Reeves v. Enter. Prods. Partners, LP

17 F.4th 1008

Darrell REEVES ; James King ; Todd A. Orcutt, Plaintiffs - Appellees,

v.ENTERPRISE PRODUCTS PARTNERS, LP, Defendant - Appellant.

No. 20-5020

United States Court of Appeals, Tenth Circuit.

FILED November 9, 2021

Rachel B. Cowen, McDermott Will & Emery LLP, Chicago, Illinois, for Appellant.

Richard J. Burch, Bruckner Burch PLLC, Houston, Texas, for Appellees.

Before TYMKOVICH, Chief Judge, BALDOCK and CARSON, Circuit Judges.

TYMKOVICH, Chief Circuit Judge.

Darrell Reeves and James King worked as welding inspectors for Enterprise Products Partners through third party staffing companies, Cypress Environmental Management and Kestrel Field Services. Reeves brought a collective action claim to recover unpaid overtime wages under the Fair Labor Standards Act, 29 U.S.C. § 216(b). King later consented to join the putative collective action and was added as a named plaintiff. Enterprise argues that both Reeves and King signed employment contracts with their respective staffing companies that should compel arbitration for both parties in this case.

We agree. Under the doctrine of equitable estoppel, we find that these agreements require the claims to be resolved in arbitration. Because Reeves and James's claims allege substantially interdependent and concerted misconduct by Enterprise and non-defendant signatories, Cypress and Kestrel, arbitration should be compelled for these claims. We reverse the district court's denial of Enterprise's motions to compel.¹

I. Background

Enterprise is an integrated midstream energy company that gathers, treats, processes, transports, and stores natural gas. It engages with a variety of companies for third-party inspection services to assist in its pipeline construction. Enterprise uses Cypress and Kestrel, among others, for these services.

Reeves performed services for Enterprise through Cypress from April 2017 to December 2017 as a welding inspector. King similarly performed services for Enterprise through Kestrel from January 2019 to October 2019 as a welding inspector.

Reeves and King both entered into separate employment agreements with their respective staffing companies. Both agreements included clauses that required them to individually arbitrate claims arising out of their employment with Cypress and Kestrel. In Reeves's employment agreement with Cypress, Reeves agreed to "resolve by arbitration all past, present, or future claims or controversies, including but not limited to, claims arising out of or related to my ... employment ..." Aplt. App. at 29. In King's mutual arbitration agreement with Kestrel, King agreed to "resolve by arbitration all past, present, or future claims or controversies, including but not limited to, claims arising out of or related to my ... employment ..." Id. at 80.

In July 2019, Reeves brought a collective action against Enterprise for unpaid overtime wages. He alleged that he and other similarly situated employees worked for Enterprise in excess of forty hours each week. Instead of paying them any overtime, Enterprise paid him and others a flat daily rate with no overtime compensation, regardless of hours worked. Reeves claimed that he is entitled to the FLSA's overtime mandate and should be paid overtime. King opted into the case on November 5, 2019.

Enterprise responded by filing motions to compel arbitration, arguing Reeves and King's respective employment agreements required arbitration. The district court denied the motions to compel, finding that the employment agreements were not binding between Reeves or King and Enterprise, who was not a signatory to the agreement. Enterprise advanced a "concerted misconduct" or "intertwined-claims" theory of equitable estoppel, asking the district court to apply the arbitration clauses Reeves and King had agreed to in their employment agreements. The theory applies equitable estoppel in cases where the signatory plaintiff's claims either (1) rely on the terms of the written agreement containing the arbitration clause, or (2) raise allegations of "substantially interdependent and concerted misconduct by both the nonsignatory and the signatory to the contract." MS Dealer Service Corp. v. Franklin , 177 F.3d 942, 947 (11th Cir. 1999). The Oklahoma Court of Civil Appeals has used this theory of equitable estoppel in two previous cases. See Cinocca v. Orcrist, Inc. , 60 P.3d 1072 (Okla. Civ. App. 2002) ; High Sierra Energy, L.P. v. Hull , 259 P.3d 902 (Okla. Civ. App. 2011). Still, the district court declined to apply this theory of equitable estoppel because the Oklahoma Supreme Court has not yet adopted it. The district court found that even if it did apply the suggested equitable estoppel test, the alleged facts failed to justify equitable estoppel under either prong in this case. Therefore, the plaintiffs’ claims were not subject to mandatory arbitration.

II. Analysis

Enterprise argues that (1) Oklahoma contract law requires applying an expanded equitable estoppel doctrine, and (2) Reeves and King's claims allege substantially interdependent and concerted misconduct by Enterprise and Cypress or Kestrel. We agree and find that the district court incorrectly concluded that Reeves and King's claims did not allege substantially interdependent and concerted misconduct between Enterprise and the staffing companies.

A. Standard of Review

We review de novo the decision of the district court to grant or deny a motion to compel arbitration. Avedon Eng'g, Inc. v. Seatex , 126 F.3d 1279, 1283 (10th Cir. 1997) (citing Armijo v. Prudential Ins. Co. of Am. , 72 F.3d 793, 796 (10th Cir. 1995) ); see also 1mage Software, Inc. v. Reynolds & Reynolds Co. , 459 F.3d 1044, 1055 (10th Cir. 2006). Federal courts have a "liberal federal policy favoring arbitration agreements." Nat'l Am. Ins. Co. v. SCOR Reins. Co. , 362 F.3d 1288, 1290 (10th Cir. 2004) (internal citation omitted). And "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp. , 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

Because estoppel is an equitable theory, however, some circuits have held that when a district court rules on a motion to compel that is based on estoppel, the review should be for an abuse of discretion rather than de novo. See Brantley v. Republic Mortg. Ins. Co. , 424 F.3d 392, 395 (4th Cir. 2005) ; Grigson v. Creative Artists Agency L.L.C. , 210 F.3d 524, 528 (5th Cir. 2000). But other courts continue to apply a de novo standard even when a motion to compel is based on equitable estoppel. See, e.g., Donaldson Co. v. Burroughs Diesel, Inc. , 581 F.3d 726, 731 (8th Cir. 2009) ; Mundi v. Union Sec. Life Ins. Co. , 555 F.3d 1042, 1044 & n. 1 (9th Cir. 2009) ; Bouriez v. Carnegie Mellon Univ. , 359 F.3d 292, 294 (3d Cir. 2004) ; Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc. , 10 F.3d 753, 757 (11th Cir. 1993).

This court has "not yet decided" what standard applies to a denial of a motion to compel arbitration based on equitable estoppel. Jacks v. CMH Homes Inc. , 856 F.3d 1301, 1304 (10th Cir. 2017) (citing Bellman v. i3Carbon, L.L.C. , 563 F. App'x 608, 612–13 (10th Cir. 2014) ). For this case, "there is no reason to depart from the de novo standard." Donaldson , 581 F.3d at 731. This case presents "at least mixed questions of law and fact." Id. In this circuit, "[w]here a mixed question primarily involves the consideration of legal principles, then a de novo review by the appellate court is appropriate" (internal citation omitted). Osage Nation v. Irby , 597 F.3d 1117, 1122 (10th Cir. 2010). Here, the district court's decision turned on whether the concerted misconduct equitable estoppel test applies, primarily an issue of law. We review this determination de novo.

B. Oklahoma Contract Law

The scope of the arbitration agreement, including the question of who it binds, is a question of state contract law. Arthur Andersen L.L.P. v. Carlisle , 556 U.S. 624, 630–31, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009). "[T]raditional principles of state law allow a contract to be enforced by or against nonparties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel." Id. (internal quotation marks omitted). Accordingly, our task in these circumstances is to determine whether the relevant state's high court would permit the nonsignatory to enforce the arbitration clause. See Wade v. EMCASCO Ins. Co. , 483 F.3d 657, 666 (10th Cir. 2007). If the state's high court has not explicitly decided the issue, the district court must "attempt to predict what the state's highest court would do." Id. (citing Wankier v. Crown Equip. Corp. , 353 F.3d 862, 866 (10th Cir. 2003) ). The court may "seek guidance from decisions rendered by lower courts in the relevant state, appellate decisions in other states with similar legal principles, district court decisions in interpreting the law of the state in question, and the ‘general weight and trend of authority’ in the relevant area of law." Wade , 483 F.3d at 666 (internal citations omitted).

The Oklahoma Supreme Court has yet to address concerted misconduct estoppel. See Williams v. TAMKO Bldg. Prods., Inc., 451 P.3d 146, 153–54 (Okla. 2019) (attempt to bind nonsignatory purchasers). But the Oklahoma Supreme Court has noted that it would be more willing to enforce an arbitration agreement where "a signatory" was "avoiding arbitration with a nonsignatory" and the nonsignatory was seeking to resolve issues "that were intertwined with the agreement." Carter v. Schuster , 227 P.3d 149, 156 (Okla. 2009). In that situation, the court reasoned that the "signatory is merely being held to his previous agreement to arbitrate." Id.

Although several Oklahoma cases have employed equitable estoppel in the arbitration context, Reeves argues that the federal court should be "reticent to expand state law without clear guidance from its...