Western Dairy Transport, LLC v. Marcial Felipe Vasquez , 457 S.W.3d 467 ( 2014 )

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
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WESTERN DAIRY TRANSPORT, LLC, No. 08-13-00175-CV
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Appellant, Appeal from
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v. 120th District Court
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MARCIAL FELIPE VASQUEZ, of El Paso County, Texas
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Appellee. (TC # 2012-DCV-06569)
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OPINION
In this consolidated interlocutory appeal and petition for writ of mandamus,
Appellant/Relator, Western Dairy Transport, LLC, challenges the trial court's order denying its
motion to compel arbitration in the suit filed by Appellee/Real Party in Interest, Marcial Felipe
Vasquez. We conclude that we lack jurisdiction over the petition for writ of mandamus. In the
interlocutory appeal, we conclude that the trial court did not abuse its discretion by denying
Western Dairy’s motion to compel arbitration.
FACTUAL SUMMARY
Vasquez worked as a mechanic for Western Dairy Transport, a trucking company, and
suffered a hernia while lifting a truck tire. Western Dairy is not a subscriber to Texas’s workers’
compensation system, but instead provides employees like Vasquez with an ERISA injury
benefit plan. The plan includes a mandatory arbitration provision, which states that it is
governed by the Federal Arbitration Act (the “FAA”). Employee’s claims for work-related
personal injuries are within the scope of matters that must be arbitrated under the plan. Vasquez
was covered under the plan, received benefits thereunder for his injuries, and signed an
acknowledgment form summarizing the arbitration requirement.1 Vasquez filed his personal
injury claim against Western Dairy in the 120th Judicial District Court of El Paso County in
November of 2012. Western Dairy responded to the suit with a motion to compel arbitration,
which the trial court denied in June of 2013. Western Dairy challenges the denial by both
interlocutory appeal and a petition for writ of mandamus.
MANDAMUS OR INTERLOCUTORY APPEAL?
As a preliminary matter, we address whether this court has jurisdiction over the
interlocutory appeal or the petition for writ of mandamus. When an arbitration agreement is
subject to the FAA, a court of appeals has jurisdiction over an interlocutory appeal challenging
the denial of a motion to compel arbitration.2 See TEX.CIV.PRAC.&REM.CODE ANN. § 51.016
(West Supp. 2013). If the FAA does not control, however, the agreement to arbitrate may still be
enforceable under Texas common law. In re Swift Transp. Co., Inc., 311 S.W.3d 484, 491
(Tex.App.--El Paso 2009, orig. proceeding). See also L.H. Lacy Company v. City of Lubbock,
1
Although Vasquez initially contended that he did not sign the acknowledgement form, before this Court he
concedes that it does contain his signature, and that the arbitration provision was a mandatory condition of his
employment regardless of whether he did or did not sign the form.
2
Section 51.016 permits interlocutory appeals in matters subject to the FAA under the same circumstances in
which they are permitted by 9 U.S.C. § 16 in federal actions. See TEX.CIV.PRAC.&REM.CODE ANN. § 51.016 (West
Supp. 2013). The Texas Legislature enacted Section 51.016 in order to eliminate the necessity of parallel
mandamus and interlocutory proceedings following the denial of a motion to compel arbitration implicating both the
FAA and the Texas Arbitration Act. See In re Santander Consumer USA, Inc., No. 01-12-00728-CV, 2013 WL
652721, at *8 (Tex.App.--Houston [1st Dist.] Feb. 21, 2013, orig. proceeding), citing SENATE COMM. ON STATE
AFFAIRS, BILL ANALYSIS, TEX. S.B. 1650, 81st Leg., R.S. (2009). No solution to the parallel proceedings problem
yet exists in cases such as this, however, where entitlement to arbitration is urged under both the FAA and Texas
common law.
2
559 S.W.2d 348, 351-52 (Tex. 1977)(holding that common law arbitration and statutory
arbitration are “cumulative” and part of a “dual system”). Mandamus is the appropriate
procedure by which we may review the trial court's ruling on a motion to compel arbitration
under the common law. See In re Paris Packaging, 136 S.W.3d 723, 727 & n.7 (Tex.App.--
Texarkana 2004, orig. proceeding).
Western Dairy seeks to compel arbitration under the FAA, and alternatively, under Texas
common law principles. But as Western Dairy asserted before the trial court, its injury benefit
plan specifically provides that “the [FAA] will govern the interpretation, enforcement, and
proceedings under this dispute resolution requirement.” Because the plan expressly provides that
it will be interpreted under the FAA, we dismiss the original proceeding in mandamus for lack of
jurisdiction and consider only the interlocutory appeal. J.B. Hunt Transport, Inc. v. Hartman,
307 S.W.3d 804, 808 (Tex.App.--San Antonio 2010, no pet.)(refusing to consider enforceability
of arbitration agreement under Texas law when the agreement specifically provided that it was to
be interpreted and enforced under the FAA).3 Palcko v. Airborne Express, Inc., 372 F.3d 588,
596 (3rd Cir. 2004)(arbitration agreement held enforceable under state law where agreement
specified that state law would control in the event FAA was inapplicable).
3
The FAA provision in Hartman was virtually identical to the one present here: “the [FAA] will govern the
interpretation, enforcement, and proceedings under this arbitration requirement.” Hartman, 307 S.W.3d at 808. The
court’s determination that this language barred application of state arbitration law flowed from a line of cases
originating with the First Court of Appeals’ decision in In re Kellogg Brown & Root, 80 S.W.3d 611, 617
(Tex.App.--Houston [1st Dist.] 2002, orig. proceeding). In Kellogg, the Houston court held that such language
constitutes a choice-of-law provision in favor of the FAA, making it unnecessary for the party desiring arbitration
“to establish that the transaction at issue involves or affects interstate commerce.” Id. Because the FAA’s interstate
commerce requisite is embodied in 9 U.S.C. § 2, which is the Act’s “primary substantive provision” Moses H. Cone
Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), we agree that language stipulating to the
FAA’s application forestalls any need to establish that the base transaction involves interstate commerce. Such
language does not preclude, however, the necessity of determining whether 9 U.S.C. § 1 excludes the employee
from the FAA’s control. This matter must be analyzed under the FAA itself. 9 U.S.C. § 1; Circuit City Stores, Inc.
v. Adams, 532 U.S. 105, 119 (2001).
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APPLICABLE LAW
A party seeking to compel arbitration under the FAA must establish: (1) the existence of
a valid, enforceable arbitration agreement, and (2) that the claims at issue fall within the
agreement's scope. In re FirstMerit Bank, 52 S.W.3d 749, 753 (Tex. 2001)(orig. proceeding).
There is a presumption in favor of arbitration under both state and federal law when ambiguities
arise in regard to an arbitration agreement’s scope, but there is no such presumption in regard to
the agreement’s validity. Id.; Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069, 1074 (5th
Cir. 2002). Validity is instead determined by the requirements of general contract law of the
applicable state. Morrison v. Amway Corp., 517 F.3d 248, 254 (5th Cir. 2008); In re
AdvancePCS Health L.P., 172 S.W.3d 603, 606 (Tex. 2005)(orig. proceeding). Once the
questions of validity and scope are resolved affirmatively, the court then considers whether any
federal statute or policy “renders the claims nonarbitrable.” Mendez v. New Bell General
Services, L.P., 727 F. Supp. 2d 585, 589 (W.D.Tex. 2010), quoting Sherer v. Green Tree
Servicing LLC, 548 F.3d 379, 381 (5th Cir. 2008). The party seeking to invalidate an arbitration
agreement bears the burden of establishing this matter, as well as other defenses to arbitration,
such as unconscionability, fraud, duress, or waiver. Gonzales v. Brand Energy & Infrastructure
Services, Inc., No. H-12-1718, 2013 WL 1188136, at * 2 (S.D.Tex. Mar. 20, 2013), citing Carter
v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004). In re Oakwood Mobile
Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999), abrogated on other grounds by, In re
Halliburton Co., 80 S.W.3d 566, 571 (Tex. 2002)(orig. proceeding).
Whether an agreement imposes a duty to arbitrate is a question of law that the appellate
court reviews de novo. In re C & H News Co., 133 S.W.3d 642, 645 (Tex.App.--Corpus Christi
2003, orig. proceeding). The trial court’s related factual determinations, however, fall under the
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no-evidence standard. Sidley Austin Brown & Wood, LLP v. J.A. Green Development Corp., 327
S.W.3d 859, 862-63 (Tex.App.--Dallas 2010, no pet.)(analyzing these standards of review for
purposes of interlocutory review under Section 51.016 of the Civil Practice and Remedies Code).
This standard is the same as the abuse of discretion standard of review. Id.
THE SCOPE AND VALIDITY OF THE ARBITRATION AGREEMENT
Western Dairy has satisfied its initial burden of demonstrating the existence of a valid
arbitration agreement. The injury benefit plan and plan summary set out the terms of the
arbitration provision. Vasquez signed an acknowledgement form summarizing the arbitration
provision and confirming his receipt of the plan summary. Additionally, there is adequate
consideration in support of the arbitration agreement. A summary of the plan provides that the
arbitration policy applies to claims brought by either Western Dairy or Vasquez, and that the
agreement to arbitrate is binding upon both. Our Supreme Court holds that reciprocal pledges to
arbitrate constitute sufficient consideration so long as the employer cannot unilaterally opt out of
its promise to arbitrate. In re Halliburton Co., 80 S.W.3d at 569-70; J.M. Davidson, Inc. v.
Webster, 128 S.W.3d 223, 228 (Tex. 2003). The plan specifies that Western Dairy cannot amend
or terminate the arbitration provision with respect to any injury claim arising before any effort to
amend or terminate is made. In Odyssey Healthcare, the Texas Supreme Court held that a
virtually identical termination and amendment clause did not render the arbitration agreement
illusory. In re Odyssey Healthcare, Inc., 310 S.W.3d 419, 424 (Tex. 2010)(orig. proceeding).
See also In re Halliburton Co., 80 S.W.3d at 569-70. Accordingly, Western Dairy does not have
the right to unilaterally opt out of its pledge to arbitrate. Western Dairy has also established that
Vasquez’s personal injury claim falls within the scope of the arbitration agreement. The
acknowledgment form Vasquez signed provides as follows: “I also acknowledge that [the plan]
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includes a mandatory company policy requiring that claims or disputes relating to the cause of an
on-the-job injury . . . be submitted to [arbitration].” Accordingly, the only remaining issue is
whether any federal statute or policy renders the claim nonarbitrable.
DOES 9 U.S.C. § 1 EXCLUCE VASQUEZ FROM THE FAA’S CONTROL?
Section 2 of the FAA provides that arbitration agreements “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2. Section 1 sets forth the exclusions to Section 2. 9 U.S.C. § 1. Section
1, however, expressly limits the reach of the FAA by exempting from its coverage the “contracts
of employment of seamen, railroad employees, or any other class of workers engaged in foreign
or interstate commerce.”4 Id. The Unites States Supreme Court has analyzed section 1, focusing
on the residual phrase, “or any other class of workers engaged in foreign or interstate
commerce.” Circuit City Stores, Inc., 532 U.S. at 112.
In Circuit City, the Supreme Court reviewed the Ninth Circuit’s holding that the residual
phrase exempted all employment contracts from the FAA, including that of a sales counselor at a
retail store whose job duties were not closely related to interstate commerce. Id. at 110, 112.
The court held that the Ninth Circuit’s interpretation failed to give proper effect to section 1’s
preceding reference to “seamen” and “railroad employees,” and was thus too broad. Id. at 114.
In reaching this conclusion, the court applied the maxim of ejusdem generis, which stands for the
principle that where “general words follow specific words in a statutory enumeration, the general
words are construed to embrace only objects similar in nature to those objects enumerated by the
preceding specific words.” Id. at 114-15 [Citations omitted]. Section 1’s residual phrase is thus
controlled and defined by the statute’s preceding reference to seaman and railroad employees.
4
Western Dairy does not argue that the arbitration provision is not a “contract of employment” within the meaning
of 9 U.S.C. § 1.
6
Id. at 115, 119. Accordingly, 9 U.S.C. § 1 “exempts from the FAA only employment contracts
of transportation workers.” Id. at 119. The Circuit City opinion does not, however, provide
express direction for determining whether an individual employee qualifies as a “transportation
worker.” Federal courts have subsequently made this determination on a case-by-case basis.
See, e.g., Lorntzen v. Swift Transp., Inc., 316 F. Supp. 2d 1093, 1097 (D.Kan. 2004).
“In order to be considered a transportation worker, an employee must actually be
employed in the transportation industry, that is, an industry directly involved in the movement of
goods.” Zamora v. Swift Transp. Corp., No. EP-07-CA-00400-KC, 2008 WL 2369769, at *6
(W.D.Tex. June 3, 2008), citing Lenz v. Yellow Transp., Inc., 431 F.3d 348, 351 (8th Cir. 2005).
There is no dispute that Western Dairy, as an interstate trucking company, is part of the
transportation industry. “[T]he more related to the transportation industry an enterprise is, the
less necessary it becomes for the employee to be directly transporting goods” in order for
Section 1’s exclusion to apply. Id., quoting Veliz v. Cintas Corp., No. C-03-1180-SBA, 2004
WL 2452851, at *5 (N.D.Cal. Apr. 5, 2004). Nonetheless, employment within the transportation
industry alone is not sufficient. The employee's individual responsibilities “must be closely
related to interstate commerce,” although he “need not actually transport the goods himself for
the exemption to apply.” Id., citing Lenz, 431 F.3d at 351-52.
In Lenz v. Yellow Transp., Inc., the Eighth Circuit set out a nonexclusive eight-part test
for determining whether an employee is a transportation worker for purposes of the 9 U.S.C. § 1
exclusion. Lenz, 431 F.3d at 352. At least two federal district courts situated in Texas have
applied the Lenz test. Zamora, 2008 WL 2369769 at *6; Barker v. Halliburton Co., No. H-07-
2677, 2008 WL 1883880, at *1-2 (S.D.Tex. Apr. 25, 2008). Lenz’s eight nonexclusive factors
are as follows: (1) whether the employee works in the transportation industry; (2) whether the
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employee is directly responsible for transporting goods in interstate commerce; (3) whether the
employee handles goods that travel interstate; (4) whether the employee supervises employees
who are themselves transportation workers, such as truck drivers; (5) whether like seamen or
railroad employees, the employee is within a class of employees for which special arbitration
already existed when Congress enacted the FAA; (6) whether the vehicle itself is vital to the
commercial enterprise of the employer; (7) whether a strike by the employee would disrupt
interstate commerce; and (8) the nexus that exists between the employee's job duties and the
vehicle the employee uses in carrying out his duties. Lenz, 431 F.3d at 352. Western Dairy
concedes that these factors properly embrace the standards announced by the Supreme Court in
Circuit City, Inc. v. Adams.
Beginning with the first factor of Lenz, there is no question that Vasquez works in the
transportation industry. See Lenz, 431 F.3d at 351. This factor weighs in favor of determining
that Vasquez is a transportation worker. The second factor, Vasquez’s direct responsibility for
the movement of goods in interstate commerce, weighs against Vasquez. Unlike truck drivers,
who are indisputably transportation workers, Vasquez is not personally responsible for the
movement of goods. See id. (noting that truck drivers are “indisputably” transportation workers
for purposes of 9 U.S.C. § 1), citing Harden v. Roadway Package Sys., Inc., 249 F.3d 1137 (9th
Cir. 2001). We consider the third factor to be neutral, because although Vasquez does not handle
goods that travel interstate, he handles the indispensable instrumentality of their travel: the trucks
themselves. Id. at 352. Vasquez does not satisfy the fourth Lenz factor as he does not supervise
employees who are themselves transportation workers. Id. The fifth factor--whether Vasquez is
subject to special arbitration provisions like seamen and railroaders--is also effectively neutral to
our analysis. While there has been no showing that Vasquez is subject to special arbitration
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provisions, there has been no showing that any Western Dairy employee is subject to such
provisions. Indeed, it appears that there are no such special arbitration provisions even for truck
drivers, despite the fact that they unquestionably qualify as transportation workers.
The last three Lenz factors, which consider the importance of trucks and truck mechanics
to Western Dairy’s overall business, weigh heavily in favor of Vasquez being a transportation
worker. The sixth factor asks whether the vehicle itself is vital to the commercial enterprise of
the employer. Id. The trucks that Vasquez serviced and kept running for Western Dairy are not
just vital to Western Dairy’s business, they are its business. Id. For that reason, seventh, a strike
by Western Dairy’s mechanics would clearly disrupt its participation in interstate commerce. Id.
Eighth and lastly, there is a very clear nexus between the job duties of a mechanic and the
vehicles he works on. Without trucks there are no mechanics; without mechanics, there are no
trucks.
In sum, four of the Lenz factors weigh heavily in favor of holding Vasquez to be a
transportation worker, two weigh against it, and two are neutral to our analysis. We hold that
Vasquez is a transportation worker for purposes of 9 U.S.C. § 1.
Western Dairy asserts that three other courts have previously determined that a mechanic
is not a transportation worker for purposes of Section 1. Two of the cases Western Dairy relies
on did not concern exclusion under 9 U.S.C. § 1, but turned instead on whether the mechanics’
claims were within the scope of the arbitration agreements, and/or whether the agreement was
unconscionable. See Sammons v. Sonic-North Cadillac, Inc., No. 6:07-cv-277-Orl-19DAB, 2007
WL 2298032, at *2-3 (M.D.Fla. 2007, Aug. 7, 2007)(turning on scope); Giordano v. Pep Boys-
Manny, Moe, & Jack, Inc., No. CIV. A. 99-1281, 2001 WL 484360, at *3-7 (E.D.Pa. Mar. 29,
2001)(turning on scope and unconscionability). Western Dairy’s third case, Dwyer v. Eagle
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Marine Servs. Ltd., Oakland, was an effort by a plaintiff-employee to vacate an arbitrator’s
award entered under the Labor Management Relations Act (“LMRA”) by arguing that the FAA
rather than the LMRA controlled. See Dwyer v. Eagle Marine Servs. Ltd., Oakland, No. C 10-
4440 SBA, 2011 WL 2600916, at * 3 (N.D.Cal. June 30, 2011). The employer, rather than the
employee, argued that the FAA was inapplicable by virtue of 9 U.S.C. § 1. Id. at *3-4. The
court found the record to be inconclusive, however, and did not determine whether the mechanic
was excluded under section 1. Id. In short, none of these cases hold that a mechanic is not a
transportation worker under section 1.5
Western Dairy also relies on cases in which employees other than mechanics were
determined not to be transportation workers. These cases are obviously factually distinct. See
Omoruyi v. Grocers Supply Co., Inc., No. 14-09-00151-CV, 2010 WL 1992585, at *4
(Tex.App.--Houston [14th Dist] May 20, 2010, no pet.)(holding that a warehouse employee was
not a transportation worker); and Kropfelder v. Snap-On Tools Corp., 859 F. Supp. 952, 958-59
(D. Md. 1994)(same). See also Tran v. Texan Lincoln Mercury, Inc., No. H-07-1815, 2007 WL
2471616, at *4 (S.D. Tex. Aug. 29, 2007)(holding that a car dealership’s finance manager was
not transportation worker). Unlike Vasquez, the employees in these cases were not “so closely
related [to interstate commerce] as to be in practical effect part of it.” Lenz, 431 F.3d at 352,
quoting Palcko v. Airborne Express, Inc., 372 F.3d 588, 593 (3rd Cir. 2004).
We hold that Vasquez is a transportation worker for purposes of 9 U.S.C. § 1, and that he
is thus exempt from the FAA’s control. As such, the trial court did not abuse its discretion by
denying Western Dairy’s motion to compel arbitration.
5
Another case cited by Western Dairy, Mamat v. United Fruit Co., held that an employee who was part of a “shore
gang” that effected repairs on a ship did not qualify as a seaman, but was instead a longshoreman, and thus that his
personal injury claims were barred by the Longshoremen's Compensation Act, 33 U.S.C. § 901, et seq. Mamat v.
United Fruit Co., 39 F. Supp. 103 (S.D.N.Y. 1940). This case predates the FAA, which was enacted in 1947.
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July 30, 2014
ANN CRAWFORD McCLURE, Chief Justice
Before McClure, C.J., Rivera, and Rodriguez, JJ.
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