Alvarez v. Emergency Site Protection, LLC et al

Western District of Texas, txwd-5:2018-cv-01298

MOTION to Compel Arbitration by Sanchez Oil & Gas Corporation. Motions referred to Judge Elizabeth S. Chestney.

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IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION JOSUE ALVAREZ, § Individually and on behalf of all others § similarly situated, § § Plaintiff, § § v. § CASE NO. 5:18-cv-01298-FB-ESC § GRYPHON HOLDCO, LLC, and § SANCHEZ OIL & GAS CORPORATION, § § Defendants. § DEFENDANT SANCHEZ OIL & GAS CORPORATION'S MOTION TO COMPEL ARBITRATION Defendant Sanchez Oil & Gas Corporation ("Sanchez") files this Motion to Compel Arbitration in the above-captioned action. Because the arguments and authorities cited therein are equally applicable to Sanchez, Sanchez joins in, adopts, and incorporates by reference in its entirety, including all exhibits, for all purposes, Defendant Gryphon Holdco, LLC's ("Gryphon") Motion to Dismiss and Compel Arbitration (ECF No. 30) and its Reply in Support of its Motion to Dismiss and to Compel Arbitration (ECF No. 32). As such, Sanchez moves to compel arbitration of all of Plaintiffs' claims pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et. seq., and the arbitration agreements executed by Plaintiffs. I. RELEVANT PROCEDURAL HISTORY Named Plaintiff Josue Alvarez – individually and on behalf of all opt-in Plaintiffs and others similarly situated – filed his Original Collective Action Complaint on December 11, 2018 (ECF No. 1) and the First Amended Collective Action Complaint (ECF No. 25) on April 26, 2019. On May 23, 2019, Defendant Gryphon Holdco, LLC ("Gryphon") filed its Motion to Dismiss and 1 Compel Arbitration (ECF No. 30). In response, Plaintiffs did not contest the arbitrability of Plaintiffs' claims but did allege that certain provisions of the contracts in which Plaintiffs' arbitration agreements are found are unconscionable and, in turn, asked the Court to strike those provisions. See Pl.'s Resp. to Def. Gryphon Holdco, LLC's Mot. to Dismiss and Compel Arbitration (ECF No. 31). In its Reply in Support of its Motion to Compel Arbitration (ECF No. 32), Defendant Gryphon opposed Plaintiff's request that the Court strike and sever the allegedly unconscionable provisions. These motions are currently pending before the Court. On June 17, 2019, Defendant Sanchez was served with the First Amended Collective Action Complaint and now timely files this responsive pleading pursuant to this Court's Order (ECF No. 39). II. ARGUMENT AND AUTHORITIES The Arbitration Agreements1 mandate that Plaintiffs' claims be settled in arbitration. Indeed, Plaintiffs do not dispute that the arbitration provisions at issue constitute valid agreements to arbitrate nor do they contend that their claims do not fall within the scope of the arbitration provisions. (ECF No. 30, p. 5-6) Both statutes and the Texas Supreme Court have made clear that once a party seeking to compel arbitration establishes that (1) there is a valid agreement to arbitrate and (2) the claims raised are within the scope of the agreement, the trial court must compel arbitration. See FAA, 9 U.S.C. §§ 2, 4; Tex. Civ. Prac. & Rem. Code §§ 171.001, 171.002, 171.021; Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 531 (5th Cir. 2019). 1 Copies of the independent contractor agreements are attached as Exhibit A to Exhibit 1 of Defendant Gryphon's Motion to Compel Arbitration (ECF No. 30) (collectively, the "Arbitration Agreements"). 2 A. Plaintiffs Do Not Contest that Plaintiffs' Claims are Subject to Arbitration. When conferring with Plaintiffs' counsel over this Motion, Plaintiffs' counsel indicated that Plaintiffs do not dispute that their claims against both Sanchez and Gryphon are subject to arbitration pursuant to the Arbitration Agreements. Rather, Plaintiff's counsel stated, "Plaintiffs dispute only having to arbitrate without the Court first striking and severing the unconscionable provisions that prevent Plaintiffs from effectively vindicating their statutory rights in arbitration." E-mail from Cliff Gordon, Pls.' counsel, to Brian G. Patterson, Def. Sanchez's counsel (June 24, 2019), attached as Exhibit 1. Plaintiffs maintain that certain provisions of the Arbitration Agreements are unconscionable as set forth in Plaintiff's Response to Defendant Gryphon's Motion to Dismiss and Compel Arbitration (ECF No. 31). Those issues are fully briefed before the Court. See ECF Nos. 31-32. B. Equitable Estoppel Allows Sanchez to Compel Arbitration. Arbitration provisions like those in the Arbitration Agreements can mandate arbitration even for non-signatories if there are "allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract." See In re Merrill Lynch, Pierce, Fenner & Smith, Inc., 195 S.W.3d 807, 814 (Tex. App.—Dallas 2006, no pet.); see also Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 261–62 (5th Cir. 2014) (stating that U.S. Supreme Court precedent in "Arthur Andersen instructs that a non- signatory to an arbitration agreement may compel a signatory to that agreement to arbitrate based on, inter alia, equitable estoppel if the relevant state contract law so permits"). Plaintiffs allege in their Amended Complaint (ECF No. 25, ¶¶ 14, 33) that both Defendants are "joint employers," "have common ownership, oversight and control over. . . Plaintiff and the Putative Class Members," and "acted directly or indirectly in the interest of each other in relation to Plaintiff and 3 the Putative Class Members." These allegations plainly satisfy the "substantially interdependent and concerted misconduct" standard. Although Sanchez is not a signatory to the Arbitration Agreements, Sanchez may nevertheless move for arbitration under the Arbitration Agreements through the principle of equitable estoppel, especially when Gryphon is already party to the agreements at issue that contain the valid arbitration clauses. Id. C. Permitting this Lawsuit to Proceed Against Sanchez While Compelling Arbitration of Plaintiffs' Claims Against Defendant Gryphon Risks Conflicting Results and Jeopardizes the Integrity of Arbitration. In the event that the Court compels arbitration of Plaintiff's claims against Defendant Gryphon, this Court should not maintain this lawsuit as to Sanchez because such a parallel proceeding would risk conflicting results in arbitration and litigation. For example, Plaintiffs allege that both Defendants are "joint employers." (ECF No. 25, ¶ 14). Any ruling in this matter on the joint employer question – while Gryphon contends in arbitration "it was not an employer at all" – threatens to undermine arbitration. (ECF No. 32, p. 6). See Waste Mgmt., Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 345 (5th Cir. 2004) ("Allowing the instant litigation to proceed would risk inconsistent results, and 'substantially impact' the arbitration.") (remanding to district court for entry of a stay of litigation). Should this Court decline to compel Plaintiffs' claims to arbitration as to both Defendants, the ensuing arbitration(s) and this lawsuit would involve the same plaintiffs and the ultimate question of liability for unpaid wages under the Fair Labor Standards Act would also be the same, thereby presenting a clear risk of inconsistent results. III. CONCLUSION AND PRAYER Defendant Sanchez Oil & Gas Corporation respectfully requests that its Motion to Compel Arbitration be granted and that all claims against Defendants Sanchez Oil & Gas Corporation and 4 Gryphon Holdco, LLC be compelled to individual arbitration subject to the Court's ruling on Plaintiffs' request to strike the objectionable provisions of Plaintiffs' Arbitration Agreements. Dated: June 27, 2019 Respectfully submitted, AKIN GUMP STRAUSS HAUER & FELD LLP By: /s/ Brian G. Patterson Brian G. Patterson State Bar No. 24042974 bpatterson@akingump.com Scott L. Friedman State Bar No. 24087543 sfriedman@akingump.com 1111 Louisiana, 44th Floor Houston, Texas 77002-5200 Telephone: 713.220.5800 Telecopier: 713.236.0822 COUNSEL FOR DEFENDANT SANCHEZ OIL & GAS CORPORATION CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above and foregoing has been served in accordance with the Federal Rules of Civil Procedure on this 27th day of June, 2019. _/s/ Brian G. Patterson_________________ Brian G. Patterson 5