Knox Waste Serv. v. Sherman, 11-19-00407-CV

• Court: Court of Appeals of Texas
• Writing for the Court: W. BRUCE WILLIAMS, JUSTICE
• Parties: KNOX WASTE SERVICE, LLC AND ADOLPHO MARTINEZ, JR., Appellants v. JASON SHERMAN AND MELISSA MILES SHERMAN, Appellees
• Decision Date: 30 September 2021
• Docket Number: 11-19-00407-CV

KNOX WASTE SERVICE, LLC AND ADOLPHO MARTINEZ, JR., Appellants
v.
JASON SHERMAN AND MELISSA MILES SHERMAN, Appellees

No. 11-19-00407-CV

Court of Appeals of Texas, Eleventh District

September 30, 2021

On Appeal from the 266th District Court Erath County, Texas Trial Court Cause No. CV35857

Panel consists of: Bailey, C.J., Trotter, J., and Williams, J.

MEMORANDUM OPINION

W. BRUCE WILLIAMS, JUSTICE

This is an interlocutory appeal of the trial court's denial of Knox Waste Service, LLC's (Knox) and Adolpho Martinez, Jr.'s motion to compel arbitration under the terms of an employment contract. Appellee Jason Sherman disputed his electronic signature on the arbitration agreement, an agreement that invoked the Federal Arbitration Act (FAA). See 9 U.S.C. §§ 1-16; TEX. CIV. PRAC. &REM. CODE ANN. § 51.016 (West 2015).

On appeal, Appellants claim that the trial court abused its discretion by:

(1) denying their motion to compel Appellees to arbitrate the personal injury claims against Appellants per the terms of the employment contract

(2) failing to hold an evidentiary hearing before denying the motion; and

(3) failing to sustain Appellants' oral motion to strike Appellees' late response, which contained Sherman's affidavit denying that he signed the arbitration agreement

We affirm in part and reverse and remand in part.

I. Background Facts

Knox is a residential and waste collection service operating out of Tye, Texas. Knox employed Sherman to drive its waste collection vehicles and to assist in the collection of waste. Sherman was in the passenger seat of one of Knox's waste collection vehicles driven by Martinez, another employee of Knox, when the truck was involved in an accident due to "mechanical issues." Sherman sustained severe injuries as a result.

Sherman and his wife, Appellees, filed a common law action against Appellants for personal injuries and loss of consortium, alleging that Appellants' negligence, negligence per se, and/or gross negligence was a proximate cause of their damages. All parties represented to the trial court that the suit was a personal injury claim against the employer-a nonsubscriber under the workers' compensation system of the State of Texas. In response to Appellees' petition, Appellants filed a motion to compel arbitration under the FAA pursuant to an alternative dispute resolution agreement (the Arbitration Agreement) between Sherman, Knox, and Benefit Staffing-a third-party company that contracted with Knox to perform administrative duties and assist in Knox's hiring process. Execution of the Arbitration Agreement by Sherman was affirmatively alleged in Appellants' answer filed on October 8, 2019, and no denial, verified or otherwise, was filed by Appellees prior to the date of the hearing on the motion to compel arbitration. On the evening before the hearing, Appellees filed a response to the motion to compel, attaching an affidavit of Sherman denying that he had signed the Arbitration Agreement. The trial court denied the motion to compel, and this appeal followed.

II. Analysis

We first note that we have jurisdiction to consider this interlocutory appeal pursuant to Section 51.016 of the Texas Civil Practice and Remedies Code, which permits an interlocutory appeal of an order denying a motion to compel arbitration when the FAA governs the arbitration agreement. CIV. PRAC. &REM. § 51.016; see also 9 U.S.C. § 16(a)(1)(B), (C); Beldon Roofing Co. v. Sunchase IV Homeowners' Ass'n, 494 S.W.3d 231, 236 (Tex. App-Corpus Christi 2015, no pet.).

A. By Express Agreement the FAA was Invoked, but Does it Control Here?

Appellants attached a copy of the Arbitration Agreement purportedly signed by Knox, Sherman, and Jeannie King-an employee and agent for Benefit Staffing at the time the agreement was executed-in support of their motion to compel arbitration. In the Arbitration Agreement, the parties agreed "to resolve all Claims (as identified below) exclusively through mediation and arbitration, rather than through a jury trial, under the terms of this Agreement.... The promises by the Parties to arbitrate their differences, rather than litigate them before courts or other bodies, constitute considerations for this Agreement." The Arbitration Agreement also states that each party "carefully read this Agreement, understand its terms, and are entering into this Agreement voluntarily and not under any form of duress." Generally, "a written arbitration agreement is prima facie valid and must be enforced unless the opposing party . . . 'allege[s] and prove[s] that the arbitration clause itself was a product of fraud, coercion, or such grounds as exist at law or in equity for the revocation of the contract.'" Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 341 (5th Cir. 2004) (internal quotations omitted) (quoting Nat'l Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326, 332 (5th Cir. 1987)). Thus, Appellants' copy of the signed Arbitration Agreement, by itself, sufficiently establishes the existence of a prima facie valid arbitration. See id.; see also In re DISH Network, L.L.C., 563 S.W.3d 433, 439 (Tex. App.-El Paso 2018, no pet.).

In our review, we note that Section K of the Arbitration Agreement expressly states that "the parties agree that this Agreement will be interpreted, enforced and governed under the [FAA]." Despite this express agreement, Appellees asserted in their response to Appellants' motion to compel arbitration-as well as on appeal- that the FAA does not control for the following reasons:

1. The FAA's "transportation worker" exception see 9 U.S.C. § 1; Circuit City Stores, Inc v. Adams, 532 U.S. 105, 119 (2001);

2. Waiver;

3. Sherman's contention that he did not sign the Arbitration Agreement; and

4. The Arbitration Agreement terms do not require arbitration of a personal injury claim against a nonsubscriber opting out of the Texas workers' compensation insurance coverage.

We will address each of the contentions made by the parties to determine whether an enforceable arbitration exists. We review de novo whether an enforceable agreement to arbitrate exists. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).

1. No Statutory Exclusion: Sherman was not a Transportation Worker

Although express agreements that certain disputes will be governed under the FAA may eliminate the need to establish that the transaction involves interstate commerce, it "does not preclude, however, the necessity of determining whether 9 U.S.C. § 1 excludes the employee from the FAA's control. This matter must be analyzed under the FAA itself." W. Dairy Transp., LLC v. Vasquez, 457 S.W.3d 458, 463 n.3 (Tex. App.-El Paso 2014, no pet.) (citing 9 U.S.C. § 1; Circuit City Stores, 532 U.S. at 119). Accordingly, we must determine whether 9 U.S.C. § 1 exempts the Arbitration Agreement from its scope. See id.

The FAA states that "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. The Supreme Court's plurality opinion in Circuit City interpreted this language to mean that "Section 1 exempts from the FAA only contracts of employment of transportation workers." Circuit City Stores, 532 U.S. at 119. Although not expressly defined by Circuit City, the term "transportation workers" has generally been defined as those workers "actually engaged in the movement of goods in interstate commerce." Id. at 112 (quoting Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1471 (D.C. Cir. 1997)); see also Eastus v. ISS Facility Servs., Inc., 960 F.3d 207, 211 (5th Cir. 2020); Rojas v. TK Commc'ns, Inc., 87 F.3d 745, 748 (5th Cir. 1996); Pilot Travel Ctrs., LLC v. McCray, 416 S.W.3d 168, 187 (Tex. App.-Dallas 2013, no pet.). Thus, the exemption should "be afforded a narrow construction." Circuit City Stores, 532 U.S. at 118; see also Rojas, 87 F.3d at 748.

Several courts have used an eight-factor test-developed by the Eighth Circuit in Lenz v. Yellow Transportation, Inc.-to assist in determining who constitutes a "transportation worker." 431 F.3d 348, 352 (8th Cir. 2005); see generally W. Dairy Transp., 457 S.W.3d at 465. Appellants apply this test in their brief, but the Fifth Circuit recently and explicitly rejected the adoption of the Lenz test in Eastus. Eastus, 960 F.3d at 211. We also decline to adopt such a test and instead choose to adhere to the general requirement that the worker must actually engage in the movement of goods in interstate commerce. See id.; see also Circuit City Stores, 532 U.S. at 119.

Regardless of whether the Arbitration Agreement is in fact an "employment contract, "^[1] or whether "waste" constitutes a "good," we hold that Sherman is not a transportation worker exempted by 9 U.S.C. § 1. To be considered a transportation worker, one must actually engage in the interstate movement of goods. See Circuit City Stores, 532 U.S. at 119; see also Saxon v. Sw. Airlines Co., 993 F.3d 492, 497 (7th Cir. 2021) ("To resolve that question we ask 'whether the interstate movement of goods is a central part of the class members' job description,' meaning that the workers are actively occupied in 'the enterprise of moving goods across interstate lines.'" (quoting Wallace v. Grubhub Holdings, Inc., 970 F.3d 798, 801-02 (7th Cir. 2020))); Eastus, 960 F.3d at 211 (in holding that an airline worker who checked passengers' tickets as they boarded the plane is not a "transportation worker," the court noted that "[i]mportant to us is that though the passengers [-i.e., the goods ] moved in interstate commerce, Eastus' role preceded that movement"); Siller v. L &F Distribs., Ltd., No. 96-40549, 1997 WL 114907, at *1 (5th Cir. Feb. 18, 1997) (unpublished) ("[A] 'carrier is engaged in interstate...