Harris v. Pacific Gas & Electric Company

Background

Dexter Harris asserted six employment-related claims against Energy Resourcing America, Inc. (ERA), Worley Group Inc. (Worley), and Pacific Gas & Electric Company (PG&E), which he described as joint employers. The claims alleged race discrimination and retaliation under Title VII of the Civil Rights Act of 1964, race discrimination, harassment, failure to prevent harassment, and retaliation under California’s Fair Employment and Housing Act, and retaliation under the federal and California False Claims Acts.

Harris alleged that ERA hired him to perform work for Worley and PG&E involving high-voltage energy-transmission inspections and related work. He alleged racial harassment, criticism of his work, retaliation after he raised concerns, and termination on August 26, 2020. The opinion also notes that the complaint’s description of some of the claims was unclear.

The defendants relied on an independent-contractor agreement between ERA and Harris’s company, Saint Jude Design Engineering Procurement and Construction Project Management LLC of Baker, Louisiana. The agreement contained a Texas choice-of-law provision and an arbitration clause covering disputes arising from or relating to the agreement, including questions about the agreement’s existence, validity, or termination. The agreement required arbitration under the American Arbitration Association’s rules, with Houston, Texas, identified as the arbitration location. Harris’s counsel stipulated that the version submitted by ERA was the version Harris signed.

Motions and the Court’s Analysis

Worley and ERA moved to compel arbitration and to dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(3), and 12(b)(6). Rule 12(b)(1) concerns subject-matter jurisdiction, Rule 12(b)(3) concerns improper venue, and Rule 12(b)(6) concerns whether a complaint adequately states a claim. PG&E separately moved to dismiss, also arguing that the claims were subject to arbitration and were inadequately pleaded. Harris opposed both motions, arguing that the arbitration provision was unenforceable and unconscionable, meaning unfairly one-sided or imposed through an unfair process, and that he had adequately pleaded his claims.

The court held that the agreement clearly and unmistakably delegated gateway questions of arbitrability to the arbitrator. “Gateway questions” are threshold questions about whether an arbitration agreement exists and whether it covers a dispute. The court relied on the agreement’s reference to disputes concerning its validity and on its incorporation of the American Arbitration Association’s rules. Because the agreement delegated those questions, the court considered Harris’s specific challenge to the delegation provision but did not decide challenges to the arbitration agreement as a whole.

The court enforced the agreement’s Texas choice-of-law provision for the delegation issue. It concluded that Texas had a substantial relationship to the parties or transaction because ERA was based in Texas. The court also concluded that Harris had not shown California had a materially greater interest than Texas in applying its law to the delegation provision. In reaching that conclusion, the court considered evidence concerning where the agreement was negotiated, where the work was performed, and Harris’s residence and domicile. The court found that the work was performed remotely, that the agreement was negotiated mostly in Texas and Louisiana, and that Harris had not shown California had the greater interest for this issue. Harris had not argued that the delegation clause was unconscionable under Texas law. The court therefore found the delegation clause enforceable and ruled that the gateway issues were for the arbitrator.

Worley was not a signatory to the agreement. The court nevertheless applied California law and concluded that Worley could enforce the arbitration provision under equitable estoppel. Equitable estoppel is a doctrine that can prevent a person from avoiding arbitration when the claims against a nonsignatory are based on the same facts and are closely intertwined with claims against a signatory. Harris asserted the same claims against ERA and Worley as joint employers and based them on the same facts. The court also noted that Worley was identified as the client in the draft agreement attached to Harris’s complaint. It found that Worley was entitled to enforce the arbitration provision.

PG&E also was not a party to the agreement. Harris did not dispute PG&E’s assertion that it acted in unison with ERA or that his claims against PG&E were intertwined with the claims against ERA. The court therefore found that PG&E could enforce the arbitration provision under equitable estoppel as well.

Disposition

The court granted in part Worley and ERA’s motion and granted in part PG&E’s motion to the extent the motions sought to compel arbitration. It held that all of Harris’s claims, including his challenges concerning arbitrability, were subject to arbitration. The court did not reach the defendants’ remaining arguments under Rules 12(b)(1), 12(b)(3), 12(b)(6), or Rule 10(b).

The court dismissed the case in its entirety without prejudice under Rule 12(b)(1) for lack of subject-matter jurisdiction. “Without prejudice” means the dismissal did not bar refiling on that basis. The clerk was directed to enter judgment stating that the case had been dismissed without prejudice and to close the case.