Coots v. Western Refining Retail, LLC
Filing
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MEMORANDUM OPINION AND ORDER by District Judge Judith C. Herrera; IT IS ORDERED that Defendant's Motion to Compel Arbitration and Dismiss or Stay Proceedings 4 is GRANTED and the case is STAYED PENDING RESOLUTION OF THE ARBITRATION PROCEEDING. (mjr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW MEXICO
MICHAEL COOTS,
Plaintiff,
v.
No. 1:17-cv-00838 JCH-LF
WESTERN REFINING RETAIL, LLC,
Defendant.
MEMORANDUM OPINION AND ORDER
On August 24, 2017, Defendant Western Refining Retail, LLC, filed a Motion to Compel
Arbitration and Dismiss or Stay Proceedings (ECF No. 4). The Court, having considered the
motion, briefs, argument, evidence, and applicable law, concludes that the motion should be
granted and this case should be stayed pending arbitration.
I.
BACKGROUND
Plaintiff Michael Coots is a former employee of Western Refining Southwest, Inc.,
(“Western Refining”) whose job supported retail convenience stores and gas stations owned and
co-operated by Defendant Western Refining Retail, LLC (“Western Retail”) a subsidiary of
Western Refining. Plaintiff began working for Western Refining in March 2008.
On June 13, 2014, Plaintiff executed a Mutual Agreement to Arbitrate Claims
(“Arbitration Agreement”) with Western Refining. In the letter describing the Arbitration
Agreement, Western Refining stated: “You do not have to sign this document. However, if you
do not sign it, you may not work for Western Refining.” Ex. A-2, ECF No. 4-1 at 4 of 9. Mr.
Coots understood that he would be fired if he did not sign the Arbitration Agreement. Aff. of
Michael Coots ¶ 3, ECF No. 6-1.
The Arbitration Agreement stated it is between the “Employee” and the “Company,”
defined as Western Refining Southwest, Inc., and its affiliated companies. Arbitration
Agreement 1, ECF No. 4-1. According to the terms of the agreement, the Company and the
Employee consented to
arbitration of any and all claims or controversies for which a court otherwise
would be authorized by law to grant relief in any way arising out of, relating to or
associated with the Employee’s employment with the Company, or its termination
(“Claims”), that the Company may have against the Employee or that the
Employee may have against the Company or against its officers, directors,
employees or agents in their capacity as such or otherwise. The Claims covered
by this Agreement include, but are not limited to, claims for wages or other
compensation due; … tort claims; claims for discrimination, including … based
on … age …; and claims for violation of any federal, state or other governmental
… statute ….
Id. The Arbitration Agreement states that it “can be modified or revoked only by a writing signed
by both parties.” Id. at 2.
Western Refining terminated Plaintiff’s employment on October 10, 2016. Plaintiff filed
a Complaint for Employment Discrimination on the Basis of Age, asserting two claims: age
discrimination under the New Mexico Human Rights Act and retaliatory discharge for reporting
safety concerns in the workplace. Compl., ECF No. 1-1. Western Refining removed the case to
federal court based on diversity jurisdiction and moved the Court to compel arbitration and
dismiss the case or stay proceedings. Plaintiff does not dispute that the contract involves
interstate commerce, and thus, that the Federal Arbitration Act, 9 U.S.C. §§ 1-16, (“FAA”)
applies. Plaintiff, however, argues that there was no consideration, so the Arbitration Agreement
is not a valid, binding contract.
II.
LEGAL ANALYSIS
The FAA makes agreements to arbitrate “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.
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Congress’s purpose in enacting the FAA was “to reverse the longstanding judicial hostility to
arbitration agreements that had existed at English common law and had been adopted by
American courts, and to place arbitration agreements upon the same footing as other contracts.”
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). The FAA has created a body
of federal substantive law establishing and regulating the duty to enforce arbitration agreements.
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985).
Arbitration agreements, however, may be invalidated by “generally applicable contract
defenses, such as fraud, duress, or unconscionability.” Rent-A-Center, West, Inc. v. Jackson, 561
U.S. 63, 68 (2010) (quoting Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). In
applying state law, a court may not construe an arbitration agreement differently from how it
otherwise construes non-arbitration agreements under state law. Avedon Engineering, Inc. v.
Seatex, 126 F.3d 1279, 1287 (10th Cir. 1997) (quoting Perry v. Thomas, 482 U.S. 483, 492 n.9
(1987)). In enacting the FAA, Congress did not intend to force parties to arbitrate in the absence
of an agreement, and therefore the “existence of an agreement to arbitrate is a threshold matter
which must be established before the FAA can be invoked.” Id. at 1286-87. When the parties
dispute the existence of a valid arbitration agreement, the presumption in favor of arbitration
disappears. Dumais v. American Golf Corp., 299 F.3d 1216, 1220 (10th Cir. 2002).
Courts generally will enforce agreements according to their terms, but “[a]rbitration
under the Act is a matter of consent, not coercion.” Volt Info. Sciences, Inc. v. Board of Trustees,
489 U.S. 468, 479 (1989). “[C]ourts should remain attuned to well-supported claims that the
agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that
would provide grounds for the revocation of any contract.” Gilmer, 500 U.S. at 33 (internal
quotations omitted).
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A. Consideration
Plaintiff argues there was a lack of consideration because he was already an employee of
Defendant at the time he signed the agreement. Defendant asserts that an employer’s mutual,
binding promise to submit claims to arbitration is valid consideration.
Under New Mexico law, a legally enforceable contract “requires evidence supporting the
existence of an offer, an acceptance, consideration, and mutual assent.” Piano v. Premier Distrib.
Co., 2005-NMCA-018, ¶ 6, 107 P.3d 11 (internal quotation marks omitted). “Consideration
consists of a promise to do something that a party is under no legal obligation to do or to forbear
from doing something he has a legal right to do.” Talbott v. Roswell Hosp. Corp., 2005-NMCA109, ¶ 16, 118 P.3d 194 (quoting Heye v. Am. Golf. Corp., 2003-NMCA-138, ¶ 12, 80 P.3d 495).
A promise of continued at-will employment, which places no constraints on an
employer’s future conduct, is illusory and is not consideration for an employee’s promise to
submit his claims to arbitration. Piano, 2005-NMCA-018, ¶ 8. In Piano, the New Mexico Court
of Appeals held that an arbitration agreement that gives an employer the unilateral right to
modify its terms is an illusory promise to arbitrate and does not amount to consideration. Id. ¶
14. Where, however, an employer has promised to arbitrate its claims and the agreement restricts
the employer’s right to modify or terminate the arbitration agreement upon the accrual of an
employee’s claim, the promise to arbitrate is consideration for the arbitration agreement. See
Sisneros v. Citadel Broadcasting Co., 2006-NMCA-102, ¶ 34, 142 P.3d 34. The Arbitration
Agreement in this case is binding on both parties and neither party may unilaterally modify its
terms. Consequently, consideration exists to support the validity Arbitration Agreement. See id.
B. Unconscionability
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In a heading in Plaintiff’s response, Plaintiff asserts the FAA does not compel arbitration
“when the Arbitration Agreement is Unconscionable.” Pl.’s Resp. 2, ECF No. 6. Plaintiff,
however, proceeded to argue that the agreement lacked consideration without providing
argument or authority on the issue of unconscionability. Defendant in its reply addressed only
the consideration issue.
Under New Mexico law, unconscionability is an affirmative defense to contract
enforcement, so the party asserting the defense bears the burden of persuading the factfinder that
the contract should be voided as unconscionable. Dalton v. Santander Consumer USA, Inc.,
2016-NMSC-035, ¶ 7, 385 P.3d 619. A court may render unenforceable a contract “when the
terms are unreasonably favorable to one party while precluding a meaningful choice of the other
party.” Id. ¶ 6. The Court is not insensitive to the fact that an employee faces great pressure to
sign a contract under the threat of termination of his employment. Nevertheless, despite the
passing reference to unconscionability, Plaintiff has not adequately raised the affirmative defense
of unconscionability. Even if adequately raised, Plaintiff did not meet his burden of persuasion
given the lack of argument and authority on the issue. The Court will therefore not address the
merits of any unconscionability defense.
C. Remedy
The FAA states that, once a court determines that the parties have a valid arbitration
agreement and that the parties' dispute falls within that arbitration agreement's scope, the court
“shall on application of one of the parties stay the trial of the action until such arbitration has
been had ....” 9 U.S.C. § 3. Although Defendant prefers dismissal, the Court will stay these
proceedings under Section 3 of the FAA.
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IT IS THEREFORE ORDERED that Defendant’s Motion to Compel Arbitration and
Dismiss or Stay Proceedings (ECF No. 4) is GRANTED and the case is STAYED PENDING
RESOLUTION OF THE ARBITRATION PROCEEDING.
____________________________________
UNITED STATES DISTRICT JUDGE
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