Opinion
22-CV-176-DC-RCG
10-13-2023
JOSE ESCALERA, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. MURPHY WELL CONTROL, LLC, and BRANDON MURPHY, Defendants.
REPORT AND RECOMMENDATION OF THE U.S. MAGISTRATE JUDGE
RONALD C. GRIFFIN, UNITED STATES MAGISTRATE JUDGE
BEFORE THE COURT are Defendant Murphy Well Control, LLC's (“MWC”) Motion to Compel Arbitration and Stay Proceedings (“Motion to Compel Arbitration”) (Doc. 44) and Defendant Brandon Murphy's (“Murphy”) Motion to Compel Arbitration and Stay Proceedings and Joinder in MWC's Motion. (Doc. 52). This case is before the Court through a Standing Order pursuant to 28 U.S.C. § 636 and Appendix C of the Local Court Rules for the Assignment of Duties to United States Magistrate Judges. After due consideration, the Court RECOMMENDS that MWC's motion be GRANTED IN PART AND DENIED IN PART (Doc. 44) and that Murphy's motion be GRANTED. (Doc. 52).
All citations are to CM/ECF generated pagination unless otherwise noted.
I. Background
On August 16, 2022, Jose Escalera (“Escalera”) filed his Original Complaint against MWC alleging failure to pay overtime under the Fair Labor Standards Act (FLSA) and collective action allegations. (Doc. 1). Ten additional claimants joined Escalera's action by filing their consent (Docs. 2, 4, 5, 25, 29). Relevant to this motion, Opt-In Plaintiffs Aschton Shropshire and William Pruitt joined on October 7, 2022 (Doc. 5) and Opt-In Plaintiff Ivan Salcido (collectively, the “Opt-In Plaintiffs”) joined on May 18, 2023 (Doc. 29). Escalera filed his First Amended Complaint on June 7, 2023, adding Brandon Murphy as a Defendant and bringing additional claims. (Doc. 33). Brandon Murphy is the owner of Murphy Well Control, LLC. Id.
Opt-In Plaintiffs Aschton Shropshire, William Pruitt, and Ivan Salcido are the only plaintiffs for which MWC has produced Independent Contractor Agreements bearing their signature. (Doc. 44).
On June 28, 2023, MWC filed the instant Motion to Compel Arbitration and Stay Proceedings seeking to enforce the arbitration provision in the Opt-In Plaintiffs' Independent Contractor Agreements. (Doc. 44). On July 12, 2023, Murphy filed the instant Motion to Compel Arbitration and Stay Proceedings and Joinder in MWC's Motion, seeking similar relief. (Doc. 52).
Thereafter, Escalera filed Responses to MWC and Murphy's Motions. (Docs. 54, 60). MWC and Murphy then filed their Replies. (Docs. 58, 61). Accordingly, the instant matter is ripe for disposition.
II. Legal Standard
The Federal Arbitration Act (“FAA”) “embodies the national policy favoring arbitration.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). Courts in the Fifth Circuit utilize a two-step analysis when deciding a motion to compel arbitration. Huckaba v. Ref-Chem, L.P., 892 F.3d 686, 688 (5th Cir. 2018) (cleaned up). First, the court must decide whether there is “a valid agreement to arbitrate,” and second, “whether the dispute falls within the scope of that agreement.” Id.
State contract law governs the scope and validity of an agreement. Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 202 (5th Cir. 2016). When determining whether a valid arbitration agreement exists, Texas has no presumption in favor of arbitration. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Instead, the party seeking to compel arbitration must show that the agreement meets all necessary contract elements. Id. at 228. Under Texas law, a binding contract requires: 1) an offer; 2) an acceptance in strict compliance with the terms of the offer; 3) a meeting of the minds; 4) each party's consent to the terms; and 5) execution and delivery of the contract with intent that it be mutual and binding. In re Capco Energy, Inc., 669 F.3d 274, 279-80 (5th Cir. 2012) (cleaned up). Whether a signature is required to bind the parties is a question of the parties' intent. Huckaba v. Ref-Chem, L.P., 892 F.3d 686, 689 (5th Cir. 2018) (cleaned up). A court can decide intent as a matter of law. Id. In ascertaining the true intentions of the parties, courts must analyze a contract's express language, harmonizing all provisions so that none are rendered meaningless. Id.
III. Discussion
MWC and Murphy (“Defendants”) argue that the Opt-In Plaintiffs signed a valid agreement to arbitrate with MWC and that their claims fall within the scope of that agreement (Docs. 44, 52). In addition, Defendants ask the Court to stay this matter pending resolution of the arbitration proceedings. (Docs. 44, 52).
In response, Escalera challenges the validity of the arbitration agreements on four grounds: 1) MWC did not sign the agreements; 2) The agreements are illusory; 3) The agreements are unconscionable; and 4) the Opt-In Plaintiffs have exercised their right to terminate the agreements and thus, the arbitration provisions do not survive. (Docs. 54, 60). Alternatively, if the Court does grant Defendants' motion to compel arbitration, Escalera asks the Court to deny Defendants' request to stay the case for the remaining claimants. Id.
The Court will first decide whether the arbitration agreements are valid based on the four objections Escalera raised. Next, the Court will determine whether to grant the stay Defendants request.
A. The Validity of the Arbitration Agreements
In this case, the validity of the arbitration agreements is dispositive of the motion to compel arbitration. In other words, if MWC can prove that the arbitration agreements are valid, the Court must grant the motion to compel arbitration.
Because Escalera does not challenge whether his claims fall within the scope of the arbitration agreement, the Court need only decide the first step of the Fifth Circuit's two-step test for a motion to compel arbitration. (Docs. 54, 60); Huckaba v. Ref-Chem, L.P., 892 F.3d 686, 688 (5th Cir. 2018). The first step of the test is the Court's determination of the validity of the arbitration agreement. Huckaba, 892 F.3d at 688.
The burden is on MWC to prove the validity of the arbitration agreements. Huckaba, 892 F.3d at 688 . With respect to contract formation, the parties only dispute the final element: the intent of both parties for the contract to be mutual and binding. (Docs. 54, 60); Id. at 689. Thus, to determine the validity of the arbitration agreements, the Court need only determine whether the parties intended for the contract to be mutual and binding. See Huckaba, 892 F.3d at 689.
1. Are the Arbitration Agreements Valid Despite MWC's Failure to Sign Them?
MWC has presented evidence that the Opt-In Plaintiffs signed agreements containing a binding arbitration provision. (Docs. 44, 44-1) Escalera argues that the arbitration agreements are invalid because the agreements had a signature block for MWC and MWC did not sign them. (Doc. 54 at 7-12). But signatures are not required as long as the parties consent to the terms of the contract, and both signatures were not intended as a condition precedent to the contract becoming effective. Huckaba v. Ref-Chem, L.P., 892 F.3d 686, 689 (5th Cir. 2018) (emphasis added). Thus, where the employer did not sign the contract, an opponent of a motion to compel arbitration can claim that either 1) the parties did not consent to the terms of the contract; or 2) the signatures were a condition precedent to the contract becoming effective. See id.
Eschewing the consent issue, Escalera instead attacks the validity of the contract based on his view that the signatures were a “condition precedent.” (Doc. 54 at 8). Thus, Escalera asserts that the language in the Opt-In Plaintiffs' Independent Contractor Agreements provides “unambiguous evidence” of the parties' intent to require both signatures as a condition precedent to the contract becoming effective. Id. If Escalera is correct, then the lack of MWC's signature on the contracts would make them ineffective, and MWC's motion to compel arbitration should be denied.
Escalera begins his argument by citing the Fifth Circuit's decision in Huckaba , but without applying the holding in Huckaba to the facts in this case. (Doc. 54 at 8-9). Escalera is correct to point out that the Fifth Circuit held that an arbitration agreement that was unsigned by the employer was unenforceable. Huckaba, 892 F.3d at 689-91. However, the Huckaba court cited three facts that supported its conclusion, and only one of those facts exists in this case. The only fact the arbitration agreements in this case and Huckaba share is the existence of a signature block for the employer. Huckaba, 892 F.3d at 689; (Doc. 44-1 at 4-11). Without more, Huckaba does not support Escalera's contention that the parties intended MWC to sign the contracts before they became effective.
Huckaba v. Ref-Chem, L.P., 892 F.3d 686 (5th Cir. 2018).
The arbitration agreement in Huckaba contained: 1) a statement that “[b]y signing this agreement the parties are giving up any right they may have to sue each other;” 2) a clause prohibiting modifications unless they are “in writing and signed by all parties;” and 3) a signature block for the employer. Id. at 689.
Escalera is on firmer ground when addressing contract provisions that provide for mutual agreement. The following contract provisions lend some support to Escalera's theory:
1) The contract states that the agreement is made between MWC and the Contractor;
(Doc 44-1 at 4).
2) The contract begins “the Parties agree as follows:”;
Id.
3) “Company and Contractor agree to the following”;
Id. at 5.
4) “Entire Agreement of the Parties”;
Id. at 8.
5) At the beginning of the arbitration provisions of the contract, there are three references to “you and MWC agree”;
Id. at 8-9.
6) Above the signature blocks is a line stating, “the parties hereto have executed this Agreement.”
Although “execute” here could mean “sign,” it could also refer to bringing a contract to its “final, legally enforceable form.” See Execute, BLACK'S LAW DICTIONARY (11th ed. 2019).
(Doc 44-1 at 11).
While helpful to Escalera, none of these provisions establishes that MWC's signature was a condition precedent to the contract becoming effective. And when the contract squarely addresses the most critical element of arbitration, MWC's signature is clearly not required. For example, the key provision of the arbitration agreement is contained in the final paragraph, bolded and underlined:
By signing this Agreement you will be agreeing that mediation and then arbitration are the sole and exclusive means of resolving any such disputes and agree not to bring any action against the company for any employment-related claim in any court, Federal or state. Moreover, you understand that by signing this Agreement, you give up your right to a civil trial.
The contract makes clear that references to “you” are references to the Contractor signing the agreement. (Doc. 44-1). All references to MWC are one of “Murphy Well Control, LLC,” “employer,” or “Company.” Id.
Id. at 10.
This provision exclusively refers to the Contractor-and not MWC-signing the agreement and giving up his right to a civil trial. This clause also distinguishes this case from three cases on which Escalera relies. In Daya v. Sky High MRI & Diagnostics, LLC, both employer and employee agreed to give up their right to a jury trial, a provision that does not exist in this case. In Hi Tech Luxury Imps., LLC v. Morgan, a similar jury trial provision as in Daya bound both parties. Significantly, in Hi Tech Luxury Imps., the signature lines appear below a statement explicitly referencing the need for a signature from both parties. Finally, in Flores v. BJ's Restaurants, Inc., a statement expressly waiving the right to a jury trial again appears as a mutual obligation requiring signatures from both parties.
Daya v. Sky High MRI & Diagnostics, LLC, No. 4:20-CV-02965, 2021 WL 4431108 at * 3 (S.D. Tex. Aug. 2, 2021), report and recommendation adopted, No. 4:20-CV-2965, 2021 WL 4427045 (S.D. Tex. Sept. 27, 2021).
Hi Tech Luxury Imports, LLC v. Morgan, No. 03-19-00021-CV, 2019 WL 1908171 (Tex. App.-Austin Apr. 30, 2019, no pet.).
“BOTH I AND THE COMPANY GIVE UP OUR RIGHTS TO TRIAL BY JURY” Id. at *2.
“MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I HAVE READ, UNDERSTAND, AND AGREE TO BE LEGALLY BOUND TO ALL OF THE ABOVE TERMS.” Id. (emphasis added) (this contract included signature blocks for both parties).
Flores v. BJ's Restaurants, Inc., No. A-21-CV-1185-LY, 2022 WL 17732340 (W.D. Tex. Oct. 17, 2022), report and recommendation adopted, No. 1:21-CV-01185-LY, 2022 WL 18402459 (W.D. Tex. Dec. 15, 2022).
“Team Member and BJ's understands and agreement that, by signing this Agreement, we are expressly waiving any and all rights to a trial by a judge and/or a jury regarding any disputes and claims which we now have or which we may in the future have that are subject to arbitration under this Agreement.” Id. at *2.
The modification clause in this case also distinguishes it from the above cases. In Huckaba, Daya, and Flores, modifications to the arbitration agreement could only occur if they were in writing and “signed by all parties.” The courts reasoned that if the parties intended for a modification to be effective only with signatures from both parties, then the parties likely intended for the original agreement to become effective only after both parties signed it. But in this case, any modification to the agreement is effective “only if it is in a writing signed by the party to be charged.” In other words, a single signature could effectively modify the agreement between MWC and the Contractor. Because the agreement between MWC and the Opt-in Plaintiffs could be modified with only one signature, then the parties here likely intended their original agreement to become effective with only one signature. Thus, MWC's failure to sign the agreements does not render them unenforceable.
Huckaba, 892 F.3d at 689; Daya, 2021 WL 4431108 at *2; See Flores, 2022 WL 17732340 at *2 (“signed by the CEO of BJ's and Team Member”); See also In re Bunzl USA, Inc., 155 S.W.3d 202, 211 (Tex. App.-El Paso 2004, no pet.) (declining to enforce an arbitration agreement where the agreement included a modification provision requiring signatures by both parties).
See Huckaba, 892 F.3d at 690; see also Daya, 2021 WL 4431108 at *2; see also Flores, 2022 WL 17732340 at *2-*3.
(Doc. 44-1 at 8).
The Restatement of Contracts provides support for the theory that, in at least some cases, only one party must sign a contract for the contract to be enforceable. See Restatement (Second) of Contracts § 135 (1981). For contracts within the Statute of Frauds, a contract signed by fewer than all parties to the contract would still be enforceable against the signers but not against the others. Id. Moreover, “it is well settled in most jurisdictions” that a contract requiring a signature only for the “party to be charged” need only be signed by the defendant to be enforceable. 10 Williston on Contracts § 29:38 (4th ed.). By contrast, the Federal Arbitration Act (FAA) and Texas Arbitration Act (TAA) only require an arbitration agreement to be in writing. 9 U.S.C. § 2; Tex. Civ. Prac. & Rem. Code Ann. § 171.001. Thus, an arbitration agreement signed by one party exceeds the demands of the FAA and TAA.
See SK Plymouth, LLC v. Simmons, 605 S.W.3d 706, 717 (Tex. App.-Houston [1st Dist.] 2020, no pet.) (holding that an employer was not required to sign the agreement where no provision expressly required the agreement to be signed by the parties); see also Wright v. Hernandez, 469 S.W.3d 744, 760 (Tex. App.-El Paso 2015, no pet.) (holding that where the agreement did not expressly require both parties' signatures, and where no references indicating that the employer's signature was contemplated as a condition precedent to the agreement's enforceability, the arbitration agreement should be enforced despite the lack of an employer's signature).
Although Escalera has produced some evidence of a mutual agreement, the Court finds that MWC's signature was not a condition precedent to the contract becoming effective. Accordingly, MWC has met its burden in establishing the validity of the arbitration agreement based on Escalera's first objection. The Court now turns to Escalera's second objection.
2. Are the Arbitration Agreements Illusory?
Escalera argues that the arbitration agreement is illusory, and thus ineffective, because it “allows Murphy to unilaterally change it anytime it wants to.” (Doc. 54 at 13). Escalera bases his argument primarily on the modification provision, which states, “Any modification of this agreement will be effective only if it is in a writing signed by the party to be charged.” (Doc. 441 at 5).
Illusory promises are those which make performance entirely optional on the part of the promisor. Restatement (Second) of Contracts § 77 cmt. a (1981).
Under Texas law, “[p]arties have the power to modify their contracts.” Hathaway v. General Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986). A modification must include a meeting of the minds supported by consideration. Id. In employment at will situations, the party modifying the contract “still must prove that the other party agreed to modify the employment terms.” Id. at 229. “Thus, to prove a modification of an at will employment contract, the party asserting the modification must prove two things: 1) notice of the change; and, 2) acceptance of the change.” Id.
Escalera is wrong to suggest that the agreement gave MWC unilateral power to modify the contract. If MWC wanted to modify the contract, it would be required to: 1) provide the Opt-in Plaintiffs with notice; and 2) prove they accepted the change. Nothing in the contract waived the Contractor's modification rights under Texas law. Instead, the contract increased the burden on MWC by requiring MWC to obtain Contractors' signatures in the event MWC wished to modify the contract. Conversely, Contractors would be required to provide notice and obtain MWC's signed acceptance before they could enforce a modification on MWC. Thus, the agreement is not illusory based on its modification provision.
See Hathaway, 711 S.W.2d at 229.
(Doc 44-1 at 4-11).
To prove acceptance without a signature under the default rule, MWC could have merely shown that Contractor continued to work for MWC after receiving “unequivocal notification” of the modification. See Hathaway, 711 S.W.2d at 229.
Escalera also argues that the agreement is illusory based on its termination provision, which requires 30 days' advance written notice by either party prior to termination. But the Texas Supreme Court held that an arbitration agreement with a termination provision providing ten days' notice was not illusory, because the employer could not avoid its promise to arbitrate. In re Halliburton Co., 80 S.W.3d 566, 570 (Tex. 2002). Therefore, the Court will not hold that this agreement is illusory based on the termination provision.
“This agreement shall automatically terminate the first to occur of the Termination Date specified above, or notwithstanding such Termination Date, on thirty (30) days advance written notice of termination by either party for any reason with or without cause. Additionally, this agreement may be terminated by either party without advance written notice if the other party has breached this agreement in any manner.” (Doc. 44-1 at 1-2).
See also Restatement (Second) of Contracts § 77 cmt. b (1981) (providing, via Illustration 5, that an agreement is not illusory where one party retains the power to terminate the agreement on 30 days' notice).
For the reasons stated above, the Court finds that the Independent Contractor Agreement is not illusory based on its modification or termination provisions. The Court will now turn to Escalera's third objection.
3. Are the Arbitration Agreements Unconscionable?
Escalera's unconscionability argument focuses on the issue of attorney fees. (Doc. 54 at 14-15). Namely, Escalera believes that the agreement is substantively unconscionable because: 1) it restricts the prevailing party's right to attorney fees under the FLSA; and 2) the agreement requires arbitration costs to be shared. Id.
The Fifth Circuit has spoken directly to the first issue. In Carter v. Countrywide Credit Indus., Inc., the court considered an arbitration agreement that required each side to pay its own attorney fees. Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 299 (5th Cir. 2004). At the same time, the agreement stated that arbitration would be adjudicated in accordance with applicable state or federal law. Id. The court held that if plaintiffs prevailed in arbitration on their FLSA claims, they would be entitled to attorney fees. Id. Thus, the failure of the agreement to explicitly mandate that the arbitrator award attorney fees to the prevailing party was not a basis for invalidating the agreements. Id.
The agreement in this case has similar language to the agreement in Carter. Although the agreement stipulates that the costs of arbitration are to be shared, it also states that the arbitrator may award all relief available to the parties under state or federal law. (Doc. 44-1 at 9). Thus, in keeping with Carter, the Court will not find that the agreement is substantively unconscionable where the arbitrator is permitted to award the plaintiff the very relief he seeks.
As to the second issue, Escalera's concerns about the costs of arbitration are not sufficiently well-grounded to render the arbitration agreement substantively unconscionable. Escalera is right that courts are wary of deterring potential litigants subject to fee-splitting arrangements in arbitration. See, e.g., In re Poly-America, L.P., 262 S.W.3d 337, 356 (Tex. 2008). But those same courts are also wary of invalidating agreements unless the complaining party can produce some evidence that arbitration costs would be prohibitively high. Id. In this case, Escalera has produced no such evidence. Thus, the Court finds that the agreement's feesharing provision is not substantively unconscionable.
4. Are the Arbitration Agreements Invalid Because the Opt-In Plaintiffs Exercised Their Right to Terminate the Agreements?
On the validity of the arbitration agreements, Escalera issues his final argument: “[I]f [the agreement] is not found to be illusory, the opt-in plaintiffs herein submit notice that they terminate the agreement.” (Doc. 54 at 14). This argument is unavailing. Any former Contractor of MWC can state that their employment agreement with the company has terminated because, for example, that worker is no longer paid by MWC in exchange for labor. But if a valid arbitration agreement existed at the time a claim arose under the FLSA, that agreement would still legally bind both MWC and the Contractor. Because the Opt-In Plaintiffs do not contend they terminated the agreement before their FLSA claims arose, any recent “termination” by the Opt-In Plaintiffs of their Independent Contractor Agreements is irrelevant to this matter.
Generally, an arbitration clause survives termination of the underlying contract. Nolde Bros. v. Loc. No. 358, Bakery & Confectionery Workers Union, AFL-CIO, 430 U.S. 243, 255 (1977) (contemplating a situation where an arbitration dispute arose after the termination of an agreement). See also Richland Equip. Co., Inc. v. Deere & Co., 745 Fed.Appx. 521, 524 (5th Cir. 2018) (explaining the Supreme Court's decision in Nolde Bros.).
B. Staying the Matter Pending Arbitration
MWC moves the Court to stay all proceedings pending the resolution of the arbitrations. (Doc. 44 at 3, 9-11). Escalera responds that the remaining plaintiffs' cases should not be stayed. (Doc. 54 at 15-19).
“[T]raditional principles of state law allow a contract to be enforced by or against nonparties to the contract[.]” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009) (cleaned up). Under the Texas Arbitration Act, “an order compelling arbitration must include a stay of the underlying litigation.” In re Gulf Expl., LLC, 289 S.W.3d 836, 841 (Tex. 2009) (cleaned up). District courts have discretion to stay litigation among the non-arbitrating parties pending the outcome of the arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n.23 (1983).
The Court finds that litigation on the remaining plaintiffs' claims cannot proceed without adversely affecting MWC's right to arbitration. In another case where plaintiffs sought relief under the FLSA, this Court explained how concurrently proceeding litigation can adversely impact an arbitration. Namely, “there is a significant risk of inconsistent results on the ultimate questions” plaintiffs raise, and the arbitrator “would be strongly influenced to follow this Court's determination given the binding effect of a federal judgment.” These same factors are present in this case. Thus, the Court will recommend granting a discretionary stay as to all remaining plaintiffs in this case, pending the outcome of arbitration between the Opt-In Plaintiffs, MWC, and Murphy.
See Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir. 1999) (ordering a stay against nonarbitrating parties because an arbitrating party's right to arbitration would be adversely affected).
Streety v. Parsley Energy Operations, LLC, No. MO:20-CV-00049-DC, 2022 WL 2783852 at *9 (W.D. Tex. June 17, 2022), appeal dismissed sub nom. Streety v. Parsley Energy Operations, L.L.C., No. 22-50644, 2022 WL 18301346 (5th Cir. Oct. 4, 2022).
Id.
The court notes that Escalera opposed the Court's applying the Waste Management factors in its analysis. (Doc. 54 at 15-19); Waste Mgmt., Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 343 (5th Cir. 2004). in this case, the court can approve of a discretionary stay without resort to the Waste Management factors. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n.23 (1983). But for the sake of completeness, the court finds all three Waste Management factors present in this case: 1) the arbitrated and litigated disputes involve the same operative facts; 2) the claims asserted in the arbitration and litigation are “inherently inseparable”; and 3) the litigation would have a “critical impact” on the arbitration. Waste Mgmt., 372 F.3d at 343.
C. Attorney Fees
MWC also moves this court to award it attorney fees and costs in connection with the prosecution of its motion to compel arbitration. (Doc. 44 at 12). Escalera asks the Court to deny MWC's request. (Doc. 54 at 19).
MWC's motion is based on this provision of the agreement:
If any legal action is brought to enforce or interpret the provisions of this Agreement, the Court shall award the prevailing party his/her/it's [sic] reasonable attorney's fees, in addition to any relieve [sic] to which the party may be entitled.
(Doc. 44-1 at 8).
The definition of “legal action” does not support MWC's view. “Action at law” is defined as “a civil suit stating a legal cause of action...” Action, Black's Law Dictionary (11th ed. 2019). “Action” by itself can mean a civil proceeding, but more accurately, a civil proceeding “which, if conducted to a determination, will result in a judgment.” Id. A motion to compel arbitration is neither a civil suit nor a proceeding that will result in a judgment. Because the Court does not recognize a motion to compel arbitration as a legal action, the Court will not award MWC attorney fees.
D. Defendant Brandon Murphy's Motion
Finally, Defendant Brandon Murphy (“Murphy”) moves, in his individual capacity, to compel the Opt-In Plaintiffs to arbitrate their claims against him, stay the proceedings of the remaining plaintiffs, and joins MWC's motion to compel arbitration. (Doc. 52).
Escalera does not respond to Murphy's arguments in his individual capacity. (Doc. 60). Instead, Escalera simply summarizes the arguments he made in response to MWC's motion. Id. Because Escalera fails to respond in any substantive manner to Murphy's motion, the Court will consider Murphy's motion unopposed.
To the extent that Murphy's motion joins MWC's motion, the Court considers those arguments opposed. The Court addressed MWC's opposed motion in parts A, B, and C of this opinion's Discussion.
The Court agrees that Murphy may invoke the doctrine of artful pleading estoppel to compel the Opt-In Plaintiffs to arbitration. In addition, all of the plaintiffs' cases against MWC and Murphy involve the “same operative facts,” are “inherently inseparable,” and the litigation would “have a critical impact on the arbitration.” Consequently, all of the plaintiffs' cases against Murphy should also be stayed pending the outcome of arbitration.
In Texas, artful pleading estoppel requires: “1) naming individual agents of the party to the arbitration clause and suing them in their individual capacity; and 2) bringing a suit that in substance is against those agents' principal.” Newman v. Plains All Am. Pipeline, L.P., 23 F.4th 393, 407-08 (5th Cir. 2022) (cleaned up). Both of these elements are present in this case. Brandon Murphy is an agent of MWC and Escalera brought suit against Murphy that is in substance one against MWC. See also In re Merrill Lynch Tr. Co. FSB, 235 S.W.3d 185, 188 (Tex. 2007) (“parties to an arbitration agreement may not evade arbitration through artful pleading, such as by naming individual agents of the party to the arbitration clause and suing them in their individual capacity”).
See subsection B and note 37. As to the question of staying the proceedings against Murphy, the Court applies the same factors and analysis it applied with MWC.
IV. Recommendation
Based on the foregoing discussion, the Court RECOMMENDS Defendant Murphy Well Control, LLC's motion be GRANTED IN PART AND DENIED IN PART. (Doc. 44). The Court RECOMMENDS that the motion be GRANTED with respect to compelling Contractors Shropshire, Pruitt, and Salcido to arbitrate their dispute with Defendant MWC, and GRANTED with respect to staying all proceedings in the case pending the conclusion of the arbitration. The Court RECOMMENDS the motion be DENIED with respect to Defendant Murphy Well Control, LLC's request for attorney fees and costs in connection with this motion.
Further, the Court RECOMMENDS that Defendant Brandon Murphy's motion be GRANTED. (Doc. 52) Contractors Shropshire, Pruitt, and Salcido should be compelled to arbitrate their dispute with Defendant Murphy. Additionally, all proceedings against Defendant Murphy should be stayed.
Finally, the Court RECOMMENDS the case be ADMINISTRATIVELY CLOSED pending conclusion of the arbitration proceedings.
Instructions for Service and Notice of Right to Appeal/Object
In the event that a party has not been served by the Clerk with this Report and Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is ORDERED to mail such party a copy of this Report and Recommendation by certified mail. Pursuant to 28 U.S.C. § 636(b)(1), any party who desires to object to this report must serve and file written objections within fourteen (14) days after being served with a copy. A party filing objections must specifically identify those findings, conclusions, or recommendations to which objections are being made; the District Judge need not consider frivolous, conclusive, or general objections. Such party shall file the objections with the Clerk of the Court and serve the objections on all other parties. A party's failure to file such objections to the proposed findings, conclusions, and recommendations contained in this report shall bar the party from a de novo determination by the District Judge. Additionally, a party's failure to file written objections to the proposed findings, conclusions, and recommendations contained in this report within fourteen (14) days after being served with a copy shall bar that party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Judge. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996).