Sanchez v. Nitro-Lift Techs., L.L.C.

• Decision Date: 08 August 2014
• Docket Number: 12–7057.,Nos. 12–7046,s. 12–7046
• Citation: 762 F.3d 1139
• Parties: Miguel SANCHEZ; Shane Schneider; Eddie Howard, on behalf of themselves and others similarly situated, Plaintiffs–Appellees, v. NITRO–LIFT TECHNOLOGIES, L.L.C., Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

762 F.3d 1139

Miguel SANCHEZ; Shane Schneider; Eddie Howard, on behalf of themselves and others similarly situated, Plaintiffs–Appellees,

v.NITRO–LIFT TECHNOLOGIES, L.L.C., Defendant–Appellant.

Nos. 12–7046, 12–7057.

United States Court of Appeals,Tenth Circuit.

Aug. 8, 2014.

Kelli M. Masters (Kevin R. Donelson, Jay P. Walters, and Regina M. Marsh, with her on the briefs) of Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, OK, for Defendant–Appellant.

Mark Hammons of Hammons, Gowens & Hurst, Oklahoma City, OK, for Plaintiffs–Appellees.

Before TYMKOVICH, SEYMOUR, and GORSUCH, Circuit Judges.

SEYMOUR, Circuit Judge.

This appeal involves a dispute concerning the scope of an arbitration clause between Nitro–Lift Technologies, L.L.C. (“Nitro–Lift”), and three of its former employees, Miguel Sanchez, Shane Schneider, and Eddie Howard (collectively, “plaintiffs”). Plaintiffs filed suit against Nitro–Lift, claiming it failed to pay overtime wages in violation of both the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and the Oklahoma Protection of Labor Act (“OPLA”), Okla. Stat. tit. 40, § 165.1 et seq. Nitro–Lift appeals from two district court orders denying its motions to dismiss and compel arbitration, or in the alternative to stay the proceeding pending arbitration, arguing plaintiffs' wage disputes fall within the scope of the arbitration clause. We reverse.

I

Nitro–Lift is a Louisiana corporation that services oil rigs across the nation, including in the state of Oklahoma. Nitro–Lift hired plaintiffs to work in and around Johnston County, Oklahoma, where it has an office. Mr. Schneider worked for Nitro–Lift from July 31, 2008, to June 11, 2010; Mr. Sanchez from approximately December 2009 until February 27, 2012; and Mr. Howard from approximately August 2008 until the end of May 2012. Their job duties included connecting nitrogen generator units to oil rigs to allow nitrogen to be pumped into the rigs, and monitoring the oil rigs to determine if and how much oil or natural gas the wells produced.

At the beginning of their employment relationship with Nitro–Lift, each plaintiff signed an identical document labeled “Confidentiality/Non–Compete Agreement,” which contains the arbitration clause at issue in this case. As the title of the agreement suggests, the language is generally limited to matters involving confidentiality and competition. Section 1 of the agreement adds the phrase “corporate property” to its subheading, and thereafter all the rights, obligations, and duties set forth in section 1 concern confidentiality, competition, and the return of corporate documents.

This is the only agreement between the parties and despite its title, Nitro–Lift claims it is an employment agreement because it was “essential” to plaintiffs' “relationship[ ] with Nitro–Lift,” that “Nitro–Lift would not have hired Plaintiffs without their consent to the Agreements,” and that “Plaintiffs would not have executed the Agreements without the assurance of employment by Nitro–Lift.” Aplt. Br. at 6. But the only language in the contract that discusses compensation states in section 1(k) that “[i]n consideration of the receipt of Confidential Information during employment, the receipt of compensation, each element of compensation being hereby acknowledged by the Employee as adequate,” the employee agrees not to compete. Aplt. App. at 238.¹ Other than that specific clause, section 1 contains no language dealing with wages, hours, overtime compensation, or other rights, duties, and responsibilities regarding wages generally found in an employment contract.

Section 1 also references a “Section 4” and “Section 4(k),” but the agreement neither contains a section 4 nor explains what topics, rights, restrictions, or duties section 4 sets forth.² Notably, section 1(m) explains that only Nitro–Lift may seek remedies in court, including injunctive relief and “any other remedies available to it ... at law or in equity for any such breach or threatened breach” by the employee. Id. at 239. Also, sections 1(k), (m), and (n) refer to section 4 self-referentially by stating “in this Section 4,” suggesting some of the agreement contains boilerplate language copied from some other contract or agreement. Id.

Section 2 of the agreement contains the arbitration clause at issue and states in pertinent part in 2(a):

Any dispute, difference or unresolved question between Nitro–Lift and the Employee (collectively, the “Disputing Parties”) shall be settled by arbitration by a single arbitrator mutually agreeable to the Disputing Parties in an arbitration proceeding conducted in Houston, Texas in accordance with the rules existing at the date hereof of the American Arbitration Association ... and the costs (including, without limitation, reasonable fees and expenses of counsel and experts for the Disputing Parties) of such arbitration (including the costs to enforce or preserve the rights awarded in the arbitration) shall be borne by the Disputing Party whom the decision of the arbitrator is against. If the decision of the arbitrator is not clearly against one of the Disputing Parties or the decision of the arbitrator is against more than one Disputing Party on one or more issues, the costs of such arbitration shall be borne equally by the Disputing Parties.

Id. at 239 (emphasis added). In addition, section 2(b) references “Section 4” as well as “Section 18,” neither of which appear in the document, stating that “[n]otwithstanding the foregoing, Nitro–Lift may apply to any court of competent jurisdiction for injunctive relief to enforce its rights under this Agreement, including, without limitation, its rights under Section 4, without breach of this Section 18.” Id. Nitro–Lift offers no explanation for why the contract references multiple sections that do not exist in the agreement.

In sworn affidavits, plaintiffs claim that when they were required to sign the contract, it was presented to them as an agreement specifically about confidentiality and competition. They contend Nitro–Lift did not explain the arbitration provision, did not allow them to read the document or the arbitration clause it contained, and did not allow them to ask questions or consult an attorney before signing the document. Plaintiffs allege they were never told that by signing the agreement, they would be waiving their right to a jury trial for claims of unpaid wages or that they would be required to arbitrate wage disputes. Finally, plaintiffs claim they never agreed to arbitrate any wage disputes with Nitro–Lift.

Plaintiffs allege that almost every week they worked for Nitro–Lift, they each worked in excess of forty hours per week and Nitro–Lift refused to pay them “overtime compensation for the hours they worked in excess of forty,” in violation of the FLSA. Aplt. App. at 170. When Mr. Sanchez discussed the issue with his supervisor, he was told that if he had a problem with the money, he should quit.³ Mr. Sanchez and Mr. Schneider initially filed suit against Nitro–Lift in the Eastern District of Oklahoma on March 21, 2012, claiming the company failed to pay overtime wages in violation of the FLSA and the OPLA. They sought their “unpaid wages, prejudgment interest, attorney fees and costs,” a declaration that Nitro–Lift's “wage policy is unlawful” and an injunction against its use and enforcement. Id. at 11–12. They also sought liquidated damages, and class certification if other similarly situated employees were found.

In response, Nitro–Lift filed a motion to dismiss and compel arbitration, or alternatively to stay the proceeding pending arbitration. It argued that the arbitration clause contained in the agreement contractually obligated plaintiffs to submit their FLSA claims to arbitration under the Federal Arbitration Act (“FAA”) and the Oklahoma Uniform Arbitration Act (“OUAA”), citing the liberal federal policy favoring arbitration, and the strong presumption in favor of arbitration under Oklahoma law. Nitro–Lift asserted the wage disputes are clearly within the scope of the arbitration clause, which mandates that “any dispute” be submitted to arbitration under the rules of the American Arbitration Association (“AAA”). In its motion, Nitro–Lift waived the originally agreed upon venue of Houston for arbitration, suggesting arbitration should take place in the Eastern District of Oklahoma.

Mr. Sanchez and Mr. Schneider filed a brief in opposition to Nitro–Lift's motion contending the arbitration provision is unenforceable with respect to their FLSA claim for a variety of reasons. They contendedtheir wage disputes do not fall within the scope of the arbitration clause.⁴ They also asserted that the arbitration clause's fee-shifting provisions violate the substantive rights afforded to employees by the FLSA because that statute specifically provides for awards of attorneys fees and costs only to prevailing plaintiffs, not to prevailing defendants. In addition, they argued that the forum selection clause and the attempted application of commercial arbitration rules ⁵ make the arbitration agreement unconscionable because these provisions would force employees to pay substantial costs they cannot afford to arbitrate the dispute in an inconvenient forum.

Before the district court ruled on the pending motion, plaintiffs filed an amended complaint adding Mr. Howard as a plaintiff. Shortly thereafter, the district court denied Nitro–Lift's pending motion to compel arbitration, addressing only the FLSA claims and the scope of the arbitration clause. The court reasoned that despite the broad language of the arbitration clause, plaintiffs did not agree to arbitrate wage disputes because the contract's subject matter was only about confidentiality and competition. The court did not address any of the other arguments raised concerning the validity of the contract. Nitro–Lift immediately filed an interlocutory appeal from the district court's...