Valenzuela et al v. Crest-Mex Corporation et al

Filing 63

MEMORANDUM OPINION AND ORDER denying without prejudice 58 MOTION to Vacate 57 Memorandum Opinion and Order, MOTION to Reopen Case for Further Proceedings filed by Jose Guillermo Gandara, Felipe Valenzuela. The Townsend Defendants are ordered to pay the arbitration fee to the AAA within 21 days of the date this memorandum opinion and order is filed. And they must participate in arbitration unless the arbitrator determines that there are conditions precedent that must be completed first. (Ordered by Senior Judge Sidney A Fitzwater on 8/13/2019) (Senior Judge Sidney A Fitzwater)

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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§ Civil Action No. 3:16-CV-1129-D
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MEMORANDUM OPINION
AND ORDER
In this action under the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201
et seq., that the court stayed after compelling arbitration, plaintiffs Felipe Valenzuela
(“Valenzuela”) and Jose Guillermo Gandara (“Gandara”) move to vacate the stay and reopen
the case for further proceedings. For reasons that follow, the court denies the motion without
prejudice, but orders defendants to pay the arbitration fee within 21 days of the date this
memorandum opinion and order is filed, and participate in arbitration unless the arbitrator
determines that there are conditions precedent that must be completed first.
I
In 2016 Valenzuela and Gandara filed this action under the FLSA on behalf of
themselves and others similarly situated for unpaid overtime pay. In response, defendant

Thomas Townsend and eight entities1 associated with him (collectively, the “Townsend
Defendants”) moved to compel arbitration and stay the case. The court granted the motion
to compel arbitration, stayed the case, and directed the clerk of court to close the case
statistically. See Valenzuela v. Crest-Mex Corp. (Valenzuela I), 2017 WL 3311203, at *1,
5 (N.D. Tex. Aug. 3, 2017) (Fitzwater, J.).2
Now, approximately three years after filing suit, Valenzuela and Gandara move to
vacate the stay and reopen the case for further proceedings. The Townsend Defendants
oppose the motion. According to Valenzuela and Gandara, following the court’s decision
in Valenzuela I, they attempted to initiate arbitration, mediation, and Christian conciliation,
but the Townsend Defendants refused to engage in any alternative dispute resolution,
including refusing to pay the arbitration fee to the American Arbitration Association
(“AAA”). According to the Townsend Defendants, the court should deny the motion because
Valenzuela and Gandara have neither followed the three-step alternative dispute resolution
process outlined in the arbitration agreement nor requested a finding of default from the
AAA.

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.
2

The court declined to reach pending motions to dismiss filed by the Townsend
Defendants and defendant Kelly Goodwin. See Valenzuela I, 2017 WL 3311203, at *1, 5.
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II
A court is not required to stay judicial proceedings in favor of arbitration if there has
been a “default in proceeding with such arbitration.” 9 U.S.C. § 3. “Of course, the district
court would always have the authority to set aside a stay improvidently granted.” Miller v.
Aaacon Auto Transp., Inc., 545 F.2d 1019, 1020 (5th Cir. 1977) (per curiam). And “cases
have held vacation of a stay proper where the defendant seeking the stay hindered the
progress of arbitration or where the parties had not concluded the proceedings within the time
specified by the court.” Id. (citing cases).
III
The court concludes, under the current circumstances of this case, that it is premature
to find that defendants are in default. Cf. Burns v. Covenant Health & Rehab of Picayune,
LLC, 2016 WL 660938, at *5 (S.D. Miss. Feb. 18, 2016) (“When an arbitrator has not held
a hearing to address non-payment or has not otherwise suspended or terminated the
proceedings, it is premature for the court to find default.” (citing N. St., LLC v. Clipper
Const., LLC, 2010 WL 3523025, at *3 (E.D. La. Sept. 2, 2010)). Here, in contrast to cases
cited by Valenzuela and Gandara—i.e., Futurewei Technologies Inc. v. E. Oliver Capital
Group, LLC, 2011 WL 1362693 (E.D. Tex. Apr. 11, 2011), and Youngs v. Haugh, 2009 WL
701013 (N.D. Tex. Mar. 18, 2009) (Means, J.)—the Townsend Defendants have not wholly
failed to participate in the case or the arbitration. Even so, the information before the court
does suggest that the Townsend Defendants have, in part, refused to comply with the court’s
memorandum opinion and order in Valenzuela I. Indeed, Valenzuela and Gandara correctly
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point out that the court previously ordered the parties to arbitration as requested by the
Townsend Defendants. See Valenzuela I, 2017 WL 3311203, at *4 (“The court in its
discretion therefore orders that plaintiffs’ claims against the Townsend Defendants be
submitted to arbitration.”).
And as the court explained in Valenzuela I, the question whether mediation (or, for
that matter, any condition precedent) must precede arbitration is for the arbitrator. See id.
at *3 (citing BG Grp., PLC v. Republic of Arg., 572 U.S. 25, 34-35 (2014)). Therefore, the
Townsend Defendants must not attempt to undermine or delay arbitration by failing to pay
the filing fee to the AAA. Nor may they do so by refusing to engage in arbitration until
condition precedents (such as Christian conciliation) have been completed, unless they have
first obtained a ruling from the arbitrator excusing them from proceeding with the courtordered arbitration.
Accordingly, the court orders the Townsend Defendants to comply with Valenzuela
I and remit the arbitration fee to the AAA within 21 days of the date this memorandum
opinion and order is filed. And they must participate in arbitration unless the arbitrator
determines that there are conditions precedent that must be completed first.
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The court denies without prejudice Valenzuela and Gandara’s motion to vacate stay
and reopen case for further proceedings. The Townsend Defendants are ordered to pay the
arbitration fee to the AAA within 21 days of the date this memorandum opinion and order
is filed. And they must participate in arbitration unless the arbitrator determines that there
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are conditions precedent that must be completed first.
SO ORDERED.
August 13, 2019.

_________________________________
SIDNEY A. FITZWATER
SENIOR JUDGE

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