Davis v. EGL Eagle Global Logistics LP

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS July 9, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk

No. 06-31019
Summary Calendar

RUFUS DAVIS, JR,

Plaintiff-Appellant,

v.

EGL EAGLE GLOBAL LOGISTICS LP,

Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Louisiana
No. 2:06-CV-2888

Before DeMOSS, STEWART, and PRADO, Circuit Judges.

Per Curiam:*

Plaintiff-Appellant Rufus Davis Jr. (“Davis”) appeals from the

district court’s grant of summary judgment in favor of Defendant-

Appellee EGL Eagle Global Logistics, L.P. (“EGL”). Davis contends

that the district court erred in two respects. First, according to

Davis, the district court erroneously determined that the Federal

Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., applied to his

*
Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIRCUIT
RULE 47.5.4.

1
claim because he was an independent contractor, and not an employee

of EGL. Second, Davis argues that the district court erred in

rejecting his argument that his contract with EGL was unenforceable

because it was unconscionable, ambiguous, internally inconsistent,

and lacked mutuality. We AFFIRM the judgment of the district court

for the reasons stated below.

I. FACTUAL AND PROCEDURAL BACKGROUND

On September 22, 2003, Davis and EGL entered into a contract

entitled “EGL Global Logistics LP Agreement for Leased Equipment

and Independent Contractor Services (Pick-up & Deliver)”

(“Agreement”). As indicated by the title, the Agreement consisted

primarily of a lease of Davis’s vehicle to EGL for the purpose of

shipping goods, and an agreement that Davis provide transportation

services for the leased vehicle, either by driving himself or by

hiring another person to drive. The Agreement stated that EGL

would pay Davis sixty percent of the total amount that it received

for each shipment picked-up or delivered by Davis.

With respect to the relationship between the parties, Section

I of the Agreement attempted to create an independent contractor

relationship. In support of this intention, the Agreement included

a provision, written in bold, capital letters and separately

initialed by both Davis and EGL, requiring Davis to notify EGL if

he believed at any point that a relationship other than an

2
independent contractor relationship existed.1

The Agreement also included three appendices which were signed

and dated on the same day as the Agreement. Appendix I identified

the leased vehicle. Appendix II listed the expenses that EGL could

deduct from any compensation due to Davis. Finally, Appendix III

specified the rate of compensation paid to Davis for each shipment

picked-up or delivered.

Two additional sections of the Agreement are of importance to

this appeal. Section 4.07 of the Agreement provides that all

settlements--that is, compensation due less authorized deductions--

are final and forbids Davis to make any claim for additional

settlement monies “unless Contractor [Davis] notifies EGL in

writing by certified mail of any discrepancies or additional claims

within fifteen (15) days of settlement of computation or said

settlement by EGL.” Section 6.07 of the Agreement mandates, “any

controversy or claim arising out of or relating to this Agreement

. . . shall be determined and settled in accordance with the

Commercial Arbitration Rules of The American Arbitration

Association.” Section 6.07 further states that “[w]ritten notice

of a demand for arbitration must be mailed to the other party and

1
The provision stated:

IF AT ANY TIME DURING THE TERM OF THIS AGREEMENT
CONTRACTOR IS OF THE OPINION THAT SOMETHING OTHER THAN AN
INDEPENDENT CONTRACTOR RELATIONSHIP EXISTS BETWEEN
CONTRACTOR AND EGL, CONTRACTOR SHALL IMMEDIATELY NOTIFY
THE MANAGER OF SHARED RESOURCES OF EGL.

3
the American Arbitration Association within ninety (90) days of the

occurrence of the claimed breach or other event giving rise to the

controversy or claim.” Failure to give the written notice of

demand for arbitration within the ninety-day period erects an

absolute bar to the institution of any proceedings.

Davis and EGL performed under the contract until December 20,

2004, at which time the Agreement was terminated.

On January 3, 2006, Davis filed a putative class action suit

in Louisiana state court alleging that Davis and other class

members (EGL’s independent contractor drivers over the past ten

year period) had been underpaid.2 EGL then removed the suit to

federal district court and filed a motion to dismiss under Federal

Rule of Civil Procedure 12(b)(6). EGL contended that dismissal was

warranted because the Agreement mandates arbitration and Davis

failed to make a timely demand for arbitration. The district court

treated EGL’s motion to dismiss as a summary judgment motion under

Federal Rule of Civil Procedure 56(c).

Thereafter, the district court granted EGL’s summary judgment

motion and dismissed Davis’s complaint. The district court based

its ruling on the conclusion that, as a matter of law, Davis was an

independent contractor under the Agreement. Therefore, the

Agreement’s arbitration provision was valid and enforceable under

2
As explained by the district court, this suit was never
certified as a class action despite being filed as such, nor did
Davis make a showing that class certification would be appropriate.

4
the FAA, and the exception for “contracts of employment” of

interstate commerce workers did not apply to Davis, an independent

contractor. Davis now appeals.

II. JURISDICTION AND STANDARD OF REVIEW

Davis appeals from a final judgment of the district court, so

this court has jurisdiction under 28 U.S.C. § 1291.

We review the district court’s grant of summary judgment de

novo. Chacko v. Sabre, Inc., 473 F.3d 604, 609 (5th Cir. 2006).

A grant of summary judgment is warranted if the evidence discloses

“no genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law.” FED. R. CIV. P.

56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

A genuine issue of material fact exists if “the evidence is such

that a reasonable jury could return a verdict for the nonmoving

party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

In ruling on a summary judgment motion, courts shall not weigh the

evidence or make credibility determinations. Id. at 255.

Furthermore, all justifiable inferences are made in favor of the

nonmoving party. Id.

III. DISCUSSION

Generally, the FAA “compels judicial enforcement of a wide

range of written arbitration agreements.” Terrebonne v. K-Sea

Transp. Corp., 477 F.3d 271, 278 (5th Cir. 2007) (internal

quotation marks omitted). The Supreme Court has recognized that

5
Congress enacted the FAA in order to “reverse the longstanding

judicial hostility to arbitration agreements.” Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991).

Accordingly, we have noted that the FAA “establishes a federal

policy favoring arbitration.” Terrebonne, 477 F.3d at 285.

Though the FAA establishes a federal policy favoring

arbitration, Section 1 of the FAA does not, however, “apply to

contracts of employment of seamen, railroad employees, or any other

class of workers engaged in foreign or interstate commerce.” 9

U.S.C. § 1. In Circuit City Stores, Inc. v. Adams, 532 U.S. 105,

119 (2001), the Supreme Court construed the extent of Section 1.

The Court rejected the view that Section 1 excluded all employment

contracts from the FAA. Instead, the Court held that Section 1

“exempts from the FAA only contracts of employment of

transportation workers.” Id.

In this case, although the Agreement contains an arbitration

provision, Davis argues that he is exempt from arbitrating his

claim because he is not an independent contractor but an EGL

employee. As a truck driver employed by EGL, Davis maintains that

he is exempt from the FAA’s reach because he was a transportation

worker.

A. Employment Status

The district court rejected Davis’s contention that he was an

employee of EGL, holding instead that he was an independent

6
contractor. In so doing, the district court appears to have

improperly weighed or made credibility determinations of some of

the factual statements in Davis’s affidavit.3 See Anderson, 477

U.S. at 255. Consequently, we have some doubts as to whether,

given a proper consideration of Davis’s statements, the summary

judgment can be affirmed on employment status grounds. The record

shows, however, that EGL proffered several grounds for summary

judgment to the district court. Therefore, we need not reach the

issue of employment status, but instead may review the summary

judgment on the additional grounds raised below but not addressed

by the district court. See Johnson v. Sawyer, 120 F.3d 1307, 1316

(5th Cir. 1997) (explaining that while summary judgment may be

affirmed “on grounds not relied on by the district court, those

grounds must at least have been proposed or asserted in that court

by the movant”).

B. Texas Arbitration Act

In EGL’s motion to dismiss, EGL argued that even assuming the

Agreement fell under the FAA’s exception for transportation

workers, the arbitration provision was nonetheless valid and

3
For example, Davis stated in his affidavit that, in spite of
the Agreement’s terms, he was required to work exclusively for EGL
and work at least forty hours per week. The district court,
however, concluded that Davis was “free to serve other carriers.”
Additionally, Davis asserted that EGL required him to attend
meetings twice a week at the EGL office and to keep and use EGL
communications equipment. These four statements, arguably the most
significant indications of control by EGL, were either contradicted
or simply not addressed by the district court.

7
enforceable under the Texas General Arbitration Act (“TGAA”), Texas

Civil Practices and Remedies Code § 171.001, et seq. We agree.

Where “an agreement contains a clause designating Texas law

but does not exclude the FAA, the FAA and Texas law, including that

state’s arbitration law, apply concurrently.” Freudensprung v.

Offshore Technical Servs., Inc., 379 F.3d 327, 338 n.7 (5th Cir.

2004). Here, Section 7.03 of the Agreement contains a choice-of-

law provision which designates Texas law as the law governing the

Agreement. Thus, because the Agreement’s choice-of-law provision

does not exclude the FAA, both the TGAA and FAA apply to the

contract.

However, while both federal and state arbitration law may

apply to a contract, these laws do not necessarily operate in

harmony. Specifically, the FAA will preempt any state laws that

“contradict the purpose of the FAA by ‘requir[ing] a judicial forum

for the resolution of claims which the contracting parties agreed

to resolve by arbitration.’” Id. (quoting Pedcor Mgmt. Co. Welfare

Benefit Plan v. Nations Pers. of Tex., Inc., 343 F.3d 355, 362 (5th

Cir. 2003)). In other words, “[f]or the FAA to preempt the [TGAA],

state law must refuse to enforce an arbitration agreement that the

FAA would enforce.” In re D. Wilson Constr. Co., 196 S.W.3d 774,

780 (Tex. 2006); see also Miller v. Pub. Storage Mgmt., Inc., 121

F.3d 215, 219 (5th Cir. 1997) (“The FAA preempts conflicting state

antiarbitration law.”) (emphasis added).

8
 Here, the FAA does not preempt the TGAA because this case

presents the situation where the FAA refuses to enforce an

arbitration provision (assuming for the moment that Davis meets the

exception for transportation workers) that the TGAA would enforce.

Under the TGAA, a written agreement to arbitrate is generally valid

and enforceable with respect to controversies that exist at the

time of the agreement or arise thereafter. See TEX. CIV. PRAC. & REM.

CODE ANN. § 171.001. Unlike the FAA, the TGAA does not exclude a

specific class of employees from its coverage. See id. § 171.002.

Thus, even if Davis were an employee of EGL, he would still be

subject to arbitration under the TGAA. We therefore hold that the

Agreement’s arbitration provision is valid and enforceable under

the TGAA, even if the Agreement is excepted from application of the

FAA.

C. Ambiguity and Inconsistency

In Davis’s second argument, he contends that the arbitration

provision of the Agreement is unenforceable due to ambiguities and

inconsistencies in the Agreement. Because of these ambiguities and

inconsistencies, Davis asserts, EGL cannot prove as a matter of law

that Davis’s claims fall under the scope of the arbitration

provision. We address each of Davis’s ambiguity arguments in turn.

Whether a contract is ambiguous is a question of law decided

by the court. D. Wilson Const. Co., 196 S.W.3d at 781. In

construing contract language, the primary objective is to discern

9
the true intention of the parties. J.M. Davidson, Inc. v. Webster,

128 S.W.3d 223, 229 (Tex. 2003). Ambiguity in a contract exists

where the agreement “is subject to two or more reasonable

interpretations after applying the pertinent rules of

construction.” Id. If, however, a contract can be “given a

definite or certain legal meaning,” no ambiguity exists. Id.

First, Davis contends that Section 6.07 of the Agreement, the

arbitration provision, conflicts with Appendix II of the Agreement,

which lists deductions from Davis’s compensation. Section 6.07 of

the Agreement states that “any claim or controversy arising out of

or relating to this Agreement, or the breach thereof . . . shall be

determined and settled in accordance with the Commercial

Arbitration Rules of The American Arbitration Association.”

Appendix II, on the other hand, enumerates the expenses which EGL

may deduct from Davis’s compensation. In essence, Davis argues

that while the arbitration provision requires “any claim or

controversy” to be arbitrated, Appendix II inconsistently permits

EGL to take self-help remedies for a variety of claims under the

contract.

Contrary to Davis’s assessment, we find only one reasonable

interpretation and no inconsistency. Appendix II, rather than

containing a list of claims, merely contains an agreed list of

expenses that EGL may deduct from Davis’s settlement payments. The

intent and effect of Appendix II is simply to allocate onto Davis

10
the initial payment of Davis’s contractual expenses and the risk of

a mistake. Any claim or controversy involving the deductions, for

example a disagreement over the value, must still be arbitrated

according to Section 6.07 of the Agreement, albeit at Davis’s

request rather than EGL’s. Such an arrangement is analogous to the

typical employment compensation arrangement: the employer pays what

the employer believes to be the correct compensation; any mistake

in pay must be challenged by the employee. Therefore, we conclude

that no ambiguity or inconsistency exists between these two

provisions.

Second, Davis alleges that the Agreement contains ambiguous

and inconsistent notification requirements. Section 6.07(a)

provides: “Written notice of a demand for arbitration must be

mailed to the other party . . . within ninety (90) days of the

occurrence of the claimed breach or other event giving rise to the

controversy or claim.” Thus, the provision places on both parties

a ninety-day notice requirement of a demand for arbitration.

Section 4.07 of the Agreement states: “Contractor will not make any

claim or bring any action against EGL for additional settlement

monies unless Contractor notifies EGL in writing by certified mail

of any discrepancies or additional claims within fifteen (15) days

of settlement.” This section requires Davis to notify EGL of any

alleged settlement errors within fifteen days of the settlement

payment as a prerequisite to bringing a claim on the disputed

11
settlement.

Again, we conclude that only a single reasonable

interpretation exists for these two provisions. Section 4.07

requires notice of erroneous settlement payments prior to demanding

arbitration, while Section 6.07(a) requires notice of a demand for

arbitration. It is clear that Davis must comply with both

provisions to have a claim for settlement monies arbitrated.

Although Davis may regard the notice requirement for arbitration as

unnecessarily duplicative in light of the notice requirement for

incorrect settlements, the two provisions are not ambiguous or

inconsistent.

Given that there is only one reasonable interpretation of the

Agreement and that its provisions do not conflict, we hold that

Davis has not shown any ambiguity or inconsistency in the

Agreement.

D. Unconscionability and Lack of Mutuality

Finally, Davis asserts that the arbitration provision of the

Agreement is unconscionable and lacks mutuality, and is therefore

unenforceable.

The party opposing arbitration bears the burden of showing

that the arbitration provision is unconscionable. In re FirstMerit

Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001). The test for

unconscionability assesses whether, in light of the parties’

general commercial background and needs, the provision is so

12
unilateral as to have been unconscionable at the time of formation.

Id. at 757. The objective is to prevent oppression and unfair

surprise, not to disturb the allocation of risks stemming from one

party’s superior bargaining position. Id.

As to the reasons why the Agreement’s arbitration provision is

unconscionable, Davis points to the “employment status of the

drivers [and] the ambiguous and unilateral nature of the

arbitration clause.” First, we have already addressed the issue of

ambiguity and held that Davis did not show ambiguity in the

arbitration provision. Second, Davis does not explain how one’s

status as an employee as opposed to an independent contractor would

change the unconscionability analysis. Lastly, the mere existence

of unequal bargaining power does not make an arbitration clause

unconscionable, nor does the fact that limited exceptions exist

which permit one party to seek judicial remedies instead of

submitting to arbitration. See id. at 757-58 (holding that an

arbitration clause that permitted the stronger party to litigate

certain claims was not unconscionable). Thus, Davis has failed to

satisfy his burden of showing unconscionability.

Lack of mutuality generally refers to the concept of

consideration. See Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 408

(Tex. 1997) (“A contract must be based upon a valid consideration,

in other words, mutuality of obligation.”), superseded by statute

on other grounds, TEX. GOV’T CODE §§ 2260.001-.108, as recognized in

13
Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 593

(Tex. 2001). Consideration is comprised of the “benefits and

detriments to the contracting parties.” Id. at 409. “The

detriments must induce the parties to make the promises and the

promises must induce the parties to incur the detriments.” Id. In

the present case, Davis did not point to any evidence of a lack of

mutuality of obligations in the Agreement.4 Therefore, we reject

Davis’s contention that the Agreement lacked mutuality.

IV. CONCLUSION

For the reasons stated above, we AFFIRM the judgment of the

district court.

AFFIRMED.

4
We also note that mutuality of remedy does not apply to this
case because specific performance is not an issue. Fed. Sign, 951
S.W.2d at 409 (“Mutuality of remedy is the right of both parties to
a contract to obtain specific performance.”)

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