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Giddings v. Media Lodge, Inc.

United States District Court, D. South Dakota, Southern Division

March 13, 2018




         Plaintiff Caleb Giddings, a Senior Airman in the United States Air Force Reserves, worked for GunUp Publishing, Inc. (GunUp) in South Dakota. When GunUp merged with Media Lodge, Inc. (Media Lodge) in the spring of 2015, Giddings accepted a job as Media Lodge's director of sales. Shortly thereafter, Giddings left to serve active duty for five-plus months with the Air Force. After returning from active duty, Giddings allegedly was demoted by and then terminated from Media Lodge without cause. Giddings sued Media Lodge, Media Lodge's Chief Executive Officer (CEO) Jeff Siegel, and Media Lodge's majority owner IA Tech, LLC (IA Tech) (collectively "Defendants")[1], alleging that they violated the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). Doc. 41. Defendants filed a motion arguing that the Federal Arbitration Act (FAA) and the arbitration clause in Giddings' Employment Agreement require this Court to stay or dismiss Giddings' case and compel arbitration. Doc. 18. For the reasons explained below, this Court grants Defendants' motion to compel arbitration under the arbitration clause, but stays the case rather than dismissing it.

          I. Facts

         GunUp was an internet media and marketing company that catered to firearms enthusiasts, manufacturers, and retailers. Doc. 24 at ¶ 5. Giddings and his then-wife Shelley (Shelley) worked for GunUp in South Dakota, and Giddings was a minority share owner of GunUp. Doc. 24 at ¶¶ 5-7. Media Lodge is an electronic media marketing company, has employees in several states, and sells electronic advertising services throughout the country. Doc. 21 at ¶ 3. Media Lodge's content targets outdoor enthusiasts who are interested in hunting, shooting, fishing, and other outdoor activities. Doc. 21 at ¶ 3.

         In 2014, Media Lodge CEO Siegel and Daniel Hall, GunUp's CEO, began negotiating a merger between GunUp and Media Lodge. Doc. 25-1 at 4; Doc. 29. These negotiations included discussions about Hall, Giddings, and Shelley coming to work for Media Lodge. Doc. 25-1 at 4; Docs. 29-29-7. GunUp and Media Lodge executed a merger agreement on March 31, 2015. Doc. 41 at ¶ 17; Doc. 25-5 at 18. The next day, Giddings, Shelley, and Hall signed employment agreements with Media Lodge. Doc. 21 at ¶ 5-7; Doc. 21-1; Doc. 24 at ¶ 6; Doc. 25-1 at 4-5. Giddings's Employment Agreement contained the following arbitration clause:

Binding Arbitration. In the event any disagreement arises under this Agreement, the disagreement shall be settled by binding arbitration pursuant to the Rules of the American Arbitration Association. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§ 1-16, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The place of arbitration shall be Atlanta, Georgia, there shall only be one arbitrator selected by the parties, and the arbitrator shall not be empowered to award damages in excess of actual damages, although the arbitrator shall be empowered to award injunctive relief. The parties hereto hereby waive all defenses in connection to any arbitration hereunder or the enforcement of any arbitration award rendered pursuant hereto.

Doc. 21-1 at 6.

         Giddings went on mandatory active duty with the United States Air Force from late April 2015 until September 30, 2015. Doc. 41 at ¶ 21. Giddings alleges that when he returned to work upon completing his service, Media Lodge violated USERRA by failing to properly reemploy him, demoting him without just cause, and terminating him without just cause. Doc. 41 at ¶¶ 49-75. Giddings seeks compensatory, general, and liquidated damages from Defendants for these alleged USERRA violations. Doc. 41. Since filing his suit, Giddings has relocated to Florida. Doc. 41 at ¶ 2. This Court held a hearing on the motions in this case in late 2017.

         II. The FAA and Standard of Review

          Congress enacted me FAA to counter judicial aversion to arbitration and ensure that courts treat arbitration agreements just like any other contract. Volt Info. Scis., Inc. v. Bd. of Trs. Leland Stanford Junior Univ., 489 U.S. 468, 478 (1989). The key language of the FAA states that a written agreement to arbitrate in a contract involving interstate commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA applies here because the Employment Agreement, including the arbitration clause, is in writing and because the Agreement concerned Giddings's work with Media Lodge, a company that is engaged in interstate commerce. Doc. 21 at ¶ 3; CarMax Auto Superstores Cal. LLC v. Hernandez. 94 F.Supp.3d 1078, 1100-02 (CD. Cal. 2015); Connell v. Meritor Sav. Bank, No. CTV. A. 90-5916, 1991 WL 25715, at *2 (E.D. Pa. Feb. 27, 1991); see also Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273-74 (1995) (adopting a broad reading of the phrase "involving commerce" in 9 U.S.C. § 2). The FAA provides two mechanisms for enforcing an arbitration agreement: a stay of proceedings under § 3 when an issue in the case is "referable to arbitration" and an order compelling arbitration under § 4 when a party has refused to adhere to an arbitration agreement. 9 U.S.C. §§3, 4. Because both Giddings and Defendants have filed affidavits with attached exhibits, this Court will apply the summary judgment standard when ruling on the motion to compel arbitration, viewing the evidence and resolving genuine issues of material dispute in the nonmoving party's favor. Neb. Mach. Co. v. Cargotec Sols. LLC. 762 F.3d 737, 741-42 (8th Cir. 2014).

         III. Analysis

         A. Delegation Provision and Waiver Thereof

         Ordinarily, a court considering a motion to compel arbitration must decide two threshold issues, sometimes referred to as "questions of arbitrability:" 1) whether a valid arbitration agreement exists between the parties; and 2) whether the dispute falls within the scope of the arbitration agreement. Faber v. Menard. Inc., 367 F.3d 1048, 1052 (8th Cir. 2004); Daisy Mfg. Co. v. NCR Corp.. 29 F.3d 389, 392 (8th Cir. 1994). Questions of arbitrability are for the court to decide "[u]nless the parties clearly and unmistakably provide otherwise." Howsam v. Dean Witter Reynolds. Inc., 537 U.S. 79, 83 (2002) (alteration in original) (quoting AT&T Techs., Inc. v. Commc'ns Workers, 475 U.S. 643, 649 (1986)). However, just as parties can agree to arbitrate the merits of a dispute, they can also agree to submit questions of arbitrability to the arbitrator. Rent-A-Center. W., Inc. v. Jackson. 561 U.S. 63, 68-69 (2010). Thus, although there is a presumption that courts will decide questions of arbitrability, these questions must be sent to arbitration if the parties clearly and unmistakably expressed their intent to do so. Howsam, 537 U.S. 79 at 83-84; see also Rent-A-Center, 561 U.S. at 69 n.l. Agreements to arbitrate questions of arbitrability have come to be known as "delegation provisions." See Rent-A-Center, 561 U.S. at 68.

         Both parties addressed questions of arbitrability to this Court in briefing and at oral argument. That is, neither party argued or even addressed a claimed delegation provision being in the arbitration clause. However, under Eighth Circuit precedent, this arbitration clause arguably could be read as containing a delegation provision intending to submit questions of arbitrability to the arbitrator. The arbitration clause provides that "[i]n the event any disagreement arises under this Agreement, the disagreement shall be settled by binding arbitration pursuant to the Rules of the American Arbitration Association ['AAA']." Doc. 21-1 at 6. The AAA Employment Arbitration Rules and Mediation Procedures, in turn, provide for the arbitrator to rule on questions of arbitrability. See AAA Employment Arbitration Rules and Mediation Procedures, Rule 6[2] ("The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement."). When an arbitration provision incorporates rules that authorize an arbitrator to decide issues of arbitrability, the Eighth Circuit deems that incorporation to constitute "a clear and unmistakable expression of the parties' intent to leave the question of arbitrability to an arbitrator." Fallo v. High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009); see also Green v. SuperShuttle Int'l. Inc., 653 F.3d 766, 769 (8th Cir. 2011) ("By incorporating the AAA Rules, the parties agreed to allow the arbitrator to determine threshold questions of arbitrability."). The arbitration clause in Fallo contained language similar to the arbitration clause here, stating that disputes "shall be settled by arbitration in accordance with the Commercial Rules of the American Arbitration Association." 559 F.3d at 877. The Eighth Circuit held that this general language was sufficient to incorporate the Commercial Rules of the AAA, including Rule 7, which gives arbitrators the authority to determine their own jurisdiction. Id. at 877-78. Because Rule 7 authorizes arbitrators to decide issues of arbitrability, the Eighth Circuit held that the arbitration provision's incorporation of the AAA rules was "a clear and unmistakable expression of the parties' intent to leave issues of arbitrability to an arbitrator."[3] Id. at 878.

         Despite what the Fallo case deems a delegation provision in the arbitration clause, Media Lodge's motion to compel arbitration relied on the arbitration clause in general, and Media Lodge at no time has argued the existence of a delegation provision requiring the arbitrator to decide questions of arbitrability. So the question becomes whether Media Lodge has waived any assertion of a delegation provision in the arbitration clause. After all, "[a] delegation clause operates as a defense that the defendant must raise in order to rely upon it." Bodine v. Cook's Pest Control. Inc., 830 F.3d 1320, 1324 (11th Cir. 2016). Under Eighth Circuit precedent, a party can waive an assertion of a delegation provision by failing to raise the argument. Express Scripts. Inc. v. Aegon Direct Mktg. Servs., Inc., 516 F.3d 695 (8th Cir. 2008). The Eighth Circuit in Express Scripts found a waiver of the argument of a delegation provision to exist because the defendant not only failed to raise the issue before the district court, but also forwent briefing the issue to the Eighth Circuit, raising it for the first time at oral argument. Id. at 701-02. Because Express Scripts involved a more obvious case of waiver, this Court-after considering briefing of the motion and oral argument on the motion-entered an Order Concerning Possible Waiver of "Delegation Provision" Assertion, Doc. 63, which noted the absence of any argument by the Defendants of a delegation provision in the arbitration clause. The Order stated that "it would benefit the Court to know for sure whether the defendants who filed the motion [to compel arbitration] are indeed waiving any arguments of a delegation provision, " and gave those defendants an opportunity "to file any assertion of a 'delegation provision' and explanation of why such assertion has not been waived, or this Court will deem any such assertion to be waived." Doc. 63. The Defendants' response to the Order was:

On February 23, 2018, the Court requested clarification from Defendants Media Lodge, IA Tech, LLC, and Jeff Siegel ("Defendants") regarding whether they had waived an argument that the arbitration provision at issue contained a "delegation provision." Defendants provide the following in response to the Court's request:
Defendants did not raise or waive an argument or make an assertion that the issue of arbitrability should be within the arbitrator's jurisdiction. Such an argument would be unsupported because the arbitration provision in this case does not contain a delegation provision. Accordingly, Defendants ...

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