Cummings v. Fedex Ground Package System, Inc., No. 04-1247.

• Decision Date: 20 April 2005
• Docket Number: No. 04-1247.
• Citation: 404 F.3d 1258
• Parties: Gary L. CUMMINGS, an individual, James Bittle, and Sean Steiner, Plaintiffs-Appellees, v. FEDEX GROUND PACKAGE SYSTEM, INC., a Delaware Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

404 F.3d 1258

Gary L. CUMMINGS, an individual, James Bittle, and Sean Steiner, Plaintiffs-Appellees, v. FEDEX GROUND PACKAGE SYSTEM, INC., a Delaware Corporation, Defendant-Appellant.

No. 04-1247.

United States Court of Appeals, Tenth Circuit.

April 20, 2005.

Submitted on the briefs: Wade Warthen, Kissinger & Fellman, P.C., Denver, CO, Frank C. Botta and Ellen P. Milcic, Thorp Reed & Armstrong, LLP, Pittsburgh, PA, for Defendant-Appellant.

Max A. Minnig Jr., Denver, CO, for Plaintiffs-Appellees.

Before LUCERO, PORFILIO, and BALDOCK, Circuit Judges.

LUCERO, Circuit Judge.

This appeal involves a dispute regarding the scope of a narrowly drawn arbitration clause. The district court denied a motion by defendant FedEx Ground Package System, Inc. ("FedEx"), to compel arbitration of two claims contained in a complaint filed against it by plaintiffs Gary Cummings, James Bittle, and Sean Steiner. In June 2003, the plaintiffs brought suit against FedEx in Colorado state court asserting claims for rescission, fraud, negligent misrepresentation, breach of contract, breach of the covenant of good faith, and deceptive trade practices. FedEx removed the case to federal court on the basis of diversity jurisdiction, and then filed a motion to dismiss the action under Fed.R.Civ.P. 12(b)(1) and to compel arbitration, citing an arbitration clause in agreements signed by each plaintiff. Plaintiffs amended their complaint to clarify that their claims are based solely on oral representations allegedly made by FedEx, not on the written agreements. FedEx reasserted its motion to dismiss and to compel arbitration of the amended complaint. The district court denied FedEx's motion, ruling that the nature of plaintiffs' claims fell outside the scope of the arbitration clause. We exercise jurisdiction pursuant to 9 U.S.C. § 16(a)(1)(C) and affirm.¹

BACKGROUND

Plaintiffs entered into separate, but for all relevant purposes identical, contracts with FedEx to serve as package delivery contractors. Plaintiffs allege in their complaint that, prior to the execution of any agreement, FedEx made oral representations to them concerning the amount of income plaintiffs would earn based on their workload and assigned delivery route, as well as the assistance that FedEx would provide them. Each plaintiff alleges that, in response to FedEx advertisements, he met with a FedEx regional recruiter to inquire about acquiring a FedEx delivery route. The complaint alleges a FedEx recruiter told each plaintiff he would be assigned a route and that, if he worked between ten and twelve hours a day, he would earn approximately $1,500 a week, plus bonuses, on that route. Plaintiffs also allege the FedEx recruiter told them they were required to purchase a truck, but that FedEx would assist them in reselling their route and the truck if they left FedEx.

Each plaintiff later signed FedEx's form Pick-Up and Delivery Contractor Operating Agreement (the "Operating Agreement"), and, as required, purchased a FedEx truck.² Each was assigned a delivery route, originating from a Colorado FedEx facility. The plaintiffs allege that, despite working in excess of the recommended hours per day, they were never able to earn close to the amount of money represented by FedEx on their assigned route; Cummings and Bittle allege they were unable to earn more than $400 a week, despite working more than twelve hours a day. All of the plaintiffs resigned from FedEx in 2001. They allege that FedEx refused to assist them in selling their trucks.

In its motion to compel arbitration, FedEx cites the following arbitration clause contained in each Operating Agreement:

12.3 Arbitration of Asserted Wrongful Termination. In the event FedEx Ground acts to terminate this Agreement (which acts shall include any claim by [plaintiff] of constructive termination) and [plaintiff] disagrees with such termination or asserts that the actions of [defendant] are not authorized under the terms of this Agreement, then each such disagreement (but no others) shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (AAA)....

Aplt.App. at 262-63.

The arbitration clause also includes a requirement that claims be submitted to arbitration within ninety days of any wrongful termination. Plaintiffs did not submit any claims to arbitration, and FedEx contends they would now be time-barred from doing so.

Although plaintiffs' amended complaint asserts eight claims, FedEx only contends two claims are subject to arbitration: the fourth claim, for breach of implied contract, and the fifth claim, for breach of the implied duty of good faith and fair dealing arising out of an implied contract. The fourth claim alleges that:

FedEx contracted with Plaintiffs, either directly or though promissory estoppel, to aid the Plaintiffs in selling their routes and or trucks if things did not work out. Such agreement does not arise from the terms of the written Contract supplied by FedEx. FedEx breached this agreement with Plaintiffs and Plaintiffs have been damaged thereby.

Aplt.App. at 97-98 (paragraph break and numbers omitted).

The fifth claim alleges that:

Plaintiffs had an implied contractual relationship with FedEx concerning income, time to complete routes and aid in selling trucks and routes upon termination, and implied thereby is the covenant of good faith and fair dealing. By failing to inform Plaintiffs of the efforts necessary to make the type of money being represented, by failing to aid Plaintiffs in selling their routes or trucks, and by other similar or related acts, FedEx has breached the covenant of good faith and fair dealing with the Plaintiffs. Plaintiffs have been damaged by such breach.

Id. at 98 (paragraph breaks and numbers omitted).

In rejecting FedEx's argument that these two claims were subject to arbitration, the district court first noted that the clause is a narrow one, which limits arbitration to very specific types of disputes. See McDonnell Douglas Fin. Corp. v. Pennsylvania Power & Light Co., 858 F.2d 825, 832 (2d Cir.1988) (discussing the difference between broad and narrow arbitration clauses). By its terms, the arbitration clause in the Operating Agreement only covers acts by FedEx to terminate the Operating Agreement or acts claimed by plaintiffs to constitute a constructive termination of the Operating Agreement.

The district court noted that the fourth claim explicitly states it is not premised on the Operating Agreement, that the fifth claim explicitly states it is based only on an implied contractual relationship, and that the amended complaint states generally that "[a]ll claims against FedEx stated herein are based on oral representations concerning the income, workload and aid in selling trucks and route, and do not arise from the terms of the signed contract between FedEx and the Plaintiffs." Aplt.App. at 95. Thus, because plaintiffs do not contend that FedEx wrongfully terminated the Operating Agreement, the district court ruled that neither the fourth nor the fifth claim falls within the purview of the Operating Agreement's arbitration clause.

ANALYSIS

We review the denial of a motion to compel arbitration de novo. Spahr v. Secco, 330 F.3d 1266, 1269 (10th Cir.2003). Because the Operating Agreement containing the arbitration clause is a "contract evidencing a transaction involving commerce," 9 U.S.C. § 2, the Federal Arbitration Act governs this case. Where, as here, the parties dispute "whether an arbitration clause in a concededly binding contract applies to a particular type of controversy, [the question] is for the court." Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). We first examine "the scope of that agreement and then determine whether [plaintiffs'] claims fall within its scope." Nat'l Am. Ins. Co. v. SCOR Reinsurance Co., 362 F.3d 1288, 1290 (10th Cir.2004).

"To determine whether a particular dispute falls within the scope of an agreement's arbitration clause, a court should undertake a three-part inquiry." Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 224 (2d Cir.2001).

First, recognizing there is some range in the breadth of arbitration clauses, a court should classify the particular clause as either broad or narrow. Next, if reviewing a narrow clause, the court must determine whether the dispute is over an issue that is on its face within the purview of the clause, or over a collateral issue that is somehow connected to the main agreement that contains...