Case Information
*1 Before TYMKOVICH , SEYMOUR , and GORSUCH , Circuit Judges.
SEYMOUR , Circuit Judge.
This appeal involves a dispute concerning the scope of an arbitration clause between Nitro-Lift Technologies, L.L.C. (“Nitro-Lift”), and three of its former employees, Miguel Sanchez, Shane Schneider, and Eddie Howard (collectively, “plaintiffs”). Plaintiffs filed suit against Nitro-Lift, claiming it failed to pay overtime wages in violation of both the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. , and the Oklahoma Protection of Labor Act (“OPLA”), Okla. Stat. tit. 40, § 165.1 et seq. Nitro-Lift appeals from two district court orders denying its motions to dismiss and compel arbitration, or in the alternative to stay the proceeding pending arbitration, arguing plaintiffs’ wage disputes fall within the scope of the arbitration clause. We reverse.
I
Nitro-Lift is a Louisiana corporation that services oil rigs across the nation, including in the state of Oklahoma. Nitro-Lift hired plaintiffs to work in and around Johnston County, Oklahoma, where it has an office. Mr. Schneider worked for Nitro-Lift from July 31, 2008, to June 11, 2010; Mr. Sanchez from approximately December 2009 until February 27, 2012; and Mr. Howard from approximately August 2008 until the end of May 2012. Their job duties included connecting nitrogen generator units to oil rigs to allow nitrogen to be pumped into the rigs, and monitoring the oil rigs to determine if and how much oil or natural gas the wells produced.
At the beginning of their employment relationship with Nitro-Lift, each plaintiff signed an identical document labeled “Confidentiality/Non-Compete Agreement,” which contains the arbitration clause at issue in this case. As the title of the agreement suggests, the language is generally limited to matters involving confidentiality and competition. Section 1 of the agreement adds the phrase “corporate property” to its subheading, and thereafter all the rights, obligations, and duties set forth in section 1 concern confidentiality, competition, and the return of corporate documents.
This is the only agreement between the parties and despite its title, Nitro- Lift claims it is an employment agreement because it was “essential” to plaintiffs’ “relationship[] with Nitro-Lift,” that “Nitro-Lift would not have hired Plaintiffs without their consent to the Agreements,” and that “Plaintiffs would not have executed the Agreements without the assurance of employment by Nitro-Lift.” Aplt. Br. at 6. But the only language in the contract that discusses compensation states in section 1(k) that “[i]n consideration of the receipt of Confidential Information during employment, the receipt of compensation, each element of compensation being hereby acknowledged by the Employee as adequate,” the employee agrees not to compete. Aplt. App. at 238. [1] Other than that specific clause, section 1 contains no language dealing with wages, hours, overtime *4 compensation, or other rights, duties, and responsibilities regarding wages generally found in an employment contract.
Section 1 also references a “Section 4” and “Section 4(k),” but the agreement neither contains a section 4 nor explains what topics, rights, restrictions, or duties section 4 sets forth. [2] Notably, section 1(m) explains that only Nitro-Lift may seek remedies in court, including injunctive relief and “any other remedies available to it . . . at law or in equity for any such breach or threatened breach” by the employee. Id. at 239. Also, sections 1(k), (m), and (n) *5 refer to section 4 self-referentially by stating “in this Section 4,” suggesting some of the agreement contains boilerplate language copied from some other contract or agreement. Id.
Section 2 of the agreement contains the arbitration clause at issue and states in pertinent part in 2(a):
Any dispute, difference or unresolved question between Nitro-Lift and the Employee (collectively, the “Disputing Parties”) shall be settled by arbitration by a single arbitrator mutually agreeable to the Disputing Parties in an arbitration proceeding conducted in Houston, Texas in accordance with the rules existing at the date hereof of the American Arbitration Association . . . and the costs (including, without limitation, reasonable fees and expenses of counsel and experts for the Disputing Parties) of such arbitration (including the costs to enforce or preserve the rights awarded in the arbitration) shall be borne by the Disputing Party whom the decision of the arbitrator is against. If the decision of the arbitrator is not clearly against one of the Disputing Parties or the decision of the arbitrator is against more than one Disputing Party on one or more issues, the costs of such arbitration shall be borne equally by the Disputing Parties.
Id. at 239 (emphasis added). In addition, section 2(b) references “Section 4” as well as “Section 18,” neither of which appear in the document, stating that “[n]otwithstanding the foregoing, Nitro-Lift may apply to any court of competent jurisdiction for injunctive relief to enforce its rights under this Agreement, including, without limitation, its rights under Section 4, without breach of this Section 18.” Nitro-Lift offers no explanation for why the contract references multiple sections that do not exist in the agreement.
In sworn affidavits, plaintiffs claim that when they were required to sign *6 the contract, it was presented to them as an agreement specifically about confidentiality and competition. They contend Nitro-Lift did not explain the arbitration provision, did not allow them to read the document or the arbitration clause it contained, and did not allow them to ask questions or consult an attorney before signing the document. Plaintiffs allege they were never told that by signing the agreement, they would be waiving their right to a jury trial for claims of unpaid wages or that they would be required to arbitrate wage disputes. Finally, plaintiffs claim they never agreed to arbitrate any wage disputes with Nitro-Lift.
Plaintiffs allege that almost every week they worked for Nitro-Lift, they each worked in excess of forty hours per week and Nitro-Lift refused to pay them “overtime compensation for the hours they worked in excess of forty,” in violation of the FLSA. Aplt. App. at 170. When Mr. Sanchez discussed the issue with his supervisor, he was told that if he had a problem with the money, he should quit. [3] Mr. Sanchez and Mr. Schneider initially filed suit against Nitro-Lift in the Eastern District of Oklahoma on March 21, 2012, claiming the company failed to pay overtime wages in violation of the FLSA and the OPLA. They sought their “unpaid wages, prejudgment interest, attorney fees and costs,” a declaration that Nitro-Lift’s “wage policy is unlawful” and an injunction against *7 its use and enforcement. Id. at 11-12. They also sought liquidated damages, and class certification if other similarly situated employees were found.
In response, Nitro-Lift filed a motion to dismiss and compel arbitration, or alternatively to stay the proceeding pending arbitration. It argued that the arbitration clause contained in the agreement contractually obligated plaintiffs to submit their FLSA claims to arbitration under the Federal Arbitration Act (“FAA”) and the Oklahoma Uniform Arbitration Act (“OUAA”), citing the liberal federal policy favoring arbitration, and the strong presumption in favor of arbitration under Oklahoma law. Nitro-Lift asserted the wage disputes are clearly within the scope of the arbitration clause, which mandates that “any dispute” be submitted to arbitration under the rules of the American Arbitration Association (“AAA”). In its motion, Nitro-Lift waived the originally agreed upon venue of Houston for arbitration, suggesting arbitration should take place in the Eastern District of Oklahoma.
Mr. Sanchez and Mr. Schneider filed a brief in opposition to Nitro-Lift’s motion contending the arbitration provision is unenforceable with respect to their FLSA claim for a variety of reasons. They contended their wage disputes do not fall within the scope of the arbitration clause. [4] They also asserted that the *8 arbitration clause’s fee-shifting provisions violate the substantive rights afforded to employees by the FLSA because that statute specifically provides for awards of attorneys fees and costs only to prevailing plaintiffs, not to prevailing defendants. In addition, they argued that the forum selection clause and the attempted application of commercial arbitration rules [5] make the arbitration agreement unconscionable because these provisions would force employees to pay substantial costs they cannot afford to arbitrate the dispute in an inconvenient forum.
Before the district court ruled on the pending motion, plaintiffs filed an amended complaint adding Mr. Howard as a plaintiff. Shortly thereafter, the district court denied Nitro-Lift’s pending motion to compel arbitration, addressing only the FLSA claims and the scope of the arbitration clause. The court reasoned that despite the broad language of the arbitration clause, plaintiffs did not agree to *9 arbitrate wage disputes because the contract’s subject matter was only about confidentiality and competition. The court did not address any of the other arguments raised concerning the validity of the contract. Nitro-Lift immediately filed an interlocutory appeal from the district court’s decision.
On the same day that Nitro-Lift filed its appeal, it filed a motion to dismiss
the amended complaint and to compel arbitration, essentially reiterating the
arguments it made in its first motion. It also pointed out that, in denying its first
motion to compel arbitration, the district court cited
Cummings v. FedEx Ground
Package System, Inc.
,
The district court construed Nitro-Lift’s second motion to compel arbitration as a Rule 60(b) motion to reconsider because Nitro-Lift had already filed an interlocutory appeal from the court’s first order. The court again reasoned that plaintiffs’ wage disputes fall outside the scope of the arbitration clause. It explained that although the clause is broad in scope and “there of *10 course arises a presumption of arbitrability,” Aplt. App. at 436, the presumption was overcome because “the arbitration clause is nestled within a narrow contract pertaining only to Plaintiffs’ promises regarding confidentiality and competition with Defendant.” Nitro-Lift timely appealed from the district court’s second order, and we consolidated the two appeals for purposes of review.
II
We review de novo both the district court’s denial of a motion to compel
arbitration,
Cummings
,
The central issue raised on appeal is whether plaintiffs’ statutory wage
disputes fall within the scope of an arbitration clause contained in a contract
labeled Confidentiality/Non-Compete Agreement, that is, whether plaintiffs
agreed to submit their FLSA wage disputes to binding arbitration by signing the
agreement at issue. Nitro-Lift contends, as it did below, that the language in the
arbitration clause is broad and covers any disputes between it and plaintiffs,
including their current wage claims. Plaintiffs counter that because the contract
*11
relates solely to issues of confidentiality and competition and was presented to
them as such, the arbitration clause covers only disputes relating to the subject
matter of the contract. They contend they never agreed to arbitrate wage disputes
and to force them to do so would be contrary to the FAA and Supreme Court
precedent. Our task is therefore to determine the scope of the arbitration clause at
issue and whether plaintiffs’ FLSA “claims fall within its scope.”
Nat’l Am. Ins.
Co. v. SCOR Reinsurance Co.
,
Congress enacted the FAA “in response to widespread judicial hostility to
arbitration.”
Am. Express Co. v. Italian Colors Rest.
,
In line with its liberal policy favoring arbitration, the Court has noted that
“any doubts concerning the scope of arbitrable issues should be resolved in favor
of arbitration, whether the problem at hand is the construction of the contract
language itself or an allegation of waiver, delay, or a like defense to
arbitrability.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.
,
Nevertheless, because “arbitration is a matter of contract” and the authority
*13
of an arbitrator arises only from the parties agreement to that forum in advance,
“a party cannot be required to submit to arbitration any dispute which [it] has not
agreed so to submit.”
AT & T Techs., Inc. v. Commc’ns Workers of Am.
, 475 U.S.
643, 648-49 (1986) (internal quotation marks and citations omitted). Federal law
“simply requires courts to enforce privately negotiated agreements to arbitrate,
like other contracts, in accordance with their terms.”
Volt Info. Sciences, Inc. v.
Bd. of Trs. of Leland Stanford Junior Univ.
,
Our circuit applies a three-part test when determining whether an issue falls
within the scope of an arbitration clause.
Cummings
,
First, recognizing there is some range in the breadth of arbitration clauses, a court should classify the particular clause as either broad or narrow. Next, if reviewing a narrow clause, the court must determine whether the dispute is over an issue that is on its face within the purview of the clause, or over a collateral issue that is somehow connected to the main agreement that contains the arbitration clause. Where the arbitration clause is narrow, a collateral matter will generally be ruled beyond its purview. Where the arbitration clause is broad, there arises a presumption of arbitrability and arbitration of even a collateral matter will be ordered if the claim alleged implicates issues of contract construction or the parties’ rights and obligations under it . (second emphasis added) (quoting Louis Dreyfus Negoce S.A. v. Blystad
Shipping & Trading Inc.
,
Applying
Cummings
’ first step, we agree with the district court that the
arbitration clause at issue here is broad. In fact, we have not found any case with
an arbitration clause as broad as this, stating that “
[a]ny dispute, difference or
*14
unresolved question
between” the parties must be arbitrated. Aplt. App. at 239
(emphasis added). This clause contains no limiting language, either restricting
arbitration to any specific disputes or to the agreement itself. Many courts have
concluded that an arbitration clause applying to disputes “arising under” or “in
connection with” the agreement constitutes a broad arbitration clause.
See, e.g.
,
Brown v. Coleman Co.
,
We are not as convinced as the district court that the narrow context of the
contract rebuts the presumption of arbitrability because “the strong presumption
in favor of arbitrability applies with even greater force when such a broad
arbitration clause is at issue.”
P & P Indus.
,
Even so, a contract “must be considered as a whole so as to give effect to
all of its provisions without narrowly concentrating upon some clause or language
taken out of context.”
Eureka Water Co. v. Nestle Waters N. Am., Inc.
, 690 F.3d
1139, 1151 (10th Cir. 2012) (quoting
Mercury Inv. Co. v. F.W. Woolworth Co.
,
We need not decide this difficult question, for we have stated that “to
acknowledge the ambiguity is to resolve the issue, because all ambiguities must
be resolved
in favor
of arbitrability.”
Armijo
,
[W]hen a contract contains an arbitration clause, there is a presumption in favor of arbitrability; that is, an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage. The Supreme Court has held that the presumption is particularly applicable where, as in the case before us now, there is a broad arbitration clause. In such cases, in the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail.
Here, we cannot say the ambiguity created by the admittedly narrow
contract containing the broad arbitration clause provides “forceful evidence” to
support plaintiffs’ claim that their wage disputes do not fall within the scope of
the arbitration clause. While the fact that the contract discusses only issues
relating to competition, confidentiality, and retention of corporate documents
certainly raises doubts as to whether plaintiffs agreed to arbitrate their wage
disputes, “all doubts must be resolved in favor of coverage.”
Id.
;
see also Moses
,
*17
III
This does not end the matter, however. Notwithstanding the “liberal
federal policy favoring arbitration agreements,”
Moses
,
Plaintiffs contend the arbitration provision here does exactly what
Gilmer
forbids, that is, it denies them the substantive rights afforded by the FLSA
because it specifically provides that “the costs (including, without limitation,
reasonable fees and expenses of counsel and experts for the Disputing Parties) of
such arbitration . . . shall be borne by [the losing party],” or, at a minimum,
requires the parties to split the costs of arbitration. Aplt. App. at 239. Contrary
to the arbitration provision, the FLSA provides: “The court in such action shall, in
*18
addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable
attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. §
216(b). “The FLSA’s fee-shifting provision refers only to a prevailing plaintiff
. . . and says nothing of a prevailing defendant.”
Mach v. Will Cnty. Sheriff
, 580
F.3d 495, 501 (7th Cir. 2009). Indeed, the “FLSA entitles a prevailing defendant
to attorney’s fees only where the district court finds that the plaintiff litigated in
bad faith.”
Turlington v. Atlanta Gas Light Co.
,
Plaintiffs rely on several cases, including our decision in
Shankle v. B–G
Maintenance Management of Colorado, Inc.
,
The Agreement thus placed Mr. Shankle between the proverbial rock and a hard place—it prohibited use of the judicial forum, where a litigant is not required to pay for a judge’s services, and the prohibitive cost substantially limited use of the arbitral forum. Essentially, B–G Maintenance required Mr. Shankle to agree to mandatory arbitration as a term of continued employment, yet failed to provide an accessible forum in which he could resolve his *19 statutory rights. Such a result clearly undermines the remedial and deterrent functions of the federal anti-discrimination laws. Given this deficiency, we conclude the Agreement is unenforceable under the Federal Arbitration Act.
Id. at 1235 (internal footnote and citations omitted). [7]
Subsequent to our decision in
Shankle
, the Supreme Court recognized that
“the existence of large arbitration costs could preclude a litigant . . . from
effectively vindicating her federal statutory rights in the arbitral forum.”
Green
Tree Fin. Corp.–Ala. v. Randolph
,
It is thus unclear from
Green Tree
“‘[h]ow detailed the showing of
prohibitive expense must be’ to support the conclusion that the provision, at a
minimum, is unenforceable.”
Morrison v. Circuit City Stores, Inc.
,
In response to Nitro-Lift’s motion to compel arbitration, plaintiffs filed affidavits claiming inability to pay the arbitration costs and fees. The district court did not address this issue, however, because it determined that the FLSA *21 claim was not within the arbitration provision. Given our reversal of the district court, it will need to determine on remand the effect of the cost-shifting provision in the arbitration clause in light of Shankle and Green Tree .
Plaintiffs further claim that Nitro-Lift’s attempt to waive the fee- and
cost-shifting provisions of the arbitration agreement makes the agreement
illusory. They argue, as they did below, that Nitro-Lift is unilaterally changing
the contract in an effort to make it enforceable.
[8]
Plaintiffs rely on
Dumais v.
American Golf Corp.
,
Nitro-Lift argues that its willingness to waive the forum selection clause,
the fee-shifting provision, and the rules governing arbitration differ from the facts
in
Dumais
in that nothing in the contract in this case expressly allows “one party
the ‘unfettered right to alter the arbitration agreement’s existence or scope’
without notice.” Reply Br. at 20 (quoting
Dumais
,
We decline to decide these issues for the first time on appeal. Because the district court found the arbitration agreement did not cover plaintiffs’ FLSA claims, it did not address any of these issues. Accordingly, we remand to the district court for further consideration of these issues in light of this opinion.
IV
Because we are reversing the district court’s denial of the motion to dismiss
and remanding for further proceedings, we must address an additional issue raised
by plaintiffs claiming that the district court lacks jurisdiction to enforce the
arbitration provision here. This is so, plaintiffs argue, because the forum
selection clause requires arbitration in Houston and in
Ansari v. Qwest
*24
Communications Corp.
,
In
1mage Software, Inc. v. Reynolds & Reynolds Co.
,
Here, as plaintiffs recognize, Nitro-Lift disclaimed the forum/venue
provisions of its agreement and moved the district court to order arbitration in the
Eastern District of Oklahoma. In any event, plaintiffs themselves waived any
issue of venue in the Eastern District of Oklahoma by failing to raise it in the
district court.
See 1mage Software
,
V
In sum, we REVERSE the district court’s denial of Nitro-Lift’s motion to compel arbitration and REMAND for further proceedings.
Notes
[1] We cite only Mr. Sanchez’s agreement for purposes of citation to the record because each plaintiff signed identical agreements.
[2] For example, the agreement on page 3 states in section 1(k) “[t]he parties agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in section 4(k) are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of Nitro-Lift.” Aplt. App. at 238. This section further notes that [t]o the extent that any part of this Section 4(k) may be invalid, illegal or unenforceable for any reason, it is intended that such part shall be enforceable to the extent that a court of competent jurisdiction shall determine that such part, if more limited in scope, would have been enforceable, and such part shall be deemed to have been so written and the remaining parts shall as written be effective and enforceable in all events. Id. Section 1(l) explains that “[i]n the event of a breach by Employee of any covenant set forth in section 4 of this Agreement, the term of such covenant will be extended by the period of the duration of such breach.” Id. at 239. Section 1(m) states “[t]he parties hereto agree and acknowledge that Nitro-Lift would not have an adequate remedy at law for the breach or threatened breach by the Employee of the covenants and agreements set forth in this Section 4.” Id. Section 1(n) also explains that “[a]ll of the covenants in this Section 4 shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause of action of Employee against Nitro-Lift, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Nitro-Lift of such covenants.”
[3] Mr. Sanchez also asserts a claim for retaliation under both the FLSA and Oklahoma law, alleging Nitro-Lift fired him after he complained of its failure to pay overtime wages. This issue is not before us on appeal.
[4] Plaintiffs also pointed out that the Oklahoma Supreme Court addressed the same contract and arbitration clause in Howard v. Nitro-Lift Techs., L.L.C. , 273 P.3d 20 (Okla. 2011), which involved a dispute concerning an issue of competition unrelated to plaintiffs’ wage disputes in this appeal. at 23. The (continued...)
[4] (...continued)
court held that the agreement’s non-competition covenants were void and
unenforceable as against Oklahoma’s public policy, that it could not judicially
modify the agreement, and that the entire contract was therefore void and
unenforceable. at 30. However, the United States Supreme Court
subsequently granted certiorari and vacated the decision of the Oklahoma
Supreme Court, holding that the court assumed the role of the arbitrator in
deciding that the covenants not to compete were invalid under state law, which
was a decision for the arbitrator in the first instance once the state court
determined there was a valid arbitration clause.
See Nitro-Lift Techs., L.L.C. v.
Howard
,
[5] We note the AAA determined that Nitro-Lift’s Demand for Arbitration would be administered under the Employment Arbitration Rules instead of the Commercial Arbitration Rules.
[6] “The FAA also provides for stays of proceedings in federal district courts
when an issue in the proceeding is referable to arbitration, § 3, and for orders
compelling arbitration when one party has failed, neglected, or refused to comply
with an arbitration agreement, § 4.”
Gilmer v. Interstate/Johnson Lane Corp.
,
[7] We distinguished
Shankle
in
Hill v. Ricoh Americas Corp.
,
[8] Nitro-Lift counters that if any of these provisions are found to be unlawful, the court should sever the provisions. Section 1(k) of the agreement regarding non-competition and confidentiality contains a severance clause which states: “[t]o the extent that any part of this Section 4(k) may be invalid, illegal or unenforceable,” the court may strike the unenforceable provisions and enforce the remaining parts. Aplt. App. at 238 (emphasis added). In context, however, it is apparent that “this Section 4(k)” is intended to be “this Section 1(k).” Accordingly, the severance clause is by its terms applicable only to the section 1 provision on non-competition and corporate property. Because the arbitration provision at issue is in Section 2 of the agreement, the severance clause does not apply to the arbitration provision.
[9] In determining whether an agreement to arbitrate is illusory, a court
applies the state law of contracts.
See Perry v. Thomas
,
[10] While a different provision of the handbook stated the employer
“reserves the right to at any time change, delete, modify, or add to any of the
provisions contained in this handbook at its sole discretion,” except the
employees’ at-will status and the arbitration provision,
Dum
ais,
[11] We note that Nitro-Lift did not offer to waive the provision requiring the losing party to pay the other party’s attorney’s fees until its Reply Brief on Appeal. Reply Br. at 17.