 

More interestingly, the Court of Appeals notes that management's affidavits in support of the motion to compel arbitration all said the same thing. As the Court summarized one affidavit: 

Brinker  also  produced the declaration of Joshua  Planty, the restaurant’s general  manager.  Planty  stated  that  “[a]ll  [former]  PDI  employees,” such as himself and Barrows, “went through Brinker’s onboarding process in 2015.” Planty  further  averred  that  he  had  “never  completed  any  onboarding documents for Plaintiff Barrows . . . or any other Team Member,” that he “never instructed  any  other  manager  to  complete  onboarding  paperwork  for  Plaintiff Barrows . . . or any other Team Member,” and that it was his “understanding that if [he] ever created a username and/or password for a Team Member using their personal  information  or  if  [he]  electronically  signed  onboarding  documents  on behalf  of  another  Team  Member  without  their  authorization,  that  would  be  a serious  violation  of  Company  policy,  for  which  [his]  employment  could  be terminated.”

One management witness Shawn Hand, signed a similar declaration on the employer's behalf. But the Court of Appeals says in a footnote that Hand later recanted that declaration. The Court writes, "Notably, after the district court issued its judgment, Hand sought to recant this declaration, which he said he had 'not read . . . closely,' and instead to aver that, in fact, 'while I was working for Chili’s, the managers, including myself, did complete onboarding documents for Team Members and were instructed to do so by upper management.'" 

I hope you are as fascinated by this as I am. I am sure plaintiff's lawyers went beserk when they got this new declaration from Hand. Really, it's the dream of every plaintiff's lawyer to get a declaration like this.

According to Hand, plaintiff is correct: management did sign arbitration agreements on behalf of the employees, without their knowledge. If true, this blows the case out of the water. Hand no longer works for Chili's, which is probably the reason he came forward after-the-fact with a new account that disadvantaged the company. In the new declaration, he wrote that "I agreed to sign the [original] declaration because I felt that if I did not support my employer, and my manager Josh Planty, that my job would be on the line." The new declaration says that in March 2021, more than a year after he signed the first declaration, plaintiff told him that she had lost her case against Chili's. Hand decided to "make things right" and said he wanted to speak with her attorneys. Hence the new declaration, which says that the store manager told him and other assistant store managers to enter information for employees in the computer system, including the so-called onboarding documents that employees "sign" when they begin their employment. Hand also says that management told him to fake employee temperatures at the start of the COVID-19 pandemic rather than send them home if they were sick. That allegation has no bearing on this case, but you have to admit, it is interesting and does not reflect well on Chili's.

When Hand recanted his declaration, plaintiff asked the district court to reopen the case and rule in her favor, but the district court denied that motion, stating, "Hand’s assertions that assistant managers and managers would sometimes complete on-boarding documents for employees, has no connection to Barrows, and does not specifically call into question her electronic signature." The Court of Appeals says "the district court is of course free on remand to take Hand’s new testimony into account."