Ted Kubala, Jr. v. Supreme Production Svc, Inc.
830 F.3d 199
| 5th Cir. | 2016Background
- Kubala filed an FLSA collective action on March 9, 2015 alleging unpaid overtime; no collective certification decision issued before appeal.
- Two days later Supreme announced a take‑it‑or‑leave‑it arbitration policy at an employee meeting, stating continued employment required acceptance; the policy included a delegation clause assigning arbitrability questions to the arbitrator.
- The policy’s effective date was the earlier of an employee’s signature or March 13, 2015; Kubala did not sign at the meeting and the district court made no finding whether he later signed.
- Supreme moved to compel arbitration (or dismiss); the district court denied the motion, reasoning no agreement covered preexisting disputes.
- On appeal the Fifth Circuit reviewed de novo, analyzed (1) contract formation under Texas law and (2) whether the agreement contained a valid delegation clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there a valid arbitration agreement formed? | Kubala argued the policy did not form a contract covering his preexisting claim. | Supreme argued Texas law allows an employer to modify at‑will employment by notice and continued work constitutes acceptance. | Held: Yes — notice + continued work constitutes acceptance; a valid arbitration agreement existed. |
| Is the arbitrability of Kubala’s claim for the court to decide or for the arbitrator (i.e., is there an enforceable delegation clause)? | Kubala contended (through contract‑interpretation arguments) the agreement did not apply to preexisting claims; he did not meaningfully dispute the delegation clause. | Supreme pointed to the delegation clause that assigns gateway arbitrability questions to the arbitrator, invoking Rent‑A‑Center. | Held: The clause is a valid delegation clause; arbitrability questions go to the arbitrator. |
| May the court resolve contract‑interpretation arguments about retroactivity in the presence of a delegation clause? | Kubala asked court to interpret coverage/retroactivity. | Supreme argued such interpretive disputes are delegated to arbitrator. | Held: Court must not resolve those interpretive questions — refer them to the arbitrator. |
| Is there an exception that allows court to retain arbitrability when arbitration argument is wholly groundless? | Kubala did not invoke or brief this exception. | Supreme acknowledged only a narrow “wholly groundless” exception exists. | Held: Douglas exception not invoked here; not applicable. |
Key Cases Cited
- Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202 (5th Cir.) (standard of review and formation/interpretation framework for arbitration motions)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S.) (separates who decides arbitrability; delegation concept)
- Rent‑A‑Center, West, Inc. v. Jackson, 561 U.S. 63 (U.S.) (delegation clauses enforceable; arbitrator decides gateway arbitrability)
- In re Halliburton Co., 80 S.W.3d 566 (Tex.) (at‑will employment: notice + continued work = acceptance of modified terms)
- Douglas v. Regions Bank, 757 F.3d 460 (5th Cir.) (narrow exception where arbitration argument is wholly groundless)