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Xome Holdings LLC v. Derbonne

United States District Court, E.D. Texas, Sherman Division

June 2, 2017

XOME HOLDINGS LLC f/k/a SOLUTIONSTAR HOLDINGS LLC, A DELAWARE LLMITED LIABILITY COMPANY
v.
PETER DERBONNE and ERIC SWENSON

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE.

         Pending before the Court is Xome Holdings LLC's Motion to Compel Arbitration (Dkt. #24). The Court, having considered the relevant pleadings, finds the motion is granted.

         BACKGROUND

         Xome Holdings LLC (“Xome”) is a Delaware limited liability company headquartered in Lewisville, Texas, and has offices in four other states and in India. Xome provides technology and data enhanced solutions to homebuyers, home sellers, real estate agents, and mortgage origination and servicing companies. Peter Derbonne and Eric Swenson (“Defendants”) are former executives of Title365 Company (“Title365”), a national title insurance and settlement services provider. On January 1, 2015, Xome acquired Title365's parent company, Experience 1, Inc. Following this acquisition, Title365 became a wholly owned subsidiary of Xome.

         Leading up to this acquisition, Defendants negotiated their employment agreements with Xome over the course of a month. Defendants and their counsel exchanged at least four drafts of their employment agreements with Xome until the parties executed a final agreement on November 21, 2014, effective January 1, 2015. In the General section of the employment agreement, the parties agreed to an arbitration clause. The relevant portion provides:

[T]he parties agree that any and all disputes that may arise in connection with, arising out of or relating to this Agreement, or any dispute that relates in any way, in whole or in part, to [Defendants'] services to the Company, the termination of such services or any other dispute by and between the parties hereto arising from such relationship shall be submitted to binding arbitration in Dallas, Texas according to the National Employment Dispute Resolution Rules and procedures of the American Arbitration Association.

(Dkt. #24, Exhibit 1 to Exhibit B at p. 13).

         On July 11, 2016, Defendants filed a complaint against Xome in the California Superior Court for the County of Orange (the “California Case”) for breach of contract, failure to pay wages, wrongful termination, and other claims related to their employment. On July 22, 2016, Xome filed a Complaint to Compel Arbitration Pursuant to Respondents' Arbitration Agreements (Dkt. #1). The only named Plaintiff is the Delaware LLC Xome and the only named defendants are California citizens Peter Derbonne and Eric Swenson.[1] On August 1, 2016, Xome filed an ex parte application to stay the California Case. On August 3, 2016, the California Superior Court for the County of Orange granted the stay until this Court rules on the motion to compel arbitration (Dkt. #7, Exhibit I). On September 13, 2016, Defendants filed a Motion to Dismiss Petition to Compel Arbitration (Dkt. #7), challenging this Court's jurisdiction.[2] On December 29, 2016, the Magistrate Judge issued a Report and Recommendation denying the motion to dismiss (Dkt. #21). On January 27, 2017, the Court issued a Memorandum Adopting the Report and Recommendation (Dkt. #22). On March 24, 2017, Xome filed this Motion to Compel Arbitration (Dkt. #24). On April 7, 2017, Defendants filed a response (Dkt. #25). On April 14, 2017, Xome filed a reply (Dkt. #26).

         LEGAL STANDARD

         “The Federal Arbitration Act (“FAA”) expresses a strong national policy favoring arbitration of disputes, and all doubts concerning the arbitrability of claims should be resolved in favor of arbitration.” Wash. Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 263 (5th Cir. 2004). The FAA, “leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985).

         When considering a motion to compel arbitration, the Court must address two questions. Graves v. BP America, Inc., 568 F.3d 221, 222 (5th Cir. 2009) (citing Fleetwood Enterprises Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)). “First, whether there is a valid agreement to arbitrate, and second, whether the dispute in question falls within the scope of the arbitration agreement.” Id. Concerning the first question of contract validity, the Court should apply “ordinary state-law principles that govern the formation of contracts.” Id., 568 F.3d at 222 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). The second question of scope is answered “by applying the ‘federal substantive law of arbitrability . . . .' ” Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)).

         ANALYSIS

         The Court must first determine whether there is a valid agreement to arbitrate applying ordinary state-law principles that govern the formation of contracts. Graves, 568 F.3d at 222. “In applying state law, however, due regard must be given to the federal policy favoring arbitration.” Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996). “In determining whether the parties agree to arbitrate a certain matter, courts apply the contract law of the particular state that governs the agreement.” Wash. Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004). Here, the employment agreement explicitly states, in all caps, the parties agree to “irrevocably submit[] to the exclusive jurisdiction of the state and federal courts located in Denton County in the State of Texas for the purposes of any suit, action or other proceeding arising out of th[e] agreement[s] for which recourse to the Courts is provided for under [the] agreement[s] or applicable law.” (Dkt. #24, Exhibit 1 to Exhibit B at p. 13). The Court finds Texas contract law applies.[3]

         Xome argues that the employment agreements expressly and unambiguously require the parties to arbitrate “any and all disputes that may arise in connection with, arising out of or relating to this Agreement . . . the termination of [Defendants'] service [to Xome], ” and “any and all claims that may arise . . . under . . . state labor statutes and regulations.” (Dkt. #24, Exhibit 1 to Exhibit B at 13). Defendants argue that the ...


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