Vallejo v Garda CL Southwest Inc
Filing
36
MEMORANDUM AND ORDER entered DENYING AS MOOT 23 MOTION to Certify Class, GRANTING 34 MOTION to Supplement as to 22 Response in Opposition to Motion,, GRANTING IN PART and DENYING IN PART 15 MOTION to Dismiss or in Alternative, Stay Proceed ings and Compel Arbritration, DENYING AS MOOT 17 MOTION to Stay Discovery and Scheduling and Docket Control Order Dates and Deadlines, GRANTING 32 MOTION to Intervene. Status Conference is set for 2/15/2013 at 08:30 AM in Courtroom 11B before Judge Lee H Rosenthal. (Signed by Judge Lee H Rosenthal) Parties notified.(leddins, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
CHRISTIAN VALLEJO, Individually and on §
behalf of all similarly situated current and
§
former employees,
§
§
Plaintiff,
§
§
VS.
§
§
GARDA CL SOUTHWEST, INC.,
§
§
Defendants.
§
CIVIL ACTION NO. H-12-0555
MEMORANDUM AND ORDER
This is a suit alleging a failure to pay the overtime required under the Fair Labor Standards
Act of 1938 (“FLSA”), 29 U.S.C. § 201 et seq. Christian Vallejo sued his former employer, Garda
CL Southwest, Inc. (“Garda”), asserting a right to relief for himself and on behalf of other similarly
situated employees. Garda moved to dismiss or stay under an arbitration clause in a collectivebargaining agreement that Vallejo signed. (Docket Entry No. 15). Garda also moved to defer any
obligation to respond to discovery or to motions other than those relating to arbitration, including
the plaintiff’s motion for conditional certification and issuance of notice. (Docket Entry No. 17).
Vallejo objected to arbitration on several grounds, including that the collective-bargaining
agreement containing the arbitration clause was fraudulent or otherwise invalid. On October 18,
2012, three other Garda employees filed opt-in notices, (Docket Entries No. 19–21), and have since
moved to intervene, (Docket Entry No. 32). The present record suggests that these employees did
not sign a collective-bargaining agreement with an arbitration clause.
At a November 14, 2012 hearing, this court stated that under governing precedent, Vallejo’s
challenges to arbitrability and to the collective-bargaining agreement had to be decided by an
arbitrator. (Docket Entry No. 30). This court reserved ruling on several subsidiary issues: (1)
whether all of Vallejo’s claims are arbitrable, considering that most of the events giving rise to the
claims happened before the effective date of the collective-bargaining agreement; (2) if all Vallejo’s
claims are subject to arbitration, whether to dismiss this suit or to continue it with the opt-in
plaintiffs. The parties submitted additional briefing addressing these issues.1
Based on the pleadings, the parties’ briefing, the arguments of counsel, and the relevant law,
this court makes the following rulings. The motion to dismiss is granted in part and denied in part.
It is granted to the extent that Vallejo is compelled to arbitrate all his claims and denied in all other
respects. The motion to stay is denied as moot. Vallejo’s motion for class certification is denied
is moot. The motion to intervene is granted.
The reasons for these rulings are explained below.
I.
Background
Vallejo worked as an armored-car driver and guard for Garda in Houston, Texas from July
2008 until Garda terminated his employment on January 26, 2012. As a guard, Vallejo was a
member of the Houston /North Houston Drivers Association, which Garda alleges is the employees’
union for Garda armored-car personnel. Vallejo was subject to a collective-bargaining agreement
entered into between the union and Garda. The agreement, which Vallejo signed on October 21,
2011, stated that the union is the exclusive representative for collective-bargaining purposes. It also
1
On November 14, 2012, this court invited the parties to supplement their briefing on the pending
motion to dismiss or to compel arbitration, no later than December 7, 2012. (Docket Entry No. 30). Vallejo
submitted a supplemental brief on December 10, 2012, docketed as a motion to supplement its response in
opposition to Garda’s motion to dismiss or compel arbitration. (Docket Entry No. 34). To the extent leave
of court was necessary to excuse the untimeliness of the supplement, Vallejo’s motion is granted.
2
contains an arbitration clause covering “grievances,” which were defined as follows:
a legitimate controversy, claim or dispute by any employee, shop steward or the
Union concerning rates of pay, entitlement to compensation, benefits, hours, or
working conditions set forth herein . . . . any claim under any federal, state or local
law, statute or regulation or under any common law theory whether residing in
contract, tort or equity or any other claim related to the employment relationship.
(Docket Entry No. 15, Ex. A, Collective-Bargaining Agreement, Art. 5(a)). The agreement required
employees to submit grievances first to Garda and then to an arbitrator, whose decision is final and
binding. The agreement also required any dispute about the “interpretation or application of this
Agreement” to be arbitrated. (Id.) The agreement stated that it was effective as of November 1,
2011.
This agreement states that it was between Garda and the Drivers’ Association, which was
the union for, and the exclusive bargaining representative of, the armored car guards and drivers.
It is undisputed that he signed the agreement. The signature line was below language stating that
by signing, the employee had (1) read and understood the agreement, (2) signed it “freely and
voluntarily,” and (3) expressly “agree[d] to its terms and conditions.” (Id., at 16–17). Vallejo
continued to work for Garda after receiving notice of the arbitration provision and signing the
agreement containing it.
In this lawsuit, Vallejo claimed that he and other employees are entitled to overtime pay
under the FLSA. He did not submit the claim to Garda or to arbitration. He proposed a class
defined as “[a]ll individuals who were employed or are currently employed by one or more of the
following: Defendant, its subsidiaries or affiliated companies as armored transport employees or in
any other similarly titled position at any time during the relevant statute of limitations period.”
(Docket Entry No. 16, ¶ 32). In his amended complaint, Vallejo alleged, among other things, that
3
the Drivers’ Association was a fraudulent or fictitious union, making the agreement fraudulent as
well. Vallejo asserted state-law claims, including for fraud, fraudulent inducement, negligence, and
negligent misrepresentation, based on those factual allegations.
Garda moved to dismiss or in the alternative to stay the litigation and compel arbitration.
(Docket Entry No. 15). Garda argued that Vallejo’s claims were expressly covered by the grievance
and arbitration provisions of the collective-bargaining agreement. Garda argued that:
[a]s a result, under both the Federal Arbitration Act and the National Labor Relations
Act, this Court is required to enforce the terms of the Agreement, which requires
Plaintiff to arbitrate any claims regarding his rate of pay or entitlement to
compensation under federal law, or related to his employment relationship with
Garda. The Agreement also assigns to arbitration all questions regarding its
interpretation and application, and this Court therefore must also yield to arbitration
in relation to any question that would require interpreting or applying the Agreement
in the first place.
(Docket Entry No. 15, at 1–2 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002);
14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009); Rent–A–Center, W., Inc. v. Jackson, 130 S. Ct.
2772 (2010))). Garda also argued that it could not be required to participate in class-wide arbitration
because it had not expressly agreed to do so. (Id. at 2 (citing AT&T Mobility LLC v. Concepcion,
131 S. Ct. 1740 (2011); Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., 130 S. Ct. 1758 (2010); Reed
v. Fla. Metro. Univ., 681 F.3d 630 (5th Cir. 2012))). Garda argued that Vallejo’s claims had to be
arbitrated on an individual rather than on a collective basis. Vallejo’s claim that the collectivebargaining agreement was fraudulent was, according to Garda, a challenge to the validity of the
contract as a whole rather than to the arbitration clause, and therefore was an issue for the arbitrator
to decide. (Id. at 12–13). Garda moved to stay discovery and other deadlines until this court ruled
on its motion to dismiss or compel arbitration. (Docket Entry No. 17).
On October 18, 2012, Jason Winn, Karlnetta Coleman, and Artemio Caballero filed notices
4
of consent to join this collective action. (Docket Entries No. 19, 20, 21). Vallejo responded to
Garda’s motion to dismiss or to compel arbitration and moved for class certification. (Docket
Entries No. 22, 23). Vallejo sought to divide the putative class into two subclasses. One would
include employees like Vallejo who did sign the agreement. For this subclass, Vallejo argued, the
arbitration clause would not be enforceable because the collective-bargaining agreement containing
it was the product of fraud and fraudulent coercion. Vallejo also argued that even if the arbitration
clause was enforceable, it would cover only those claims that arose after the collective-bargaining
agreement’s effective date. The second subclass would include employees like Winn, Coleman, and
Caballero, whom Vallejo claimed had not signed the collective-bargaining agreement and were not
otherwise bound by its grievance and arbitration provisions.
Vallejo’s response in opposition to Garda’s motion to stay discovery and docketing deadlines
similarly argued that Winn, Coleman, Caballero, and other potential class members had not signed
the collective-bargaining agreement and were not bound by its arbitration provisions. Vallejo also
argued that before briefing closed and this court ruled on the motion to dismiss, discovery should
be allowed into the facts relating to his claim that the union and the collective-bargaining agreement
were fraudulent. Vallejo argued that such information would be essential to determining whether
the arbitration clause in the agreement was binding. Vallejo contended that this court, not the
arbitrator, had to make that threshold arbitrability determination. (Docket Entry No. 27).
Garda filed a reply in support of its motion to dismiss or to compel arbitration. (Docket
Entry No. 25). In it, Garda emphasized Vallejo’s admission that he had received a complete copy
of the collective-bargaining agreement, including the arbitration clause, and then continued working
for Garda. (Id. at 1–2 (citing Docket Entry No. 22, Ex. A, Vallejo Decl., ¶ 8))). Garda also argued
5
that Vallejo attacked the agreement as a whole, rather than the validity or applicability of the
arbitration clause itself, and that such challenges were for the arbitrator, not this court, to decide.
On November 14, 2012, this court held a hearing on the parties’ motions. (Docket Entry No.
30). Following the arguments of counsel, this court indicated that it was inclined to require Vallejo
to arbitrate because, given the broad language of the arbitration clause and the fact that Vallejo
challenged the entire collective-bargaining agreement as fraudulent, the arbitrator, not the court,
should decide arbitrability. In that hearing, two additional issues were identified but not resolved.
The first was whether all of Vallejo’s claims were arbitrable, or only those that arose after the
effective date of the collective-bargaining agreement. That would leave little for the arbitrator,
because the agreement was signed shortly before Vallejo was fired. The second was whether the
suit should be dismissed as to Winn, Coleman, and Caballero, or whether they should be allowed
to intervene as named plaintiffs. This court reserved its final ruling on these issues and allowed the
parties to submit additional briefing by December 7, 2012. Garda submitted a supplemental brief
on December 7, (Docket Entry No. 31), and Vallejo submitted a supplemental brief on December
12, 2012, (Docket Entry No. 34).
On December 10, 2012, Winn, Coleman, and Caballero moved to intervene with a proposed
complaint. (Docket Entries No. 32, 33). Garda opposed the motion, arguing that there was no
intervention as of right under Federal Rule of Civil Procedure 24(a)(2), that the intervenors would
suffer no prejudice in filing their own lawsuit, and that Vallejo’s claims were “on the brink of
dismissal” in light of the November 14 hearing. (Docket Entry No. 35, at 3 & n.3).
In its supplemental brief, Garda argued that all of Vallejo’s claims are arbitrable even if the
underlying events took place before the effective date of the agreement containing the arbitration
6
clause. “Plaintiff’s argument is that the Agreement should not apply to certain of his claims that are
based on facts that occurred prior to the date of the Agreement. This is simply a question regarding
the application of the Agreement, which the parties have agreed to arbitrate, and the Court must
enforce this agreement like any other.” (Docket Entry No. 31, at 2). Garda also argued that the
breadth of the arbitration clause requires Vallejo “to not only arbitrate claims or disputes concerning
rates of pay or entitlement to compensation, but also ‘any claim under any federal, state or local
law,’ and ‘any other claim related to the employment relationship.’” (Id. at 3 (quoting Docket Entry
No. 15, Ex. A, Art. 5(a))).
In response, Vallejo argued that his claims were arbitrable only to the extent that they arose
after the effective date of the collective-bargaining agreement with the arbitration clause became
effective, for the following reasons:
•
substantially all of the acts giving rise to Vallejo’s claims occurred before the
agreement was executed or became effective, when no arbitration clause was in
effect;
•
the arbitration clause did not explicitly apply to prior claims;
•
the arbitration clause defined a grievance as a “condition that exists as a result of a
violation of the express terms of the Agreement.”
•
the collective-bargaining agreement provided that “the arbitrator shall not have the
right to amend, take away, modify, add to, change, or disregard any of the provisions
of this Agreement.”
(Docket Entry No. 34, at 2).
The parties’ arguments are addressed below.
7
II.
The Legal Standard
A.
Arbitrability
The Federal Arbitration Act (“FAA”) requires district courts to direct parties to arbitrate
issues covered by a valid arbitration agreement. 9 U.S.C. §§ 3, 4; see also Dean Witter Reynolds,
Inc. v. Byrd, 470 U.S. 213, 218 (1985). Federal policy strongly favors enforcing arbitration
agreements. Dean Witter Reynolds, 470 U.S. at 217; Moses H. Cone Mem. Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24 (1983). When a party moves to compel arbitration, the FAA requires
district courts to order arbitration of arbitrable claims. Sedco, Inc. v. Petroleos Mexicanos Mexican
Nat’l Oil Co. (In re Sedco, Inc.), 767 F.2d 1140, 1147 (5th Cir. 1985). Arbitration agreements, like
other contracts, may be invalidated by contract defenses like fraud, duress, unconscionability, or
waiver. See Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); see also Miller Brewing
Co. v. Fort Worth Distrib. Co., Inc., 781 F.2d 494, 497 (5th Cir. 1986) (“‘The right to arbitration,
like any other contractual right, can be waived.’” (quoting Cornell & Co. v. Barber & Ross Co., 360
F.2d 512, 513 (D.C. Cir. 1966) (per curiam))). Because of the strong presumption in favor of
arbitration, “a party seeking to invalidate an arbitration agreement bears the burden of establishing
its invalidity.” Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004).
B.
Intervention
Absent a statute giving a right to intervene, Rule 24(a) imposes four requirements for
intervention as of right: (1) timeliness, (2) an interest relating to the subject matter of the main
action, (3) at least potential impairment of that interest if the action is resolved without the
intervenor, and (4) lack of adequate representation by existing parties. “‘Impairment exists when
the decision of a legal question . . . would, as a practical matter, foreclose the rights of the proposed
8
intervenor in a subsequent proceeding.’” Stewart v. City of Houston, 2009 WL 783319, at *1 (S.D.
Tex. Mar. 24, 2009) (quoting Shea v. Angulo, 19 F.3d 343, 347 (7th Cir. 1994)). If the disposition
of a suit will not bar a proposed intervenor from asserting his or her rights in a separate action, the
“impairment” prong of Rule 24(a) typically is not met. See Shea, 19 F.3d at 347.
III.
Analysis
A.
Does this Court or the Arbitrator Decide Arbitrability?
Because arbitration is a matter of contract, a party cannot be required to submit to arbitration
any dispute it has not agreed to arbitrate. First Options of Chi. v. Kaplan, 514 U.S. 938, 943 (1995).
A threshold issue is what challenges to arbitrability are for the court to determine, and what
challenges are for the arbitrator. This court’s tentative ruling at the November 14 hearing is
consistent with established precedent that the arbitrability issues Vallejo raises are for an arbitrator
to decide.
Under the FAA, a written agreement to arbitrate “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.
Section 3 allows a party to request a stay of a federal action pending arbitration if a valid arbitration
clause exists; § 4 allows a party to seek an order compelling arbitration under the parties’ contract.
The Supreme Court has issued a series of decisions addressing which so-called gateway challenges
to an arbitration clause are for arbitrators to decide and which a court must first decide. A challenge
to the validity of the parties’ contract as a whole, as opposed to the arbitration clause contained in
the contract, is for the arbitrator to decide. In Prima Paint Corp. v. Flood & Conklin Manufacturing
Co., 388 U.S. 395 (1967), the Supreme Court held that a challenge to the validity of the entire
agreement as having been fraudulently induced was for the arbitrator to resolve, not the court.
9
Regardless of whether a contract as a whole is valid, agreements to arbitrate are severable from a
larger contract and may be separately enforced and their validity separately determined. Id. at 406.
This result was recently affirmed in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006).
The Court held that a challenge to an agreement containing the arbitration clause, as opposed to a
challenge to the arbitration provision specifically, is for the arbitrator to decide. Id. at 445–46.
In Rent–A–Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010), the plaintiff challenged an
arbitration agreement as unconscionable because he had been required to sign it as a condition of
his employment. The contract contained a delegation clause, in which the contracting parties
themselves decided whether the court or arbitrator will decide challenges to arbitrability. The
delegation clause stated that “[t]he Arbitrator, and not any federal, state, or local court or agency,
shall have exclusive authority to resolve any dispute relating to the interpretation, applicability,
enforceability or formation of this Agreement, including, but not limited to any claim that all or any
part of this Agreement is void or voidable.” Id. at 2775. Prior case law made clear that “‘[t]he
question ‘who has the primary power to decide arbitrability’ turns upon what the parties agreed
about that matter. Did the parties agree to submit the arbitrability question itself to arbitration?”
First Options, 514 U.S. at 943 (emphasis in original) (quoting AT&T Techs., Inc. v. Commc’ns
Workers, 475 U.S. 643, 649 (1986)). “Courts should not assume that the parties agreed to arbitrate
arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.” First Options,
514 U.S. at 944 (alterations in original) (quoting AT&T Techs., 475 U.S. at 649). The Court
distinguished between the overall arbitration agreement (the “contract”), and the agreement to
arbitrate arbitrability (the “delegation clause”). Rent–A–Center, 130 S. Ct. at 2778–79. The plaintiff
“challenged only the validity of the contract as a whole” rather than the validity of the delegation
10
clause. Id. at 2779. The plaintiff’s challenge to the arbitration agreement as unconscionable — that
the plaintiff had been required to sign as a condition of his employment — had to be arbitrated
because the delegation clause “clearly and unmistakably” gave the arbitrator exclusive authority
over the enforceability of the agreement to arbitrate. Id. at 2775, 2779. In accordance with a valid
delegation clause, questions of arbitrability (including the arbitrability of the overall agreement to
arbitrate) must go to an arbitrator. Id. at 2778–79; see also Wootten v. Fisher Invs., Inc., 688 F.3d
487, 493–94 (8th Cir. 2012); In re Checking Account Overdraft Litig. MDL No. 2036, 674 F.3d
1252, 1256–57 (11th Cir. 2012).
Challenges to contract formation — including whether the plaintiff ever signed the contract
or, if not, can nonetheless be bound under principles of contract law or agency, or whether the signor
lacked authority to commit the alleged principal — are different from the challenges to contract
validity addressed in Buckeye and Rent–A–Center. Federal substantive law governs questions of
arbitrability, including in diversity cases. Moses H. Cone, 460 U.S. at 24. State-law contract
principles govern questions of contract formation. First Options, 514 U.S. at 944; see also 9 U.S.C.
§ 2 (providing that written agreements to arbitrate “shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation of any contract”). Challenges to
the existence — as opposed to the enforceability or validity or scope — of an agreement to arbitrate,
are for a court to decide. E.g., DK Joint Venture 1 v. Weyand, 649 F.3d 310, 317 (5th Cir. 2011)
(“[It] is for the courts and not the arbitrator to decide in the first instance[ ] a dispute over whether
the parties entered into any arbitration agreement in the first place.”); Will-Drill Res., Inc. v. Samson
Res. Co., 352 F.3d 211, 212 (5th Cir. 2003) (“We vacate the order compelling arbitration and
remand the case to the district court, concluding that where the very existence of any agreement to
11
arbitrate is at issue, it is for the courts to decide based on state-law contract formation principles.”).
The Supreme Court did not address that aspect of the which-tribunal-decides-arbitrability issue in
Buckeye or Rent-A Center.
The Court did address that issue in Granite Rock Co. v. International Brotherhood of
Teamsters, 130 S. Ct. 2847 (2010). The central dispute was whether a collective-bargaining
agreement had been ratified on a specific date. If the ratification occurred on one date, a no-strike
provision applied. The gateway issue was whether the dispute over the ratification date would be
decided in arbitration or litigation. The collective-bargaining agreement had a broad arbitration
clause, but no specific delegation clause. The Court held that the contract-formation issue was for
the courts, emphasizing that when a dispute concerns contract formation, it “is generally for courts
to decide.” Id. at 2855–56. Because it was the court, rather than the arbitrator, that had to decide
whether an agreement to arbitrate existed, the date of contract formation was for the court to decide,
at least in the absence of a delegation clause to the contrary. Id. at 2859–60. The Court did not
analyze in detail whether the result would have been different had the agreement delegated contractformation issues to the arbitrator. “[A]bsent a valid provision specifically committing such disputes
to an arbitrator,” the contract-formation issue was for the court to decide. Id. at 2858.
Several lower court decisions applying Rent–A–Center and Granite Rock are instructive.
In Allen v. Regions Bank, 389 F. App’x 441 (5th Cir. 2010) (per curiam), the court addressed an
arbitration provision in a home equity loan contract. The arbitration agreement contained a
delegation provision stating, “[A] dispute regarding whether a particular controversy is subject to
arbitration, including any claim of unconscionability and any dispute over the scope or validity of
this agreement to arbitrate disputes or of this entire Agreement, shall be decided by the
12
arbitrator(s).” Id. at 443. The court of appeals found that the provision “clearly and unmistakably”
called for the arbitrator to decide arbitrability issues. Id. at 446; see also Petrofac, Inc. v.
DynMcDermott
Petrol.
Operations
Co.,
687
F.3d
671,
675
(“[The]
arbitration
agreement . . . . state[s] that ‘[t]he arbitrator shall have the power to rule on his or her own
jurisdiction, including any objections with respect to the existence, scope or validity of the
arbitration agreement.’ We agree with most of our sister circuits that [this] presents clear and
unmistakable evidence that the parties agreed to arbitrate arbitrability.”); Schneider v. Kingdom of
Thailand, 688 F.3d 68, 72 (2d Cir. 2012) (“[W]hether the district court properly declined to
determine independently whether the [lawsuit] involved ‘approved investments’ [under the
arbitration agreement] does not turn on whether that question was one of scope or formation. It
turns on whether there was clear and unmistakable evidence of the parties’ intent to commit that
question to arbitration. For in the absence of such clear and unmistakable evidence, questions of
arbitrability are presumptively resolved by the court, regardless of whether they are related to scope
or formation. . . . The district court should not have refused to determine independently whether the
[lawsuit] involved ‘approved investments’ without first finding clear and unmistakable evidence of
the parties’ intent to submit that question to arbitration.” (citing Granite Rock, 130 S. Ct. at
2858–59)).
In Janiga v. Questar Capital Corp., 615 F.3d 735 (7th Cir. 2012), the court addressed a
dispute arising under an agreement between a recent immigrant and a financial services company.
The agreement had a broad arbitration clause. The plaintiff sued, alleging breach of fiduciary duty
and fraud, and the defendant sought to enforce the arbitration provision. The district court
concluded that contract formation was an issue because of the plaintiff’s limited English, and that
13
the district court had to decide this issue before it could decide whether to compel arbitration. Id.
at 737. The appellate court “agree[d] with the district court that the existence of a contract is an
issue that the courts must decide prior to staying an action and ordering arbitration, unless the parties
have committed even that gateway issue to the arbitrators.” Id. at 738. The appellate court,
however, found a written agreement to arbitrate sufficiently evidenced by the plaintiff’s signature.
“[T]he parties formed a contract and their agreement included an arbitration clause.” Id. The
appellate court reversed the district court because the record contained enough evidence to resolve
the threshold question on arbitrability. Id.
In the present suit, to the extent Vallejo challenges the validity of the collective-bargaining
agreement, it is a challenge to the validity of the entire agreement, not to the arbitration provision.
That invalidity challenge is for an arbitrator to decide under Prima Paint and the many similar cases.
Unlike in Granite Rock and similar cases, Vallejo does not challenge that he signed the arbitration
provision or that he continued working after he did so.
In addition, Texas law — which would apply to formation issues — recognizes that an
employee who has received notice of an arbitration policy accepts it by continuing to work with
knowledge of the provisions. In re Halliburton Co., 80 S.W.3d 566, 568 (Tex. 2002) (citing
Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 229 (1986)). “‘To prove notice, an employer
asserting modification must prove that he unequivocally notified the employee of definite changes
in employment terms.’” Id. (quotation omitted). “[W]hen an employer notifies an employee of
changes to the at-will employment contract and the employee ‘continues working with knowledge
of the changes, he has accepted the changes as a matter of law.’” Id. (quotation omitted); see also
In re Dillard Dep’t Stores, Inc., 198 S.W.3d 778, 780 (Tex. 2006) (per curiam) (holding that the
14
absence of a signed agreement is not an obstacle to enforcement of the arbitration agreement);
Munoz v. Luby’s Inc., 2011 WL 6291966, at *4–6 (S.D. Tex. Dec. 14, 2011). It is undisputed that
the collective-bargaining agreement’s arbitration provision was in writing. It is also undisputed that
Vallejo continued to work after having signed the collective-bargaining agreement and having notice
of its arbitration provision. No facts in this case could support a claim that the parties failed to form
an arbitration agreement.
Given the record and the governing precedent, Vallejo’s challenges to arbitrability are
arbitrable.
B.
Are Vallejo’s Claims Arising from Events Before the Agreement Covered by the
Arbitration Clause?
The parties dispute whether claims that arose from events occurring before the effective date
of the collective-bargaining agreement are subject to its arbitration clause. “The language of the
arbitration agreement at issue determines whether a particular dispute is within its scope.” Douglas
v. Timex Corp., 1998 WL 34072739, at *4 (S.D. Tex. Dec. 30, 1998) (citing Pennzoil Exploration
& Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1064 (5th Cir. 1998)). The arbitration clause
provides that the parties will arbitrate any unresolved dispute over a “grievance.” (Docket Entry No.
15, Ex. A, Art. 5(b)–(c)). A “grievance” is “a condition that exists as a result of a violation of the
express terms of the [Collective Bargaining] Agreement”; a “claim or dispute” by an employee
concerning working conditions, hours, pay, or benefits; “the interpretation or application” of the
Agreement; or “any claim under” law or “any other claim related to the employment relationship.”
(Id., Art. 5(a)).
Courts considering similar clauses have found that they cover claims that arose before the
effective date of the arbitration agreement and make those claims arbitrable. See, e.g., Douglas,
15
1998 WL 34072739, at *4 (“The Belmont Plan does not limit arbitration to only those events which
arose after its effective date. Instead, it applies to ‘any legal or equitable claim.’ From the plain
language of the Plan, it is clear that any claims which arose before its effective date are subject to
arbitration.” (citation omitted)); see also R.M. Perez & Assocs., Inc. v. Welch, 960 F.2d 534, 539
(5th Cir. 1992) (allowing arbitration of preexisting claims when the arbitration clause covered
“all . . . relations and dealings” with the defendant), abrogation on other grounds recognized by
Brabham v. A.G. Edwards & Sons Inc., 376 F.3d 377, 381 (5th Cir. 2004); Melendez v. Hoque &
Mumith, Inc., 2012 WL 2595268, at *3 (N.D. Tex. July 3, 2012) (“The Agreement . . . 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 controversies arising from or related to matters
covered by the Agreement, including compensation issues.”); Boice v. A.G. Edwards & Sons, Inc.,
1988 WL 97966, at *2 (E.D. La. Sept. 9, 1988) (ordering arbitration because an arbitration clause
governing “[a]ny controversy . . . arising out of this agreement . . . or any other cause whatsoever”
was “not limited to future controversies”).
One case reaches a different result. In Moran v. Ceiling Fans Direct, Inc., 2006 WL
2478837, at *5 (S.D. Tex. Aug. 25, 2006), the court held that FLSA claims that arose before the
effective date of the arbitration agreement were not arbitrable because they were not “disputes
‘arising out of’ the employment relationship.” The Moran court decided that the “arising out of”
language in the arbitration agreement covered only those employment-related claims that had yet
to “‘com[e] into being’” when the agreement became effective. Id. (quoting In re Brookshire
Brothers, Ltd., 198 S.W.3d 381, 386 (Tex. App.—Texarkana, 2006, orig. proceeding)). Moran is
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distinguishable because the arbitration clause in the collective-bargaining agreement here is much
broader. The arbitration clause does not define arbitrable grievances or disputes only as those
“arising out of” the collective-bargaining agreement or the employment relationship. Cf. id. Rather,
the clause covers claims “that exist[]” because of a breach of the Agreement; any “claim or dispute”
about wages; and “any other claim related to the employment relationship.” (Docket Entry No. 15,
Ex. A, Art. 5(a)). The language in this case is more similar to the broad language in the cases in
which courts ordered arbitration of disputes that arose before the effective date of an arbitration
clause. See, e.g., Douglas, 1998 WL 34072739, at *4; Boice, 1988 WL 97966, at *2.
Vallejo cites an Alabama case for the proposition that an arbitration clause is prospective
unless it contains explicit language making it retrospective. (Docket Entry No. 34, at 3 (“[T]he
arbitration clause in the fraudulent Labor Agreement does not specifically include prior claims.”
(citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kirton, 719 So. 2d 201, 203 (Ala. 1998)))).
Merrill Lynch held that an arbitration provision will cover disputes arising under prior contracts
where the clause contains retroactive, time-specific language mandating its application to previously
executed contracts. 719 So. 2d at 203. To rule that an arbitration provision is prospective-only
unless it includes such language is inconsistent with the approach taken in the federal courts.
Vallejo also argues that the lack of an explicit retroactivity provision makes the arbitration
clause ambiguous. Vallejo is correct that the arbitration clause does not define “grievance” in
retrospective terms. Cf. Rent–A–Center, 130 S. Ct. 2772, 2777 (“‘Claims Covered By The
Agreement’ provides for arbitration of all ‘past, present or future’ disputes arising out of Jackson’s
employment with Rent–A–Center.”). The clause here defines a grievance as “a condition that exists
as a result of a violation of the express terms of the Agreement,” (Docket Entry No. 15, Ex. A, Art.
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5(a)–(c)), and the agreement was not effective until November 2011. But the arbitration clause also
broadly defines an arbitrable claim as a “claim or dispute” by an employee concerning . . . pay,”
“any claim under” a law, such as the FLSA, or “any other claim related to the employment
relationship.” (Id., Art. 5(a)). These are disputes that could arise before the effective date of the
agreement. Given the broad language of the arbitration clause in the agreement Vallejo signed, and
the federal cases set out above, Vallejo’s claims are arbitrable even though the agreement with the
arbitration clause became effective close to the end of his employment.
C.
The Motion to Intervene
Garda argues that the intervenors’ motion to intervene should be denied because they are not
entitled to intervene as of right. See FED. R. CIV. P. 24(a)(2). According to Garda, the intervenors
cannot show they will suffer irreparable harm if they are not allowed to intervene. But the
intervenors satisfy the requirements for permissive intervention under Rule 24(b)(1)(B), which gives
this court discretion to allow intervention as to anyone with “a claim or defense that shares with the
main action a common question of law or fact.” “That Rule gives district courts discretion to allow
intervention when ‘(1) timely application is made by the intervenor, (2) the intervenor’s claim or
defense and the main action have a question of law or fact in common, and (3) intervention will not
unduly delay or prejudice the adjudication of the rights of the original parties.’” Bear Ranch, LLC
v. HeartBrand Beef, Inc., 286 F.R.D. 313 (S.D. Tex. 2012) (quoting League of United Latin Am.
Citizens v. Clements, 884 F.2d 185, 189 n.2 (5th Cir. 1989)). It is clearly more efficient for both the
parties and the court to allow Winn, Coleman, and Caballero to intervene in this suit rather than
require them to file anew. Their application was timely; the claims and the lawsuit have common
questions, and neither undue delay nor prejudice will result.
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The motion to intervene is granted. In light of this ruling, the motion to stay discovery and
Vallejo’s motion for class certification are moot. The class certification denial is without prejudice
to reassertion when and as appropriate.
IV.
Conclusion
The motion to dismiss or to stay proceedings and compel arbitration is granted in part and
denied in part. The motions to stay discovery and deadlines and to certify a class are denied as
moot. The motion to intervene is granted. The motion to file a supplemental response in opposition
to the motion to dismiss is granted. A status conference is set for February 15, 2013, at 8:30 a.m.
in Courtroom 11-B.
SIGNED on January 30, 2013, at Houston, Texas.
______________________________________
Lee H. Rosenthal
United States District Judge
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