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Turn of the Tide?

turntide1Attorneys Brad Shafer and Matt Hoffer strike at the heart of dancer class-action lawsuits

For a change, we have some very good legal news to report. The attorneys of Shafer & Associates, P.C. — for 30 years, a law firm devoted exclusively to representing the gentlemen’s club industry — recently delivered a one-two punch to the dreaded dancer class-action lawsuits.


12EXPO brad1First, Brad Shafer obtained approval from a federal court in Michigan of an elaborate national class action settlement that, Shafer says, is a first-of-its-kind resolution to the seemingly intractable problem of distinguishing employees from independent contractors. Shafer provided a short presentation of this settlement at the National ACE meeting during the recent Gentlemen’s Club EXPO in Las Vegas.
This settlement came out of a lawsuit filed by an entertainer who had performed in the Saginaw, Michigan, Deja Vu club.

“We were confident that we could have limited the initial Michigan lawsuit to an individualized arbitration concerning only a single dancer,” explains Shafer, “but after we filed our motion to arbitrate and talked to class counsel, we found that they were open to addressing the work status of the entertainers going forward, and that was an opening that we had to pursue on behalf of our clients.”  
Over six months, Shafer negotiated with three class counsels and came up with an elaborate but objective way to determine whether a dancer or a dancer applicant can perform as an independent contractor or whether she must, rather, work as an employee.

This is in contrast, Shafer notes, to the various subjective tests that many courts and administrative agencies use to distinguish employees from independent contractors where business owners don’t know if they have misclassified workers until a court, judge or arbitrator comes back and makes the decision.

“Most importantly,” points out Shafer, “this ‘assessment’ (as it is called in the settlement agreement) is “primarily based upon information that the dancer provides, instead of having clubs make the ‘call’ on their own.”
Shafer further noted that this may well be the first case of its kind in any industry that has attempted to deal with worker classification in a manner Shafer believes to be a “rational, logical and, more importantly, objective way.”
This 129-page settlement brought in 64 clubs across the country (with a separate settlement covering the 10 Deja Vu-related clubs in San Francisco), and provides far more than just the assessment criteria. There is an “enhanced” offer of employment as a way to try to entice dancers to choose to work as employees, and there are also elaborate legal protections built in to the settlement that guarantee the rights of those entertainers who desire to, and who may indeed perform — in accordance with the assessment criteria — as independent contractors.

“We think we’ve addressed most every aspect of the relationship between clubs and dancers that we see raised in the lawsuits that are filed around the country,” observes Shafer.
But addressing the concerns of exotic dancers, as we all know, is not the point of these lawsuits. These cases are more to line the pocketbooks of plaintiff attorneys, who never seem to really care how the dancers are classified at the end of the litigation and, occasionally, even acknowledge that entertainers prefer to perform as non-employees. So, three attorneys who wanted either free money out of this settlement or to be able to proceed in their own lawsuits against the settling clubs, were able to get a whopping four dancers, out of a class of 28,000 entertainers, to file objections to the settlement. The district court rejected those objections and nevertheless granted final approval to the settlement. But that didn’t stop these lawyers.

Upon a settlement being announced in Michigan, an attorney filed suit in Nashville, seeking expedited national notice. That suit was stayed for a time by the Michigan court under the All Writs Act after the court preliminarily approved the Michigan settlement. Upon the final approval of the Michigan settlement, the Nashville attorney sought to issue nationwide notice to the dancers who did not “opt in” to the federal Fair Labor Standards Action portion of the Michigan settlement.

hofferThe Deja Vu defendants, through Matt Hoffer, responded by filing a motion to dismiss the lawsuit and to shift the claim into individualized arbitration. The Nashville attorney responded by asserting that the arbitration provision contained in the contract that the dancer admitted to having signed, violated the National Labor Relations Act (“NLRA”) because (they asserted) a collective action is “concerted activity” protected by the NLRA. This argument was based on a recent decision of the Sixth Circuit (which includes Nashville) in N.L.R.B. v. Alternative Entertainment, which had held, on the circumstances before the court, that arbitration provisions that only permit individual arbitration violate the NLRA. The dancer then moved the Nashville court to delay ruling on Deja Vu’s motion to arbitrate so that class notice could be sent out in the interim! Mr. Hoffer responded in kind.

In a detailed 38-page opinion, the Nashville trial judge, Althea Trauger, resolved six separate motions that were pending before her. On the critical issue of arbitration, the court rejected the arguments of the dancers and agreed with the positions of Deja Vu defendants.

Concluding that all of the plaintiffs’ claims were subject to arbitration “under the very broadly worded arbitration agreement,” Judge Trauger concluded that none of the dancers’ objections to arbitration had merit. In addressing the question of whether the waivers of class and collective actions violated the NLRA, the court made two critical rulings that are, Hoffer believes, the first of their kind in the country.

First, Judge Trauger ruled that because the plaintiff no longer performed at the club in question, she simply was not entitled to the protections that the NLRA affords to employees (or even alleged employees).
“I think I’m the first attorney in the county who has raised this argument in a dancer case,” notes Hoffer, “and the court correctly agreed.”

Second, Trauger further concluded that opt-in “collective” actions under the Fair Labor Standards Act (FLSA) are not the type of “concerted activity” protected under the NLRA. And, while the plaintiff also contended that the collective action waiver of her dancer contract itself violated the FLSA, the court rejected that argument as well by relying upon other cases that had concluded that such waivers were perfectly enforceable, and further observed that “the writing appears to be on the wall that this trend is becoming uniform law.”

While the dancer further argued that the arbitration clause was invalid because it had been (allegedly) procured by fraud, that it was unconscionable, and that it was barred by waiver and estoppel, the court, Hoffer notes, correctly concluded that “because the Nashville Deja Vu dancer contract contained a ‘delegation’ clause, all such matters had to be referred to the arbitrator for decision instead of to the court.”
As a result of the ruling compelling the case to arbitration, the court denied as moot the motion for class notice and dismissed the lawsuit outright.
Mr. Hoffer also noted that Memphis FALA attorney Eddie Bearman was “local” counsel on the case and that his assistance was invaluable.
“There is so much you can do to protect you and your club on the dancer work classification issue,” Shafer says. “But so many club owners bury their heads in the sand and do nothing. They think they won’t get sued, but they eventually do and then it’s too late.”  

This article briefly summarizes extremely complex legal issues and is provided for general information purposes only and is not intended to provide either an exhaustive analysis of these matters or any specific legal advice or recommendation. Laws vary by state and municipality. The positions and opinions expressed by the attorneys represented here are theirs alone, and do not necessarily reflect those of ED Publications. Club operators and others are strongly encouraged to consult their attorneys and accountants for specific advice on how these issues will affect their businesses and what measures to take. Larry Kaplan and ED Publications do not guarantee the accuracy of this information.

Larry Kaplan has for 16 years been the Legal Correspondent for ED Magazine. Mr. Kaplan is a broker in the sales and purchase of adult nightclubs and adult stores and the Executive Director of the ACE of Michigan adult nightclub state trade association. Contact Larry Kaplan at (313) 815-3311 or e-mail larry@kaplanclubsales.com.

To get more information about Shafer & Associates, including about their new legal newsletter, call (517) 886-6560 or email Brad@bradshaferlaw.com or Matt at Matt@bradshaferlaw.com.

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