Filed: Feb. 19, 2015
Latest Update: Mar. 02, 2020
Summary: Case: 14-10193 Document: 00512940369 Page: 1 Date Filed: 02/19/2015 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED February 19, 2015 No. 14-10193 Lyle W. Cayce Clerk JESUS M. PACHECO, and all others similarly situated under 29 U.S.C. 216(B); ANTONIO SANCHEZ; GABRIEL ROBLES; SANTOS RIVAS; LUIS ONTIVEROS; ENRIQUE RAZO; OSCAR MARTINEZ, Plaintiffs - Appellants v. PCM CONSTRUCTION SERVICES, L.L.C.; DAWNNA L. HOGAN- GUERRA; MIGUEL GUERRA,
Summary: Case: 14-10193 Document: 00512940369 Page: 1 Date Filed: 02/19/2015 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED February 19, 2015 No. 14-10193 Lyle W. Cayce Clerk JESUS M. PACHECO, and all others similarly situated under 29 U.S.C. 216(B); ANTONIO SANCHEZ; GABRIEL ROBLES; SANTOS RIVAS; LUIS ONTIVEROS; ENRIQUE RAZO; OSCAR MARTINEZ, Plaintiffs - Appellants v. PCM CONSTRUCTION SERVICES, L.L.C.; DAWNNA L. HOGAN- GUERRA; MIGUEL GUERRA, ..
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Case: 14-10193 Document: 00512940369 Page: 1 Date Filed: 02/19/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 19, 2015
No. 14-10193
Lyle W. Cayce
Clerk
JESUS M. PACHECO, and all others similarly situated under 29 U.S.C.
216(B); ANTONIO SANCHEZ; GABRIEL ROBLES; SANTOS RIVAS; LUIS
ONTIVEROS; ENRIQUE RAZO; OSCAR MARTINEZ,
Plaintiffs - Appellants
v.
PCM CONSTRUCTION SERVICES, L.L.C.; DAWNNA L. HOGAN-
GUERRA; MIGUEL GUERRA,
Defendants - Appellees
Appeal from the United States District Court
for the Northern District of Texas
No. 3:12-CV-4057
Before KING, DAVIS, and OWEN, Circuit Judges.
PER CURIAM:*
Plaintiffs-Appellants appeal the district court’s grant of Defendants-
Appellees’ motion to compel arbitration on the grounds that the Defendants-
Appellees waived their right to arbitration by substantially invoking the
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 14-10193
judicial process. For the following reasons, we AFFIRM the judgment of the
district court.
I. Factual and Procedural Background
Plaintiffs-Appellants are former employees of PCM Construction
Services, LLC, suing under the Fair Labor Standards Act (“FLSA”) for unpaid
overtime wages and retaliation. Appellants’ contracts included an arbitration
provision (the “Arbitration Provision”), which reads:
EMPLOYEE AGREES TO SUBMIT ANY DISPUTE
BETWEEN EMPLOYEE AND THE COMPANY, OR ANY OF
THE COMPANY’S EMPLOYEES, REPRESENTATIVES OR
AGENTS, TO MANDATORY, BINDING ARBITRATION. This
provision applies to all claims brought by Employee except for
those related to any action pending against Company on November
1, 2011. The arbitration will be held exclusively pursuant to the
provisions of the Federal Arbitration Act (“FAA”). For Employees
who work primarily in Texas, the arbitration shall be in Bexar
County, Texas; for all other Employees, the arbitration shall be
conducted in Raleigh, North Carolina. The arbitration shall be
presided over by a single arbitrator under the Employment rules
of the American Arbitration Association applicable to such
disputes(s) then in effect. Each party to the arbitration shall
equally bear the expenses of the arbitration, and the decision of
the arbitrator as to any matter submitted to arbitration shall be
final, conclusive, binding upon and enforceable by all parties to the
arbitration. The duty to arbitrate disputes shall survive the
termination of Employee’s employment with the Company and this
Agreement. Any claim subject to arbitration must be brought in
the claimant’s individual capacity, and not as a plaintiff or class
member in any purported class or representative proceeding. The
parties agree that the arbitrator may not consolidate more than
one person’s claims, and may not otherwise preside over any form
of a representative or class proceeding.
Appellant Jesus Pacheco filed a complaint on October 10, 2012, against PCM
and two officers of PCM (collectively, “PCM”), Dawna Hogan-Guerra and
Miguel Guerra, alleging violations of FLSA, specifically for failure to pay
overtime wages. PCM filed an answer to Pacheco’s complaint on November 2,
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2012. PCM’s answer did not mention the Arbitration Provision. In March
2013, Pacheco returned opt-in consent forms for other similarly situated
former PCM employees.
On March 7, 2013, PCM moved to dismiss Appellants’ claims against
Hogen-Guerra and Guerra under Federal Rule of Civil Procedure 12(b)(6),
arguing that Hogan-Guerra and Guerra were not Appellants’ employers—
rather, only PCM was. Appellants filed an amended complaint adding
additional plaintiffs on March 20, 2013. On March 27, 2013, PCM filed a
second motion to dismiss, again arguing that Hogan-Guerra and Guerra were
not Appellants’ employers. The next day, Appellants filed a nine-page motion
to certify a class of similarly situated employees pursuant to FLSA, 29 U.S.C.
§ 216(b). Appellants and PCM filed a Joint Status Report pursuant to Federal
Rule of Civil Procedure 26 and the district court’s Order for Scheduling
Proposals on April 11, 2013. On April 18, 2013, PCM filed a five-page motion
to deny Appellants’ motion for class certification. Shortly thereafter, on May
1, 2013, PCM filed a reply to Appellants’ response to PCM’s second motion to
dismiss.
On November 14, 2013, PCM filed their motion to compel arbitration
with the district court. Appellants filed a response to the motion to compel
arbitration on December 5, 2013. After the magistrate judge recommended
that PCM’s second motion to dismiss be granted, 1 Appellants filed their Second
Amended Complaint. PCM filed a third 12(b)(6) motion to dismiss on
December 30, 2013.
The district court granted PCM’s motion to compel arbitration and
dismissed Appellants’ complaint with prejudice. In rejecting Appellants’
1 The magistrate judge also recommended, in a separate document filed December 18,
2013, that Appellants’ class certification motion be granted.
3
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argument that PCM waived arbitration by substantially invoking the judicial
process, the district court reasoned that PCM had not filed any discovery on its
own and that PCM’s motions to dismiss were brief in length, focused on only a
single issue, and had not been ruled on at the time PCM moved to compel
arbitration. The district court also noted that PCM’s thirteen month delay did
not appear to be a disfavored tactical delay and that all of PCM’s actions before
the district court were merely defensive. The district court further held that
Appellants had failed to demonstrate prejudice, because “their briefing in
response to one motion to dismiss was fairly limited in scope and length, and
they will have the burden on the issue of whether the Individual Defendants
qualify as employers under the FLSA whether the case proceeds in federal
court or arbitration.” As such, the district court concluded that Appellants had
not “incurred any fees in this litigation that they would not have incurred in
arbitration” and that Appellants’ “‘generalized protestations’ regarding delay
and case activity are too tenuous to establish prejudice and overcome the
strong federal presumption in favor of arbitration.” Appellants then appealed
to this court.
II. Enforceability of the Arbitration Provision
Appellants first contend that the district court erred in compelling
arbitration because the Arbitration Provision is unenforceable. A district
court’s grant of a motion to compel arbitration is reviewed de novo. Covington
v. Aban Offshore Ltd., 650 F.3d 556, 558 (5th Cir. 2011). A district court must
compel arbitration if there is an agreement for arbitration and a party has
failed to comply with that agreement. 9 U.S.C. § 4. The determination of
whether there is a valid agreement to arbitrate is generally governed by
“ordinary state-law principles that govern the formation of contracts.” First
Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 944 (1995). Appellants argue
that the Arbitration Provision is an unenforceable illusory promise and that it
4
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fails for lack of consideration. Before the district court, however, they argued
only that the Arbitration Provision did not cover Appellants’ claims, that the
Arbitration Provision was procedurally and substantively unconscionable, that
the Arbitration Provision imposed prohibitive costs on Appellants, that the
Arbitration Provision impermissibly forced Appellants to waive their
substantive rights under FLSA, and that PCM waived its right to arbitration
by substantially invoking the judicial process, discussed in Part III infra. As
Appellants failed to argue that the Arbitration Provision was illusory or lacked
consideration before the district court, these arguments are waived. See
Crawford Prof’l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 267 (5th Cir.
2014) (“The general rule of this court is that arguments not raised before the
district court are waived and will not be considered on appeal” (internal
quotation marks omitted)).
III. Waiver of the Right to Arbitrate
We also reject Appellants’ argument that PCM waived its right to
arbitration by substantially invoking the judicial process. A district court’s
determination that a party has waived its right to arbitration is reviewed de
novo, though the factual findings underlying that determination are reviewed
for clear error. In re Mirant Corp., 613 F.3d 584, 588 (5th Cir. 2010). A party
waives its right to arbitration by (1) substantially invoking the judicial process
(2) to the detriment or prejudice of the other party.
Id. “The question of what
constitutes a waiver of the right of arbitration depends on the facts of each
case.” Tenneco Resins, Inc. v. Davy Int’l, AG,
770 F.2d 416, 420 (5th Cir. 1985).
There is, however, “a strong presumption against finding a waiver of
arbitration, and the party claiming that the right to arbitrate has been waived
bears a heavy burden.” Republic Ins. Co. v. PAICO Receivables, LLC,
383 F.3d
341, 344 (5th Cir. 2004).
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Beginning with the first element, we conclude that PCM did not
substantially invoke the judicial process. In order to substantially invoke the
judicial process and waive the right to arbitration, the party seeking
arbitration must have taken acts in the lawsuit sufficient to “demonstrate[] a
desire to resolve the arbitrable dispute through litigation rather than
arbitration.” Id. at 345 (internal quotation marks omitted). PCM’s actions in
this case were relatively limited. PCM’s motions to dismiss were confined to a
single issue—whether Guerra and Hogan-Guerra qualified as “employers”
under FLSA—and were very brief in length. We also significantly discount the
relevance of PCM’s third motion to dismiss, as it was filed after PCM moved to
compel arbitration. Once a defendant has put the plaintiff on notice of its
intent to demand arbitration, the plaintiff’s burden of showing waiver by
subsequent acts of the defendant is heavier. Cf. Keytrade USA, Inc. v. Ain
Temouchent M/V,
404 F.3d 891, 897 (5th Cir. 2005) (“[The burden of showing
waiver of the right to arbitration] falls even more heavily when the party
seeking arbitration has included a demand for it in its answer.” (internal
quotation marks omitted)); Tenneco
Resins, 770 F.2d at 420 (“Thus, once the
defendant, by answer, has given notice of insisting on arbitration, the burden
is heavy on the party seeking to prove waiver.” (internal quotation marks and
brackets omitted)). Further, while Appellants had sent out discovery, PCM
had not yet responded or propounded its own discovery requests prior to
moving to compel arbitration, a factor we have considered relevant in prior
cases. See Tenneco
Resins, 770 F.2d at 421 (“However, when only a minimal
amount of discovery has been conducted, which may also be useful for the
purpose of arbitration, the court should not ordinarily infer waiver based upon
prejudice to the party opposing the motion to stay litigation . . . .”). Moreover,
while PCM did file a response in opposition to Appellants’ motion for class
certification, PCM filed its motion to compel arbitration before the magistrate
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judge recommended certifying the class or propounded a recommendation on
PCM’s motion to dismiss, thus avoiding one of the concerns discussed in
Mirant. See Mirant, 613 F.3d at 591 (“To hold otherwise would encourage
litigants to delay moving to compel arbitration until they could ascertain how
the case was going in federal district court.” (internal quotation marks
omitted)). Given the limited scope of PCM’s actions in this case, they are
insufficient to overcome the “strong presumption against finding a waiver of
arbitration.”
Republic, 383 F.3d at 344.
As we conclude that PCM did not substantially invoke the judicial
process, we need not, and therefore do not, address the prejudice element. 2
IV. Conclusion
For the foregoing reasons, the judgment of the district court is hereby
AFFIRMED.
2 Appellants argue that the district court should have dismissed the case without
prejudice or stayed the litigation pending the arbitration rather than dismissing the case
with prejudice. While dismissal of an action pendant to a motion to compel arbitration may
be a debatable procedure, see Lloyd v. Hovensa, LLC, 369 F.3d 263, 268–71 (3d Cir. 2004)
(criticizing cases approving of dismissal rather than a stay by citing the role played by district
courts under the FAA even after an action has been stayed pending arbitration and the effect
of a dismissal rather than a stay on appellate rights under section 16 of the FAA), Appellants’
argument on this point is foreclosed by our circuit’s prior precedent, as the district court
determined that all claims in the suit were subject to arbitration, see Alford v. Dean Witter
Reynolds, Inc.,
975 F.2d 1161, 1164 (5th Cir. 1991) (“Because it determined that all of Alford’s
claims were subject to arbitration, the district court acted within its discretion when it
dismissed this case with prejudice.”).
7
