Denise Badgerow v. Greg Walters

Case: 19-30766 Document: 00515564622 Page: 1 Date Filed: 09/15/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
No. 19-30766 September 15, 2020
Lyle W. Cayce
Clerk
DENISE A. BADGEROW,
Plaintiff - Appellant
v.
GREG WALTERS; THOMAS MEYER; RAY TROSCLAIR,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
Before JOLLY, GRAVES, and DUNCAN, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
A panel of arbitrators issued an arbitration award dismissing all of the
plaintiff’s claims against Ameriprise Financial Services, Inc. (Ameriprise) and
three of its franchise advisors. The plaintiff then filed a petition in Louisiana
state court to vacate that arbitration award, as to certain defendant parties.
The defendants in the Louisiana state-court proceeding removed the action to
vacate to federal court. The plaintiff moved to remand, asserting that the
federal court lacked subject-matter jurisdiction over the petition to vacate. The
district court held that it did have subject-matter jurisdiction over the petition
to vacate and thus denied remand. The district court, exercising that
jurisdiction, then ruled on the removed petition to vacate, denying the
Case: 19-30766 Document: 00515564622 Page: 2 Date Filed: 09/15/2020
No. 19-30766
plaintiff’s claims with prejudice, the merits of which are not appealed. This
appeal followed, appealing only the jurisdiction of the federal court over the
petition to vacate.
We hold that the district court had subject-matter jurisdiction over the
plaintiff’s petition to vacate the arbitration award and thus correctly denied
remand. Accordingly, we affirm the judgment of the district court.
I.
The background to the underlying employment dispute in this case is
more fully laid out in our opinion in the related case Badgerow v. REJ
Properties Inc., No. 19-30584. In this separate case, we set out here only the
procedural history relevant to the jurisdictional question implicated in this
appeal.
Denise Badgerow was employed as an associate financial advisor by REJ
Properties, Inc. (REJ), a Louisiana corporation whose three principals
(collectively, “the Principals”) were “independent franchise advisors” for
Ameriprise.1 She was employed at REJ from January 2014 until July 2016,
when she was terminated.
During her employment with REJ, Badgerow signed an agreement to
arbitrate any disputes that may arise between her and “Ameriprise Financial
or its Affiliates.” This agreement required her to arbitrate all claims against
the Principals, who were all Ameriprise affiliates. After her termination,
Badgerow initiated an arbitration proceeding against the three principals
before an arbitration panel of the Financial Industry Regulatory Authority
(FINRA). Later, after Ameriprise successfully moved to compel arbitration in
a separate federal lawsuit, Badgerow added a declaratory judgment claim
against Ameriprise to the FINRA arbitration.
1 The three principals of REJ were Thomas Meyer, Ray Trosclair, and Greg Walters.
2
Case: 19-30766 Document: 00515564622 Page: 3 Date Filed: 09/15/2020
No. 19-30766
In the FINRA arbitration, Badgerow sought damages from the
Principals for tortious interference of contract and for a violation of Louisiana’s
“whistleblower” law. Her declaratory judgment claim against Ameriprise
sought to hold Ameriprise jointly liable for the alleged discriminatory conduct
of the Principals and REJ. In December 2018, the FINRA arbitration panel
issued an award dismissing all of Badgerow’s claims against both the
Principals and Ameriprise with prejudice.
In May 2019, Badgerow brought a new action in Louisiana state court—
a petition to vacate the FINRA arbitrators’ award dismissing her claims
against the Principals. She alleged that the FINRA arbitrators’ dismissal of
the whistleblower claim was obtained by fraud committed by the Principals on
the FINRA arbitrators, and that this fraud required vacatur of the FINRA
panel’s dismissal of all her claims against the Principals. In her petition to
vacate, Badgerow named only the Principals as defendants. The Principals
removed the Louisiana action to vacate to the federal court of the Eastern
District of Louisiana. Badgerow filed a motion to remand, asserting the lack
of federal subject-matter jurisdiction. The Principals filed their own motion to
confirm the FINRA arbitration award.
The district court held that it had federal subject-matter jurisdiction over
Badgerow’s petition to vacate and thus denied remand to Louisiana state court.
Ruling on the substance of the petition, the court held that no fraud had been
perpetrated by the Principals on the FINRA arbitrators and therefore denied
vacatur of the FINRA arbitration dismissal award. The court also confirmed
the FINRA arbitration dismissal award with respect to all parties. Badgerow
has timely appealed the denial of her motion to remand.
3
Case: 19-30766 Document: 00515564622 Page: 4 Date Filed: 09/15/2020
No. 19-30766
II.
A.
On appeal, Badgerow, we repeat, challenges only the finding of federal
subject-matter jurisdiction over her petition to vacate and the denial of
remand, not, in any instance, the merits of the confirmation of the FINRA
arbitration dismissal award, nor the dismissal on the merits of the removed
petition to vacate. Stated differently, the only issue for our review is whether
the district court properly found that it had jurisdiction to rule on the merits
of the removed petition to vacate and properly denied remand.
“[T]he proper standard of review of a district court’s denial of a motion
to remand is de novo.” Allen v. Walmart Stores, L.L.C., 907 F.3d 170, 182 (5th
Cir. 2018).
B.
We start with the basics. The federal removal statute requires, among
other things, that a removed case must be a civil action “of which the district
courts of the United States have original jurisdiction.” 28 U.S.C. § 1441(a).
When the action at issue is one brought under the Federal Arbitration Act
(FAA), analyzing whether the district courts would have original jurisdiction
over the action can become a nuanced question.2
2 Badgerow notes that she brought her petition to vacate in state court under the
Louisiana Arbitration Law, not the Federal Arbitration Act. But she presents no argument
as to how the jurisdictional analysis would differ if we were to apply the Louisiana
Arbitration Law rather than the FAA. In any event, the arbitration agreement between
Badgerow and Ameriprise that covers this dispute explicitly states that it is “covered and
enforceable under the terms of the Federal Arbitration Act.” This arbitration agreement
covers disputes between Badgerow and Ameriprise as well as disputes between Badgerow
and the Principals, who are franchisees of Ameriprise. Furthermore, the First Circuit has
held that “where the FAA applies, it may be displaced by state law (if at all) only if the parties
have so agreed explicitly.” Ortiz-Espinosa v. BBVA Sec. of Puerto Rico, Inc., 852 F.3d 36, 42
(1st Cir. 2017) (citing Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576, 590 (2008)). Here, not
only does the agreement lack an explicit agreement to invoke the Louisiana Arbitration Law,
it in fact contains an agreement to apply the FAA. And finally, even if the Louisiana
Arbitration Law were to apply, “Louisiana courts look to federal law in interpreting the
4
Case: 19-30766 Document: 00515564622 Page: 5 Date Filed: 09/15/2020
No. 19-30766
In Vaden v. Discover Bank, 556 U.S. 49 (2009), the Supreme Court
adopted the so-called “look-through” analysis for determining federal
jurisdiction in actions to compel arbitration under section 4 of the FAA.
Although the instant proceeding is a petition to vacate under FAA section 10,
our court has held that “motions brought under sections 9, 10, and 11 [of the
FAA], each of which provides the ability to seek a different remedy in district
court following an arbitration award, are subject to the look-through approach
endorsed in Vaden.” Quezada v. Bechtel OG & C Constr. Servs., Inc., 946 F.3d
837, 843 (5th Cir. 2020). Under this analysis, “a federal court should determine
its jurisdiction by ‘looking through’ [an FAA] petition to the parties’ underlying
substantive controversy.” Vaden, 556 U.S. at 62. If “looking through” to the
claims involved in the underlying dispute (in this case, the claims brought in
the FINRA arbitration proceeding) shows that the dispute itself (i.e. the
dispute that was presented to the FINRA arbitrators) could have been brought
in federal court, then federal jurisdiction lies over the FAA petition. Id.
III.
A.
The district court’s application of the look-through analysis proceeded in
the following steps: (1) Federal jurisdiction exists over the petition to vacate if
at least one of Badgerow’s claims in the FINRA arbitration was predicated on
federal law; (2) Badgerow’s joint-employer claim against Ameriprise in the
FINRA arbitration was predicated on federal employment law; (3) The joint-
employer claim against Ameriprise in the FINRA arbitration may confer
federal jurisdiction, even though the dismissal of that claim is not a dismissal
Louisiana Arbitration Law because it is virtually identical to the United States Arbitration
Act . . . .” Chevron Phillips Chem. Co., LP v. Sulzer Chemtech USA, Inc., 831 So. 2d 474, 476
(La. App. 2002). We will therefore treat the petition as one brought under FAA section 10,
the FAA equivalent of the Louisiana Arbitration Law provision Badgerow seeks to invoke.
5
Case: 19-30766 Document: 00515564622 Page: 6 Date Filed: 09/15/2020
No. 19-30766
that Badgerow seeks to vacate with her petition to vacate; and (4) Federal
jurisdiction therefore exists over the petition to vacate because of the federal
claim against Ameriprise in the FINRA arbitration.
On appeal, Badgerow argues that the third step of the analysis was
erroneous because only claims in the FINRA arbitration that were made
against the Principals, the defendants in the petition to vacate, may be
considered for the purposes of determining federal jurisdiction over the
petition. She thus argues that because she does not seek to vacate the FINRA
arbitrators’ dismissal of her claim against Ameriprise and has not named
Ameriprise as a defendant in this action, the claim against Ameriprise in the
FINRA arbitration cannot be considered in the look-through analysis. We next
move to the merits of this objection.3
B.
Badgerow argues that by not naming Ameriprise as a defendant in her
state-court action to vacate, and by not challenging the FINRA panel’s
dismissal of her claim against Ameriprise, she has disqualified her FINRA
arbitration claim against Ameriprise as a potential source of federal
jurisdiction over her petition to vacate. As Badgerow accurately notes, “the
language in Vaden specifically requires looking through to the underlying
3 Badgerow also argues that the second step of the court’s analysis, i.e. that a federal
claim is presented, was wrong because the joint-employer claim against Ameriprise in the
FINRA arbitration did not arise under federal law and thus cannot confer federal jurisdiction.
But Badgerow asserted in the FINRA arbitration that “Ameriprise tacitly participated in all
the conduct Ms. Badgerow alleges herein and in the Federal Complaint with regard to
discrimination and other employment issues described herein.” Badgerow here refers to her
complaint in a separate federal discrimination suit, where Badgerow brought several claims
of Title VII liability against REJ. Thus, Badgerow sought a declaratory judgment
establishing that Ameriprise was a joint employer with REJ, which would make Ameriprise
liable for any injuries inflicted on Badgerow by REJ in violation of federal civil rights law.
Adjudicating that claim requires applying Title VII (specifically the four factors laid out in
Trevino v. Celanese Corp., 701 F.2d 397, 403–04 (5th Cir. 1983)) and thus arises under federal
law. The district court plainly was correct in finding that Badgerow’s claim against
Ameriprise in the FINRA arbitration was a federal-law claim.
6
Case: 19-30766 Document: 00515564622 Page: 7 Date Filed: 09/15/2020
No. 19-30766
controversy ‘between the parties.’” The only parties to this case are Badgerow
and the Principals, not Ameriprise. Badgerow thus argues that the look-
through analysis “should only look at [the] controversy ‘between the parties’ to
her action to vacate, and not the claims made in the arbitration against a third-
party Ameriprise.” The district court rejected this argument, holding that
“Badgerow cannot deprive the Court of subject matter jurisdiction over an
action to vacate the award by stripping off a single state law claim [i.e. the
claim against the Principals] as a basis for attacking the award.”
A careful reading of Vaden demonstrates that the district court’s
approach was correct. Vaden tells us that federal jurisdiction lies over an FAA
petition “if, ‘save for’ the [arbitration] agreement, the entire, actual
‘controversy between the parties,’ as they have framed it, could be litigated in
federal court.” Vaden, 556 U.S. at 66 (citation omitted). Vaden emphasizes
that our view of the “actual controversy between the parties” should not be too
narrow. “The relevant question is whether the whole controversy between the
parties—not just a piece broken off from that controversy—is one over which
the federal courts would have jurisdiction.” Id. at 67.
So we turn to engage Vaden’s look-through analysis to assess whether,
“save for the arbitration agreement,” a federal court would have had
jurisdiction over an action raising the same claims against the Principals that
Badgerow brought in the FINRA arbitration proceeding—namely tortious
interference and Louisiana “whistleblower”—the dismissal of which she now
seeks to vacate.
Our look-through analysis here shows that Badgerow’s claims against
Ameriprise and the Principals all arose from the same common nucleus of
operative fact, namely her employment claims of unfair treatment and
discriminatory conduct while working at REJ, which claims include her state-
law claims of interference of her employment contract and her whistleblower
7
Case: 19-30766 Document: 00515564622 Page: 8 Date Filed: 09/15/2020
No. 19-30766
claims, the subject of her Louisiana motion to vacate. And, in an action arising
out of this “whole controversy”—i.e. this “full-bodied controversy,” Vaden, 556
U.S. at 68 n.16—the federal-law claim against Ameriprise would have been
sufficient for federal jurisdiction to bestow its adjudicative powers over
Badgerow’s state-law claims against the Principals under supplemental
jurisdiction principles. See 28 U.S.C. § 1367(a).
We thus hold that, applying the look-through analysis, the district court
correctly found that the federal claim against Ameriprise in the FINRA
arbitration proceeding meant that there was federal subject-matter
jurisdiction over the removed petition to vacate the FINRA arbitration
dismissal award. The district court therefore correctly denied Badgerow’s
motion to remand the action to vacate to Louisiana state court.
IV.
In this opinion, we have held that the district court had jurisdiction over
Badgerow’s petition to vacate, which was filed in, and removed from, the
Louisiana state court. To resolve that question, we have first acknowledged
that we are bound by our court’s Quezada decision to apply the look-through
analysis as defined by the Supreme Court in Vaden. Applying the look-through
analysis, we have held, first, that the district court correctly found that
Badgerow’s Title VII declaratory judgment claim against Ameriprise in the
FINRA arbitration was a federal-law claim. We have held, second, that all of
Badgerow’s claims against the Principals and Ameriprise in the FINRA
arbitration arose from the same common nucleus of operative fact, and that
under the principle of supplemental jurisdiction, federal jurisdiction obtains
over Badgerow’s state-law tortious interference and whistleblower claims. The
district court therefore properly held that Badgerow’s federal claim against
Ameriprise in the FINRA arbitration invested federal jurisdiction over
Badgerow’s Louisiana petition to vacate the FINRA arbitration award as to the
8
Case: 19-30766 Document: 00515564622 Page: 9 Date Filed: 09/15/2020
No. 19-30766
Principals. Because there was federal jurisdiction over the removed petition
to vacate, denial of remand back to the Louisiana state court was proper.
We therefore AFFIRM the denial of remand. Since Badgerow does not
challenge the merits of the district court’s order denying vacatur, confirming
the FINRA arbitration award dismissing the claims against the Principals, and
dismissing the case in its entirety with prejudice, the judgment of the district
court is, in all respects,
AFFIRMED.
9