Davis v. EGL Eagle Global Logistics LP ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS July 9, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 06-31019
Summary Calendar
RUFUS DAVIS, JR,
Plaintiff-Appellant,
v.
EGL EAGLE GLOBAL LOGISTICS LP,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
No. 2:06-CV-2888
Before DeMOSS, STEWART, and PRADO, Circuit Judges.
Per Curiam:*
Plaintiff-Appellant Rufus Davis Jr. (“Davis”) appeals from the
district court’s grant of summary judgment in favor of Defendant-
Appellee EGL Eagle Global Logistics, L.P. (“EGL”). Davis contends
that the district court erred in two respects. First, according to
Davis, the district court erroneously determined that the Federal
Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., applied to his
*
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that this opinion should not be published and is not precedent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.
1
claim because he was an independent contractor, and not an employee
of EGL. Second, Davis argues that the district court erred in
rejecting his argument that his contract with EGL was unenforceable
because it was unconscionable, ambiguous, internally inconsistent,
and lacked mutuality. We AFFIRM the judgment of the district court
for the reasons stated below.
I. FACTUAL AND PROCEDURAL BACKGROUND
On September 22, 2003, Davis and EGL entered into a contract
entitled “EGL Global Logistics LP Agreement for Leased Equipment
and Independent Contractor Services (Pick-up & Deliver)”
(“Agreement”). As indicated by the title, the Agreement consisted
primarily of a lease of Davis’s vehicle to EGL for the purpose of
shipping goods, and an agreement that Davis provide transportation
services for the leased vehicle, either by driving himself or by
hiring another person to drive. The Agreement stated that EGL
would pay Davis sixty percent of the total amount that it received
for each shipment picked-up or delivered by Davis.
With respect to the relationship between the parties, Section
I of the Agreement attempted to create an independent contractor
relationship. In support of this intention, the Agreement included
a provision, written in bold, capital letters and separately
initialed by both Davis and EGL, requiring Davis to notify EGL if
he believed at any point that a relationship other than an
2
independent contractor relationship existed.1
The Agreement also included three appendices which were signed
and dated on the same day as the Agreement. Appendix I identified
the leased vehicle. Appendix II listed the expenses that EGL could
deduct from any compensation due to Davis. Finally, Appendix III
specified the rate of compensation paid to Davis for each shipment
picked-up or delivered.
Two additional sections of the Agreement are of importance to
this appeal. Section 4.07 of the Agreement provides that all
settlements--that is, compensation due less authorized deductions--
are final and forbids Davis to make any claim for additional
settlement monies “unless Contractor [Davis] notifies EGL in
writing by certified mail of any discrepancies or additional claims
within fifteen (15) days of settlement of computation or said
settlement by EGL.” Section 6.07 of the Agreement mandates, “any
controversy or claim arising out of or relating to this Agreement
. . . shall be determined and settled in accordance with the
Commercial Arbitration Rules of The American Arbitration
Association.” Section 6.07 further states that “[w]ritten notice
of a demand for arbitration must be mailed to the other party and
1
The provision stated:
IF AT ANY TIME DURING THE TERM OF THIS AGREEMENT
CONTRACTOR IS OF THE OPINION THAT SOMETHING OTHER THAN AN
INDEPENDENT CONTRACTOR RELATIONSHIP EXISTS BETWEEN
CONTRACTOR AND EGL, CONTRACTOR SHALL IMMEDIATELY NOTIFY
THE MANAGER OF SHARED RESOURCES OF EGL.
3
the American Arbitration Association within ninety (90) days of the
occurrence of the claimed breach or other event giving rise to the
controversy or claim.” Failure to give the written notice of
demand for arbitration within the ninety-day period erects an
absolute bar to the institution of any proceedings.
Davis and EGL performed under the contract until December 20,
2004, at which time the Agreement was terminated.
On January 3, 2006, Davis filed a putative class action suit
in Louisiana state court alleging that Davis and other class
members (EGL’s independent contractor drivers over the past ten
year period) had been underpaid.2 EGL then removed the suit to
federal district court and filed a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6). EGL contended that dismissal was
warranted because the Agreement mandates arbitration and Davis
failed to make a timely demand for arbitration. The district court
treated EGL’s motion to dismiss as a summary judgment motion under
Federal Rule of Civil Procedure 56(c).
Thereafter, the district court granted EGL’s summary judgment
motion and dismissed Davis’s complaint. The district court based
its ruling on the conclusion that, as a matter of law, Davis was an
independent contractor under the Agreement. Therefore, the
Agreement’s arbitration provision was valid and enforceable under
2
As explained by the district court, this suit was never
certified as a class action despite being filed as such, nor did
Davis make a showing that class certification would be appropriate.
4
the FAA, and the exception for “contracts of employment” of
interstate commerce workers did not apply to Davis, an independent
contractor. Davis now appeals.
II. JURISDICTION AND STANDARD OF REVIEW
Davis appeals from a final judgment of the district court, so
this court has jurisdiction under 28 U.S.C. § 1291.
We review the district court’s grant of summary judgment de
novo. Chacko v. Sabre, Inc., 473 F.3d 604, 609 (5th Cir. 2006).
A grant of summary judgment is warranted if the evidence discloses
“no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” FED. R. CIV. P.
56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
A genuine issue of material fact exists if “the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In ruling on a summary judgment motion, courts shall not weigh the
evidence or make credibility determinations. Id. at 255.
Furthermore, all justifiable inferences are made in favor of the
nonmoving party. Id.
III. DISCUSSION
Generally, the FAA “compels judicial enforcement of a wide
range of written arbitration agreements.” Terrebonne v. K-Sea
Transp. Corp., 477 F.3d 271, 278 (5th Cir. 2007) (internal
quotation marks omitted). The Supreme Court has recognized that
5
Congress enacted the FAA in order to “reverse the longstanding
judicial hostility to arbitration agreements.” Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991).
Accordingly, we have noted that the FAA “establishes a federal
policy favoring arbitration.” Terrebonne, 477 F.3d at 285.
Though the FAA establishes a federal policy favoring
arbitration, Section 1 of the FAA does not, however, “apply to
contracts of employment of seamen, railroad employees, or any other
class of workers engaged in foreign or interstate commerce.” 9
U.S.C. § 1. In Circuit City Stores, Inc. v. Adams, 532 U.S. 105,
119 (2001), the Supreme Court construed the extent of Section 1.
The Court rejected the view that Section 1 excluded all employment
contracts from the FAA. Instead, the Court held that Section 1
“exempts from the FAA only contracts of employment of
transportation workers.” Id.
In this case, although the Agreement contains an arbitration
provision, Davis argues that he is exempt from arbitrating his
claim because he is not an independent contractor but an EGL
employee. As a truck driver employed by EGL, Davis maintains that
he is exempt from the FAA’s reach because he was a transportation
worker.
A. Employment Status
The district court rejected Davis’s contention that he was an
employee of EGL, holding instead that he was an independent
6
contractor. In so doing, the district court appears to have
improperly weighed or made credibility determinations of some of
the factual statements in Davis’s affidavit.3 See Anderson, 477
U.S. at 255. Consequently, we have some doubts as to whether,
given a proper consideration of Davis’s statements, the summary
judgment can be affirmed on employment status grounds. The record
shows, however, that EGL proffered several grounds for summary
judgment to the district court. Therefore, we need not reach the
issue of employment status, but instead may review the summary
judgment on the additional grounds raised below but not addressed
by the district court. See Johnson v. Sawyer, 120 F.3d 1307, 1316
(5th Cir. 1997) (explaining that while summary judgment may be
affirmed “on grounds not relied on by the district court, those
grounds must at least have been proposed or asserted in that court
by the movant”).
B. Texas Arbitration Act
In EGL’s motion to dismiss, EGL argued that even assuming the
Agreement fell under the FAA’s exception for transportation
workers, the arbitration provision was nonetheless valid and
3
For example, Davis stated in his affidavit that, in spite of
the Agreement’s terms, he was required to work exclusively for EGL
and work at least forty hours per week. The district court,
however, concluded that Davis was “free to serve other carriers.”
Additionally, Davis asserted that EGL required him to attend
meetings twice a week at the EGL office and to keep and use EGL
communications equipment. These four statements, arguably the most
significant indications of control by EGL, were either contradicted
or simply not addressed by the district court.
7
enforceable under the Texas General Arbitration Act (“TGAA”), Texas
Civil Practices and Remedies Code § 171.001, et seq. We agree.
Where “an agreement contains a clause designating Texas law
but does not exclude the FAA, the FAA and Texas law, including that
state’s arbitration law, apply concurrently.” Freudensprung v.
Offshore Technical Servs., Inc., 379 F.3d 327, 338 n.7 (5th Cir.
2004). Here, Section 7.03 of the Agreement contains a choice-of-
law provision which designates Texas law as the law governing the
Agreement. Thus, because the Agreement’s choice-of-law provision
does not exclude the FAA, both the TGAA and FAA apply to the
contract.
However, while both federal and state arbitration law may
apply to a contract, these laws do not necessarily operate in
harmony. Specifically, the FAA will preempt any state laws that
“contradict the purpose of the FAA by ‘requir[ing] a judicial forum
for the resolution of claims which the contracting parties agreed
to resolve by arbitration.’” Id. (quoting Pedcor Mgmt. Co. Welfare
Benefit Plan v. Nations Pers. of Tex., Inc., 343 F.3d 355, 362 (5th
Cir. 2003)). In other words, “[f]or the FAA to preempt the [TGAA],
state law must refuse to enforce an arbitration agreement that the
FAA would enforce.” In re D. Wilson Constr. Co., 196 S.W.3d 774,
780 (Tex. 2006); see also Miller v. Pub. Storage Mgmt., Inc., 121
F.3d 215, 219 (5th Cir. 1997) (“The FAA preempts conflicting state
antiarbitration law.”) (emphasis added).
8
Here, the FAA does not preempt the TGAA because this case
presents the situation where the FAA refuses to enforce an
arbitration provision (assuming for the moment that Davis meets the
exception for transportation workers) that the TGAA would enforce.
Under the TGAA, a written agreement to arbitrate is generally valid
and enforceable with respect to controversies that exist at the
time of the agreement or arise thereafter. See TEX. CIV. PRAC. & REM.
CODE ANN. § 171.001. Unlike the FAA, the TGAA does not exclude a
specific class of employees from its coverage. See id. § 171.002.
Thus, even if Davis were an employee of EGL, he would still be
subject to arbitration under the TGAA. We therefore hold that the
Agreement’s arbitration provision is valid and enforceable under
the TGAA, even if the Agreement is excepted from application of the
FAA.
C. Ambiguity and Inconsistency
In Davis’s second argument, he contends that the arbitration
provision of the Agreement is unenforceable due to ambiguities and
inconsistencies in the Agreement. Because of these ambiguities and
inconsistencies, Davis asserts, EGL cannot prove as a matter of law
that Davis’s claims fall under the scope of the arbitration
provision. We address each of Davis’s ambiguity arguments in turn.
Whether a contract is ambiguous is a question of law decided
by the court. D. Wilson Const. Co., 196 S.W.3d at 781. In
construing contract language, the primary objective is to discern
9
the true intention of the parties. J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223, 229 (Tex. 2003). Ambiguity in a contract exists
where the agreement “is subject to two or more reasonable
interpretations after applying the pertinent rules of
construction.” Id. If, however, a contract can be “given a
definite or certain legal meaning,” no ambiguity exists. Id.
First, Davis contends that Section 6.07 of the Agreement, the
arbitration provision, conflicts with Appendix II of the Agreement,
which lists deductions from Davis’s compensation. Section 6.07 of
the Agreement states that “any claim or controversy arising out of
or relating to this Agreement, or the breach thereof . . . shall be
determined and settled in accordance with the Commercial
Arbitration Rules of The American Arbitration Association.”
Appendix II, on the other hand, enumerates the expenses which EGL
may deduct from Davis’s compensation. In essence, Davis argues
that while the arbitration provision requires “any claim or
controversy” to be arbitrated, Appendix II inconsistently permits
EGL to take self-help remedies for a variety of claims under the
contract.
Contrary to Davis’s assessment, we find only one reasonable
interpretation and no inconsistency. Appendix II, rather than
containing a list of claims, merely contains an agreed list of
expenses that EGL may deduct from Davis’s settlement payments. The
intent and effect of Appendix II is simply to allocate onto Davis
10
the initial payment of Davis’s contractual expenses and the risk of
a mistake. Any claim or controversy involving the deductions, for
example a disagreement over the value, must still be arbitrated
according to Section 6.07 of the Agreement, albeit at Davis’s
request rather than EGL’s. Such an arrangement is analogous to the
typical employment compensation arrangement: the employer pays what
the employer believes to be the correct compensation; any mistake
in pay must be challenged by the employee. Therefore, we conclude
that no ambiguity or inconsistency exists between these two
provisions.
Second, Davis alleges that the Agreement contains ambiguous
and inconsistent notification requirements. Section 6.07(a)
provides: “Written notice of a demand for arbitration must be
mailed to the other party . . . within ninety (90) days of the
occurrence of the claimed breach or other event giving rise to the
controversy or claim.” Thus, the provision places on both parties
a ninety-day notice requirement of a demand for arbitration.
Section 4.07 of the Agreement states: “Contractor will not make any
claim or bring any action against EGL for additional settlement
monies unless Contractor notifies EGL in writing by certified mail
of any discrepancies or additional claims within fifteen (15) days
of settlement.” This section requires Davis to notify EGL of any
alleged settlement errors within fifteen days of the settlement
payment as a prerequisite to bringing a claim on the disputed
11
settlement.
Again, we conclude that only a single reasonable
interpretation exists for these two provisions. Section 4.07
requires notice of erroneous settlement payments prior to demanding
arbitration, while Section 6.07(a) requires notice of a demand for
arbitration. It is clear that Davis must comply with both
provisions to have a claim for settlement monies arbitrated.
Although Davis may regard the notice requirement for arbitration as
unnecessarily duplicative in light of the notice requirement for
incorrect settlements, the two provisions are not ambiguous or
inconsistent.
Given that there is only one reasonable interpretation of the
Agreement and that its provisions do not conflict, we hold that
Davis has not shown any ambiguity or inconsistency in the
Agreement.
D. Unconscionability and Lack of Mutuality
Finally, Davis asserts that the arbitration provision of the
Agreement is unconscionable and lacks mutuality, and is therefore
unenforceable.
The party opposing arbitration bears the burden of showing
that the arbitration provision is unconscionable. In re FirstMerit
Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001). The test for
unconscionability assesses whether, in light of the parties’
general commercial background and needs, the provision is so
12
unilateral as to have been unconscionable at the time of formation.
Id. at 757. The objective is to prevent oppression and unfair
surprise, not to disturb the allocation of risks stemming from one
party’s superior bargaining position. Id.
As to the reasons why the Agreement’s arbitration provision is
unconscionable, Davis points to the “employment status of the
drivers [and] the ambiguous and unilateral nature of the
arbitration clause.” First, we have already addressed the issue of
ambiguity and held that Davis did not show ambiguity in the
arbitration provision. Second, Davis does not explain how one’s
status as an employee as opposed to an independent contractor would
change the unconscionability analysis. Lastly, the mere existence
of unequal bargaining power does not make an arbitration clause
unconscionable, nor does the fact that limited exceptions exist
which permit one party to seek judicial remedies instead of
submitting to arbitration. See id. at 757-58 (holding that an
arbitration clause that permitted the stronger party to litigate
certain claims was not unconscionable). Thus, Davis has failed to
satisfy his burden of showing unconscionability.
Lack of mutuality generally refers to the concept of
consideration. See Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 408
(Tex. 1997) (“A contract must be based upon a valid consideration,
in other words, mutuality of obligation.”), superseded by statute
on other grounds, TEX. GOV’T CODE §§ 2260.001-.108, as recognized in
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Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 593
(Tex. 2001). Consideration is comprised of the “benefits and
detriments to the contracting parties.” Id. at 409. “The
detriments must induce the parties to make the promises and the
promises must induce the parties to incur the detriments.” Id. In
the present case, Davis did not point to any evidence of a lack of
mutuality of obligations in the Agreement.4 Therefore, we reject
Davis’s contention that the Agreement lacked mutuality.
IV. CONCLUSION
For the reasons stated above, we AFFIRM the judgment of the
district court.
AFFIRMED.
4
We also note that mutuality of remedy does not apply to this
case because specific performance is not an issue. Fed. Sign, 951
S.W.2d at 409 (“Mutuality of remedy is the right of both parties to
a contract to obtain specific performance.”)
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