Williams v. All Web Leads, Inc.

Western District of Texas, txwd-5:2019-cv-00426

MOTION to Dismiss or, in the alternative, Compel Individual Arbitration by All Web Leads, Inc.

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION JOE WILLIAMS, Individually and § on Behalf of All Others Similarly § Situated § § Plaintiff, § § CIVIL ACTION NO. 5:19-cv-00426-DAE v. § § ALL WEB LEADS, INC. § § Defendant. § DEFENDANT'S MOTION TO DISMISS, OR IN THE ALTERNATIVE, MOTION TO STAY PROCEEDINGS, COMPEL INDIVIDUAL ARBITRATION, AND DISMISS CLASS-BASED CLAIMS Defendant All Web Leads, Inc. ("Defendant" or "AWL") moves the Court to dismiss or, in the alternative, stay this proceeding, compel arbitration of plaintiff Joe Williams's ("Plaintiff") claims on an individual basis—as provided for in the parties' arbitration agreement—and dismiss Plaintiff's class-based claims. In support thereof, Defendant respectfully shows the following: I. INTRODUCTION Plaintiff's Fair Labor Standards Act ("FLSA") and Texas common law claims must be decided through individualized arbitration because those claims are covered by a valid and enforceable written arbitration agreement. The arbitration agreement, in turn, is governed by the Federal Arbitration Act ("FAA"). This case arises out of the employment relationship between Plaintiff and his former employer, Defendant AWL; Plaintiff seeks to "recover unpaid wages, overtime wages, and other applicable penalties." As a result, this Court should enforce the agreement and compel Plaintiff to arbitrate his individual claims against Defendant. See Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019); Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199 (5th Cir. 2016). Defendant's Motion to Dismiss and Compel Arbitration Page 1 II. FACTUAL BACKGROUND On or about June 15, 2018, in conjunction with his commencement of employment, Plaintiff electronically signed an Employee Proprietary Information Agreement ("EPIA"). See Exhibit A-1 (EPIA); Exhibit A (Declaration of Kristie Douglas, hereafter "Douglas Decl."). The EPIA contains an agreement to arbitrate with Defendant "any dispute, claim or controversy concerning [Plaintiff's] employment" (the "Arbitration Agreement"). Specifically, the Arbitration Agreement states as follows: 11. (a) Arbitration. [….] I agree that any dispute, claim or controversy concerning my employment or the termination of my employment or any dispute, claim or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in Austin, Texas in accordance with the rules then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. To the extent permitted by law, the Company shall pay the administrative fees associated with the arbitration, except for the first $300.00 in administrative fees for any arbitration that is initiated by me, and each of us shall separately pay our counsel fees and expenses. See Ex. A-1, at p. 4. Defendant performed its obligations under the EPIA, and the EPIA is valid and binding. See Ex. A, Douglas Decl. All of Plaintiff's individual claims in this pending lawsuit stem from his employment with Defendant, and therefore fall within the scope of the Arbitration Agreement. Accordingly, Plaintiff is compelled to submit his individual claims in this lawsuit to arbitration. Additionally, because the Arbitration Agreement does not evidence the parties' mutual consent to class-based arbitration, under clear Supreme Court precedent, the arbitration must consist only of Plaintiff's individual claims, and his class-based claims must be dismissed. See Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019). Defendant's Motion to Dismiss and Compel Arbitration Page 2 III. THE FEDERAL ARBITRATION ACT The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1, et seq., provides in pertinent part: A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, . . . 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 applies to all transactions "involving commerce." 9 U.S.C. § 2. The phrase "involving commerce" in the FAA has been interpreted by the United States Supreme Court to mean "affecting commerce," and the phrase signals a congressional intent to extend the FAA to the limits of the Commerce Clause power. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273–74 (1995); Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003); see also In re Nexion Health at Humble, 173 S.W.3d 67, 69 (Tex. 2005) ("The FAA extends to any contract affecting commerce, as far as the Commerce Clause of the United States Constitution will reach."). Under the FAA, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp., 460 U.S. 1, 24–25 (1983). Indeed, district courts must defer to arbitration "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. . . doubts should be resolved in favor of coverage." United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83 (1960). Accordingly, to the extent any doubts exist as to whether Plaintiff's claim should be arbitrated under the Arbitration Agreement, this Court must resolve any such doubts in favor of arbitration. Here, the FAA applies because AWL quotes and sells auto and home insurance to consumers across the United States. See Ex. A, Douglas Decl. As a result, AWL's activities Defendant's Motion to Dismiss and Compel Arbitration Page 3 "affect commerce," and the Arbitration Agreement is covered by the FAA. Moreover, in deciding whether a dispute is subject to arbitration under the FAA, a court must determine whether a valid agreement to arbitrate exists, and, if so, whether the subject matter of the dispute is covered by the arbitration agreement. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83-84 (2002); Paine Webber, Inc. v. Chase Manhattan Private Bank (Switzerland), 260 F.3d 453, 462 (5th Cir. 2001); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001). Because the Arbitration Agreement is valid and enforceable and covers the subject matter of Plaintiff's claims against Defendant, Plaintiff's claims are subject to arbitration under the FAA. IV. ARGUMENT AND AUTHORITIES In the Fifth Circuit, "a district court lacks subject matter jurisdiction over a case and should dismiss it pursuant to Federal Rule of Civil Procedure 12(b)(1) when the parties' dispute is subject to binding arbitration." Gilbert v. Donahoe, 751 F.3d 303, 306 (5th Cir. 2014). District courts have the authority to compel arbitration under Section 4 and Section 206 of the Federal Arbitration Act, provided that a valid and enforceable arbitration agreement exists. See 9 U.S.C. §§ 4, 206. Under the FAA, written arbitration agreements in any contract involving commerce "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. "There is a strong presumption in favor of arbitration and the party seeking to invalidate an arbitration agreement bears the burden of establishing its invalidity." Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004) (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)). When faced with a motion to compel arbitration, courts routinely apply a two-step inquiry. First, the court examines whether the parties agreed to arbitrate the dispute in question. "This determination involves two considerations: (1) whether there is a valid agreement to arbitrate Defendant's Motion to Dismiss and Compel Arbitration Page 4 between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996). Second, courts analyze "whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims." Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 628 (1985). A. The Arbitration Agreement is Valid and Enforceable and Covers the Subject Matter of this Dispute. Whether the parties entered into a valid arbitration agreement turns on state contract law. Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 2012). Arbitration agreements between employers and their employees are broadly enforceable in Texas. In re Poly–Am., L.P., 262 S.W.3d 337, 348 (Tex. 2008). When an arbitration agreement is imposed during employment, as here, the question is whether the arbitration agreement was a valid modification of the terms of employment. Id. at 203. "To demonstrate a modification of the terms of at-will employment, the proponent of the modification must demonstrate that the other party: (1) received notice of the change; and (2) accepted the change." In re Halliburton Co., 80 S.W.3d 566, 568 (Tex. 2002). Here, it is indisputable that Plaintiff received the EPIA and signed the agreement, indicating his acceptance. Furthermore, there can be no dispute that the Arbitration Agreement covers Plaintiff's FLSA and Texas common-law-based wage claims. The Arbitration Agreement expressly covers "any dispute, claim or controversy concerning [Plaintiff's] employment." Ex. A-1. Plaintiff's claims, as pleaded, fall squarely within the scope of the Arbitration Agreement. As a result, the existence of a valid and enforceable arbitration agreement that covers the subject matter of this dispute cannot be denied. Defendant's Motion to Dismiss and Compel Arbitration Page 5 B. Federal Law Mandates that Plaintiff Be Required to Arbitrate His Claim. When an arbitration agreement is found to exist that is governed by the FAA, "[b]y its terms, the Act leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration … [.]" Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985). The FAA also provides for a stay of proceedings in district courts when an issue in the proceedings is referable to arbitration. 9 U.S.C. § 3. Where some, but not all, of a plaintiff's claims are arbitrable, a stay of judicial proceedings pending arbitration is appropriate. However, where, as here, all of Plaintiff's claims are arbitrable, a stay is not necessary, and the legal action should be dismissed. See, e.g., Trammell v. AccentCare, Inc., No. A-17-CV-1129-LY, 2018 WL 2925134, at *1 (W.D. Tex. June 11, 2018), report and recommendation adopted, No. A-17-CV- 1129-LY, 2018 WL 7288019 (W.D. Tex. Sept. 18, 2018); Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 678 (5th Cir. 1999); Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992). Accordingly, this Court should dismiss this lawsuit without prejudice and order Plaintiff to arbitrate his claims against AWL. C. The Arbitration Must Proceed as an Individual Action, Rather Than A Class or Collective Action. Where, as here, the parties did not explicitly consent to class- or collective-based arbitration, the Court should compel Plaintiff to arbitrate his claims on an individualized basis. A court cannot allow a party to be forced into a class arbitration proceeding to which it did not agree, because arbitration "is a matter of consent." Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 681–82 (2010). Specifically, the United States Supreme Court has held that, "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual Defendant's Motion to Dismiss and Compel Arbitration Page 6 basis for concluding that the party agreed to do so." Id. at 664. Moreover, the Supreme Court has directly stated that class arbitration is inconsistent with the FAA. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 342 (2011). Here, the Arbitration Agreement is silent on the matter of the parties' consent to class or collective arbitration; therefore, the Court must order individual— and not class or collective—arbitration. Critically, the Supreme Court's recent ruling in Lamps Plus makes it even more abundantly clear that this action must proceed as an individual arbitration of Plaintiff's claims. "Neither silence nor ambiguity" in whether or not an arbitration agreement provides for class-based arbitration "provides a sufficient basis for concluding that parties to an arbitration agreement agreed to undermine the central benefits of arbitration itself" in order to arbitrate claims on a class- wide basis. Lamps Plus, 139 S. Ct., at 1416-17. "Court may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis." Id., at 1419. Likewise, when an arbitration agreement is silent on that point, compelling individual arbitration is the correct course. Id., at 1412 (citing Stolt-Nielsen). Therefore, regardless of whether the Court dismisses the claim for lack of subject matter jurisdiction, or in the alternative, stays the federal court proceedings pending the outcome of the arbitration, the Supreme Court could not be more clear: Plaintiff's claims must proceed on an individual basis and his class- and collective-based claims must be dismissed. V. CONCLUSION AND PRAYER Defendant requests that this Court dismiss Plaintiff's lawsuit without prejudice and compel Plaintiff to arbitrate his claims on an individual basis in accordance with the terms of the Arbitration Agreement and applicable law. In the alternative, Defendant requests that this action be stated pending the resolutions of Plaintiff's individualized claim through binding arbitration. Defendant's Motion to Dismiss and Compel Arbitration Page 7 Dated May 16, 2019 Respectfully submitted, CORNELL SMITH MIERL BRUTOCAO BURTON, LLP 1607 West Avenue Austin, Texas 78701 Telephone: (512) 328-1540 Telecopy: (512) 328-1541 Steve Mierl- State Bar No. 00795529 smierl@cornellsmith.com Andrew J. Broadaway State Bar No. 24082332 abroadaway@cornellsmith.com By: /s/ Steve Mierl Steve Mierl ATTORNEYS FOR DEFENDANT CERTIFICATE OF SERVICE I hereby certify that on May 16, 2019, I electronically filed a true and correct copy of this document with the Clerk of the Court using the CM/ECF system, and will send notice of such filing to the following counsel of record: Anderson Alexander, PLLC Clif Alexander; Lauren Braddy; Alan Gordon; Carter Hastings 819 N. Upper Broadway Corpus Christi, Texas 78401 /s/ Andrew Broadaway Andrew Broadaway Defendant's Motion to Dismiss and Compel Arbitration Page 8