Opinion
EP-20-CV-00290-DB-ATB
03-16-2021
JOSE FERNANDEZ, Plaintiff, v. SIERRA PLASTICS, INC., REGENCY PLASTICS-UBLY, INC., GEMINI GROUP SERVICE, INC., Defendants.
REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE
On this day, the Court considered Defendants' "Motion to Compel Arbitration and to Abate Proceedings Pending Arbitration" ("Motion"), filed by Sierra Plastics, Inc. ("Sierra"), Regency Plastics-UBLY, Inc. ("Regency"), and Gemini Group Service, Inc. ("Gemini") (collectively "Defendants"). The matter was referred to this Court pursuant to the Standing Order re: Procedures for the Pilot Project and the Direct Assignment to Magistrate Judges of Civil Proceedings.
For the reasons set forth below, the Court RECOMMENDS that Defendants' Motion to Compel Arbitration and to Abate Proceedings Pending Arbitration be GRANTED.
I. BACKGROUND
a. Procedural Background
Plaintiff Jose Fernandez ("Plaintiff") originally filed his Complaint asserting claims for negligence and negligent hiring, supervision, training, and retention on October 14, 2020, in the 171st District Court in El Paso County, Texas, styled Jose Fernandez, Plaintiff, v. Sierra Plastics, Inc., Regency Plastics-Ubly, Inc., and Gemini Group Service, Inc; Case No. 2020-DCV-3332 ("State Court Suit"). (ECF No. 1-1, p. 2). On November 20, 2020, Defendants filed their Notice of Removal pursuant to 28 U.S.C. §§ 1332, 1441(b), and 1446 on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1). (ECF No. 1, p. 1-2).
On November 30, 2020, Defendants filed their Motion seeking to "compel arbitration and abate the proceedings as required by the Arbitration Agreement and applicable law." (ECF No. 4, p. 2). After being granted an extension of time to file his response (Text Order dated December 18, 2020) and leave to exceed page limitation (ECF No. 10), Plaintiff filed his "Plaintiff's Response in Opposition to Defendants' Motion to Compel Arbitration and to Abate Proceedings Pending Arbitration" ("Response") on January 5, 2021. (ECF No. 11). Thereafter, Defendants filed their "Reply Brief in Support of Defendants' Motion to Compel Arbitration" ("Reply") on January 11, 2021. (ECF No. 13).
While recounting the factual background, the Court addresses only the facts relevant to this Report and Recommendation.
Collectively, Defendants are "in the business of manufacturing plastic parts." (ECF No. 11, p. 2); see also (ECF No. 13-1, p. 2-3) (affidavit of Alice S. Mata) ("Sierra Plastics is among three Gemini facilities that 'specialize in manufacturing custom plastic extrusions for OEM, Tier-1 automotive, lawn and garden, medical, consumer and appliance industries.'") (quoting Gemini Group's Plastic Extrusion Locations, Gemini Group, https://geminigroup.net/plastics/profile-extrusion-gpi-sp/locations-and-contact/ (last visited Mar. 16, 2021)).
Plaintiff started working as a die setter for Defendants in August 2018. (ECF No. 11, p. 3); (ECF No. 4, p. 1). As a die setter, Plaintiff's job duties included: "(1) being responsible for the die changes on stretch bending machines; (2) maintaining and caring for the dies so that they were [in] proper clean working condition; and (3) performing required operations to set-up and operate various sizes and types of machines." (ECF No. 11, p. 3-4).
At the beginning of his employment, Plaintiff signed a "Receipt and Arbitration Acknowledgement" ("Arbitration Acknowledgement") (ECF No. 4-2, p. 2) and agreed to the "Arbitration of Certain Injury Related Disputes" ("Arbitration Agreement"). (ECF No. 4, p. 1); (ECF No. 4-1, p. 2-5); (ECF No. 11, p. 4) (citing (ECF No. 11-1, p. 7-10)).
Plaintiff alleges that on or about October 31, 2018, "Plaintiff sustained an on-the-job injury." (ECF No. 11, p. 3). This on-the-job injury caused "injuries and damages suffered by Plaintiff to his back and other parts of his body." (Id.).
II. LEGAL STANDARDS
Section 2 of the Federal Arbitration Act ("FAA") provides that agreements to arbitrate are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Under the FAA, the court must perform a two-step inquiry to determine whether to compel a party to arbitrate. Dealer Computer Services, Inc. v. Old Colony Motors, Inc., 588 F.3d 884, 886 (5th Cir. 2009). "[T]he first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985); see also Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002) ("In adjudicating a motion to compel arbitration under the Federal Arbitration Act, courts begin by determining whether the parties agreed to arbitrate the dispute."). The second step for the court to determine is "whether federal statute or policy renders the claims nonarbitrable." Dealer Computer Services, 588 F.3d at 886.
Courts divide the first step of the analysis—whether the parties agreed to arbitrate the dispute in question—into two separate determinations: "(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." Title v. Enron Corp., 463 F.3d 410, 418 (5th Cir. 2006) (quoting Webb v. Investacorp, 89 F.3d 252, 258 (5th Cir. 1996)); see also Dealer Computer Services, 588 F.3d at 886 ("The courts divide the first step into two more questions: whether a valid agreement to arbitrate exists and whether the dispute falls within that agreement."). Due to the "federal policy favoring arbitration," the "ambiguities as to the scope of the arbitration clause itself [should be] resolved in favor of arbitration." Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 476 (1989); see also Fleetwood Enterprises, 280 F.3d at 1073 ("In determining whether the dispute falls within the scope of the arbitration agreement, ambiguities are resolved in favor of arbitration.") (internal quotes and punctuation omitted). "However, this federal policy favoring arbitration does not apply to the determination of whether there is a valid agreement to arbitrate between the parties; instead ordinary contract principles determine who is bound." Fleetwood Enterprises, 280 F.3d at 1073 (internal quotes omitted); see also Volt Information Sciences, 489 U.S. at 478 ("[T]he FAA does not require parties to arbitrate when they have not agreed to do so.").
The Supreme Court has held that, since the FAA is merely a "policy guaranteeing the enforcement of private contractual arrangements, [courts should] look first to whether the parties agreed to arbitrate a dispute, not to general policy goals, to determine the scope of the agreement." E.E.O.C. v. Waffle House, 534 U.S. 279, 294 (2002) (internal citations omitted). Furthermore, the Court reiterated that "[i]t goes without saying that a contract cannot bind a nonparty." Id. Finally, in resolving issues regarding the existence of an agreement to arbitrate, the Fifth Circuit has held that "courts apply ordinary state-law principles that govern the formation of contracts." Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294, 301 (5th Cir. 2004). III. ANALYSIS
The Court notes that Plaintiff's Response contains numerous errors in citations to case law thereby creating difficulty for this Court to confirm the proper authorities to which Plaintiff relies. See, e.g., (ECF No. 11, p. 9) (citing to "Vasquez, 457 S.W.3d at 466" without providing a full citation anywhere in his Response): (ECF No. 11, p. 17) (ambiguous "Id. at 677" citation when prior citation contained multiple authorities); (ECF No. 11, p. 20) (improper citation to "United States v. Patterson, 211 F.3d 92, 930 (5th Cir. 2000)") (second emphasis added); (ECF No. 11, p. 20) (improper "See id." and two "Id." citations where prior citation contained multiple authorities). Further, Plaintiff continually cites to his exhibits generally, never providing a pinpoint citation to any exhibit. See (ECF No. 11-1) (Plaintiff's seven exhibits, ranging from one page to 36 pages). Therefore, the Court has attempted, in this Report and Recommendation, to refer and cite to the particular cases and exhibit contents as close as possible to Plaintiff's apparent intentions. If to any extent the Court mischaracterizes Plaintiff's intended citations, it is due to Plaintiff's own failure to cite to the correct authorities diligently, accurately, and precisely. See Munoz v. State Farm Lloyds of Texas, 533 F.3d 568, 573 (5th Cir. 2008) ("The invited error doctrine provides that a party may not complain on appeal of errors that he himself invited or provoked the court to commit.") (internal quotes and alteration omitted); Cf. Barker v. Norman, 651 F.2d 1107, 1129 n.26 (5th Cir. 1981) ("[A Magistrate] judge, however, is neither required nor permitted to become counsel for any party . . . .).
Plaintiff first argues that "Defendants have not met their burden to show the existence of a valid contract." (ECF No. 11, p. 5). However, Plaintiff provides no argument or authority to support the assertion that there is no agreement between Plaintiff and Defendants or that Plaintiff's claims fall outside of the Arbitration Agreement. See Title, 463 F.3d at 418 (holding that courts consider two separate determinations when deciding whether the parties agreed to arbitrate the dispute in question: "(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.").
a. Defendants have met Their Burden to Show the Existence of a Valid Agreement
In fact, Defendants provided the Arbitration Acknowledgement signed by Plaintiff and the "Arbitration Agreement" as exhibits to their Motion. (ECF No. 4-2, p. 2); (ECF No. 4-1, p. 2-5). The Arbitration Agreement provides, in relevant part:
The employer hereby adopts a mandatory company policy requiring that the following claims or disputes must be submitted to final and binding arbitration under this Appendix: . . . any legal or equitable claim by or with respect to an employee for any form of physical or psychological damage, harm or death which relates to an accident, occupational disease, or cumulative trauma (including, but not limited to, claims of negligence or gross negligence or discrimination; [and] claims for . . . negligent hiring/training/supervision/retention . . . .(ECF No. 4-1, p. 2) (emphasis added). The Court finds that Plaintiff's claims of "negligence" and "negligent hiring, supervision, training, or retention" are clearly covered by the Arbitration Agreement. See (ECF No. 1-1, p. 6-7).
Furthermore, the Arbitration Acknowledgement is signed by Plaintiff and provides, in relevant part:
ARBITRATION. I acknowledge that this [Summary Plan Description] includes a mandatory company policy requiring that certain claims or disputes . . . must be submitted to an arbitrator rather than a judge and jury in court. I understand that by receiving this SPD and becoming employed (or continuing my employment) with the Company . . . , I am accepting and agreeing to comply with these arbitration requirements. I understand that the Company is also accepting and agreeing to comply with these arbitration requirements.(ECF No. 4-2, p. 2) (first emphasis in original) (second emphasis added). Although Plaintiff alleges that he "did not ever knowingly sign away [his] right to a jury trial . . . and [] would never have knowingly given up [his] right to a jury trial," the Arbitration Acknowledgement clearly states that the Plaintiff and Defendants would pursue their claims before "an arbitrator rather than a judge and jury in court." (ECF No. 11-1, p. 13); (ECF No. 4-2, p. 2). Further, Plaintiff's allegations that "[his] employer did not inform [him] of [his] rights or of the basic meaning of [the Arbitration Acknowledgment]" and that Plaintiff "was never told or explained what 'arbitration' means" are unpersuasive. (ECF No. 11-1, p. 13). By signing the Arbitration Acknowledgement, Plaintiff is "presumed to have read it and grasped its contents and legal effects." ReadyOne Industries, Inc. v. Casillas, 487 S.W.3d 254, 258 (Tex. App. 2015) ("Although a party may argue a contract was never formed, by signing a contract, he is presumed to have read it and grasped its contents and legal effects."); Lucchese Boot Co. v. Licon, 473 S.W.3d 390, 403 (Tex. App. 2015) (it is presumed that a party who "has the opportunity to read an arbitration agreement and signs it, knows its contents.") (quoting EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996)). Therefore, the Court finds no merit in Plaintiff's argument that he did not knowingly waive his right to a jury. Accordingly, the Court finds that the Arbitration Acknowledgement demonstrates a valid agreement to arbitrate between Plaintiff and Defendants and that Plaintiff's claims fall squarely within the claims covered by the Arbitration Agreement.
While Plaintiff fails to support his assertion that Defendants have not met their burden of showing the existence of a valid contract, Plaintiff instead raises three affirmative defenses to the enforcement of the Arbitration Agreement: (1) that "the 'Exemption Clause' of the Federal Arbitration Act applies and therefore the alleged arbitration agreement is unenforceable;" (2) that "Defendants were aware of an existing right to arbitrate, but waived that right by acting inconsistent with the intent to arbitrate;" and (3) that "the arbitration agreement is unconscionable and consequently unenforceable." (ECF No. 11, p. 5, 10, 16). Therefore, the Court will address these affirmative defenses in turn.
b. Plaintiff is not a "Transportation Worker" that is Exempt from the FAA
Plaintiff first argues that Defendants' Motion should be denied because Plaintiff, a die setter, "is considered a transportation worker for purposes of the FAA and therefore, the purported arbitration agreement is invalid and unenforceable under Texas law." (ECF No. 11, p. 6). Defendants, in their Reply, argue that "[t]he 'transportation worker' exclusion from the FAA is narrow, [and Plaintiff's] argument would have the exception swallow the rule." (ECF No. 13, p. 2).
The FAA provides that "a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has held that the "significance of Congress' use of the words 'involving commerce'" was that "the FAA was enacted pursuant to Congress' substantive power to regulate interstate commerce and admiralty." Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 112 (2001).
Here, there is no doubt that the Arbitration Agreement is a contract that involves interstate commerce. The Arbitration Agreement states that "[t]he Employer is engaged in transactions involving interstate commerce and the employee's employment involves such commerce." (ECF No. 11-1, p. 9) (emphasis added). However, the dispute between the parties regarding the applicability of the FAA does not involve the basic authorization of the FAA under § 2 but instead involves the exemption from coverage under § 1.
Section 1 of the FAA provides "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. The Supreme Court has held that the application of "workers engaged in . . . commerce" is limited to "transportation workers, defined, for instance, as those who are 'actually engaged in the movement of goods in interstate commerce.'" Circuit City Stores, 532 U.S. at 112, 119 (quoting Cole v. Burns Intern. Sec. Services, 105 F.3d 1465, 1471 (D.C. Cir. 1997)). Further, the Fifth Circuit has held that "[t]he exclusionary clause of Section 1 of the Arbitration Act should be narrowly construed to apply to the employment contracts of seamen, railroad workers, and any other class of workers actually engaged in the movement of goods in interstate commerce in the same way that seamen and railroad workers are." Rojas v. TK Commc'ns, Inc., 87 F.3d 745, 748 (5th Cir. 1996) (quoting Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 600-01 (6th Cir. 1995) (emphasis added)); Tran v. Texan Lincoln Mercury, Inc., C.A. No. H-07-1815, 2007 WL 2471616, at *5 (S.D. Tex. Aug. 29, 2007) (finding that an auto dealership finance manager was not a "transportation worker").
Here, Plaintiff is not engaged in the movement of goods in interstate commerce in any way similar to seamen or railroad workers. Plaintiff argues that "Plaintiff's primary job responsibilities included maintaining the machines, which produced the products that Defendants transported out to other states and Mexico . . . Defendants employed Plaintiff to accomplish their transportation mission." (ECF No. 11, p. 8-9) (internal citation omitted). However, the Court finds that Plaintiff's arguments are without merit.
First, the Court finds no support for Plaintiff's argument that Defendants had a "transportation mission." According to Plaintiff's own Response, Defendants are "in the business of manufacturing plastic parts." (ECF No. 11, p. 2); see also (ECF No. 13-1, p. 2-3) (affidavit of Alice S. Mata) ("Sierra Plastics is among three Gemini facilities that 'specialize in manufacturing custom plastic extrusions for OEM, Tier-1 automotive, lawn and garden, medical, consumer and appliance industries.'") (quoting Gemini Group's Plastic Extrusion Locations, Gemini Group, https://geminigroup.net/plastics/profile-extrusion-gpi-sp/locations-and-contact/ (last visited Mar. 16, 2021)). More importantly, Defendants "do[] not have [their] own fleet of vehicles to distribute [their] manufactured goods, and instead ship[] product[s] to customers by various commercial delivery companies that are contracted for such shipping." (ECF No. 13-1, p. 3). The Court fails to see how any employee at a manufacturing company that does not transport its own manufactured goods would be "actually engaged in the movement of goods in interstate commerce in the same way that seamen and railroad workers are." See Rojas v. TK Commc'ns, Inc., 87 F.3d at 748 (emphasis added).
Further, none of Plaintiff's duties or responsibilities suggest Plaintiff actually engaged in the movement of goods. Plaintiff continually asserts that "Plaintiff's primary job duty included maintaining the machines that produced the 'goods' that would then travel interstate and even to Mexico." (ECF No. 11, p. 9); see also (Id. at p. 8). Plaintiff also asserts that "[a]s a die setter, Plaintiff directly handle[d] the goods transported in interstate commerce . . . [and] impact[ed] interstate and foreign commerce by ensuring that the machines that produce the goods are maintained and running smoothly . . . . Simply put, Plaintiff's job was essential in not only producing goods, but also transporting them." (Id. at p. 10). However, the Court fails to see how Plaintiff's duties of maintaining the manufacturing machines equates to actually engaging in the movement of goods in interstate commerce. See Eastus v. ISS Facility Services, Incorporated, 960 F.3d 207, 212 (5th Cir. 2020) ("[L]ongshoremen and delivery-truck loaders are not transportation workers under Section 1. Loading or unloading a boat or truck with goods prepares the goods for or removes them from transportation."). The record does not support the allegation that Plaintiff directly handled the goods that traveled in interstate commerce; instead, Plaintiff handled the machines that produced the goods. See (Id. at p. 9-10); (ECF No. 11-1, p. 60). Further, the Court fails to see how maintaining the machines that produced the goods is equivalent to transporting the goods. Plaintiff's conclusory argument that Plaintiff's job was essential to transporting goods is not supported by the record. Plaintiff did not drive the trucks that transported the goods, Defendants did not own their own fleet of commercial vehicles or transport their manufactured goods, and there is no evidence that Plaintiff ever handled, much less transported, any of the manufactured goods.
Plaintiff's argument appears to be based on the theory that all employment contracts that are subject to the FAA are also exempt from the FAA since an employee's work affects "foreign or interstate commerce." This interpretation of § 1 is the same erroneous interpretation that the Ninth Circuit adopted in Circuit City Stores before the Supreme Court overturned the Ninth Circuit's decision. See Circuit City Stores, Inc. v. Adams, 194 F.3d 1070, 1071-72 (9th Cir. 1999), rev'd and remanded, 532 U.S. 105 (2001). The Supreme Court noted that "under this view the 'involving commerce' provision brings within the FAA's scope all contracts within the Congress' commerce power, and the 'engaged in . . . commerce' language in § 1 in turn exempts from the FAA all employment contracts falling within that authority." Circuit City, 532 U.S. at 114 (alteration in original).
Plaintiff's reading of § 1 "runs into an immediate and . . . insurmountable textual obstacle." Id. "Unlike the 'involving commerce' language in § 2, the words 'any other class of workers engaged in . . . commerce' constitute a residual phrase, following, in the same sentence, explicit reference to 'seamen' and 'railroad employees.'" Id. (alteration in original). In fact, this Court notes that Plaintiff chooses to ignore the explicit reference to "seaman" and "railroad employees" by omitting the proceeding language when citing to § 1 in his Response. See (ECF No. 11, p. 6) ("However, § 1 of the FAA, also known as the "Exemption Clause," provides that the FAA does not apply to 'contracts of employment of . . . [a] class of workers engaged in foreign or interstate commerce.'") (emphasis and alterations in original).
In Circuit City, the Supreme Court held that "[t]he wording of § 1 calls for the application of the maxim ejusdem generis, the statutory canon that where general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words." Circuit City, 532 U.S. at 114-15 (emphasis in original) (internal quotes and alterations omitted). Plaintiff's argument that all employment contracts are excluded by § 1 "fails to give independent effect to the statute's enumeration of the specific categories of workers which precedes it; there would be no need for Congress to use the phrases 'seamen' and 'railroad employees' if those same classes of workers were subsumed within the meaning of the 'engaged in . . . commerce' residual clause." Id. at 114 (alteration in original). Instead, the residual clause is "controlled and defined by reference to the enumerated categories of ['seamen' and 'railroad employees'] which are recited just before it," such that it is clear that § 1 "exempts from the FAA only contracts of employment of transportation workers." Id. at 115, 119.
Further, accepting Plaintiff's interpretation of § 1 here would not only be contrary to the Supreme Court's decision in Circuit City, but it would be inconsistent with every circuit court that has ruled on the issue. See, e.g., Dickstein v. DuPont, 443 F.2d 783, 785 (1st Cir. 1971); Erving v. Virginia Basketball Club, 468 F.2d 1064, 1069 (2d Cir. 1972); Tenney Engineering, Inc. v. United Elec. & Machine Workers of Am., 207 F.2d 450, 452-53 (3d Cir. 1953); O'Neil v. Hilton Head Hospital, 115 F.3d 272, 274 (4th Cir. 1997); Rojas v. TK Commc'ns, Inc., 87 F.3d 745, 748 (5th Cir. 1996); Asplundh Tree Co. v. Bates, 71 F.3d 592, 600-01 (6th Cir. 1995); Pryner v. Tractor Supply Co., 109 F.3d 354, 358 (7th Cir. 1997); Lenz v. Yellow Transp., Inc., 431 F.3d 348, 351 (8th Cir. 2005); McWilliams v. Logicon, Inc., 143 F. 3d 573, 575-76 (10th Cir. 1998); Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054, 1060 (11th Cir. 1998); Cole v. Burns Intern. Sec. Services, 105 F.3d 1465, 1471 (D.C. Cir. 1997).
In sum, Plaintiff is not even remotely engaged in the movement of goods in interstate commerce similar to seamen or railroad workers, and Plaintiff's proposed construction of § 1 is contrary to all prior federal court precedent. Accordingly, the Court finds that Plaintiff is not a "transportation worker" under a proper reading of the FAA.
Although it is clear from a plain reading of the exclusionary clause of § 1 of the FAA that Plaintiff is not a transportation worker, Plaintiff advocates for applying the nonexclusive eight-factor test that was first outlined by the Eighth Circuit and later adopted by district courts in the Western District of Texas. (ECF No. 11, p. 6-7); see Lenz v. Yellow Transp., Inc., 431 F.3d 348, 352 (8th Cir. 2005); Pruitt v. Act Fast Delivery, Inc., No. 5:19-CV-49-DAE, 2019 WL 6048023 (W.D. Tex. Sept. 12, 2019); Zamora v. Swift Transp. Corp., No. EP-07-CA-00400-KC, 2008 WL 2369769, at *6 (W.D. Tex. June 3, 2008), aff'd, 319 F. App'x 333 (5th Cir. 2009). However, adoption of this eight-factor test has recently been rejected by the Fifth Circuit. See Eastus, 960 F.3d at 211 ("[W]e reject [the parties'] urging that we adopt a multiple-factor test used in another circuit. No other circuit has adopted this test, and in our view, it unduly adds to the complexity of the analysis.") (internal citation omitted). Therefore, the Court rejects Plaintiff's request to analyze the facts of the instant case under the Eighth Circuit's eight-factor test.
In sum, the plain reading of the FAA supports the finding that Plaintiff is not a transportation worker who is exempt from arbitration pursuant to Title 9 U.S.C. § 1. Accordingly, the Court recommends rejecting Plaintiff's argument that the arbitration agreement is unenforceable due to Plaintiff being a transportation worker for the purposes of the FAA.
c. Defendants Have not Acted Inconsistent with an Intent to Arbitrate and Have not Waived Their Right to Arbitrate
Plaintiff argues that Defendants' Motion should be denied because "Defendants waived their right to arbitrate by acting inconsistent with an intent to arbitrate and . . . grant[ing the] motion would prejudice Plaintiff." (ECF No. 11, p. 16). Defendants contend that, "[c]onsistent with a strong national policy favoring resolution of disputes by arbitration," no previous case has found waiver under circumstances similar to the instant case. (ECF No. 13, p. 3).
The Supreme Court has held that "courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration . . . [including] claims of 'waiver, delay, or a like defense to arbitrability.'" BG Group, PLC v. Republic of Argentina, 572 U.S. 25, 34-35 (2014) (quoting Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 25 (1983)). However, the Fifth Circuit has interpreted that it is "clear that the Court [in BG Group] was referring only to waiver, delay, or like defenses arising from non-compliance with contractual conditions precedent to arbitration . . . and not to claims of waiver based on active litigation in court." Vine v. PLS Financial Services, Incorporated, 689 F. App'x 800, 803 (5th Cir. 2017) (quoting Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 219 (3d Cir. 2007)). The Fifth Circuit reasoned that "[u]nlike other types of waiver, litigation-conduct waiver 'implicates courts' authority to control judicial procedures or to resolve issues . . . arising from judicial conduct.'" Id. (quoting Ehleiter, 482 F.3d at 219) (emphasis in original); see also Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 14 (1st Cir. 2005) ("We hold that the Supreme Court . . . did not intend to disturb the traditional rule that waiver by conduct, at least due to litigation-related activity, is presumptively an issue for the court."); Grigsby & Assocs., Inc. v. M. Sec. Inv., 664 F.3d 1350, 1353 (11th Cir. 2011) (same); JPD, Inc. v. Chronimed Holdings, Inc., 539 F.3d 388, 393 (6th Cir. 2008) (same); Martin v. Yasuda, 829 F.3d 1118, 1122-23 (9th Cir. 2016) (same). But see Nat'l Am. Ins. Co. v. Transamerica Occidental Life Ins. Co., 328 F.3d 462, 466 (8th Cir. 2003) (holding that all waiver challenges should be committed to an arbitrator when the arbitrator has been appointed by the district court).
"[Judicial] waiver will be found when the party seeking arbitration substantially invokes the judicial process to the detriment or prejudice of the other party." In re Mirant Corp., 613 F.3d 584, 588 (5th Cir. 2010) (quoting Walker v. J.C. Bradford & Co., 938 F.2d 575, 577 (5th Cir. 1991)); see also Aptim Corp. v. McCall, 888 F.3d 129, 140 (5th Cir. 2018) ("The right to arbitrate can be waived if a party (1) substantially invokes the judicial process and (2) thereby causes detriment or prejudice to the other party.") (internal quotes omitted). "There is a strong presumption against finding a waiver of arbitration, and the party claiming that right to arbitrate has been waived bears a heavy burden." In re Mirant Corp., 613 F.3d at 588 (quoting Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 344 (5th Cir. 2004)).
1. Defendants did not Substantially Invoke the Judicial Process
The Court will first examine whether Defendants substantially invoked the judicial process. For a party to invoke the judicial process, the "party must, at the very least, engage in some overt act in court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration." In re Mirant Corp., 613 F.3d at 589 (quoting Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir. 1999)).
In the Fifth Circuit, there is no "bright-line rule . . . for deciding whether a party has waived its right to arbitration. Rather, . . . precedent establishes that '[t]he question of what constitutes a waiver of the right of arbitration depends on the facts of each case." Id. (quoting Tenneco Resins, Inc. v. Davy Int'l, AG, 770 F.2d 416, 420 (5th Cir. 1985)) (alteration in original); see also Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir. 2004) ("Ultimately, however, the question of what constitutes a waiver of the right of arbitration depends on the facts of each case.") (internal quotes omitted).
In Perry Homes v. Cull, the Texas Supreme Court outlined a wide variety of factors that different federal circuit courts have considered when applying a totality-of-the-circumstances test on a case-by-case basis, including:
• whether the movant was plaintiff (who chose to file in court) or defendant (who merely responded);
• how long the movant delayed before seeking arbitration;
• whether the movant knew of the arbitration clause all along;
• how much pretrial activity related to the merits rather than arbitrability or jurisdiction;
• how much time and expense has been incurred in litigation;
• whether the movant sought or opposed arbitration earlier in the case;
• whether the movant filed affirmative claims or dispositive motions;
• what discovery would be unavailable in arbitration;
• whether activity in court would be duplicated in arbitration; and258 S.W.3d 580, 591 (Tex. 2008) (internal footnotes omitted).
• when the case was to be tried.
In the present case, Defendants (who merely responded to the litigation) were the parties who moved for arbitration. (ECF No. 4). Further, Defendants undertook minimal delay in filing their Motion to Compel Arbitration. Plaintiff originally filed his lawsuit in state court on October 14, 2020, and served Defendants on October 27, 2020. (ECF No. 13, p. 2) (citing (ECF No. 1-1, p. 2)). Within a month, on November 20, 2020, Defendants removed the case to this Court (ECF No. 1) and filed their Motion to Compel Arbitration and Answer ten days later, on November 30, 2020. (ECF No. 4). Although Defendants most likely knew of the Arbitration Agreement "all along," Defendants' only pretrial activity in the case before filing their Motion to Compel Arbitration was their Notice of Removal and their Corporate Disclosure Statement. See (ECF No. 1-4). Unlike In re Mirant Corp., Defendants here did not file any motions to dismiss or participate in any pretrial activity related to the merits of the instant case. See In re Mirant Corp., 613 F.3d at 587; see also Petroleum Pipe Americas Corp. v. Jindal Saw, Ltd., 575 F.3d 476, 480 (5th Cir. 2009) ("A party waives arbitration by seeking a decision on the merits before attempting to arbitrate."). Rather, Defendants' only pretrial activity involved jurisdiction and arbitrability. See (ECF No. 1) (Defendants' Notice of Removal); (ECF No. 2) (Defendants' Corporate Disclosure Statement); (ECF No. 4) (Defendants' Motion to Compel Arbitration and to Abate Proceedings Pending Arbitration). Further, Defendants did not file any affirmative claims or dispositive motions, and Defendants have not previously sought or opposed arbitration.
Defendants Sierra and Regency were served on October 27, 2020. However, Defendant Gemini was not served. (ECF No. 1-1, p. 2). The Court notes that "[w]here the defendant voluntarily appears before the federal court after having removed the case, it has submitted to the jurisdiction of the court, obviating the need for renewed service." City of Clarksdale v. BellSouth Telecommunications, Inc., 428 F.3d 206, 214 n.15 (5th Cir. 2005) Here, by joining the Motion to Compel Arbitration (ECF No. 4) and Answer (ECF No. 5), Gemini has waived any defense of improper service. See id. ("A defendant's removal to federal court does not waive its right to object to service of process. Filing an answer to the complaint without objecting to service of process does, however, waive a defendant's right to object to service of process.") (internal citations omitted); Maiz v. Virani, 311 F.3d 334, 340 (5th Cir. 2002) ("A party makes a general appearance whenever it invokes the judgment of the court on any question other than jurisdiction."); Fed. R. Civ. P. 12(h)(1).
Although Defendants do not assert when they learned of the Arbitration Agreement, they do not deny Plaintiff's allegation that Defendants knew the Arbitration Agreement existed prior to Plaintiff filing their claim. See (ECF No. 11, p. 22) (Plaintiff alleges that "Defendants had knowledge of the purported agreement [and] were in possession of such document . . . [when] Defendants[ failed] to produce a copy of the alleged arbitration agreement upon Plaintiff's request . . . .).
Since discovery did not begin until January 8, 2021 (ECF No. 12), over a month after Defendants filed their Motion to Compel Arbitration (ECF No. 4), the parties have not incurred much time nor expense in litigation. Compare (ECF No. 13, p. 3) (noting as of January 11, 2021, "[n]o discovery has occurred in this case."), with Nicholas v. KBR, Inc., 565 F.3d 904, 910-911 (5th Cir. 2009) (where the Fifth Circuit found that the "litigation activities were significant" when "[defendant] removed the case to federal court . . . ; successfully opposed [plaintiff's] motion to remand; answered [plaintiff's] complaints; propounded discovery requests; and deposed [plaintiff]."). Since no discovery occurred before Defendants filed their Motion, the Court finds that Defendants have not participated in any discovery procedures that would be otherwise unavailable in arbitration. Further, the case is not set to be tried until May 10, 2022. (ECF No. 15, p. 2). Therefore, the Court finds that there is little or no activity in the instant case that would be duplicated in arbitration.
In sum, nine of the ten factors that federal circuit courts consider, as outlined in Perry Homes, support the conclusion that Defendants have not engaged in an overt act that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration. Accordingly, the Court finds that Defendants have not substantially invoked the judicial process.
2. Plaintiff was not Prejudiced by Defendants' Actions
To support a finding of wavier, Plaintiff must also demonstrate prejudice. "Prejudice in the context of arbitration waiver refers to delay, expense, and damage to a party's legal position." Nicholas v. KBR, Inc., 565 F.3d 904, 907, 910 (5th Cir. 2009). "Courts considering prejudice look to things such as how much discovery has been conducted and how much the litigation relates to the merits." Aptim Corp., 888 F.3d at 142 ("Minimal discovery does not demonstrate prejudice."); see also Miller Brewing Co. v. Fort Worth Distributing Co., Inc., 781 F.2d 494, 498 (5th Cir. 1986) ("A party may not invoke arbitration and yet seek pre-trial discovery going to the merits. . . . [A]ny attempt to go to the merits and to retain still the right to arbitration is clearly impermissible.") (alterations in original) (internal quotes omitted).
Plaintiff argues that "Defendants' delay prejudices Plaintiff . . . because Defendants are seeking to compromise his right to pursue his claim." (ECF No. 11, p. 16). However, as discussed above, the Court finds that Defendants undertook minimal delay in filing their Motion to Compel Arbitration. Furthermore, Plaintiff fails to identify any action by Defendants that the Fifth Circuit has considered in order to find prejudice. Discovery did not begin until January 8, 2021 (ECF No. 12), over a month after Defendants filed their Motion to Compel Arbitration (ECF No. 4). See (ECF No. 13, p. 3) (noting as of January 11, 2021, "[n]o discovery has occurred in this case."). Further, no litigation has related to the merits of the case. See (ECF No. 1-15).
Plaintiff's primary argument regarding prejudice appears to be that "[a]ccording to the . . . arbitration agreement . . . , Plaintiff had a two-year statute of limitations to pursue his claim in arbitration, regardless of the fact that he initiated a claim in state court within the applicable statute of limitations[, and that g]ranting Defendants' motion would prejudice Plaintiff in a manner that cannot be cured." (ECF No. 11, p. 16) (emphasis added). However, Plaintiff later proposes in his Response a way the prejudice regarding the statute of limitations can be cured. (ECF No. 11, p. 20) ("Alternatively, if this Court grants Defendants' Motion and orders arbitration, Plaintiff requests that this Court make the judicial determination that his claim is not void and deemed waived).
The Court will address Plaintiff's request infra in Section III(d) of this order.
In sum, Plaintiff fails to assert any circumstances or actions by Defendants that would amount to prejudice for Plaintiff. Accordingly, the Court finds that compelling arbitration would not prejudice Plaintiff.
3. Plaintiff's Legal Authority is Distinguishable from the Instant Case or Contrary to Plaintiff's Arguments
In support of his waiver argument, Plaintiff cites to legal authority that is either non-binding, distinguishable, contrary to his own position, or some combination of the three.
Plaintiff begins by citing two non-binding Seventh Circuit decisions: Halim v. Great Gatsby's Auction Gallery, Inc., 516 F.3d 557 (7th Cir. 2008) and Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabinetry, 50 F.3d 388 (7th Cir. 1995). (ECF No. 11, p. 11-12). First, the Court notes that decisions by federal circuit courts other than the Fifth Circuit are not legally controlling precedent on this Court. See White v. Sanders, 49 F. 3d 728, 728 n.5 (5th Cir. 1995) (holding that other circuit courts decisions are not binding in the Fifth Circuit). Moreover, the Court finds that both cases fail to support Plaintiff's waiver argument.
In Halim v. Great Gatsby's Auction Gallery, Inc., the Seventh Circuit found that the defendant did not waive arbitration when it "removed the case to federal court approximately six weeks after [plaintiff] filed the complaint[, and w]ithin thirty days of removal and before any other pleadings were filed in the case, [defendant] sought to dismiss the case by invoking the arbitration clause." 516 F.3d at 562 (emphasis added). Here, Defendants removed the case approximately five weeks after Plaintiff filed the complaint and filed their Motion ten days after removal. See (ECF No. 1-1) (original claim filed in state court on October 14, 2020); (ECF No. 1) (Notice of Removal filed on November 20, 2020); (ECF No. 4) (Motion to Compel Arbitration filed on November 30, 2020). Contrary to Plaintiff's assertions, the Court finds that Defendants here were more diligent in filing their removal and request for arbitration than the defendant who did not waive arbitration in Halim. Therefore, the Court finds that Halim, although not binding on this Court, supports the finding that Defendants have not waived their right to arbitration.
Next, Plaintiff argues that "in Cabinetree of Wisconsin, Inc. v. Kraftmaid Caibentry [sic], Inc., the Seventh Circuit held that a party's election to proceed before a nonarbitral tribunal for resolution is a presumptive waiver of the right to arbitrate." (ECF No. 11, p. 11) (citing Cabinetree of Wisconsin, 50 F.3d at 390). However, Plaintiff's arguments about a "presumptive waiver" are misguided. First, the Fifth Circuit has declined to accept the presumptive waiver analysis in Cabinetree. See Nicholas v. KBR, Inc., 565 F.3d 904, 908 (holding the Fifth Circuit continues to require a showing of prejudice and rejecting the Seventh Circuit's holding "that a party's 'election to proceed before a nonarbitral tribunal for the resolution of a contractual dispute is a presumptive waiver of the right to arbitrate.'") (quoting Cabinetree, 50 F.3d at 390); see also Dale v. Citigroup Global Markets, Inc., CA No. M-12-82, 2012 WL 13046848, at *5 n.5 (S.D. Tex. June 13, 2012) ("Thus, Cabinetree does not stand for the position that removal constitutes waiver, and is factually inapposite from this case where [d]efendants removed subject to their arbitration demand and engaged in no discovery.").
Further, Plaintiff appears to misinterpret what constitutes a presumptive waiver. In Cabinetree, the Seventh Circuit held that "invoking judicial process is presumptive waiver." Cabinetree, 50 F.3d at 390 (emphasis in original). The Seventh Circuit uses "election to proceed before a nonarbitral tribunal" and "invoking judicial process" interchangeably. See id. Contrary to Plaintiff's argument here, the Seventh Circuit has not held that the mere act of removing a case to federal court is an "election to proceed before a nonarbitral tribunal" or sufficiently invokes the judicial process so as to constitute a presumptive waiver of the right to arbitrate. In fact, later Seventh Circuit cases, like Halim, have not equated removal with a presumptive waiver as Plaintiff advocates here. Compare Halim, 516 F.3d at 562 (finding that timely removal and moving for arbitration were not substantial invocation of the judicial process so as to constitute waiver), with (ECF No. 11, p. 13) (Plaintiff incorrectly argues that "Defendants' [removal to federal court constituted an] election to proceed before a nonarbitral tribunal for resolution [and therefore] a presumptive waiver of the right to arbitrate . . . ."). The Court finds no authority that construes Cabinetree to stand for the proposition that a defendant's removal of a case from state to federal court constitutes a waiver.
The Court notes that an in-depth analysis of the evolution of case law in the Seventh Circuit is not binding nor helpful in the instant case. However, the Court has found at least one case, in addition to Halim provided by Plaintiff, that is contrary to Plaintiff's reading of Cabinetree. See, e.g., Cooper v. Asset Acceptance, LLC, 532 F. App'x 639, 642 (7th Cir. 2013) ("[A]ny presumption of waiver due to [defendant's] removal of the case to federal court is rebuttable where a party's activities did not 'signify an intention to proceed in a court to the exclusion of arbitration.'") (quoting Cabinetree, 50 F.3d at 390).
Finally, the facts in Cabinetree are distinguishable from the instant case. In Cabinetree, the defendant removed the case to federal district court within the thirty-day limit specified by law. Cabinetree, 50 F.3d at 389. This is where Plaintiff would have this Court stop and find waiver. See (ECF No. 11, p. 13). However, the defendant in Cabinetree invoked the judicial process through more actions than simply removing the case to federal court. First, the parties in Cabinetree participated in discovery. Compare Cabinetree, 50 F.3d at 389, with (ECF No. 13, p. 3) ("No discovery has occurred in this case."). Second, during discovery, the defendant in Cabinetree made discovery demands, which resulted in the plaintiff producing "almost two thousand documents," and the defendants "dragged its heels in responding to [the plaintiff's] discovery demands." Cabinetree, 50 F.3d at 389. In January 1994, roughly four months after the initial complaint was filed, a trial date was set for December 6, 1994. Id. However, the defendant in Cabinetree continued to wait another seven months to file a motion to compel arbitration, less than five months before the trial date. Compare id., with (ECF No. 1 and 4) (showing Defendants filed their Motion to Compel Arbitration 10 days after removal), (ECF No. 4 and 12) (showing Defendants filed their Motion to Compel Arbitration over a month before discovery began), and (ECF No. 4 and 15) (showing Defendants filed their Motion to Compel Arbitration over a month before a trial date was set and roughly 18 months before the trial date). Finally, the only reason defendant in Cabinetree gave for its delay in filing for arbitration was it wanted "to weigh its options." Id. at 391. This reason was the cause for the Seventh Circuit's concern that the defendants "wanted to play heads I win, tails you lose." Id.
Plaintiff argues that "if Defendant wanted arbitration, it could have moved for a stay of Plaintiff's suit in the Texas state court." (ECF No. 11, p. 14). Although Plaintiff's argument contains no legal support, the Court notes that it is contrary to Plaintiff's own prior litigation activity. Plaintiff's injury occurred "[o]n or about October 31, 2018." (ECF No. 1-1, p. 5). Plaintiff filed his claim on October 14, 2020, and served two of the three Defendants on October 27, 2020. (ECF No. 1-1, p. 2). Defendants were not required to respond to Plaintiff's Complaint until November 23, 2020, which is 23 days after the two-year statute of limitations deadline. See (id.). "Plaintiff's concern is that if this Court grants Defendants' Motion to Compel and orders arbitration, Defendants will bring a statute of limitations defense in arbitration, thereby barring Plaintiff from pursuing his claim in arbitration." (ECF No. 11, p. 21). However, Plaintiff's would still raise this concern if Defendants filed their Motion to Compel in state court on November 11, 2020, instead of removing the case to federal court. Plaintiff's appear to assert that three actions should have occurred between Tuesday, October 27, 2020, and Saturday, October 31, 2020: (1) Defendants file their Motion to Compel Arbitration in state court; (2) the state court grant Defendants' Motion to Compel Arbitration; and (3) Plaintiff file their claim in the proper arbitration forum. The Court notes that 4 days is an extreme deadline to ask of opposing counsel and the state court judge, considering it took Plaintiff nearly 2 years after the injury and 16 months after Defendants' response letter to file Plaintiff's claim (ECF No. ECF No. 1-1); (ECF No. 11-1, p. 5) (Defendants' response letter on January 11, 2019), and it took Plaintiff 36 days to file his Response to Defendants' Motion to Compel Arbitration. See (ECF No. 4) (Motion to Compel Arbitration filed November 30, 2020); (ECF No. 13) (Plaintiff's Response filed January 5, 2021). Further, Plaintiff alleges that "Defendants' failure to produce a copy of the [Arbitration Agreement] . . . actively misled Plaintiff into filing his action in court rather than initiating arbitration." (ECF No. 11, p. 22) (emphasis in original). To the extent Plaintiff is attempting to argue that Defendants' actions led Plaintiff to believe there was no agreement to arbitrate, the Court finds this argument frivolous and without merit. Plaintiff clearly signed the Arbitration Acknowledgement that plainly stated that Plaintiff's "claims or disputes . . . must be submitted to an arbitrator, rather than a judge and jury in court." (ECF No. 4-2, p.2). Furthermore, in his Complaint, Plaintiff claims that "the Injury Plan or Occupational Benefit Plain [sic] are void and invalid for one or more of the following reasons: [list of 15 reasons]." (ECF No. 1-1, p. 9-10). Not only did Plaintiff know of the existence of the Arbitration Agreement, but Plaintiff had to be aware of the contents of the Arbitration Agreement in order to assert fifteen specific defenses to the application of the Arbitration Agreement. Additionally, the Court notes that the assertion of these fifteen defenses indicate that Plaintiff would have opposed Defendants' Motion to Compel Arbitration even if filed before October 31, 2020.
Here, Plaintiff alleges that "Defendants' lack of diligence in producing the signed arbitration agreement before Plaintiff commenced this action in Texas state court, as well as Defendant's removal (instead of moving for a stay of Plaintiff's suit in state court) . . . essentially say [the Defendants] wanted to see how the case was going before deciding whether they could be better off in arbitration." (ECF No. 11, p. 15). The Court is unable to discern what insight Plaintiff thought that Defendants gained from removing the case to federal court or by filing their corporate disclosures that would help Defendants determine "how the case was going." See (ECF No. 1-3). Unlike the defendant in Cabinetree, Defendants did not force Plaintiff to produce "almost two thousand documents" or wait nearly a year before filing their Motion. See Cabinetree, 50 F.3d at 389.
See Section III(c)(4), below, indicating that there is no right to pre-litigation discovery. See generally Fed. R. Civ. P. 26(d).
Notably, the Court finds Plaintiff has made some serious, unsupported accusations that "Defendants wanted to play heads I win, tails you lose" and that Defendants' conduct amounted to a "type of gamesmanship [that] is strongly discouraged and not kindly looked upon by courts." (ECF No. 11, p. 15) (internal alterations and quotes omitted). The Court fails to find any merit in the law or within the facts of the instant case that would support Plaintiff's accusations that Defendants partook in some "type of gamesmanship" in order "to see how the case was going" so they could "play heads I win, tails you lose." (Id.). In fact, only 24 days had passed from the date Defendants were originally served with Plaintiff's lawsuit in state court until Defendants filed their Notice of Removal with this Court. See (ECF No. 1-1, p. 2) (Defendants Sierra and Regency were served on October 27, 2020, while Defendant Gemini was never served); (ECF No. 1) (Notice of Removal filed on November 20, 2020). Further, only 34 days passed from the date of service on Defendants before Defendants filed their Motion to Compel Arbitration. See (ECF No. 1-1, p. 2) (Defendants served on October 27, 2020); (ECF No. 4) (Motion to Compel Arbitration filed on November 30, 2020). In contrast, it took Plaintiff 36 days to file his Response to Defendants' Motion to Compel Arbitration. See (ECF No. 4) (Motion to Compel Arbitration filed November 30, 2020); (ECF No. 13) (Plaintiff's Response filed January 5, 2021). If there was any "delay" in the current proceedings, it has been Plaintiff, not Defendants, who caused such delay.
The Court granted Plaintiff's Agreed Motion to Extend Time for Plaintiff's Deadline to Respond to Defendants' Motion to Compel Arbitration and to Abate Proceedings Pending Arbitration (ECF No. 7) on December 18, 2020. Text Order dated December 18, 2020.
Next, Plaintiff attempts to rely on Nicholas v. KBR, Inc., 565 F.3d 904 (5th Cir. 2009), which is distinguishable on its facts to the instant case, and Plaintiff misinterprets the holdings of that case. First, Nicholas is most notably distinguishable from the instant case because it was the plaintiff in Nicholas who attempted to compel arbitration. 565 F.3d at 908 ("We conclude that the act of a plaintiff filing suit without asserting an arbitration clause constitutes substantial invocation of the judicial process, unless an exception applies."). The Fifth Circuit held in Nicholas that "it is difficult to see how a party could more clearly evince a desire to resolve a dispute through litigation rather than arbitration than by filing a lawsuit going to the merits of an otherwise arbitrable dispute." Id. (internal quotes and alterations omitted). Although the legal standard is the same whether the party attempting to compel arbitration is a plaintiff or a defendant, the "[d]ifferences between the two sides arise from the voluntariness and timing of their actions." Id. Although not evident in Plaintiff's response, this factual distinction is not lost upon this Court. Further, the Fifth Circuit found that the plaintiff in Nicholas "engaged in substantial litigation activity before asserting her right to arbitration." Id. at 909. In Nicholas, the plaintiff partook in the following court proceedings before filing her motion to compel arbitration: (1) filed her lawsuit in state court on January 17, 2017; (2) filed a motion to remand after the case was removed a month later on February 23, 2017; (3) filed an amended complaint roughly four months after the original complaint on May 2, 2007; (4) filed a Joint Discovery/Case Management Plan five months after the original complaint on June 19, 2007; (5) later responded to written discovery without raising any objections; and (6) sat without objection for her deposition. Id. at 906-07. The plaintiff finally filed her motion for arbitration ten months after she filed the original lawsuit. Id. at 907. Furthermore, the plaintiff filed notice and took a deposition of a third-party witness subsequent to requesting arbitration. Id. As discussed above, the Court finds no activity by Defendants that is even remotely close to the plaintiff's activities in Nicholas, which would lead this Court to find that Defendants substantially invoked the judicial process.
Further, Plaintiff argues that "[b]ecause Defendants . . . failed to demand arbitration while engaging in pretrial activity inconsistent with an intent to arbitrate (i.e., removing to federal court instead of moving for [a] stay in Texas state court), Plaintiff 'may more easily show that [his] position has been compromised i.e., prejudiced.'" (ECF No. 11, p. 16) (quoting Nicholas, 565 F.3d at 910). However, as discussed above, the Fifth Circuit in Nicholas did not hold that removing to federal court is "activity inconsistent with an intent to arbitrate." See Nicholas, 565 F.3d at 910. Further, Plaintiff notes in his own Response that "courts generally have not found waiver where removal was the only action taken by the party against whom the waiver was to be enforced . . . ." (ECF No. 11, p. 11) (emphasis in original). However, Plaintiff also argues that "Defendants should have selected to enforce the alleged arbitration agreement with Plaintiff instead of removing to federal court . . . ." (Id. at p. 14) (emphasis in original). Plaintiff appears to contradict himself, first arguing that removal alone does not constitute waiver and then arguing that Defendants waived their right to arbitration by not compelling arbitration in state court.
Defendants' only pretrial activity in the instant case before filing their Motion to Compel Arbitration was their Notice of Removal and their Corporate Disclosure Statement. See (ECF No. 1-4). No court in the Fifth Circuit has found waiver in circumstances similar to the instant case. See, e.g., Kane v. Yancy, CA No. H-15-1861, 2015 WL 9598897, at *5 (S.D. Tex. Dec. 7, 2015) (holding that the defendant did not substantially invoke the judicial process when "the record shows that [d]efendant . . . filed an [a]nswer in state court . . . , withdrew that [a]nswer the very next day . . . , filed a timely [n]otice of [r]emoval . . . , and then filed its original [m]otion to [d]ismiss and [c]ompel [a]rbitration [seven days after removal]."); Lauzon v. Pulte Homes, Inc., CA No. SA-12-CV-117-XR, 2012 WL 4434761, at *3 (W.D. Tex. Sept. 24, 2012) (holding that the defendant did not substantially invoke the judicial process when the defendant "filed [a] motion to compel arbitration . . . just several weeks after it removed the case to federal court . . . [and] did not file any motions or pleadings before it filed its motion to compel arbitration [and did not] file[] a motion to dismiss or a motion for summary judgment, nor . . . engage[] in discovery"). In fact, courts have not found waiver even where the moving party had participated substantially more in the judicial proceedings than the Defendants in the instant case. See, e.g., Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656, 661-62 (5th Cir. 1995) (no waiver where defendant removed and filed motions to dismiss and to stay proceedings, answered complaint, asserted counterclaim, and exchanged discovery, both before and after moving for stay pending arbitration upon discovery of arbitration agreement); Walker v. J.C. Bradford & Co., 938 F.2d 575, 576-78 (5th Cir. 1991) (no waiver where, over the course of thirteen months, defendant removed, served discovery, filed an answer, and participated in an initial pretrial conference before moving to compel arbitration since the Fifth Circuit found that the non-moving party was not prejudiced by the delay).
In sum, the legal authorities that Plaintiff cites are either distinguishable on the facts to the instant case, have not been extended by the Fifth Circuit, or do not support Plaintiff's argument that Defendant substantially invoked the judicial process.
4. Defendants' Refusal to Answer Plaintiff's Pre-Litigation Letter and Provide a Copy of the Arbitration Agreement is not Relevant to Waiver
Excluding Plaintiff's contradictory arguments regarding Defendants' removal of the case to this Court, Plaintiff's sole argument regarding potential waiver appears to surround a pre-litigation letter Plaintiff's counsel sent to Defendants. Plaintiff argues that Defendants "acted inconsistent with the intent to arbitrate" when Defendants "refused [to] provide any documents nor put Plaintiff on notice of their intent to arbitrate any claims" after Plaintiff "requested that Defendants produce any signed arbitration agreement between Plaintiff and Defendants or in the alternative, inform Plaintiff if there is no arbitration agreement." (ECF No. 11, p. 14-15). However, the Court finds that this letter is not relevant to Plaintiff's waiver argument.
Judicial waiver is found "when the party seeking arbitration substantially invokes the judicial process to the determinant or prejudice of the other party." In re Mirant Corp., 613 F.3d at 588 (quoting Walker, 928 F.2d at 577) (emphasis added). The contents of the letter and any facts or circumstances surrounding the letter, involve entirely pre-litigation activity that occurred roughly 22 months prior to Plaintiff filing his initial complaint in state court. Therefore, the Court finds that Plaintiff's arguments regarding Plaintiff's letter do not aid in the determination of whether or not the Defendants substantially invoked the judicial process. See Walker, 938 F.2d at 578 ("Pre-suit inactivity does not invoke the judicial process and cannot support a finding of waiver.").
Assuming Plaintiff is attempting to introduce a waiver argument other than judicial waiver, it is not for this Court to decide. The Supreme Court has held that "courts presume that the parties intend arbitrators, not courts, to decide disputes about . . . claims of 'waiver, delay, or a like defense to arbitrability.'" BG Group, PLC, 572 U.S. at 35 (quoting Moses H. Cone Memorial Hospital, 460 U.S. at 25); see also Vine, 689 F. App'x at 803 (Fifth Circuit holding that "[u]nlike other types of waiver, litigation-conduct waiver 'implicates courts' authority to control judicial procedures or to resolve issues . . . arising from judicial conduct.'") (quoting Ehleiter, 482 F.3d at 219) (emphasis in original).
Plaintiff argues that "[a]lthough Plaintiff had yet to file the lawsuit, he was doing his due diligence, inquiring into the existence of an arbitration clause prior to selecting a forum to resolve his claim against Defendants." (ECF No. 11, p. 15). However, it appears to the Court that Plaintiff was attempting to accomplish more than his due diligence. First, it appears Plaintiff was attempting to change Defendants' legal right to arbitration by eliciting and construing a nonresponse as a waiver of arbitration as well as preventing Defendants from removing the case to federal court. The letter provides, in relevant part:
If I do not receive a copy of the signed arbitration agreement within two weeks of receiving this request, your failure to produce any signed arbitration agreement will be your acceptance to proceed in State Court and your waiver of enforcement of any arbitration agreement. We believe the same logic applied to employees applies to employers. Please see In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002) (an employee can accept an agreement to arbitrate merely by continuing employment, without signing any document or expressly agreeing to the arbitration).(ECF No. 11-1, p. 2). Plaintiff's assertion that Defendants' failure to provide the Arbitration Agreement within Plaintiff's manufactured deadline constitutes a waiver is without merit or support in the law. The case cited by Plaintiff does not support Plaintiff's argument, and Plaintiff fails to provide any valid legal authority for its argument. Further, the Court notes that Plaintiff has not adopted this argument in their Response. (ECF No. 11).
Further, it appears Plaintiff was attempting to use this letter as a form of quasi-pre-litigation discovery by demanding Defendants produce numerous documents in addition to the Arbitration Agreement. In addition to the Arbitration Agreement, Plaintiff requested the following documents:
1. Original executed Plan documents;(ECF No. 11-1, p. 2-3). It is clear to the Court that Plaintiff's letter did not only request the Arbitration Agreement, in order to properly select the proper forum to bring his complaint, it also included demands for a plethora of other documents. The Court also notes that while there are 15 document requests in Plaintiff's letter, including the request for the Arbitration Agreement, at least 10 of these requests ask for the production of more than one document.
2. All filings made on this Plan;
3. All correspondences on this Plan;
4. All Plan documents;
5. All complaints on this Plan;
6. Explanation of the benefits;
7. All bills received by the Plan and paid for by the Plan;
8. Notice of posting cessation of workers['] compensation benefits;
9. Net worth of this plan;
10. Net worth of the funding source for this plan;
11. All certifications and filing of the Plan with the U.S. Department of Labor and Internal Revenue Service;
12. All documents showings notice and delivery of the Plan to Beneficiaries;
13. All payments made to Mr. Fernandez under the Plan for the incident in question; and
14. Any reimbursement paid by the employer to the Plan for Mr. Fernandez.
Defendants responded to Plaintiff's demands with a letter stating, in relevant part:
[Defendants] are in the process of completing their investigation of this matter. Please be advised that nothing in your letter changes any substantive or procedural rules or laws regarding any claims or defenses or any other matter. Please also be advised that we are not further responding to the demand for various records.(ECF No. 11-1, p. 5). Plaintiff argues that Defendants' letter amounted to action "inconsistent with the intent to arbitrate." (ECF No. 11, p. 14). The Court disagrees. Plaintiff has provided no legal authority for the proposition that Defendants, prior to the commencement of litigation, were under any obligation to provide documents to Plaintiff. See generally Fed. R. Civ. P. 26(d) ("A party may not seek discovery from any source before the parties have conferred as required by Rule 26(f) . . . ."). Instead, Plaintiff argues that "Defendants' failure to produce a copy of the [Arbitration Agreement] upon Plaintiff's request actively misled Plaintiff into filing his action in court rather than initiating arbitration." (ECF No. 11, p. 22) (emphasis in original). Again, Plaintiff provides no support for this accusation. Defendants did not convey to Plaintiff that there was not an Arbitration Agreement. See (Id. at 4-5) ("Defendants failed to mention anything about the existence—or nonexistence—of a signed arbitration agreement between Defendants and Plaintiff."). Therefore, the Court cannot find that Defendants' conduct "actively misled" Plaintiff.
Defendants note in their reply that the reason "[Plaintiff] waited nearly two years after his accident, and a year and 10 months after the document request, to file suit, is a matter between [Plaintiff] and his counsel." (ECF No. 13, p. 3). The Court, here, finds that if Plaintiff had wanted to obtain the Arbitration Agreement and these other documents, Plaintiff could have, at any time, filed a lawsuit and initiated discovery. Although Plaintiff claims he only requested the Arbitration Agreement out of "due diligence," it is clear to the Court that Plaintiff's letter was also asking for a flood of pre-litigation discovery in addition to attempting to alter Defendants' right to arbitration. The letter more closely resembles an attempt to circumvent the rules of discovery than a request originating from due diligence.
In sum, Plaintiff's purely pre-litigation letter to Defendants is not relevant to Plaintiff's waiver argument that Defendants substantially invoked the judicial process. Accordingly, the Court finds any argument by Plaintiff based upon this letter that Defendants waived their right to arbitration is without merit.
5. Conclusion
In conclusion, the Court finds that Plaintiff has failed to meet his heavy burden in showing that Defendants substantially invoked the judicial process to his detriment or prejudice. Accordingly, the Court recommends rejection of Plaintiff's argument that Defendants waived their right to arbitration.
d. The Fees Imposed by the Arbitration Agreement are not Substantively Unconscionable
Plaintiff argues that Defendants' Motion should be denied since "[t]he alleged arbitration agreement is substantially [sic] unconscionable because the fees it imposes on Plaintiff are excessive." (ECF No. 11, p. 17). Defendant argues that "[i]t is simply not unconscionable to require [Plaintiff] to participate in the arbitration to which he agreed as a condition of employment." (ECF No. 13, p. 4).
"The burden of proving unconscionability rests on the party seeking to invalidate the arbitration agreement." Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294, 301 (5th Cir. 2004) (citing In re Halliburton Co., 80 S.W.3d 566, 572 (Tex. 2002)). Further, "[i]n determining the contractual validity of an arbitration agreement, courts apply ordinary state-law principles that govern the formation of contracts." Carter, 262 F.3d at 301 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). As a result, Texas state law is the applicable law "to determine whether the arbitration agreement[] here [is] unconscionable." Carter, 362 F.3d at 301.
"Under Texas law, unconscionability includes two aspects: (1) procedural unconscionability, which refers to the circumstances surrounding the adoption of the arbitration provision, and (2) substantive unconscionability, which refers to the fairness of the arbitration provision itself." Id. (citing In re Halliburton Co., 80 S.W.3d at 571). Complaints of the prohibitive costs of arbitration are "grounded in substantive unconscionability." In re Olshan Foundation Repair Co., LLC, 328 S.W.3d 883, 892 (Tex. 2010).
The Texas Supreme Court has held that "in general, a contract will be found unconscionable if it is grossly one-sided." In re Poly-America, L.P., 262 S.W.3d 337, 348 (Tex. 2008); see also In re Olshan Found., 328 S.W.3d at 892 ("[T]he theory behind unconscionability in contract law is that courts should not enforce a transaction so one-sided, with so gross a disparity in the values exchanged, that no rational contracting party would have entered the contract."). Furthermore, "arbitration is intended as a lower cost, efficient alternative to litigation." In re Olshan Found., 328 S.W.3d at 892. Therefore, an arbitration agreement is substantively unconscionable if "the existence of large arbitration costs could preclude a litigant . . . from effectively vindicating [his or her] federal statutory rights in the arbitral forum." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000).
The Texas Supreme Court outlined the following factors in determining whether the arbitral forum is an adequate and accessible substitute to litigation: (1) "a comparison of the total costs of the two forums;" (2) "the actual cost of arbitration compared to the total amount of damages the claimant is seeking;" and (3) "the claimant's overall ability to pay the arbitration fees and costs." In re Olshan Found., 328 S.W.3d at 894-895. Further, since "arbitration is favored in both federal and Texas law," courts "should be wary of setting the bar for holding arbitration clauses unconscionable too low." In re Olshan Found., 328 S.W.3d at 892.
Although Plaintiff filed a 23-page Response and 60 pages of exhibits, Plaintiff does not provide sufficient facts for the Court to determine whether the fees imposed by the Arbitration Agreement are excessive. Here, the Court finds only two facts are certain regarding whether the fees imposed by the Arbitration Agreement are substantively unconscionable. First, Plaintiff will have to pay a non-refundable filing fee, which is capped at $300. (ECF No. 11, p. 19); (ECF No. 11-1, p. 53). Second, in his Complaint, Plaintiff is seeking $200,0000 to $1,000,000 in damages in the instant case. (ECF No. 1-1, p. 7).
For the first factor, "the comparison of the total costs of the two forums," Plaintiff fails to provide sufficient evidence regarding the cost of arbitration or litigation in federal court. First, Plaintiff fails to provide any evidence of the estimated cost of litigation in federal court. In re Olshan, 328 S.W.3d at 897 ("Even if we took these invoices as evidence of the likely arbitration charges to the homeowners, they have provided no comparison of these charges to the expected cost of litigation . . . or their ability to pay these costs."). Second, Plaintiff provides scarce evidence regarding the cost of arbitration. Plaintiff is responsible for paying a non-refundable filing fee, which is capped at $300. (ECF No. 11, p. 19); (ECF No. 11-1, p. 53). Plaintiff asserts that "[t]he flight cost alone per witness would amount to at least $370.00 per witness." (ECF No. 11, p. 19) (citing (ECF No. 11-1, p. 13-14) ("I have researched the cost of such flights to be at least $370.00 per round trip [sic] per witness on American Airlines, which is the cheapest airline I could find.")). However, Plaintiff provides no evidence such as quotes, estimates, past receipts, links to online pricing, or other similar documentation to substantiate his claims in his affidavit that roundtrip flights between El Paso and Dallas are "at least $370.00." See In re Olshan Found., 328 S.W.3d at 895 ("While we do not mandate that claimants actually incur the cost of arbitration before they can show its excessiveness, parties must at least provide evidence of the likely cost of their particular arbitration, through invoices, expert testimony, reliable cost estimates, or other comparable evidence.") (emphasis added); see also Poly-America, 262 S.W.3d at 354-55 (concluding that the plaintiff's "own affidavit and that of an expert witness providing detailed estimates of the likely cost of arbitration" constituted sufficient evidence); Olshan Found. Repair Co. v. Ayala, 180 S.W.3d 212, 215-16 (Tex. App. 2005) (holding that an invoice for a party's share of arbitration expenses constituted sufficient evidence). Plaintiff also asserts that he "anticipates calling at least six witnesses." (ECF No. 11, p. 19). Assuming, arguendo, that each flight would cost $370, Plaintiff would incur $2,220 in flight costs.
Pursuant to Federal Rule of Evidence 201, this Court may take judicial notice on its own at any stage of the proceeding of "a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot be questioned." Fed. R. Ev. 201(b). Here, the Court takes judicial notice of the prices provided on American Airline's website. See Kitty Hawk Aircargo, Inc. v. Chao, 418 F.3d 453, 457 (5th Cir. 2005) (taking judicial notice of the information published on the website of the National Mediation Board); M.D. v. Abbot, CA No. 2:11-CV-00084, 2020 WL 7485018, at *111 n.117 (S.D. Tex. Dec. 18, 2020) ("The Court takes notice of the information provided on Prairie Harbor's website); Shirely v. FMC Technologies, Inc., No. A-20-CV-261-RP, 2020 WL 5995695, at *5 n.3 (W.D. Tex. Oct. 9, 2020) ("Pursuant to Fed. R. Evid. 201, the Court takes judicial notice of the CPR Rules on CPR's website . . . ."). Although the date of arbitration is unknown, and Plaintiff fails to assert for which days he searched airline fares, the Court notes the price of several of weekday roundtrip fares are well below Plaintiff's assertion of "at least $370.00." See Book Flights, American Airlines, https://www.aa.com/booking/find-flights/newsearch?bookingPathStateId=1613491375459-825 (last visited Mar. 16, 2021) (roundtrip prices from El Paso to Dallas on April 5 and April 6 starting at $207, May 3 and May 4 starting at $187, and June 7 and June 8 starting at $240). Although the Court also notes that airline prices fluctuate over time, Plaintiff has provided no evidence, either in quotes, estimates, or screenshots of American Airline's website, to support that roundtrip tickets were "at least $370.00."
Plaintiff next asserts that "the approximate hotel cost in Dallas County is $115.00, meaning that Plaintiff would incur about $700.00 more in expenses if his witnesses were required to stay overnight in Dallas County." (ECF No. 11, p. 19) (citing (ECF No. 11-1, p. 14) ("Further, I would have to pay for the hotel stays for such witnesses at least one night and probably more which I have researched to cost around $115 per night.")). However, Plaintiff again fails to provide any evidence to support his claim in his affidavit that the hotel cost would be $115 per witness. The Court finds no quotes, estimates, past receipts, links to online pricing, or other similar documentation in the record that would support Plaintiff's claim that the cost for a hotel is "around $115 per night" in the Dallas area. See In re Olshan Found., 328 S.W.3d at 895 ("Evidence that merely speculates about the risk of possible cost is insufficient."). Assuming, arguendo, that the hotel cost will be $115 per witness, Plaintiff would incur $690 in hotel costs, not $700.
Combining the $300 for the highest possible filing fee, the $2,220 for flights, and $690 for hotels, Plaintiff is asserting a total of $3,210 in arbitration costs. However, the Plaintiff has failed to provide any evidence regarding the expected costs of litigation in federal court. Without such evidence, the Court is unable to compare Plaintiff's total costs of arbitration with the total costs of litigation. See Bradford v. Rockwell Semiconductor Sys., Inc., 238 F.3d 549, 556 n.5 (4th Cir. 2001) ("The cost of arbitration . . . cannot be measured in a vacuum or premised upon a claimant's abstract contention that arbitration costs are 'too high.' Rather, [the court] must focus upon a claimant's expected . . . arbitration costs . . . measured against . . . claimant's expected costs for litigation and his ability to pay those costs."). Therefore, the Court finds that Plaintiff has not met his burden to satisfy the first factor.
For the second factor, "the actual cost of arbitration compared to the total amount of damages the claimant is seeking;" Plaintiff is seeking $200,0000 to $1,000,000 in damages in the instant case. (ECF No. 1-1, p. 7). Assuming, arguendo, that arbitration will cost no more than $3,210 as Plaintiff asserts, the cost of arbitration would be as much as 1.605% of the total amount of damages Plaintiff is seeking, or as little as 0.321% of the total amount of damages. Compared to the potential recovery, the Court finds that this fractional cost would not deter Plaintiff from bringing his claim in arbitration. See In re Olshan, 328 S.W.3d at 894 ("In the absence of unusual animus between the parties or external motives, plaintiffs continue to pursue claims when the expected benefits of the lawsuit outweigh the total cost of bringing it."). Accordingly, the Court finds that the second factor weighs against Plaintiff.
Finally, as to the third factor, "the claimant's overall ability to pay the arbitration fees and costs," Plaintiff provides no evidence or documents to support Plaintiff's actual income or assets, much less how his income or assets preclude an ability to pay the arbitration fees and costs. The only facts the Court can gather regarding Plaintiff's ability to pay the arbitration fees and costs is that Plaintiff is represented by counsel and has not filed to proceed in forma pauperis. Without any additional evidence, the Court finds that Plaintiff has failed to meet his burden to satisfy the third factor. See Green Tree, 531 U.S. at 90 n.6 (finding that a party's unsupported statement that she did not have the resources to pay the high costs of arbitration was insufficient).
The Court further notes that under the Arbitration Agreement, both parties are responsible for the costs of their own witnesses. (ECF No. 4-1, p. 4) ("Any arbitration under this Appendix will be administered by the American Arbitration Association ('AAA') under its then-current Employment Arbitration Rules and Mediation Procedures."); (ECF No. 11-1, p. 40) ("Unless otherwise agreed by the parties or as provided under applicable law, the expenses of witnesses for either side shall be borne by the party producing such witnesses."). Therefore, Defendants would also incur additional expenses if arbitration occurs in Dallas County and not El Paso County. Further, Plaintiff's filing fee is capped at $300, while Defendants' filing fee is $1,900 in addition to a $750 case management fee. (ECF No. 11-1, p. 53). Further, while Plaintiff claims that their arbitration costs could be as high as $3,210, Plaintiff also asserted in their letter that Defendants' arbitration fees "[could] easily exceed more than twenty thousand dollars." Compare (ECF No. 11, p. 19), with (ECF No. 11-1, p. 2). Finally, if Plaintiff's claim is successful in arbitration, Plaintiff is entitled to reimbursement of his filing fee from Defendants. (ECF No. 4-1, p. 4). In sum, the Court fails to see how the provisions of the Arbitration Agreement are "grossly one-sided" in favor of Defendants.
Furthermore, the Defendants state in their Reply that "Defendants agree to arbitration in El Paso County, Texas . . . [and that Plaintiff] never asked Defendants if they would agree to arbitration in El Paso County . . . ." (ECF No. 13, p. 4). If arbitration were to occur in El Paso, Plaintiff's concerns regarding the cost of transporting and lodging witnesses would become moot. The Court notes that nothing in the Arbitration Agreement mandates or precludes the parties from arbitrating in a specific locale. The Arbitration Agreement provides, in relevant part:
Unless otherwise agreed to in writing by the parties, the arbitrator selected by the parties . . . shall be an attorney licensed to practice in the State of Texas with experience in personal injury litigation, and [] shall be selected from a panel of arbitrators located in Dallas County, Texas.(ECF No. 4-1, p. 3). While the Arbitration Agreement outlines that the arbitrator shall be selected from a panel located in Dallas County, the Court notes that it appears it does not mandate arbitration to occur in Dallas County. Further, it appears that the parties can stipulate in writing to selecting an arbitrator through different means, and therefore could stipulate in writing to a specific locale for arbitration. However, to the extent that there are any ambiguities as to the terms or conditions of the Arbitration Agreement, those ambiguities are for the arbitrator, not this Court, to decide. See (Id.) ("The arbitrator, and not any federal . . . court . . . , shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this agreement . . ."); Dealer Computer Services, Inc. v. Old Colony Motors, Inc., 588 F.3d 884, 887 (5th Cir. 2009) (holding that the arbitrator should decide whether parties meet the procedural condition precedent to the obligation to arbitrate).
In sum, Plaintiff has provided no more than speculation that he might pay $3,210 in arbitration costs. Indeed, the majority of those anticipated costs are highly speculative. If arbitration occurs in El Paso County, Plaintiff would incur no more than $300, the maximum filing fee allowed. "Substantive unconscionability threatens to become the exception that swallows the rule if all that must be done to avoid arbitration is to assume the most expensive possible scenario." In re MHI Partnership, Ltd., No. 14-07-00851-CV, 2008 WL 2262157, at *7 (Tex. App. May 29, 2008). Further, the Texas Supreme Court has held that "to conclude that an arbitration agreement is unconscionable based merely on the 'risk that [the claimant] will be saddled with prohibitive costs' would undermine the 'liberal federal policy favoring arbitration agreements.'" In re Olshan Found., 328 S.W.3d at 892 (quoting Green Tree, 531 U.S. at 91). Accordingly, Plaintiff has failed to specify anything more than a mere risk that the Arbitration Agreement will impose prohibitive costs.
Assuming, arguendo, that this Court or the arbitrator should find that the fees imposed by the Arbitration Agreement are substantively unconscionable, the Court would still recommend compelling the parties to arbitration based on the language of the Arbitration Agreement. The Arbitration Agreement provides, in relevant part, that "[i]f one or more of the provisions in [the Arbitration Agreement] are deemed void by law, then the remaining provisions will continue in full force and effect." (ECF No. 11-1, p. 10). Therefore, the Court finds that even if the District Court or the arbitrator should later find that the fees imposed by the Arbitration Agreement are substantively unconscionable, this finding would not invalidate the entire Arbitration Agreement and the parties would still be compelled to arbitrate their claims.
In sum, the Court finds that Plaintiff has not provided sufficient evidence required in order to satisfy his burden in demonstrating that the costs and fees prescribed in the Arbitration Agreement are substantively unconscionable. Accordingly, the Court recommends rejecting Plaintiff's argument that the fees imposed by the Arbitration Agreement are substantively unconscionable.
e. The Court Need Not Make a Judicial Determination as to Whether Plaintiff's Claim is Void or Deemed Waived Because the Pending Litigation Should be Stayed
Alternatively, Plaintiff argues that "if this Court grants Defendants' Motion and orders arbitration, . . . this Court [should] make the judicial determination that [Plaintiff's] claim is not void and deemed waived." (ECF No. 11, p. 20). Defendants respond by arguing that Plaintiff's "request that this Court sua sponte toll the statute of limitations is improper, not supported by a proper motion, and issues relating to the statute of limitations [are] not a question for the Court [to] judge under a valid arbitration agreement." (ECF No. 13, p. 5).
The Arbitration Agreement provides that "[w]hen a party seeks arbitration, such party must give written notice of any claim to the American Arbitration Association and the other party within the applicable statute of limitations." (ECF No. 4-1, p. 2). The statute of limitations for negligence and negligent hiring, supervision, training, and retention is two years. See Tex. Civ. Prac. & Rem. Code § 16.003(a); see also H.D.N. Corp. v. Autozone Texas, L.P., CA No. 4:12-CV-3723, 2014 WL 4471537, at *5 (S.D. Tex. Sept. 9, 2014) ("[N]egligent hiring claim is . . . subject to a two-year statute of limitations."); JPMorgan Chase Bank, N.A. v. Professional Pharmacy II, 508 S.W.3d 391, 414 (Tex. App. 2014) ("A two-year statute of limitations applies to a cause of action for negligence.").
Plaintiff first asks this Court to apply the doctrine of equitable tolling. See (ECF No. 11, p. 20) (citing United States v. Patterson, 211 F.3d 927, 930 (5th Cir. 2000)). However, the doctrine of equitable tolling is not relevant to the instant case. "The doctrine of equitable tolling preserves a plaintiff's claims when strict application of the statute of limitations would be inequitable." Patterson, 211 F.3d at 930 (citation omitted). "Courts have typically extended tolling where 'the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period, or where complainant has been induced or tricked by his adversary's misconduct into allowing the filing deadline to pass." Harris v. Boyd Tunica, Inc., 628 F.3d 237, 239 (5th Cir. 2010) (quoting Irwin v. Dep't of Veterans Affairs, 498 U.S. 89, 96 (1990)). Courts consider that the doctrine of equitable tolling is applicable in cases where a plaintiff fails "to timely file his complaint in accordance with [the statute of limitations]." See id. Here, however, Plaintiff properly filed their complaint in state court prior to the expiration of the two-year statute of limitations. See (ECF No. 1-1, p 3, 5) (claim arose "on or about October 31, 2018" and Plaintiff filed their claim on October 14, 2020). Therefore, the Court finds that the doctrine of equitable tolling is inapplicable to the instant case.
Plaintiff next points to the following provision of the Arbitration Agreement which provides, in relevant part:
If after expiration of the applicable statute of limitation (1) a court has ordered the parties to arbitrate, and (2) such court or arbitrator for whatever reason has determined that the claim is not void and deemed waived, then the party that is compelled to arbitrate must initiate a claim for arbitration regarding such claim with the AAA and serve the other party with 30 days of such order or the party's claim shall be void and deemed waived.(ECF No. 11-1, p. 7). This Court finds that this provision is ambiguous as to whether it grants authority to this Court to determine that Plaintiff's claim is not void or deemed waived or if it merely outlines a timeline for when a party must file notice after a court compels arbitration. However, courts generally have held that satisfaction of conditions precedent to arbitration is for the arbitrator, not the courts, to decide. See G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 516 (Tex. 2015) ("[W]e agree that the courts must defer to the arbitrators to determine the meaning and effect of the contractual deadline."). Further, the Northern District of Texas has held that "whether the claims are barred by limitations . . . is a defense to the underlying claim, not to the validity of the agreement" and this issue is for the arbitrator to resolve. Vesta Fire Ins. Corp. v. Employers Reinsurance Crop., No. 3:05-CV-2404-P, 2006 WL 1506949, at *4 (N.D. Tex. May 31, 2006). Further, the Arbitration Agreement also provides, in relevant part:
The arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation,
applicability, enforceability or formation of this agreement including, but not limited to, any claim that all or any part of this agreement is void or voidable.(ECF No. 11-1, p. 8). The Court finds this language of the Arbitration Agreement reserves for the arbitrator the interpretation and applicability of the Arbitration Agreement. Therefore, the Court finds that the issue of whether the conditions precedent to arbitration, like satisfaction of the statute of limitations, is best reserved for the arbitrator instead of this Court to decide.
Plaintiff's primary concern "is that if this Court grants Defendants' Motion to Compel and orders arbitration, Defendants will bring a statute of limitations defense in arbitration, thereby barring Plaintiff from pursuing his claim in arbitration." (ECF No. 11, p. 21). However, Plaintiff's equitable concerns can be cured through procedures provided for under the FAA. Title 9 U.S.C. § 3 provides, in relevant part:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.9 U.S.C. § 3 (emphasis added). Here, although Plaintiff has not asked this Court to stay the current proceedings, Defendants have, to their credit, asked for a stay in their Motion. (ECF No. 4, p. 5).
Staying the current proceedings will maintain the current action, preserving Plaintiff's timely filing of his original Complaint. In fact, the Fifth Circuit previously admonished a plaintiff who argued for tolling of statute of limitations after failing to timely file her complaint due to the defendant not paying arbitration fees. See Fonseca v. USG Ins. Services, Inc., 467 F. App'x 260, 261 (5th Cir. 2012). The Fifth Circuit held, in relevant part:
"[W]e held that a claimant who demanded arbitration is not required to wait until the outcome of the arbitration to file a lawsuit. [The plaintiff] could have (and should have) filed her suit within the statute of limitations and, thereafter, sought a
stay of the action pending arbitration. Such a course would have guaranteed that the lawsuit was brought within the limitations period without waiving any right to arbitration which may have existed."Fonseca, 467 F. App'x at 261 (internal citations omitted) (emphasis added).
Here, the Court finds that Plaintiff has taken the necessary steps advised by the Fifth Circuit in Fonseca. Plaintiff timely filed her claim in state court in order to guarantee that the lawsuit was brought within the limitations period without waiving any right to arbitration which may have existed. If the arbitrator subsequently refuses to hear Plaintiff's claims for whatever reason, either due to statute of limitations, nonpayment of arbitration fees, or other unforeseeable issues with arbitration, Plaintiff will still be able to resume litigation in federal court in the instant case. Therefore, the Court finds that staying the current proceedings pending arbitration is proper and remedies any equitable concerns of the Plaintiff.
Plaintiff argues that "Defendants' failure to produce a copy of the alleged arbitration agreement upon Plaintiff's request actively misled Plaintiff into filing his action in court rather than initiating arbitration." (ECF No. 11, p. 22). However, as discussed above, the Fifth Circuit advises that plaintiffs who are unsure of the right to arbitration should file their claims in court prior to initiating arbitration proceedings. See Fonseca, 467 F. App'x at 261. Therefore, the Court finds that Defendants' nonresponse to Plaintiff's pretrial request did not prevent Plaintiff from timely filing his claim.
In sum, the Court finds it unnecessary to make a judicial determination as to whether Plaintiff's claims in arbitration should be deemed void or waived, since conditions precedent to arbitration and the interpretation of the Arbitration Agreement are for the arbitrator to decide, and Plaintiff's equitable concerns can be remedied by staying the current proceedings. Accordingly, the Court recommends staying the current proceeding pending arbitration.
IV. CONCLUSION
For the foregoing reasons, the Court finds that Plaintiff is not a "transportation worker" exempt from arbitration. The Court also finds that Defendants have not substantially invoked the judicial process to Plaintiff's detriment so as to waive their right to arbitrate. Further, the Court finds that the fees imposed in the Arbitration Agreement are not substantively unconscionable and do not void the Arbitration Agreement. Finally, the Court finds that Plaintiff's request, for this Court to determine that his claim is not void, is better addressed by staying the current proceedings pending arbitration.
Accordingly, the Court RECOMMENDS that Defendant's Motion to Compel Arbitration and to Abate Proceedings Pending Arbitration be GRANTED. The Court FURTHER RECOMMENDS that the proceedings be STAYED until resolution of the arbitration proceedings.
SIGNED and ENTERED this 16th day of March, 2021.
/s/ _________
ANNE T. BERTON
UNITED STATES MAGISTRATE JUDGE
NOTICE
FAILURE TO FILE WRITTEN OBJECTIONS TO THE PROPOSED FINDINGS, CONCLUSIONS AND RECOMMENDATIONS CONTAINED IN THE FOREGOING REPORT, WITHIN FOURTEEN DAYS OF SERVICE OF SAME, MAY BAR DE NOVO DETERMINATION BY THE DISTRICT JUDGE OF AN ISSUE COVERED HEREIN AND SHALL BAR APPELLATE REVIEW, EXCEPT UPON GROUNDS OF PLAIN ERROR, OF ANY UNOBJECTED-TO PROPOSED FACTUAL FINDINGS AND LEGAL CONCLUSIONS AS MAY BE ACCEPTED OR ADOPTED BY THE DISTRICT COURT.