Carlos Alvarado v. Pacific Motor Trucking Company

FILED
NOT FOR PUBLICATION
DEC 23 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

CARLOS ALVARADO; ALAN CHILDS; No. 14-56823
WILLIAM FROGUE; DAVID KEE;
ROSS KERSHNER; RAFAEL D.C. No.
MARROQUIN; JESSE MEDINA; 5:14-cv-00504-DOC-DTB
DAVID MOLINA; FRANK MONTEZ;
CARL MORGAN; JESSE NAPOLES;
ALFONSO REYES; CARLOS ROMERO; MEMORANDUM*
LEOBARDO ZEPEDA,

Plaintiffs-Appellants,

v.

PACIFIC MOTOR TRUCKING
COMPANY, a Missouri corporation,

Defendant-Appellee.

Appeal from the United States District Court
for the Central District of California
David O. Carter, District Judge, Presiding

Argued and Submitted November 10, 2016
Pasadena, California

*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: SCHROEDER and BYBEE, Circuit Judges, and SMITH,** Chief District
Judge.

Carlos Alvarado, Alan Childs and twelve additional Plaintiffs were all

employed as long haul drivers by Defendant, Pacific Motor Trucking Company

(“PMTC”). In 2006 and 2007, PMTC instituted an owner-operator program to

replace existing trucks. Under that program, the drivers would purchase the new

trucks and become parties to an “Operating Agreement and Equipment Lease”

(“the Agreement”). Although Plaintiffs did not see the Agreement until after they

had made substantial financial commitments, the Agreement included a

comprehensive arbitration clause that required Plaintiffs to follow the same

procedures as those contained in the parties’ existing Collective Bargaining

Agreements.

PMTC cancelled the Agreement approximately two years later, pursuant to a

provision authorizing cancellation by either party with thirty days notice. Plaintiffs

now appeal the district court’s judgment dismissing their action for fraud and

breach of contract. The district court ruled that under the Federal Arbitration Act

(“FAA”), 9 U.S.C. § 1, et seq., the arbitration clause was valid and enforceable.

The court also denied Plaintiffs’ motion to alter or amend the judgment.

**
The Honorable William E. Smith, Chief United States Judge for the
District of Rhode Island, sitting by designation.
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 Plaintiffs on appeal first contend that the entire contract, and by extension

the arbitration clause, was unconscionable as a result of fraud in the inducement.

Their principle assertion is that the company fraudulently misrepresented the

agreement as one that would continue for the long term, when, in fact, PMTC

terminated the contract after two years, leaving Plaintiffs in substantial debt. To

the extent that fraud in the inducement can indicate unconscionability, however,

there must be knowledge at the time the contract was entered into that a material

representation was false. See Brewer v. Missouri Title Loans, 364 S.W.3d 486,

493 (Mo. 2012); ITT Commercial Fin. Corp. v. Mid-Atlantic Marine Supply Corp.,

854 S.W.2d 371, 386 (Mo. 1993). Here, there is no indication that PMTC knew

that the arrangement would not be long term. The evidence in this record reflects

that the cause of the termination was PMTC losing its largest customer.

The Agreement’s nonexclusivity of remedies creates no ambiguity with

respect to the arbitration provision. This argument is raised for the first time on

appeal and lacks merit.

Plaintiffs also argue that they are exempt from the FAA’s mandatory

enforcement requirement because they are transportation workers engaged in

interstate commerce within the meaning of 9 U.S.C. § l. The FAA exemption

applies to “contracts of employment” of interstate transportation workers. The

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Agreement was not a contract of employment. The Agreement established the

terms governing PMTC’s use of the trucks, not the terms of Plaintiffs’

employment. The terms and conditions of employment were contained in the

parties’ Collective Bargaining Agreements. The Agreement contains some

provisions, including the arbitration provision, that are consistent with terms in the

Collective Bargaining Agreements. Such terms do not, however, transform the

Agreement into a contract of employment.

PMTC’s motions to strike portions of the excerpts of record and opening

brief are denied.

The district court’s judgment is AFFIRMED.

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