Jesus Maravilla v. Gruma Corporation ( 2019 )

Case: 18-20570 Document: 00515104392 Page: 1 Date Filed: 09/04/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 18-20570
Fifth Circuit
FILED
September 4, 2019
JESUS MARAVILLA, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
GRUMA CORPORATION, doing business as Mission Tortillas,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:18-CV-1309
Before KING, ELROD, and ENGELHARDT, Circuit Judges.
PER CURIAM:*
I.
Plaintiff-Appellant Jesus Maravilla (“Maravilla”) and Defendant-
Appellee Gruma Corporation (“Gruma”), doing business as Mission Tortillas,
entered into an agreement (“the Agreement”) that Maravilla would sell and
distribute food products to Gruma’s retail customers within a specified area in
Texas. The Agreement stated that Maravilla “agrees that he . . . is not an
employee of [Gruma] for any purpose, but is an Independent sales and
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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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distribution contractor.” The parties also mutually disclaimed and waived the
right to pursue class action claims against one another.
Additionally, the Agreement includes the following arbitration provision:
“[A]ny and all other claims and causes of action arising out of or relating to
this Agreement (including, without limitation, matters relating to . . .
enforceability of all or any part of this Agreement . . . ) shall be resolved by
arbitration through JAMS/Endispute (“JAMS”).”
The Agreement further explains that all arbitration proceedings “shall
proceed pursuant to JAMS Streamlined Arbitrations Rules and Procedures.”
JAMS Streamlined Rule 8 provides:
Jurisdictional and arbitrability disputes, including disputes
over the formation, existence, validity, interpretation, or scope
of the agreement under which Arbitration is sought, and who
are proper Parties to the Arbitration, shall be submitted to and
ruled on by the Arbitrator. The Arbitrator has the authority to
determine jurisdiction and arbitrability issues as a preliminary
matter. 1
On April 26, 2018, Maravilla filed a purported collective Fair Labor
Standards Act action against Gruma, along with a motion for class
certification. On May 16, 2018, Gruma filed its first motion to dismiss,
alternatively a motion to compel arbitration, as well as a motion to stay class
certification proceedings. Maravilla then filed an amended complaint that
added collective action allegations, among other allegations, and a response to
Gruma’s first motion to dismiss. Maravilla argued in his response that the
Agreement containing the arbitration provision was invalid and unenforceable
1 JAMS Streamlined Rules became effective July 1, 2014.
(https://www.jamsadr.com/rules-streamlined-arbitration/). The Distributor Agreement was
entered into and effective as of July 31, 2014.
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because he is “not proficient in written English” and therefore the contract was
unconscionable.
The same day that Maravilla filed his response, Gruma filed a second
motion to dismiss seeking dismissal of Maravilla’s claims and compelling
arbitration. 2 Gruma notes in its appellate brief that Maravilla did not file a
separate response to Gruma’s second motion to dismiss. However, the district
court concluded that because Gruma’s arguments regarding arbitration were
“virtually identical” in both its first and second motion to dismiss, Maravilla’s
response applied with equal force to Gruma’s second motion to dismiss.
On July 26, 2018, the district court granted Gruma’s second motion to
dismiss and compelled Maravilla to arbitrate the dispute individually. 3
Maravilla timely appealed, challenging the district court’s dismissal of his
claims in favor of arbitration. On appeal, Maravilla contends that the district
court erred in its determination that the arbitration clause was enforceable. 4
Maravilla maintains that the Agreement was unconscionable (and thus
unenforceable) because it was in English and he “was not proficient in written
English.”
II.
This court reviews de novo a district court’s ruling on a motion to compel
arbitration. Kubala v. Supreme Prod. Servs., 830 F.3d 199, 201 (5th Cir. 2016);
2 Gruma also filed a “Motion to Stay Conditional Certification Proceedings in Light of
Plaintiff’s Agreement to Individual Arbitration,” which was granted by the district court on
July 17, 2018. Thus, Maravilla is the sole appellant in this appeal.
3 This is a final appealable order. See, e.g., Westlake Styrene Corp. v. P.M.I. Trading,
Ltd., 71 F. App’x 442, 442 (5th Cir. 2003).
4 Maravilla does not challenge on appeal the district court’s determination that the
Agreement contained an enforceable class action waiver. Therefore, he has abandoned this
claim on appeal. See FED. R. APP. P. 28(a)(8)(A); United States v. Cothran, 302 F.3d 279, 286
n.7 (5th Cir. 2002).
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see also Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004)
(de novo standard applies when a motion to compel part of motion to dismiss).
III.
“The [Federal Arbitration Act] reflects the fundamental principle that
arbitration is a matter of contract.” Rent-A-Ctr., West, Inc. v. Jackson, 561 U.S.
63, 67 (2010). Courts must enforce arbitration agreements according to their
terms. “Like other contracts, however, [arbitration agreements] may be
invalidated by ‘generally applicable contract defenses . . . .’” Rent-A-Ctr., 561
U.S. at 68 (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)).
Courts “apply ordinary state-law principles that govern the formation of
contracts.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Both
parties agree that Texas law applies. 5
Courts apply a two-step analysis to determine whether parties should be
compelled to arbitrate a dispute. The first step focuses only on contract
formation: the court must determine “whether the parties entered into any
arbitration agreement at all.” Kubala, 830 F.3d at 201. In conducting this
initial inquiry, the court distinguishes between “‘validity’ or ‘enforceability’
challenges and ‘formation’ or ‘existence’ challenges.” Arnold v. Homeaway, Inc.,
890 F.3d 546, 550 (5th Cir. 2018).
The second step involves a limited inquiry if, as here, the agreement
purportedly contains a delegation clause 6: “whether the purported delegation
clause is in fact a delegation clause—that is, if it evinces an intent to have the
5 The “Governing Law” section of the Agreement states: “This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas. The Federal
Arbitration Act, 9 U.S.C. § 1 et seq. shall also apply as needed to uphold the validity or
enforceability of the arbitration provisions of this Agreement.”
6 A delegation clause is “an agreement to arbitrate threshold issues concerning the
arbitration agreement.” Rent-A-Ctr., 561 U.S. at 68. “Delegation clauses are enforceable and
transfer the court’s power to decide arbitrability questions to the arbitrator.” Kubala, 830
F.3d at 202.
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arbitrator decide whether a given claim must be arbitrated.” Kubala, 830 F.3d
at 202. If the agreement contains a delegation clause, a “motion to compel
arbitration should be granted in almost all cases.” Id.; see also Edwards v.
Doordash, Inc., 888 F.3d 738, 744 (5th Cir. 2018) (“If there is an agreement to
arbitrate with a delegation clause, and absent a challenge to the delegation
clause itself, we will consider that clause to be valid and compel arbitration.”).
We proceed to the first step. Maravilla argues that the Agreement is
invalid because it was written in English, in which he claims he is not
proficient. Because he could not understand the Agreement, he asserts that
the Agreement was unconscionable. The initial determinative issue is whether
Maravilla’s unconscionability argument is a challenge to contract enforcement,
as the district court reasoned, or contract formation.
If his argument is a challenge to contract enforcement or validity, the
argument is properly heard by the arbitrator. Edwards, 888 F.3d at 744. If it
is a question of contract formation, the court may hear it. “In deciding whether
the agreement to arbitrate exists, federal courts do not consider general
challenges to the validity of the entire contract . . . [but] [w]e are permitted to
consider arguments about contract formation.” Id. (citations omitted).
Additionally, the court may hear a direct challenge to the arbitration clause
specifically. Rent-A-Ctr., 561 U.S. at 71 (“[W]e nonetheless require the basis of
challenge to be directed specifically to the agreement to arbitrate before the
court will intervene.”).
Under Texas law, “a contract signatory’s inability to understand English
is not a defense to contract formation.” Doskocil Mfg. Co. v. Nguyen, No. 02-16-
00382, 2017 WL 2806322, at *5 (Tex. App. June 29, 2017) (collecting cases);
accord In re Ledet, No. 04-04-00411, 2004 WL 2945699, at *5 (Tex. App. Dec.
22, 2004) (citing Vera v. N. Star Dodge Sales, Inc., 989 S.W.2d 13, 17–18 (Tex.
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App. 1998)). 7 Therefore, it is a validity challenge under an unconscionability
analysis. See Estate of Benitez v. Sears, Roebuck & Co., No. 3:13-CV-0468, 2013
WL 4223875, at *3 n.3 (N.D. Tex. Aug. 14, 2013) (collecting cases); see also In
re Turner Bros. Trucking Co., 8 S.W.3d 370, 376 (Tex. App. 1999) (explaining
that under Texas law, contracts which are unconscionable are invalid and
unenforceable.). Unconscionability arguments “represent affirmative defenses
against the enforcement of a presumptively formed contract.” Ridge Natural
Res., L.L.C. v. Double Eagle Royalty, L.P., 564 S.W.3d 105, 129 (Tex. App. 2008)
(citing In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001)).
“[A] challenge to the validity of the contract as a whole, and not
specifically to the arbitration clause, must go to the arbitrator.” Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440, 449 (2006). Despite his attempts to
narrowly frame his arguments to challenge only the arbitration agreement,
Maravilla’s contention of not being able to read the contract pertains to the
validity of the contract as a whole. Therefore, it is a decision for the arbitrator.
See Primerica Life Ins. v. Brown, 304 F.3d 469, 472 (5th Cir. 2002) (“[U]nless
a defense relates specifically to the arbitration agreement, it must be
submitted to the arbitrator as part of the underlying dispute.”); Ridge Natural
Res., 564 S.W.3d at 131 (declining to consider procedural unconscionability
arguments that go to the container contract as a whole, concluding that those
are matters for the arbitrator). In fact, Maravilla’s affidavit specifically
references the entire employment contract: “I am fluent and proficient in the
Spanish language. Gruma neither presented me with an employment
agreement nor an arbitration clause in a language that I could understand.”
On appeal, he maintains that the district court erred “by ignoring evidence in
7Instead, it is well-established that “[a]bsent proof of mental incapacity, a person who
signs a contract is presumed to have read and understood the contract, unless she was
prevented from doing so by trick or artifice.” Doskocil, 2017 WL 2806322, at *5.
6
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the record that demonstrates that Gruma’s employment agreement is not
binding, and thus the arbitration clause is void.” Because Maravilla’s
unconscionability argument does not relate to whether an agreement to
arbitrate was formed and because it calls into question the validity of the
contract as a whole, we proceed to the next step. See Edwards, 888 F.3d at 746.
Turning to step two, the court must determine whether the Agreement
contains a delegation clause that “clearly and unmistakably” provides for the
validity and enforceability of the arbitration agreement to be decided by the
arbitrator. See Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687
F.3d 671, 675 (5th Cir. 2012). Importantly, Maravilla failed to specifically
dispute that the Agreement contains a valid delegation clause on appeal or
before the district court. The arbitration clause explicitly delegates to the
arbitrator “any and all claims and causes of action arising out of or relating to
this Agreement [] including, without limitation, matters relating to . . .
enforceability of all or any part of this Agreement.” The broad and “unqualified
‘any dispute’ language in the [arbitration clause] confirms that the delegation
of arbitrability was intended to apply to all disputes between the parties.”
Richland Equip. Co. v. Deere & Co., 745 F. App’x 521, 525 (5th Cir. 2018).
Additionally, the adoption of specific arbitration rules—such as JAMS—
shows that a party knowingly intended to arbitrate gateway issues of
arbitrability. See Rent-A-Ctr., 561 U.S. at 79 (stating that parties’ intent can
be found where “delegation is clear and unmistakable”); see also Cooper v.
WestEnd Capital Mgmt., L.L.C., 832 F.3d 534, 546 (5th Cir. 2016) (noting that
the parties had “expressly adopted” the JAMS rules in their agreement,
“present[ing] clear and unmistakable evidence that [they] agreed to arbitrate
arbitrability”).
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IV.
Because Maravilla’s unconscionability argument targets the Agreement
as a whole and because he fails to specifically challenge the delegation clause,
we treat the delegation clause as valid. Therefore, Maravilla’s arguments
regarding the validity of the Agreement, which includes the arbitration
provision, must be submitted to the arbitrator. See Edwards, 888 F.3d at 746.
We AFFIRM the district court’s order compelling arbitration.
8