Alvarez v. Emergency Site Protection, LLC et al

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

MOTION to Dismiss and Compel Arbitration by GRYPHON HOLDCO, LLC. Motions referred to Judge Elizabeth S. Chestney.

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2 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION JOSUE ALVAREZ, § Individually and on behalf of all others § similarly situated, § § Plaintiff, § § vs. § NO. 5:18-CV-01298-FB-ESC § GRYPHON HOLDCO, LLC, and § SANCHEZ OIL & GAS CORPORATION, § § Defendants. § § DEFENDANT GRYPHON HOLDCO, LLC'S MOTION TO DISMISS AND COMPEL ARBITRATION Named Plaintiff Josue Alvarez and all opt-in plaintiffs (Dillon Silva, Steven Silva, Felipe Perez, Gennise Garcia, Heriberto Lope, Jr., and Francisco Perez) signed binding arbitration agreements requiring individual arbitration of their overtime claims against Defendant Gryphon Holdco, LLC ("Gryphon"). Accordingly, Gryphon respectfully moves this Court to compel the claims of all Plaintiffs to individual arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1, et. seq., ("FAA") and the arbitration agreements they each executed and, once so compelled, dismiss this action. I. PROCEDURAL HISTORY On December 11, 2018, Alvarez filed an Original Collective Action Complaint against Emergency Site Protection, LLC, Gryphon Oilfield Solutions, LLC, and Sanchez Oil & Gas Corporation to recover minimum wages, overtime wages and liquidated damages brought pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-19. (ECF No. 1). Alvarez 1 2 alleged that he was staffed to provide security services at Sanchez well sites by Gryphon and Site, but was misclassified as an independent contractor. (Id. at ¶¶ 20-23). Although he named Gryphon as a defendant, Alvarez did not serve Gryphon with the Original Complaint. (See Order to Show Cause, ECF No. 12). Between February 26 and April 16, 2019, while Gryphon still had not been served, six individuals opted-into the lawsuit by filing Notices of Filing Consents to Join.1 On April 26, 2019, Alvarez filed his First Amended Collective Action Complaint ("Amended Complaint"). (ECF No. 25). Gryphon was finally served with the Amended Complaint on May 2, 2019. (ECF No. 29). On the same day, Emergency Site Protection, LLC was dismissed without prejudice by stipulation of the parties. (ECF No. 28). Defendant Gryphon now timely responds to the Amended Complaint by filing this Motion seeking an order compelling individual arbitration and dismissing this lawsuit. II. RELEVANT FACTS A. Two Forms of Arbitration Agreements Before providing any services that form the basis of their overtime claims, each of the Plaintiffs entered into independent contractor agreements with one of two companies: former defendant Emergency Site Protection, LLC ("Site") or non-party Emergency Sphinx Protection, LLC ("Sphinx").2 See Ex. 1, Declaration of Ryan McMillan ("McMillan Dec."), ¶ 4, and Ex. A thereto, Site Contractor Agreements and Sphinx Independent Contractor Agreements. Gryphon is the corporate parent to Sphinx and a successor-in-interest to Site. Ex. 1, McMillan Dec. ¶3. Named Plaintiff Alvarez and opt-in plaintiffs Garcia, Dillon Silva, Francisco Perez3 entered into 1 On February 26, 2019, Gennise Garcia and Heriberto Lopez, Jr. filed a Notice of Consent (ECF. No. 8). On February 26, 2019, Dillon Silva and Steven R. Silva filed a Notice of Consent (ECF. No. 9). On March 5, 2019, Felipe Perez filed a Notice of Consent (ECF. No. 10). And on April 16, 2019, Francisco Perez filed a Notice Consent (ECF. No. 19). 2 Copies of each Plaintiff's respective agreements are attached collectively as Ex. A to Ex. 1, McMillan Dec. 3 Full names are used to differentiate opt-in plaintiffs Dillon Silva and Steven Silva, as well as Francisco Perez and Felipe Perez. 2 2 Independent Contractor Agreements with Sphinx. (See Ex. A to Ex. 1, McMillan Dec.). Opt-in plaintiffs Lopez, Felipe Perez, and Steven Silva entered into Contractor Agreements with Site. (See Ex. A to Ex. 1, McMillan Dec.). The Contractor Agreements with Site (the "Site Agreements") all contain mandatory arbitration provisions: Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be resolved by arbitration conducted by the Commercial Division of the American Arbitration Association and in accordance with the rules thereof, or in any other convenient forum agreed to in writing by the parties. The arbitrator shall be authorized to determine only those matters submitted to it… (See Ex. A to Ex. 1, McMillan Dec.). Likewise, the Independent Contractor Agreements with Sphinx (the "Sphinx Agreements") also contain mandatory arbitration provisions: (a) Applicable Rules. Any controversy or dispute between Contractor and Company…arising from or any way related to the performance of Services, this Agreement, or the termination thereof…shall be resolved exclusively by final and binding arbitration administered by JAMS under its Employment Arbitration Rules & Procedures and the JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness then applicable to the dispute." (b) All Disputes Must be Arbitrated. It is the intent of the Parties hereto that all disputes between them but be arbitrated, expressly including, but not limited to…(iii) any claim for compensation or benefits, including any claim under the Fair Labor Standards Act, or any other federal or state statute or regulation related to payment of wages[.] (Id.). Regardless of the form of agreement signed, Plaintiffs each signed, dated, and delivered a copy of the independent contractor agreements to Site or Sphinx prior to performing services through either of the companies. All of the arbitration agreements should be enforced and 3 2 Plaintiffs compelled to arbitrate their claims against Gryphon on an individual, rather than collective, basis. III. LEGAL STANDARD The FAA provides that "a written provision in any … contract ... involving commerce to settle by arbitration a controversy thereafter arising … 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 FAA reflects "a liberal federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). The FAA also provides that "[a] party aggrieved by the alleged failure, neglect, or refusal of another under a written agreement for arbitration may petition any United States district court…for an order directing that arbitration proceed in the matter provided for in such agreement." 9 U.S.C. § 4. Such petitions further the purpose of the FAA "to ensure that private arbitration agreements are enforced according to their terms." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011). Accordingly, the FAA mandates that courts "rigorously enforce" arbitration agreements. Am. Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013). As the Supreme Court has instructed lower courts, "due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause [must be] resolved in favor of arbitration." Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52, 62 (1995). Similarly, Texas law also contains "a strong presumption" in favor of arbitration. ASW Allstate Painting & Const. Co. v. Lexington Ins. Co., 188 F.3d 307, 310 (5th Cir. 1999). 4 2 IV. ARGUMENT Two elements determine whether a dispute should be compelled to arbitration: (1) whether there is an agreement to arbitrate; and (2) whether the agreement covers the dispute. Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 201 (5th Cir. 2016). Here, these threshold issues are satisfied and each of the Plaintiffs should be compelled to individual arbitration. A. Plaintiffs Agreed to Arbitrate. Ordinary Texas principles of contract law dictate whether the parties entered into valid, enforceable arbitration agreements. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); see also Ex. A to Ex. 1, McMillan Dec. (each agreement contains a Texas choice-of- law clause). As an initial matter, Texas law does not permit a party to deny a contract that he has signed, and that is more than is required for enforcement of an arbitration clause. See ReadyOne Indus., 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."); see also In re Halliburton co., 80 S.W.3d 566, 568-69 (Tex. 2002) (enforcing an arbitration program against an employee who continued working after receiving notice of the program); In re Advance PCS Health L.P., 172 S.W.3d 603, 606 (Tex. 2005) ("neither the FAA nor Texas law requires that arbitration clauses by signed, so long as they are written and agreed to by the parties"). Both the Sphinx Agreements and Site Agreements contain mutual arbitration obligations—in other words, in exchange for his agreement to arbitrate, each Plaintiff received a promise that claims against him would likewise be arbitrated. (See Ex. A to Ex. 1, McMillan Dec.). Under Texas law, this results in an enforceable agreement: a "mutual agreement to arbitrate claims provides sufficient consideration to support an arbitration agreement." Lizalde v. 5 2 Vista Quality Markets, 746 F.3d 222, 225 (5th Cir. 2014); see also Roche v. Triple Crown Consulting, LLC, No. A-14-CV-088 LY, 2014 WL 12884721, at *2 (W.D. Tex. Apr. 23, 2014) ("The Texas Supreme Court has made clear that mutual promises to submit all employment disputes to arbitration constitute sufficient consideration to support an arbitration agreement."). Thus, Plaintiffs entered into enforceable arbitration agreements. B. The Arbitration Provisions Apply to Plaintiffs' FLSA Claims. Nor is there any question that the arbitration provisions cover the claims asserted in this lawsuit. The Site Agreements (signed by opt-ins Lopez, Felipe Perez, and Steven Silva) extend to "[a]ny controversy or claim arising out of or relating to this Agreement, or the breach thereof[.]" (See Ex. A to Ex. 1, McMillan Dec.). The FLSA claims "arise out of or relate to" the Site Agreements because those agreements are the documents that define the working relationship between each Plaintiff and Defendants. See, e.g., Garza v. Thomas Jude Henry, P.C., No. SA-14-CA-877-OLG, 2014 WL 11332307, at *6 (W.D. Tex. Dec. 4, 2014), report and recommendation adopted sub nom. Garza v. Henry, No. SA-14-CA-877-OLG, 2015 WL 11669640 (W.D. Tex. Jan. 12, 2015) (finding the arbitration clause covering "all disputes, controversies, claims, or demands arising out of our professional contract or any other provision hereof" applicable to plaintiff's FLSA claims). Similarly, the Sphinx Agreements (signed by Alvarez, Garcia, Francisco Perez, and Dillon Silva) extend to "[a]ny controversy or dispute …arising from or any way related to the performance of Services, this Agreement, or the termination thereof," including but not limited to "any claim for compensation or benefits, including any claim under the Fair Labor Standards Act[.]" (Id.). Not only do Plaintiffs' FLSA claims "arise from" and "relate to" the Sphinx Agreements, FLSA claims are expressly covered. There is no credible argument that the 6 2 claims asserted in this action fall outside the scope of the arbitration clauses. See, e.g., Rodriguez v. John Eagle Sport City Motors, LLP, No. 3:14-CV-0334-D, 2014 WL 2587599, at *3 (N.D. Tex. June 10, 2014) (compelling FLSA claims to arbitration). C. No Federal Statute Precludes Arbitration. Once a court satisfies itself that the parties agreed to arbitrate their dispute, it must next consider whether any federal statute or policy renders the dispute non-arbitrable. Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003). A claim is subject to arbitration unless Congress intended to preclude the parties from waiving their judicial remedies. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S. Ct. 1647, 1652 (1991); Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656, 659 (5th Cir. 1995). Relevant to the Amended Complaint in this case, the Supreme Court has held that agreements to arbitrate employment disputes are enforceable. See Circuit City Stores, Inc. v. Adams, 121 S. Ct. 1302 (2001); Rojas v. TK Commc'ns, Inc., 87 F.3d 745, 747-48 (5th Cir. 1996). FLSA claims, such as those brought here, are also plainly arbitrable. Rodriguez, 2014 WL 2587599, at *3; Pacheco v. PCM Const. Servs., LLC, No. 3:12-CV-4057-L, 2014 WL 145147, at *6-8 (N.D. Tex. Jan. 15, 2014), aff'd sub nom. Pacheco v. PCM Const. Servs., L.L.C., 602 F. App'x 945 (5th Cir. 2015). Accordingly, no federal statute or policy renders Plaintiffs' FLSA claims non-arbitrable. Thus, Plaintiffs must be compelled to arbitration. D. Plaintiffs Waived the Right to Participate in a Collective Action. The arbitration provision in the Sphinx Agreements specifically provides that "Contractor expressly waives the right to participate in any class or collective action and, rather, expressly agrees that Contractor will resolve any dispute or claim in a single action between only Contractor and Company and Company's other Contractors, owners, members, 7 2 directors or officers." (See Ex. A to Ex. 1, McMillan Dec.). Such waivers are enforceable under the FAA. See AT&T Mobility, 563 U.S. at 348 (class arbitration without agreement by the parties is "inconsistent" with the FAA.) As such, named plaintiff Alvarez and opt-ins Garcia, Francisco Perez, and Dillon Silva should be compelled to arbitrate their claims on an individual basis. While the arbitration provision in the Site Agreements does not include an express class or collective action waiver, this makes the Site Agreements, at best, ambiguous as to whether class or collective arbitrations are permissible. And as the Supreme Court recently held, "[c]ourts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis." Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1419 (2019). Because the arbitration provision is silent, Plaintiffs who signed the Site Agreements cannot argue that there is any contractual basis for concluding that the parties agreed to class arbitration. Accordingly, opt-in plaintiffs Lopez, Felipe Perez, and Steven Silva should likewise be compelled to arbitrate their claims on an individual basis. Thus, regardless of which agreement is considered, all Plaintiffs have agreed to arbitrate their FLSA claims on an individual basis only. E. Plaintiffs Cannot Avoid Enforcement of the Arbitration Agreements by Non- Signatory Co-Defendant. Gryphon, although not a signatory to either the Site Agreements or Sphinx Agreements, is nevertheless entitled to compel arbitration of Plaintiffs' claims against it. Gryphon is the corporate parent to Sphinx and a successor-in-interest to Site.4 The strong federal policy in favor of arbitration requires reading arbitration agreements in favor of allowing non-signatories, like Gryphon, to compel arbitration. See Arthur Anderson, LLP v. Carlisle, 556 U.S. 624 (2009). Similarly, Texas law also contains "a strong presumption" in favor of arbitration. ASW Allstate Painting & Const. Co. v. Lexington Ins. Co., 188 F.3d 307, 310 (5th Cir. 1999) (citing Certain 4 Indeed, named plaintiff Alvarez alleges in his Amended Complaint that "Defendant ESP [i.e., Site] was purchased and wholly acquired and integrated into Defendant Gryphon." Am. Compl., ECF No. 25, § 30. 8 2 Underwriters at Lloyd's of London v. Celebrity, Inc., 950 S.W.2d 375, 378 (Tex.App.—Tyler 1996, writ dism'd w.o.j.)). Non-signatories to arbitration agreements can compel arbitration because the signatory should be equitably estopped from evading his arbitration agreement. In this case, equitable estoppel prevents Plaintiffs from making an end-run around their arbitration agreements by asserting their claims against a non-signatory defendant (Gryphon), rather than the entities that signed their respective agreements (Site and Sphinx). As the Fifth Circuit has held, the "application of equitable estoppel is warranted when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract." Grigson v. Creative Artists Agency L.L.C., 210 F.3d 524, 527 (5th Cir. 2000). "Otherwise the arbitration proceedings between the two signatories would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted." Id. Here, estoppel applies because the Plaintiffs assert their claims against all defendants, alleging that "Defendants are joint employers" and referring throughout the Amended Complaint to "Defendants" and their alleged conduct in violation of the FLSA. See Am. Compl, ECF No. 25, ¶ 14. Thus, not only have Plaintiffs alleged "substantially interdependent and concerted misconduct," they have alleged indistinguishable and identical misconduct by all defendants, signatories and nonsignatories alike. See, e.g., Amended Complaint, ECF No. 25, ¶ 3, ("Defendants improperly classified Plaintiff and the Putative Class Members as independent contractors."), and id. at ¶ 14 ("[a]ll Defendants are responsible, both individually and jointly, for compliance with all of the applicable provisions of the FLSA[.]"). Under Fifth Circuit and Texas law, then, Plaintiffs must be equitably estopped from avoiding arbitration with Gryphon. 9 2 Furthermore, Texas law provides that a non-signatory to a contract "may invoke the direct benefits estoppel exception to enforce an arbitration clause contained in a contract that contains other terms on which the signatory plaintiff must rely to prosecute its claims." Smith v. Kenda Capital, LLC, 451 S.W.3d 453, 458 (Tex. App. 2014) (citing VSR Fin. Servs., Inc. v. McLendon, 409 S.W.3d 817, 831 (Tex.App.-Dallas 2013, no pet.)). "This species of estoppel applies when a signatory's claim against a nonsignatory 'references or presumes the existence of the written agreement' containing the clause." Id. Here, Plaintiffs' FLSA claims presume the existence of their respective agreements because they are claiming that they were not properly compensated for the work they performed under those agreements. The Site Agreement specifically states: Company shall pay Contractor for the Services rendered under this Agreement as provided in the applicable SOW within 45 days of the receipt of Contractor's invoice for such Services. Contractor shall not be entitled to any other compensation for such project. (See Ex. A to Ex. 1, McMillan Dec.). Likewise, the Sphinx Agreement specifically states: Contractor shall be paid a fixed fee per hour worked as set forth in the attached Schedule 1, (the "Fees") payable on completion of the Services to the Company's satisfaction and upon the Contractor submitting an invoice to Company for the Services performed, whereupon Company shall pay Contractor the undisputed invoiced amount. Contractor shall not be entitled to any other compensation for such project. (Id.). If this Court were to allow the Plaintiffs to avoid the enforcement of the arbitration provisions with respect to the non-signatory Defendant, Gryphon, the strong federal policy in favor of arbitration would be thwarted. The Court should find, consistent 10 2 with the unambiguous language in the Site Agreements and Sphinx, that each Plaintiff is required to arbitrate his claims against Gryphon, and to do so on an individual basis only. V. CONCLUSION The strong policy of the FAA to enforce such arbitration agreements applies here. Named plaintiff Josue Alvarez and opt-in plaintiffs Dillon Silva, Steven R. Silva, Felipe Perez, Gennise Garcia, Heriberto Lopez, Jr., and Francisco Perez signed unambiguous and valid arbitration agreements covering the claims they are asserting in this lawsuit against Defendant Gryphon. They are required to arbitrate their claims on an individual basis only, and not as a collective action. The Court should not permit them to make an end-run around their contractual obligations to individually arbitrate their overtime claims by bringing a collective action against a non-signatory to their agreements. Rather, the Court should dismiss the Plaintiffs' claims and, to the extent they wish to pursue their claims against the defendants, order that they may do so individually and through arbitration. CHAMBERLAIN, HRDLICKA, WHITE, WILLIAMS & AUGHTRY By:/s/ Annette A. Idalski Annette A. Idalski Texas Bar No. 00793235 191 Peachtree Street, N.E. Thirty-Fourth Floor Atlanta, GA 30303-1747 Telephone: (404) 659-1410 Facsimile: (404) 659-1852 and Stephanie M. Gilliam Texas Bar No. 24083071 1200 Smith Street, Suite 1400 Houston, Texas 77002 Telephone: (713) 654-9608 11 2 Facsimile: (713) 658-2553 Attorneys for Defendant Gryphon Holdco, LLC CERTIFICATE OF SERVICE On May 23, 2019, I electronically submitted the foregoing document with the clerk of court for the U.S. District Court, Western District of Texas, using the electronic case filing system of the court. I hereby certify that I have served all counsel of record electronically. /s/ Annette A. Idalski 12