United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND OPINION
Rosenthal Chief United States District Judge.
2018, Robert Perales, representing himself, sued SFM, LLC,
Ron Haas, and Stephen Quiroz in Texas state court, asserting
a claim under the federal Family and Medical Leave Act, 29
U.S.C. § 2601, et seq. (Docket Entry No. 1-1).
The defendants timely removed and, in July 2018, moved to
dismiss and compel arbitration based on an agreement Perales
signed. (Docket Entry Nos. 1, 3). Because Perales did not
respond within the time to do so or appear at the August 2018
initial conference, the court granted the motion and
dismissed Perales's claim based on the arbitration
agreement. (Docket Entry Nos. 9, 10). In February 2019, the
court granted Perales's motion to reinstate the case and
directed him to respond to the defendants' motion to
dismiss and compel arbitration. (Docket Entry Nos. 12, 13,
15, 16, 17, 18). Perales responded in June 2019, and the
defendants replied. (Docket Entry Nos. 19, 20).
record shows that Perales and the defendants signed an
employment agreement on January 19, 2016. (Docket Entry No.
4-1 at 5; Docket Entry No. 19 at 4). The agreement contained
a “Mandatory Arbitration” clause that reads:
“Sprouts and Team Member agree that any claim, as that
term is defined in Section 4 below, shall be submitted to
final and binding arbitration administered by JAMS in
accordance with the then current JAMS Employment Arbitration
Rules & Procedures.” (Docket Entry No. 4-1 at 1,
3). Section 4, “Covered Claims, ” provides that
the agreement “covers all [claims], whether based in
contract, tort, equity, or other legal theory, and whether
arising under any federal, state, or local statute, . . .
arising out of or related to Team Member's employment
with Sprouts and/or the termination thereof.”
(Id.). By signing the agreement, Perales confirmed
(A) [HAD] READ EACH PROVISION OF THIS AGREEMENT CAREFULLY
BEFORE SIGNING IT; (B) [HAD] SUFFICIENT OPPORTUNITY TO REVIEW
THIS AGREEMENT WITH ANY ADVISOR WHICH [HE] MAY DESIRE TO
CONSULT, INCLUDING LEGAL COUNSEL; (C) [HAD] SUFFICIENT
OPPORTUNITY TO ASK ANY QUESTIONS [HE] HA[S] ABOUT THIS
AGREEMENT AND ANY PROVISION CONTAINED IN IT; (D) AND
UNDERSTAND[S] [HIS] RIGHTS AND OBLIGATIONS UNDER THIS
AGREEMENT, INCLUDING THAT THE AGREEMENT PROVIDES FOR FINAL
AND BINDING ARBITRATION OF ALL CLAIMS ARISING OUT OF OR
RELATED TO [HIS] EMPLOYMENT, INCLUDING TERMINATION.
(Id. at 5).
concedes that he signed the agreement. He argues that it is
unconscionable because he was forced to sign it “under
threat of termination, ” and because the defendants did
not give him enough time to read the agreement before he
signed it. (Id. at 4-5).
Fifth Circuit “analyze[s] whether a party can be
compelled to arbitrate using a two-step process.”
Janvey v. Alguire, 847 F.3d 231, 240 (5th Cir.
2017). Applying “the contract law of the particular
state that governs the agreement, ” Wa. Mut. Fin.
Grp., LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004),
the court first decides “if the party has agreed to
arbitrate the dispute, ” Janvey, 847 F.3d at
240 (quoting Sherer v. Green Tree Serv. L.L.C., 548
F.3d 379, 381 (5th Cir. 2008)). “If the party opposing
arbitration has agreed to arbitrate, ” the court then
decides “‘if any federal statute or policy
renders the claims nonarbitrable.'” Id.
(quoting Sherer, 548 F.3d at 381).
Perales does not argue “that a federal statute or
policy would bar arbitration here, the issue . . . is limited
to the analysis's first step.” Sherer, 548
F.3d at 381.
one, the court consider “two issues: (1) whether there
is a valid agreement to arbitrate between the parties; and
(2) whether the dispute in question falls within the scope of
that arbitration agreement.” Carey v. 24 Hour
Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 2012).
Perales does not argue that his FMLA “claim falls
outside the scope of the arbitration agreement.”
Id. He argues only that the agreement is invalid
based on unconscionability.
agreement does not specify which state law applies.
(See Docket Entry No. 4-1). Because this
“action was brought in a Texas federal court, . . .
Texas choice-of-law rules apply.” Weber v. PACT XPP
Techs., AG, 811 F.3d 758, 771 (5th Cir. 2016). Texas
courts follow the most-significant-relationship test set
forth in the Restatement (Second) of Conflicts of
Laws. See, e.g., Minn. Mining & Mfg.
Co. v. Nishika Ltd., 953 S.W.2d 733, 735 (Tex. 1997).
“‘When, as here, the parties have not expressly
chosen the applicable law, [the court] consider[s] . . .
contacts' such as the place of contracting, negotiation,
performance, and the location of the contract's subject
matter.” Ballard v. Devon Energy Prod. Co.,
L.P., 678 F.3d 360, 365 n.14 (5th Cir. 2012) (quoting
Minn. Mining, 953 S.W.2d at 735).
a Texas resident, worked for the defendants at a retail store
in Texas. (Docket Entry No. 1-1 at 5; Docket Entry No. 4 at
1). The record also shows that the agreement was negotiated
and signed in Texas. (Docket Entry No. 19 at 4). The relevant
factors point to applying Texas law.
recognizes both substantive and procedural
unconscionability.” Mattar v. BBVA Compass Bank,
NA, No. 13-16-496-CV, 2018 WL 2440382, at *5 (Tex.
App.-Corpus Christi-Edinburg 2018, no pet.).
“Substantive unconscionability refers to the fairness
of the agreement itself, whereas procedural unconscionability
refers to the circumstances surrounding adoption of the
agreement.” Id. Unconscionability
“defies precise legal definition because it is not a
concept, but a determination to be made in light of a variety
of factors not unifiable into a formula.” Id.
(quotation omitted). “Depending on context, factors
that may be considered include the commercial atmosphere in
which the agreement was made, the alternatives available to
the parties, the parties' ability to bargain, any
illegality or public-policy concerns, and the agreement's
oppressive or shocking nature.” Id.
“party contesting the contractual arbitration
provision, ” Perales “has the burden to show
procedural unconscionability.” Fleetwood Enters.,
Inc. v. Gaskamp, 280 F.3d 1069, 1077 (5th Cir. 2002)
(citing Smith v. H.E. Butt Grocery Co., 18 S.W.3d
910, 912 (Tex. App.-Beaumont 2000, pet. denied). Perales
fails to satisfy his burden because he offers only conclusory
statements to support his position. Id. (“The
Gaskamps have not met their burden here. The only evidence
[they] have presented is in the form of their allegations of
misrepresentations and pressure to sign the documents
quickly. Such allegations are insufficient to establish
agreement is not unconscionable even if, as Perales asserts,
he was required to sign the agreement as a condition of his
continued employment. In re Halliburton Co., 80
S.W.3d 566, 572 (Tex. 2002) (“Because an employer has a
general right under Texas law to discharge an at-will
employee, it cannot be unconscionable, without more, ...