Roberts v. Central Refrigerated Service et al

Filing 31

MEMORANDUM DECISION and Order- granting 15 Motion to Compel and Dismissed Plaintiff's Complaint 2 without prejudice.; terminating 15 Motion to Dismiss ; terminating 15 Motion to Stay. The arbitration agreement is valid and enforceable and is severable from the contract as a whole. The court orders that the case be submitted to arbitration according to the terms of the agreement.SO ORDERED. Signed by Judge Clark Waddoups on 6/18/14. (jmr)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION

JACOB ROBERTS,
Plaintiff,

MEMORANDUM DECISION
AND ORDER

vs.
CENTRAL REFRIGERATED
SERVICE, et al.,

Case No. 2:13-cv-911

Defendants.

Judge Clark Waddoups

INTRODUCTION
Defendants Central Refrigerated Service, Inc. (“Central”), Jon Isaacson and Bob Baer
move to compel arbitration of Plaintiff Jacob Roberts’ individual claim and to dismiss the
Complaint (Dkt. No. 2). In the alternative, Defendants request that the court stay further
proceedings in the action pending the conclusion of arbitration. Defendants’ Motion to Compel
Arbitration asserts that the parties’ written employment agreement mandates that the present
dispute be arbitrated under the laws of Utah. Def.’s Mot. to Compel at 1 (Dkt. No. 15).
The court heard argument on February 13, 2014 and took the motion under advisement.
After carefully reviewing the parties’ filings and relevant legal authorities, the court GRANTS
Defendant Central’s Motion to Compel Arbitration and DISMISSES the case without prejudice.
FACTUAL BACKGROUND
Central is a Utah-based refrigerated trucking company that is incorporated under the laws

of Nebraska and headquartered in Salt Lake City, Utah. Plaintiff Jacob Roberts was employed by
Central as a company truck driver. Mr. Roberts filed a Complaint on October 8, 2013 alleging
that Central failed to fully compensate him for wages earned while under their employ. Mr.
Roberts also alleges “unlawful pay practices and policies” in violation of the Fair Labor
Standards Act (“FLSA”) and that Central failed to pay at least the minimum wage for orientation
time, travel time, and training time.
Defendants assert that Mr. Roberts signed an agreement containing a mandatory binding
arbitration clause that encompasses all claims related to Mr. Roberts’ employment with Central.
The agreement specifies that it be governed by Utah law. At or near the beginning of his
employment with Central, Mr. Roberts was provided several documents to read and sign. One of
the documents Mr. Roberts signed is the “Memorandum of Understanding Form” (the
“Memorandum”) which sets forth certain terms of the driver’s employment with Central.
Directly above Mr. Roberts’ signature is the following provision:
I agree to and will be bound by the laws of Utah in all respects relating to the
employee-employer relationship. I understand that I am a Utah employee for all
employment issues, which may include, but are not limited to wages,
unemployment insurance, workers compensation, Title VII, ADA, ADEA, FMLA,
Title 29 and so forth. I understand that I must report all work-related injuries to
the Worker’s Compensation department within 24 hours of occurrence. I have
been issued a written policy with the proper procedure for the reporting of an
injury. Since I am now a Utah employee, I expressly agree to have all employment
matters settled under the laws and jurisdiction of Utah.
I agree in the event of any dispute, claim or controversy arising between me or
the company relating to my employment relationship, any claim of discrimination,
wrongful termination, sexual harassment, Title VII, ADA, ADEA, or FMLA, that
any such dispute or controversy will be settled by final, mandatory binding
arbitration in accordance with the arbitration rules of the American Arbitration
Association and any judgment upon the award rendered by the arbitrator may be
entered into the court system of the State of Utah.
2

See Def.’s Mot. to Compel, Ex. B (Dkt. No. 15-2) (emphasis added).
ANALYSIS
I. APPLICABLE LAW
A. Utah Contract Law
Under Utah law, generally, formation of a contract requires only an offer, an acceptance,
and consideration. Cea v. Hoffman, 2012 UT App 101, P24 (Utah Ct. App. 2012). Where only
the appearance of a promise exists, i.e., a statement made in such vague or conditional terms that
the person making it commits himself to do nothing, the alleged promise is illusory and
unenforceable. Resource Management Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028,
1036 (Utah 1985). Where one party reserves an absolute and unconditional power to terminate a
contract, the contract is illusory and unenforceable. Id. at 1037.
B. Utah Arbitration Law
Under the Utah Arbitration Act, a written agreement to arbitrate an existing or future
controversy arising between the parties to an agreement is “valid, enforceable, and irrevocable
except upon a ground that exists at law or in equity for the revocation of a contract.” Utah Code
Ann. §78B-11-107(1). The court decides whether an agreement to arbitrate exists or whether a
controversy is covered by the agreement. Id. at §78B-11-107(2). An arbitrator decides whether “a
condition precedent to arbitrability has been fulfilled” and whether “a contract containing a valid
agreement to arbitrate is enforceable.” Id. at §78B-11-107(3).
Thus, Utah law prescribes that the arbitration agreement is severable from the contract as
a whole and the court need only determine whether the arbitration provision is enforceable. If the
court determines that it is enforceable, all other issues must then be turned over to the arbitrator.
3

See id.; cf. Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 70-72 (2010) (under federal
arbitration law an arbitration provision is severable from the remainder of the contract and any
challenge to the contract as a whole is to be left for the arbitrator). Upon a showing of an
agreement between the parties to a dispute to arbitrate, the court shall proceed summarily to
decide the issue and order the parties to arbitrate. Id. at §78B-11-108(1)(b). If the court finds that
there is no enforceable agreement, it may not order the parties to arbitrate. Id. at §78B-11-108(3).
Whether the arbitration agreement here constitutes a valid and enforceable agreement is a
question of law. Reed v. Davis County Sch. Dist., 892 P.2d 1063, 1064 (Utah App. 1995). In
interpreting the arbitration agreement, the court looks first to the document itself. Id. When a
written contract’s language is not ambiguous, the parties’ intent “must be determined from the
words of the agreement.” Id. at 1065. The policy of the law in Utah is to “interpret contracts in
favor of arbitration, in keeping with our policy of encouraging extrajudicial resolution of disputes
when the parties have not agreed to litigate.” Id. (internal quotation marks and citations omitted).
Arbitration is a contractual remedy for the settlement of disputes. The parties are
free to structure their agreement in any manner they desire. We respect the parties’
freedom to contract by enforcing arbitration agreements according to their terms
and ensuring that arbitration proceedings are conducted in the manner to which
the parties have agreed. As with any contract, we determine what the parties have
agreed upon by looking first to the plain language within the four corners of the
document.
When interpreting the plain language, we look for a reading that harmonizes the
provisions and avoids rendering any provision meaningless. If we find the
language unambiguous, we interpret the contract as a matter of law. We find
ambiguity only where the language of the contract is reasonably capable of being
understood in more than one sense.
Peterson & Simpson v. IHC Health Servs., 2009 UT 54, *13 (internal quotation marks and
citations omitted). “Incorporation by reference requires that ‘the reference be clear and
4

unequivocal, and alert the non-drafting party that terms from another document are being
incorporated.’” Id. at *15 (quoting Hous. Auth. v. Snyder, 2002 UT 28, *19).
II. DISCUSSION
A. The FAA Does Not Preempt Either Application of the Utah Arbitration Act
or Enforcement of the Arbitration Agreement
i. Federal Arbitration Act § 1 Exemption
The FAA provides that it does not apply to “contracts of employment of seamen, railroad
employees, or any other class of workers engaged in interstate commerce.” 9 U.S.C. § 1. This is
an express exemption from the general policy favoring arbitration under the FAA. See
Owner-Operator at 1257 (10th Cir. 2004). “The Supreme Court has clarified that this . . .
exemption applies only to workers actually engaged in the movement of goods in interstate
commerce, in other words, to contracts of employment for transportation workers.” Id. (quoting
Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001)).
ii. Preemption Law: FAA vs. Utah Law
“While the FAA preempts application of state laws which render arbitration agreements
unenforceable, it does not follow, however, that the federal law has preclusive effect in a case
where the parties have chosen in their arbitration agreement to abide by state rules.” Volt
Information Sciences v. Board of Trustees of Leland Stanford University, 489 U.S. 468, 472
(1989). There is not a federal policy favoring arbitration under a certain set of procedural rules.
Id. at 476. The federal policy simply ensures the enforceability, according to their terms, of
private agreements to arbitrate. Id. Interpreting a choice-of-law clause to make state rules
governing arbitration applicable does not offend the rule of liberal construction nor does it offend

5

any other FAA policy. Id.
In recognition of Congress’ principal purpose of ensuring that private arbitration
agreements are enforced according to their terms, [the United States Supreme
Court has] held that the FAA preempts state laws which require a judicial forum
for the resolution of claims which the contracting parties agreed to resolve by
arbitration. But it does not follow that the FAA prevents the enforcement of
agreements to arbitrate under different rules than those set forth in the Act itself.
Indeed, such a result would be quite inimical to the FAA’s primary purpose of
ensuring that private agreements to arbitrate are enforced according to their terms.
Arbitration under the Act is a matter of consent, not coercion, and parties are
generally free to structure their arbitration agreements as they see fit. Just as they
may limit by contract the issues which they will arbitrate, so too may they specify
by contract the rules under which that arbitration will be conducted.”
Id. at 478-79. The effect of § 1 of the FAA is to leave the arbitration of disputes in the excluded
categories as if the FAA had never been enacted. Mason-Dixon Lines, Inc. v. International
Brotherhood of Teamsters, etc., 443 F.2d 807, 809 (3d Cir. 1971). “There is no language in the
FAA that explicitly preempts the enforcement of state arbitration statutes.” Palcko v. Airborne
Express, Inc., 372 F.3d 588, 595 (3d Cir. 2004).
iii. Application
Mr. Roberts argues that the court should decline to enforce the arbitration agreement
because § 1 of the FAA excludes “contracts of employment of seamen, railroad employees, or
any other class of workers engaged in foreign or interstate commerce.” Mr. Roberts asserts that
as a transportation worker, he falls within the FAA exclusion and applying the Utah Act to him
would interfere with the policy goals of Congress. He argues that the FAA preempts the
application of Utah law.
Mr. Roberts points the court to Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001).
In that case, the Court discusses the background for the enactment of § 1’s exclusion of
6

transportation workers and explains that Congress had already enacted specific dispute resolution
methods for seamen and their employers as well as railroad employees. See 532 U.S. at 121.
Congress acted so that it would not unsettle established or developing statutory dispute resolution
procedures covering specific types of workers. See id. Mr. Roberts argues that the Circuit City
Court found “it was rational to conclude that Congress expanded the exemption to cover other
interstate transportation workers so as to reserve for itself more specific legislation for those
engaged in transportation.” Pl.’s Mem. in Opp. at 11 (Dkt. No. 24).
While it is true that Congress has reserved for itself the power to enact more specific
legislation for certain types of workers engaged in interstate transportation, Mr. Roberts fails to
cite the court to any particular legislation specifically providing alternative dispute resolution
means that would apply to him. In an attempt to show specific legislation that would apply, Mr.
Roberts asserts that the FLSA provides this type of mechanism. Mr. Roberts fails, however, to
point the court to any FLSA provision that might provide such means. The FLSA prescribes
standards for the basic minimum wage and overtime pay and affects most private and public
employment. It does not, however, provide any alternative dispute resolution means specifically
for transportation workers engaged in interstate commerce like Mr. Roberts.
Mr. Roberts also refers the court to Owner-Operator Indep. Drivers Ass’n v. C.R.
England, Inc., 325 F. Supp. 2d 1252 (D. Utah 2004). While there are similarities between that
case and the present one, C.R. England is not on point. In that case, Defendant C.R. England did
not show that the arbitration clause at issue covered Plaintiffs’ claims. See 325 F. Supp. 2d at
1259. Here, the arbitration agreement covers Mr. Roberts’ claims. The arbitration clause at issue
in C.R. England did not inform the employee that the state’s arbitration action would be applied
7

if the FAA was found to be inapplicable. Here, conversely, Central’s arbitration agreement
makes it clear that Utah’s state arbitration laws will apply.
The agreement states that “I agree to and will be bound by the laws of Utah in all
respects relating to the employee-employer relationship” and “I understand that I am a Utah
employee for all employment issues.” Furthermore, it states that “[s]ince I am now a Utah
employee, I expressly agree to have all employment matters settled under the laws and
jurisdiction of Utah.” The agreement further declares that “I agree in the event of any dispute,
claim or controversy arising between me and [Central] relating to my employment relationship
. . . that any such dispute or controversy will be settled by final, mandatory binding arbitration.”
These are clear statements that Utah law controls the arbitration agreement. The court cannot
read this language to mean anything other than that the employee will be subject to the state’s
arbitration law in the case of a dispute between employer and employee.
Because Mr. Roberts’ claims against Central are matters involving his employment
relationship with Central, Mr. Roberts’ arbitration agreement with Central covers his claims. For
example, Mr. Roberts alleges that Central failed to fully compensate him for wages earned while
under their employ, that Central violated the FLSA by using unlawful pay practices and policies,
and that Central failed to pay at least the minimum wage for orientation time, travel time, and
training time. Each of these claims involves Mr. Roberts’ employment relationship with Central.
In his agreement, Mr. Roberts agreed to be bound by the laws of Utah in all matters involving his
employee-employer relationship with Central. He also acknowledged that he would be a Utah
employee for all employment issues once he signed the agreement. Moreover, he expressly
agreed to have all employment matters settled under the laws and jurisdiction of Utah and to
8

have any dispute with Central settled by final and mandatory binding arbitration. Mr. Roberts’
arbitration agreement covers all of his claims against Central.
The conclusion that the FAA does not preempt Utah law allowing for arbitration is
confirmed by Volt Information Sciences v. Board of Trustees of Leland Stanford University, 489
U.S. 468 (1989). In Volt, the Supreme Court held that a California statute allowing a stay of
arbitration was not preempted by the FAA where the parties had contracted that the arbitration
agreement would be governed by California law. 489 U.S. at 470. The parties had entered into a
construction contract under which Volt would install a system of electrical conduits on
Stanford’s campus. Id. The contract included an agreement to arbitrate all disputes between the
parties relating to the contract. Id.
The contract also included a choice-of-law provision that provided that the contract be
governed by the law of the place where the project is located, which was in California. Id. A
dispute involving compensation for extra work arose between the parties during the course of the
project and Volt made a formal demand for arbitration. Id. Stanford then filed an action against
Volt in the California Superior Court alleging fraud and indemnity. In response, Volt petitioned
the court to compel arbitration. Id. at 471. Stanford moved to stay arbitration pursuant to
California law. Id.
The Superior Court denied Volt’s motion to compel arbitration and the California Court
of Appeal affirmed. Id. The Court of Appeal held that “by specifying that their contract would be
governed by ‘the law of the place where the project is located,’ the parties had incorporated the
California rules of arbitration . . . into their arbitration agreement.” Id. at 472. The United States
Supreme Court affirmed, ruling that “[w]here, as here, the parties have chosen in their agreement
9

to abide by the state rules of arbitration, application of the FAA to prevent enforcement of those
rules would actually be inimical to the policies underlying state and federal arbitration law.” Id.
(internal citations and quotation marks omitted).
Similarly, here, Mr. Roberts and Central chose in their agreement to abide by Utah’s
arbitration law. Thus, allowing application of the FAA’s § 1 exemption to prevent enforcement
of the very state laws that the parties contracted for would indeed offend the policies underlying
state and federal arbitration law. The FAA was designed to “overrule the judiciary’s longstanding
refusal to enforce agreements to arbitrate,” Volt, 489 U.S. at 474 (quoting Dean Witter Reynolds
Inc. v. Byrd, 470 U.S. 213, 219 (1985)), “and place such agreements upon the same footing as
other contracts.” Id. (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974) (internal
citations and quotations marks omitted). Moreover, there is not a federal policy favoring
arbitration under a certain set of procedural rules. Id. at 476. The federal policy is simply to
ensure the enforceability of private arbitration agreements according to their terms. Id.
The parties are free to negotiate the terms of arbitration and the arbitration agreement here
states that the laws of Utah will apply to any dispute that arises or is related to Mr. Roberts’
employment with Central. Mr. Roberts in effect asks the court to declare that the FAA forbids
application of the very laws that the parties contracted to govern their agreement. Volt does not
support such a result. The “FAA contains no express preemptive provision, nor does it reflect a
congressional intent to occupy the entire field of arbitration.” Id. at 477.
As Volt states, the FAA’s passage was motivated by a congressional desire to enforce
agreements into which parties had entered. Id. at 478. Thus, the Supreme Court has recognized
that the FAA does not require parties to arbitrate when they have not agreed to do so. Id.
10

Furthermore, it does not prevent parties who do agree to arbitrate from excluding certain claims
from the scope of their arbitration agreement or from electing that the agreement be governed by
state rather than federal law. See id. “It simply requires courts to enforce privately negotiated
agreements to arbitrate, like other contracts, in accordance with their terms.” Id.
Congress has not shown a clear intention to fill the entire field of arbitration here. Thus,
the FAA’s § 1 exemption does not preempt either application of the Utah Arbitration Act or
enforcement of the arbitration agreement between Central and Mr. Roberts. Because Mr. Roberts
and Central agreed for Utah law to govern their arbitration agreement, the court will not prevent
them from abiding by the terms of their agreement. Utah law controls the enforcement of the
arbitration agreement, which the court is required to enforce, and the Utah Act should be applied
to its enforcement.
B. The Arbitration Agreement is Not Included as a Part of Central’s Drivers
Manual and is Not Illusory.
Mr. Roberts also contends that the arbitration agreement is unenforceable. He argues that
Central’s Drivers Manual reserves for Central the complete and unfettered right to modify,
revoke, or suspend any of its provisions. He continues that the Memorandum is a part of the
Manual, thus allowing Central to modify or revoke it at any time. Such a revocable agreement, he
argues, is illusory and unenforceable. Mr. Roberts’ argument is based on the following provision
found in Central’s Manual:
The information in this manual is subject to change without notice. [Central]
reserves the rights to amend, revoke, replace or suspend any and all of the policies
and procedures contained in this manual.
Pl.’s Mem. in Opp., Ex. B, 12 (Dkt. No. 24-2) (emphasis added).

11

Mr. Roberts’ specifically argues that the Memorandum refers to the Manual as “this
Drivers Manual” three times, not just as the Drivers Manual, but as “this Drivers Manual”
(emphasis added). This language, he asserts, is sufficiently clear to find that the Manual
incorporates the Memorandum, including the right of Central to modify or disavow the
arbitration clause at will. Mr. Roberts also argues that the end of the Manual’s table of contents
lists Orientation Forms and suggests that the Memorandum was a part of these Orientation
Forms. Additionally, Mr. Roberts asserts that if the Manual can be changed at any time to alter
policies and procedures, then the arbitration clause is illusory because Central can change the
arbitration agreement at any time. Central responds that the Memorandum does not incorporate
the Manual and is a separate and distinct document.
The court finds that there is not a factual basis for Mr. Roberts’ argument. The fact that
the Memorandum refers to the Manual as “this Drivers Manual” three times is not a compelling
basis to support the assertion that the Memorandum incorporates the Manual. The factual
evidence does not support Mr. Roberts’ assertion that the Orientation Forms referred to at the end
of the Manual’s table of contents makes the Memorandum a part of the Manual. Mr. Roberts
argues that there is an ambiguity in the arbitration provision about whether it is part of the
Manual. The court, however, finds no ambiguity. No language in the arbitration provision is
unclear or suggests in any way that it is intended to be part of the Manual.
Furthermore, the language of the Manual is not sufficiently specific to incorporate the
arbitration agreement into the Manual. Under Utah law, “[incorporation] by reference requires
that ‘the reference be clear and unequivocal, and alert the non-drafting party that terms from
another document are being incorporated.” IHC Health Servs. 2009 UT 54 at *15 (quoting
12

Snyder, 2002 UT 28 at *19) (internal quotation marks omitted). If Central intended to incorporate
the Memorandum into the Manual or the Manual into the Memorandum, it did not do so clearly
and unequivocally here to properly alert Mr. Roberts that the terms from the other document
were being incorporated.
When interpreting the language of the arbitration agreement, the court looks for a reading
that harmonizes the provisions in favor of arbitration and avoids rendering any provision
meaningless. Here, the arbitration provision would, in essence, become meaningless, if it were
read as being a part of the Manual and the Manual is later determined to be illusory. Based on the
plain language contained within the four corners of the Memorandum and the arbitration
agreement, the court finds that the agreement is not a part of the Manual.
Mr. Roberts points to Dumais v. American Golf Corp., 299 F.3d 1216 (10th Cir. 2002),
and DeHart v. Stevens-Henager College, Inc., 2005 U.S. Dist. LEXIS 40199 (D. Utah Dec. 2,
2005), for support. The two cases are distinguishable. Both Dumais and DeHart involved
arbitration agreements that were quite conspicuously a part of the employee handbooks. Unlike
the arbitration agreement in Dumais, the Central arbitration provision does not allow Central the
unfettered right to alter the provision’s existence or scope because the agreement is not a part of
the Manual. Moreover, there are no conflicts of provisions in this case like there were in Dumais.
In DeHart, the arbitration provision was included in two separate documents both of
which were provided to the employee as part of a packet during new hire training. The first
document was the employee manual that contained policies and procedures and the second
document was a separate sheet containing the agreement which the employee signed. The
arbitration provision was included in both. The striking difference between DeHart and this case
13

is that the arbitration agreement is not contained in both Central’s Manual and in the separate
Memorandum.
Furthermore, the arbitration agreement, standing on its own, is a valid contract consisting
of an offer, an acceptance and consideration. Central offered Mr. Roberts employment in
exchange for his agreement to certain terms of employment. The arbitration agreement is
included among those terms and constitutes an offer. The consideration that accompanied the
offer was Mr. Roberts’ employment with Central. Mr. Roberts accepted Central’s offer when he
signed the agreement. Having entered into the contract with Central, Mr. Roberts accepted the
benefit of the bargain and cannot now excuse himself and escape the requirements of the
contract.
The court does not find Mr. Roberts’ arguments to be compelling on this issue and holds
that the Memorandum, and in turn, the arbitration agreement, are not a part of Central’s Manual
and the court finds that the agreement is not illusory. Because the court finds that the arbitration
agreement is valid and enforceable, and separate from the Manual, any other issues concerning
the validity and possible illusory nature of the Manual must be decided by the appointed
arbitrator. See Utah Code Ann. §78B-11-107(2)-(3).
C. The CEO Did Not Need to Sign the Arbitration Agreement Because It Was
Part of an At-Will Employment Contract.
Mr. Roberts’ argument that the arbitration agreement is unenforceable because it is not
contained in an agreement signed by the CEO also fails. The Manual provides, under the section
entitled “Employment At-Will,” that:
No [Central] manager, supervisor, or Driver has the authority to enter into any
employment agreement for any specified period of time or to make any other
employment agreement other than at-will. Only the CEO has the authority to make
14

any employment agreement, and then only in writing.
Pl.’s Mem. in Opp., Ex. B at 12 (Dkt. No. 24-2). Mr. Roberts argues that this provision
encompasses the arbitration agreement and that because Central’s CEO never signed Mr.
Roberts’ arbitration agreement, no contract to arbitrate was ever formed.
Mr. Roberts, however, misunderstands the language and meaning of this provision. The
provision’s plain language is clear and unambiguous. It simply states that it pertains only to
employment agreements that are “other than at-will.” Because Mr. Roberts’ employment
agreement with Central is an at-will agreement, it falls under the exception to this provision of
the Manual. The provision simply does not apply to Mr. Roberts’ arbitration agreement and the
agreement did not need to be signed by Central’s CEO.
CONCLUSION
The court GRANTS Defendant Central Refrigerated Service’s Motion to Compel
Arbitration (Dkt. No. 15) and DISMISSES Plaintiffs’ Complaint (Dkt. No. 2) without prejudice.
The arbitration agreement is valid and enforceable and is severable from the contract as a whole.
The court orders that the case be submitted to arbitration according to the terms of the agreement.
SO ORDERED this 18th day of June, 2014.
BY THE COURT:

____________________________
Clark Waddoups
United States District Judge

15