Gassaway v. Beacon Fabrication, LLC

Decision Date24 February 2020
Docket NumberCivil Action No. 3:20-CV-983-L-BH
PartiesLEON GASSAWAY, STANROD JOHNSON, TAVARE RIDGE, BRANDON ROBINS, AND NICHOLAS SPRAGLIN, Plaintiffs, v. BEACON FABRICATION, LLC and ANCHOR FABRICATION, LLC, Defendants.
CourtU.S. District Court — Northern District of Texas
Referred to U.S. Magistrate Judge
FINDINGS, CONCLUSIONS, AND RECOMMENDATION

By order of reference dated August 21, 2020 (doc. 18), before the Court for recommendation is Defendants' Motion to Dismiss and Compel Arbitration and Brief in Support, filed July 17, 2020 (doc. 11). Based on the relevant filings and applicable law, the motion should be GRANTED, and the case should be dismissed without prejudice.

I. BACKGROUND

Leon Gassaway, Stanrod Johnson, Tavares Ridge, Brandon Robinson, and Nicholas Spragin (collectively Plaintiffs) sue Beacon Fabrication, LLC (Employer), a privately-owned metal fabrication manufacturer in Garland, Texas, and its alleged owner, Anchor Fabrication, LLC (Anchor), for discrimination and retaliation in employment. (doc. 1 at 1, 3, 5.)1

At the time they were hired, Plaintiffs were provided a copy of its Employee Handbook (Handbook), which was also used by Anchor, and an Employee HandbookAcknowledgment form (Acknowledgment). (See doc. 12-1 at 2, 4-15.) The Acknowledgment form they all signed states:

I promise to read this handbook within my first week of employment or upon one week of receipt of the handbook. I understand that the policies and procedures presented here are for information and illustration purposes and are subject to revision or revocation, with or without my prior knowledge, at any time for any reason deemed necessary by management.

(Id. at 17-21.)

The Handbook includes a dispute resolution program (Plan) that requires Employer and Anchor (collectively Defendants) and their employees to submit disputes to binding arbitration:

EMPLOYEE RIGHTS

By agreeing to the Plan, Employees do not give up any substantive legal rights. If the Parties cannot resolve their disputes as described herein, the Parties agree to ultimately resolve said claims or disputes in arbitration rather than litigation. It is vital to understand that this Plan does not waive anyone's substantive legal rights. In fact, the Plan neither creates not destroys any rights; it merely changes the forum in which those rights will be resolved, in a way that will be mutually beneficial.
HOWEVER, YOU ARE WAIVING YOUR RIGHT TO LITIGATE ANY DISPUTE YOU MAY HAVE WITH THE COMPANY, WHETHER PAST, PRESENT, OR FUTURE.

(Id. at 6-7) (capitalization in original). Article 7 addresses amendment, duration, and election of the Plan:

7.11 Amendment. The Company has the sole right to amend this Plan. An amendment may be made by resolution or consent of the Board of Directors, or by an instrument in writing executed by the Plan Director. The amendment shall describe the nature of the amendment and its effective date.
7.12 Duration. This Plan shall survive the employer-employee relationship between the Company and the Employee, and shall apply to any dispute whether it arises or is asserted before, during, or after termination of employment.
7.13 Employee Election. This Plan is not a condition of employment. Any employee who desire to retain the right to resolve disputes through litigation rather than according to the Plan, shall notify the Company in writing no later than seven (7) days after the date the Employee is hired. The notification must be in writing and timely filed.
7.14 Construction and Enforceability.
(a) Any issue or dispute concerning the formation, applicability, interpretation, enforceability, revocability, fairness, inducement, unconscionably, misrepresentation, unfair bargaining power, duress, public policy, or general rules of equity, shall be subject to arbitration as provided herein. The arbitrator, and not any federal, state2 or local court or agency shall have authority to decide any such issue or dispute.
(b) The decision of an arbitrator or any such issue or dispute, as well as any dispute submitted to arbitration as provided in this Plan, shall be final and binding upon the Parties.

(Id. at 14-15.) (bold and underline in original). The Plan also states that "[t]he Company may terminate this Plan by executing a notice of termination, specifying the date of termination." (Id. at 15.)

As allowed by section 7.13, Plaintiffs did not notify Employer in writing that they were electing to retain the right to resolve any disputes through litigation rather than according to the Plan. (Id. at 2.) Defendants did not amend or terminate the Plan at any point during or after Plaintiffs' employment. (Id.)

On April 21, 2020, Plaintiffs sued Defendants for disparate treatment, hostile work environment, and retaliation under Title VII of the Civil Rights Act of 1964, and The Civil Rights Act of 1866, as well as discrimination, hostile work environment, and retaliation under the Texas Employment Discrimination Act. (doc. 1 at 17-21.) They seek compensatory and punitive damages, pre and post judgment interest, attorney's fees, and injunctive relief. (Id. at 21-22.)

On July 17, 2020, Defendants moved to compel arbitration and to dismiss Plaintiffs' claims. (doc. 11.) On August 7, 2020, Plaintiffs responded that the alleged arbitration agreement is not valid because it is illusory, and alternatively, it is unconscionable. (doc. 15.) On September 20, 2019, Defendants filed their reply. (doc. 17.)

II. FEDERAL ARBITRATION ACT

The Federal Arbitration Act (FAA) provides that "a written agreement to arbitrate in any contract involving interstate commerce or a maritime transaction 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'" Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989) (quoting 9 U.S.C. § 2). It "embodies the national policy favoring arbitration." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). The FAA provides "for orders compelling arbitration when one party has failed or refused to comply with an arbitration agreement." EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002) (citing 9 U.S.C. §§ 3-4.) A court may not compel arbitration under the FAA until it is "satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue." 9 U.S.C § 4.

Courts in the Fifth Circuit employ a two-step inquiry when determining a motion to compel arbitration under the FAA. See Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002) (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)). The first step is to determine whether the parties agreed to arbitrate the dispute at issue. Webb v. Investacorp., Inc., 89 F.3d 252, 258 (5th Cir. 1996) (per curiam). This involves consideration of "(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement."Safer, 422 F.3d at 294 (citations omitted); accord Webb, 89 F.3d at 258. In light of the strong federal policy favoring arbitration, "the Supreme Court has held that 'any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.'" Safer, 422 F.3d at 294 (quoting Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). This presumption "does not apply to the determination of whether there is a valid agreement to arbitrate between the parties,'" however. Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003) (quoting Fleetwood Enters. Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)).

The second step of the inquiry is to determine "whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims." Safer v. Nelson Fin. Grp., Inc., 422 F.3d 289, 294 (5th Cir. 2005) (quoting Webb, 89 F.3d at 258); accord OPE Int'l LP v. Chet Morrison Contractors, Inc., 258 F.3d 443, 445-46 (5th Cir. 2001) (per curiam) (citing Mitsubishi, 473 U.S. at 628.). "Only if the court finds there is an agreement to arbitrate does it consider the second step of whether any legal constraints render the claims nonarbitrable." Edwards v. Conn Appliances, Inc., No. 3:14-CV-3529-K, 2015 WL 1893107, at *2 (N.D. Tex. Apr. 24, 2015) (citing Webb, 89 F.3d at 258).

III. APPLICABLE STANDARD

"While the two-step inquiry used to consider a motion to compel arbitration under the FAA is well-settled, 'the [Fifth] Circuit has never discussed the appropriate standard for a district court to apply when considering a motion to stay or compel arbitration.'" Jackson v. Royal Caribbean Cruises, Ltd., 389 F. Supp. 3d 431, 443 (N.D. Tex. 2019) (quoting Rain CII Carbon, LLC v. ConocoPhillips Co., No. CIVA 09-4169, 2010 WL 148292, at *3 (E.D. La. Jan. 11,2010), and citing Grant v. House of Blues New Orleans Restaurant Corp., No. CIV.A. 10-3161, 2011 WL 1596207, at *2 (E.D. La. Apr. 27, 2011)). Jackson noted that "'[t]he majority of other circuits apply a summary judgment-like standard, giving deference to the claims of the non-movant.'" Id. (quoting Rain CII Carbon, 2010 WL 148292, at *3 (citing Clutts v. Dillard's, Inc., 484 F. Supp.2d 1222, 1224 (D. Kan. 2007)), and citing Grant, 2011 WL 1596207, at *2-4 (collecting cases using summary judgment standard on motion to compel arbitration).3 District courts in this circuit have also considered motions to compel arbitration under the summary judgment standard. See id.; see also Rain CII Carbon, 2010 WL 148292, at *3; Rocha v. Macy's Retail Holdings, Inc., No. EP-17-CV-73-PRM, 2017 WL 4399575, at *2 (W.D. Tex. Oct. 3, 2017) ("Similar to a motion for summary judgment, and subject to the same evidentiary standards, the party alleging an arbitration agreement must present summary proof that the dispute is subject to arbitration ... and the party resisting arbitration may...

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