Alissa Moon v. Breathless Inc

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________

No. 16-3356
_____________

ALISSA MOON;
YASMEEN DAVIS, individually and on
behalf of all others similarly situated

v.

BREATHLESS INC, a/k/a Vision Food & Spirits, d/b/a
Breathless Men’s Club

Alissa Moon,
Appellant
____________

On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 2-15-cv-06297)
District Judge: Honorable Susan D. Wigenton
____________

Argued January 18, 2017
 Before: FISHER,* HARDIMAN, and GREENAWAY, JR.,
Circuit Judges

(Opinion Filed: August 17, 2017)

Jeremy E. Abay, Esq. [ARGUED]
John K. Weston, Esq.
Sacks Weston Diamond, LLC
1845 Walnut Street, Suite 1600
Philadelphia, PA 19103

Counsel for Appellant

Marc J. Gross, Esq. [ARGUED]
Justin P. Kobenschlag, Esq.
Greenbaum, Rowe, Smith & Davis LLP
75 Livingston Avenue, Suite 301
Roseland, NJ 07068

Counsel for Appellee

____________

*
Honorable D. Michael Fisher, United States Circuit Judge
for the Third Circuit, assumed senior status on February 1,
2017.

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 OPINION OF THE COURT
____________

GREENAWAY, JR., Circuit Judge.

In this appeal, we must determine whether an
arbitration clause in a signed contract covers Appellant’s
statutory claims. The United States District Court for the
District of New Jersey answered this question in the
affirmative. We disagree. We shall reverse and remand.

I. BACKGROUND

In 2013, Alissa Moon (“Moon”) began performing at
the Breathless Men’s Club (“Club”) in Rahway, New Jersey.
In January of 2015, Moon agreed to rent performance space
in the Club and signed an Independent Dancer Rental
Agreement (“Contract”). The Contract contains an
employment provision and an arbitration clause.

The employment provision provides:

Dancer understands and agrees that he/she is an
independent contractor and not an employee of
club. Dancer is renting the performance space
for an agreed upon fee previously agreed to by
Dancer and Club.

App. 41.

The arbitration clause reads:

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 In a dispute between Dancer and Club under
this Agreement, either may request to resolve
the dispute by binding arbitration. THIS
MEANS THAT NEITHER PARTY SHALL
HAVE THE RIGHT TO LITIGATE SUCH
CLAIM IN COURT OR TO HAVE A JURY
TRIAL – DISCOVERY AND APPEAL
RIGHTS ARE LIMITED IN ARBITRATION.
ARBITRATION MUST BE ON AN
INDIVIDUAL BASIS. THIS MEANS
NEITHER YOU NOR WE MAY JOIN OR
CONSOLIDATE CLAIMS IN
ARBITRATION, OR LITIGATE IN COURT
OR ARBITRATE ANY CLAIMS AS A
REPRESENTATIVE OR MEMBER OF A
CLASS.

App. 42.

In August of 2015, Moon2 sued the Club pursuant to
the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et
seq., the New Jersey Wage Payment Law (“NJWPL”), N.J.
Stat. Ann. § 34:11-4.1, et seq., and the New Jersey Wage and
Hour Law (“NJWHL”), N.J. Stat. Ann. § 34:11-56a, et seq.
App. 10–37. In September, the Club moved to dismiss the
Complaint on the ground that the Contract’s arbitration clause
foreclosed Moon from seeking relief in the District Court. In
November, the District Court denied the Motion to Dismiss
and ordered the parties to engage in limited discovery on the
arbitration issue. After discovery, the Club filed a Motion for
Summary Judgment in favor of arbitration and the District

2
Another performer sued but she did not join the appeal.

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Court held a hearing. On July 29, 2016, the District Court
granted the Club’s Motion for Summary Judgment
concluding that, “[T]here [wa]s no genuine dispute as to
whether Plaintiff’s claims fall within the scope of the
arbitration provision.” Moon v. Breathless, Inc., No.
CV1506297SDWLDW, 2016 WL 4072331, at *4 (D.N.J.
July 29, 2016). On August 10, 2016, Moon filed a timely
Notice of Appeal. On appeal, Moon asks us to determine
anew whether her claims fall within the scope of the
Contract’s arbitration provision.

II. JURISDICTION

For her federal claims, Moon invoked the District
Court’s jurisdiction pursuant to 28 U.S.C. § 1331. For her
state claims, Moon drew upon the District Court’s power of
supplemental jurisdiction, 28 U.S.C. § 1367. We have
appellate jurisdiction pursuant to 28 U.S.C. § 1291.

III. STANDARD OF REVIEW

On an appeal from a grant of summary judgment, our
review is “plenary” and we “apply the same test the district
court should have utilized initially.” Giles v. Kearney, 571
F.3d 318, 322 (3d Cir. 2009) (citation omitted). Summary
judgment should be granted only when the record shows that
“there is no genuine dispute as to any material fact and that
the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). “[A]ll justifiable inferences are to be drawn
in [the nonmovant’s] favor,” but the “mere existence of some
evidence in support of the nonmovant is insufficient to deny a
motion for summary judgment; enough evidence must exist to
enable a jury to reasonably find for the nonmovant on the

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issue.” Giles, 571 F.3d at 322 (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986)).

IV. ANALYSIS

The parties debate an arbitration clause’s scope.
Pursuant to the precedent of the Supreme Court of the United
States, state law applies: “When deciding whether the parties
agreed to arbitrate a certain matter (including arbitrability),
courts generally . . . should apply ordinary state-law
principles that govern the formation of contracts.” First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944
(1995).

The parties agree that New Jersey law applies to this
controversy. See Appellant’s Br. at 8 (“As a matter of
contract interpretation, federal courts apply state contract law
to determine the scope of an arbitration clause.”); Appellee’s
Br. at 4 (“Federal courts ordinarily apply state contract law in
determining the enforceability and scope of an arbitration
clause.”).

Thus we must decide two questions under New Jersey
law: First, should a court decide whether the parties should
submit this issue to arbitration? Second, if the parties have
contracted to allow a court to decide arbitrability, have the
parties agreed to arbitrate the claims at issue here? We
answer the first question in the affirmative and the second
question in the negative.

A. A Court Should Decide Arbitrability

Under New Jersey law, “the law presumes that a court,
not an arbitrator, decides any issue concerning arbitrability.”

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Morgan v. Sanford Brown Inst., 137 A.3d 1168, 1177 (N.J.
2016). To overcome this presumption, an arbitration clause
must contain “‘clea[r] and unmistakabl[e]’ evidence ‘that the
parties agreed to arbitrate arbitrability.’” Id. (alterations in
original) (quoting First Options, 514 U.S. at 944). “Silence
or ambiguity in an agreement does not overcome the
presumption that a court decides arbitrability.” Id. at 1178.

The Supreme Court of New Jersey applied these
principles in Morgan v. Sanford Brown Institute. In that case,
students sued a for-profit, post-secondary education institute
under the New Jersey Consumer Fraud Act; and the institute
moved to dismiss the complaint on the ground that the
students signed the following arbitration agreement with the
institute: “[A]ny objection to arbitrability or the existence,
scope, validity, construction, or enforceability of this
Arbitration Agreement shall be resolved pursuant to this
paragraph (the ‘Arbitration Agreement’).” Id. at 1182.

In Morgan, the court found that the arbitration clause
did not strip the court of its authority to decide arbitrability.
It supported its conclusion with two arguments. First, “[t]he
paragraph does not explain that an arbitrator will decide
whether the parties agreed to arbitrate legal claims, including
statutory violations . . . .” Id. at 1179. Second, the institute
conceded the issue in the lower court: “Defendants did not
argue to the motion court that it lacked jurisdiction to decide
whether the parties agreed to arbitration because that role was
for the arbitrator alone.” Id.

For the same reasons, we find that the parties here did
not agree to arbitrate arbitrability. First, the arbitration clause
here falls below the standard set by Morgan. In Morgan, the
arbitration clause referenced arbitrability but did not clearly

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delegate this issue to an arbitrator: “[A]ny objection to
arbitrability or the existence, scope, validity, construction, or
enforceability of this Arbitration Agreement shall be resolved
pursuant to this paragraph (the ‘Arbitration Agreement’).” Id.
at 1182. Here, the arbitration clause fails to mention
arbitrability, let alone the venue for deciding it:

In a dispute between Dancer and Club under
this Agreement, either may request to resolve
the dispute by binding arbitration. THIS
MEANS THAT NEITHER PARTY SHALL
HAVE THE RIGHT TO LITIGATE SUCH
CLAIM IN COURT OR TO HAVE A JURY
TRIAL – DISCOVERY AND APPEAL
RIGHTS ARE LIMITED IN ARBITRATION.
ARBITRATION MUST BE ON AN
INDIVIDUAL BASIS. THIS MEANS
NEITHER YOU NOR WE MAY JOIN OR
CONSOLIDATE CLAIMS IN
ARBITRATION, OR LITIGATE IN COURT
OR ARBITRATE ANY CLAIMS AS A
REPRESENTATIVE OR MEMBER OF A
CLASS.

App. 42.

Second, like in Morgan, the Defendant conceded in the
trial court that courts must decide issues of arbitrability:

When confronted with a motion to stay or
dismiss under the [Federal Arbitration Act], the
Court engages in a limited review to determine
whether: (1) there is a valid, enforceable
agreement to arbitrate; (2) the claims at issue

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 fall within the scope of the agreement to
arbitrate; and, (3) the moving party has waived
arbitration. 9 U.S.C. § 3 . . . .

Motion to Dismiss in Favor of Arbitration or, in the
Alternative, to Stay Pending Arbitration at 6, Alissa Moon et
al. v. Breathless, Inc., No. 2:15-cv-06297-SDW-LDW (D.N.J.
Sept. 24, 2015), ECF No. 12-2 (emphasis added). Having
established our power to decide the arbitration clause’s scope,
we now turn to this issue.

B. A Court Should Decide Moon’s Wage-and-Hour
Claims

To cover a statutory right under New Jersey law, an
arbitration clause must do three things. First, it must identify
the general substantive area that the arbitration clause covers:
“To pass muster, however, a waiver-of-rights provision
should at least provide that the employee agrees to arbitrate
all statutory claims arising out of the employment relationship
or its termination.” Garfinkel v. Morristown Obstetrics &
Gynecology Assocs., 773 A.2d 665, 672 (N.J. 2001); see also
Atalese v. U.S. Legal Servs. Grp., 99 A.3d 306, 315–16 (N.J.
2014) (“But the clause, at least in some general and
sufficiently broad way, must explain that the plaintiff is
giving up her right to bring her claims in court or have a jury
resolve the dispute.”); Martindale v. Sandvik, Inc., 800 A.2d
872, 883 (N.J. 2002) (“In the circumstances of this case, the
language in the arbitration agreement not only was clear and
unambiguous, it was also sufficiently broad to encompass
reasonably plaintiff’s statutory causes of action.”).

Second, it must reference the types of claims waived
by the provision: “It should also reflect the employee’s

9
general understanding of the type of claims included in the
waiver, e.g., workplace discrimination claims.” Garfinkel,
773 A.2d at 672. It need not, however, mention the specific
statutory rights at issue: “We do not suggest that the
arbitration clause has to identify the specific constitutional or
statutory right guaranteeing a citizen access to the courts that
is waived by agreeing to arbitration.” Atalese, 99 A.3d at
315.

Third, it must explain the difference between
arbitration and litigation: “The waiver-of-rights language,
however, must be clear and unambiguous—that is, the parties
must know that there is a distinction between resolving a
dispute in arbitration and in a judicial forum.” Id. at 315; see
also Martindale, 800 A.2d at 884 (enforcing an arbitration
clause because it, inter alia, “addressed specifically a waiver
of the right to a jury trial, augmenting the notice to all parties
to the agreement that claims involving jury trials would be
resolved instead through arbitration”).

The Supreme Court of New Jersey has interpreted
three arbitration clauses to determine whether they covered a
particular type of statutory claim. In two of these cases,
Garfinkel and Atalese, the court found that the arbitration
clause did not cover the plaintiff’s statutory claims. In the
other, Martindale, the Supreme Court of New Jersey came to
the opposite conclusion. The case at bar resembles Garfinkel
and Atalese more than Martindale. As a result, we conclude
here that the arbitration clause does not cover Moon’s wage-
and-hour claims.

1. Garfinkel

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 In Garfinkel, a doctor employed by the Morristown
Obstetrics and Gynecology Associates (“MOGA”) sued
MOGA for breaching an employment contract, for
perpetrating a tort, and for violating the New Jersey Law
Against Discrimination (“LAD”). Garfinkel, 773 A.2d at
668. In response to the doctor’s suit, MOGA invoked the
following arbitration clause:

Except as otherwise expressly set forth in
Paragraphs 14 or 15 hereof, any controversy or
claim arising out of, or relating to, this
Agreement or the breach thereof, shall be
settled by arbitration in Morristown, New
Jersey, in accordance with the rules then
obtaining of the American Arbitration
Association, and judgement [sic] upon any
reward rendered by the arbitrator or arbitrators
may be entered in any court having jurisdiction
thereof.

Id.

The Supreme Court of New Jersey found that the
arbitration clause did not cover the doctor’s statutory claims
for three reasons. First, the clause did not reference statutory
claims: “Moreover, the language does not mention, either
expressly or by general reference, statutory claims redressable
by the LAD.” Id at 672. Second, the clause implicitly
exempted all other statutory claims by explicitly exempting
some: “As noted, paragraph eighteen excepts from its
purview the two paragraphs of the agreement pertaining to
post-termination restrictions and severance pay. Those
exceptions further suggest that the parties intended disputes
over the terms and conditions of the contract, not statutory

11
claims, to be the subject of arbitration.” Id. Third, the clause
mentioned contract disputes: “The clause states that ‘any
controversy or claim’ that arises from the agreement or its
breach shall be settled by arbitration. That language suggests
that the parties intended to arbitrate only those disputes
involving a contract term, a condition of employment, or
some other element of the contract itself.” Id.

2. Atalese

In Atalese, a customer sued a debt-adjustment services
company in New Jersey court for violating New Jersey’s
Consumer Fraud Act and the Truth-in-Consumer Contract,
Warranty and Notice Act. The company responded by
invoking the following arbitration clause of its service
agreement:

In the event of any claim or dispute between
Client and the USLSG related to this
Agreement or related to any performance of any
services related to this Agreement, the claim or
dispute shall be submitted to binding arbitration
upon the request of either party upon the service
of that request on the other party.

Atalese, 99 A.3d at 310.

The Supreme Court of New Jersey found that the
consumer had not waived her statutory rights by signing this
arbitration provision because “the wording of the service
agreement did not clearly and unambiguously signal to
plaintiff that she was surrendering her right to pursue her
statutory claims in court.” Id. at 316.

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3. Martindale

In Martindale, an employee sued her employer under
New Jersey’s Family Leave Act and New Jersey’s Law
Against Discrimination. In response to suit, her employer
invoked an arbitration clause contained in an employment
application. The clause read as follows: “As a condition of
my employment, I agree to waive my right to a jury trial in
any action or proceeding related to my employment with [the
Employer]. I understand that I am waiving my right to a jury
trial voluntarily and knowingly, and free from duress or
coercion.” Martindale, 800 A.2d at 875 (capitalization
omitted).

The Supreme Court of New Jersey found that the
arbitration clause covered the employee’s claims for two
reasons. First, the court found that the contract was
sufficiently broad because, unlike in Garfinkel and other
cases, it did not make a limiting reference to a contract:
“Unlike the arbitration provisions contained in Garfinkel and
Alamo, the arbitration provision here does not contain any
limiting references.” Id. at 884. Second, the court held that
the arbitration provision was appropriately clear because it
specifically referenced the type of claims covered: “Its
wording provided plaintiff with sufficient notice at the time
she signed the agreement that all claims relating to
employment with and termination from [the Employer] would
be resolved through arbitration.” Id.

4. Applying Garfinkel, Atalese, and Martindale

Garfinkel and Atalese govern the case at bar. We
reach this conclusion because the arbitration clause at issue
here, like the arbitration clauses in Garfinkel and Atalese,

13
references contract disputes–not statutory rights. In
Garfinkel, the clause applied to “any controversy or claim
arising out of, or relating to, this Agreement or the breach
thereof . . . .” Garfinkel, 773 A.2d at 668. In Atalese, the
clause covered “any claim or dispute . . . related to this
Agreement or related to any performance of any services
related to this Agreement . . . .” Atalese, 99 A.3d at 310.
Here, the clause likewise only includes “a dispute between
Dancer and Club under this Agreement.” App. 42. The Club
has not identified a significant difference between these three
formulations which all point to disputes related to the
agreement at issue.

In Atalese and Garfinkel, the Supreme Court of New
Jersey found that the quoted language made the arbitration
clauses applicable only to contract claims. Atalese, 99 A.3d
at 315 (“Nor is it written in plain language that would be clear
and understandable to the average consumer that she is
waiving statutory rights.”); Garfinkel, 773 A.2d at 672 (“That
language suggests that the parties intended to arbitrate only
those disputes involving a contract term, a condition of
employment, or some other element of the contract itself.”).
Because the arbitration clause here resembles the arbitration
clauses in Garfinkel and Atalese, and because the Supreme
Court of New Jersey found that the arbitration clauses in
Garfinkel and Atalese only applied to contract disputes, we
hold that the arbitration clause here does not cover Moon’s
statutory claims.

Two issues prevent us from finding that Martindale
governs the case at bar. First, Martindale held that the
contract was sufficiently broad to cover statutory claims
because it lacked a limiting principle, such as a reference to
an agreement, unlike Garfinkel. Martindale, 800 A.2d at 884.

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Here, the contract contains a limiting term because it directly
references the Contract: “In a dispute between Dancer and
Club under this Agreement . . . .” App. 42. Second,
Martindale held that the arbitration clause was sufficiently
clear to cover statutory rights because it specifically
referenced claims “related to my employment with [the
Employer].” Martindale, 800 A.2d at 875. Here, the
arbitration clause does not reference employment or status as
an independent contractor.

In its decision, the District Court focused on Moon’s
attempts to question the arbitration clause’s validity. It
devoted the final two pages of its decision to the issue
presented here. In those final pages, the District Court cited
Atalese in passing but it did not cite Morgan, Garfinkel,
Martindale, and the principles that those cases support.
Insofar as those decisions control, the District Court erred in
omitting any reference to them.

On appeal, the Club responds to Garfinkel in two
3
ways. First, it disputes the factual similarities and argues
that Garfinkel does not govern the case before us because
Garfinkel involved employees, whereas the case at bar
involves, according to the Club, an independent contractor:
“None of the cases cited by Appellant involved a dispute as to
whether the individual making statutory employment claims
was an employee or independent contractor.” Appellee’s Br.
at 12. Second, it asserts that deciding the arbitration question
would force the court to determine the case’s merits and that
the Supreme Court has prohibited this result: “If the Court
were to find that Breathless should have specifically

3
The Club ignores Atalese’s substance entirely.

15
referenced an employment relationship or statutory
employment claims in the arbitration provision, which it
should not, the Court would effectively be ruling on the
merits of Appellant’s underlying claims . . . .” Id. at 13.

Neither argument persuades. The first argument lacks
merit because the Supreme Court of New Jersey has applied
Garfinkel to cases outside of the employment context. See,
e.g., Atalese, 99 A.3d at 314 (applying Garfinkel to a
consumer contract).

The second argument also misses the mark because the
case that it relies upon does not support its point. To
substantiate this second argument, the Club quotes the
following language from AT&T Technologies, Inc. v.
Communications Workers of America: “[I]n deciding
whether the parties have agreed to submit a particular
grievance to arbitration, a court is not to rule on the potential
merits of the underlying claims.” 475 U.S. 643, 649 (1986).
This language establishes the two step process for deciding
arbitration disputes and the requirement that courts may only
resolve issues that fall outside of the arbitration clause. See
id. at 651 (“If the court determines that the agreement so
provides, then it is for the arbitrator to determine the relative
merits of the parties’ substantive interpretations of the
agreement.”). It does not, as the Club asserts, prove the
impossibility of distinguishing these two steps. Indeed, in
AT&T Technologies, Inc., the Supreme Court remanded the
case to the trial court to perform the first step of the inquiry.
Id. at 648.

Furthermore, the Club’s second argument fails because
the District Court could find that the arbitration clause does
not cover the plaintiff’s wage-and-hour claims without

16
deciding the claims’ merits. To answer the arbitrability
question, the Court must decide what the arbitration provision
says. See Hirsch v. Amper Fin. Servs., LLC, 71 A.3d 849,
857 (N.J. 2013) (“A court must look to the language of the
arbitration clause to establish its boundaries.”). To resolve
the separate wage-and-hour claims, the Court would need to
determine what the Appellant does. See Rutherford Food
Corp. v. McComb, 331 U.S. 722, 729 (1947) (“Where the
work done, in its essence, follows the usual path of an
employee, putting on an ‘independent contractor’ label does
not take the worker from the protection of the Act.”).

The Club presents one final counterargument—that
Moon’s claim that she should be treated as an employee
actually arises “under the Agreement” because it refers to
Moon as an “independent contractor.” Appellant’s Br. at 10–
11 (citing App. 41, 42). Despite the contract’s employment
provision, Moon’s claims still arise under the FLSA and New
Jersey statutes, not the agreement itself. In Bell v.
Southeastern Pennsylvania Transportation Authority, we held
that SEPTA employees’ wage-related claims under the FLSA
did not arise under their Collective Bargaining Agreement
(“CBA”) merely because they asked for more pay than agreed
upon in the CBA. 733 F.3d 490, 495–96 (3d Cir. 2013). The
employees did not argue that SEPTA failed to compensate
them in the amount set forth in the CBA; they instead argued
that the CBA in question failed to comply with the FLSA. Id.
at 495. As such, resolution of the FLSA claims required
resolution not of a dispute under the terms of the CBA, but of
a statutory claim that the CBA violated the law. Id. Thus, we
held the arbitration clause governing disputes under the CBA
in that case did not apply to their FLSA claims. Id. at 496.
Similarly, Moon’s claim here is that she should receive

17
certain wages and benefits as an employee under the FLSA
despite her agreement stating otherwise. Because she relies
“solely on [her] statutory, rather than [her] contractual, rights
to recovery, . . . [she] may proceed on [her] FLSA claims
without first seeking arbitration.” Id.

Because the arbitration clause at bar resembles those at
issue in Garfinkel and Atalese more than the one at issue in
Martindale and because Moon’s claims arise under statutes
rather than the Contract, we find that the arbitration clause
does not cover Moon’s statutory wage-and-hour claims.

V. CONCLUSION

For the foregoing reasons, we will reverse the orders
of the District Court and remand these matters.

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