Opinion ID: 4091712
Heading Depth: 2
Heading Rank: 1

Heading: Arbitrability is a gateway issue

Text: Reyna argues that district courts “consistently” conditionally certify a collective action before determining the arbitrability of a claim, but the cases he relies on have distinct procedural postures from that at issue here. In particular, he cites cases where (1) the district court declined to determine the validity of arbitration agreements with potential opt-in plaintiffs, not 3 Under the FAA, “a party may seek interlocutory review of ‘an order . . . denying an application . . . to compel arbitration.’” Al Rushaid v. Nat’l Oilwell Varco, Inc., 757 F.3d 416, 419 (5th Cir. 2014) (quoting 9 U.S.C. § 16(a)(1)(C)). On this interlocutory appeal we do not consider the district court’s denial of IBC’s motion for summary judgment. See Tamez v. City of San Marcos, 62 F.3d 123, 124 (5th Cir. 1995) (“Generally, this Court does not have jurisdiction over interlocutory appeals of the denial of motions for summary judgment because such pretrial orders are not ‘final decisions’ for the purposes of 28 U.S.C. § 1291.”). 4 After IBC filed its notice of appeal, the district court granted Reyna’s motion to conditionally certify the proposed collective and issue notice to potential opt-in plaintiffs. IBC then moved to stay further proceedings in the district court pending appeal, which this court granted on September 1, 2016. At oral argument both Reyna and IBC stated that no notice had been sent to potential opt-in plaintiffs. Therefore Reyna remains the only named plaintiff in the suit. 5 No. 16-40057 arbitration agreements with the sole named plaintiff; 5 (2) the named plaintiff was potentially covered by an arbitration agreement, but the defendant failed to move to compel that plaintiff to arbitrate his claim; 6 (3) the court was not addressing a motion to compel arbitration; 7 and (4) the district court had already compelled those named plaintiffs who had signed arbitration agreements to arbitrate their claims but nonetheless granted conditional certification of the collective because there existed at least one remaining plaintiff not subject to arbitration. 8 None of the cases cited by Reyna presented the same posture as this case: a defendant who promptly moved to compel the sole plaintiff to arbitrate his claim, pursuant to an arbitration agreement that undisputedly exists. Those courts that have addressed cases with similar postures are in agreement that “whether the named plaintiffs must arbitrate their claims should be decided 5 See Romero v. La Revise Assocs., L.L.C., 968 F. Supp. 2d 639, 645–48 (S.D.N.Y. 2013); Hernandez v. Immortal Rise, Inc., No. 11-CV-4360, 2012 WL 6720734, at  (E.D.N.Y. Dec. 27, 2012); Green v. Plantation of La., LLC, No. 2:10-0364, 2010 WL 5256348, at  & n.4 (W.D. La. Dec. 15, 2010); Ali v. Sugarland Petroleum, No. 4:09-CV-0170, 2009 WL 5173508, at  (S.D. Tex. Dec. 22, 2009); Villatoro v. Kim Son Rest., L.P., 286 F. Supp. 2d 807, 811 (S.D. Tex. 2003). 6 See Davis v. NovaStar Mortg., Inc., 408 F. Supp. 2d 811, 818 (W.D. Mo. 2005) (“In the present matter, defendants have not moved to compel arbitration at all, although the case has been pending for over a year.”). 7 See Hernandez, 2012 WL 6720734, at  (denying defendants’ request to set aside an order granting plaintiffs’ motion for conditional certification); Krstic v. J.R. Contracting & Envtl. Consulting, No. 09-2459, 2011 WL 1042732, at  (D.N.J. Mar. 6, 2011) (“Defendants contend that this case should be dismissed in its entirety . . . because Plaintiffs signed arbitration agreements . . . .”); Mowdy v. Beneto Bulk Transp., No. C06-05682, 2008 WL 901546, at  (N.D. Cal. Mar. 31, 2008) (“Now before this court is plaintiffs’ motion for approval of . . . notice and conditional certification of an FLSA opt-in class . . . .”). 8 See Bowman v. Doe Run Res. Corp., No. 4:13-CV-2519, 2014 WL 3579885, at  (E.D. Mo. July 21, 2014) (granting smelters’ motion for conditionally certifying a collective action after compelling several named smelters to arbitrate their claims); D’Antuono v. C & G of Groton, Inc., No. 3:11-cv-33, 2011 WL 5878045, at ,  (D. Conn. Nov. 23, 2011) (granting the remaining representatives’ motion to conditionally certify after the other representatives were compelled to arbitrate their claims). 6 No. 16-40057 well before the nationwide notification issue is reached.” Carter v. Countrywide Credit Indus., Inc., 189 F. Supp. 2d 606, 618 (N.D. Tex. 2002), dismissed on other grounds, 57 F. App’x 212 (5th Cir. 2003); see also, e.g., White v. Turner, No. H-15-1485, 2016 WL 1090107, at –6 (S.D. Tex. Mar. 21, 2016) (rejecting plaintiffs’ argument that the court should defer consideration of arbitration agreements until after the conditional certification stage); Dixon v. NBCUniversal Media, LLC, 947 F. Supp. 2d 390, 405–06 (S.D.N.Y. 2013) (denying the motion for conditional certification as moot because the only named plaintiff “ha[d] agreed to arbitrate her FLSA claims, and ha[d] waived the right to bring a collective action with regard to those claims”). We therefore disagree with Reyna’s argument that courts typically delay consideration of the arbitrability of a claim until after conditional certification is granted. In addition, we have instructed that a district court must consider an agreement to arbitrate as a “threshold question.” Auto Parts, 782 F.3d at 196. To hold otherwise would present a justiciability issue: a court could conditionally certify a collective action solely on the basis of a claim that the plaintiff was bound to arbitrate and was therefore barred from bringing it in court in the first place. Cf. James v. City of Dallas, 254 F.3d 551, 563 (5th Cir. 2001) (“If the litigant fails to establish standing, he or she may not seek relief on behalf of himself or herself or any other members of the class.” (citing O’Shea v. Littleton, 414 U.S. 488, 494 (1974)). Furthermore, deciding whether Reyna should be compelled to arbitrate his FLSA claim prior to conditional certification more closely aligns with the “national policy favoring arbitration” embodied by the FAA. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)); see also Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004) (“[T]here is a strong presumption in favor of arbitration . . . .”). Accordingly we have instructed that “a court is required to enforce a party’s 7 No. 16-40057 commitment to arbitrate his federal statutory claims.” Carter, 362 F.3d at 297. We conclude that the district court erred when it deferred deciding the “threshold question” of whether Reyna is required to arbitrate his claims until after the conditional certification stage. Auto Parts, 782 F.3d at 196. Upon a motion to compel arbitration, a court should address the arbitrability of the plaintiff’s claim at the outset of the litigation. B. Only the arbitrator has the authority to decide issues of arbitrability Having concluded that the district court was required to consider the arbitrability of Reyna’s claim before conditionally certifying the collective, we now turn to the issue of who has authority to determine arbitrability. Because IBC contends that the Policy contains a delegation clause, we apply the framework outlined in Kubala v. Supreme Production Services, Inc. for analyzing arbitration agreements that contain a delegation clause. — F.3d — , —, 2016 WL 3923866, at  (5th Cir. July 20, 2016). Under this framework, if a party asserts that an arbitration agreement contains a delegation clause, this court only asks (1) whether the parties entered into a valid arbitration agreement and, if so, (2) whether the agreement contains a valid delegation clause. Id. “If there is a delegation clause, the motion to compel arbitration should be granted in almost all cases.” Id. First, it is undisputed that Reyna and IBC entered into a valid arbitration agreement. Reyna has not denied signing the Policy nor has he raised any challenges to the validity of the Policy either before the district court or on appeal. And we have long recognized that FLSA claims are subject to arbitration. Carter, 362 F.3d at 298. Second, the arbitration agreement between IBC and Reyna contains a valid delegation clause. A delegation clause is a provision in an arbitration agreement that “transfer[s] the power to decide threshold questions of arbitrability to the arbitrator.” Kubala, 2016 WL 8 No. 16-40057 3923866, at . The Supreme Court “ha[s] recognized that parties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.” Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68–69 (2010). The delegation clause in the Policy provides: “The arbitrator(s) shall have the exclusive authority to determine the arbitrability of any dispute which the employee or the employer asserts is subject to the [Policy].” It also grants the arbitrator “the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of the [Policy].” This language is strikingly similar to the delegation clause in the arbitration agreement at issue in Rent-A-Center, which provided: “The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this [arbitration] Agreement . . . .” Id. at 66. In that case, the Supreme Court concluded that the clause clearly evinced an intent by the parties to delegate the authority to decide arbitrability issues to the arbitrator. Id. at 69–70. Similarly here the Policy contains a valid delegation clause that delegates the authority to resolve arbitrability disputes to the arbitrator. See Kubala, 2016 WL 3923866, at  (relying on similarity between the language of the clause in Rent-A-Center and the clause at issue in that case to conclude that clause was a valid delegation clause). Because the arbitration agreement contains a delegation clause, any disputes about the arbitrability of Reyna’s claim or the scope of the arbitration agreement 9 must be decided by the 9 Reyna contends, for the first time on appeal, that the Policy does not apply to FLSA collective actions because it only explicitly mentions “class actions.” Because Reyna failed to raise this argument in the district court, we consider it waived. XL Specialty Ins. Co. v. Kiewit Offshore Servs., Ltd., 513 F.3d 146, 153 (5th Cir. 2008). But even were we to consider this argument, the Policy’s silence on the permissibility of collective actions does not counsel against compelling arbitration of Reyna’s claim because the Policy’s delegation clause 9 No. 16-40057 arbitrator, not the courts. 10 Accordingly, the district court erred in denying IBC’s motion to compel arbitration.