W.L. Doggett LLC v. Paychex, Inc.

92 F. Supp. 3d 593, 2015 U.S. Dist. LEXIS 39941, 2015 WL 1311226
CourtDistrict Court, S.D. Texas
DecidedMarch 9, 2015
DocketCivil Action No. H-14-506
StatusPublished
Cited by8 cases

This text of 92 F. Supp. 3d 593 (W.L. Doggett LLC v. Paychex, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
W.L. Doggett LLC v. Paychex, Inc., 92 F. Supp. 3d 593, 2015 U.S. Dist. LEXIS 39941, 2015 WL 1311226 (S.D. Tex. 2015).

Opinion

ORDER

DAVID HITTNER, District Judge.

Pending before the Court are Defendant Paychex, Inc.’s Motion to Compel Arbitration and Dismiss or Stay, Defendant’s Motion to Transfer Venue to Western District of New York, and Plaintiffs’ Motion for Leave to Amend the Complaint. Having considered the motions, submissions, and applicable law, the Court determines the motion to compel arbitration should be granted, the motion to transfer venue should be denied as moot, and the motion [596]*596for leave to amend the complaint should be denied as futile.

/. BACKGROUND

Defendant Paychex, Inc. (“Paychex”) provides human resource services, such as payroll and employee benefits, to businesses. In October 2010, Plaintiffs W.L. Doggett LLC and Doggett Heavy Machinery Services, LLC (collectively, “Doggett”) entered- into an agreement with Paychex whereby Paychex was to provide various human resource services to Doggett. Specifically, Doggett and Paychex signed a “Paychex Major Market Services Agreement” and “Paychex Human Resource Services Agreement” (collectively, the “Contracts”).1 The Contracts contain an arbitration agreement. To provide the human resource services, Doggett or Dog-gett’s employees had to provide Paychex with their personal information and the personal information of their dependents, such as social security numbers.

Doggett alleges that, in 2018, more than 1,000 Doggett employees or their dependents had their personal information and identities stolen due to Paychex’s failure to terminate a former Doggett employee’s access to the Paychex system when requested to do so by Doggett. Doggett has filed suit against Paychex and ten unidentified defendants (John Does 1-10) for the events related to this alleged identify theft, bringing the following causes of action in its first amended complaint, which was filed May 2, 2014: negligence, negligence per se, gross negligence, negligent training and supervision, fraudulent inducement, negligent misrepresentation, conversion, unauthorized access of a protected computer system with intent to defraud in violation of the Computer Fraud and Abuse Act, breach of contract, and breach of the duty of good faith and fair dealing.2 On June 20, 2014, Paychex moved to compel arbitration in accordance with the parties’ arbitration agreement in the Contracts. In the alternative, Paychex moved to transfer venue to the Western District of New York. Doggett has moved for leave to file a second amended complaint.

II. LAW & ANALYSIS

A. Motion to Compel Arbitration

Paychex moves to compel arbitration for two reasons: the parties allegedly agreed to have an arbitrator decide whether their claims must be arbitrated; and, even if the court were to decide whether their claims must arbitrated, this case allegedly falls within the scope of an arbitration agreement between the parties. “Ordinarily, whether a claim is subject to arbitration is á question for a court. However, if the parties have clearly and unmistakably agreed to arbitrate arbitrability, certain threshold questions — such as whether a particular claim is subject to arbitration — are for the arbitrator, and not a court, to decide.” Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 262 (5th Cir.2014) (citation omitted). Such a so-called “delegation provision” is an “agree[ment] to arbitrate gateway questions of arbitrability, such as ... whether [the parties’] agreement covers a particular controversy.” Douglas v. Regions Bank, 757 F.3d 460, 462 (5th Cir.2014) (alternation in original) (quoting Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68-69, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010)) (internal quotation marks omitted). An arbitrator must decide arbitrability if (1) the parties clearly and unmistakably intended to delegate the power to decide arbitrability to an arbitrator; and if [597]*597so, (2) the assertion of arbitrability is not wholly groundless. Id. at 462-64. The Court will address each step of this analysis in turn.

1. Did the Parties Clearly and Unmistakably Intend to Delegate the Power to Decide Arbitrability to an Arbitrator?

First, the Court must examine the delegation provision to determine whether the parties clearly and unmistakably intended to delegate the power to decide arbitrability to an arbitrator. Id. A delegation provision “need not recite verbatim that the parties agree to arbitrate arbitrability in order to manifest clear and unmistakable agreement.” Hous. Ref., L.P. v. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union, 765 F.3d 396, 410 n. 28 (5th Cir.2014). A delegation provision that gives an arbitrator the authority to resolve disputes relating to the “enforceability,” “validity,” or “applicability” of an arbitration agreement constitutes clear and unmistakable evidence that the parties intended to arbitrate arbitrability. See, e.g., Rent-A-Center, 561 U.S. at 71-72, 130 S.Ct. 2772; Douglas, 757 F.3d at 462 & n. 3; Aviles v. Russell Stover Candies, Inc., 559 Fed.Appx. 413, 414 (5th Cir.2014). In addition, “[ejxpress incorporation of the [Rules of the American Arbitration Association] constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.” Crawford Prof'l Drugs, 748 F.3d at 262-63 (citing Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir.2012)).

It is undisputed both Doggett and Paychex entered into and signed the Contracts that each included an identical arbitration agreement, which in turn included an identical delegation provision. The arbitration agreement provides, “[A]ny dispute arising out of, or in connection with the [Contracts] will be determined only by binding arbitration in Rochester, New York, in accordance with the commercial rules of the American Arbitration Association.” 3 The delegation provision provides, “Arbitrable disputes include, without limitation, disputes about the formation, interpretation, applicability, or enforceability of [the Contracts].”4 The language of the delegation provision — signed by both parties — is clear and unmistakable evidence that the parties intended to delegate the power to decide arbitrability to an arbitrator. In addition, the parties’ incorporation of the Rules of the American Arbitration Association into their arbitration agreement — again, signed by both parties — is additional clear and unmistakable evidence that the parties intended to delegate the power to decide arbitrability to an arbitrator.

Because there is a clear and unmistakable delegation provision, the Court would normally move to the second step of the analysis: whether the assertion of arbitra-bility is wholly groundless. However, because Doggett contends the arbitration agreement should not be enforced due to public policy and unconscionability, the Court will address whether these contentions bar enforcement of the delegation provision.

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Bluebook (online)
92 F. Supp. 3d 593, 2015 U.S. Dist. LEXIS 39941, 2015 WL 1311226, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wl-doggett-llc-v-paychex-inc-txsd-2015.