Darrow v. InGenesis Inc.

Decision Date02 July 2020
Docket NumberSA-20-CV-00530-XR
PartiesJENNIE DARROW, Plaintiff, v. INGENESIS INC., DR. VERONICA MUZQUIZ EDWARDS, Defendants.
CourtUnited States District Courts. 5th Circuit. Western District of Texas
ORDER

On this date, the Court considered Defendants' Motion to Dismiss and Compel Arbitration (ECF No. 42), Plaintiff's Response (ECF No. 45), and Defendants' Reply (ECF No. 46). The Court also considered the oral arguments of the parties made in open court on June 30, 2020. After careful consideration, the Court will GRANT Defendants' motion.

BACKGROUND
I. Procedural Background

This case arises out of an employment-related dispute between Plaintiff Jennie Darrow ("Plaintiff") and her former employer Defendant InGenesis Inc. ("InGenesis") and its CEO and founder Defendant Dr. Veronica Muzquiz Edwards ("Edwards") (collectively, "Defendants"). InGenesis is a staffing company that provides staffing-related services for large institutional and corporate clients. The company is a Texas corporation based in San Antonio. InGenesis hired Plaintiff in July 2018 to serve as its Executive Director of Managed Service Provider Programs. The parties agreed that Plaintiff would perform her job remotely from her home in New Jersey.

Plaintiff alleges that she enjoyed success in her role with InGenesis and managed some of the company's biggest clients, including the University of Texas ("UT") and the State of Ohio. According to Plaintiff, a few months into her employment, she discovered InGenesis was consciously failing to conduct mandatory background checks and drug screenings on candidates that it helped staff to highly sensitive hospital and prison positions at UT and the State of Ohio. Plaintiff alleges InGenesis had both a contractual and a moral duty to ensure these background checks and drug tests were completed, and that the clients relied upon InGenesis to perform these checks. Plaintiff claims that she repeatedly complained to InGenesis officials but was met with inaction and retaliation in the form of removal from the UT account and eventual termination of her employment without explanation on May 24, 2019.

Plaintiff filed suit on August 21, 2019 in the U.S. District Court for the District of New Jersey, alleging a single cause of action against both Defendants: retaliation in violation of the New Jersey Conscientious Employee Protection Act ("CEPA"). Defendants filed a motion to dismiss or to compel arbitration and to transfer the case to this Court. ECF No. 6. After briefing on the issue, Judge Kevin McNulty issued an opinion finding that the parties had agreed to a forum-selection clause that designated the Western District of Texas as the appropriate forum. ECF No. 28. Judge McNulty granted Defendants' motion to transfer venue to this Court, but declined to compel arbitration and left "any associated decisions about whether to stay or dismiss the case to the discretion of" this Court. Id. at 11; ECF No. 29. The case was transferred to this Court on April 29, 2020, and the Court ordered Defendants to file any further motion to compel arbitration, stay, or dismiss no later than June 1, 2020. ECF No. 33.

On June 1, Defendants filed their present motion to dismiss and compel arbitration, or alternatively, to stay proceedings pending arbitration. ECF No. 42. Defendants argue that Plaintiff executed a binding Arbitration Agreement requiring arbitration of the claim asserted in this litigation. Id. at 2. They further argue that because Plaintiff's sole claim is arbitrable, the entirecase should be dismissed after the Court compels arbitration, or alternatively stayed pending the outcome of arbitration. Id. at 7. In response, Plaintiff argues that there is no valid agreement to arbitrate. ECF No. 45 at 1-3. Plaintiff further urges there is a conflict within the Arbitration Agreement regarding the amount of arbitration expense to be paid by Plaintiff, and that this Court should limit Plaintiff's portion of the arbitration expenses to $300. Id. at 4. Finally, Plaintiff asks that if the motion to compel arbitration is granted, this lawsuit be stayed rather than dismissed. Id.

II. Contracts at Issue

Defendants' claim that this dispute is subject to arbitration is based upon the Arbitration Agreement executed by the parties on July 2, 2018. ECF No. 42-2. Plaintiff and Defendant Edwards electronically signed that two-page agreement. Id. at 2. In paragraph 1, the Arbitration Agreement provides, in relevant part:

This Arbitration Agreement modifies the legal and equitable rights and obligations of InGenesis, Inc. ("InGenesis") and Employee. Read it carefully as InGenesis and Employee are bound by these provisions regarding past, current and future matters and issues, acts and/or omissions. Enforcement of the Arbitration Agreement shall be governed by the Federal Arbitration Act.

Employer InGenesis and Employee agree that, for many reasons, lawsuits and court actions are disadvantageous to both. Therefore, they agree that any claim or dispute between them or against the other or any agent or employee of the other, whether related to the employment relationship or otherwise, including those created by practice, common law, court decision, or statute, now existing or created later, including any related to allegations of violations of state or federal statutes related to discrimination, harassment, and/or retaliation (collectively referred to as "Claims"), shall be resolved by neutral binding arbitration by the American Arbitration Association, under the rules of procedure in effect at the time any claim is made...

Any disputes shall be arbitrated by an arbitrator pursuant to the Employment Rules of the Association at the Association's regional office in Houston, Texas. The decision of the arbitrator shall be final and conclusive on the parties and shall be a bar to any suit, action or proceeding instituted in any federal, state or local court....

Each party shall pay its own costs of arbitration, except that the Employer agrees to pay for one day of arbitration hearings. Fees paid are subject to (including

attorneys' fees) the award of fees, as provided by law and arbitration rules. Any award of the arbitrator may be entered as a judgment in any court of competent jurisdiction. By signing this Agreement, the parties are giving up any right they might have to a jury trial.

Id. at 1 (emphasis in original). The Arbitration Agreement also contains a "Choice of Law" provision, which provides that the parties "agree that the terms of this Arbitration Agreement shall be construed and enforced in accordance with the laws of the State of Texas...." Id. Finally, the Agreement includes a "Forum Selection" provision:

Subject to paragraph 1, the parties further agree that all actions or proceedings arising in connection with this Agreement, including injunctive relief, shall be tried and litigated exclusively in the Federal Courts of the Western District of Texas, San Antonio Division, or in the State District Courts of Texas located in Bexar County, Texas. The aforementioned choice of venue is intended by the parties to be mandatory and not permissive in nature, thereby precluding the possibility of litigation between the parties with respect to or arising out of this Agreement in any jurisdiction other than that specified in this paragraph....

Id. at 1-2.

Plaintiff also claims two additional contracts are relevant here: the "Restrictive Agreements" and the amendments thereto, both signed by the parties and executed on July 10, 2018. ECF Nos. 45-2, 45-3. The Restrictive Agreements describe Plaintiff's "Duty of Loyalty to Employer," including agreements of non-disclosure of proprietary and confidential information, non-solicitation of employees or clients of InGenesis, and non-competition. ECF No. 45-2 at 1-3. The Restrictive Agreements document also contains a provision regarding choice of law and forum selection:

These Agreements shall be governed by the laws of the State of Texas.... Any litigation or proceeding brought by either party involving the enforcement of these Agreements or the rights, duties, or obligations of any party shall be brought exclusively in the state or federal courts sitting in San Antonio, Bexar County, Texas. If either party shall commence any action or proceeding against the other party related to a breach or alleged breach of this Agreement, including without limitation any action for injunctive or equitable relief or for a judicial declarationof rights hereunder, the prevailing party in such action shall be entitled to recover reasonable costs, attorneys' fees and expenses.

Id. ¶ 8. The Amendment to Restrictive Agreements, also signed by the parties on July 10, 2018, modifies the non-competition provisions and provides for an application for waiver or modification of any provision of the Agreements. ECF No. 45-3. The Amendment further states "All parts of the Agreements not amended herein remain in full force and effect." Id. ¶ 3.

DISCUSSION
I. Is Plaintiff's claim subject to arbitration?

The Federal Arbitration Act ("FAA") provides that 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 Act "mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). "The FAA was designed to overrule the judiciary's long-standing refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts." Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478 (1989) (internal quotations and citations omitted). Thus, the FAA establishes "a liberal federal policy favoring arbitration agreements" and "requires courts to enforce agreements to arbitrate according to their...

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