Court Opinion

ID: 50872
Source: CourtListenerOpinion
Date Created: 2010-04-26 00:59:04+00
Date Added: 2024-06-11T09:39:00.295154
License: Public Domain

United States Court of Appeals
                                                                     Fifth Circuit
                                                                   F I L E D
                                                                     July 5, 2007
                IN THE UNITED STATES COURT OF APPEALS
                                                                Charles R. Fulbruge III
                         FOR THE FIFTH CIRCUIT                          Clerk
                         _____________________

                              No. 06-51519
                           (Summary Calendar)
                         _____________________

RECTOR L. LESTER, III,

                                                      Plaintiff-Appellant

versus

ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.,
also known as AERT, Inc.,

                                                      Defendant-Appellee.

                       ---------------------
          Appeal from the United States District Court
                for the Western District of Texas
                           (A:05-CV-603)
                       ---------------------

Before SMITH, WIENER and OWEN, Circuit Judges.

PER CURIAM:*

     Plaintiff-Appellant     Rector   Lester,   III    appeals    from    the

district court’s orders (1) dismissing and compelling arbitration

of   Lester’s   negligence   claim    against   his    former     employer,

Defendant-Appellant Advanced Environmental Recycling Technologies

(AERT), and (2) dismissing Lester’s claims for breach of fiduciary

duty against AERT’s occupational injury benefits plan administrator

     *
       Pursuant to 5TH CIR. R. 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this opinion should not be published and is not precedent except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 CIR. R. 47.5.4.
(“the Plan Administrator”) and breach of the duty of good faith and

fair dealing against AERT as preempted by ERISA.             We affirm.

                         I.       FACTS & PROCEEDINGS

     Lester suffered a knee injury in August 2003 while he was

employed by AERT as a machine operator at its Junction, Texas

facility.        AERT   is    a     non-subscriber   to    Texas’s     worker’s

compensation system but maintains an occupational injury benefits

plan (the “Plan”) for its employees.             Under the Plan, disputes

“arising out of any Accident or Occurrence, or otherwise regarding

or relating to the Plan” are subject to binding arbitration.                 The

Summary   Plan    Descriptions       (SPD)   distributed   by   AERT    to   its

employees included this arbitration provision. Lester acknowledged

receipt of the 2002 Plan SPD in September 2002 and acknowledged

receipt of the 2003 SPD nine days after his injury.             Following his

second acknowledgment, Lester received Plan benefits in the form of

medical treatment for his injuries.

     Lester filed suit in the district court in August 2005,

requesting (1) a declaratory judgment determining whether Texas law

or federal common law under ERISA governed his claims, and (2)

compensatory and punitive damages for AERT’s negligence (failure to

maintain a safe workplace) and breach of its duty of good faith and

fair dealing, and the Plan Administrator’s breach of her fiduciary

duty.     AERT filed a motion to compel arbitration of Lester’s

negligence claim, and, in response, Lester filed a motion for

                                         2
partial summary judgment on the declaratory judgment issue. Before

the district   court    ruled    on   any   motions,      Lester   filed,   then

withdrew, a stipulation forfeiting his claim for breach of the duty

of good faith and fair dealing.

     The   district    court    (1)   granted    AERT’s    motion   to   compel

arbitration of Lester’s negligence claim, and (2) dismissed his

claim for breach of fiduciary duty as preempted by ERISA.                    In

making its ruling, the court overlooked Lester’s withdrawal of his

stipulation voluntarily dismissing his breach of good faith and

fair dealing claim.      After Lester objected, the court issued a

second order dismissing that claim as also preempted by ERISA.

Lester timely filed a notice of appeal.

                               II.    ANALYSIS

A.   Standard of Review

     This appeal was taken from the district court’s grant of a

motion to compel arbitration and its decision on Lester’s motion

for partial summary judgment, the combination of which resulted in

the dismissal of all of his claims.              We review both rulings de

novo, applying the same standards as the district court.1

B.   Arbitration

     1.    The District Court’s Ruling

     1
       See Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702, 708
(5th Cir. 2002) (motion to compel arbitration); Breen v. Texas A&M
Univ., 485 F.3d 325, 331 (5th Cir. 2007) (summary judgment).

                                       3
     A party seeking to compel arbitration must first establish the

existence of an arbitration agreement subject to the Federal

Arbitration Act (“FAA”).2       Here, the district court concluded that

AERT met this burden by showing that both Plan SPDs sent to Lester

contained an express arbitration provision and that Lester, by (1)

twice acknowledging receipt of the Plan SPDs, (2) continuing to

work for AERT after being notified of the Plan terms, and (3)

accepting Plan benefits following his injury, had accepted the

terms of that provision.

     The court rejected Lester’s argument that he only consented to

the Plan terms under duress, purportedly caused by AERT’s threat to

withhold medical care unless he acknowledged receipt of the SPD.

The court held that Lester failed to prove an essential element of

duress, i.e., that AERT threatened to do something that it had no

legal    right   to   do,3   because,   as   a   non-subscriber   to   Texas’s

workers’ compensation insurance system, AERT had the right to

refuse payment for Lester’s medical treatment if he elected not to

agree to the Plan terms.        The court concluded that as a matter of

law AERT could not place Lester under duress simply by requiring

that he acknowledge receipt of the SPD before receiving medical

benefits under the Plan.

     2
         9 U.S.C. § 1, et seq.
     3
       See Osorno v. Osorno, 76 S.W.3d 509, 511 (Tex. App.–Houston
2002, no pet.) (“For duress to be a contract defense, it must
consist of a threat to do something the threatening party has no
legal right to do.”).

                                        4
     2.     Right to Jury Trial

     On appeal, Lester contends that, under section 4 of the FAA,4

he was entitled to a jury trial —— which he demanded —— to

determine the validity of the arbitration agreement presumptively

created by his acknowledged receipt of the Plan SPDs.         We disagree.

     “Although the FAA permits parties to demand a jury trial to

resolve factual issues surrounding the making of an arbitration

agreement . . . it is well-established that ‘[a] party to an

arbitration    agreement     cannot   obtain   a   jury   trial   merely   by

demanding one.’”5    Additionally, a party contesting the making of

the arbitration agreement must “make at least some showing that

under prevailing law, he would be relieved of his contractual

obligation to arbitrate if his allegations proved to be true” and

“produce some evidence to substantiate his factual allegations.”6

Accordingly, to receive a jury trial on the issue of the validity

of his consent to the Plan’s arbitration agreement, Lester must (1)

     4
         9 U.S.C. § 4 provides, in pertinent part,

     If the making of the arbitration agreement . . . be in
     issue, the court shall proceed summarily to the trial
     thereof.
     . . . .
     Where such an issue is raised, the party alleged to be in
     default may . . . demand a jury trial of such issue, and
     upon such demand the court shall make an order referring
     the issue or issues to a jury.
     5
       Orr, 294 F.3d at 710 (quoting Dillard v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir. 1992)).
     6
         Dillard, 961 F.2d    at 1154.

                                      5
show that he would not be bound by the Plan’s arbitration provision

if his post-injury acknowledgment of receipt of the SPD was made

under duress, and (2) produce evidence indicating that his post-

injury acknowledgment was made under duress.

       We assume, without deciding, that Lester can make the first of

these showings; i.e, that the agreement to arbitrate evidenced by

his    acknowledged          receipt   of   the   SPD   would     be   invalid   if    he

acknowledged that receipt under duress.                  Even assuming this to be

the case, to be entitled to a jury trial, Lester must also “produce

some       evidence     to     substantiate       his   factual    allegations        [of

duress].”7       He has not done so here.

       As the district court correctly recognized, to prove that he

consented to the Plan’s arbitration provision under duress, Lester

must show that AERT obtained his consent by threatening to do

something that it had no legal right to do.8                Even if we regard all

of Lester’s factual allegations as true, however, he cannot clear

this hurdle.          It is undisputed that an employer that opts out of

Texas’s workers’ compensation system has no duty to compensate an

injured employee (who the employer does not cover under another

employee benefits plan) unless and until that employee successfully

asserts a negligence claim against the employer.9                         AERT could

       7
           Id.
       8
           See Osorno, 76 S.W.3d at 511.
       9
           See Werner v. Colwell, 909 S.W.2d 866, 868 (Tex. 1995).

                                             6
therefore lawfully refuse to pay the medical expenses of any

injured employee who did not accept the Plan terms, and any threat

it made to withhold medical benefits from Lester unless he accepted

those       terms   could   not    constitute    duress.       Whether   Lester’s

condition at the time caused him to feel pressured to accept the

Plan terms is irrelevant to a determination whether AERT’s actions

amounted to duress.         Consequently, Lester was not entitled to have

a jury determine the validity of his agreement to arbitrate, as

evidenced by his acceptance of the Plan terms.

       3.      Other Issues

       Lester also contends that there was no sufficiently reliable

evidence presented to support the district court’s conclusion that

AERT had even adopted the Plan and its arbitration agreement.                  This

contention barely merits comment, as AERT submitted to the district

court complete copies of the Plan, authenticated as business

records, which clearly reflect its adoption and maintenance for all

time    periods     relevant      to   the   instant   case.    Lester   did   not

challenge the authenticity of these submissions in the district

court.

       Lester also asserts that the Plan’s arbitration provision was

invalid because it did not comply with a Texas state law requiring

that an agreement to arbitrate a personal injury claim be agreed to

in writing and signed by each party and its counsel.10                         This

       10
Tex. Civ. Prac. & Rem. Code Ann. §§ 171.002(a)(3) and (c).

                                             7
argument is unavailing.        It is well settled that “the primary

purpose of the [FAA] is to require the courts to compel arbitration

when the parties have so provided in their contract, despite any

state     legislative   attempts   to    limit   the     enforceability    of

arbitration agreements.”11     “To this end, the [FAA] preempts state

statutes to the extent they are inconsistent with that Act.”12

Here, it is clear that the Texas statute on which Lester relies is

inconsistent with, and therefore preempted by, the FAA.13

     Lester next maintains that (1) the one-year limitations period

for requesting arbitration set forth in the Plan expired before the

district    court   ordered   arbitration,   and   (2)    AERT’s   delay   in

providing Lester with a copy of the Plan constituted a waiver of

the right to demand arbitration.        As Lester did not present either

of these arguments in the district court, we will not consider them

on appeal.14

     Finally, Lester complains that his agreement to arbitrate nine

days after his injury was invalid, because Texas law requires that

any waiver of a cause of action for personal injury sustained

     11
       Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271 (Tex.
1992) (citations omitted).
     12
          Id.
     13
       See Freudensprung v. Offshore Technical Services, Inc., 379
F.3d 327, 338 n.7 (5th Cir. 2004) (holding that the FAA preempts
the same state law provisions relied on by Lester).
     14
       Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Discount
Centers, Inc., 200 F.3d 307, 316-17 (5th Cir. 2000).

                                    8
during the course and scope of employment be entered into no

earlier than ten days after the initial report of the injury.             As

Lester also failed to raise this issue in the district court, we

mention it only to point out that an agreement to arbitrate is not

a waiver of a cause of action.

C.   ERISA Preemption of Other State-Law Claims

     Lester    next   insists    that    the   district   court   erred   in

dismissing, as preempted by ERISA, his claims against the Plan

Administrator for breach of fiduciary duty and against AERT for

breach of the duty of good faith and fair dealing.          We disagree.

     ERISA supersedes “any and all State laws insofar as they may

now or hereafter relate to any employee benefit plan”15 but does not

govern an employee benefits plan that “is maintained solely for the

purpose of complying with applicable workmen’s compensation laws.”16

We have held, however, that occupational injury benefit plans

established by non-subscribers to Texas’s workers’ compensation

system —— such as the one at issue here —— are not “maintained

solely for the purpose of complying with applicable workmen’s

compensation laws” and thus are governed by ERISA.17         Consequently,

the district court properly dismissed Lester’s state-law claims

against the Plan Administrator for breach of fiduciary duty and

     15
          29 U.S.C. § 1144(a).
     16
          § 1003(b)(3).
     17
       See Hernandez v. Jobe Concrete Products, Inc., 282 F.3d 360,
363 (5th Cir. 2002).

                                     9
against AERT for breach of the duty of good faith and fair dealing

as preempted by ERISA.     Moreover, we note that Texas courts have

routinely declined to recognize a duty of good faith and fair

dealing flowing from an employer to its employees.18

     Finally, we conclude that, to the extent Lester’s complaint

encompasses a claim for breach of fiduciary duty under ERISA, that

claim is not actionable. Under ERISA, a plan participant may bring

a civil action to enjoin an act that violates any provision of

ERISA or to obtain any “otherwise appropriate equitable relief.”19

Here, Lester seeks only compensatory and punitive damages for

AERT’s delay in paying benefits under the Plan.     The Supreme Court

has held that money damages are not available through the civil

remedy provisions of ERISA.20        Consequently, Lester’s claim for

breach of fiduciary duty against the Plan Administrator is not

cognizable under the limited civil remedies provided by ERISA.

                           III.     CONCLUSION

     For the foregoing reasons, the district courts orders (1)

compelling arbitration of Lester’s negligence claim against AERT,

and (2) dismissing as preempted by ERISA Lester’s claims for breach

     18
       See Fed. Exp. Corp. v. Dutschmann, 846 S.W.2d 282, 284 n.1
(Tex. 1993) (citations omitted).
     19
          29 U.S.C. § 1132(a)(3).
     20
          Mertens v. Hewitt Assoc., 508 U.S. 248, 255-56 (1993).

                                     10
of fiduciary duty against the Plan Administrator and the duty of

good faith and fair dealing against AERT are, in all respects,

AFFIRMED.

                               11