Christie v. Loomis Armored US, Inc.
ORDER Plaintiffs Objection 24 , to the Magistrate Judges Recommendation is SUSTAINED; Rejecting 21 Report and Recommendations of the The Magistrate, on the grounds first raised by the Plaintiff in her objection; Denying 8 Defendants Motion to Compel Arbitration; The Magistrate Judge shall promptly set this matter for a Scheduling Conference pursuant to Local Rule 16.1. by Judge William J. Martinez on 12/9/2011.(ervsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 10–cv–02011–WJM–KMT
LOOMIS ARMORED US, INC.,
ORDER SUSTAINING PLAINTIFF’S OBJECTION TO MAGISTRATE
JUDGE’S RECOMMENDATION AND DENYING DEFENDANT’S
MOTION TO COMPEL ARBITRATION
In this employment discrimination action, Defendant Loomis Armored U.S., Inc.
(“Defendant” or “Loomis”) filed a Motion to Compel Arbitration (“Motion”). (ECF No. 8.)
The Motion was referred to U.S. Magistrate Judge Kathleen M. Tafoya for a
recommended disposition. (ECF No. 20.) On March 21, 2011, Magistrate Judge
Tafoya issued her recommendation that the Motion be granted. (ECF No. 21.) Plaintiff
filed a timely objection to the Recommendation. (ECF No. 22.) These matters are fully
briefed and ready for review.
For the reasons set forth below, Plaintiff’s Objection is sustained, the Magistrate
Judge’s Recommendation is rejected, and Defendant’s Motion is denied.
I. LEGAL STANDARD
When a Magistrate Judge issues a recommendation on a dispositive matter,
Federal Rule of Civil Procedure 72(b)(3) requires that the district court judge “determine
de novo any part of the magistrate judge's [recommendation] that has been properly
objected to.” Fed. R. Civ. P. 72(b)(3). In conducting its review, “[t]he district court judge
may accept, reject, or modify the recommendation; receive further evidence; or return
the matter to the magistrate judge with instructions.” Id.
In her Recommendation, the Magistrate Judge found as follows: (1) Plaintiff’s
employment contract, which contains the disputed arbitration provision, was not a
contract of adhesion; (2) the terms of the arbitration provision were sufficient clear so as
to be enforceable; (3) Defendant’s failure to execute the agreement did not render it
unenforceable; (4) the condition precedent was sufficient clear; (5) the agreement was
not illusory; and (6) that Plaintiff had clearly and unambiguously waived her right to a
jury trial. (ECF No. 21.) Based on these findings, the Magistrate Judge recommended
that Defendant’s Motion to Compel Arbitration be granted.
The Court has reviewed the Recommendation and finds that it is well-reasoned
and thorough. The Court agrees with the findings and conclusions made therein.
However, in her Objection, Plaintiff raises a new argument that was not briefed by the
parties in the original motion papers and thus was not passed on by the Magistrate
Judge. Plaintiff now argues that, by the nature of her position as a driver for Defendant,
her employment contract is exempt from the FAA. Defendant contends that Plaintiff
waived the exemption argument or, if not waived, that Plaintiff is not exempt. The Court
will address each issue in turn below.
Defendant argues that Plaintiff is not permitted to raise a new argument at this
stage in the proceedings. While issues not raised before the Magistrate Judge are
generally treated as waived, see Marshall v. Chater, 75 F.3d 1421, 1426 (10th Cir.
1996), the Court has discretion to consider issues not raised below. Lyons v. Jefferson
Bank & Trust, 994 F.2d 716, 721 (10th Cir. 1993). The Tenth Circuit is more solicitous
of newly raised arguments when they challenge the authority of the court to take a
particular action or when they involve purely legal issues. See id. (appeals court’s
general rule that it does not consider new arguments raised on appeal does not apply
when argument challenges the court’s authority to hear a case); Grubb v. FDIC, 833
F.2d 222, 224 (10th Cir. 1987) (considering purely legal question raised for the first time
on appeal); Stahmann Farms, Inc. v. United States, 624 F.2d 958, 961 (1980)
(exercising discretion to consider new argument raised on appeal because it was a
purely legal question and no further factual development was necessary).
The new argument raised by Plaintiff in her Objection is whether her employment
contract is exempt from the FAA under Section 1 of that statute. (ECF No. 24 at 2-3.)
Section 1 of the FAA excludes “contracts of employment of seamen, railroad
employees, or any other class of workers engaged in foreign or interstate commerce.”
9 U.S.C. § 1. Plaintiff argues that Loomis is a transportation company and that, as a
driver for Loomis, she is a “worker engaged in . . . interstate commerce.” The parties do
not dispute any facts relevant to this inquiry. Thus, the question of whether Plaintiff’s
employment contract is exempt from the FAA is a question of statutory interpretation
and, therefore, a purely legal question. United Rentals Northwest, Inc. v. Yearout, 573
F.3d 997, 1001 (10th Cir. 2009) (“Statutory interpretation presents a question of law,
and the facts of an individual case will not affect a court’s interpretation of a statute.”).
Moreover, Plaintiff’s argument challenges the Court’s authority to remand this
case to arbitration. Defendant moves to compel arbitration under Section 4 of the FAA,
which gives the Court the authority to enforce an arbitration agreement and to order the
parties to arbitration in lieu of allowing the action to proceed in court. 9 U.S.C. § 4.
However, “a district court has no authority to compel arbitration under Section 4 where
Section 1 exempts the underlying contract from the FAA’s provisions.” Van Dusen v.
Swift Trans. Co., 654 F.3d 838, 843 (9th Cir. 2011); Harden v. Roadway Package Sys.,
Inc., 249 F.3d 1137, 1140 (9th Cir. 2001) (“The district court lacked authority to compel
arbitration because the FAA is inapplicable to [employees] who are engaged in
interstate commerce.”). Thus, there is a question as to whether the Court has the
authority to send this case to arbitration.
Because Plaintiff’s newly-raised argument is a purely legal issue that challenges
the Court’s authority to compel arbitration, the Court will consider it despite the fact that
Plaintiff failed to raise it before the Magistrate Judge.
Applicability of Section 1
As previously stated, Section 1 of the FAA exempts from the Act’s coverage
“contracts of employment of seamen, railroad employees, or any other class of workers
engaged in foreign or interstate commerce.” 9 U.S.C. § 1. In Circuit City Stores, Inc. v.
Adams, 532 U.S. 105 (2001), the Supreme Court held that this exemption “is limited to
transportation workers, defined, for instance, as those workers ‘actually engaged in the
movement of goods in interstate commerce.’” Id. at 112 (quoting Cole v. Burns Int'l
Security Servs., 105 F.3d 1465, 1471 (D.C. Cir. 1997)); see also McWilliams v. Logicon,
Inc., 143 F.3d 573, 576 (10th Cir. 1998) (Section 1 applies only to employment
contracts “of employees actually engaged in the channels of interstate commerce.”).
Though the Tenth Circuit has not addressed this issue since Circuit City was decided,
other courts have held that an employee invoking Section 1 must show: (1) their
employer is a transportation company; and (2) their particular position was involved with
interstate commerce. See Hill v. Rent-A-Center, 398 F.3d 1286, 1290 (11th Cir. 2005);
Palko v. Airborne Express, Inc., 372 F.3d 588, 593 (3d Cir. 2004) (court must determine
whether employee is “a ‘transportation worker’ in a ‘class of workers . . . engaged in . . .
commerce’ within the meaning of the FAA.”).
Defendant argues that Plaintiff has not shown that she ever delivered goods to
another state. (ECF No. 25 at 4.) However, an employee need not actually transport
goods across state lines to be part of a class of employees engaged in interstate
commerce. “Interstate commerce” includes not only goods that travel across state lines
but also “the intrastate transport of goods in the flow of interstate commerce.” Siller v.
L&F Distributors, Ltd., 109 F.3d 765 (5th Cir. 1997). In Palko, the plaintiff was
responsible for monitoring the performance of truck drivers that delivered packages
around the Philadelphia area. 372 F.3d at 590. There was no evidence that any of the
drivers under the plaintiff’s supervision delivered packages to another state. Id.
Despite the fact that Plaintiff was not an actual driver and that none of the drivers she
supervised actually crossed state lines, the Third Circuit held that the supervisor’s work
“was so closely related to interstate and foreign commerce as to be in practical effect
part of it.” Id. at 593. Thus, the supervisor was exempt from the FAA under Section 1.
Id. at 594.
In this case, Loomis is registered with the Department of Transportation and
identifies itself as engaged in the business of interstate transport of currency. (ECF No.
26-1.) Thus, the Court has little trouble finding that Loomis is a transportation
company. Unlike the supervisor in Palko, Plaintiff is a actually employed as a driver for
Defendant. Her job is to transport currency, a good that is undisputedly in the stream of
interstate commerce. Accordingly, the Court finds that Plaintiff belongs to a class of
workers engaged in interstate commerce and is therefore exempt from the FAA
pursuant to Section 1.
Defendant moves pursuant to Section 4 of the FAA for the Court to enter an
order compelling Plaintiff to arbitration. (ECF No. 8 at 8.) Because the Court has held
that Plaintiff’s employment contract is not subject to the FAA, the Court lacks the
authority to do so. Van Dusen, 654 F.3d at 843.
Accordingly, it is hereby ORDERED as follows:
Plaintiff’s Objection (ECF No. 24) to the Magistrate Judge’s Recommendation is
The Magistrate Judge’s Recommendation (ECF No. 21) is REJECTED on the
grounds first raised by the Plaintiff in her objection;
Defendant’s Motion to Compel Arbitration (ECF No. 8) is DENIED; and
The Magistrate Judge shall promptly set this matter for a Scheduling
Conference pursuant to Local Rule 16.1.
Dated this 9th day of December, 2011.
BY THE COURT:
William J. Martínez
United States District Judge
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