Carter v. Countrywide Credit Industries, Inc., 03-10484.

Citation362 F.3d 294
Decision Date05 March 2004
Docket NumberNo. 03-10484.,03-10484.
PartiesLoy CARTER, Etc.; et al., Plaintiffs, Loy Carter, on behalf of themselves and all others similarly situated; Geoff Burkhart, on behalf of themselves and all others similarly situated; Heather Dawn Young, on behalf of themselves and all others similarly situated; Deborah Robinson, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. COUNTRYWIDE CREDIT INDUSTRIES, INC.; Countrywide Home Loans, Inc.; Full Spectrum Lending, Inc., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Caryl L. Boise (argued), Sigrid Stone McCawley, Boies, Schiller & Flexner, Hollywood, FL, Karen K. Fitzgerald, Kleiman, Lawrence, Baskind & Fitzgerald, Dallas, TX, for Plaintiffs-Appellants.

Bryan Douglas Perkins (argued), Ruth Ann Daniels, Connie Kay Wilhite, Gibson, McClure, Wallace & Daniels, Dallas, TX, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before GARWOOD, JOLLY and CLEMENT, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

Appellees Countrywide Credit Industries, Inc., Countrywide Home Loans, Inc., and Full Spectrum Lending, Inc. ("Countrywide") are in the business of selling and servicing consumer mortgage loans. Appellants Loy Carter, Geoff Burkhart, Heather Young, and Deborah Robinson ("Carter Appellants") are current and former employees of Countrywide who brought suit against Countrywide on behalf of themselves and others similarly situated in an attempt to recover overtime compensation allegedly due under the provisions of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201. Following the filing of this suit, Countrywide moved to compel the plaintiffs to submit their claims to arbitration under arbitration agreements ("the Arbitration Agreements"), which all Countrywide employees sign as a condition of their employment with the company.

In response, the Carter Appellants admitted that they signed the Arbitration Agreements. However, they asserted that the Agreements were invalid and thus unenforceable for four primary reasons: (1) FLSA claims are not subject to arbitration; (2) the Agreements are unconscionable; (3) the Agreements infringe on substantive rights otherwise granted by the FLSA; and (4) the fee splitting arrangement contained in the Agreements imposes impermissibly prohibitive arbitration costs on them.

The district court rejected the first three arguments entirely, holding that the Agreements were not unconscionable nor would their enforcement clash with any substantive provisions of the FLSA. The district court did hold, however, that the Agreements' fee-splitting provision imposed prohibitive costs on the Carter Appellants; in this respect, the district court simply severed this provision from the Agreements under the severability clause, and ordered Countrywide to pay all costs associated with arbitration. The district court then granted Countrywide's motion to compel arbitration.

The Carter Appellants appealed. On appeal, they reassert their earlier objections to the validity and enforceability of the Arbitration Agreements here. They also contend that although the district court correctly concluded the fee-splitting provision was unenforceable, it nevertheless erred by merely severing that provision as opposed to invalidating the Agreements entirely. For the reasons below, we disagree and AFFIRM the judgment compelling arbitration.

I

The Federal Arbitration Act ("FAA") provides that pre-dispute arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has noted that the purpose of the FAA is "`to reverse the longstanding judicial hostility to arbitration agreements ... and to place [them] upon the same footing as other contracts.'" Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)). Accordingly, there is a strong presumption in favor of arbitration and a party seeking to invalidate an arbitration agreement bears the burden of establishing its invalidity. Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. We review the denial of a motion to compel arbitration de novo. Hadnot v. Bay, Ltd., 344 F.3d 474, 476 (5th Cir.2003).

II

The Carter Appellants first argue that the Arbitration Agreements are unenforceable because FLSA claims are not subject to arbitration. They contend that the FLSA grants them access to a judicial forum and that this grant cannot be waived by an agreement to arbitration. For authority, they cite the Supreme Court case of Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981). We cannot agree.

We have already noted that individuals seeking to avoid the enforcement of an arbitration agreement face a high bar. This bar is high even where, as here, the claims subject to arbitration are statutory in nature. Under Gilmer, a court is required to enforce a party's commitment to arbitrate his federal statutory claims unless he can show that Congress intended to preclude arbitration or other nonjudicial resolution of those claims. 500 U.S. at 26, 111 S.Ct. 1647. This showing is made by reference to "the text of the [statute], its legislative history, or an inherent conflict between arbitration and the [statute's] underlying purposes." Id. (internal quotations removed). In weighing such an argument, a court should keep centrally in mind "that questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration." Id. (internal quotations removed). Perhaps indicative of the difficulty of making such a showing, the Supreme Court has seldom found congressional intent to preclude the arbitration of any particular statutory claim.

The Carter Appellants assert here that the text and legislative history of the FLSA explicitly preclude arbitration. As the district court noted, however, there is nothing in the FLSA's text or legislative history supporting this assertion. Indeed, like the district court, we find nothing that would even implicitly have that effect. This fact has been recognized by the other two circuit courts that have addressed this issue. See Kuehner v. Dickinson & Co., 84 F.3d 316, 319-20 (9th Cir.1996) (finding no evidence that Congress intended to preclude arbitration of FLSA claims in the text or legislative history of the statute); Adkins v. Labor Ready, Inc., 303 F.3d 496, 506 (4th Cir.2002) (holding that FLSA claims are arbitrable).

Undaunted, the Carter Appellants cite Barrentine and its Fifth Circuit progeny, Bernard v. IBP, Inc. of Nebraska, 154 F.3d 259 (5th Cir.1998), for the proposition that FLSA claims are not subject to arbitration. However, neither of these cases support the Carter Appellants. Significantly, Barrentine and Bernard involved arbitration agreements embedded in collective-bargaining agreements, not individually executed pre-dispute arbitration agreements like the ones at issue here. This difference is not insignificant; the Supreme Court explicitly distinguished between these two types of arbitration agreements in Gilmer, ultimately concluding that the former may not be subject to arbitration while the latter are. In addition, as the Supreme Court noted in Gilmer, Barrentine took place during a period of judicial skepticism concerning the efficacy of arbitral forums. By the time of Gilmer, however, the "mistrust of the arbitral process" expressed by Barrentine-era cases had been "undermined by [the Supreme Court's] recent arbitration decisions." Gilmer, 500 U.S. at 34 n. 5, 111 S.Ct. 1647. Similar conclusions concerning the inapplicability of Barrentine to this case were reached by our sister circuits in Kuehner, 84 F.3d at 320, and Adkins, 303 F.3d at 506. We thus find unpersuasive the Carter Appellants' contention that FLSA claims are not subject to arbitration.

III

The Carter Appellants also argue that the Arbitration Agreements here are invalid because they deprive them of substantive rights guaranteed by the FLSA. Specifically, they contend that the Agreements interfere with their right under the FLSA to proceed collectively, collect attorney fees, select their forum, and engage in appropriate discovery. We find no such interference that will preclude the enforcement of these agreements.

First, we reject the Carter Appellants' claim that their inability to proceed collectively deprives them of substantive rights available under the FLSA. The Supreme Court rejected similar arguments concerning the ADEA in Gilmer, despite the fact that the ADEA, like the FLSA, explicitly provides for class action suits. 500 U.S. at 32, 111 S.Ct. 1647. What is more, the provision for class actions in the ADEA is the FLSA class action provision, which the ADEA expressly adopts. 29 U.S.C. § 626(b). Accordingly, Gilmer's conclusion in this respect applies with equal force to FLSA claims.

Similarly, we reject the Carter Appellants' assertion that the Arbitration Agreements' limits on discovery deprive them of substantive FLSA rights. Once again, the Supreme Court considered and rejected a similar argument in Gilmer. Id. at 31, 111 S.Ct. 1647. There, the Court noted that the mere fact that discovery in arbitration proceedings "might not be as extensive as in federal courts" does not render those agreements invalid; by agreeing to arbitrate, a party simply "trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration." Id. Thus, a party seeking to have an arbitration agreement invalidated on this basis must show that the discovery provisions in question "will prove insufficient to allow [FSLA] claimants ... a fair opportunity to present their claims." Id....

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