Sun Coast Resources, Inc. v. Roy Conrad ( 2020 )

Case: 19-20058 Document: 00515385433 Page: 1 Date Filed: 04/16/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 19-20058
Fifth Circuit
FILED
April 16, 2020
SUN COAST RESOURCES, INCORPORATED, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
ROY CONRAD,
Defendant - Appellee
Appeals from the United States District Court
for the Southern District of Texas
Before WIENER, HIGGINSON, and HO, Circuit Judges.
JAMES C. HO, Circuit Judge:
Roy Conrad is an hourly fuel tech and driver for Sun Coast Resources,
which sells and transports diesel, gas, and other oil products. His job requires
travel, for which Sun Coast provides reimbursements and per diems. Conrad
believes that Sun Coast violated the Fair Labor Standards Act by not including
those amounts in his “regular rate” for purposes of calculating overtime.
Pursuant to an arbitration agreement, he brought his FLSA overtime claim
against Sun Coast in arbitration on behalf of a class of similarly situated
employees.
In a clause construction award, the arbitrator determined that “the
agreement . . . clearly provides for collective actions.” Sun Coast asked the
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district court to vacate the award pursuant to § 10(a)(4) of the Federal
Arbitration Act. 9 U.S.C. § 10(a)(4). The district court rejected the application,
determining that the arbitrator had interpreted the agreement and that he
therefore did not exceed his powers. We affirm.
I.
We review an order confirming an arbitration award de novo, using the
same standards employed by the district court. See, e.g., 21st Fin. Servs.,
L.L.C. v. Manchester Fin. Bank, 747 F.3d 331, 335 (5th Cir. 2014).
The district court’s refusal to vacate the arbitrator’s clause construction
award under § 10(a)(4) is proper if the award has some basis in the arbitration
agreement. See Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 559 U.S. 662, 671
(2010). The correctness of the arbitrator’s interpretation is irrelevant so long
as it was an interpretation. See, e.g., Oxford Health Plans LLC v. Sutter, 569
U.S. 564, 572 (2013) (Section 10(a)(4) permits vacatur “only when the
arbitrator strayed from his delegated task of interpreting a contract, not when
he performed that task poorly”); BNSF Ry. Co. v. Alstom Transp., Inc., 777
F.3d 785, 789 (5th Cir. 2015) (“The sole question is whether the arbitrators
even arguably interpreted the [arbitration agreement] . . . . [I]t is not whether
their interpretations of the [a]greement or the governing law were correct.”).
The award here shows that the arbitrator interpreted the agreement.
See BNSF Ry. Co., 777 F.3d at 788 (“In determining whether the arbitrator
exceeded her authority, district courts should consult the arbitrator’s award
itself.”). First, the arbitrator pointed to the breadth of claims subject to
arbitration—with few exceptions not applicable here, “any claim that could be
asserted in court or before an administrative agency” and “any controversy or
claim” arising out of the employment relationship fell within the agreement’s
ambit. The breadth of claims the agreement covered, compared to the
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relatively few it exempted, suggested to the arbitrator that “the parties made
a conscious choice” not to exclude class arbitration.
Likewise, the arbitrator noted that the agreement authorized arbitration
of “all remedies which might be available in court.” He also noted that “Sun
Coast drafted the agreement” but did not “carve out” class proceedings. Both
facts suggested to him that class arbitration was appropriate.
Finally, the arbitrator noted that the parties agreed that the American
Arbitration Association (AAA) rules for employment disputes would govern
arbitration. And those rules permit class proceedings. See SUPPLEMENTARY
RULES FOR CLASS ARBITRATIONS § 1(a) (AM. ARBITRATION ASS’N 2003)
(providing rules “where a party submits a dispute to arbitration on behalf of or
against a class or purported class”).
The arbitrator’s analysis here mirrors the analysis in Reed v. Florida
Metropolitan University, Inc., 681 F.3d 630 (5th Cir. 2012). There, the
arbitrator decided an arbitration agreement provided for class proceedings. Id.
at 638. The Reed arbitrator based his decision on two provisions in the
arbitration agreement: The provision requiring that “any dispute” go to
arbitration governed by the AAA arbitration rules and a provision allowing the
arbitrator to award “any remedy available from a court.” Id. at 641 (alterations
omitted) (quoting the arbitration agreement). He also considered the scope of
claims available under state law. See id. at 641–42.
The Reed court ordered vacatur of the award pursuant to § 10(a)(4). Id.
at 645. But the Supreme Court subsequently determined that was improper,
abrogating that part of Reed. See Oxford Health, 569 U.S. at 568 & n.1. So
whatever the merits of the arbitrator’s analysis here, it is enough that he
“focused on the arbitration clause’s text, analyzing (whether correctly or not
makes no difference) the scope of both what it barred from court and what it
sent to arbitration.” Id. at 570.
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II.
Section 10’s deferential review therefore does not justify vacating the
award. But Sun Coast argues that deference is inappropriate because whether
an arbitration agreement permits class proceedings “is a gateway issue for
courts, not arbitrators, to decide, absent clear and unmistakable language to
the contrary.” 20/20 Commc’ns, Inc. v. Crawford, 930 F.3d 715, 718–19 (5th
Cir. 2019).
By various indications, the arbitration agreement here appears to assign
the question of class arbitrability to the arbitrator rather than to the court,
overcoming the presumption we articulated in 20/20. It provides for
arbitration of “any controversy or claim arising out of or relating to [the]
employment relationship with Sun Coast.” That “[c]overs any dispute
concerning the arbitrability of any such controversy or claim.” And the
agreement incorporates the AAA rules for arbitration. Those provisions
strongly indicate that the parties bargained for the arbitrator to decide class
arbitrability. See 20/20 Commc’ns, 930 F.3d at 720 (noting that similar
language “could arguably be construed to authorize arbitrators to decide
gateway issues of arbitrability such as class arbitration”); Reed, 681 F.3d at
635–36 (consenting to the AAA Supplementary Rules “constitutes a clear
agreement to allow the arbitrator to decide whether the party’s agreement
provides for class arbitration”).
But we ultimately need not reach the issue, because Sun Coast forfeited
it. In fact, Sun Coast forfeited the issue, not once, but twice—first, by not
presenting it to the arbitrator at all, and second, by not presenting it in a timely
manner to the district court.
First, Sun Coast joined Conrad in submitting the class arbitrability
question to the arbitrator—and did not once suggest to the arbitrator that he
had no authority to decide class arbitrability issues. See, e.g., Executone Info.
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Sys., Inc. v. Davis, 26 F.3d 1314, 1323 (5th Cir. 1994) (“[W]e look both to the
contract and to the scope of the submissions to the arbitrator to determine the
arbitrator’s authority.”); Piggly Wiggly Operators’ Warehouse, Inc. v. Piggly
Wiggly Operators’ Warehouse Indep. Truck Drivers Union, Local No. 1, 611
F.2d 580, 584 (5th Cir. 1980) (same).
To begin with, Sun Coast affirmatively agreed that the arbitrator should
decide whether collective proceedings were appropriate. In its answer to
Conrad’s arbitration complaint, Sun Coast asked the arbitrator to “sustain [its]
objections to [Conrad’s] request for a collective action” and to “preclude this
arbitration from proceeding as a class (or collective) arbitration.” And in doing
so, the company did not contend that the arbitrator lacked the power to decide
the issue.
Moreover, in a subsequent scheduling order, the company again agreed
“that the most efficient and expeditious use of time and resources is for the
Arbitrator to first decide whether or not this arbitration may proceed as a
collective action proceeding.”
At no point did Sun Coast ever dispute the arbitrator’s authority to
decide class arbitrability at any time during the arbitration proceedings. To
the contrary, in its arbitration briefing, the company said the “sole
issue . . . is . . . whether the parties agreed to authorize collective arbitration in
the first place.” The silence is especially telling since Conrad claimed in his
brief that the arbitrator could pass on class arbitrability. To be sure, “merely
arguing the arbitrability issue to an arbitrator does not indicate a clear
willingness to arbitrate that issue.” First Options of Chi., Inc. v. Kaplan, 514
U.S. 938, 946 (1995). But Sun Coast needed to do something “to disabuse the
arbitrator” of any notion that he could decide the collective proceeding issue.
Executone Info. Sys., 26 F.3d at 1323. It did not.
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In response, Sun Coast claims that it sufficiently raised the question of
the arbitrator’s authority to decide class arbitrability by citing “cases like”
Opalinski v. Robert Half International Inc. from the Third Circuit. But there
are two Opalinski decisions from the Third Circuit, and Sun Coast does not say
in its brief which one it provided to the arbitrator.
Had the company cited the first decision, Opalinski v. Robert Half
International Inc. (Opalinski I), 761 F.3d 326 (3rd Cir. 2014), Sun Coast might
have a claim that it argued to the arbitrator that he lacked the authority to
decide the class arbitrability issue. See id. at 335–36 (holding that class
arbitrability is a gateway issue).
But the company cited the second decision. And the second decision does
not support Sun Coast’s claim. In Opalinski v. Robert Half International Inc.
(Opalinski II), 677 F. App’x 738 (3rd Cir. 2017), the Third Circuit simply looked
at whether the arbitration agreement did in fact authorize collective
proceedings. See id. at 741–44. Put simply, Opalinski II involved whether the
agreement authorizes class arbitration—not the authority of the arbitrator to
decide that issue. Opalinski II did briefly mention the court’s prior holding in
Opalinski I that “the question of arbitrability of class claims is for the
court . . . to decide”—but only to point out that it would not “revisit th[e] issue,
consistent with [its] well-established Internal Operating Procedures.” Id. at
741. But the bulk of the opinion in Opalinski II instead focuses on interpreting
the arbitration agreement. Id. at 741–44.
The record shows that Sun Coast provided Opalinski II to the
arbitrator—the wrong Opalinski if the point was to contest the arbitrator’s
authority to decide class arbitrability. The company cited Opalinski II—and
“cases like” it—not to show that the arbitrator lacked power to decide the class
arbitration issue, but for the proposition that “the absence of any explicit
mention of class arbitration in arbitration agreements weighs against a finding
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that it was authorized.” Far from establishing that Sun Coast contested the
arbitrator’s jurisdiction, the company’s reliance on Opalinski II establishes
that the only issue the company contested before the arbitrator was the proper
interpretation of the arbitration agreement.
Second, Sun Coast did not challenge the arbitrator’s authority to decide
class arbitrability in a timely fashion before the district court.
Throughout the district court proceedings, Sun Coast contended that the
arbitrator failed to interpret the agreement—not that the arbitrator had no
authority to interpret the agreement as to class arbitrability. For example,
Sun Coast stated that “if there’s two plausible explanations for the
language, . . . the Court can’t second-guess [the arbitrator]. But what we’re
saying . . . is there isn’t two plausible explanations” here. Similarly, in its
briefing, Sun Coast’s thesis was that the arbitrator “ignored the rigorous legal
standards to be applied in determining whether an arbitration agreement that
is silent on the issue of collective action can be rewritten to require collective
action arbitration.” In addition, Sun Coast provided the district court with a
highlighted copy of Opalinski II. The highlighted portions cover the Third
Circuit’s discussion of whether the arbitration agreement authorizes class
arbitration—not the authority of the arbitrator to decide that issue, the issue
decided in Opalinski I.
Thus, from the time Conrad initiated the arbitration through the initial
district court proceedings, Sun Coast’s sole argument was that the arbitration
agreement’s terms did not provide for collective proceedings. Only in its Rule
59 motion did the company challenge, for the first time, the arbitrator’s
authority to decide class arbitrability. The argument is therefore forfeited yet
again. See, e.g., U.S. Bank Nat’l Ass’n v. Verizon Commc’ns, Inc., 761 F.3d 409,
425 (5th Cir. 2014) (“This court will typically not consider an issue or new
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argument raised for the first time in a motion for reconsideration in the district
court.”).
The best that may be said for Sun Coast is that it badly misreads the
record. The district court gave the arbitrator’s decision the deference it was
due and properly upheld the award.
***
Earlier in these proceedings, the panel informed the parties that oral
argument would not be necessary in this appeal. That decision spared the
parties the expense of having counsel prepare for argument. In response, Sun
Coast filed a motion demanding oral argument, which we denied a few days
later.
Sun Coast’s motion misunderstands the federal appellate process in
more ways than one. To begin, the motion claims that “oral argument is the
norm rather than the exception.” Not true. “More than 80 percent of federal
appeals are decided solely on the basis of written briefs. Less than a quarter
of all appeals are decided following oral argument.” 1
In addition, Sun Coast suggests that deciding this case without oral
argument would be “akin to . . . cafeteria justice.” The Federal Rules of
Appellate Procedure state otherwise. They authorize “a panel of three judges
who have examined the briefs and record” to “unanimously agree[] that oral
argument is unnecessary for any of the following reasons”—such as the fact
that “the dispositive issue or issues have been authoritatively decided,” or that
“the facts and legal arguments are adequately presented in the briefs and
record, and the decisional process would not be significantly aided by oral
argument.” FED. R. APP. P. 34(a)(2)(B)–(C).
Admin. Office of the U.S. Courts, A Journalist’s Guide to the Federal Courts 37,
1
https://www.uscourts.gov/file/24263/download (last visited Apr. 9, 2020).
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In this appeal, the panel unanimously agreed that the decisional process
would not be meaningfully aided by oral argument. That should surprise no
one, considering the one-sided language of the agreement, Sun Coast’s failure
to preserve its argument before either the arbitrator or the district court, and
its confusion on appeal between Opalinski I and Opalinski II.
Arbitration has sometimes been criticized for favoring “powerful
economic interests” over those the interests harm. See DIRECTV, Inc. v.
Imburgia, 136 S. Ct. 463, 477 (2015) (Ginsburg, J., dissenting). Arbitration
clauses are, to be sure, typically drafted by the economically more powerful
party. See id. Even so, arbitration can nevertheless benefit both sides by
reducing litigation costs, which disproportionately harm the less well-off.
But another tactic powerful economic interests sometimes use against
the less resourced is to increase litigation costs in an attempt to bully the
opposing party into submission by war of attrition—for example, by filing a
meritless appeal of an arbitration award won by the economically weaker
party, and then maximizing the expense of litigating that appeal. See id. at
476 n.3 (Ginsburg, J., dissenting) (“[L]arge arbitration costs could preclude a
litigant . . . from effectively vindicating her federal statutory rights.”) (quoting
Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000)).
Dispensing with oral argument where the panel unanimously agrees it
is unnecessary, and where the case for affirmance is so clear, is not cafeteria
justice—it is simply justice. We affirm. 2
2 Conrad asks that the court supplement the record or take judicial notice of further
proceedings that have occurred in the arbitration. Since we affirm the judgment of the
district court in Conrad’s favor, we deny his request as moot.
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