Leal v. Sinclair Broadcasting Group, Inc. et al

Filing 37

REPORT AND RECOMMENDATIONS re 25 Motion to Compel filed by San Antonio Television, LLC, Sinclair Broadcasting Group. Signed by Judge Andrew W. Austin. (td)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
FRANKLIN LEAL

§
§
VS.
§
§
SINCLAIR BROADCAST GROUP, INC. §
AND SAN ANTONIO TELEVISION, LLC §

A-16-CV-679 LY

REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
TO:

THE HONORABLE LEE YEAKEL
UNITED STATES DISTRICT JUDGE
Before the Court are: Defendants’ Motion to Compel Arbitration (Dkt. No. 25); Amended

Plaintiff’s Opposition to Defendants’ Motion to Compel Arbitration (Dkt. No. 28); Defendants’ Reply
in Support of Motion to Compel Arbitration and Dismiss (Dkt. No. 32); and Defendants’ Objections
to Plaintiff’s Evidence Submitted in Opposition to Motion to Compel Arbitration (Dkt. No. 33).1 The
undersigned submits this Report and Recommendation to the United States District Court pursuant
to 28 U.S.C. § 636(b) and Rule 1(h) of Appendix C of the Local Court Rules of the United States
District Court for the Western District of Texas.
I.

GENERAL BACKGROUND

Franklin Leal worked as a television news producer for the local Telemundo television
station run by KEYE-TV, a Texas-based CBS Television affiliate. Leal, who is Hispanic, produced
the Spanish language news segments for the television station until he was terminated on September
11, 2015. Leal alleges he was discriminated against, retaliated against, and ultimately fired because
of his national origin and alleged mental disability.

1

The Court HEREBY DENIES Defendants’ Objections to Plaintiff’s Evidence Submitted
in Opposition to Motion to Compel Arbitration (Dkt. No. 33).

On May 10, 2016, Leal filed this lawsuit in the 250th Judicial District of Travis County, Texas
against Sinclair Broadcast Group, Inc., the owner and operator KEYE-TV, San Antonio Television,
LLC, a subsidiary of Sinclair, Telemundo Austin KEYE-TV, Amy Villarreal, in her individual
capacity, and Ana Maria Lamas, in her individual capacity (“Defendants”). Leal’s lawsuit alleges
(1) discrimination and hostile work environment claims under Title VII of the Civil Rights Act of
1964 and the Texas Commission on Human Rights Act; (2) retaliation claims under Title VII and
the TCHRA; (3) discrimination on the basis of, and failure to accommodate, his alleged mental
disability under the Americans with Disabilities Act and the TCHRA; (4) intentional infliction of
emotional distress under Texas law; and (5) wrongful discharge under Texas law.
On June 10, 2016, Defendants removed the case on the basis of federal question jurisdiction
under 28 U.S.C. § 1331. On June 17, 2016, Defendants filed a Motion to Dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6), seeking the dismissal of Leal’s IIED and wrongful
discharge claims, and of the individual defendants. See Dkt. No. 6. On September 26, 2016, the
undersigned issued a Report and Recommendation recommending that the Motion to Dismiss be
granted in part and denied in part. See Dkt. No. 20. Specifically, the Court recommended that the
District Court dismiss Defendants Telemundo Austin KEYE-TV, Amy Villarreal and Ana Maria
Lamas from this lawsuit as they were not subject to suit. The Court further recommended that the
District Court dismiss Leal’s state law claim for intentional infliction of emotional distress for failure
to state a claim on which relief may be granted. Finally, the Court recommended that the District
Court deny the Motion to Dismiss with regard to the state law wrongful discharge claim and permit
Leal to re-plead his wrongful discharge claim under Texas law. The Court further noted that Leal’s
claims against Sinclair Broadcast Group, Inc. and San Antonio Television, LLC under Title VII, the
ADA and the TCHRA remained in the lawsuit as they were not at issue in the Motion to Dismiss.

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On December 22, 2017, the District Court adopted the Report and Recommendation in full
and dismissed Leal’s claims against Defendants Telemundo Austin KEYE-TV, Amy Villarreal, and
Ana Maria Lamas and dismissed his state-law claim for intentional infliction of emotional distress
with prejudice. Dkt. No. 23. The District Court denied the Motion to Dismiss with regard to Leal’s
state-law claim of wrongful discharge, and ordered Leal to file an Amended Complaint before
January 6, 2017. On January 5, 2017, Leal filed his Amended Complaint against Sinclair Broadcast
Group, Inc. and San Antonio Television, LLC., reasserting his employment discrimination,
retaliation and hostile work environment claims under Title VII, the ADA, and TCHRA and repleading his state wrongful discharge claim and alleging that Defendants violated his Employment
Agreement. In response, Defendants filed the instant Motion to Compel Arbitration and Dismiss
under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). in which they argue that the
Employment Agreement Leal relies on contains an arbitration clause requiring Leal to submit all the
claims asserted in this case to binding arbitration.
II. ANALYSIS
In his Amended Complaint, Leal alleges that on October 11, 2013, he entered into “an
enforceable employment contract” that limited the Defendants’ right to discharge him “at will.” Dkt.
No. 24 at ¶ 26. Leal attaches a copy of the agreement to his Amended Complaint. He alleges that
Defendants violated the Employment Agreement by wrongfully discharging him and failing to pay
him through the contract term. In response, Defendants now claim—for the first time—that the
Employment Agreement contains an arbitration clause that requires Leal to submit the claims raised
in this lawsuit to arbitration. Defendants rely on the following language in the Employment
Agreement:
ARBITRATION. Except as specifically provided in Section 12, Employee and
Employer agree to submit any dispute or controversy arising out of or relating to this
Agreement including, but not limited to, claims of termination allegedly resulting
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from discrimination of any type, claims based on common law, contract, or
statutorily created or protected rights or any other basis prohibited by law,
exclusively to final and binding arbitration before a neutral arbitrator.
***
Subject to the parties agreement that Employer’s remedies for a violation or
threatened violation of Section 1.2, Section 7 or Section 11 of this Agreement are not
subject to the arbitration provisions of this Section 15, Employee and Employer agree
that this arbitration shall be the exclusive means of resolving any dispute or
controversy arising out of or relating to this Agreement, Employee’s employment
with Employer, or termination of Employee’s employment, and that no other action
will be brought by Employee in any court or other forum, including but not limited
to, claims based on common law, contract, or statutorily created or protected rights.
Dkt. No. 25-2 at 9. Based on this language, Defendants argue that Leal must pursue his claims in
arbitration and the case should be dismissed. In response, Leal contends that the Court should not
enforce the arbitration clause because (1) the arbitration clause is procedurally and substantively
unconscionable and/or (2) Defendants have waived their right to seek arbitration. The Court will
address the waiver argument first.
A.

Waiver
There is a “strong federal policy in favor of enforcing arbitration agreements.” Dean Witter

Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 (1985). However, “[t]he right to arbitrate a dispute, like
all contract rights, is subject to waiver.” Nicholas v. KBR, Inc., 565 F.3d 904, 907 (5th Cir. 2009).
Thus, “[a] party who has entered into an agreement to arbitrate must insist on this right, lest it be
waived.” Janvey v. Alguire, 847 F.3d 231, 243 (5th Cir. 2017). Although waiver of arbitration is not
a favored finding, “[w]aiver will be found when the party seeking arbitration substantially invokes
the judicial process to the detriment or prejudice of the other party.” Miller Brewing Co. v. Fort
Worth Distrib. Co., 781 F.2d 494, 497 (5th Cir. 1986). As the Fifth Circuit has explained:

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A party waives his right to arbitrate when he actively participates in a lawsuit or takes
other action inconsistent with that right. When one party reveals a disinclination to
resort to arbitration on any phase of suit involving all parties, those parties are
prejudiced by being forced to bear the expenses of a trial . . . . Substantially invoking
the litigation machinery qualifies as the kind of prejudice . . .that is the essence of
waiver.
Id. Under well-established Fifth Circuit precedent, a party waives its right to arbitrate if it (1)
substantially invokes the judicial process and (2) thereby causes detriment or prejudice to the other
party. Janvey, 847 F.3d at 243.
“A party generally invokes the judicial process by initially pursing litigation of claims then
reversing course and attempting to arbitrate those claims.” Nicholas, 565 F.3d at 907. As the Fifth
Circuit has further explained, “[t]o invoke the judicial process, a party must, at the very least, engage
in some overt act in court that evinces a desire to resolve the arbitrable dispute through litigation
rather than arbitration.” In re Mirant Corp., 613 F.3d 584, 589 (5th Cir. 2010). As mentioned, Leal
did not invoke the arbitration clause, but instead filed suit in state court. Defendants similarly did
not invoke their rights under the clause, instead choosing to remove the case to this Court and then
file a substantive motion to dismiss requesting that the Court dismiss several defendants and claims
in this lawsuit. Defendants did not mention the arbitration clause in its removal or in the motion to
dismiss. Defendants waited some eight months after Leal filed his original lawsuit in state court to
invoke the arbitration clause.
Defendants contend that they did not substantially invoke the judicial process because they
only filed a partial motion to dismiss which they contend is insufficient to “substantially invoke”
the process.2 However, in In re Mirant Corp., 613 F.3d 584, 589 (5th Cir. 2010), the Fifth Circuit
2

In support of their argument that they did not substantially invoke the judicial process,
Defendants rely on Williams v. Cigna Financial Advisors, Inc., 56 F.3d 656 (5th Cir. 1995), in which
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observed that motions to dismiss “are not homogenous” and that “[i]n this Circuit, a bright-line rule
is inappropriate for deciding whether a party has waived its right to arbitration.” Rather, “the
question of what constitutes a waiver of the right of arbitration depends on the facts of each case.”
Id. (internal citations and quotations omitted). The Court further found that filing three motions to
dismiss the plaintiff’s complaint was enough to substantially invoke the judicial process. Id. The
Court noted that the defendant partially succeeded on one of its motions to dismiss when the district
court dismissed the plaintiff’s breach of fiduciary duty claim with prejudice and noted that “[a]
dismissal with prejudice for failure to state a claim is a decision on the merits.” Id. Similarly,
Defendants’ motion to dismiss here sought the dismissal of Leal’s wrongful discharge and IIED
claims, as well as three parties—Telemundo Austin KEYE-TV and the individual defendants.
Although Defendants contend in their reply brief that they only sought a partial dismissal and “did
not seek complete dismissal” of Leal’s case, in their Motion to Dismiss, Defendants specifically
requested that “this Court dismiss Plaintiff’s complaint for failure to state a claim.” Dkt. No. 6 at
9. The District Court ultimately dismissed all of Leal’s claims against Defendants Telemundo
Austin KEYE-TV, Amy Villarreal, and Ana Maria Lamas, as well as Leal’s IIED claim “WITH
PREJUDICE.” Dkt. 23 at 3. Thus, Defendants sought a decision on the merits in this case before
attempting to arbitrate this case. “A party waives arbitration by seeking a decision on the merits
before attempting to arbitrate.” Petroleum Pipe Ams. Corp. v. Jindal Saw, Ltd., 575 F.3d 476, 480

the Court held that the defendant did not waive his right to arbitration despite having removed the
case to federal court, filed a motion to stay and motion to dismiss. Unlike the instant case, the
defendant in Williams filed its motion for stay pending arbitration as soon as it discovered that the
dispute was subject to arbitration. In addition, the defendant only filed an answer and motion to
dismiss after it had already filed the motion for stay pending arbitration. Under those facts, the
Court found that the defendant did not waive its right to arbitration. Accordingly, Defendants’
reliance on Williams is misplaced.
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(5th Cir. 2009); see also, Miller Brewing, 781 F.2d at 498 (“Any attempt to go to the merits and to
retain still the right to arbitration is clearly impermissible.”).
By removing this case to Federal Court and filing a substantive motion to dismiss,
Defendants demonstrated a clear and unmistakable “disinclination” to arbitrate this case. See
Petroleum Pipe, 575 F.3d at 482 (holding that party invoked the judicial process by waiting a year
after suit was filed to move for arbitration, removing case to federal court, filed counterclaims,
participated in discovery and sought a ruling from the court on settlement agreement); Nicholas, 565
F.3d at 908 (finding that party invoked the judicial process by filing suit and pursuing claims for ten
months before invoking her right to arbitrate); Jallo v. Resurgent Capital Servs., LP and LVNV
Funding, LLC., 131 F.Supp.3d 609, 614-15 (E.D. Tex. Aug. 7, 2015) (finding that party invoked
judicial process by waiting ten months to move for arbitration after they had filed answers, motions
to stay, motions for judgment on the pleadings and motions for extensions of time); Parker v. ABC
Debt Relief, Ltd. Co., 2011 WL 13156874, *2 (N.D. Tex. Nov. 4, 2011) (holding that defendant
invoked judicial process by filing numerous motions to dismiss, filed answers and participated in
discovery).
Also like the defendant in In re Mirant Corp., Leal moved to compel arbitration only after
the District Court denied the Motion to Dismiss with regard to the wrongful discharge claim and
permitted Leal to file an Amended Complaint. Defendants should not be allowed “a second bite of
the apple through arbitration.” Petroleum Pipe, 575 F,3d at 482. “To hold otherwise would
encourage litigants to delay moving to compel arbitration until they could ascertain how the case was
going in federal district court.” In re Mirant Corp., 613 F.3d at 590 (internal quotation marks and
citation omitted). “In essence, [Defendants] attempted to play ‘heads I win, tails you lose,’ which
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is the worst possible reason for failing to move for arbitration sooner than it did.” Id. Based upon
the foregoing, the Court finds that Defendants substantially invoked the judicial process in this case.
B.

Prejudice
“In addition to invocation of the judicial process, the party opposing arbitration must

demonstrate prejudice” before the Court will find a waiver of the right to arbitrate. Nicholas, 565
F.3d at 910. “Prejudice in the context of arbitration waiver refers to delay, expense, and damage to
a party’s legal position.” Id.
Leal has been prejudiced by Defendants’ delay in raising the arbitration clause. As noted,
Defendants waited eight months before filing a motion to compel arbitration, during which time
Defendants removed the case to federal court and obtained dismissal of some of Leal’s claims. See
Nicholas, 565 F.3d at 910 (finding that ten month delay without mentioning arbitration clause was
prejudicial). “While delay in asserting the right to arbitrate will not alone result in waiver, such
delay does bear on the question of prejudice, and may, along with other considerations, require a
court to conclude that waiver has occurred.” Id. (internal citations and quotations omitted). During
this delay, Leal was prejudiced by unnecessary litigation costs in defending against the removal, the
motion to dismiss, and this motion to compel arbitration. See In re Mirant Corp., 613 F.3d at 591
(finding that plaintiff was prejudiced by legal expenses incurred as a result of use of the federal court
system). Leal’s attorney has spent 586 hours on the litigation in this case since it was removed to
federal court. See Attach. 2 to Dkt. No. 28. “These are precisely the expenses of litigation that
arbitration is designed to avoid.” Nicholas, 565 F.2d at 911. In addition, Leal has had to respond
Defendants’ Motion to Dismiss which has given Defendants a preview of Leal’s litigation strategy.
See Parker, 2011 WL 13156874 at * 3 (finding that plaintiff was prejudiced by not just litigation
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costs but by having to respond to motions thereby giving defendants a preview of litigation strategy).
Based upon the foregoing, the Court finds that Leal has been substantially prejudiced as a result of
Defendants’ invocation of the judicial process. Accordingly, the Court finds that Defendants have
waived their right to arbitration.3
III. RECOMMENDATION
Based upon the foregoing, the undersigned Magistrate Judge RECOMMENDS that the
District Court DENY Defendants’ Motion to Compel Arbitration (Dkt. No. 25) because Defendants
have waived their right to arbitration.
IV. WARNINGS
The parties may file objections to this Report and Recommendation. A party filing
objections must specifically identify those findings or recommendations to which objections are
being made. The District Court need not consider frivolous, conclusive, or general objections. See
Battle v. United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after the party is served with a copy of the Report
shall bar that party from de novo review by the District Court of the proposed findings and
recommendations in the Report and, except upon grounds of plain error, shall bar the party from
appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the
District Court. See 28 U.S.C. § 636(b)(1)(c); Thomas v. Arn, 474 U.S. 140, 150-53, 106 S. Ct. 466,

3

Because the Court has found that Defendants waived their right to arbitration, the Court need
not address Leal’s alternative argument that the arbitration clause is unenforceable because it is
unconscionable.
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472-74 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en
banc).
SIGNED this 25th day of April, 2017.

_____________________________________
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE

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