WalMart Stores Tex. v. Pete

• Docket Number: Civil Action 1:23-CV-251-MJT-CLS
• Decision Date: 02 October 2023
• Parties: WALMART STORES TEXAS LLC, Plaintiff, v. DAVID R. PETE, Defendant.
• Court: U.S. District Court — Eastern District of Texas

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WALMART STORES TEXAS LLC, Plaintiff, v. DAVID R. PETE, Defendant.

Civil Action No. 1:23-CV-251-MJT-CLS

United States District Court, E.D. Texas, Beaumont Division

October 2, 2023

REPORT AND RECOMMENDATION ON PLAINTIFF'S OPPOSED MOTION TO DISMISS ARBITRATION PROCEEDING (DOC. #7)

CHRISTINE L STETSON UNITED STATES MAGISTRATE JUDGE

Pursuant to 28 U.S.C. § 636 and the Local Rules of Court for the Assignment of Duties to United States Magistrate Judges, the district court referred this proceeding to the undersigned United States magistrate judge to conduct all pretrial proceedings, to enter findings of fact and recommend disposition on case-dispositive matters, and to determine non-dispositive matters. See 28 U.S.C. § 636(b)(1); E.D. TEX. CIV. R. 72. Pending before the court is Walmart Stores Texas, LLC's Opposed Emergency Motion to Stay and Dismiss Arbitration Proceeding [hereinafter “Motion to Stay and Dismiss Arbitration”]. (Doc #7.)

I. Procedural History

Plaintiff filed suit on July 3, 2023, seeking (1) a declaration that no agreement to arbitrate exists between Plaintiff and Defendant for claims that may arise from the factual allegations asserted in Defendant's Demand for Arbitration, (2) a stay and then dismissal of the arbitration proceeding currently pending under AAA Cause No. 01-23-0001-6617 [hereinafter “Arbitration Proceeding”], and (3) recovery for “costs, expenses and attorney's fees.” (Doc. #1.) On August 18, 2023, Plaintiff filed the Emergency Motion to Stay and Dismiss Arbitration. (Doc. #7.)

Defendant filed a response to the motion on August 21, 2023. (Doc. #8.) On August 24, 2023, the undersigned granted the emergency motion as to the stay, but deferred judgment on the dismissal of arbitration pending a hearing. The undersigned held a hearing on the dismissal of arbitration on September 5, 2023. (Doc #14.) The matter is now ripe for review.

II. Factual Background

According to the record, on May 2, 2020, Defendant was waiting in a line to enter the Walmart store at 4145 Dowlen Rd. in Beaumont, Texas. (Doc. #7-3 at 1.) According to Defendant, he asked the manager to “engage in conversation about the line and immediately it turn[ed] into a debate and then [the manager] told [Defendant] to leave without reason.” (Id.) Police then confronted Defendant. (Id.) Defendant was allegedly in “fear for [his] life.” (Id.) Defendant then called the Walmart corporate office to file a complaint. (Id.) Throughout the summer of 2020, Defendant claims he exchanged numerous emails with various workers at Walmart's corporate office about the incident and how he was now afraid to go to any Walmart store. Complaint at 1, Pete v. McMillon, et. al., No. 1:22-CV-30 (E.D. Tex. Jan. 26, 2022).

On July 26, 2022, Defendant filed suit in this court against Doug McMillion, President & CEO of Walmart Corp, Kathryn Mclay, President & CEO of Sam's Club, and Donna Moris, Executive Vice President & Chief People Officer of Walmart. Id. Defendant alleged Walmart violated his constitutional rights under the First and Fourteenth Amendment. (Doc. #7-5.) After Defendant repeatedly failed to remedy his complaint, Magistrate Judge Zack Hawthorn recommended that the case be dismissed without prejudice. (Id.) Judge Marcia Crone adopted the recommendation and dismissed Defendant's case on May 19, 2022. (Doc. #7-4.) Defendant then filed an unsuccessful appeal before the Fifth Circuit Court of Appeals that was dismissed on August 2, 2022. (Doc. #1 at ¶ 4.)

Sometime after his case was dismissed, Defendant discovered the website Walmart.com's “Terms of Use.” (Docs. #s 7-2, 14.) Section 20, Part 1 of Walmart.com's Terms of Use is a broad arbitration clause that claims to subject to arbitration “all disputes arising out of or related to these terms or use or any aspect of the relationship between you and Walmart, including any products or services sold by Walmart or the Walmart Entities.” (Doc. #7-2 at 17) (emphasis added.) The Terms of Use defines Walmart as “Wal-Mart.com USA, LLC and Walmart, Inc., and any subsidiaries of Wal-Mart Stores, Inc (including any subsidiaries that Walmart Inc. may form or acquire in the future), and their affiliates, directors, officers, employees, and agents.” (Id. at 2.)

According to Plaintiff, Defendant attempted to initiate arbitration with Plaintiff before American Arbitration Association (hereinafter “AAA”) sometime after his federal court case was dismissed, but the AAA initially dismissed his Demand for Arbitration. (Doc. #1 at ¶ 4.) Then, on May 5, 2023, over three years since the incident at the Walmart store in Beaumont, Defendant filed his current Demand for Arbitration under the Consumer Arbitration Rules of the AAA. (Doc. #7-3.) The arbitration demand concerned the events of May 2, 2020, and contained identical language to his initial complaint in the case 1:22-cv-30. (Id.) Defendant also attached the Terms of Use from Walmart.com to his complaint. (Doc. #1 at ¶ 4.)

The arbitration clause in the Terms of Use apparently persuaded the AAA to allow the proceeding (AAA Cause No. 01-23-0001-6617) to go forward. Plaintiff filed objections to the arbitration with AAA. The AAA appointed an arbitrator and Plaintiff was ordered to pay a filing fee related to the arbitration proceeding. (Doc. #14.) On July 3, 2023, Plaintiff filed its first complaint in this case seeking the relief at issue here. (Doc. #1.)

III. Legal Standard

A. Dismissing Arbitration

The Federal Arbitration Act does not provide guidelines for when and how a court should terminate arbitration proceedings of private arbitration providers. However, federal courts addressing the issue have dismissed arbitration proceedings or entered analogous orders when arbitration contracts were waived or otherwise invalid. See, e.g., Leal v. Luxottica Retail N. Am., Inc., 3:10-CV-2044-B, 2011 WL 873348, at *2 (N.D. Tex. Mar. 10, 2011) (finding plaintiff waived his contractual right to arbitration and ordering plaintiff dismiss his arbitration demand before the American Arbitration Association); Kambala v. Checchi and Co. Consulting, Inc., 1:17-CV-00451 (APM), 2017 WL 4564731, at *2 (D. D.C. May 4, 2017) (finding plaintiff waived his contractual right to arbitration, enjoining arbitration proceedings, and ordering the plaintiff “immediately withdraw the arbitration demand pending before the American Arbitration Association”); Horizon Plastics, Inc. v. Constance, 00 Civ. 6458 (RCCC), 2004 WL 1234049, at *4 (S.D.N.Y. June 2, 2004) (enjoining an arbitration proceeding and declaring that the parties had no agreement to arbitrate).

District courts have the authority to determine (1) whether a valid agreement to arbitrate exists between the parties, and (2) whether a given dispute falls within the scope of a valid arbitration agreement. Pennzoil Expl. and Prod. v. Ramco Energy Ltd., 139 F.3d 1061, 1065 (5th Cir. 1998); Tittle v. Enron Corp., 463 F.3d 410, 418 (2006). The latter determination may be subject to arbitration, as opposed to court review, but only if the arbitration agreement explicitly delegates that power to the arbitrator. Allen v. Regions Bank, 389 Fed.Appx. 441, 446 (5th Cir. 2010) (“The parties must have clearly intended for issues of arbitrability to be arbitrated... [otherwise, the scope of the arbitration agreement is for the court to decide”).

B. Declaratory Judgment Act

The Declaratory Judgment Act grants district courts the authority to “declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a); see Val-Com Acquisitions Trust v. Chase Home Fin., L.L.C., 434 Fed.Appx. 395, 395 (5th Cir. 2011). Courts must have an independent basis for subject matter jurisdiction to issue declaratory relief, as the Act does not grant federal courts additional jurisdiction. City of El Paso, Tex. v. El Paso Ent., Inc., 535 F.Supp.2d 813, 819-20 (W.D. Tex. 2008), aff'd, 382 Fed.Appx. 361 (5th Cir. 2010)

A declaration must resolve an “actual controversy between the parties.” United Transp. Union v. Foster, 205 F.3d 851, 857 (5th Cir.2000) (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937)). “An actual controversy is a dispute that is ‘definite and concrete, touching the legal relations of parties having adverse legal interests.'” Val-Com, 434 Fed.Appx. at 395 (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (citation and internal quotation marks omitted)). Contract “formation, validity, construction and effect, performance or breach, and termination” are all valid subject matter for a declaratory judgment. Full Gospel Baptist Church Fellowship Int'l v. Cap. One, No. CIV.A. 12-2749, 2013 WL 950567 (E.D. La. Mar. 11, 2013) (quoting W.H. Beach, Annotation, Application of Declaratory Judgment Acts to Questions in Respect of Contracts or Alleged Contracts, 162 A.L.R. 756 (2012)). Plaintiff bears “the burden of establishing the existence of an actual controversy under the Act. See Vantage Trailers, Inc. v. Beall Corp., 567 F.3d 745, 748 (5th Cir. 2009); Young v. Vannerson, 612 F.Supp.2d 829, 840 (S.D. Tex. 2009).

C. Attorney's Fees

The American rule is that parties each pay their own litigation costs unless a statute or contract provides otherwise. Marx v. Gen. Revenue Corp., 568 U.S. 371, 382 (2013). The Declaratory Judgment Act “does not by itself provide statutory authority to award attorney's fees that would not otherwise be available under state law in a diversity action.” Westchester Surplus Lines Ins. Co. v. Maverick Tube Corp., 722 F.Supp.2d 787, 799 (S.D. Tex. 2010) (quoting Mercantile Nat'l Bank v. Bradford Co., 850 F.2d 215, 218 (5th Cir. 1988)).

Courts may in rare and exceptional circumstances “award attorneys' fees in exercise of their equitable powers...