McCauley v. Halliburton Energy Services, Inc.

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
December 30, 2005
FOR THE TENTH CIRCUIT
Clerk of Court
RODNEY MCCAULEY; JERI
MCCAULEY; GARRISON
MCCAULEY; MADISON
MCCAULEY; WHITNEY
MCCAULEY, No. 05-6011
(D.C. No. 04-CV-807-F)
Plaintiffs - Appellees, (W. Okla.)
v.
HALLIBURTON ENERGY
SERVICES, INC., a Delaware
corporation,
Defendant - Appellant.
ORDER AND JUDGMENT *
Before KELLY, PORFILIO, and TYMKOVICH, Circuit Judges.
Halliburton Energy Services, Inc. invokes our jurisdiction under 9 U.S.C.
§ 16(a)(1)(C) to appeal the denial of its motion to compel arbitration of a claim
for negligence and loss of consortium filed by Rodney McCauley, his wife, and
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally
disfavors the citation of orders and judgments; nevertheless, an order and
judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
his three children (McCauley, collectively). Halliburton contends these claims are
subject to arbitration under the Halliburton Dispute Resolution Program (HDRP).
After careful analysis of the terms of the HDRP and the issues raised by the
parties, the district court held those claims are not governed by the program. We
agree and affirm. 1
For 19 years, Rodney McClauley was employed by Halliburton as a Senior
Electronics Technician. He also independently owned and operated McCauley
Insulation (MI) as a sole proprietorship. On December 2, 2002, Halliburton hired
MI to spray foam insulation on the exterior of one of Halliburton’s bulk tanks.
Rodney asserts he asked Halliburton to transport the tank to another location
where he had the proper equipment to do the job, but Halliburton insisted he do
the work in its yard. 2
1
Another panel granted Halliburton’s motion to stay the proceedings in the
district court. McCauley v. Halliburton Energy Servs., Inc., 413 F.3d 1158 (10th
Cir. 2005). Recognizing “[w]hether an interlocutory appeal from the denial of a
motion to compel arbitration divests a district court of jurisdiction to proceed on
the merits of the underlying claim while the appeal is pending is a question of
first impression in this circuit,” the panel looked to sister circuits which had split
in their responses. Following the Seventh and Eleventh Circuits and related
precedent here, see e.g. Stewart v. Donges, 915 F.2d 572, 576 (10th Cir. 1990),
the court held “the district court is divested of jurisdiction while a non-frivolous
§ 16(a) motion is pending.” Id. at 1162 (emphasis added).
2
Only to give context to the issues on appeal, we recite certain uncontested
facts stated in the briefs.
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After Rodney finished his regular Halliburton work for the day, he picked
up his MI equipment and returned to the Halliburton yard. Waiting for him was
not the equipment Halliburton promised, but instead a forklift with a wooden
pallet for Rodney to stand upon which had neither safety railings nor a safety
harness. In the process of spraying the insulation, Rodney fell and was injured.
The McCauley family filed a complaint asserting four causes of action.
Their first, third and fourth causes asserted negligence, intentional infliction of
emotional distress, and loss of consortium arising from Rodney’s fall. The
second cause asserted wrongful termination, fraud and deceit, and the third cause
asserted intentional infliction of emotional distress against Halliburton as
Rodney’s employer.
Halliburton moved to compel arbitration of all claims, contending that as a
Halliburton employee, Rodney had agreed to resolve all work-related claims
under the HDRP. In response, McCauley conceded the second and third causes of
action were subject to arbitration, but the remaining claims were not.
Nonetheless, Halliburton argued those claims were intimately interwoven
with the arbitrable claims. Thus, it asserted, Rodney’s employment relationship
with Halliburton as well as principles of judicial economy demanded resolution of
all of the McCauley claims in one efficient “arbitral forum.” In opposition,
McCauley maintained those claims stemmed from an incident which occurred
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while he was performing work as an independent contractor, not while working as
an employee of Halliburton. Further, McCauley asserted Rodney’s wife and
children were not parties to the HDRP; therefore, their claims cannot be subjected
to arbitration.
The district court granted, in part, but rejected, in part, Halliburton’s
motion to compel. Although the court recognized the strong federal policy
favoring arbitration, it determined the court, and not an arbitrator, must decide
whether the parties had agreed to arbitrate. Although recognizing that
arbitrability is a matter of contract and that a party cannot be compelled to
arbitrate a dispute he has not agreed to submit to that process, the court was
mindful of the over-arching federal policy favoring arbitration. Agreeing with
Halliburton and noting McCauley’s concession, the court held all of the
McCauley claims for wrongful termination, fraud and deceit set out in the second
cause, as well as for the claim of intentional infliction of emotional distress
contained in the third cause, fell within the HDRP. The court reasoned all of
those claims are arbitrable because they “relate to and arise out of McCauley’s
former employment relationship with Halliburton.” It then granted Halliburton’s
motion to compel arbitration of those claims.
The court, however, refused to compel arbitration of the negligence claim
because it “is not rooted in any acts or omissions by McCauley as an employee or
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by Halliburton [as an] employer.” Quoting the HDRP’s language on the scope of
the agreement and the definition of “Dispute,” 3 the court stated,
A fair reading of the HDRP, broad in scope though it may be, is that,
to be encompassed by the HDRP, a dispute must in some operative
respect, be rooted in the employment relationship . . . . The
distinction between employment and independent contracting was, it
is safe to assume, well known to the Halliburton lawyers who drafted
the HDRP. If they had intended the HDRP to cover any conceivable
claim, even one arising entirely from an independent contractor
relationship which was altogether distinct from the employment
relationship, they could have written the document to say that, but
they did not do so in the HDRP. As to the arbitration of McCauley’s
status as an independent contractor, the court concludes that
Halliburton is not entitled to recast McCauley’s claims, as pled, and
then compel McCauley to arbitrate the matter if he takes issue with
Halliburton’s recasting of his claims. The negligence claim, as pled
by McCauley, does not touch upon McCauley’s employment
relationship with Halliburton. Nor is the claim, as argued by
Halliburton, inextricably intertwined or related with the employment
related claims.
(emphasis in original).
The court added the loss of consortium claims “are derivative of the
negligence claim” and do not arise out of the employment relationship. It is from
that judgment Halliburton appeals.
3
The HDRP states “dispute”:
means all legal and equitable claims, demands, and controversies, of
whatever nature or kind, whether in contract, tort, under statute or
regulation, or some other law, between persons bound by the Plan . .
. including, but not limited to any matter with respect to . . . any
personal injury allegedly incurred in or about a Company workplace.
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This interlocutory appeal is governed by 9 U.S.C. § 16(a)(1)(C), which
permits review of the denial of a motion to compel arbitration under the Federal
Arbitration Act. Determining the correctness of that denial de novo is confined to
principles of contract. Spahr v. Secco, 330 F.3d 1266, 1269 (10th Cir. 2003).
“While federal policy generally favors arbitration, the obligation to arbitrate
nevertheless remains a creature of contract. Because an arbitrators’ authority
arises only when the parties agree in advance to that forum, ‘a party cannot be
required to submit to arbitration any dispute which he has not agreed so to
submit.’” Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252
F.3d 218, 224 (2d Cir. 2001) (quoting AT&T Techs., Inc. v. Commc’ns Workers of
Am., 475 U.S. 643, 648 (1986)). Whether the HDRP applies to a particular type
of controversy is a question for the court. Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83 (2002).
We have set out the process of review in a number of cases. First, we
examine “the scope of that agreement and then determine whether plaintiffs’
claims fall within its scope.” Nat’l Am. Ins. Co. v. SCOR Reinsurance Co., 362
F.3d 1288, 1290 (10th Cir. 2004). “To determine whether a particular dispute
falls within the scope of an agreement’s arbitration clause, a court should
undertake a three-part inquiry.” Louis Dreyfus, 252 F.3d at 224. In Cummings v.
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Fedex Ground Package Sys., Inc., 404 F.3d 1258, 1262 (10th Cir. 2005), we
followed the Second Circuit’s Dreyfus analysis, explaining:
First, recognizing there is some range in the breadth of arbitration
clauses, a court should classify the particular clause as either broad
or narrow. Next, if reviewing a narrow clause, the court must
determine whether the dispute is over an issue that is on its face
within the purview of the clause, or over a collateral issue that is
somehow connected to the main agreement that contains the
arbitration clause. Where the arbitration clause is narrow, a
collateral matter will generally be ruled beyond its purview. Where
the arbitration clause is broad, there arises a presumption of
arbitrability and arbitration of even a collateral matter will be
ordered if the claim alleged implicates issues of contract
construction or the parties’ rights and obligations under it.
Cummings, 404 F.3d at 1262 (emphasis added) (internal citations and quotations
omitted).
Here, the HDRP states:
The plan is designed to provide a program for the quick, fair,
accessible, and inexpensive resolution of Disputes between the
Company and the Company’s present and former Employees and
Applicants for employment, related to or arising out of a current,
former or potential employment relationship with the Company.
(emphasis added).
Against this background, Halliburton now contends the plain text of the
HDRP embraces McCauley’s remaining claims, and, even if that reading was not
readily apparent, the liberal federal policy favoring arbitration preserves it.
Further, it maintains the HDRP is not limited to disputes between Employees and
Halliburton. Instead its language that it is “intended to create an exclusive
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procedural mechanism for the final resolution of all Disputes falling within its
terms” reflects a clear intention to resolve “all disputes between the parties
regardless of whether they relate to or arise out of the employment relationship.”
Moreover, the negligence claim - under any reading - “touches” the employment
relationship. Halliburton points to the fact that Rodney was an employee for 19
years and continued to work for Halliburton. It reminds McCauley alleged he had
to undertake the unsafe operation because he was “both an employee and sole
proprietor.” Thus, but for his employment with Halliburton, he would not have
undertaken the work. Surely, this allegation satisfies “the low standard that his
employment relationship touch” his claim. 4
Halliburton urges the root of the court’s error was concluding the claim
must arise from the HDRP. “This is not the test for arbitrability,” it insists, citing
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625,
n.13 (1985), for the broad proposition that federal policy presumes the inclusion
of all such claims. 5 Only by imposing the “artificial standard” of independent
4
Rodney contends accepting the job for MI was a “Hobson’s choice.” He
feared loss of either his regular job or future business for MI if he refused.
5
Mitsubishi addressed whether claims arising under the Sherman Act in an
arbitration clause in an agreement embodying an international commercial
transaction are subject to arbitration under the FAA and Convention on the
Recognition and Enforcement of Foreign Arbitral Awards. The entire footnote
Halliburton cites reads:
(continued...)
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contractor status to “effectively revers[e] the presumption in favor of arbitration”
could the district court abridge the sweep of the HDRP. Instead, Halliburton
states arbitration must be required “if the agreement can be interpreted in any way
to cover the claim.” Thus, Halliburton argues the claims of Rodney’s wife and
children are also swept within the HDRP, citing, Farmers & Merchants Bank v.
Hamilton Hotel Partners of Jacksonville, 702 F. Supp. 1417, 1425 (W.D. Ark.
1988) (holding a non-signatory trustee who opened the account for plaintiff and
acted on his behalf is bound by the arbitration agreement). 6
Finally, Halliburton alleges error in the court’s resolving Rodney
McCauley’s independent contractor status. It contends that is a fact issue
entangled in the merits of the dispute and a gateway issue that should be reserved
for the arbitrator, citing Howsam, 537 U.S. at 84 (gateway issues are whether the
5
(...continued)
Contrary to Soler’s suggestion, the exclusion of some areas of
possible dispute from the scope of an arbitration clause does not
serve to restrict the reach of an otherwise broad clause in the areas in
which it was intended to operate. Thus, insofar as the allegations
underlying the statutory claims touch matters covered by the
enumerated articles, the Court of Appeals properly resolved any
doubts in favor of arbitrability.
Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc, 473 U.S. 614, 625 n. 13
(1985) (emphasis added).
6
It also cites Bombalier v. Lifemark Hosp. of Fla., 661 So.2d 849, 852 (Fla.
App. 1995), a case we disregard because of its reliance upon a Florida law that is
irrelevant to this case.
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parties are bound by a given arbitration clause and whether arbitration clause
applies to a particular controversy). 7 Thus, Halliburton adds, already in the outer
limit of its authority when it found the dispute had to be rooted in the employment
relationship, the court - at that point - should have referred the entire matter to the
arbitrator. Instead, it improperly resolved a disputed issue of fact which touched
on the merits of the action before the arbitrator. Further, that finding was based
solely on the “mere allegations” of the complaint without an evidentiary hearing. 8
McCauley asserts Halliburton never disputed his status when he performed
the outside work as the sole proprietor of McCauley Insulation. Indeed, in its
discovery response, Halliburton admitted: “Rodney Earl McCauley and/or
McCauley Insulation was hired as an independent contractor by Halliburton
Energy Service, Inc. to perform work [] on December 2, 2002.” On that date,
McCauley contends Rodney applied foam to a tank as an outside independent
contractor, but, while fortuitous that Rodney also worked for Halliburton,
7
Howsam held the gateway procedural issues for the arbitrator “‘which grow
out of the dispute and bear on its final disposition’ are presumptively not for the
judge, but for an arbitrator, to decide.” Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 84 (2002). It noted, for example, an arbitrator should decide
whether the first two steps of a grievance procedure were completed, where these
steps are prerequisites to arbitration, John Wiley & Sons, Inc. v. Livingston, 376
U.S. 543, 557 (1964); and allegations of waiver, delay, or a like defense to
arbitrability, Moses H. Cone Mem’l Hosp., 460 U.S. 1, 24-25 (1983).
8
McCauley cites Halliburton’s trial court filings and maintains Halliburton
never disputed his status as an independent contractor status or sole
proprietorship until this appeal.
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McCauley asserts there is no relationship between applying foam and his work as
an Electronics Technician, contending Halliburton’s reading of the sweep of the
HDRP would snag an ex-employee driving his family in his family car and hit by
a Halliburton truck.
Controverting Halliburton’s contention for an expansive scope for the
HDRP, McCauley quotes an “explainer” to the HDRP which states: “[the HDRP]
is designed for use by employees at every level of the Company, for almost any
work-place related conflict.” Also, McCauley cites a brochure which commends
the HDRP to work “for the benefit of all - the employees and the Company.”
These provisions, McCauley asserts, bear no other meaning than the HDRP
applies to disputes between the employee and employer which relate to or arise
out of the employment relationship. Otherwise, McCauley maintains under the
overall contract, “the requisite clear and unmistakable evidence” the parties
intended to submit the matter to an arbitrator is absent here. Spahr, 330 F.3d at
1270 (plaintiff’s mental capacity is a question for the court, not arbitrator, in
deciding motion to compel arbitration).
Resolving these contentions, we start with the instruction in Howsam that
“a gateway dispute about whether the parties are bound by a given arbitration
clause raises a ‘question of arbitrability’ for a court to decide.” Howsam, 537
U.S. at 84. The district court properly addressed the issue and concluded the
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HDRP circumscribes a relationship between the employee and Halliburton in
disputes arising out of that relationship. Although both sides have treated us to a
great deal of Oklahoma contract law and Tenth Circuit cases addressing the issue,
we think the test in Cummings guides us. 404 F.3d at 1262. The HDRP includes,
such as here, a broad arbitration clause where there arises a presumption of
arbitrability “and arbitration of even a collateral matter will be ordered if the
claim alleged implicates issues of contract construction or the parties’ rights and
obligations under it.” 404 F.3d at 1262. However, “arbitration is a matter of
contract and a party cannot be required to submit to arbitration any dispute which
he has not agreed so to submit.” AT & T Techs., Inc. 475 U.S. at 648 (quotations
omitted).
Two factors are of significance in determining whether the McCauleys are
contractually bound to arbitrate their negligence claim. First, the HDRP clearly
evinces Halliburton’s intent to make the plan’s terms applicable to disputes
between the company and its employees for matters “related to or arising out of a
current, former or potential employment relationship with the Company.” Second,
the plan defines “dispute” as claims “between persons bound by the Plan . . . with
respect to . . . the relationship between the Employee and the Company.” These
provisions are not so broad as to sweep within the plan’s structure a sole
proprietor and his family and force them to arbitrate a claim justiciable in court.
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Halliburton’s late-game attempt to inject into this case a question of whether
Rodney was acting as a sole proprietor should not change that outcome. We will
not consider a new theory on appeal, even one “that falls under the same general
category as an argument presented at trial or . . . a theory that was discussed in a
vague and ambiguous way” at trial. Bancamerica Commercial Corp. v. Mosher
Steel of Kan., Inc., 100 F.3d 792, 798-99 (10th Cir. 1996) (quotation omitted), op.
amended on other grounds, 103 F.3d 80 (10th Cir. 1996). “[T]o preserve the
integrity of the appellate structure, we should not be considered a ‘second shot’
forum . . . where secondary, back-up theories may be mounted for the first time.”
Tele-Communications, Inc. v. Comm’r, 104 F.3d 1229, 1233 (10th Cir. 1997).
Neither McCauley Insulation nor the McCauley family was a party to the
HDRP; nor are their negligence and loss of consortium claims grounded in
Rodney’s status as an employee of Haliburton. We disagree with Halliburton that
its Dispute Resolution Plan could be read to include them. The district court’s
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analysis was correct, and it committed no error in holding those claims cannot be
subjected to arbitration. 9
AFFIRMED.
Entered for the Court
John C. Porfilio
Senior Circuit Judge
9
The parties argue a number of other issues which we do not address
because they are collateral and not consequential to the issue of whether
mandatory arbitration was properly denied.
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