TL;DR
- Dayana Garcia worked as a server at Gloria’s Restaurant in Texas for approximately seven months and filed a federal Fair Labor Standards Act (FLSA) lawsuit in July 2023, alleging the restaurant failed to pay her minimum wage as required by federal law.
- Gloria’s Restaurant management, operating through multiple corporate entities and co-founder Jose Fuentes, spent five months fully participating in litigation: they filed a 31-defense answer, sat through discovery, attended mediation, and signed a joint court report declaring they had “no intent to arbitrate.”
- After that mediation failed, the Restaurant Defendants abruptly reversed course and moved to compel arbitration, attempting to yank the case out of federal court and into a private forum known for protecting corporations over workers.
- The tactic backfired. Both the district court and the United States Court of Appeals for the Fifth Circuit ruled that Gloria’s waived its right to arbitrate. The case number is No. 24-10699, decided June 24, 2025.
- In deciding this case, the Fifth Circuit rewrote its own legal standard for arbitration waiver, now following the Supreme Court’s 2022 ruling in Morgan v. Sundance, eliminating a special pro-arbitration rule that had historically made it harder for workers to hold corporations to their litigation choices.
- The Restaurant Defendants’ own internal disorganization was central to the case: they handed out arbitration agreements they then claimed not to know existed, distributed paperwork tied to a benefit plan they had already discontinued, and failed to list arbitration among thirty-one affirmative defenses.
The court’s exact words for what Gloria’s tried to pull are in Legal Receipts. The line about “a crisis of their own creation” is the one they really don’t want you to read.
Gloria’s Restaurant Tried to Bury a Wage Theft Lawsuit in Arbitration After Swearing They Wouldn’t
Case Filed: July 2023 | Fifth Circuit Decision: June 24, 2025 | Case No. 24-10699 | USDC No. 3:23-CV-1585
The Non-Financial Ledger: What This Cost Dayana Garcia That No Settlement Can Return
Dayana Garcia showed up to work at Gloria’s. She carried plates, filled drinks, remembered orders, smiled through long shifts, and did the labor that kept a popular Texas restaurant chain operating. She worked at the Las Colinas and Colleyville locations for approximately seven months. Seven months of her life. And when it was over, what she was allegedly left with was not even the federal minimum wage she was legally guaranteed. The Fair Labor Standards Act exists precisely because Congress understood that workers, especially tipped workers in the restaurant industry, are vulnerable to employers who will take whatever they can unless the law stops them. Gloria’s, according to Garcia’s lawsuit, took.
Filing a federal lawsuit is not a casual act for a service-industry worker. It means hiring a lawyer, or finding one willing to work the case. It means putting your name on a public document against your former employer in a state where the restaurant industry is tightly networked. It means the possibility of being known as “the one who sued.” For someone working as a server, likely living paycheck to paycheck in a labor market where restaurant gigs are plentiful but stable ones are not, the decision to sue carries real personal risk. The cost of that courage deserves to be named, even when courts are not in the business of naming it.
Then the delay happened. Garcia filed her lawsuit in July 2023. For five full months, she participated in a federal case in good faith. She watched the defendants answer. She sat through the discovery process, exchanging interrogatories and production requests. She attended mediation in December 2023, investing time, legal resources, and emotional energy into trying to resolve a dispute over wages she was already owed. Mediation is not easy. It requires a worker to sit across from the people who underpaid her, to negotiate about the value of her own labor, and to try to reach a compromise on something that should never have required compromise at all. She did all of this. And then, at the mediation, Gloria’s finally mentioned they wanted to push the whole case into arbitration.
Arbitration is a word that deserves plain translation. When a corporation compels arbitration, it removes your case from the public court system and places it before a private decision-maker, typically one chosen from a roster that corporations help shape through repeat business. The proceedings are usually confidential. Outcomes favor employers at rates that have been documented by researchers, labor advocates, and journalists for decades. There is no public record. There is no jury of your peers. There is no precedent set that protects the next worker. When Gloria’s tried to compel arbitration five months into open litigation, they were attempting to close a door that Garcia had already walked through, retroactively, and send her into a room where the odds were worse. That attempt represents a second act of bad faith layered on top of the original wage theft allegation.
The court record shows something else that matters: Gloria’s had an arbitration agreement in their own files all along. They had Garcia’s signed acknowledgment form. They had been distributing that paperwork, along with an arbitration agreement, at some branches even after they discontinued the benefit plan the paperwork was tied to. The right hand did not know what the left hand was doing, or chose not to. Either way, it was Garcia who paid the price for that organizational negligence: months of litigation she now had to defend all over again at the appellate level, because Gloria’s refused to accept the district court’s ruling and appealed. The case went to the Fifth Circuit. Garcia had to litigate the same question a second time: did these defendants waive their right to arbitrate? The answer was yes. But the asking cost her.
There is a version of this story in which Garcia gives up at any of several inflection points: when the wages come up short, when the lawsuit feels too expensive, when the mediation fails, when the arbitration motion arrives, when the appeal is filed. The fact that she did not give up, and that she won, is the only reason this ruling exists. This ruling now shapes the law for every worker in the Fifth Circuit who faces a similar tactic. That is the real cost of what Gloria’s did: it was not just one server’s time and dignity. It was a challenge to the principle that workers get to use the courts too, and that corporations do not get to treat the judicial process like a waiting room they can walk out of whenever the results stop going their way.
“Seven months of her life. Seven months of carrying plates and filling drinks and trusting that the law meant something. Then Gloria’s decided the law was inconvenient.”
Legal Receipts: The Exact Words the Court Used to Shut Gloria’s Down
The following are direct quotations and factual statements drawn from the Fifth Circuit’s opinion in Garcia v. Fuentes Restaurant Management Services Inc., No. 24-10699, decided June 24, 2025, authored by Circuit Judge Dana M. Douglas. These are the words of the court, not paraphrase. Read them carefully.
“The parties responded that they were ‘not considering arbitration to resolve this litigation and Defendants are not aware of any arbitration agreements.’ Instead, they had agreed to mediate the matter in November 2023 and were open to exploring both informal and formal settlement discussions.” Fifth Circuit Opinion, No. 24-10699, Page 2 — Describing the defendants’ own joint report statement to the court
“The Restaurant Defendants gave Garcia the arbitration agreement, and Garcia’s signed acknowledgment form was in the Restaurant Defendants’ files. That the Restaurant Defendants were unaware of their own file does not assist them — they are in a crisis of their own creation.” Fifth Circuit Opinion, No. 24-10699, Page 14–15 — The court rejecting Gloria’s excuse that they didn’t know about the arbitration agreement
“The Restaurant Defendants did not assert an arbitration defense in their answer, expressly stated they would not seek arbitration, and subsequently engaged in typical litigative processes. These acts were intentionally taken, and, together, constitute abandonment of the right to arbitrate.” Fifth Circuit Opinion, No. 24-10699, Page 13 — The court’s core finding of waiver
“The magistrate judge recommended that the motion be denied, reasoning that the Restaurant Defendants engaged in several overt acts demonstrating a desire to resolve the arbitrable dispute through litigation, including ‘filing an answer and defending this litigation for almost five months, participating in discovery, attending mediation, and expressly representing to the Court in the parties’ Joint Report that [they] did not intend to pursue arbitration of Garcia’s claims.'” Fifth Circuit Opinion, No. 24-10699, Page 3–4 — Summarizing the magistrate judge’s findings
“The parties stated that they were ‘not considering arbitration to resolve this litigation,’ and the Restaurant Defendants specifically noted that they were ‘not aware of any arbitration agreements.’ This statement is an ‘overt act in court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration.'” Fifth Circuit Opinion, No. 24-10699, Page 9 — The court treating the defendants’ joint report statement as a litigative act
“We frown upon attempts ‘to switch judicial horses in midstream’ due to ‘poor judgment . . . or poor foresight.’ As we discuss below, the Restaurant Defendants’ failure to discover the possibility of arbitration in their own files is poor foresight. This delay, within the context of the above acts, suggests an intent to remain in court.” Fifth Circuit Opinion, No. 24-10699, Page 13 — The court calling out the defendants’ conduct directly
“We do not condone a party’s failure to apprise itself of its own key documents in litigation.” Fifth Circuit Opinion, No. 24-10699, Page 15, footnote 10 — The court quoting its own prior ruling in Tristar to reject Gloria’s argument
“At some point prior to Garcia’s hiring, the Restaurant Defendants discontinued the Occupational Injury Employee Benefit Plan to which the SDP applied. But some Gloria’s locations continued to provide the associated SDP acknowledgement form alongside an arbitration agreement. While it is unclear why some branches of Gloria’s continued to distribute an outdated SDP acknowledgement form, the record suggests that Garcia signed only the acknowledgement form and not the arbitration agreement.” Fifth Circuit Opinion, No. 24-10699, Page 3, footnote 1 — Documenting the corporate disorganization at the root of the case
“Considering the totality of the circumstances, we conclude that the Restaurant Defendants ‘intentional[ly] relinquish[ed] or abandon[ed] . . . a known right’ by substantially invoking the judicial process.” Fifth Circuit Opinion, No. 24-10699, Page 16 — The court’s final conclusion, quoting Morgan v. Sundance
“The Restaurant Defendants suggested ‘an early mediation knowing that Judge Kinkeade is also a fan of early resolution.’ It is true that the parties, in doing so, complied with an order reflecting the court’s interest in managing the case. But the record also shows that these statements supported mediation in lieu of arbitration.” Fifth Circuit Opinion, No. 24-10699, Page 10 — The court noting that the defendants chose mediation specifically as an alternative to arbitration, then later tried to invoke arbitration anyway
Societal Impact Mapping: This Is Bigger Than One Restaurant and One Server
Environmental Degradation
The source document in this case is a federal appellate ruling focused on labor law and civil procedure, and it contains no direct environmental claims. What the record does reveal, however, is something that connects to environmental justice through the economic conditions it documents. Gloria’s Restaurant operates as a Latin-themed chain across multiple Texas locations, organized through a web of at least three corporate entities: Fuentes Restaurant Management Services Incorporated, Gloria’s Restaurant Las Colinas L.L.C., and Nancy Fuentes Fairview Incorporated. This kind of multi-entity corporate structure is a recurring feature of the restaurant and food-service industry, and it is relevant to environmental accountability in one specific way: when corporations fragment their operations across shell entities and limited liability companies, they also fragment their accountability for the conditions in which their workers and communities operate.
Wage suppression and labor exploitation are materially connected to environmental harm in low-income and working-class communities. Workers who are underpaid do not have the financial buffer to choose where they live based on air quality, water safety, or green space. They live where they can afford to live, which in the Dallas-Fort Worth metro area often means proximity to industrial zones, highways, and other pollution sources. The demographic profile of tipped restaurant workers in Texas, a workforce that skews young, female, and Latino, overlaps heavily with communities that bear disproportionate environmental burdens. The legal fight Dayana Garcia was forced to wage was a fight over minimum wage, but the population of workers she represents as a putative collective action plaintiff lives at the intersection of wage theft and environmental sacrifice. That intersection is not accidental. It is a feature of how low-wage labor markets are structured.
Public Health
The public health dimensions of this case begin with the simplest possible fact: Dayana Garcia alleges she was not paid the federal minimum wage. For a tipped worker in the restaurant industry, minimum wage is already a floor, not a living wage. When an employer falls below that floor, they are not merely violating a technical legal standard. They are removing the financial foundation that allows a worker to meet basic health needs: food security, stable housing, access to healthcare, and the ability to take a sick day without facing financial collapse. Restaurant workers frequently lack employer-sponsored health insurance. They work through illness because missing a shift means missing rent. Wage theft, when it occurs at the scale of a collective action, is a public health event with real, measurable consequences in the bodies of the workers it affects.
The arbitration tactic Gloria’s deployed is itself a public health concern, and that claim deserves to be stated plainly. Mandatory arbitration clauses in employment contracts suppress the number of wage theft claims that ever become public, which means they suppress the public health data that would otherwise document the scope of the problem. When a worker is compelled into private arbitration, the outcome is confidential. No public record is created. No pattern is established in the legal system. No other worker can point to the decision as evidence. The restaurant industry’s widespread use of these clauses has made wage theft a largely invisible epidemic. The Fifth Circuit’s ruling in this case, which strengthens the standard for workers trying to fight arbitration waiver, is a small but real improvement in the visibility of that epidemic.
The mental health cost of what Garcia went through also belongs in this accounting. The source document describes a litigation process spanning from July 2023 through at least June 2025: two full years of federal court proceedings, including an appeal, all stemming from what should have been a straightforward wage dispute. Extended legal uncertainty is a well-documented source of chronic stress. For a service-industry worker without institutional resources, the psychological toll of being the named plaintiff in a federal lawsuit for two years while fighting a corporate defendant with multiple lawyers represents a form of harm that never appears in any settlement calculation.
Economic Inequality
The economic inequality embedded in this case operates on at least three levels, and each one deserves direct attention. The first is the original wage theft allegation itself. The Fair Labor Standards Act sets a federal minimum wage floor precisely because history demonstrates that, without legal compulsion, a meaningful segment of employers will pay workers as little as the labor market allows rather than as much as the workers’ contribution warrants. Garcia’s lawsuit alleges Gloria’s fell below even that floor. In a labor market where tipped workers already rely on customer generosity to supplement depressed base wages, falling short of the federal minimum is a meaningful deprivation. It is money taken from someone who had already agreed to accept very little.
The second level is the arbitration system itself as an instrument of economic inequality. Corporations that include mandatory arbitration clauses in their employment paperwork are not doing so because they believe arbitration produces fairer outcomes. They are doing so because the evidence consistently shows arbitration produces outcomes more favorable to employers. Employees who proceed through mandatory arbitration win less often, win smaller awards when they do prevail, and face significant barriers to class or collective action that would make individual claims economically viable. By attempting to compel arbitration five months into a federal collective action, Gloria’s was not just trying to change the venue. They were trying to change the economic math of the dispute in a way that systematically disadvantages low-wage workers.
The third level is the corporate structure itself. The Restaurant Defendants in this case are not a single employer. They are at least three corporate entities plus an individual co-founder, Jose Fuentes, all named as defendants. This kind of structure, common in the restaurant industry, creates legal complexity that serves the corporation. It makes it harder to identify who is actually liable. It creates opportunities to argue that one entity rather than another was the true employer. It generates litigation costs that disproportionately burden plaintiffs rather than defendants, because the defendants have institutional legal infrastructure and the plaintiffs, in most cases, do not. Garcia’s case is structured as a collective action, which signals that she is not the only server at Gloria’s who may have experienced these wage conditions. The number of workers potentially affected by the same practices is, by definition, larger than one.
Finally, the Fifth Circuit’s ruling itself has significant economic inequality implications that extend beyond this single case. Before Morgan v. Sundance in 2022, Fifth Circuit courts applied a pro-arbitration standard that required workers to demonstrate they had been prejudiced before a court would find that a corporation waived its right to compel arbitration. That standard was a gift to corporate defendants. It allowed them to explore litigation, use federal discovery processes, and then retreat to arbitration if the case was going badly, with minimal risk of being held to their litigative choices. By adopting the Morgan standard and affirming the district court’s denial, the Fifth Circuit has made that kind of strategic behavior more costly for corporations. That is an economic redistribution of legal risk, and it runs in favor of workers.
“Arbitration is not a neutral forum. It is a system that corporations built for themselves. Gloria’s tried to use it after the federal process stopped going their way. The Fifth Circuit said no.”
The “Cost of a Life” Metric: What Gloria’s Was Really Protecting
The Timeline: How Gloria’s Built Their Own Waiver, Step by Step
The following chart maps the documented sequence of events from Garcia’s lawsuit filing through the Fifth Circuit’s ruling, showing exactly when Gloria’s took actions that the court later characterized as “overt acts evincing a desire to resolve the arbitrable dispute through litigation.”
What Now: Who To Watch and What To Do
The Fifth Circuit’s ruling is a legal win, and legal wins matter. But a court decision is not a policy change, and it is not a union contract, and it is not a living wage. Here is who holds accountability in this situation, what agencies are relevant, and what actions have teeth.
Corporate Entities Named in the Case
- Fuentes Restaurant Management Services Incorporated (doing business as Gloria’s Restaurant)
- Gloria’s Restaurant Las Colinas L.L.C. (doing business as Gloria’s Restaurant)
- Nancy Fuentes Fairview Incorporated (doing business as Gloria’s Restaurant)
- Jose Fuentes — Co-founder, named individually as a defendant
Regulatory Watchlist: Agencies With Authority Here
- U.S. Department of Labor — Wage and Hour Division (WHD): The primary federal agency responsible for enforcing the Fair Labor Standards Act. File a wage complaint at dol.gov/agencies/whd. If you work in a restaurant and your employer is not paying federal minimum wage or stealing your tips, this is your first call.
- National Labor Relations Board (NLRB): If Gloria’s or any employer is using mandatory arbitration to block collective action or suppress workers from organizing, the NLRB has jurisdiction. Recent NLRB rulings have challenged the use of mandatory arbitration clauses that prevent workers from joining class actions.
- Consumer Financial Protection Bureau (CFPB): The CFPB has studied and reported on mandatory arbitration clauses in consumer and worker contracts. Their data supports what this case demonstrates: arbitration systematically disadvantages individuals against corporations.
- Texas Workforce Commission — Labor Law Section: For Texas-based workers, state-level complaints about wage violations can be filed here alongside or instead of federal complaints.
- U.S. Equal Employment Opportunity Commission (EEOC): Relevant if wage disparities in this case intersect with discriminatory treatment of workers by protected class.
The Legal Standard That Changed: What Workers Everywhere Should Know
The Fifth Circuit adopted the Morgan v. Sundance, 596 U.S. 411 (2022) standard in this ruling. That means corporations in the Fifth Circuit can no longer hide behind a special pro-arbitration presumption when trying to compel arbitration after they’ve already been litigating. Waiver is now judged by the same standard as any other contract: did the party knowingly abandon the right by acting inconsistently with it? This matters for every worker in Texas, Louisiana, and Mississippi who is facing an arbitration motion from an employer who already litigated the case for months. Share this ruling with your labor lawyer or union rep.
Mutual Aid, Local Organizing, and Direct Action
- Restaurant Opportunities Centers United (ROC United): A national worker organization specifically focused on the restaurant industry. They track wage theft, advocate for tipped worker protections, and connect workers with legal resources. Find them at rocunited.org.
- Texas AFL-CIO and Local Union Chapters: Restaurant workers in Dallas-Fort Worth have local labor organizing infrastructure. Connecting with a union or labor council in your area is the single most effective long-term protection against the tactics documented in this case.
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