United States District Court, D. South Dakota, Southern Division
OPINION AND ORDER GRANTING MOTION TO STAY CASE AND
COMPEL ARBITRATION
ROBERTO A. LANGE, UNITED STATES DISTRICT JUDGE
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 ...