Rodgers-Rouzier v. American Queen Steamboat Operating Co., LLC

Rodgers-Rouzier v. American Queen Steamboat Operating Co., LLC

What’s at Stake

The Federal Arbitration Act (FAA) says that certain classes of workers (such as seamen or transportation workers) cannot be compelled into arbitrating disputes with employers and have their right to sue an employer in court taken away. This case is about preventing the federal courts from compelling those workers into arbitration under state law when they can’t be compelled under the FAA.

Background

Named plaintiff Mary Rodgers-Rouzier was a bartender aboard American Queen riverboats. Wheile on six-week tours of duty, she worked twelve-hour days seven days a week without receiving overtime pay. Failing to pay overtime wages is one of the most common forms of wage theft, and is a violation of the Fair Labor Standards Act (FLSA). She brought a collective action under the FLSA on behalf of herself and other American Queen employees, alleging that she and her coworkers were misclassified as exempt from overtime pay requirements.

American Queen moved to compel arbitration under the FAA, citing a forced arbitration agreement Ms. Rodgers-Rouzier signed as part of her onboarding paperwork. Among other things, the arbitration agreement provided for a dramatically shortened statute of limitations, permitted American Queen to unilaterally select the arbitration forum—and therefore, the arbitration rules.The agreement also specifically spelled out that it was governed by the FAA. The district court denied American Queen’s initial motion to compel arbitration under the FAA, finding Ms. Rodgers-Rouzier is a “seaman” within the meaning of §1of the FAA and therefore her contract is exempt from the statute.

Meanwhile, more than 120 American Queen workers opted in to the action.

Ms. Rodgers-Rouzier then moved for conditional certification of a proposed FLSA collective action and notice to additional American Queen employees. American Queen objected, now arguing that the workers were subject to arbitration under Indiana state law. The court denied Ms. Rodgers-Rouzier’s motion for notice without prejudice to allow American Queen to come back with additional evidence.

American Queen then submitted additional evidence and filed a renewed motion to compel arbitration of Ms. Rodgers-Rouzier’s claims, this time under Indiana state law, which makes no exceptions for certain classes of workers like the FAA does. The district court granted that motion, rejecting Ms. Rodgers-Rouzier’s arguments that the clause’s terms were unenforceable because the short statute of limitations operated to deprive them of their FLSA rights and other provisions are vague and unconscionable as a matter of state law. After compelling arbitration of Ms. Rodgers-Rouzier’s claims, the court also dismissed the claims of the other American Queen workers who had opted in.

On appeal, we argued that the forced arbitration agreement’s clear reference to the FAA meant it could not be enforced by a federal court under Indiana law. The Seventh Circuit agreed and reversed the district court’s order compelling arbitration. The appellate court held that because the agreement stated that the FAA governed, as a matter of state contract law, the parties were bound to that choice. And the FAA is clear that “seamen” like the workers on American Queen cannot be forced into arbitration.

Core Legal Issues

Federal law on the question whether arbitration can be compelled under state law when arbitration cannot be compelled under the FAA is still developing, and this decision is important early precedent.

Public Justice has been developing arguments explaining when a federal court cannot compel arbitration under state law—for example, in Miller v. Amazon, pending in the Ninth Circuit—and this was an opportunity to make those arguments on behalf of a party.

In addition, this case presented questions of waiver post-Morgan v. Sundance, whether defendants can file iterative motions to compel arbitration, the role of opt-in plaintiffs in FLSA cases (and collective action tolling issues), as well as whether state arbitration law can operate to eviscerate federal statutory rights.

As hopefully more employment cases get out from under the FAA, thanks in part to Southwest Airlines v. Saxon, we anticipate that this issue of whether state law can be used as a substitute will become more prevalent, and we made good in the Seventh Circuit on that question.