Wolford v. Flint Trading, Inc. et al
ORDER granting in part and denying in part 11 Defendants Motion To Dismiss And Compel Arbitration. it is FURTHER ORDERED that the parties SHALL SUBMIT Wolfords claims to arbitration in Greensboro, North Carolina, and such arbitration shall proc eed in accordance with the governing rules of the American Arbitration Association. It is FURTHER ORDERED that this action is STAYED until arbitration concludes. The motion is DENIED to the extent that the Defendants seek dismissal of this action, by Judge Wiley Y. Daniel on 7/30/2014.(evana, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior Judge Wiley Y. Daniel
Civil Action No. 13-cv-02835-WYD-CBS
STEPHEN P. WOLFORD,
FLINT TRADING, INC., a North Carolina corporation, and
ENNIS PAINT, INC., a Texas Corporation, d/b/a Ennis-Flint and d/b/a Ennis Traffic
THIS MATTER is before the Court on Flint Trading, Inc. and Ennis Paint, Inc.’s
Motion To Dismiss And Compel Arbitration [ECF No. 11]. For the reasons stated below,
the motion is GRANTED IN PART and DENIED IN PART.
On October 17, 2013, plaintiff, Stephen P. Wolford, filed this suit against
defendants, Flint Trading, Inc. and Ennis Paint, Inc. (collectively “the Defendants”),
alleging the following claims arising out of Wolford’s termination and the Defendants’
alleged failure to properly pay employment bonuses: (1) violation of the Colorado Wage
Claim Act, COLORADO REVISED STATUTES § 8-4-109, et seq.; (2) violation of the Fair
Labor Standards Act, 29 U.S.C. § 201, et seq.; (3) wrongful discharge in violation of
public policy; (4) breach of contract; (5) unjust enrichment; (6) conversion; and, (7)
On June 8, 1998, defendant, Flint Trading, Inc. (“Flint”), hired plaintiff, Stephen P.
Wolford, as a sales representative. Wolford received multiple bonuses and pay
increases and was eventually promoted to Regional Sales Manager in 2000. On April
2, 2012, Flint and defendant, Ennis Paint, Inc. (“Ennis”), merged and began doing
business as Flint-Ennis. After the merger, Wolford alleges that the Defendants failed to
properly pay him bonuses. Wolford inquired as to why he was not receiving his
bonuses to multiple persons, including Regional Sales Director, Kirk Ebert. After Ebert
notified Wolford that he would not receive a bonus for a specified portion of his sales,
Wolford sent an email to Bernadette Young, a Human Resources representative,
regarding the Defendants’ failure to pay him bonuses. Wolford alleges that the
Defendants terminated him within thirty minutes of him sending the email to Young.
On November 18, 2013, the Defendants filed a Motion To Dismiss And Compel
Arbitration [ECF No. 11] arguing that this Court lacks subject matter jurisdiction over
Wolford’s claims because the arbitration clause in the Employment Agreement (“the
Agreement”) [ECF No. 11-1] between Flint and Wolford mandates that all claims arising
out of the Agreement “shall be settled by arbitration . . . ” ECF No. 11-1, p. 9, § 14.
Wolford argues that: (1) his claims are not subject to the Agreement’s arbitration clause
because he terminated the Agreement by letter on December 3, 2013; and, (2) Ennis
cannot demand arbitration because he is not a party to the Agreement.
A. The Defendants’ Motion To Dismiss And Compel Arbitration [ECF No. 11]
The Defendants request that I compel the parties to arbitrate Wolford’s claims
pursuant to the Agreement’s arbitration clause.
The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., represents the strong
federal public policy favoring arbitration. Vaden v. Discover Bank, 556 U.S. 49, 58
(2009) (quotation marks and internal citations omitted) (“In 1925, Congress enacted the
FAA [t]o overcome judicial resistance to arbitration, and to declare a national policy
favoring arbitration of claims that parties contract to settle in that manner”). Pursuant to
§ 2 of the FAA:
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, or the refusal to perform the whole or
any part thereof, or an agreement in writing to submit to
arbitration an existing controversy arising out of such a
contract, transaction, or refusal, shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract.
(emphasis added). Thus, the FAA governs contracts involving commerce. The FAA
“reaches not only the actual physical interstate shipment of goods but also contracts
relating to interstate commerce.” Comanche Indian Tribe of Okla. v. 49, L.L.C., 391 F.3d
1129, 1132 (10th Cir. 2004) (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388
U.S. 395, 401 n.7 (1967)). Wolford, a Colorado resident, alleges that Flint, a North
Carolina for-profit corporation, and Ennis, a Texas for-profit organization, failed to
properly pay him employment bonuses and terminated him in violation of public policy.
Wolford’s claims arise from the Agreement executed by Flint and himself, which
undoubtedly involves interstate commerce. Thus, the Agreement’s arbitration clause is
governed by the FAA.
“The question whether the parties have submitted a particular dispute
to arbitration, i.e., the ‘question of arbitrability,’ is ‘an issue for judicial determination
unless the parties clearly and unmistakably provide otherwise.’” Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT&T Techs., Inc. v. Commc’ns
Workers of Am., 475 U.S. 643, 649 (1986)). The Agreement does not contain any
language evidencing the parties’ intent to arbitrate the issue of arbitrability. Thus, I must
determine whether to compel arbitration of all or any of Wolford’s claims against the
Defendants. In resolving this question, I follow the three part inquiry set forth by the
United States Court of Appeals for the Tenth Circuit in Cummings v. FedEx Ground
Package Sys., 404 F.3d 1258, 1261 (10th Cir. 2005). In Cummings, the Tenth Circuit
First, recognizing there is some range in the breadth of
arbitration clauses, a court should classify the particular
clause as either broad or narrow. Next, if reviewing a narrow
clause, the court must determine whether the dispute is over
an issue that is on its face within the purview of the clause,
or over a collateral issue that is somehow connected to the
main agreement that contains the arbitration clause. Where
the arbitration clause is narrow, a collateral matter will
generally be ruled beyond its purview. Where the arbitration
clause is broad, there arises a presumption of arbitrability
and arbitration of even a collateral matter will be ordered if
the claim alleged implicates issues of contract construction
or the parties’ rights and obligations under it.
Cummings, 404 F.3d at 1261 (quoting Louis Dreyfus Negoce S.A. v. Blystad Shipping &
Trading Inc., 252 F.3d 218, 224 (2d Cir. 2001)). A broad arbitration clause is one that
“refer[s] all disputes arising out of a contract to arbitration . . . ” McDonnell Douglas
Finance Corp. v. Penn. Power & Light Co., 858 F.2d 825, 832 (2d Cir. 1988) (citations
omitted). In contrast, a narrow arbitration clause limits arbitration to specific disputes.
Here, the Agreement’s arbitration clause states, in pertinent part, “[a]ny controversy or
claim arising out of or relating to this Agreement, or its breach, shall be settled by
arbitration in the City of Greensboro, North Carolina in accordance with the then
governing rules of the American Arbitration Association.” ECF No. 11-1, p. 9, § 14.
Such language is consistent with a broad arbitration clause and I will therefore apply the
presumption of arbitrability applicable to broad arbitration provisions. See Brown v.
Coleman Co., 220 F.3d 1180, 1184 (10th Cir. 2000) (holding that an arbitration clause
covering “all disputes or controversies arising under or in connection with this
Agreement” is “the very definition of a broad arbitration clause as it covers not only
those issues arising under the employment contract, but even those issues with any
connection to the contract”).
1. Initial Matter
Wolford argues that the Defendants’ actions entitle him to exemplary damages.
Wolford then argues that because he is entitled to exemplary damages and because
Colorado state law precludes an award of exemplary damages in arbitration
proceedings, arbitration is inappropriate. See COLORADO REVISED STATUES § 13-21102(5) (“Unless otherwise provided by law, exemplary damages shall not be awarded in
administrative or arbitration proceedings, even if the award or decision is enforced or
approved in an action commenced in court”). I disagree.
The plaintiff in Willingham v. Omaha Woodmen Life Ins. Soc’y, 2009 U.S. Dist.
LEXIS 73411 (D. Colo. Aug. 19, 2009), posited an argument similar to Wolford’s.
Specifically, the plaintiff argued that “because he is requesting exemplary damages on
the bad faith claim, and because C.R.S. § 13-21-102(5) prevents arbitration tribunals
from awarding exemplary damages, he is entitled to have at least the bad faith claim
heard by a jury.” 2009 U.S. Dist. LEXIS 73411 at *2. While noting that the FAA
governed the arbitration clause at issue, the Court stated that the plaintiff failed to
provide any authority supporting his position and held that “the Plaintiff is free to pursue
all his claims and requested remedies, including exemplary damages, in an arbitral
forum.” Id. at *4. The court in Pyle v. Securities U.S.A., Inc., 758 F. Supp. 638, 639 (D.
Colo. Mar. 8, 1991), came to a similar conclusion when it stated that “[b]ecause there
has been no showing that the parties agreed that Colorado arbitration law should
govern in this FAA action, Colo. Rev. Stat. § 13-21-102(5) does not apply.” The FAA
governs the Agreement’s arbitration clause. Therefore, Colorado state law will not
dictate the outcome of any issue regarding arbitration under the Agreement. Cf. Volt
Info. Scis. V. Bd. of Trs. 489 U.S. 468, 479 (1989) (“Where, as here, the parties have
agreed to abide by state rules of arbitration, enforcing those rules according to the
terms of the agreement is fully consistent with the goals of the FAA . . . ”). As such,
Wolford’s request for exemplary damages does not preclude arbitration.
Upon reading the parties’ briefs, three issues regarding arbitration are before me:
(1) whether the Agreement’s arbitration clause survived Wolford’s termination of the
Agreement on December 3, 2013; (2) if the arbitration clause survived, what claims are
arbitrable; and, (3) whether Ennis, as a non-signatory of the Agreement, can invoke the
Agreement’s arbitration clause.
a. Whether the Arbitration Clause Survived Wolford’s Termination of
Pursuant to § 18(a) of the Agreement, “[t]he Employee or the Company may
voluntarily elect to terminate this Agreement at any time provided that the party electing
to terminate must deliver to the other party fifteen (15) days written notice of such
termination.” ECF No. 11-1, p. 10. § 18(a). On November 20, 2013, Wolford sent a
letter to Flint stating that “I, Stephen P. Wolford, personally and through my counsel, do
hereby provide my Notice to Terminate The Agreement in writing to the Company’s
principal office, effective in fifteen (15) days of this mailing, on or before December 3,
2013.” ECF No. 13-3, p. 1, ¶ 1. Wolford also states in the letter that due to his express
termination of the Agreement, “the Arbitration Clause in Section 14 shall be null and
void.” Id. at ¶ 2. Wolford argues that his November 20, 2013 letter terminated the
Agreement and therefore he is not bound by the Agreement’s arbitration clause. I
The Tenth Circuit has stated that:
Under the federal common law of arbitrability, an arbitration
provision in a contract is presumed to survive the
expiration of that contract unless there is some express
or implied evidence that the parties intend to override
this presumption: “In short, where the dispute is over a
provision of the expired agreement, the presumptions
favoring arbitrability must be negated expressly or by
clear implication.” Nolde Bros., Inc. v. Local No. 358,
Bakery & Confectionery Workers Union, 430 U.S. 243, 255,
51 L. Ed. 2d 300, 97 S. Ct. 1067 (1977). Thus, when a
dispute arises under an expired contract that contained a
broad arbitration provision, courts must presume that the
parties intended to arbitrate their dispute. This is so even if
the facts of the dispute occurred after the contract
expired. See id. (holding that claims for severance pay by
workers who were discharged after their collective
bargaining agreement expired were subject to the continuing
force of the prior arbitration clause). The presumption in
favor of continuing arbitrability, however, disappears in
either of two situations: first, if the parties express or
clearly imply an intent to repudiate post-expiration
arbitrability, and second, if the dispute cannot be said to
arise under the previous contract. See id. at 25455; United Food & Commercial Workers Int’l Union v. Gold
Star Sausage Co., 897 F.2d 1022, 1026 (10th Cir.
1990); see also Primex Int’l Corp. v. Wal-Mart Stores, Inc.,
89 N.Y.2d 594, 679 N.E.2d 624, 626, 657 N.Y.S.2d 385
(N.Y. 1997) (holding that commercial disputes relating to two
expired contracts were arbitrable, but any portion of the
disputes relating to the last contract between the parties,
which lacked an arbitration clause, was not arbitrable).
Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 781 (10th Cir. 1998)
(emphasis added). Pursuant to the Tenth Circuit’s statement in Riley, I must proceed
under the presumption that the Agreement’s arbitration clause survived Wolford’s
termination of the Agreement. There are two ways to defeat this presumption: (1) there
must be evidence that the parties expressly or clearly implied an intent to repudiate the
arbitration clause; and, (2) the dispute at issue does not arise under “the previous
contract.” Id. Because there is only one contract at issue, i.e., the Agreement, the
second ground for defeating the presumption does not apply in this case. Thus, in order
to defeat the presumption that the arbitration clause survived Wolford’s termination of
the Agreement, there must be evidence that the parties expressly or clearly implied an
intent to repudiate the arbitration clause.
i. Intent to Repudiate the Arbitration Clause
The law under Riley is clear, the “parties” must expressly indicate or clearly
imply their intention to repudiate the arbitration clause. This language contemplates
action by both parties. Here, there is only unilateral action: Wolford’s express
repudiation of the arbitration clause. There is no evidence before me that the
Defendants responded to Wolford’s repudiation by expressly indicating their intent to
repudiate the arbitration. In fact, there is no evidence before me that indicates the
Defendants even responded to Wolford’s termination letter. Thus, under Riley, the
parties did not expressly indicate or clearly imply their intent to repudiate the arbitration
clause. Therefore, the arbitration clause survived Wolford’s termination of the
This conclusion does not reward the Defendants’ silence. Whether the
Defendants’ silence was calculated or not, their present opposition to repudiation sheds
some light on their probable response to Wolford’s termination letter had they indeed
responded. Further, Flint drafted the Agreement and chose to include an arbitration
clause. This directly evidences Flint’s desire to avoid judicial proceedings. Mindful of
the strong federal policy favoring arbitration, this is an appropriate conclusion. Moses H.
Cone Mem’l Hops. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (citations
omitted) (“The Arbitration Act establishes that, as a matter of federal law, any doubts
concerning the scope of arbitrable issues should be resolved in favor of arbitration,
whether the problem at hand is the construction of the contract language itself or an
allegation of waiver, delay, or a like defense to arbitrability”).
b. Arbitrable Claims
“[T]he policy of the Arbitration Act requires a liberal reading of arbitration
agreements . . . ” Moses H. Cone Mem’l Hosp., 460 U.S. at 23 n.27. “[A]ny doubts
concerning the scope of arbitrable issues should be resolved in favor of arbitration . . . ”
Id. at 24-25. As previously noted, the Agreement’s arbitration clause is broad. “When a
contract contains a broad arbitration clause, matters that touch the underlying contract
should be arbitrated.” Brown, 220 F.3d at 1184. With this understanding, I turn to
whether Wolford’s claims are arbitrable.
The substance of Wolford’s seven claims is that the Defendants failed to pay
bonuses and commissions owed to Wolford and that the Defendants’ termination of
Wolford is against public policy because it was in retaliation for Wolford questioning the
Defendants’ failure to pay the bonuses and commissions. It is clear that Wolford’s
termination arises out of the Agreement. Regarding bonuses and commission, Wolford
argues that the “commission and bonus compensation plans were not contemplated by
The Agreement in 1998, they in no way arise out of The Agreement which provides Mr.
Wolford with a base salary and they say nothing about bonuses or commissions in any
way.” ECF No. 13, p. 8, ¶ 3. I agree with Wolford that the Agreement does not
expressly mention bonuses or commission. However, that fact does not preclude a
finding that a dispute regarding bonuses and commission is not arbitrable. Bonuses
and commission are part and parcel to an employee’s salary, especially in sales.
Further, the Agreement provides that Wolford’s salary would be renegotiated every
year. ECF No. 11-1, p. 4, § 3 / p. 5, § 3. Wolford’s bonuses and commission on sales is
undoubtedly included in these annual renegotiations. Thus, I find that the any claim
arising from the dispute regarding Wolford’s bonuses and commission “touch[es]” the
Agreement and is therefore arbitrable. Brown, 220 F.3d at 1184. I therefore conclude
that all of Wolford’s claims are arbitrable under the Agreement.
c. Whether Ennis, as a Non-Signatory of the Agreement, Can Invoke
the Agreement’s Arbitration Clause
Arbitration arises from a contract between parties, and therefore “a party cannot
be forced to arbitrate any issue he has not agreed to submit to arbitration.” Commun.
Workers of Am. v. Avaya, Inc., 693 F.3d 1295, 1300 (10th Cir. 2012) (citations omitted).
However, “[a] non-signatory to an arbitration agreement may be bound to arbitrate
under general contract law and agency principles.” 31-903 MOORE’S FEDERAL PRACTICE
– Civil § 903.06.
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There is no dispute that Wolford and Flint are the only signatories to the
Agreement. The Defendants argue that Ennis, a non-signatory to the Agreement, may
invoke the Agreement’s arbitration clause under the doctrine of equitable estoppel. This
Court recognizes the doctrine of equitable estoppel as a vehicle to compel nonsignatories to arbitrate with signatories. Adams v. ModernAd Media, LLC, 2013 U.S.
Dist. LEXIS 25263, *14 (D. Colo. Feb. 25, 2013); GATX Mgmt. Servs. LLC v. Weakland,
171 F. Supp. 2d 1159, 1166-67 (D. Colo. Nov. 14, 2001); Cherry Creek & Party Shop,
Inc. v. Hallmark Mktg. Corp., 176 F. Supp. 2d 1091, 1098-99 (D. Colo. Dec. 24, 2001).
In Cherry Creek Card & Party Shop, Inc., Judge Babcock relied on a case from the
United States Court of Appeals for the Second Circuit to explain equitable estoppel in
the arbitration context. Judge Babcock stated:
As the Second Circuit explained, there are two theories
of equitable estoppel in the arbitration context. First, courts
have held non-signatories to an arbitration clause when the
non-signatory knowingly exploits the agreement containing
the arbitration clause despite having never signed the
agreement. SeeThomson-CSF, S.A. v. Am. Arbitration
Ass’n, 64 F.3d 773, 778 (2d Cir. 1995). Second, courts have
bound a signatory to arbitrate with a non- signatory “at the
nonsignatory’s insistence because of ‘the close relationship
between the entities involved, as well as the relationship of
the alleged wrongs to the nonsignatory’s obligations and
duties in the contract . . . and [the fact that] the claims were
intimately founded in and intertwined with the underlying
contract obligations.’” Id. at 779 (internal quotation marks
omitted) (quoting Sunkist Soft Drinks, Inc. v. Sunkist
Growers, Inc., 10 F.3d 753, 757 (11th Cir. 1993) (quoting
McBro Planning & Dev. Co. v. Triangle Elec. Const. Co., 741
F.2d 342, 344 (7th Cir. 1984)).
176 F. Supp. 2d at 1098. Judge Babcock further stated that “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
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nonsignatory and one or more of the signatories to the contract.” Id. Wolford alleges all
seven of his claims against both Flint and Ennis. All seven of Wolford’s claims arose
after Flint and Ennis merged and began doing business as Ennis-Flint. In fact,
according to Wolford’s allegations in his Complaint [ECF No. 1], the merger created the
conflict which forms the basis of this lawsuit. As such, I find that Wolford alleges
“substantially interdependent and concerted misconduct” by both Flint and Ennis such
that Ennis, a non-signatory to the Agreement, may enforce the Agreement’s arbitration
clause and join in the arbitration. Cherry Creek Card & Party Shop, Inc., 176 F. Supp.
2d at 1098.
B. Dismissal or Stay
Under the FAA, when a district court decides an issue is “referable to arbitration,”
the district court “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 . . . ” 9
U.S.C. § 3. In their Motion To Dismiss And Compel Arbitration [ECF No. 11], the
Defendants “request that the Court dismiss this case and order arbitration of Wolford’s
claims.” ECF No. 11, p. 7, ¶ 3. In the Defendants’ Reply To Plaintiff’s Response To
Defendants’ Motion To Dismiss And Compel Arbitration [ECF No. 14], the Defendants
“ask the court to dismiss or stay this case and compel plaintiff to arbitrate his claims.”
ECF No. 14, p. 8, ¶ 4 (emphasis added). While the Defendants’ original request was
that I dismiss this action, they subsequently request that I dismiss or stay this action.
The FAA’s text is clear, upon a party’s application for a stay, I must stay the action until
arbitration has been held in accordance the parties’ agreement. Thus, this action is
STAYED until arbitration concludes.
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After careful consideration of the matter before this Court, it is
ORDERED that the Defendants’ Motion To Dismiss And Compel Arbitration [ECF
No. 11] is GRANTED IN PART and DENIED IN PART.
The motion is GRANTED to the extent that the Defendants seek an Order from
this Court compelling arbitration of all Wolford’s claims and a stay pending arbitration.
As such, it is
FURTHER ORDERED that the parties SHALL SUBMIT Wolford’s claims to
arbitration in Greensboro, North Carolina, and such arbitration shall proceed in
accordance with the governing rules of the American Arbitration Association. It is
FURTHER ORDERED that this action is STAYED until arbitration concludes.
The motion is DENIED to the extent that the Defendants seek dismissal of this
Dated: July 30, 2014.
BY THE COURT:
/s/ Wiley Y. Daniel
Wiley Y. Daniel
Senior U. S. District Judge
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