Class action under the Fair Labor Standards Act (FLSA); Enforcement of an arbitration clause; The Federal Arbitration Act; Whether the cost-shifting provision in the clause could be severed & the rest of it enforced; Whether the district court impermissibly “reformed” the contract; American Arbitration Association (AAA)

[This appeal was from the ED-MI.] The court held that the district court did not err by severing the “cost-sharing” provision in the arbitration clause contained in the parties' Independent Contractor Agreements and enforcing the rest of the clause. Thus, it affirmed the dismissal of the case in favor of arbitration. Plaintiffs are hair stylists in defendants’ salons. Upon hiring, each signed an Independent Contractor Agreement that contained an arbitration clause. They filed a class action complaint against defendants in federal court under the FLSA. Defendants moved to dismiss, arguing that the case had to proceed under arbitration before the AAA. But the arbitration clause provided that the parties were required to “split” the arbitration costs as provided in the AAA’s Commercial Arbitration Rules. Plaintiffs argued that the “agreement was unenforceable because it was unconscionably costly and would require them to pay arbitration costs that exceed their yearly income.” The district court agreed on that point but enforced the contract’s severability clause by severing the reference to the Commercial Arbitration Rules, which resulted in a default to lower cost rules for their dispute. It then enforced the rest of the arbitration clause and granted defendants’ motion to dismiss. Framing the issue as whether it could sever the cost-shifting provision in the arbitration clause and enforce the rest of it, the court held that it could. The contract contained a severability clause that provided that the rest of the agreement would continue after a portion was severed. The court rejected plaintiffs’ argument that the phrase “‘the remaining provisions shall nevertheless continue in full force’” applied only to the contract’s eleven sections. They claimed that if one of those sections contained something unenforceable, the court was required to “sever the entire section from the agreement,” not just the unenforceable part. The court explained that if this were the case, the district court would have had to sever the entire arbitration section, not just the cost-shifting provision. It found that this was “a bridge too far.” Plaintiffs also argued that “the district court impermissibly reformed the contract” without a finding of “mutual mistake.” However, it “did not change the scope or meaning of ‘Commercial Arbitration Rules’ to cure a mutual mistake. It instead declined to enforce this cost-shifting clause because it was unconscionably burdensome to the stylists.”