Patterson v. Nine Energy Serv., LLC

Decision Date30 August 2018
Docket NumberNo. CIV 17-1116 JB/GBW,CIV 17-1116 JB/GBW
Citation330 F.Supp.3d 1280
Parties Ryan PATTERSON, Plaintiff, v. NINE ENERGY SERVICE, LLC, Defendant.
CourtU.S. District Court — District of New Mexico

Jack L. Siegel, Siegel Law Group, P.L.L.C., Dallas, Texas and J. Derek Braziel, Travis Andrew Gasper, Lee & Braziel, L.L.P., Dallas, Texas, Attorneys for the Plaintiff

Christopher S. Mann, Jones Walker, L.L.P., New Orleans, Louisiana and Jennifer L. Anderson, Jones Walker, L.L.P., Baton Rouge, Louisiana, Attorneys for the Defendant



THIS MATTER comes before the Court on: (i) the Defendant's Motion to Dismiss the First Amended Class Action Complaint (R. Doc. 3) and Compel Arbitration, filed December 6, 2017 (Doc. 5)("Motion"); and (ii) the Surreply in Opposition to Defendant's Motion to Dismiss the Class Action Complaint and Serve [sic], filed January 10, 2018 (Doc. 16)("Surreply Motion"). The Court held a hearing on June 27, 2018. The primary issues are: (i) whether the Court has diversity jurisdiction to adjudicate this case when the citizenship of one of the parties is unclear; (ii) whether the arbitration agreement into which Plaintiff Ryan Patterson and Defendant Nine Energy Service, LLC ("Nine Energy") entered contains adequate consideration; (iii) whether the arbitration agreement is substantively unconscionable, because it contains a unilateral carve-out allowing Nine Energy to request injunctive relief in court to protect its confidential information; and (iv) whether the arbitration agreement is substantively unconscionable, because it provides only sixty days after a dispute arises in which to file a demand for arbitration. The Court concludes that the parties have not established diversity jurisdiction, so the Court will order the parties to show cause why the Court should not dismiss this case for lack of subject-matter jurisdiction. On the merits, if the Court has subject-matter jurisdiction, the Court is inclined to conclude that the Arbitration Agreement contains adequate consideration, and, although the injunctive relief provision is substantively unconscionable, it is also severable. Further, the Court is not inclined to hold the Arbitration Agreement's sixty-day limitations period unconscionable. Finally, if the Court has subject-matter jurisdiction, the Court is inclined to stay proceedings in this case, rather than dismissing it. Accordingly, the Court is inclined to grant the Motion in part.


Patterson worked for Nine Energy, an oilfield services company, from March to October of 2017. See First Amended Class Action Complaint ¶ 5, at 2, filed November 13, 2017 (Doc. 3)("Amended Complaint").

His "primary job duty consisted of operating pressure control equipment and tools." Amended Complaint ¶ 15, at 3. Nine Energy first offered Patterson employment via letter on February 28, 2017. See Letter from Sally Haynes, Human Resources Manager, to Ryan Patterson at 1-2, (dated February 28, 2017), filed January 3, 2018 (Doc. 14-2)("Offer Letter"). Patterson's Offer Letter states that his employment is contingent upon an enumerated list of items, including drug testing, physical capacity testing, and other things. See Offer Letter at 1. The Offer Letter does not mention arbitration. See Offer Letter at 1-2. Patterson accepted the employment offer by signing the Offer Letter on March 1, 2017. See Offer Letter at 2. Patterson did not begin work at Nine Energy until March 20, 2017. See Supplemental Declaration of Sharon Warren ¶ 7, at 2 (dated January 3, 2018), filed January 3, 2018 (Doc. 14-1).

On March 1, 2017 -- the same day that Patterson signed the Offer Letter -- he also signed the Confidentiality and Dispute Resolution Agreement at 6, filed December 6, 2017 (Doc. 5-2)("Arbitration Agreement"). The Arbitration Agreement states that "the Company and the Employee agree to submit exclusively to final and binding arbitration any and all Disputes as defined herein in accordance with the following understanding and terms." Arbitration Agreement at 3. The Arbitration Agreement defines the word "dispute" as

all legal and equitable claims, demands, disputes, controversies, issues, and disagreements, of whatever nature or kind, whether in contract, tort, under statute or regulation, or any other law or source of legal obligation, including but not limited to those relating to, concerning, or arising out of this Agreement; the interpretation or subject matter of this Agreement or program ... wages or other compensation received by or owed to any Employee, including minimum wage and overtime pay.

Arbitration Agreement at 2. The Arbitration Agreement continues:

Each Dispute shall be arbitrated on an individual basis. The parties forego and waive any right to join or consolidate their Disputes or claims with those of any other employee ... or to assert any Disputes or claims in arbitration as a representative or as a member of a class.... Neither the Company nor any employee or applicant for employment may pursue any Dispute or claim on a class action, collective action, or consolidated basis or in a representative capacity on behalf of other individuals, or participate as a class or collective action member in such a proceeding.... The Parties waive any right to a jury trial and to pursue or participate in class or collective actions with respect to Disputes that are subject of this Agreement and for which a jury trial, class action, and collective action would otherwise be available.

Arbitration Agreement at 3. The Arbitration Agreement contains several other important provisions. See Arbitration Agreement at 3-4. One states that "arbitration shall be commenced by either Party filing a demand for arbitration with the AAA[1 ] within 60 days after such Dispute has arisen." Arbitration Agreement at 3. Another notes:

Notwithstanding the provisions of this Agreement, the Company may bring an action in any court of competent jurisdiction for injunctive relief to enforce the Employee's obligations with respect to the confidentiality and protection of trade secrets and other non-public information belonging to the Company, or with respect to any non-competition, non-solicitation, or any other restrictive covenant provisions in any separate agreement between the Company and the Employee.

Arbitration Agreement at 4. Still another provision states: "The Parties acknowledge and agree that this Agreement and the Parties' employment relationship affect and involve interstate commerce, and that this Agreement is governed by the Federal Arbitration Act."2 Arbitration Agreement at 5. Finally, the Arbitration Agreement contains an integration clause, stating:

No agreements or representations, oral or otherwise express or implied, with respect to the subject matter hereof have been made by either Party that are not set forth expressly in this Agreement.... This Agreement sets forth the entire agreement of the Parties hereto with respect to the subject matter herein, in particular the Parties' agreement regarding the protection of Confidential Information and the procedural mechanism for the final resolution of Disputes and supersedes all prior understandings, agreements, clauses, provisions, representations, or promises, whether oral or written, of the Parties to the extent they relate to or concern the subject matter herein.

Arbitration Agreement at 5. Patterson now alleges in this class action that Nine Energy failed to pay him and other employees overtime wages in violation of the New Mexico Minimum Wage Act, N.M. Stat. Ann. § 50-4-22(D). See Amended Complaint ¶ 3, at 1.


Patterson filed his original Complaint on November 8, 2017. See Original Class Action Complaint, filed November 8, 2017 (Doc. 1)("Original Complaint"). Patterson subsequently filed the Amended Complaint on November 13, 2017. See Amended Complaint at 1. Nine Energy filed the Motion on December 6, 2017. See Motion at 1.

1. The Motion.

Nine Energy moves the Court to dismiss this case for lack of subject-matter jurisdiction and to compel arbitration. See Motion at 1. Nine Energy first contends that Patterson's claims fall within the Arbitration Agreement's scope, because the Arbitration Agreement's provisions "cover all disputes, claims, or disagreements relating to Plaintiff's employment." Motion at 5. Nine Energy then argues that the Arbitration Agreement contains adequate consideration, asserting that "the bargained for exchange in this case was Plaintiff's offer of employment with Nine Energy in exchange for signing the Confidentiality and Dispute Resolution Agreement as well as the Parties' mutual agreement to submit all employment disputes to arbitration." Motion at 6. Turning to the class action allegations, Nine Energy avers that the Arbitration Agreement expressly states that the parties waive any right to participate in a class or collective action regarding any disputes subject to the agreement. See Motion at 7-8. Nine Energy concludes that the Court should grant the Motion and compel Patterson to arbitrate his claims on an individual basis. See Motion at 8.

2. The Response.

Patterson responds. See Response to Defendant's Motion to Dismiss the First Amended Class Action Complaint and Compel Arbitration, filed January 2, 2018 (Doc. 13-1)("Response"). Patterson first asserts that the Arbitration Agreement is substantively unconscionable. See Response at 4. According to Patterson, the Arbitration Agreement section allowing Nine Energy to bring an action for injunctive relief in court to enforce an employee's confidentiality obligations, such as the protection of trade secrets, represents a unilateral carve-out favoring Nine Energy and is therefore unconscionable. See Response at 4-5. Second, Patterson avers that the Arbitration Agreement contains no consideration and is thus illusory. See Response at 5. According to Patterson "continued at-will employment cannot serve as consideration...

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