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In a putative class action alleging violations of the Fair Labor Standards Act (FLSA), a federal court in California ruled that the employer waived its right to demand arbitration by acting in a manner inconsistent with an intent to arbitrate.
In Beauperthuy v. 24 Hour Fitness USA, Inc., No. 06-0715 SC, 2006 WL 3422198 (N.D. Cal. Nov. 28, 2006), Beauperthuy and others brought a putative class action against 24 Hour Fitness, their former employer, alleging FLSA violations. The putative class action followed two separate but related proceedings: (1) an FLSA lawsuit against 24 Hour Fitness that eventually settled; and (2) an arbitration involving some of the same plaintiffs and claims as the instant lawsuit.
During the course of the earlier proceedings, 24 Hour Fitness sought a stay of the arbitration and withheld consent to class-wide arbitration of the FLSA claims, based on a provision in the underlying arbitration agreement that disallowed arbitration “on a class action basis.” Without the consent of 24 Hour Fitness, the arbitrator found no authority to proceed and dismissed the matter without prejudice.
The arbitrator’s dismissal prompted the claimants to bring the instant lawsuit. Initially, 24 Hour Fitness moved for dismissal and explicitly declined to request an order compelling arbitration, stating it would be “highly inconvenient.” In denying 24 Hour Fitness’ motion to dismiss, the Court noted “vigorous disagreement” as to whether the arbitration agreement precluded class-wide arbitration of the FLSA claims. Following that ruling, 24 Hour Fitness filed a motion to compel arbitration.
The Court denied the motion to compel arbitration, finding that 24 Hour Fitness waived its right to demand arbitration. Specifically, the Court found that 24 Hour Fitness acted in a manner inconsistent an intent to arbitrate by “consistently refus[ing] to consent to arbitration” and “explicit[ly] refus[ing] to request the Court compel arbitration.” The Court also found that those refusals prejudiced plaintiff because of the “delay and costs incurred.”
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