James Robertson, Sr. v. Intratek Computer ( 2020 )

Case: 19-50792 Document: 00515587317 Page: 1 Date Filed: 10/02/2020
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
October 2, 2020
No. 19-50792 Lyle W. Cayce
Clerk
James W. Robertson, Sr.,
Plaintiff—Appellant,
Robertson Technologies, Incorporated,
Appellant,
versus
Intratek Computer, Incorporated; Allan Fahami; Roger
Hayes Rininger,
Defendants—Appellees.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:18-CV-373
Before Wiener, Engelhardt, and Oldham, Circuit Judges.
Andrew S. Oldham, Circuit Judge:
The question presented is whether a federal whistleblower statute, 41
U.S.C. § 4712, renders unenforceable an arbitration agreement between
James Robertson and his former employer, Intratek. It does not. The district
court therefore correctly enforced the arbitration agreement between
Robertson and Intratek. But the district court erred in compelling arbitration
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of claims not covered by that agreement. So we affirm in part, reverse in part,
and remand for further proceedings.
I.
Intratek conditioned Robertson’s employment on his willingness to
sign an arbitration agreement. That agreement said:
I hereby agree, pursuant to the policy, to submit to binding
arbitration any employment related controversy, dispute or
claim between me and the Company, its officers, agents or
other employees, including but not limited to . . . tort claims . . .
and claims for violation of any federal, state, or other
government law, statute, regulation, or ordinance, except
claims for workers’ compensation and unemployment
insurance benefits.
I understand that by agreeing to arbitration, I am waiving the
right to a trial by jury of the matters covered by the Arbitration
policy.
The “Arbitration policy,” in turn, covered “[a]ny controversy, dispute or
claim between any employee and the Company, or its officers, agents or other
employees related to employment.” Robertson signed the agreement on June
17, 2011, and began working on July 11. While at Intratek, Robertson provided
various information and technology services to the United States
Department of Veterans Affairs (“VA”).
Intratek fired Robertson in September 2015. Not long after, Robertson
filed a whistleblower complaint with the Office of the Inspector General for
the VA. Robertson alleged that Allan Fahami, Intratek’s CEO, bribed VA
officials to secure lucrative government contracts. According to the
whistleblower complaint, a VA employee named Roger Rininger accepted
bribes from Fahami and Intratek. An investigation followed. At the time
Robertson filed suit, it remained ongoing.
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On May 7, 2018, Robertson filed suit in federal district court against
Intratek, Fahami, and Rininger. Robertson alleged that Intratek violated 41
U.S.C. § 4712 by firing him for reporting misconduct. Robertson further
alleged that the defendants tortiously interfered with Robertson’s business
relationships.
Intratek and Fahami moved to stay the suit and compel arbitration of
the claims against them. Rininger—who worked for the VA—obviously was
not a party to the Intratek-Robertson arbitration agreement. So Rininger and
Robertson “agreed to effectively stay the case as it pertained to Mr.
Rininger” until the court ruled on the motion to compel arbitration.
The district court referred the matter to a magistrate judge. The
magistrate judge decided that 41 U.S.C. § 4712 didn’t bar arbitration of the
whistleblower claim. It also found that all of Robertson’s claims (including,
apparently, those against Rininger) fell within the scope of the arbitration
agreement. Furthermore, the magistrate judge determined that the case
should be dismissed instead of stayed, as “each of Plaintiff’s claims is subject
to arbitration.”
Robertson filed objections to the magistrate judge’s recommendation
on December 20, 2018. Then, on January 29, 2019, Robertson moved to
amend his complaint and add his company, Robertson Technologies, Inc.
(“Robertsontek”), as a plaintiff. Intratek and Fahami filed their opposition
to Robertson’s objections and his motion to amend his complaint.
Meanwhile, Rininger and Robertson stipulated that Rininger could wait until
21 days after any ruling on the motion to compel arbitration before filing an
answer to the original complaint.
The district court adopted the report and recommendation of the
magistrate judge and denied Robertson’s motion to amend his complaint. On
the motion to amend, the district court found that “Robertson’s proposal to
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add his alter ego, Robertson Technologies, Inc., amounts to a tactical
maneuver to avert the real possibility that this action will be compelled to
arbitration.” As for the magistrate judge’s recommendation, the court
overruled all of Robertson’s objections. The court also explained that “all of
Robertson’s claims are subject to arbitration.” Thus the court granted the
motion to compel arbitration and dismissed the case without prejudice. The
court entered final judgment. Robertson timely appealed.
We review a grant of a motion to compel arbitration de novo, Dealer
Comput. Servs., Inc. v. Old Colony Motors, Inc., 588 F.3d 884, 886 (5th Cir.
2009), and a denial of leave to amend pleadings for abuse of discretion,
Filgueira v. U.S. Bank Nat’l Ass’n, 734 F.3d 420, 422 (5th Cir. 2013).
II.
The principal question on appeal is one of first impression in our
Circuit: whether Robertson can use 41 U.S.C. § 4712 to escape the arbitration
agreement he signed. Statutory text says no. So does Supreme Court
precedent. And the legislative history is irrelevant.
A.
In general, federal law requires federal courts to enforce arbitration
agreements. In 1925, Congress enacted the Federal Arbitration Act (“FAA”)
“as a response to judicial hostility to arbitration.” CompuCredit Corp. v.
Greenwood, 565 U.S. 95, 97 (2012). Section 2 of the FAA provides that written
arbitration agreements are generally “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 2 thus obligates courts to enforce arbitration
agreements according to their terms “unless the FAA’s mandate has been
overridden by a contrary congressional command.” CompuCredit, 565 U.S.
at 98 (quotation omitted).
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To show a “contrary statutory command,” the party opposing
arbitration must show that “Congress intended to preclude a waiver of a
judicial forum” for the claims at issue. Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 26 (1991). If “Congress intended the substantive
protection afforded by a given statute to include protection against waiver of
the right to a judicial forum,” the Supreme Court has said “that intention
will be deducible from text or legislative history.” Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).1 Throughout this
inquiry, courts should keep “in mind that ‘questions of arbitrability must be
addressed with a healthy regard for the federal policy favoring arbitration.’”
Gilmer, 500 U.S. at 26 (quotation omitted).
The Court recently “stressed that the absence of any specific
statutory discussion of arbitration or class actions is an important and telling
clue that Congress has not displaced the Arbitration Act.” Epic Sys. Corp. v.
Lewis, 138 S. Ct. 1612, 1627 (2018). The Court explained:
In many cases over many years, this Court has heard and
rejected efforts to conjure conflicts between the Arbitration
Act and other federal statutes. In fact, this Court has rejected
every such effort to date (save one temporary exception since
overruled), with statutes ranging from the Sherman and
Clayton Acts to the Age Discrimination in Employment Act,
1
The Court has also indicated that a contrary congressional command may be
discerned from “an ‘inherent conflict’ between arbitration and [another statute’s]
underlying purposes.” Gilmer, 500 U.S. at 26. It’s not clear whether statutory purpose
remains a part of the Court’s prescribed inquiry on this issue. See CompuCredit, 565 U.S.
at 95–108 (analyzing issue without considering statutory purpose). But see id. at 675
(Sotomayor, J., concurring in the judgment) (stating that purpose remains relevant to this
inquiry). In any event, Robertson hasn’t advanced any argument on statutory purpose and
thus has forfeited the issue. See Cinel v. Connick, 15 F.3d 1338, 1345 (5th Cir. 1994) (“An
appellant abandons all issues not raised and argued in its initial brief on appeal.” (emphasis
omitted)).
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the Credit Repair Organizations Act, the Securities Act of
1933, the Securities Exchange Act of 1934, and the Racketeer
Influenced and Corrupt Organizations Act.
Ibid. (collecting cases). Thus, the party opposing arbitration—and urging a
congressional command contrary to the FAA—faces a high bar.
Robertson cannot hurdle it with 41 U.S.C. § 4712. We start, as always,
with the statutory text. See Whitlock v. Lowe (In re DeBerry), 945 F.3d 943,
947 (5th Cir. 2019). Section 4712 requires a complainant like Robertson to
exhaust administrative remedies before filing suit. See 41 U.S.C. § 4712(b),
(c)(1). And § 4712 further specifies that administrative remedies are
exhausted when the agency acts or fails to act for specified time periods:
(2) Exhaustion of remedies.—If the head of an executive
agency issues an order denying relief under [(c)](1) or has not
issued an order within 210 days after the submission of a
complaint under subsection (b), or in the case of an extension
of time under paragraph (b)(2)(B), not later than 30 days after
the expiration of the extension of time, and there is no showing
that such delay is due to the bad faith of the complainant, the
complainant shall be deemed to have exhausted all
administrative remedies with respect to the complaint, and the
complainant may bring a de novo action at law or equity against
the contractor or grantee to seek compensatory damages and
other relief available under this section in the appropriate
district court of the United States, which shall have jurisdiction
over such an action without regard to the amount in
controversy. Such an action shall, at the request of either party
to the action, be tried by the court with a jury. An action under
this paragraph may not be brought more than two years after
the date on which remedies are deemed to have been
exhausted.
Id. § 4712(c)(2). Robertson wrenches out of context the second sentence of
this paragraph—“[s]uch an action shall, at the request of either party to the
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action, be tried by the court with a jury”—and says it provides him a
freestanding “right” or “remedy” to a jury trial. Then he argues that his jury
trial “right” or “remedy” cannot be waived in an employment agreement:
(7) Rights and remedies not waivable.—The rights and
remedies provided for in this section may not be waived by any
agreement, policy, form, or condition of employment.
Id. § 4712(c)(7). Thus, Robertson concludes, § 4712(c)(2) and (7) preclude
Intratek from taking away his “right” or “remedy” of a jury trial by enforcing
the arbitration agreement.
Robertson confuses the rights and remedies created by § 4712 with the
means it provides to secure them. Section 4712 creates whistleblower rights:
“An employee of a contractor, subcontractor, grantee, or subgrantee or
personal services contractor may not be discharged, demoted, or otherwise
discriminated against as a reprisal for” blowing the whistle on certain
government-contracting abuses. Id. §4712(a)(1). And § 4712 creates an
administrative apparatus to review whistleblowers’ complaints and to afford
them administrative remedies. Id. § 4712(b). Section 4712 further specifies
that “[a]n action under this paragraph may not be brought more than two
years after the date on which remedies”—that is, administrative remedies—
“are deemed to have been exhausted.” Id. § 4712(c)(2) (emphasis added).
Thus, the text and structure of § 4712 make clear that a jury trial is one way
to vindicate a whistleblower’s statutory rights after the whistleblower
exhausts administrative remedies; the jury trial is not itself a “right” or
“remedy” created by § 4712.
B.
A long line of Supreme Court precedent confirms our interpretation
of § 4712. Start with 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009). The
question presented was whether the FAA required enforcement of a
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“provision in a collective-bargaining agreement that clearly and
unmistakably require[ed] union members to arbitrate claims arising under the
Age Discrimination in Employment Act of 1967 (ADEA).” Id. at 251. The
Court held yes. Id. at 274.
In so holding, the Court dismantled an argument much like
Robertson’s. Pyett claimed that the ADEA provided “a ‘[substantive] right’
to proceed in court.” Id. at 259 (alteration in original; quoting 29 U.S.C.
§ 626(f)(1)). And ADEA said that “[a]n individual may not waive any right
or claim under this chapter unless the waiver is knowing and voluntary.” 29
U.S.C. § 626(f)(1). No matter, the Court said. “[T]he agreement to arbitrate
ADEA claims is not the waiver of a substantive right as that term is employed
in the ADEA.” 14 Penn Plaza, 556 U.S. at 259 (quotation omitted). For that
reason, the Court criticized an earlier decision for “confus[ing] an agreement
to arbitrate those statutory claims with a prospective waiver of the
substantive right.” Id. at 265 (discussing Alexander v. Gardner-Denver Co.,
415 U.S. 36 (1974)).
The Court took pains to correct that confusion: “The decision to
resolve ADEA claims by way of arbitration instead of litigation does not waive
the statutory right to be free from workplace age discrimination; it waives
only the right to seek relief from a court in the first instance.” Id. at 265–66;
see also Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001). On that
account, the “right” to a judicial forum wasn’t a “right” protected by the
waiver limitation at all. 14 Penn Plaza, 556 U.S. at 259; see also McLeod v. Gen.
Mills, Inc., 856 F.3d 1160, 1164 (8th Cir. 2017) (holding ADEA’s antiwaiver
provision “refers narrowly to waiver of substantive ADEA rights or claims—
not, as the former employees argue, the ‘right’ to a jury trial or the ‘right’ to
proceed in a class action”).
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CompuCredit teaches the same lesson. There, the issue was whether
arbitration could be compelled for claims under the Credit Repair
Organizations Act (“CROA”). CompuCredit, 565 U.S. at 96 (discussing 15
U.S.C. §§ 1679 et seq.). CROA provided a private cause of action to those
aggrieved by the conduct of credit repair organizations. Id. at 98. The statute
also had an antiwaiver provision. It declared that “[a]ny waiver by any
consumer of any protection provided by or any right of the consumer under
this subchapter” was “void” and could “not be enforced by any Federal or
State court or any other person.” 15 U.S.C. § 1679f(a).
Nonetheless, the Court rejected the notion that CROA “provide[d]
consumers with a ‘right’ to bring an action in court.” CompuCredit, 565 U.S.
at 100. The statute’s references to court proceedings didn’t change that
outcome. The Court observed that “[i]t is utterly commonplace for statutes
that create civil causes of action to describe the details of those causes of
action, including the relief available, in the context of a court suit.” Ibid. So
“[i]f the mere formulation of the cause of action in this standard fashion were
sufficient to establish the contrary congressional command overriding the
FAA, valid arbitration agreements covering federal causes of action would be
rare indeed.” Id. at 100–01 (quotation omitted). Of course, they are not rare.
See id. at 101 (citing Gilmer, 500 U.S. at 28; Shearson/Am. Exp., Inc. v.
McMahon, 482 U.S. 220, 240 (1987); Mitsubishi Motors, 473 U.S. at 637).
Relying on those holdings, the CompuCredit Court determined that the
waiver of “initial judicial enforcement” wasn’t a waiver of a right covered by
the antiwaiver provision. Ibid.
These cases reflect the Supreme Court’s dogged insistence that
Congress speak with great clarity when overriding the FAA. See, e.g., Epic
Sys., 138 S. Ct. at 1627. That long line of decisions has also given Congress
even more reason to use pellucid language in antiwaiver provisions. Cf.
CompuCredit, 565 U.S. at 104 n.4 (observing that a line of cases dating back
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decades gave Congress reason to write clear antiwaiver provisions); id. at 116
(Ginsburg, J., dissenting) (“Our decisions have increasingly alerted Congress
to the utility of drafting antiwaiver prescriptions with meticulous care.”). As
the Court observed in Epic Systems, Congress has “shown that it knows how
to override the Arbitration Act when it wishes.” 138 S. Ct. at 1626. It didn’t
do that with 41 U.S.C. § 4712.
C.
The Supreme Court has also said legislative history is a data point in
this inquiry. See Mitsubishi Motors, 473 U.S. at 628. But cf. CompuCredit, 565
U.S. at 96–105 (not discussing legislative history). Both parties zero in on the
same slice of legislative history—a prior Senate draft version of the
antiwaiver provision. It said: “The rights and remedies provided for in this
section may not be waived by any agreement, policy, form, or condition of
employment, including by any predispute arbitration agreement, other than an
arbitration provision in a collective bargaining agreement.” 158 Cong. Rec.
S6142 § 844 (Sept. 11, 2012) (Senate Amendments to H.R. 4310) (emphasis
added). The House rejected that italicized language.
The Supreme Court has told us that such drafting history “tells us
nothing.” Murphy v. Smith, 138 S. Ct. 784, 790 n.2 (2018). The legislators
who voted to drop the italicized “including” clause might’ve thought it was
“flabby duplication.” Ibid. Or perhaps they dropped it because they
substantively disagreed with it. See ibid. “There is no way to know, and we
will not try to guess.” Ibid. And whatever that deletion might (or might not)
mean, this wee snippet of legislative history can’t provide anything like the
clarity needed to override the FAA. Cf. CompuCredit, 565 U.S. at 103 (noting
that if Congress meant to displace arbitration provisions, “it would have done
so in a manner less obtuse than what respondents suggest”); Azar v. Allina
Health Servs., 139 S. Ct. 1804, 1815 (2019) (“So in the end and at most, we
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are left with exactly the kind of murky legislative history that we all agree
can’t overcome a statute’s clear text and structure.”). Therefore, § 4712’s
history does nothing to change our reading of its plain text.
III.
The next question is whether the arbitration policy covers
Robertson’s claims against Intratek, Fahami, and Rininger. It plainly does for
the first two. It plainly does not for the third one.
A.
We start with Intratek and its CEO Fahami. Intratek, Fahami, and
Robertson are all governed by an arbitration policy that Robertson signed at
the beginning of his employment. The relevant text of the arbitration policy
says:
Any controversy, dispute or claim between any employee and
the Company, or its officers, agents or other employees related
to employment, shall be settled by binding arbitration, at the
request of either party. . . .
The Claims which are to be arbitrated under this Policy
include, but are not limited to claims for wages and other
compensation, claims for breach of contract (express or
implied), claims for violation of public policy, tort claims, and
claims for discrimination and/or harassment (including, but
not limited to, race, religious creed, color, national origin,
ancestry, physical disability, mental disability, medical
condition, marital status, age, pregnancy, sex or sexual
orientation) to the extent allowed by law, and claims for
violation of any federal, state, or other government law, statute,
regulation, or ordinance, except for claims for workers’
compensation and unemployment insurance benefits.
Robertson makes two arguments. Both border on frivolous. First, he
says the policy applies to “any employee,” so it does not apply to Robertson
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because Intratek fired him. But the policy expressly mentions claims for
unemployment insurance benefits. If the policy only covered claims by current
employees, it wouldn’t need to mention unemployment at all. We refuse to
read that clause as surplusage. See Hawthorne Land Co. v. Equilon Pipeline Co.,
LLC, 309 F.3d 888, 893 (5th Cir. 2002) (“A contract should be interpreted
so as to avoid neutralizing or ignoring a provision or treating it as
surplusage.”); Ewing Constr. Co., Inc. v. Amerisure Ins. Co., 420 S.W.3d 30,
37 (Tex. 2014) (similar).
Second, Robertson argues that the arbitration policy expressly applies
to specified claims and makes no mention of the wrongful-termination and
tortious-interference claims he brought against Intratek. Robertson’s
premise is wrong because the policy explicitly covers claims under “any
federal . . . law” (like Robertson’s claim under § 4712), as well as “state . . .
law” and “tort” (like Robertson’s claims for wrongful termination and
tortious interference). Moreover, the policy applies to claims that “include,
but are not limited to,” the specified examples. The policy also applies to
“[a]ny controversy, dispute or claim between any employee and the
Company, or its officers, agents or other employees related to employment.”
And Robertson cannot seriously contest that his claims are “related to [his]
employment” at Intratek.2 The policy plainly applies to Robertson’s claims
2
Consider, for example, Robertson’s tortious-interference claim. Robertson
alleges that Intratek and Fahami first fired him and then defamed him to his would-be future
business partners. Had Robertson’s relationship with his employer not gone awry, Intratek
and Fahami would’ve lacked a motive to defame him. What Robertson calls a “campaign
of tortious interference,” was, as counsel acknowledged, a “response to [Robertson]
opposing illegal activity . . . while he was employed” at Intratek. Oral Arg. 12:49 to 13:01.
Thus, the content and cause of the “campaign of tortious interference” both relate to
Robertson’s employment with Intratek.
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against Intratek. See Neal v. Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir.
1990).
B.
The same is not true of Robertson’s claims against Rininger. Rininger
is a VA official. He therefore (obviously) never signed any employment
contract with Intratek, much less an employment-related arbitration
agreement. And although nonsignatories can be compelled to arbitrate under
certain conditions, see Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d
347, 355–56 (5th Cir. 2003), Robertson never moved to arbitrate his claims
against Rininger. Nor did the district court explain any basis (lawful or
otherwise) for compelling arbitration of Robertson’s claims against Rininger.
It’s with good reason, then, that neither Rininger nor Intratek even attempt
to explain how claims against Rininger could be arbitrable. The district
court’s decision to compel arbitration of these claims was erroneous.
IV.
Finally, we face the question of whether the district court abused its
discretion by denying Robertson’s motion to amend his complaint. It did not.
Rule 15 says courts “should freely give leave [to amend] when justice
so requires.” Fed. R. Civ. P. 15(a)(2). Though that’s a generous standard,
“leave to amend can be properly denied where there is a valid justification.”
Carroll v. Fort James Corp., 470 F.3d 1171, 1175 (5th Cir. 2006). Valid
justifications include undue delay, bad faith, and dilatory motive. See Cantú
v. Moody, 933 F.3d 414, 424 (5th Cir. 2019) (quotation omitted). The district
court also may consider “whether the facts underlying the amended
complaint were known to the party when the original complaint was filed.”
Southmark Corp. v. Schulte Roth & Zabel (In re Southmark Corp.), 88 F.3d 311,
316 (5th Cir. 1996). We review denial of leave to amend pleadings for abuse
of discretion. Filgueira, 734 F.3d at 422.
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The district court denied Robertson leave to add his company
(Robertsontek) as a co-plaintiff. It’s not as if Robertson was previously
unaware of his own company’s existence or potential interest in the case. Nor
was Robertson unaware of the risk that a federal court would enforce his
arbitration agreement with Intratek. Still he waited nine months—until the
magistrate judge recommended compelling arbitration—to move for leave to
add a party who could not be compelled to arbitrate. That led the district
court to conclude that Robertson’s motion was an untimely “tactical
maneuver” meant to “challenge the effect of the Report and
Recommendation” by preventing arbitration of the claims against Intratek
and Fahami. That was not an abuse of discretion. See Cantú, 933 F.3d at 424;
Whitaker v. City of Houston, 963 F.2d 831, 836 (5th Cir. 1992).
Nor can Robertson demand leave to amend under Rule 19. That rule
requires the joinder of necessary parties so long as they won’t deprive the
court of subject-matter jurisdiction. Fed. R. Civ. P. 19(a)(1); see also
Lincoln Prop. Co. v. Roche, 546 U.S. 81, 90 (2005) (“Rule 19 provides for the
joinder of parties who should or must take part in the litigation to achieve a
just adjudication.” (quotation omitted)). “Rule 19 is designed to protect the
interests of absent persons as well as those already before the court from
multiple litigation or inconsistent judicial determinations.” 7 Charles
Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice & Procedure § 1602, at 22 (3d ed. 2001) (emphasis added).
On this record, however, Rule 19 is inapplicable. The district court
described Robertsontek as Robertson’s “alter ego.” Because Robertsontek
was merely Robertson’s alter ego, it wasn’t absent from or necessary to the
suit.
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* * *
The district court’s judgment is AFFIRMED in part, REVERSED
in part, and REMANDED for further proceedings consistent with this
opinion.
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