Lester v. Advanced Environmental Recycling Technologies, Inc. , 248 F. App'x 492 ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
July 5, 2007
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
_____________________
No. 06-51519
(Summary Calendar)
_____________________
RECTOR L. LESTER, III,
Plaintiff-Appellant
versus
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.,
also known as AERT, Inc.,
Defendant-Appellee.
---------------------
Appeal from the United States District Court
for the Western District of Texas
(A:05-CV-603)
---------------------
Before SMITH, WIENER and OWEN, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Rector Lester, III appeals from the
district court’s orders (1) dismissing and compelling arbitration
of Lester’s negligence claim against his former employer,
Defendant-Appellant Advanced Environmental Recycling Technologies
(AERT), and (2) dismissing Lester’s claims for breach of fiduciary
duty against AERT’s occupational injury benefits plan administrator
*
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this opinion should not be published and is not precedent except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.
(“the Plan Administrator”) and breach of the duty of good faith and
fair dealing against AERT as preempted by ERISA. We affirm.
I. FACTS & PROCEEDINGS
Lester suffered a knee injury in August 2003 while he was
employed by AERT as a machine operator at its Junction, Texas
facility. AERT is a non-subscriber to Texas’s worker’s
compensation system but maintains an occupational injury benefits
plan (the “Plan”) for its employees. Under the Plan, disputes
“arising out of any Accident or Occurrence, or otherwise regarding
or relating to the Plan” are subject to binding arbitration. The
Summary Plan Descriptions (SPD) distributed by AERT to its
employees included this arbitration provision. Lester acknowledged
receipt of the 2002 Plan SPD in September 2002 and acknowledged
receipt of the 2003 SPD nine days after his injury. Following his
second acknowledgment, Lester received Plan benefits in the form of
medical treatment for his injuries.
Lester filed suit in the district court in August 2005,
requesting (1) a declaratory judgment determining whether Texas law
or federal common law under ERISA governed his claims, and (2)
compensatory and punitive damages for AERT’s negligence (failure to
maintain a safe workplace) and breach of its duty of good faith and
fair dealing, and the Plan Administrator’s breach of her fiduciary
duty. AERT filed a motion to compel arbitration of Lester’s
negligence claim, and, in response, Lester filed a motion for
2
partial summary judgment on the declaratory judgment issue. Before
the district court ruled on any motions, Lester filed, then
withdrew, a stipulation forfeiting his claim for breach of the duty
of good faith and fair dealing.
The district court (1) granted AERT’s motion to compel
arbitration of Lester’s negligence claim, and (2) dismissed his
claim for breach of fiduciary duty as preempted by ERISA. In
making its ruling, the court overlooked Lester’s withdrawal of his
stipulation voluntarily dismissing his breach of good faith and
fair dealing claim. After Lester objected, the court issued a
second order dismissing that claim as also preempted by ERISA.
Lester timely filed a notice of appeal.
II. ANALYSIS
A. Standard of Review
This appeal was taken from the district court’s grant of a
motion to compel arbitration and its decision on Lester’s motion
for partial summary judgment, the combination of which resulted in
the dismissal of all of his claims. We review both rulings de
novo, applying the same standards as the district court.1
B. Arbitration
1. The District Court’s Ruling
1
See Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702, 708
(5th Cir. 2002) (motion to compel arbitration); Breen v. Texas A&M
Univ., 485 F.3d 325, 331 (5th Cir. 2007) (summary judgment).
3
A party seeking to compel arbitration must first establish the
existence of an arbitration agreement subject to the Federal
Arbitration Act (“FAA”).2 Here, the district court concluded that
AERT met this burden by showing that both Plan SPDs sent to Lester
contained an express arbitration provision and that Lester, by (1)
twice acknowledging receipt of the Plan SPDs, (2) continuing to
work for AERT after being notified of the Plan terms, and (3)
accepting Plan benefits following his injury, had accepted the
terms of that provision.
The court rejected Lester’s argument that he only consented to
the Plan terms under duress, purportedly caused by AERT’s threat to
withhold medical care unless he acknowledged receipt of the SPD.
The court held that Lester failed to prove an essential element of
duress, i.e., that AERT threatened to do something that it had no
legal right to do,3 because, as a non-subscriber to Texas’s
workers’ compensation insurance system, AERT had the right to
refuse payment for Lester’s medical treatment if he elected not to
agree to the Plan terms. The court concluded that as a matter of
law AERT could not place Lester under duress simply by requiring
that he acknowledge receipt of the SPD before receiving medical
benefits under the Plan.
2
9 U.S.C. § 1, et seq.
3
See Osorno v. Osorno, 76 S.W.3d 509, 511 (Tex. App.–Houston
2002, no pet.) (“For duress to be a contract defense, it must
consist of a threat to do something the threatening party has no
legal right to do.”).
4
2. Right to Jury Trial
On appeal, Lester contends that, under section 4 of the FAA,4
he was entitled to a jury trial —— which he demanded —— to
determine the validity of the arbitration agreement presumptively
created by his acknowledged receipt of the Plan SPDs. We disagree.
“Although the FAA permits parties to demand a jury trial to
resolve factual issues surrounding the making of an arbitration
agreement . . . it is well-established that ‘[a] party to an
arbitration agreement cannot obtain a jury trial merely by
demanding one.’”5 Additionally, a party contesting the making of
the arbitration agreement must “make at least some showing that
under prevailing law, he would be relieved of his contractual
obligation to arbitrate if his allegations proved to be true” and
“produce some evidence to substantiate his factual allegations.”6
Accordingly, to receive a jury trial on the issue of the validity
of his consent to the Plan’s arbitration agreement, Lester must (1)
4
9 U.S.C. § 4 provides, in pertinent part,
If the making of the arbitration agreement . . . be in
issue, the court shall proceed summarily to the trial
thereof.
. . . .
Where such an issue is raised, the party alleged to be in
default may . . . demand a jury trial of such issue, and
upon such demand the court shall make an order referring
the issue or issues to a jury.
5
Orr, 294 F.3d at 710 (quoting Dillard v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir. 1992)).
6
Dillard, 961 F.2d at 1154.
5
show that he would not be bound by the Plan’s arbitration provision
if his post-injury acknowledgment of receipt of the SPD was made
under duress, and (2) produce evidence indicating that his post-
injury acknowledgment was made under duress.
We assume, without deciding, that Lester can make the first of
these showings; i.e, that the agreement to arbitrate evidenced by
his acknowledged receipt of the SPD would be invalid if he
acknowledged that receipt under duress. Even assuming this to be
the case, to be entitled to a jury trial, Lester must also “produce
some evidence to substantiate his factual allegations [of
duress].”7 He has not done so here.
As the district court correctly recognized, to prove that he
consented to the Plan’s arbitration provision under duress, Lester
must show that AERT obtained his consent by threatening to do
something that it had no legal right to do.8 Even if we regard all
of Lester’s factual allegations as true, however, he cannot clear
this hurdle. It is undisputed that an employer that opts out of
Texas’s workers’ compensation system has no duty to compensate an
injured employee (who the employer does not cover under another
employee benefits plan) unless and until that employee successfully
asserts a negligence claim against the employer.9 AERT could
7
Id.
8
See Osorno, 76 S.W.3d at 511.
9
See Werner v. Colwell, 909 S.W.2d 866, 868 (Tex. 1995).
6
therefore lawfully refuse to pay the medical expenses of any
injured employee who did not accept the Plan terms, and any threat
it made to withhold medical benefits from Lester unless he accepted
those terms could not constitute duress. Whether Lester’s
condition at the time caused him to feel pressured to accept the
Plan terms is irrelevant to a determination whether AERT’s actions
amounted to duress. Consequently, Lester was not entitled to have
a jury determine the validity of his agreement to arbitrate, as
evidenced by his acceptance of the Plan terms.
3. Other Issues
Lester also contends that there was no sufficiently reliable
evidence presented to support the district court’s conclusion that
AERT had even adopted the Plan and its arbitration agreement. This
contention barely merits comment, as AERT submitted to the district
court complete copies of the Plan, authenticated as business
records, which clearly reflect its adoption and maintenance for all
time periods relevant to the instant case. Lester did not
challenge the authenticity of these submissions in the district
court.
Lester also asserts that the Plan’s arbitration provision was
invalid because it did not comply with a Texas state law requiring
that an agreement to arbitrate a personal injury claim be agreed to
in writing and signed by each party and its counsel.10 This
10
Tex. Civ. Prac. & Rem. Code Ann. §§ 171.002(a)(3) and (c).
7
argument is unavailing. It is well settled that “the primary
purpose of the [FAA] is to require the courts to compel arbitration
when the parties have so provided in their contract, despite any
state legislative attempts to limit the enforceability of
arbitration agreements.”11 “To this end, the [FAA] preempts state
statutes to the extent they are inconsistent with that Act.”12
Here, it is clear that the Texas statute on which Lester relies is
inconsistent with, and therefore preempted by, the FAA.13
Lester next maintains that (1) the one-year limitations period
for requesting arbitration set forth in the Plan expired before the
district court ordered arbitration, and (2) AERT’s delay in
providing Lester with a copy of the Plan constituted a waiver of
the right to demand arbitration. As Lester did not present either
of these arguments in the district court, we will not consider them
on appeal.14
Finally, Lester complains that his agreement to arbitrate nine
days after his injury was invalid, because Texas law requires that
any waiver of a cause of action for personal injury sustained
11
Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271 (Tex.
1992) (citations omitted).
12
Id.
13
See Freudensprung v. Offshore Technical Services, Inc., 379
F.3d 327, 338 n.7 (5th Cir. 2004) (holding that the FAA preempts
the same state law provisions relied on by Lester).
14
Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Discount
Centers, Inc., 200 F.3d 307, 316-17 (5th Cir. 2000).
8
during the course and scope of employment be entered into no
earlier than ten days after the initial report of the injury. As
Lester also failed to raise this issue in the district court, we
mention it only to point out that an agreement to arbitrate is not
a waiver of a cause of action.
C. ERISA Preemption of Other State-Law Claims
Lester next insists that the district court erred in
dismissing, as preempted by ERISA, his claims against the Plan
Administrator for breach of fiduciary duty and against AERT for
breach of the duty of good faith and fair dealing. We disagree.
ERISA supersedes “any and all State laws insofar as they may
now or hereafter relate to any employee benefit plan”15 but does not
govern an employee benefits plan that “is maintained solely for the
purpose of complying with applicable workmen’s compensation laws.”16
We have held, however, that occupational injury benefit plans
established by non-subscribers to Texas’s workers’ compensation
system —— such as the one at issue here —— are not “maintained
solely for the purpose of complying with applicable workmen’s
compensation laws” and thus are governed by ERISA.17 Consequently,
the district court properly dismissed Lester’s state-law claims
against the Plan Administrator for breach of fiduciary duty and
15
29 U.S.C. § 1144(a).
16
§ 1003(b)(3).
17
See Hernandez v. Jobe Concrete Products, Inc., 282 F.3d 360,
363 (5th Cir. 2002).
9
against AERT for breach of the duty of good faith and fair dealing
as preempted by ERISA. Moreover, we note that Texas courts have
routinely declined to recognize a duty of good faith and fair
dealing flowing from an employer to its employees.18
Finally, we conclude that, to the extent Lester’s complaint
encompasses a claim for breach of fiduciary duty under ERISA, that
claim is not actionable. Under ERISA, a plan participant may bring
a civil action to enjoin an act that violates any provision of
ERISA or to obtain any “otherwise appropriate equitable relief.”19
Here, Lester seeks only compensatory and punitive damages for
AERT’s delay in paying benefits under the Plan. The Supreme Court
has held that money damages are not available through the civil
remedy provisions of ERISA.20 Consequently, Lester’s claim for
breach of fiduciary duty against the Plan Administrator is not
cognizable under the limited civil remedies provided by ERISA.
III. CONCLUSION
For the foregoing reasons, the district courts orders (1)
compelling arbitration of Lester’s negligence claim against AERT,
and (2) dismissing as preempted by ERISA Lester’s claims for breach
18
See Fed. Exp. Corp. v. Dutschmann, 846 S.W.2d 282, 284 n.1
(Tex. 1993) (citations omitted).
19
29 U.S.C. § 1132(a)(3).
20
Mertens v. Hewitt Assoc., 508 U.S. 248, 255-56 (1993).
10
of fiduciary duty against the Plan Administrator and the duty of
good faith and fair dealing against AERT are, in all respects,
AFFIRMED.
11