LOS ANGELES (Legal Newsline) – An appellate court in California has decided that a strip club sued by its former employees cannot compel arbitration.

The California Court of Appeal, Second District ruled Aug. 23 for plaintiff Mary Elena Sprunk and the certified class of dancers who filed suit alleging wage and hour issues. Sprunk filed her lawsuit against Prisma LLC.

“Arbitration agreements are part and parcel of the litigation landscape, and this is an important decision in one way: If an arbitration agreement is not timely raised and advocated, it can be waived," said Sprunk's attorney, Andre Jardini.

"In this case, there was a waiver found, and no dancer among the several hundreds of dancers that are involved will be forced to arbitration. We will proceed to trial, or settle as the case may be, but we will not arbitrate.”

The court found Sprunk “waived its right to seek arbitration by filing and then withdrawing a motion to compel arbitration against the named plaintiff, Maria Elena Sprunk, and then waiting until after a class had been certified to seek arbitration against class members."

Sprunk was a dancer at a strip club, Plan B, in Los Angeles. In 2011 she and other dancers filed suit against the owners of the club, claiming that it misappropriated their tips, failed to pay minimum wages, and misclassified them as independent contractors.

The 2011 complaint also said that the club failed to pay them insurance benefits or pay employee payroll taxes.

“These are people that don’t get paid, that actually have to pay to go onstage," Jardini said. "There’s minimum wage violations, and tip issues in our case, and a number of other issues because the club wants to treat the dancers as independent contractors. 

"That’s another ruse, I would call it, that employers use to avoid employment law. They say this person isn’t really an employee, I have a contract with them.”

In 2012, the club filed, but later withdrew, a motion to compel arbitration of the dispute.

The case was certified as a class action in April 2015. Another motion to compel arbitration was filed in August 2015 by the club, arguing that before the class was certified, it wasn’t a party to the litigation. That motion was denied. The club appealed.

Jardini doesn’t know if the defendant will appeal further. 

“They have fought this very vigorously. Their next step would be to ask for re-hearing, which I don’t think is likely, or to petition the California Supreme Court to weigh in. I don’t think the California Supreme Court will be interested because the rights and duties of parties are very well-defined by arbitration agreements,” he said.

Next steps for the plaintiff class? 

“We are a certified class, so we are past the procedural issue of should it be a class action," Jardini said. "It is a class action. When we return to the trial court we will start to put together the merits, discovery that’s necessary, and then a plan for trial. Rarely do class actions go to trial. Most certified class actions settle.”

Jardini’s firm has tried other cases involving the employment of exotic dancers. 

“We have the Hills case [Quincece Hills v. Todd and Katie Inc., doing business as Paradise 2000] involving hundreds of dancers and that went to trial. There was a verdict on behalf of the class, for $6 million. The class was tried by K.L. Myles and she did a great job in that case,” Jardini notes. 

“The tips were paid directly to the dancers and under California law that means the tips are theirs, and not the club’s. The club took most of the tips, which was illegal, we thought, and the jury agreed.”

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