Court Opinion

ID: 4519029
Source: CourtListenerOpinion
Date Created: 2020-03-24 18:00:27.540982+00
Date Added: 2024-06-11T08:40:41.999673
License: Public Domain

Case: 19-50353      Document: 00515356507         Page: 1    Date Filed: 03/24/2020

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

                                                                                FILED
                                    No. 19-50353                          March 24, 2020
                                  Summary Calendar
                                                                           Lyle W. Cayce
                                                                                Clerk
STEPHEN HISER, Individually and on behalf of all others similarly situated;
DANA ACE, Individually and on behalf of all others similarly situated,

              Plaintiffs – Appellees,

v.

NZONE GUIDANCE, L.L.C.,

              Defendant – Appellant.

                   Appeal from the United States District Court
                        for the Western District of Texas
                             USDC No. 1:18-CV-1056

Before JONES, CLEMENT, and OLDHAM, Circuit Judges.
PER CURIAM: ∗
       NZone Guidiance, L.L.C., an oil and gas services company, appeals from
the denial of its petition to compel arbitration. See 9 U.S.C. §§ 4, 16(a)(1)(B).
NZone hired Hiser and other workers through RigUp Inc., a workforce bidding
platform. When those workers brought suit against NZone, NZone moved to
compel arbitration based on an agreement between the workers and RigUp.
We review de novo a district court’s denial of a motion to compel arbitration.

       ∗
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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                                  No. 19-50353
Auto Parts Mfg. Miss., Inc. v. King Const. of Houston, L.L.C., 782 F.3d 186, 196
(5th Cir. 2015). “We may affirm the district court’s judgment on any basis
supported by the record.” Hays v. HCA Holdings, Inc., 838 F.3d 605, 608 (5th
Cir. 2016) (internal quotation marks and citation omitted).
      First, NZone argues that the district court erred by answering the
question of arbitrability, instead of reserving it for the arbitrator. The district
court rejected NZone’s argument because, among other reasons, NZone did not
raise it in its opening petition to compel. We agree with the district court that
NZone thereby forfeited the argument. See Jones v. Cain, 600 F.3d 527, 541
(5th Cir. 2010).
      Second, NZone argues the district court should have relied on the
doctrine of equitable estoppel to compel arbitration. Our review is for abuse of
discretion—that means either an erroneous application of law, or an
assessment of evidence that is “clearly erroneous.” Auto Parts Mfg. Miss., Inc.,
782 F.3d at 196. And our review is governed by Texas contract law. See First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Hays, 838 F.3d at
609 n.1.
      In the arbitration context, the Texas Supreme Court has distinguished
between two different kinds of equitable estoppel: concerted misconduct
estoppel and intertwined claims estoppel. See In re Merrill Lynch Tr. Co. FSB,
235 S.W.3d 185, 193–94 (Tex. 2007). And it “disallow[ed] the former while
noting the relevancy and value of the latter.” Hays, 838 F.3d at 611 n.5; see
also Al Rushaid v. Nat’l Oilwell Varco, Inc., 814 F.3d 300, 305 (5th Cir. 2016)
(recognizing that “[t]he concerted misconduct estoppel theory is foreclosed”
under Texas law). NZone’s petition to enforce arbitration was unclear on which
estoppel theory it purported to invoke. But it relied heavily on Grigson v.
Creative Artists Agency L.L.C., 210 F.3d 524 (5th Cir. 2000), a case that
involved concerted misconduct estoppel, see Hays, 838 F.3d at 610–11 n.4.
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                                 No. 19-50353
Since the Texas Supreme Court has rejected that theory, the district court
correctly refused to apply it here. NZone cannot avoid that result by arguing
for the first time on appeal that it really meant to invoke Grigson for
intertwined claims estoppel. See, e.g., Coury v. Moss, 529 F.3d 579, 587 (5th
Cir. 2008).
      Third, NZone argues the district court should have relied on the doctrine
of direct benefits estoppel to compel arbitration. “This estoppel theory
precludes a plaintiff from seeking to hold the non-signatory liable based on the
terms of an agreement that contains an arbitration provision while
simultaneously asserting the provision lacks force because the defendant is a
non-signatory.” Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624,
637 (Tex. 2018). But in Texas, “when the substance of the claim arises from
general obligations imposed by state law . . . or federal law, direct-benefits
estoppel is not implicated even if the claim refers to or relates to the contract
or would not have arisen but for the contract’s existence.” Id. (internal
quotation marks and citation omitted). The plaintiffs here are individual
workers who signed agreements with RigUp and performed services for NZone.
Their claims against NZone arise under the federal Fair Labor Standards Act.
So any “liability arises from general obligations imposed by [that] law.” In re
Weekley Homes, L.P., 180 S.W.3d 127, 132 (Tex. 2005). Because the plaintiffs’
overtime claims are based on a right conferred by federal law, the plaintiffs do
not seek a benefit from their agreements with RigUp, and NZone could not
compel arbitration under direct benefits estoppel.
      Fourth and finally, NZone argues that it is a third-party beneficiary of
the agreements between RigUp and the individual workers and can thus
enforce the arbitration provision. Under Texas law, “[t]here is a presumption
against conferring third-party beneficiary status on noncontracting parties.”
Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 420 (Tex. 2011)
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                                 No. 19-50353
(internal quotation marks and citation omitted). “[O]nly a clear expression of
the intent to create a third-party beneficiary can overcome that presumption.”
First Bank v. Brumitt, 519 S.W.3d 95, 103 (Tex. 2017). “It is not enough that
the third party would benefit—whether directly or indirectly—from the
parties’ performance, or that the parties knew that the third party would
benefit.” Id. at 102. Instead, the party seeking to establish third-party-
beneficiary status must show that contracting parties “intended to grant the
third party the right to be a ‘claimant’ in the event of a breach.” Id. Courts
making such a determination consider only the language of the contract,
construed as a whole, and any doubt is resolved against conferring such status.
Id. at 102–03.
      Here, the arbitration provision is framed in terms of “resolving disputes
between you and RigUp.” It says “[a]ny arbitration between you and RigUp
will be settled under the Federal Arbitration Act,” and it says that either “you
or RigUp may commence an arbitration proceeding.” (Emphases added). That
language does not confer on NZone the right to enforce the arbitration
agreement.
      AFFIRMED.

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