Hinkley v. Envoy Air, Inc., No. 19-10848

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: RHESA HAWKINS BARKSDALE, Circuit Judge.
• Citation: 968 F.3d 544
• Parties: John HINKLEY ; Steve Rice, Plaintiffs - Appellants v. ENVOY AIR, INCORPORATED, Defendant - Appellee
• Docket Number: No. 19-10848
• Decision Date: 04 August 2020

968 F.3d 544

John HINKLEY ; Steve Rice, Plaintiffs - Appellants
v.
ENVOY AIR, INCORPORATED, Defendant - Appellee

No. 19-10848

United States Court of Appeals, Fifth Circuit.

FILED August 4, 2020

Joshua H. Sisam, Sisam & Associates, L.L.P., Boerne, TX, Kirk Matthew Claunch, Claunch Law Firm, Fort Worth, TX, for Plaintiffs-Appellants.

Lindsay Anne Hedrick, Jones Day, Dallas, TX, for Defendant-Appellee.

Before BARKSDALE, HAYNES, and WILLETT, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge.

968 F.3d 546

This action's having been dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) (failure to state claim), at issue are: the action's removal; and jurisdiction over a claim pursuant to Texas Labor Code § 21.051 et seq. (barring age discrimination in employment decisions), for which the district court concluded plaintiffs failed to plausibly allege exhaustion of the requisite administrative remedies. AFFIRMED.

I.

Because dismissal was pursuant to Rule 12(b)(6), the facts discussed infra are as alleged in the operative first amended complaint. E.g. , Garrett v. Commonwealth Mortg. Corp. of Am. , 938 F.2d 591, 592 n.2 (5th Cir. 1991) (citation omitted).

Envoy hired appellants John Hinkley and Steve Rice (each then over 40 years of age) as trainee pilots in 2017. Both executed agreements with Envoy governing their employment relationship.

Envoy ranked its incoming trainee pilot classes by age. Envoy encouraged older trainee pilots, including appellants, to train on the complex EMB-175 aircraft; but, Envoy's "training process for [that aircraft] was deficient and not fully established". The older trainees were subsequently told they were less likely to become pilots because the EMB-175 was "much harder" to learn than other airframes, and Envoy told appellants they "should just quit" because they were unlikely to pass. Envoy then constructively discharged appellants.

Appellants filed this action on 29 November 2018 in Texas’ 451st district court in Kendall County; that county is located in the federal western district. 28 U.S.C. § 124(d)(4). They alleged both disparate treatment and disparate impact based on age, in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621 et seq. , and the Texas Labor Code, § 21.051 et seq. Envoy answered with a general denial; raised an affirmative defense of lack of administrative exhaustion; and presented counterclaims, asserting appellants breached their employment (letter) agreements by failing to repay signing bonuses after they resigned their positions.

Envoy removed this action, pursuant to 28 U.S.C. § 1441(a), to the northern district of Texas on 7 January 2019, referencing in the notice of removal the letter agreements’ forum-selection clauses. These identical clauses: required "any suit, action or proceeding with respect to th[ese] agreement[s] ... be brought in the district court of the state of Texas, county of Tarrant, or in the United States District Court for the Northern District of Texas, Fort Worth Division"; and "waive[d] any claim that any such suit, action or proceeding brought in either such court has been brought in an inconvenient forum". Accordingly, Envoy contended the northern district was "the proper venue for removal" pursuant to the general removal statute, 28 U.S.C. § 1441(a). Notably, appellants never moved to remand this action to state court.

968 F.3d 547

On 25 January, Envoy moved to dismiss this action pursuant to Rule 12(b)(6), contending appellants failed to allege they had administratively exhausted their ADEA and Texas Labor Code claims. Following a sua sponte order to replead, appellants filed on 21 February the operative first amended complaint, alleging administrative exhaustion. They also added claims for breach of contract and promissory estoppel. (The operative complaint's allegations are asserted on behalf of a putative similarly situated class.)

Envoy countered on 7 March with another Rule 12(b)(6) motion, again contending, inter alia , appellants failed to sufficiently plead their ADEA and Texas Labor Code claims’ administrative exhaustion. Appellants’ 28 March response to the new Rule 12(b)(6) motion, among other things: contended they exhausted their claims by filing a charge with the Texas Workforce Commission (TWC) on 30 November 2018 (which was the day after they filed this action); and attached documents they asserted substantiated that filing.

The court on 2 April 2019 sua sponte transferred this action to the western district because it concluded removal to the northern district was "improper". Transfer was pursuant to 28 U.S.C. § 1631 (authorizing transfer to another federal court "if ... in the interest of justice", after transferor court "finds ... there is a want of jurisdiction").

On 4 April, Envoy moved, pursuant to 28 U.S.C. § 1404(a) (authorizing, "[f]or the convenience of parties and witnesses, [and] in the interest of justice", transfer of action "to any other district or division where it might have been brought or to any district or division to which all parties have consented"), to transfer the action back to the northern district, contending: the forum-selection clause required at least the counterclaims be litigated in the northern district; and the relevant public and private factors favored the entire action's litigation in that court.

Appellants’ 18 April response to the transfer motion asserted, inter alia , that Envoy: waived the forum-selection clause by filing its counterclaims in a forum (the 451st district court in Kendall County) that clause did not permit; should be "estopped from arguing that Kendall County [was] an inconvenient location to have that dispute resolved"; and "c[ould not] complain about the application of either section 1441 or 1631" because it "chose to remove this matter to the wrong forum". Appellants further contended that, by transferring pursuant to § 1631, the district court for the northern district recognized it lacked jurisdiction over the action because of improper removal.

In a 9 May order, the district court for the western district ruled, inter alia : the forum-selection clause "plainly governed" the counterclaims; whether it also governed the other claims was immaterial because the relevant factors favored transfer of the action under § 1404(a) ; and the improper removal did not divest the district court for the northern district of jurisdiction, nor was that district an improper venue. Accordingly, pursuant to § 1404(a), it transferred the action back to the northern district.

The district court for the northern district concluded, inter alia , in its 28 June opinion: appellants failed to plausibly allege administrative exhaustion; and, in any event, they failed to allege a facially neutral policy with a disproportionately adverse effect on employees aged 40 or over. Accordingly, it dismissed the ADEA (federal question) and Texas Labor Code (supplemental jurisdiction) claims with prejudice; but, it declined to exercise supplemental jurisdiction over the remaining state-law claims, which it remanded to the

968 F.3d 548

451st district court. (The court did not state why it elected to exercise supplemental jurisdiction over the Texas Labor Code claim.) For compelling alternative reasons, the court denied leave to amend the first amended complaint.

II.

Although they note the denial of leave to amend, appellants do not expressly contest being denied leave to do so. And, the potential complexity of this appeal is lessened greatly by appellants’ not challenging the following aspects of the district courts’ rulings: the district court for the western district's § 1404(a) transfer back to the northern district; the district court for the northern district's exercising supplemental jurisdiction over their Texas Labor Code claim; and, as decided by the district court for the northern district, their failure to plausibly allege they administratively exhausted their ADEA and Texas Labor Code claims. Instead, they contend the district court for the northern district erred: by sua sponte transferring this action to the western district instead of remanding it to state court; and, if remand was not required, by dismissing their Texas Labor Code claim with prejudice pursuant to Rule 12(b)(6) instead of without prejudice pursuant to Rule 12(b)(1) (lack of jurisdiction). Each claim fails.

A.

The parties focus on the mechanics of a transfer pursuant to § 1631. In that regard, they contest whether the transferor court must expressly find, as stated in § 1631, transfer to be "in the interest of justice" and whether this transfer was. See 28 U.S.C. § 1631. As stated, appellants assert the district court for the northern district erred by sua sponte transferring the action to the western district. But, the district court for the western district transferred the action back to the northern district, which then dismissed appellants’ claims.

This unusual procedural posture raises a more fundamental issue. Article III's "case or controversy" requirement permits federal courts to adjudicate only live disputes—a party must retain a "legally cognizable interest in the outcome" of an issue, or its resolution is moot. Campanioni...