Valenzuela et al v. Crest-Mex Corporation et al

Filing 57

Memorandum Opinion and Order Grants 43 Motion to Compel, filed by 3328 Cedar Plaza Lane Apartments Inc, Cedar Sierra Management Co LLC, La Sierra Apartments Trust, Thomas Townsend, Sierra Management Co, Mtorma Trust, Sierra Mana gement Trust, Dallas Net Lease Trust, Crest-Mex Corporation This case is stayed pending the completion of arbitration. The clerk of court is directed to close this case statistically, without prejudice to reopening it statistically for further proceedings provided for under the FAA. (Ordered by Judge Sidney A Fitzwater on 8/3/2017) (ndt)

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
FELIPE VALENZUELA, JOSE
GUILLERMO GANDARA, and all
others similarly situated under 29 U.S.C.
§ 216(B),
Plaintiffs,
VS.
CREST-MEX CORPORATION d/b/a
LA SIERRA APARTMENTS, et al.,
Defendants.

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§
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§ Civil Action No. 3:16-CV-1129-D
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MEMORANDUM OPINION
AND ORDER
Plaintiffs Felipe Valenzuela (“Valenzuela”) and Jose Guillermo Gandara (“Gandara”)
bring this lawsuit on behalf of themselves and others similarly situated for unpaid overtime
pay under the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et seq.
Defendant Thomas Townsend (“Townsend”) and eight entities1 associated with him
(collectively, the “Townsend Defendants”) move to compel arbitration and stay the
proceedings in this case. The Townsend Defendants and defendant Kelly Goodwin
(“Goodwin”) move to dismiss under Fed. R. Civ. P. 12(b)(6). For reasons that follow, the
court grants the motion to compel arbitration and stay proceedings, directs the clerk of court

1

These entities are Crest-Mex Corporation d/b/a La Sierra Apartments, MTORMA
Trust, Dallas Net Lease Trust, Sierra Management Trust, Sierra Management Co., La Sierra
Apartments Trust, Cedar Sierra Management Co., LLC, and 3328 Cedar Plaza Lane
Apartments, Inc.

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to close this case for statistical purposes, and declines to reach the Townsend Defendants’
and Goodwin’s (“Goodwin’s”) motions to dismiss.
I
Plaintiff Valenzuela worked as a maintenance employee at the La Sierra Apartments
from 2001 until 2016, and plaintiff Gandara worked there as a maintenance employee from
1999 until 2016. Plaintiffs allege that defendants Townsend and Goodwin were officers,
owners, managers, or trustees of the entity defendants, and that all defendants were plaintiffs’
employers during this period.
According to the Townsend Defendants, two separate agreements obligate plaintiffs
to arbitrate this dispute. First, Townsend maintains that in 2014 he prepared a “DISPUTE
RESOLUTION PROGRAM AGREEMENT” (“2014 Agreement”) that required plaintiffs
to arbitrate claims against their employer, and that he hand-delivered copies in both English
and Spanish to plaintiffs, and also mailed copies to them. Townsend also posits that, at the
time he hand-delivered the copies of the 2014 Agreement to plaintiffs, he told them that they
would be bound by the agreement if they continued to work and receive pay; and that after
receiving the 2014 Agreement, plaintiffs orally agreed to its terms, and also continued to
work and receive pay. The 2014 Agreement provides that the parties to the agreement are
the following: the employee; Sierra Management Co Trust, AKA La Sierra Apartments at
3328 Cedar Plaza Lane, Dallas, TX 75235; and/or Crest Mex Corporation; Guadalupe

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Gandara2; and/or Lupe Gandara Management Co. Guadalupe Gandara (“Guadalupe”), who
is not a party to this lawsuit, was a manager of the apartment building where plaintiffs
worked.
Second, Townsend contends that, in December 2015, he hand-delivered to plaintiffs
an updated agreement, entitled NOTICE: DISPUTE RESOLUTION PROGRAM, CLASS
ACTION WAIVER (“2016 Agreement”), and sent them copies by mail and facsimile in
January 2016. Townsend avers that plaintiffs once again orally agreed to the terms of the
2016 Agreement and continued to work and receive pay after receiving it. The 2016
Agreement provides that the parties to the agreement are the employee and Cedar Sierra
Management Co, LLC.
Plaintiffs dispute Townsend’s account in part. Both plaintiffs aver that they do not
remember receiving the 2014 Agreement. As for the 2016 Agreement, Valenzuela does not
remember receiving it, but both plaintiff Gandara and manager Guadalupe acknowledge
receiving it. Valenzuela reads very little English, and Gandara does not read any English.
Defendants Goodwin and the Townsend Defendants move to dismiss plaintiffs’ action
for failure to state a claim. The Townsend Defendants also move to compel arbitration and
stay proceedings, and they request that their motion to compel arbitration and stay
proceedings be considered before their motion to dismiss. Plaintiffs oppose the motion to
compel arbitration and stay proceedings; defendant Goodwin has expressed no position on

2

The 2014 Agreement spells the name Guadalupe “Guadelupe.”
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the motion.
II
Section 2 of the Federal Arbitration Act (“FAA”) provides that written agreements to
arbitrate controversies arising out of an existing contract “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 “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
on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc.
v. Byrd, 470 U.S. 213, 218 (1985) (citing 9 U.S.C. §§ 3-4) (emphasis in original). When
considering a motion to compel arbitration, the court engages in a two-step process. First,
the court determines “whether the parties agreed to arbitrate the dispute.” Webb v.
Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996) (per curiam) (citation omitted). “This
determination involves two considerations: (1) whether there is a valid agreement to arbitrate
between the parties; and (2) whether the dispute in question falls within the scope of that
arbitration agreement.” Id. (citations omitted). Second, the court decides “‘whether legal
constraints external to the parties’ agreement foreclosed the arbitration of those claims.’” Id.
(quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628
(1985)). “If there is a valid agreement to arbitrate, and there are no legal constraints that
foreclose arbitration, the court must order the parties to arbitrate their dispute.” Celaya v.
Am. Pinnacle Mgmt. Servs., LLC, 2013 WL 4603165, at *2 (N.D. Tex. Aug. 29, 2013)
(Fitzwater, C.J.). Because of the strong presumption in favor of arbitration, the party
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opposing a motion to compel arbitration bears the burden of proving that the agreement is
invalid or that the claims are outside the scope of the agreement. Carter v. Countrywide
Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004).
III
The court addresses first whether a valid agreement to arbitrate was formed.
A
The Townsend Defendants contend that there are valid arbitration agreements
because, in both 2014 and 2016, plaintiffs received notice of their employer’s arbitration
policy and continued to work and accept pay, which constitutes an acceptance under Texas
contract law. See Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 203 (5th Cir. 2016).
Plaintiffs respond that they did not receive effective notice of the 2014 and 2016
Agreements. They maintain that they do not remember receiving a copy of the 2014
Agreement. As for the 2016 Agreement, plaintiff Gandara and manager Guadalupe both
acknowledge receiving it, but plaintiff Valenzuela does not remember receiving it. Plaintiffs
contend that Townsend has not proved notice of either agreement by mail because he has not
provided evidence that a letter was properly addressed, stamped, and mailed; and that they
did not receive effective notice of either Agreement because, although each contained a
written Spanish translation, each stated that the English version controlled, and Townsend
did not orally translate the English version into Spanish or submit a certified translation of
it.

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B
The court concludes that plaintiffs formed a valid agreement to arbitrate. Under Texas
law, an at-will employee who receives notice of an employer’s arbitration policy and
continues working has accepted that policy as a matter of law. Kubala, 830 F.3d at 203. At
a minimum, the Townsend defendants have shown that plaintiffs received notice of the 2016
Agreement and then continued to work and receive pay. Townsend avers that he delivered
the 2016 Agreement to plaintiffs by hand and by mail, and he offers documentation of the
mailing. Plaintiffs do not dispute this account other than to say that Valenzuela does not
remember receiving the 2016 Agreement, but others do.
The Agreements’ language choice does not undermine their validity, because
providing the original Agreements in both English and Spanish, and making the English
version controlling, did not prevent effective notice under the circumstances shown here.
See, e.g., Estate of Benitez v. Sears, Roebuck & Co., 2013 WL 4223875, at *5 (N.D. Tex.
August 14, 2013) (Fitzwater, C.J.) (compelling arbitration where plaintiff could not read or
write English but had access to interpreter and Spanish version of agreement). Accordingly,
an arbitration agreement was formed.
IV
The court next considers whether plaintiffs’ claims are within the scope of the
Agreements.
A
The Townsend Defendants contend that plaintiffs’ claims are within the scope of
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either Agreement. They maintain that the 2014 Agreement contains a delegation of
arbitrability clause, which permits the arbitrator to decide whether plaintiffs’ claims are
within the scope of the agreement, see Kubala, 830 F.3d at 202; and that the 2016 Agreement
encompasses “all issues at any time including all state and federal laws regarding work,
employment, pay, [and] overtime[.]” Ds. App. 16.
Plaintiffs respond that this dispute should not be arbitrated because the 2016
Agreement sets out a procedure requiring the parties to mediate their dispute before seeking
arbitration, and this condition has not been met.
B
The court concludes that this dispute is within the scope of the Agreements. Plaintiffs
do not contest that their claims would be arbitrable under either the 2014 Agreement’s
delegation of arbitrability clause or the 2016 Agreement’s broad terms of scope.
As for the 2016 Agreement’s mediation term, the Supreme Court has held that
whether a condition precedent to arbitration has been fulfilled is presumptively a question
for the arbitrator. See BG Grp., PLC v. Republic of Arg., ___ U.S. ___, 134 S. Ct. 1198,
1207 (2014). Because the 2016 Agreement’s mediation term at most affects what must occur
before the duty to arbitrate arises, not whether the arbitration agreement is valid, the
presumption applies here. See id.; see also Chorley Enters., Inc. v. Dickey’s Barbecue Rest.,
Inc., 807 F.3d 553, 565 (4th Cir. 2015) (holding that mediation requirement was condition
precedent to be decided by arbitrator). And because nothing in the 2016 Agreement indicates
that the parties did not intend to delegate this authority to the arbitrator, the presumption has
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not been rebutted. See BG Grp., 134 S. Ct. at 1208. Accordingly, the question whether
mediation must precede arbitration under the 2016 Agreement is for the arbitrator.
V
The court now turns to whether any legal constraints external to the Agreements
foreclose the arbitration of this dispute.
A
Plaintiffs contend that the Agreements are procedurally unconscionable because the
binding version is written in English, and defendants have not proved that an accurate
Spanish translation was provided; and that the Agreements are substantively unconscionable
because they purport to reduce the limitations period from two or three years under the FLSA
to one year, and to limit the right of appeal.3

3

With regard to right of appeal, the 2014 Agreement provides:
NEITHER PARTY HAS THE RIGHT TO LITIGATE CLAIM
OR CLAIMS IN COURT OR HAVE A JURY TRIAL, RAISE
OTHER ISSUES, OR ADDITIONAL STATUTE OF
LIMITATIONS, DISCOVERY RIGHTS, NOR APPEAL
RIGHTS. THIS MEANS GIVING UP CONSTITUTIONAL
RIGHTS FOR TRIAL AND OR JURY AND OR APPEAL.

Ds. App. 5-6. The 2016 Agreement provides:
The decision of the Arbitrator shall be final and binding to all
parties and may be entered in applicable court as final judgment
without further right of appeal. THIS MEANS THAT
NEITHER PARTY HAS THE RIGHT TO LITIGATE SUCH
CLAIM IN COURT OR TO HAVE A JURY TRIAL.
STATUTE OF LIMITATIONS, DISCOVERY RIGHTS AND
APPEAL RIGHTS ARE LIMITED IN MEDIATION OR
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The Townsend Defendants contend that plaintiffs have not met their burden to show
unconscionability, because Spanish translations of the Agreements were provided, and
plaintiffs do not contest the translations’ accuracy; because a shortened limitations period is
not unconscionable under Texas law; and because the Agreements’ recital of limited appeal
rights merely restates controlling law that limits appeal of an arbitration.
B
The court concludes that no external legal constraints foreclose arbitration of this
dispute. The Agreements’ language choices do not make them procedurally unconscionable
because plaintiffs were provided with Spanish translations, and they do not contend that the
translations were inaccurate. See Benitez, 2013 WL 4223875, at *5; see also Fleetwood
Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1077 (5th Cir. 2002) (“The party contesting the
contractual arbitration provision has the burden to show procedural unconscionability.”).
Likewise, assuming that a shortened limitations period is an issue for the court, such
a provision is not unconscionable under Texas law unless plaintiffs present evidence that the
circumstances between the parties made the provision unconscionable, which plaintiffs have
not done. See Celaya, 2013 WL 4603165, at *3. Regarding the Agreements’ reference to
limited appeal rights, the court interprets these provisions as not inconsistent with the
“extraordinarily narrow” appellate review that the FAA already prescribes, see Glover v.

ARBITRATION.
Ds. App. 17.
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IBP, Inc., 334 F.3d 471, 473-74 (5th Cir. 2003), and these provisions therefore are not
substantively unconscionable.
VI
Finally, the court addresses whether plaintiffs must arbitrate their claims against
defendants who are not parties to the 2014 and 2016 Agreements.
A
“[A] non-signatory to a contract with an arbitration clause can compel arbitration
under an equitable estoppel theory[.]” Hill v. G E Power Sys., Inc., 282 F.3d 343, 348 (5th
Cir. 2002) (internal quotation marks omitted). “[A]pplication 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 [a]
nonsignatory and one or more of the signatories to the contract.” Grigson v. Creative Artists
Agency L.L.C., 210 F.3d 524, 527 (5th Cir. 2000) (quoting MS Dealer Serv. Corp. v.
Franklin, 177 F.3d 942, 947 (11th Cir. 1999)) (emphasis omitted). “Otherwise the arbitration
proceedings between the two signatories would be rendered meaningless and the federal
policy in favor of arbitration effectively thwarted.” Id. (quoting MS Dealer, 177 F.3d at 947)
(emphasis omitted). “[T]he decision to utilize equitable estoppel in this fashion is within the
district court’s discretion.” Hill, 282 F.3d at 348.
B
The Townsend Defendants contend that, although not all defendants were parties to
the 2014 and 2016 Agreements, all defendants are entitled to enforce the arbitration
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agreements because plaintiffs, in interdependent claims, assert that all defendants were their
employers while the Agreements were in effect. See Grigson, 210 F.3d at 527. Plaintiffs do
not respond to this contention.
The court concludes that plaintiffs’ claims against all of the Townsend Defendants
must be arbitrated. By alleging that all defendants were their employers during the same
period of time, and that all defendants violated the FLSA by withholding overtime pay,
plaintiffs advance allegations of “substantially interdependent and concerted misconduct by
both the non-signator[ies] and one or more of the signatories” to the Agreements. Id.
(emphasis and internal quotation marks omitted); see Westbrook v. JAG Indus. Servs., Inc.,
2015 WL 93447, at *4 (N.D. Tex. Jan. 7, 2015) (Lynn, J.) (compelling arbitration of FLSA
claims against nonsignatory based on concerted misconduct theory). The court in its
discretion therefore orders that plaintiffs’ claims against the Townsend Defendants be
submitted to arbitration.
VII
Having determined that plaintiffs’ claims must be arbitrated and that a stay should be
entered, the court declines at this time to reach the motions of the Townsend Defendants and
Goodwin to dismiss for failure to state a claim.
Nothing in this memorandum opinion and order precludes plaintiffs and Goodwin
from agreeing to arbitration, or, absent such an agreement, prevents Goodwin from moving
to compel arbitration. Absent such an agreement or motion, however, plaintiffs’ action
against Goodwin is also stayed until the completion of arbitration given plaintiffs’ allegation
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that Goodwin was their employer and the court’s reasoning supra in § VI(B) concerning the
effect of such a claim.
*

*

*

The court grants the Townsend Defendants’ motion to compel arbitration and stay
proceedings. This case is stayed pending the completion of arbitration. The clerk of court
is directed to close this case statistically, without prejudice to reopening it statistically for
further proceedings provided for under the FAA.
SO ORDERED.
August 3, 2017.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

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