Jeremy Parr v. Stevens Transport Inc

United States District Court

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

JEREMY PARR et al. §

Vv. : CIVIL ACTION NO, 3:19-CV-2378-8

STEVENS TRANSPORT, INC. et al. :

MEMORANDUM OPINION AND ORDER

This Memorandum Opinion and Order addresses Defendants Stevens Transports, Inc. and

Stevens Transport CD, Inc.’s Motion to Compel Individual Arbitration [ECF No. 71]. For the

following reasons, the Court grants the Motion.

L BACKGROUND

This is a putative wage-and-hour class action brought by Plaintiffs Jeremy Parr (“Parr”),

Ronald Castle (“Castle”), and Julic Vines (“Vines”) (collectively, “Plaintiffs”) against Defendants

Stevens Transport, Inc. (“STI”), Stevens Transport CD, Inc. (“CD”), and Does 1-10 (collectively,

“Defendants”) under California law. See Second Am. Compl. 91. STI and CD, Texas

corporations engaged in the hauling and delivery of freight, allegedly hired Parr, Castle, and Vines

as truck drivers, See id. §] 12, 15, 18, 22-25; Defs.’ App. 7-12. Specifically, Defendants: hired

Parr, a resident of Missouri or Texas,! and Castle, a resident of Arizona, as employees; and, entered

into an independent contractor arrangement with Vines, a resident of Texas. See Second Am.

Compl. Ff 11, 14, 17; Defs.’ App. 10, 12.

Importantly, individuals employed with STI, like Parr and Castle, attend a three-day

orientation in Texas, where they execute certain paperwork and enter into a Mutual Agreement to

Arbitrate Claims (the “Arbitration Agreement”). See Defs.’ App. 9-10, 15-17. CD’s independent

' While Plaintiffs allege that Parr is a resident of Missouri, Part’s employment application and his Commercial

Driver’s License issued by the state of Texas listed a home address in Brenham, Texas. See Defs.’ App. 13, 20.

contractors, like Vines, are individuals who own or lease their own trucks, and who enter into

independent contractor agreements with CD in Texas that include the Arbitration Agreement. See

id. at 11. Defendants allow employees and independent contractors to ask questions about the

Arbitration Agreement, to take it home for further review, and to discuss it with others, including

an attorney. See id. at 69, 84, 99. In fact, the Arbitration Agreement requires the signatory to

acknowledge that he or she “ha{s] been given the opportunity to discuss [the Arbitration]

[A]greement with [his or her] private legal counsel” and that the signatory has “availed [him- or

herself] of that opportunity to the extent” desired. Jd, at 27, 39, 65. Parr, Castle, and Vine each

signed the Arbitration Agreement with either STI or CD while in Texas. See id. at 15-17, 21-28,

33-40, 46, 59-66,

These agreements provided, in relevant part, that:

The Company and [Plaintiff] mutually consent to the resolution of all claims or

controversies (“claims”), whether or not arising out of [Plaintiff's] employment (or

its termination), that the Company may have against [Plaintiff] or that [Plaintiff]

may have against the Company and/or its officers, directors, employees or

agents. ... includ[ing]... claims for wages or other compensation due; ... and

claims for violation of any federal, state, or other governmental law, statute,

regulation, or ordinance...

Id. at 22, 34, 60. According to the Arbitration Agreement, arbitration was to occur “under the

auspices of ,. . Judicial Workplace Arbitration, Inc.’s Rules & Procedures for Arbitration,” id. at

25, 37, 63, and Defendants would “pay the fees and costs of the arbitrator and the arbitration

hearing,” id. at 26, 38, 64. Additionally, each agreement included an express class action waiver:

[Plaintiff] understand[s] and agree[s] that there will be no right or authority for any

dispute to be brought, heard, or arbitrated as a class action and/or as a collective

action (the “Class Action Waiver’)... . [O]nly a court and not the arbitrator shall

determine any issues or claims related to the applicability, enforceability, or

formation of this Class Action Waiver, including but not limited to any claim that

all or part of this Class Action Waiver is void or voidable.

If the Class Action Waiver is deemed to be unenforceable for any reason, the

Company and [Plaintiff] agree that this [Arbitration] Agreement is otherwise silent

as to any party’s ability to bring a class and/or collective action in arbitration in so

far as there has been no agreement between the parties on whether this Agreement

permits class arbitration. If the Class Action Waiver is deemed to be unenforceable,

the question of whether this [Arbitration] Agreement permits any dispute to be

arbitrated as a class or collective action shall be determined only by a court and not

by an arbitrator. All other questions of interpretation, applicability, enforcement or

formation of this Agreement shall be determined by the arbitrator, as stated in the

section entitled “Arbitration Procedures.”

Id. at 23, 35, 61. The agreements also contained forum-selection and choice-of-law provisions,

that required arbitration to take place in Dallas, Texas, under “the substantive law (and the law of

remedies, if applicable) of the State of Texas, or federal law, or both.” Jd. at 25, 37, 63. Finally,

the Arbitration Agreement delegated all issues, other than those pertaining to the class waiver, to

the arbitrator:

The arbitrator, and not any federal, state, or local court or agency, shall have

exclusive authority to resolve any dispute relating to the interpretation,

applicability, enforceability or formation of this [Arbitration] Agreement including,

but not limited to any claim that all or any part of this [Arbitration] Agreement is

void or voidable. However, as stated in the “Class Action Waiver” section above,

the preceding sentence shall not apply to the clause entitled “Class Action Waiver.”

id. at 25, 37, 63.

Based on the parties’ Arbitration Agreement, Defendants filed the present Motion to

Compel Individual Arbitration, which is now ripe and before the Court.

H. ANALYSIS

A. Choice of Law

As the parties agree, state law, rather than federal law, dictates the enforceability of the

arbitration agreement and the class-action waiver, because Plaintiffs are interstate truck drivers

who qualify for the Federal Arbitration Act’s “transportation worker” exemption. See Shanks v.

Swift Transp. Co., Civ. A. L-07-55, 2008 WL 2513056, at *4 (S.D. Tex. June 19, 2008) (collecting

authorities), The parties disagree, however, as to whether Texas law or California law applies.

See Mot. 9 (arguing that Texas law applies); Resp. 8-12 (arguing that California law applies). In

resolving this issue, the Court applies California’s conflict-of-law rules because this case was

transferred to this Court under 28 U.S.C. § 1404. See Ferens v. John Deere Co., 494 U.S. 516,

523 (1990); Van Dusen v. Barrack, 376 U.S. 612, 635-37 (1964).

Under California law, in cases where the parties have entered into a contractual choice-of-

law clause:

[T]he party advocating application of the choice-of-law provision... has the

burden of establishing either (1) the chosen state has a substantial relationship to

the parties or their transaction, or (2) another reasonable basis for the parties’ choice

of law. If [the party] makes this showing, the burden then shifts to the party

opposing enforcement of the choice-of-law provision . . . to demonstrate [that] ‘the

chosen state’s law is contrary to a fundamental policy of California’ and that

‘California has a materially greater interest than the chosen state in the

determination of the particular issue.” Accordingly, ‘the parties’ choice generally

will be enforced unless the other side can establish both that the chosen law is

contrary to a fundamental policy of California and that California has a materially

greater interest in the determination of the particular issue.

Tri-Union Seafoods, LLC v. Starr Surplus Lines Ins., 88 F. Supp. 3d 1156, 1166 (S.D. Cal, 2015)

(citations omitted) (quoting Wash. Mut. Bank, FA y, Superior Court, 15 P.3d 1071, 1078-79

(Cal. 2001)). Here, the fact that Defendants are Texas corporations “is sufficient under California

choice of law rules to establish a ‘substantial relationship’ between the chosen law and the parties

to the dispute.” Abat v. Chase Bank USA, N.A., Case No.: SACV 07-01476-CJC(ANx), 2010 WL

11465416, at *1 (C.D. Cal. Oct. 28, 2010) (citing Nedlloyd Lines BV. v, Superior Court, 3 Cal.

Ath 459, 467 (Cal, 1992)). Thus, the sole issue is whether Plaintiffs demonstrated both that Texas’s

law is contrary to a fundamental policy of California and that California has a materially greater

interest than the chosen state in the determination of the particular issue. See id. (citing Wash.

Mut. Bank, 15 P.3d at 1078-79),

The Court finds that Plaintiffs did not demonstrate that California has a materially greater

interest than the chosen state in the determination of the enforceability of the Arbitration

Agreement and class-action waiver.” “[(P]laintiffs’ own contacts with [California] are dubious.”

ECF No. 48 at 6 (opinion of the Northern District of California). Plaintiffs are not California

residents. See Second Am. Compl. ff 11, 14, 17; Defs.’ App. 10, 12. Parr logged 10.2% of his

mileage in California over 7 months; Castle logged 10.4% over 3.5 years; and Vines logged 6.55%

over almost 4 years. See Defs.’ App. 10, 15-16, 45-46. Similarly, the Arbitration Agreements at

issue were signed while Plaintiffs were physically in Texas. See id. at 9-11, 15-17. Defendants

are incorporated and headquartered in Texas, manage their business activities and operations in

Texas, and retain drivers as Texas employees for purposes of unemployment and workers’

compensation. See Second Am. Compl. {ff 12, 15, 18, 22-25; Defs.’ App. 7-12. Of Defendants’

drivers, 9 out of 3,248 were California residents, while 1,122 were Texas residents; similarly, 8

out of 1,176 independent contractors were California residents, while 404 were Texas residents

See Defs.” App. 10 46. Given the parties’ significant interaction with Texas and minimal

interaction with California, the Court finds that California does not have a materially greater

interest in determining the enforceability of the arbitration agreement and the class-action waiver.

See McKinney v. Google, Inc., No. C 10-01177 JW, 2010 WL 11489027, at *3 (N.D. Cal. Nov.

16, 2010) (finding that California did not have a materially greater interest where the agreement

was signed, the agreement was to be performed, the wrong occurred, and Plaintiff resided in

Pennsylvania).

Consequently, the Court applies Texas law in determining the enforceability of the

arbitration agreement and the class action waiver pursuant to the parties’ choice-of-law provision.?

2 Accordingly, the Court does not need to reach the issue of whether Texas law is fundamentally contrary to California

law. See Abat, 2010 WL 11465416, at *1-2.

3 Byen if the Court found that the choice-of-law provision is unenforceable, the Court would apply Texas law under

“the comparative impairment approach to the governmental interest analysis” because Texas’s “interests would be

more significantly impaired if the Court were to apply California law.” Abat, 2010 WL 11465416, at *3 (citing

Bernard v. Harrah's Club, 546 P.2d 719, 722-23 (Cal, 1976); Hurtado y. Superior Court, 522 P.2d 666, 669 (Cal.

1974)). Texas’s interest in enforcing agreements that are between its citizens and that were negotiated, entered into,

B. Arbitration Agreement

In Texas, “[alrbitration is... governed by two fundamental principles: arbitration

agreements are contracts that must be enforced according to their terms, and a party cannot be

compelled to arbitrate any dispute absent an agreement to do so.” Robinson v, Home Owners

Memt. Enters., Inc., 590 8.W.3d 518, 525 (Tex. 2019) (citations omitted). “Ordinarily, a party

seeking to compel arbitration must show that (1) a valid, enforceable arbitration agreement exists

and (2) the claims asserted fall within the scope of that agreement.” Hawdi v. Mutammara,

No. 01-18-00024-CV, 2019 WL 3418506, at *3 (Tex. App-—Houston [1st Dist.] July 30, 2019,

no pet.). “It is well-settled, however, that parties can agree to delegate to the arbitrator the power

to resolve gateway issues regarding the validity and enforceability of the arbitration agreement; in

that event, the entire matter of arbitrability is transferred from the trial court to the arbitrator.”

Firstlight Fed. Credit Unit v. Loya, 478 S.W.3d 157, 164 (Tex. App.—-El Paso 2015, no pet.)

(citation omitted). “When faced with such an agreement, courts have no discretion but to compel

arbitration unless the [arbitration] clause’s validity is challenged on legal or public policy

grounds.” RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 121 (Tex. 2018) (citation omitted).

“So the proper procedure is for a court to first determine if there is a binding arbitration agreement

that delegates arbitrability to the arbitrator. If there is such an agreement, the court must then

compel arbitration so the arbitrator may decide gateway issues the parties have agreed to arbitrate.”

ld.

and largely performed in Texas, are significantly more compelling than California’s interest in not enforcing allegedly

“unconscionable class arbitration waivers.” Oestreicher y. Alienware Corp., 322 F. App’x 489, 491 (9th Cir. 2009)

(quoting Hoffinan v. Citibank (SD), N.A., 546 F.3d 1078, 1083 (9th Cir, 2008) (per curiam)). This is especially true

given that the Northern District of California has already concluded that “[P]laintiffs’ own contacts with [California]

are dubious.” ECF No, 48 at 6.

In the present case, the Court finds that, pursuant to Texas law, the parties entered into an

arbitration agreement. See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (noting

that courts “apply ordinary state-law principles that govern the formation of contracts”); GJ

Partners, LTD v. Cima Contractors, LLC, No. 05-18-01412-CV, 2020 WL 400180, at *3 (Ct.

App.-Dallas Jan. 23, 2020, no pet.) (“Before a court can compel arbitration, it must first

determine that a valid arbitration agreement exists between the parties.” (citations omitted)).

Defendants filed the arbitration agreements that appear to be signed by Plaintiffs, see Defs.’ App.

15-17, 21-28, 33-40, 46, 59-66, which is “evidence of a valid and enforceable agreement.” Atlas

Trading Conglomerate Inc. v. AT&T Inc., Civ. A. No, 3:15-CV-0404-K, 2016 WL 3870857, at *4

(N.D. Tex. Oct. 5, 2016) (citation omitted). Furthermore, Plaintiffs do not dispute that they entered

into the Arbitration Agreements.

Rather, Plaintiffs contend that the Court should not enforce the Arbitration Agreements

because: (1) the choice-of-law provision contained therein “[p]urports to eliminate all of the claims

Plaintiffs bring in this case,’”* Resp. 2-8; and (2) the agreements are unconscionable because they

are contracts of adhesion, they were signed “[d]ue to [o|ppression,” Defendants did not provide

Plaintiffs with “the rules that would govern any arbitration,” the agreements permit Defendants to

seek certain exclusive remedies, and require the parties to attempt to resolve the dispute through

direct negotiation, id. at 9-11, 17-23. However, these arguments do not challenge the validity of

contract formation, but “represent affirmative defenses against the enforcement ofa presumptively

formed contract.” Maravilla v. Gruma Corp., 783 F. App’x 392, 396 (Sth Cir. 2019) (quoting

Ridge Nat. Res., L.L.C. v. Double Eagle Royalty, L.P., 564 S.W.3d 105, 129 (Tex. App. 2018)).

4 “plaintifi[s] identif[y] no reason why [their] objections to the application of [Texas] law and [Its effects] on the

available remedies cannot be made to the arbitrator.” Bhandara Family Living Tr. v. Underwriters at Lloyd's, London,

No. CV H-19-968, 2020 WL 1482559, at *4 (S.D. Tex. Feb. 20, 2020).

The parties expressly delegated the determination of any issues related to “interpretation,

applicability, [or] enforceability” of the Arbitration Agreements to the arbitrator, see Defs.’

App. 23, 25, 61, and the Court is not at liberty to “rewrite the parties{*] contract [Jor add to its

language,” Robinson, 590 8.W.3d at 534; see also Firstlight Fed. Credit Union, 478 8.W.3d at

164 (“[A] delegation clause providing that the parties agreed to arbitrate ‘any and all claims

challenging the validity or enforceability of this Agreement [in whole or in part]’ clearly and

unmistakably provide[s] for issues of validity and enforceability to be determined by the

arbitrator,” (citation omitted)). This is especially true given that Plaintiffs’ arguments pertain to

the entirety of the agreements—ie., including the choice-of-law provision, the Class Action

Waiver, etc.—and not solely to the arbitration clause. See RSL Funding, LLC, 569 §.W.3d at 124

(“Classic contract defenses such as unconscionability, illegality and fraudulent inducement” are

decided by the arbitrator “if they are alleged only against the contract as a whole.”).

Furthermore, the Court declines Plaintiffs’ invitation to reach these gateway issues by

finding that any conclusion other than that the agreements are unconscionable is “wholly

groundless.” Resp. 5 (quoting Douglas v. Regions Bank, 757 F.3 460, 462-64 (Sth Cir. 2014)).

The Supreme Court in Henry Schein, Inc. v. Archer & White Sales, Inc. rejected the “wholly

groundless” exception, and directed courts to enforce the partics’ agreement even if the court

believes “the arbitrator will inevitably conclude that the dispute is not arbitrable... .”° 1398, Ct.

524, 530 (2019). While Henry Schein involved the Federal Arbitration Act, the “wholly

groundless” exception does not appear in the Texas Arbitration Act, and “Texas courts look to

federal case law construing the FAA for guidance because of the similarities between the two

acts.” Rodriguez v. Tex. Leagure Brewing Co., 586 8.W.3d 423, 427 (Tex. App.—Houston [14th

Dist.] July 9, 2019, pet. denied), Pursuant to Henry Schein, therefore, the Court finds that all issues

related to the interpretation, applicability, or enforceability of the Arbitration Agreements, will be

decided by the Arbitrator.°

Cc. Class Action Waiver

Importantly, the Arbitration Agreements reserve one gateway issue for the Court’s

determination—‘“the applicability, enforceability, or formation of th[e] Class Action Waiver.”

Defs.’ App. 23, 25, 61; see also Robinson, 590 S.W.3d at 529 (“[ Whether the parties have agreed

to arbitrate disputes as a class is a threshold question of arbitrability.”). Plaintiffs challenge the

enforceability of the Class Action Waiver under California law. See Resp. 12-15. The Court,

however, has determined that Texas law, rather than California law, governs this dispute. See

supra § TII(A). Under Texas law:

“TC]lass action is a procedural device intended to advance judicial economy by

trying claims together that lend themselves to collective treatment.” The class

action furnishes “an efficient means for numerous claims with a common complaint

to a remedy ‘[where it is not economically feasible to obtain relief within the

traditional framework of a multiplicity of small individual suits for damages’”

However, ... the class action may not “‘be construed to enlarge or diminish any

substantive rights or obligations of any parties to any civil action.’” “[There is no

entitlement to proceed as a class action.”

Ranzy y. Extra Cash of Tex., Inc., Civ, A. H-09-3334, 2011 WL 13257274, at *7 (S.D. Tex.

Oct. 14, 2011) (first and third alterations added) (citations omitted). Thus, Texas courts routinely

compel cases to individual arbitration where, as here, “[t]he clear language of the parties’

5 This includes Plaintiffs’ objections based on the application of California Labor Code § 229 that purports to prohibit

arbitrability of certain claims, see Resp. 22, and the determination of arbitrability of any claim brought under

California’s Private Attorneys General Act, see id. at 25, because the Arbitration Agreements contain clear and

unmistakable delegation provisions. See Ratajesak v. New Prime, Inc., No. SACV189396DOCAGRX, 2019 WL

1771659, at *6 (C.D. Cal. Mar. 20, 2019); Cobarruviaz v. Maplebear, Inc., 143 F. Supp. 3d 930, 946 (N.D. Cal. 2015).

Additionally, the Court does not resolve Plaintiffs’ challenges to the enforceability of the delegation clause because

those challenges “relate[] to the arbitration agreement as a whole,” and so “must be directed to arbitration.” /HS

Acquisition No, 171, Inc. v. Beatty-Ortiz, 387 S.W.3d 799, 808 (Tex. App—EI Paso 2012, no pet.) (citing Rent-A-

Ctr, W., Inc. v. Jackson, 561 U.S. 63, 68-70 (2010)); see also Resp. 16 (admitting that “the grounds for procedural

unconscionability discussed below apply with equal force to the [Arbitration Agreements’] delegation provision as to

the arbitration provision .. . ."); id, at 23 (arguing that “because the contract as a whole is unconscionable... a

delegation clause . . . is substantively unconscionable as well” (emphasis added)),

agreement expressly forbids class” actions. NCP Fin. Ltd. P’Ship v. Escatiola, 350 8.W.3d 152,

155 (Tex. App.—San Antonio 2011, no pet.); Jn re Online Travel Co., 953 F. Supp. 2d 713, 722

(N.D. Tex. 2013). In fact, Plaintiffs do not contest the validity of the Class Action Waiver under

Texas law.® “Absent any argument or basis to hold the class action waiver provision internally

invalid, this [C]ourt must conclude it applies... Cash Biz, LP v, Henry, 539 8.W.3d 342, 354

(Tex. App.—San Antonio 2016, pet. filed), aff'd, 551 S.W.3d 111 (Tex. 2018).

III. CONCLUSION

For the reasons discussed above, the Court GRANTS Defendants’ Motion to Compel

Individual Arbitration. Any challenges to the enforceability or scope of the Arbitration

Agreements must be decided by the arbitrator. This action will be stayed and administratively

closed pending the outcome of arbitration. The Court directs the Clerk of Court to administratively

close this case until such time as the Court orders it to be reopened.

SO ORDERED.

SIGNED May_9_, 2020.

UNITED STATES DISTRICT JUDGE

6 The Court further finds that Plaintiffs did not demonstrate that the Class Action Waiver is unenforceable under

California law, which requires Plaintiffs to present “specific, individualized, and precise” evidence, Truly Nolen of

Am. v. Superior Court, 208 Cal, App. 4th 487, 511 (2012), of, among other factors, “the potential for retaliation against

members of the class,” Muro v. Cornerstone Staffing Sols., Inc., 20 Cal. App. Sth 784, 792 (2018) (citing Geniry v.

Superior Court, 165 P.3d 556, 568 (Cal. 2007). The sole evidence of “potential retaliation” in this case is a declaration

from Plaintiffs’ counsel that states that putative class members in unspecified cases have refused to give a ‘written

statement supporting the putative class claims because they fear retaliation from their employer.” Decl, of Nicholas

Conlon § 2. The Court finds that this declaration merely speculates regarding putative class members in the present

case, and does not amount to specific, individuated, and precise evidence of potential retaliation, See Conde v. Open

Door Mitg., LLC, Case No. 15-CV-04080-KAW, 2017 WL 5172271, at *10 (N.D. Cal. Nov. 8, 2017) (“[G]eneralized

statements lacking supporting evidence do not satisfy the Gev/ry test.”).

10