Court Opinion

ID: 64556
Source: CourtListenerOpinion
Date Created: 2010-04-26 05:17:01+00
Date Added: 2024-06-11T17:20:30.247720
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                   Fifth Circuit

                                                                            FILED
                                                                         January 12, 2009

                                       No. 07-30794                   Charles R. Fulbruge III
                                                                              Clerk

BRYAN EDWARD BAUDOIN,

                                                  Plaintiff-Appellant,
v.

MID-LOUISIANA ANESTHESIA CONSULTANTS, INC., APMC; FRANCIS
X. ROBICHAUX; JOSEPH GERALD PATTON; JEFFREY T. RAPP; MARK
G. LEMARIE,

                                                  Defendants-Appellees.

                   Appeal from the United States District Court
                      for the Western District of Louisiana
                             USDC No. 1:07-CV-751

Before REAVLEY, STEWART, and OWEN, Circuit Judges.
PER CURIAM:*
       Plaintiff-Appellant Dr. Bryan Edward Baudoin appeals the district court’s
grant of Mid-Louisiana Anesthesia Consultants, Inc., APMC’s (“MLAC”) Federal
Rule of Civil Procedure 12(b)(3) motion to dismiss for improper venue as well as
the district court’s refusal to exercise supplemental jurisdiction over his state
law claims against Dr. Francis X. Robichaux, Dr. Joseph Gerald Patton, Dr.

       *
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
                                  No. 07-30794

Jeffrey T. Rapp, and Dr. Mark G. Lemarie (“individually-named Defendants”),
some of the principals in MLAC. We REVERSE and REMAND.
                  FACTUAL AND PROCEDURAL HISTORY
      On March 29, 2004, Baudoin, a board certified anesthesiologist, and MLAC
entered into a physician employment agreement (“PEA”) for a term of two years
commencing on May 3, 2004. Section 4 of the PEA specified that Baudoin’s
compensation would be $25,000 per month ($300,000 per year). Section 8(a) of
the PEA stated that Baudoin “shall be offered partnership after two complete
years of employment.” Section 9 prefaced with the phrase “Notwithstanding
anything in Section 8 hereof to the contrary . . . ”, and contained provisions with
respect to termination of the PEA. Section 10 specified that if Baudoin was
employed by the Armed Forces, Baudoin and MLAC were to use their best efforts
to permit Baudoin to render services to MLAC as long as such an arrangement
was feasible, and that if Baudoin’s service in the Armed Forces prevented or
prohibited him from rendering full-time service to MLAC, MLAC had the right
to negotiate accommodations. This section also explained that in the event the
parties were unable to come to a mutual accommodation, the PEA could be
terminated. Section 13, entitled “Severability” stated:
      Should any part of this Agreement be declared invalid, such shall
      not affect the validity of any remaining portion and any such
      remaining portion shall continue in force and effect as if this
      Agreement had been executed with such invalid portion eliminated,
      and it is hereby declared the intention of the parties hereto that
      they would have executed the remaining portion of this Agreement
      without including any such part or portion which may or any reason
      hereafter be declared invalid. Further, if the validity of any
      portion of this Agreement should be contested as invalid or
      unenforceable by any party hereto, all parties h [sic] hereby
      agree to submit any such dispute to binding arbitration
      under the rules of the American Arbitration Association to be
      held at Alexandria, Louisiana. The purpose of such arbitration
      shall include reformation of this Agreement, retroactive in effect, if
      possible, to make the Agreement valid, binding, and enforceable, in

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                                No. 07-30794

      keeping with the terms and spirit of the original Agreement as
      much as possible.

(emphasis added). At the time Baudoin entered into the PEA with MLAC, he
was a member of the United States Army Reserve.
      After his employment with MLAC commenced, Baudoin was counseled
several times concerning his lack of productivity for MLAC, and was informed
by the management of MLAC that if his productivity did not increase, he would
not make partner. In the middle of November 2005, he was called to active duty
with the United States Army at Walter Reed Army Medical Center for a ninety
day tour of duty commencing on January 19, 2006. On January 13, 2006, the
last day that Baudoin worked at MLAC prior to leaving for his active duty
assignment, Rapp informed Baudoin “that the partners felt [he] wasn’t carrying
[his] load and [he] wasn’t going to make partner.”
      When Baudoin returned from active duty, Patton told him that he was not
going to make partner at the end of the term of the PEA, but that MLAC wanted
Baudoin to sign a contract extension. During June 2006, Baudoin met with
Robichaux, who informed Baudoin that while he would not be elevated to
partner, his salary would be raised so that he would receive 85% of the
compensation physicians who were shareholders of MLAC received. Under the
new arrangement, Baudoin would earn approximately $510,000 per year. Even
though Baudoin refused to sign a new two-year PEA, he began receiving and
accepting the increased salary provided under the new contract beginning in
August 2006. Baudoin resigned on December 1, 2006, and filed suit in federal
district court against MLAC and the abovenamed physicians on April 30, 2007.
      In his complaint, Baudoin alleged that MLAC breached the terms of
Section 8(a) of the PEA by not granting him partnership in MLAC. He also
alleged that MLAC and the individually-named Defendants violated the
Uniformed Services Employment and Reemployment Rights Act (“USERRA”),

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                                  No. 07-30794

38 U.S.C. § 4301, et seq., by denying him partnership in MLAC due to his status
as a member of the U.S. military. Finally, Baudoin also brought a state tort
claim against the individually-named Defendants for intentional interference
with contract. Defendants responded by filing a Rule 12(b) motion to dismiss on
the grounds that Section 13 of the PEA dictated that the disputes at issue were
subject to binding arbitration. On July 27, 2007, the district court issued a
memorandum ruling and a judgment. In its ruling, the district court held that
the parties had entered into a valid agreement to arbitrate, and that the dispute
between the parties fit squarely within the parameters of the arbitration clause.
The district court granted Defendants’ motion and dismissed without prejudice
Baudoin’s claims for breach of the PEA and violation of USERRA, finding that
they were subject to arbitration. The district court also dismissed without
prejudice Baudoin’s state law intentional interference with contract claims
against the individually-named Defendants, declining to exercise its
supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over the remaining state
law claims that were not subject to arbitration. Baudoin timely filed his notice
of appeal.
                           STANDARD OF REVIEW
      We review a federal district court’s interpretation of contracts de novo. See
Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 754 (5th Cir. 1993)
(internal citation omitted). Similarly, we review a district court’s ruling on a
motion to compel arbitration de novo. Garrett v. Circuit City Stores, Inc., 449
F.3d 672, 674 (5th Cir. 2006) (internal citation omitted).
                                 DISCUSSION
      The central issue on appeal is whether Section 13 of the PEA that Baudoin
and MLAC entered into compels arbitration of the present dispute. Baudoin
maintains that his claims against MLAC are not subject to arbitration, and
urges this Court to reverse the district court’s determination to the contrary.

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                                  No. 07-30794

Defendants assert that the district court’s dismissal of Baudoin’s claims for
breach of contract and violation of USERRA should be affirmed. We first
address the scope of the arbitration provision.      We then turn to whether
Baudoin’s USERRA claim is subject to the arbitration provision, noting that the
resolution of this claim determines whether the court has supplemental
jurisdiction over Baudoin’s related state law claims. Finally, we determine
whether Baudoin’s breach of contract claim is subject to the arbitration
provision.
Scope of the Arbitration Clause
      As the district court properly recognized, when determining whether a
dispute is subject to arbitration, a court must engage in a two-step process.
First, it must determine whether a valid agreement to arbitrate exists between
the parties. Fleetwood Enters. Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir.
2002) (internal citation omitted). If so, it must then determine whether the
dispute at hand fits within the parameters of the arbitration agreement. Id.
The parties do not disagree that they executed a valid arbitration agreement;
therefore we turn to the second step.
      Federal courts have long adhered to a policy of favoring arbitration. Moses
H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)
(“[T]he Courts of Appeals have . . . consistently concluded that questions of
arbitrability must be addressed with a healthy regard for the federal policy
favoring arbitration. We agree.”).    Likewise, the Louisiana Supreme Court has
written:
      . . . even when the scope of an arbitration clause is fairly debatable
      or reasonably in doubt, the court should decide the question of
      construction in favor of arbitration. The weight of this presumption
      is heavy and arbitration should not be denied unless it can be said
      with positive assurance that an arbitration clause is not susceptible
      of an interpretation that could cover the dispute at issue. Therefore,
      even if some legitimate doubt could be hypothesized, this Court, in

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                                  No. 07-30794

      conjunction with the [United States] Supreme Court, requires
      resolution of the doubt in favor of arbitration.

Aguillard v. Auction Mgmt. Corp., 908 So. 2d 1, 18 (La. 2005). This Court has
also distinguished between “narrow” and “broad” arbitration clauses. Hornbeck,
981 F.2d at 754-55. Narrow arbitration clauses are ones where the language of
the clause requires the arbitration of disputes “arising out of” the agreement,
whereas broad arbitration clauses are those where the language of the clause
requires arbitration of any dispute that arises out of or relates to” the
agreement, or disputes that are “in connection with” the agreement.” Coffman
v. Provost * Umphrey LLP, 161 F. Supp. 2d 720, 725 (E.D.Tex. 2001). We have
previously explained that “if the clause is narrow, the matter should not be
referred to arbitration or the action stayed, unless the court determines that the
dispute falls within the clause.” Hornbeck, 981 F.2d at 755. With this precedent
in mind, we hold that Section 13 of the PEA is a narrow arbitration clause that
does not compel arbitration of Baudoin’s claims of breach of contract and
violation of USERRA against MLAC.
      The district court erred by looking at the language in the arbitration
clause in isolation, without considering the context under which that language
appears in the PEA. Here, the arbitration clause is only contained within the
severability section, and when reading the section as a whole, we are persuaded
that this is a narrow arbitration clause that applies only to disputes regarding
the validity or enforceability of any portion of the contract or disputes regarding
reformation. MLAC does not dispute that USERRA renders certain provisions
of the contract invalid and unenforceable. MLAC contends only that Baudoin
entered into a new, subsequent oral agreement. MLAC is not seeking to enforce
or reform, for example, paragraph 10 of the original written contract, which
gives MLAC the right to terminate Baudoin’s employment if the parties cannot

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                                    No. 07-30794

reach an agreement to accommodate one another if service in the Armed Forces
prevents Baudoin from rendering full-time services to MLAC.
      The district court stated that construing the arbitration clause narrowly
would “produce[ ] an absurd result and deprive[ ] the preceding sentence
concerning severability and the survival of the residual contract almost
meaningless.” We disagree. For example, the sentence directly following the
arbitration clause states: “The purpose of such arbitration shall include
reformation of this Agreement, retroactive in effect, if possible, to make the
Agreement valid, binding, and enforceable, in keeping with the terms and spirit
of the original Agreement as much as possible.”
      This Court interprets the section entitled Severability as allowing
arbitration only of claims that deal with the validity of a portion of the contract
or the need for reformation. The abovementioned sentence allows the arbitrator,
after determining the validity of the section, to retroactively reform the PEA,
taking into account its determination of the validity of the section. Without this
sentence, the arbitrator could only declare portions of the agreement valid or
invalid, but could not go the further step of actually reforming the agreement to
make it valid, binding, and enforceable. The sentence serves a function of
allowing the agreement to remain valid, even if a portion of the agreement is
found to be invalid. The sentence does not create a broad arbitration provision
that extends the scope of the arbitration proceedings to disputes beyond the
validity of a section of the PEA.
      Defendants urge this Court to adopt a broad reading of the arbitration
clause, but the plain language of the PEA prevents such a result. As noted
above, the language preceding and following the arbitration clause in Section 13
only addresses the issue of validity; to interpret the arbitration clause to include
Baudoin’s claims of violation of USERRA and beach of contract would go against
the clear reading and meaning of Section 13. Similarly, Defendants’ attempts

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                                  No. 07-30794

to convert Baudoin’s claims into issues of validity is unavailing. The Defendants
do not deny that parts of paragraph 10 are rendered unenforceable, nor do they
seek to reform the PEA, and accordingly, there is no dispute regarding validity
or reformation to arbitrate.
USERRA Claim
      The Defendants make two separate arguments as to why Baudoin’s
USERRA claim is subject to the arbitration provision contained in the PEA.
      The Defendants first hinge their argument on the following statement in
Baudoin’s brief on appeal: “Paragraph 10 of the PEA is totally irrelevant since
USERRA supercedes any contract or agreement that reduces, limits or
eliminates in any manner any right of benefit provided under the federal
legislation.” However, we understand Baudoin as asserting that paragraph 10
is essentially inapplicable here because of the primacy of USERRA in resolving
his claims. As noted above, the Defendants do not dispute that USERRA
overrides portions of the PEA that might otherwise provide a defense to
Baudoin’s breach of contracts claims. Therefore there is no “dispute” or contest
within the meaning of the PEA that is subject to the arbitration provision.
      This Court affirmed a district court decision in Coffman v. Provost *
Umphrey Law Firm, 161 F. Supp. 2d 720 (E.D. Tex. 2001). See Coffman v.
Provost Umphrey LLP, 33 Fed. Appx. 705 (5th Cir. 2002). In Coffman, the
district court applied an arbitration clause narrowly in the context of a statutory
sex-based discrimination claim.      The district court held that because the
plaintiff’s “statutory claims could be maintained independently of the contract,
such claims do not fall within the scope of the arbitration clause.” Coffman, 161
F. Supp. 2d at 732. Here, as in Coffman, portions of the Employment Agreement
may be relevant in litigating the statutory claim, but Baudoin may maintain his
USERRA claims independently of the PEA. As explained by the Fourth Circuit,
while parties may agree to arbitrate all disputes arising out of an employment

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                                  No. 07-30794

relationship, including statutory claims, the parties must evidence their intent
to do so by enacting a sufficiently broad arbitration agreement. See Brown v.
Trans World Airlines, 127 F.3d 337, 341-42 (4th Cir. 1997). As discussed above,
the arbitration provision in the PEA is narrow and deals only with claims that
portions of the contract are invalid or unenforceabe.
      The Defendants also claim that Baudoin’s USERRA claim is subject to
binding arbitration pursuant to Garrett v. Circuit City Stores, Inc., 449 F.3d 672
(5th Cir. 2006). Garrett is distinguishable from this case. Ultimately, this Court
held that USERRA claims do not override the enforcement of an arbitration
agreement. The arbitration clause, however, at issue in Garrett was broad and
governed all “claims arising out of cessation of employment . . . .” Id. at 674.
Thus, the Court found that USERRA “does not conflict with the FAA’s policy to
encourage the procedural remedy of arbitration.” Id. at 678. Garrett stands for
the proposition that USERRA claims may be arbitrated, but it is distinguishable
from this case because the arbitration clause found in the PEA has a narrow
scope that does not extend to claims on issues other than disputes as to the
validity of provisions.
      Because the Court concludes that the USERRA claim is not subject to
arbitration, we hold that the district court has federal question jurisdiction over
this claim. As a result, the district court may exercise supplemental jurisdiction
over Baudoin’s breach of contract claims, and we now consider whether that
claim is subject to arbitration under the PEA.
Breach of Contract Claim
      In the Defendants’ Motion to Dismiss, they conclusorily assert that Section
8 is vague and ambiguous, and follow this allegation with a legal conclusion that
this necessarily renders the section unenforceable. On appeal, the Defendants’
claim that Baudoin’s claim to partnership is invalid or unenforceable because
MLAC is a corporation and not a partnership. The Defendants then argue that

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                                  No. 07-30794

the word partnership in Section 8 does not mean “equal partnership.” While the
Defendants do not use the word “ambiguous” in their brief on appeal, it is clear
from their arguments that they are alleging that the meaning of the word
partnership in the PEA is unclear and ambiguous. The Defendants state “there
was no meeting of the minds with respect to the nature and scope of the offer of
‘partnership.’” We find this to be unpersuasive. The Defendants and Baudoin
entered into, and operated under, an employment contract for the requisite two
years, although the Court notes that Baudoin spent part of this time working for
the United States Army at Walter Reed Army Medical Center.             See Vishal
Hospitality, LLC. v. Choice Hotels Intern., Inc. 939 So. 2d 414, 418 (La. App. 1
Cir. 2006) (stating "it is undisputed that the parties were operating under a
franchise agreement, and did so for five years. . . . Clearly, there was a meeting
of the minds as to the existence of a franchisee-franchisor relationship. While the
exact terms of the agreement may be at issue, its existence is not.").
Furthermore, the Defendants present no Louisiana or federal case law in
support for the propositions that (1) the language actually is vague and/or
ambiguous, and (2) that vague and/or ambiguous language necessitates a finding
that the provision is unenforceable or invalid.
      Under Louisiana state law, if the district court were to find the word
“partner” ambiguous, the district court may then admit parole evidence to
determine the parties intention.      Starke Taylor & Sons, Inc. v. Riverside
Plantation, 301 So. 2d 676, 679 (La. App. 3 Cir. 1974) (stating that “if the
language of a written agreement is on its face ambiguous, the courts can
consider parole evidence and all of the surrounding circumstances in an effort
to determine the true intent of the parties”). Ambiguous language is not
necessarily found to be invalid on its face. See, e.g., RCC Props., L.L.C. v.
Wenstar Props., L.P., 930 So. 2d 1233, 1237 (La. App. 2 Cir. 2006) (disagreeing
“with the trial court’s finding that [a] servitude was invalid because the method

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                                  No. 07-30794

of measuring ‘primary business’ described by the servitude was ambiguous”).
Instead, courts are charged with interpreting the ambiguous language in the
contract to determine the intent of the parties.          If a bare assertion by
Defendants, without more, that whatever contract provision Baudoin sued under
is unenforceable controlled our decision, Defendants would be able to bring any
suit related to this contract into arbitration. Such a loophole would turn the
narrow arbitration clause in this agreement into a broad one, rendering the
actual language and structure of this narrow arbitration provision meaningless.
We decline to do so.
      This Court has explained that “as a matter of federal law, arbitration
agreements and clauses are to be enforced unless they are invalid under
principles of state law that govern all contracts. Therefore, ‘generally applicable
contract defenses such as fraud, duress, or unconscionability, may be applied to
invalidate arbitration agreements . . . .’” Iberia Credit Bureau, Inc. v. Cingular
Wireless LLC, 379 F.3d 159, 166 (5th Cir. 2004). The Defendants do not claim
that any section of the PEA was enacted as a result of fraud or duress, and the
Defendants do not claim that any section of the PEA is unconscionable.
Louisiana caselaw analyzing arbitration provision disputes demonstrates that
“invalidity” includes, yet is not limited to, contracts that contain provisions that
are (1) unconscionable or (2) possess features of both adhesionary formation and
unduly harsh substances. See Iberia Credit, 379 F.3d at 166-67 (citing Simpson
v. Grimes, 849 so. 2d 740 (La. App. 3 Cir. 2000); Andry v. New Orleans Saints,
820 so. 2d 602, 603-04 (La. App. 5 Cir. 2002). While this Court does not find that
these are the only instances when a contract provision may be found invalid or
unenforceable, these cases provide the Court with guidance on what types of
contract provisions are traditionally found to be invalid under Louisiana
caselaw. The Defendants’ attempts to allege invalidity, from language that is
at most ambiguous, must fail.

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                                 No. 07-30794

      Having determined that Baudoin’s claims are not subject to arbitration,
we also hold that the district court erred when it dismissed without prejudice
Baudoin’s claims of intentional interference with contract against the
individually-named Defendants.
                               CONCLUSION
      For the foregoing reasons, the judgment of the district court is REVERSED
and we REMAND this case for proceedings consistent with this opinion.

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