Sanchez v. Nitro-Lift Technologies, L.L.C.
762 F.3d 1139
| 10th Cir. | 2014Background
- Nitro‑Lift required three Oklahoma‑based employees (Sanchez, Schneider, Howard) to sign a "Confidentiality/Non‑Compete Agreement" containing a very broad arbitration clause: "Any dispute, difference or unresolved question between Nitro‑Lift and the Employee shall be settled by arbitration."
- The signed agreement otherwise addresses confidentiality, non‑competition, and return of corporate property; it references absent sections (4, 18) and contains boilerplate and a severability clause tied to Section 1, not the arbitration clause.
- Plaintiffs sued in federal court under the FLSA and Oklahoma law for unpaid overtime and sought damages, fees, and injunctive relief; Nitro‑Lift moved to dismiss and compel arbitration (or stay), waiving the contract’s Houston forum requirement.
- The district court denied Nitro‑Lift’s motions, holding the arbitration clause did not cover wage claims because the agreement’s subject matter was limited to confidentiality/non‑compete. Nitro‑Lift appealed; the Tenth Circuit consolidated interlocutory appeals.
- The Tenth Circuit treated the arbitration clause as broad, applied the presumption of arbitrability, and held the FLSA wage claims fall within the clause’s scope, reversing the district court and remanding for further consideration of enforceability issues (e.g., fee‑shifting, unaffordability, severability, alleged illusoriness).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of arbitration clause — do FLSA wage claims fall within it? | Agreement concerns only confidentiality/non‑compete; plaintiffs never agreed to arbitrate wages. | Clause is extremely broad ("any dispute between" parties) and covers wage claims. | Clause is broad; presumption of arbitrability applies; FLSA wage claims fall within scope. |
| Whether arbitration of statutory claims would allow effective vindication of FLSA rights given fee/cost allocation | Fee/cost‑splitting will deter employees and deny effective vindication of FLSA rights; plaintiffs submitted affidavits of inability to pay. | Employer points to waivers/offers to mitigate costs and asks severance of unlawful provisions. | Not decided on appeal; remanded for district court to evaluate in light of Shankle/Green Tree and to permit proof of prohibitive costs. |
| Whether employer’s post‑hoc waiver of unenforceable provisions makes the agreement illusory | Employer’s selective waivers demonstrate an ability to alter enforcement and should not salvage an unlawful agreement. | Employer did not reserve an unfettered unilateral right to change the arbitration clause. | Not decided on appeal; remanded for district court to address illusoriness/severability in first instance. |
| Venue/jurisdiction to compel arbitration where clause specified Houston | Plaintiffs: Ansari bars district court from compelling arbitration outside agreed district. | Nitro‑Lift waived the Houston forum; parties failed to raise venue objection below. | Venue rule in Ansari is non‑jurisdictional; parties may waive it; no procedural bar here. |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (Sup. Ct.) (arbitration agreements enforceable and to be "rigorously enforced" according to their terms)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (Sup. Ct.) (resolving doubts about arbitrability in favor of arbitration)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (Sup. Ct.) (statutory claims may be arbitrated so long as arbitration permits effective vindication of statutory rights)
- Green Tree Fin. Corp.–Ala. v. Randolph, 531 U.S. 79 (Sup. Ct.) (party resisting arbitration must show likelihood of prohibitive arbitration costs to defeat enforcement)
- Cummings v. FedEx Ground Package Sys., Inc., 404 F.3d 1258 (10th Cir.) (three‑part test for whether dispute falls within arbitration clause: classify clause; narrow clause → on‑face vs. collateral; broad clause → presumption of arbitrability)
- Shankle v. B–G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230 (10th Cir.) (arbitration fee‑sharing that effectively bars access to arbitration makes agreement unenforceable for statutory claims)
- Ansari v. Qwest Commc’ns Corp., 414 F.3d 1214 (10th Cir.) (section 4 forum language construed as venue rule restricting courts from ordering arbitration in another district)
- 1mage Software, Inc. v. Reynolds & Reynolds Co., 459 F.3d 1044 (10th Cir.) (Ansari’s rule is venue, not jurisdictional; parties may waive objection to venue)