Butler v. Z&H Foods ( 2021 )

Case: 21-20086 Document: 00516004841 Page: 1 Date Filed: 09/07/2021
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
September 7, 2021
No. 21-20086 Lyle W. Cayce
Clerk
Donna Kay Butler; Brittany Gallien; Ernest Kizzee;
Jasmine Smithers; LaPorsha Stanley; Bonnie Williams,
Plaintiffs—Appellants,
versus
Z&H Foods, Incorporated,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:19-cv-2759
Before Southwick, Oldham, and Wilson, Circuit Judges.
Per Curiam:*
The six plaintiffs are former employees of a Popeyes restaurant owned
by the defendant, Z&H Foods, Inc. (“Z&H”). In 2019, after exhausting their
administrative remedies before the Equal Employment Opportunity
Commission (“EEOC”), they sued in federal district court. Plaintiffs
*
Pursuant to 5th Circuit Rule 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opinion should not be published and is not precedent except under the limited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 Circuit Rule 47.5.4.
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brought discrimination and retaliation claims (based on color and/or race)
under Title VII and 42 U.S.C. § 1981. Z&H filed an answer and responded
to some discovery requests but made none of its own. Then, nine months
after the complaint was filed, Z&H moved to compel arbitration. Relying on
an arbitration agreement between each plaintiff and Z&H (the
“Agreement”), the district court compelled arbitration and dismissed the
case. Plaintiffs appealed.
We review the district court’s order compelling arbitration de novo.
Crawford Pro. Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 256 (5th Cir.
2014). But we review the court’s factual findings only for clear error. Id.Applying those standards, we address and reject plaintiffs’ four arguments in
turn. The first three lack merit, and plaintiffs forfeited the fourth by failing to
raise it before the district court.
Plaintiffs first argue there simply was no arbitration Agreement. More
precisely, they argue the Agreement’s existence is “in issue” within the
meaning of the Federal Arbitration Act (“FAA”), and that the district court
therefore erred by denying them a jury trial on the question. See 9 U.S.C. § 4(“If the making of the arbitration agreement . . . be in issue, the court shall
proceed summarily to the trial thereof.”).
Questions of an arbitration agreement’s validity and existence are
governed by state law. See, e.g., Halliburton Energy Servs. v. Ironshore Specialty
Ins. Co., 921 F.3d 522, 530 (5th Cir. 2019). To put the Agreement’s existence
“in issue” for FAA purposes, plaintiffs “must make at least some showing
that under prevailing law, [they] would be relieved of [their] contractual
obligations to arbitrate if [their] allegations proved to be true and produce
some evidence to substantiate [their] factual allegations.” Am. Heritage Life
Ins. Co. v. Orr, 294 F.3d 702, 710 (5th Cir. 2002) (quotation and alterations
omitted); see 9 U.S.C. § 4. And without corroborating evidence, self-serving
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affidavits will not suffice to entitle the plaintiffs to a jury trial. See Orr, 294
F.3d at 710.
The district court correctly applied these standards and concluded the
Agreement’s existence was not “in issue.” Though each plaintiff offered an
affidavit claiming he or she had not signed the Agreement, the court
concluded that “Plaintiffs do not offer, and the record does not contain, any
evidence that corroborates Plaintiffs’ self-serving affidavits.” Given that
factual finding, the existence of the Agreement was not in issue. See Orr, 294
F.3d at 710. And the court explicitly based its finding on its consideration of
a wide variety of evidence—including a digitally signed Agreement for each
plaintiff.
The plaintiffs now contend the court’s factual conclusion was clearly
erroneous. Their argument boils down to the claim that Z&H either forged
each and every one of plaintiffs’ digital signatures or simply falsified the
Agreements from the ground up. Specifically, they point to a letter Z&H
previously sent to the EEOC—a letter where Z&H wrongly said it had “no
record” of one of the plaintiffs’ (Jasmine Smithers) ever having worked for
Z&H. They suggest that this letter, combined with Z&H’s later production
of Smithers’s signed Agreement, proves that Z&H forged at least her
signature and perhaps the others. They also argue that forging digital
documents and signatures is, in general, easy to do.
Neither point comes close to showing the district court clearly erred.
Z&H offered an explanation for the inaccurate EEOC letter: the error, said
Z&H, was based on Smithers’ own mistaken listing of her dates of
employment when she complained to the EEOC. There is nothing clearly
erroneous about crediting that explanation. And the mere fact that a
document can be falsified does not mean any given document actually was
falsified. So we conclude the district court’s finding—that nothing in the
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record supports plaintiffs’ affidavits about falsification—was not clearly
erroneous.
Second, the plaintiffs argue the Agreement was based on an illusory
promise and therefore invalid under Texas law. This question is indeed
governed by Texas contract law, see e.g., Halliburton, 921 F.3d at 530, and we
review the district court’s contract interpretation de novo, see D2 Excavating
Inc. v. Thompson Thrift Constr., Inc., 973 F.3d 430, 433 (5th Cir. 2020). Under
Texas law, “an arbitration provision [is] illusory if the contract permits one
party to legitimately avoid its promise to arbitrate, such as by unilaterally
amending or terminating the arbitration provision and completely escaping
arbitration.” Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d
494, 505 (Tex. 2015).
The plaintiffs argue as follows. The Agreement is part of an Employee
Handbook (the “Handbook”). The Handbook provides both that “[t]he
procedures, practices, policies and benefits described here may be modified
or discontinued,” and that “Z&H . . . reserves the right to amend or modify
these policies at any time.” Meanwhile, the arbitration Agreement describes
itself as “mutually binding” and “only . . . revo[cable] or modifi[able] by a
writing signed by the Parties.” But the Agreement also provides that “to the
extent of any conflict with this Agreement, the express terms regarding the
resolution of disputes contained in the separate written binding and
enforceable contract shall control.” The Handbook counts as such a separate
contract. So, plaintiffs contend, the Handbook’s unilateral-modification
provision trumps the Agreement’s mutual-modification provision and
renders the latter illusory under Royston. 467 S.W.3d at 505.
This reading is creative but wrong. First, it does not accord with the
plain contractual text. See Great Am. Ins. Co. v. Primo, 512 S.W.3d 890, 893
(Tex. 2017) (“‘Plain meaning’ is a watchword for contract interpretation
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because word choice evinces intent. A contract’s plain language controls, not
what one side or the other alleges they intended to say but did not.”
(quotation omitted)). The Handbook states that Z&H has “separate
documents regarding arbitration.” (emphasis added). Thus, the Handbook
(along with its unilateral-modification clause) does not apply to the
Agreement. Moreover, as the district court correctly noted, plaintiffs’
reading would render superfluous the Agreement’s provision that it “can
only be revoked or modified by a writing signed by the Parties.” See Coker v.
Coker, 650 S.W.2d 391, 394 (Tex. 1983) (readings that render phrases
meaningless are disfavored). We conclude that under Texas law, Z&H has
no unilateral power to terminate the Agreement. The Agreement is therefore
not illusory.
Third, the plaintiffs argue Z&H waived its right to arbitrate through
its litigation conduct. “Waiver of arbitration is a disfavored finding. But we
will find it when the party seeking arbitration substantially invokes the
judicial process to the detriment or prejudice of the other party.” Int’l Energy
Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 999 F.3d 257, 266 (5th
Cir. 2021) (quotation and internal citation omitted). And that invocation
requires, “at the very least, engag[ing] in some overt act in court that evinces
a desire to resolve the arbitrable dispute through litigation rather than
arbitration.” In re Mirant Corp., 613 F.3d 584, 589 (5th Cir. 2010). Yet merely
participating in discovery—without “shower[ing] the opposing party with
interrogatories and discovery requests”—does not amount to waiver.
Keytrade USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 898 (5th Cir. 2005)
(quotation and alterations omitted).
Here, Z&H filed an answer and participated in discovery, but it made
neither discovery requests nor motions of its own. It waited nine months
before filing its motion to dismiss and compel arbitration. But under our
precedent, that does not constitute a waiver. See Keytrade, 404 F.3d at 898.
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Fourth and finally, the plaintiffs argue the district court had power to
stay the case but not to dismiss it. They raise this issue for the first time on
appeal and make no showing of extraordinary circumstances. So the issue is
forfeited. See, e.g., Kitchen v. BASF, 952 F.3d 247, 253 (5th Cir. 2020)
(“Because [the appellant] did not present this argument to the district court,
and he makes no attempt to demonstrate extraordinary circumstances for
why we should consider it, this argument is [forfeited].”). The plaintiffs’
only response is that Z&H asked the district court to stay the case as an
alternative to dismissing it. But a mere request to stay—in the alternative and
by the opposing party, no less—is no substitute for plaintiffs’ actually raising
the argument below.
AFFIRMED.
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