Melendez v. Hoque & Mumith, Inc.
Filing
15
Memorandum Opinion and Order granting Defendant's 8 Motion to Compel Arbitration and Motion to Dismiss. (Ordered by Judge Sam A Lindsay on 7/3/2012) (tln)
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
FRANCISCO MELENDEZ,
Plaintiff,
v.
HOQUE & MUMITH, INC. d/b/a
AMERICAN LIMOS AND
TRANSPORTATION and ALT
WORLDWIDE CHAUFFEURED
SERVICES,
Defendant.
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Civil Action No. 3:12-CV-01332-L
MEMORANDUM OPINION AND ORDER
Before the court is Defendant’s Motion to Compel Arbitration and Motion to Dismiss, filed
May 24, 2012. After carefully reviewing the motion, Plaintiff’s response, and applicable law, the
court grants Defendant’s Motion to Compel Arbitration and Motion to Dismiss.
I.
Background
Plaintiff Francisco Melendez (“Melendez”) brought this action against Defendant Hoque &
Mumith, Inc. d/b/a American Limos and Transportation and Alt Worldwide Chauffeured Services
(“Defendant”) on April 30, 2012, alleging causes of action for failure to pay wages and retaliation
under the Fair Labor Standards Act (“FLSA”). Melendez alleges in his Complaint that he was
employed by Defendant as a limousine driver from approximately August 2010 to December 18,
2010, and at all times during his employment he was paid by the hour and received additional
payment in the form of bonuses and other compensation. Melendez contends that he regularly
worked more than 40 hours per week, but Defendant did not pay him an overtime premium of at
Memorandum Opinion and Order – Page 1
least one and one-half times his regular rate of pay for hours worked over 40 in a workweek during
his employment. He further maintains that Defendant threatened to countersue when he approached
Defendant in an attempt to resolve his FLSA claim without resort to litigation. Defendant filed this
motion, seeking to compel arbitration of Melendez’s FLSA claims pursuant to an arbitration
provision in an Associate Agreement (“Agreement”) signed by Melendez that governs the terms of
his employment with Defendant as a limousine driver. Defendant also requests that this action be
dismissed rather than stayed if its motion to compel arbitration is granted.
II.
Analysis
Defendant contends that Melendez’s FLSA claims are subject to the arbitration provision
in Agreement signed by him. Melendez counters that the Agreement is unenforceable because the
parties never agreed on when the Agreement would begin. Melendez therefore contends that the
Agreement lacks an essential term and is unenforceable because of indefiniteness. Melendez further
contends that even if enforceable, the arbitration agreement does not encompass his overtimes
claims. While Melendez concedes that his lawsuit relates to his employment, he argues that it does
not arise from or relate to any of the terms of the Agreement.
The court uses a two-step inquiry to determine whether parties should be compelled to
arbitrate a dispute. Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004). The
court first determines whether the parties agreed to arbitrate the dispute. Id. If it concludes that the
parties agreed to arbitrate the dispute, the court then considers “whether any federal statute or policy
renders the claims non-arbitrable.” R.M. Perez & Assocs., Inc. v. Welch, 960 F.2d 534, 538 (5th Cir.
1992). Whether the parties agreed to arbitrate involves a determination under state law as to whether
a valid arbitration agreement exists and whether the specific dispute at issue falls within the scope
Memorandum Opinion and Order – Page 2
of the arbitration agreement. Banc One Acceptance Corp., 367 F.3d at 429. The strong federal
policy favoring arbitration does not apply to the initial determination of whether there is a valid
arbitration agreement; however, the court is guided by this policy and must resolve all ambiguities
in favor of arbitration if it determines that an agreement to arbitrate exists. Id.
Defendant, as the party seeking to compel arbitration, has the burden of establishing, by a
preponderance of the evidence, the existence of an arbitration agreement. Banks v. Mitsubishi
Motors Credit of Am., Inc., 435 F.3d 538, 540 (5th Cir. 2005). If Defendant establishes that an
arbitration agreement exists, the burden shifts to Melendez, the party opposing arbitration, to show
that the arbitration agreement is not enforceable, or that the dispute does not come within the scope
of the arbitration agreement. Id. In deciding this issue, the court considers consider whether any
federal statute or policy renders the claims non-arbitrable. Id. The Federal Arbitration Act (“FAA”)
provides for a mandatory stay of proceedings when an issue is referable to arbitration. 9 U.S.C. §
3. An action may be dismissed, however, if all of the plaintiff’s claims are arbitrable. See, e.g.,
Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 678 (5th Cir. 1999) (citing Alford v. Dean Witter
Reynolds, 975 F.2d 1161, 1164 (5th Cir. 1992)).
Both parties acknowledge that Texas state law applies to determine whether a valid
arbitration agreement exists. Under Texas law, the issue of whether an agreement constitutes an
enforceable contract is usually a question of law. Shin-Con Dev. Corp. v. I.P. Invs., Ltd., 270
S.W.3d 759, 765 (Tex. App.
Dallas 2008, pet. denied) (citation omitted). To be enforceable, “an
agreement must be sufficiently definite to enable a court to understand what the promisor
undertook.” Id. (citing T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex.
1992)). Definiteness in a contract’s material terms is required because a party cannot accept an offer
Memorandum Opinion and Order – Page 3
unless the terms of the offer are reasonably certain. Id. (citing Fort Worth Indep. Sch. Dist. v. City
of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000)). The parties must agree to all essential terms of an
agreement for the contract to be enforceable. Stanley Boot Co., 847 S.W.2d at 221. If the agreement
is so indefinite as to make it impossible for the court to determine the legal obligations of the parties,
it is not enforceable. Shin-Con Dev. Corp., 270 S.W.3d at 765.
In support of its motion to compel, Defendant submitted a copy of the Agreement signed by
Melendez on August 24, 2010, that contains the following arbitration provision: “Any claim or
controversy that arises out of or relates to this agreement, or the breach of it, shall be settled by
arbitration in accordance with the rules of the American Arbitration Association. Judgment upon
the award rendered may be entered in any court with jurisdiction.” Doc. 9, Exh. A 2. Defendant has
therefore met its burden of establishing that an arbitration agreement exists and the burden shifts to
Melendez to show that the arbitration agreement is not enforceable, or that his claims do not come
within the scope of the arbitration agreement.
Melendez first asserts that the Agreement containing the arbitration provision never became
effective because the first page includes a space for the effective date of the Agreement that was left
blank. Melendez contends that the effective date is an essential term of the parties’ Agreement. For
support that an effective date is an essential term, he relies on a handful of authorities that are not
binding on this court and are distinguishable because, as explained herein, the parties’ duties in this
case do not flow from the effective date of the contract but instead flow from the period of time
Melendez was employed by Defendant as a limousine driver.* He further notes that the Agreement
*
Melendez cites the following cases: Cohran v. Liberty Mut. Ins. Co., 368 S.E.2d 751, 752 (Ga. 1988)
(effective date of contract determined to be essential in case involving the issue of whether a claim was covered under
a renewal insurance policy where the renewal negotiations involved a counteroffer with a proposed effective date that
Memorandum Opinion and Order – Page 4
is dated August 24, 2012, the date he signed the Agreement, but that he signed the Agreement ten
days after he began working for Defendant.
The specific provision in the Agreement referred to by Melendez states: “Term of
Employment: Subject to the provisions set forth below, this agreement will begin on __________.”
Id. 1.
The two-page Agreement is not a term contract. In other words, it does not guarantee
employment to Melendez for a set period of time. Instead, it states that Defendant agrees to employ
Melendez based on the terms and conditions set forth in the Agreement and that Defendant may
terminate him without cause upon two weeks’ notice. The Agreement also sets forth Melendez’s
title, his duties and compensation, confidential treatment of proprietary information, responsibility
for accidents and traffic violations, death benefits, restrictions on postemployment solicitation of
Defendant’s clients, a requirement that Melendez provide assistance with litigation if requested,
settlement by arbitration of disputes, Defendant’s nonwaiver of the right to enforce the Agreement,
and a provision that the Agreement applies to the company’s successors and assignees. At the
bottom of the second page of the Agreement, Melendez agreed to the terms of the Agreement as
evidenced by his signature.
Because the Agreement is not a term contract and it is sufficiently clear from the contract’s
terms that it applies to that period of time that Melendez is employed by Defendant, the court
concludes that the commencement date of the Agreement is not essential to the contract or the
parties’ agreement to arbitrate. Accordingly, the court rejects Melendez’s argument that the contract
was neither accepted nor rejected as of the date of the loss); Luigino’s Inc. v. Societes des Produits Nestle S.A., No.
03-4186ADM/RLE, 2005 WL 735919, at *3 (D. Minn. Mar. 30, 2005) (concluding that “[A]ll of the Agreement’s
critical obligations flowed from the effective date.”); Duhr v. Viking Ins., 1984 WL 180129, at *1 (Wis. Ct. App., Aug.
23, 1984) (another insurance case where coverage of a loss claim was predicated on the effective and expiration dates
of an insurance policy and involved the issue of whether a subsequently issued policy retroactively covered the liability
claimed).
Memorandum Opinion and Order – Page 5
and agreement to arbitrate are unenforceable as written, and the court is not aware of any federal
statute or policy that would render the arbitration provision unenforceable.
Moreover, as Defendant correctly notes, Melendez’s argument regarding indefiniteness goes
to the contract as a whole, and not specifically to the arbitration provision, and therefore does not
render the arbitration agreement itself unenforceable. In re Kaplan Higher Educ. Corp., 235 S.W.3d
206, 210 (Tex. 2007) (refusing to apply unclean hands defense where misconduct pertained to the
contract as a whole and concluding that defendants’ alleged unclean hands did not render the
arbitration agreement unenforceable) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.
440, 449 (2006) (“We reaffirm today that . . . a challenge to the validity of the contract as a whole,
and not specifically to the arbitration clause, must go to the arbitrator.”)).
Next, Melendez argues that even if the arbitration agreement is enforceable, his claim for
overtime compensation does not arise out of or relate to the Agreement or any breach of the
Agreement and thus does not fall within the scope of the arbitration agreement. For further evidence
that his claims are outside the scope of the arbitration agreement, he again notes that he started
working for Defendant on August 14, 2010, but he did not sign the Agreement until August 24,
2010. Melendez thus maintains that if the court compels arbitration of his claims, it should only
compel those that deal with his claims for compensation after August 24, 2010, because the
Agreement that he did not sign until August 24, 2010, cannot possibly apply to claims before this
date. The court again disagrees.
The Agreement at issue unquestionably deals with the compensation Melendez is entitled to
while employed by Defendant as a limousine driver, regardless of his employment commencement
date or the date he signed the Agreement, and the arbitration agreement encompasses all claims and
Memorandum Opinion and Order – Page 6
controversies arising from or related to matters covered by the Agreement, including compensation
issues. Melendez’s claim for compensation and related matters are therefore covered by the parties’
agreement to arbitrate. Accordingly, the court concludes that Defendant’s Motion to Compel
Arbitration should be granted. Furthermore, since all of Melendez’s claims are arbitrable, the court
determines that dismissal of this action is appropriate. Alford, 975 F.2d at 1164.
III.
Conclusion
For the reasons explained, the court grants Defendant’s Motion to Compel Arbitration and
Motion to Dismiss, and dismisses this action with prejudice. The parties shall arbitrate all claims
raised by Plaintiff in accordance with the provision of the Agreement relating to arbitration.
It is so ordered this 3rd day of July, 2012.
_________________________________
Sam A. Lindsay
United States District Judge
Memorandum Opinion and Order – Page 7
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