CALEB NELSON v. CARL BLACK CHEVROLET OF NASHVILLE, LLC, (d/b/a) CARL BLACK CHEVROLET
No. 3:17-cv-00687
UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION
Chief Judge Crenshaw
This case presents several interesting questions, and, so far as the Court can tell, one novel issue regarding the scope and enforceability of an arbitration agreement. They arise in the context of a “Motion for Stay Pending Arbitration” (Doc. No. 16) filed by Carl Black Chevrolet of Nashville, LLC (“Carl Black“), which Caleb Nelson (“Nelson) opposes (Doc. No. 20). For the reasons that follow, the Motion for Stay will be granted.
I. Factual Background
Only a few undisputed facts are necessary to place the parties’ arguments in context. On January 6, 2016, Nelson began working as a Sales Manager for Carl Black. A week or so earlier, he signed various employment related documents, including an Agreement to Arbitrate Claims (“Agreement“).
The Agreement contained the following provision regarding its scope:
Any claim that otherwise would have been decidable in a court of law - whether under local, state, or federal law or otherwise - will instead be heard by arbitration. The claims covered by this Agreement include, but are not limited to, the enforceability and/or interpretation of this Agreement; whether a claim is arbitrable;
. . . claims for discrimination or harassment . . . claims for “whistleblowing” or retaliation . . . ; and claims for violation of any federal, state, or other governmental law, statute, regulation or ordinance.
(Doc. No. 17-1, Agreement ¶ 5(A)). The Agreement also provided that it “shall survive the termination of the Employee‘s employment, and may only be revoked or modified in a written document which expressly refers to the ‘Agreement to Arbitrate Claims,’ and which is signed by both the Employee and by an authorized representative of the Company.” (Id. at ¶ 10.) As for consideration, the Agreement provided:
In making this Agreement, Employee recognizes that employment with and continued employment with the Company and the Company‘s agreement to arbitrate claims against Employee serve as good and valuable consideration for the mutual obligations contained herein. Employee enters into this Agreement knowingly and voluntarily. Employee agrees that final and binding arbitration will lead to more expedient and cost-effective resolution of any claim against the company.
(Id. ¶ 2).
Nelson resigned on May 2, 2016, but returned as the General Sales Manager on May 14, 2016. The new position had significantly more responsibility (including supervisory authority over the sales force), and a commensurate increase in pay. Nelson did not sign a new arbitration agreement upon his return to work, and claims he was not informed that the Agreement signed when he first went to work some five to six months earlier would cover his renewed employment at Carl Black.
On July 30, 2016, Nelson was terminated. He alleges his termination was in retaliation for his whistleblowing regarding the sale of vehicles under active safety recalls. He also claims that he was retaliated against on the basis of his race and because he opposed the hostile work environment to which he had been subjected. He filed suit in this Court under
Carl Nelson contends that all of the claims advanced by Nelson are encompassed by the Agreement. Accordingly, and after filing an Answer, it filed the present Motion pursuant to the
II. Legal Discussion
So far as relevant, the FAA provides that a “written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
There is a strong federal policy in favor of arbitration, Huffman v. Hilltop Cos., LLC, 747 F.3d 391, 394 (6th Cir. 2014), and “[i]t is well-established that any doubts regarding arbitrability should be resolved in favor of arbitration.” Glazer v. Lehman Bros., 394 F.3d 444, 451 (6th Cir. 2005) (citing Moses H. Cone Mem‘l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). Further, “[t]he FAA ensures that arbitration agreements are as enforceable as any other contract.” Nat‘l Labor Relations Bd. v. Alternative Entm‘t, Inc., 858 F.3d 393, 400-01 (6th Cir. 2017) (citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)).
Because “[t]he FAA does not . . . make arbitration agreements more enforceable than other contracts, however, they “may be voided for the same reasons for which any contract may be invalidated, including forgery, unconscionability, and lack of consideration.” Glazer, 394 F.3d 444,
Nelson raise both types of challenges here. He claims the Agreement is unenforceable due to the lack of mutual assent upon his return to work at Carl Black. He also argues that his MAP- 21 claim is outside the scope of the Agreement. Prior to reaching those substantive issues, however, the Court must address a procedural argument that Nelson also raises.
A. Waiver
Nelson argues that Carl Black has waived the right to arbitrate through its litigation conduct by failing to raise the arbitration issue as an affirmative defense in its Answer. His sole support is the following language from the Sixth Circuit‘s decision in Johnson Assoc. Corp. v. HL Operating Corp., 680 F.3d 713 (6th Cir. 2012):
[A] defendant‘s failure to raise arbitration as an affirmative defense shows his intent to litigate rather than arbitrate. The filing of an answer is, after all, the main opportunity for a defendant to give notice of potentially dispositive issues to the plaintiff; and the intent to invoke an arbitration provision is just such an issue.
Id. at 717. That language, however, appeared in the context of a discussion about whether arbitration was an affirmative defense under
Even though the Sixth Circuit in Johnson ultimately found the right to arbitrate was waived, it did so where, not only had defendant failed to raise it in the answer, defendant asserted a counterclaim for breach of contract, engaged in formal settlement negotiations, and “actively scheduled and requested discovery, including depositions,” that resulted in the production by plaintiff of “1,151 pages of responsive documents and a 4.11 gigabyte hard drive full of responsive information.” Id. at 719-720. In arriving at its conclusion, the Sixth Circuit noted that “‘waiver of the right to arbitration is not to be lightly inferred,‘” and reiterated that “‘a party may waive an agreement to arbitrate by engaging in two courses of conduct: (1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) “delaying its assertion to such an extent that the opposing party incurs actual prejudice.“‘” Id. at 717 (citation omitted) (collecting cases).
Apart from a failure to raise the arbitration issue in the Answer, this case bears no resemblance to Johnson. Even before suit was filed, and while the matter was before the Equal Employment Opportunity Commission, Carl Black‘s counsel sent Nelson‘s counsel an email that stated: “As you know, it is Carl Black‘s position that the arbitration agreement is enforceable and Carl Black intends to enforce it.” (Doc. No. 21-1 at 3). At the initial case management conference held just two months after the Complaint was filed and less than one month after the Answer, Carl Black raised the issue of arbitration and inquired whether it should move to amend the Answer or file a Motion to Compel Arbitration. Counsel was informed by the Magistrate Judge that “it would
The record before the Court simply does not allow for a finding that Carl Black took action “completely inconsistent” with an intent to enforce the Agreement, or that Nelson has suffered any “actual prejudice” as a result of the month an a half delay between the filing of the Answer and the Motion to Stay. See Precision Builders, Inc. v. Olympic Grp., L.L.C., 642 F. App‘x 395, 400 (5th Cir. 2016) (collecting cases for the proposition that “failing to assert the right to demand arbitration in an answer or counterclaim does not necessarily waive the right, standing alone“); Zuckerman Spaeder, LLP v. Auffenberg, 646 F.3d 919, 923 (D.C. Cir. 2011) (stating that “[a] defendant who delays seeking a stay pending arbitration until after his first available opportunity might still prevail on a later stay motion provided his delay did not prejudice his opponent or the court“); Healthcare Mgmt. Sys., Inc. v. Syntel Ltd., 2013 WL 3834043, at *1 (M.D. Tenn. July 24, 2013) (distinguishing Johnson, collecting cases for the proposition that “delay of five months is not extraordinary,” and finding no waiver even though request was made four months after case was removed and some discovery had been conducted).
Accordingly, the Court finds no waiver and turns to the merits of Carl Black‘s Motion.
B. Enforceability
Nelson argues that the Agreement is unenforceable due to the lack of mutual assent because he did not re-sign the Agreement or enter into a new one when he returned to Carl Black to serve as its General Sales Manager. In fact, he contends that “the parties never discussed arbitration, an
In Frank, plaintiff went to work for 84 Lumber in July 1999, at which time she filled out assorted employment paperwork and signed an arbitration agreement that covered “[a]ny statutory or common law disputes or controversies” arising out of her employment. Id. at *2. She was terminated in May 2000, but deemed eligible for rehire. When plaintiff was rehired in August 2000, she did not sign another arbitration agreement. The “contested issue [wa]s whether the arbitration agreement from 1999 [could] be applied to claims arising when there was no separate arbitration agreement for [plaintiff‘s] second period of employment.” Id. at *4. Noting, “[a]t bottom, the question is one of contract interpretation,” the court found that “the objective indications of [the parties‘] intentions - in words or deeds” did not suggest that the arbitration agreement would continue. Id. at *6.
Noticeably absent from the discussion in Frank is any indication that the arbitration agreement contained language stating that it survived the termination of employment, as is the case here. Such language, however, was present in Elsisy v. Pep Boys-Manny, Moe & Jack, 2008 WL 5262720, at *3 (M.D.N.C. Dec. 17, 2008), where the court found an arbitration agreement binding, even though plaintiff had only signed the agreement when he was hired at the Pep-Boys store in Raleigh, North Carolina, but not when he was rehired at the company‘s Greensboro store. Even so, and while Elsisy is more analogous than Frank, it nevertheless is distinguishable because the arbitration agreement contained a clause - not present here - that stated if the employee was subsequently re-employed by the company, the agreement would remain in full force and effect.
There is a case, cited by neither party, that is virtually on all fours with the facts at hand. In Cummins v. Town & Country Ford, Inc., 2011 WL 1403179, at *1 (S.D. Ind. Apr. 13, 2011), plaintiff was hired as a finance manager at Town and Country in 2005, at which time he signed an arbitration agreement. He left that position in 2008, but returned to the dealership as the Sales Manager several month later. He did not sign an arbitration agreement upon his return and, claims it was never discussed. In response to the dealership‘s motion to compel arbitration, plaintiff argued that he “was not bound by the arbitration agreement because it only applied to his first term of employment and he never signed or was provided with a second arbitration agreement during his second term of employment.” Id. at *2. Rejecting that argument, the court wrote:
The pertinent parts of the Agreement state:
This Policy shall constitute the entire agreement between the Employee and Company for the resolution of Covered Claims. The submission of an application, acceptance of employment or the continuation of employment by an individual shall be deemed to be acceptance of the dispute resolution program. No signature shall be required for the policy to be applicable.
REQUIREMENTS FOR CHANGE IN AGREEMENT. This Agreement to arbitrate shall survive the termination of my employment. It can only be revoked or modified by mutual consent evidenced by a writing signed by both parties that specifically states an intent to revoke or modify this Agreement.
In this case, as stated, the policy is the entire agreement between the parties. When [plaintiff] returned to employment with Town & Country, this constituted “acceptance of employment” or “the continuation of employment” under the Agreement. No additional signature was required to accept the “mutual promise to resolve claims.” The language specifically provides that the Agreement “survives” the termination of employment, and there is no evidence that the Agreement was revoked by “mutual consent evidenced by a writing signed by both parties” as called for in the Agreement.
Similarly in this case, the parties signed an agreement in which they agreed (1) “to the final and binding resolution by arbitration of any claim“; (2) “that employment with and continued employment with the Company . . . serves as good and valuable consideration“; (3) that the Agreement “shall survive the termination of the Employee‘s employment“; and (4) that the Agreement could “only be revoked or modified in a written document . . . signed by both the Employee and an authorized representative of the company.” (Doc. No. 17-1 ¶¶ 1, 2, 10). Given that language, and further given “[t]he fact that the plaintiffs face a difficult task in rebutting the strong presumption in favor of arbitration ‘by clear implication’ and with ‘positive assurance,‘” Huffman, 747 F.3d 395, the Court finds the Agreement is valid and enforceable, notwithstanding that it was not re-signed or specifically renewed when Plaintiff resumed his employment with Carl Black.
In reaching this conclusion, the court recognizes that “because arbitration agreements are fundamentally contracts, [a court] review[s] the enforceability of an arbitration agreement according to the applicable state law of contract formation.” Herbender v. Bickford Sen. Living Corp., 656 F.3d 411, 416 (6th Cir. 2011) (citation omitted). However, the law of Tennessee is not unlike that in Indiana (Frank and Cummins) or North Carolina (Elsisy) in that ordinary contract principles are used to determine whether an enforceable agreement to arbitrate exists. Wofford v. M.J. Edwards & Sons Funeral Home Inc., 490 S.W.3d 800, 809 (Tenn. Ct. App. 2015). Under Tennessee law, “[m]utual promises are sufficient to constitute consideration,” Estate of Brown, 402 S.W.3d 193, 200 (Tenn. 2013), and “an arbitration agreement is not a contract of adhesions” unless the employee shows that he “would be unable to find a suitable job if he refused to agree to arbitrate,” Howell v. Rivergate Toyota, Inc., 144 F. App‘x 475, 478 (6th Cir. 2005).
As for the gap in employment, the parties have cited, and the Court has found, no Tennessee cases directly on point. It is significant, in the Court‘s view, however, that the gap in employment was only 12 days,2 and the Complaint is broadly worded and can be read to cover both periods of his employment with Carl Black. In this regard, the Complaint states that “Plaintiff is a former employee of defendant” without reference to the dates of his employment, and alleges assorted wrongs that occurred “[d]uring plaintiff‘s employment,” (Doc. No. 1 Complaint ¶¶ 1, 8 & 9). The Court, therefore, finds that the Agreement is enforceable, particularly since “[a]rbitration agreements are favored in Tennessee by both statute and case law.” Glassman, Edwards, Wyatt, Tuttle & Cox, P.C. v. Wade, 404 S.W.3d 464, 466 (Tenn. 2013). However, because (as discussed below) the Agreement reserves for the arbitrator gateway issues as to arbitrability and enforceability, the arbitrator is free to revisit the issue of whether the Agreement applies to Nelson‘s second period of employment at Carl Black.
C. Scope
Nelson argues that his MAP-21 claim is beyond the scope of the Agreement.3 More
(E) De novo review. With respect to a complaint under paragraph (1), if the Secretary has not issued a final decision within 210 days after the filing of the complaint and if the delay is not due to the bad faith of the employee, the employee may bring an original action at law or equity for de novo review in the appropriate district court of the United States, which shall have jurisdiction over such an action without regard to the amount in controversy, and which action shall, at the request of either party to the action, be tried by the court with a jury. The action shall be governed by the same legal burdens of proof specified in paragraph (2)(B) for review by the Secretary.
First, the Agreement states that “[t]he claims covered . . . include, but are not limited to, the enforceability and/or interpretation of this Agreement [and] whether a claim is arbitrable[.]” (Doc. No. 17-1, Agreement ¶ 5(a)). While “[d]elegation to an arbitrator of gateway issues does not mean that a federal court should automatically grant a motion to compel arbitration . . . a party seeking to avoid the effects of a delegation provision must ‘challenge[ ] the delegation provision specifically.‘” Danley v. Encore Capital Grp., Inc., 2017 WL 710470, at *3 (6th Cir. Feb. 22, 2017) (quoting Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 72 (2010)). Where, as here, a “party fails to do so, a court must treat the delegation provision as valid and enforce it as written.” Id.
Second, Nelson reads the statute as vesting exclusive jurisdiction in the district court, but that
Third, the Supreme Court has long held that the “duty to enforce arbitration agreements is not diminished when a party bound by an agreement raises a claim founded on statutory rights.” Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220, 238 (1987). This includes statutory employment claims where the right to a jury trial attaches. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001); (“The [Supreme] Court has been quite specific in holding that arbitration agreements can be enforced under the FAA without contravening the policies of congressional enactments giving employees specific protection against discrimination prohibited by federal law.“); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991) (holding that Age Discrimination in Employment Act claims are subject to arbitration); Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 658 (6th Cir. 2003) (observing that “[t]he Supreme Court has made clear that statutory rights, such as those created by Title VII, may be subject to mandatory arbitration . . . if the arbitral forum permits the effective vindication of those rights).
Finally, and as previously noted, “‘as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.‘” Masco Corp., 382 F.3d at 627
IV. Conclusion
On the basis of the foregoing, the Court will grant Carl Black‘s “Motion for Stay Pending Arbitration.
An appropriate Order will enter.
WAVERLY D. CRENSHAW, JR.
CHIEF UNITED STATES DISTRICT JUDGE