Labor & Employment Law Daily Wrap Up, ARBITRATION—5th Cir.: Court properly compelled former employee of DISH Network affiliates to arbitrate claims, (Jun 16, 2025)

By Marjorie Johnson, J.D.

However, the court’s dismissal of his lawsuit pending arbitration was not a proper “separate reason” post-Spizzirri since it did not meet the heightened standard for dismissing a case with prejudice.

An employee who sued two DISH Network Corporation affiliates for employment discrimination after he was terminated convinced the Fifth Circuit to reverse the dismissal of his lawsuit while arbitration was pending in light of the Supreme Court’s intervening Smith v. Spizzirri decision. However, the appeals court affirmed the district court’s order compelling him to arbitrate his claims, rejecting his contention that the affiliates could not enforce the agreement because they were not specifically named in the agreement and finding that he failed to create any other triable issues as to the validity of the arbitration agreement (Yanez v. Dish Network, L.L.C., No. 24-50580 (5th Cir. Jun. 13, 2025)).

Arbitration agreement. When EchoStar Communications Corporation hired the employee as a customer service representative in 2001, he allegedly signed an arbitration agreement purporting to bind him, EchoStar, and all EchoStar affiliates to arbitrate all employment-related disputes. The agreement defined “affiliates” as those “companies controlling, controlled by or under common control with, EchoStar Communications Corporation.”

Corporate changes. In 2007, EchoStar advised the SEC noting it was changing its name to DISH Network Corporation. By the next year, DISH Network Corporation had moved some of its assets into a new, separately traded company, EchoStar Corporation, but retained its customer service call centers. Both DISH Network L.L.C. and Echosphere L.L.C. are wholly owned subsidiaries of DISH Network Corporation.

Arbitration order. After his termination in 2018, the employee filed this lawsuit against DISH Network L.L.C. and Echosphere L.L.C. alleging age and national-origin discrimination. The court granted the companies’ motion to compel arbitration, stayed the case pending arbitration, and transferred it to a different district court in line with the agreement’s stipulation that arbitration be conducted in El Paso.

Dismissal of lawsuit. The arbitration proceeded slowly, and the district court issued the parties three show cause notices requiring updates. Frustrated with the parties’ “amorphous language” in a joint status update, the court ordered the parties to file a status report every 90 days. After they failed to meet one of the deadlines, the court dismissed the case without prejudice. The employee then sought to alter or amend the judgment under Federal Rule of Civil Procedure 59(e).

SCOTUS Spizzirri decision. Before the district court ruled on the employee’s 59(e) motion, the Supreme Court issued Smith v. Spizzirri, where it held that a district court may not dismiss a case instead of issuing a stay when the dispute is subject to arbitration under the Federal Arbitration Act (FAA) and a party requests a stay pending arbitration. The district court subsequently denied the employee’s motion, holding that “Smith still allows a trial court to dismiss a stayed FAA case so long as there is a valid ‘separate reason’ to do so,” and identifying the parties’ failure to file a status report as such a reason.

Agreement covered “affiliates.” In concluding that the district court did not err in compelling arbitration, the Fifth Circuit found that the employee failed to cast doubt on the validity of the of arbitration agreement. Though he argued that the defendants were not parties to the agreement and therefore could not enforce it, the appeals court disagreed, nothing the agreement identified EchoStar and its affiliates. Significantly, EchoStar became DISH Network Corporation, and DISH Network Corporation is the 100-percent owner of subsidiaries DISH Network, L.L.C. and Echosphere, L.L.C. Therefore, the two “affiliates” could enforce the arbitration agreement by its own terms.

Signature not required. The employee additionally argued that the agreement was invalid because neither he nor the two affiliates signed it. However, neither the FAA nor Texas law requires that arbitration clauses be signed, and a Texas appeals court has held that when the record does not suggest “that the parties intended for a signature to be a condition precedent to the signing of an agreement, then a party’s failure to sign the agreement does not render the agreement unenforceable, as long as it appears that the parties otherwise” consented to the agreement.

The Fifth Circuit also rejected the employee’s contention that the agreement was illusory. The parties’ mutual promise to submit certain disputes to arbitration satisfied the consideration requirement under Texas law unless one party “has the unrestrained unilateral authority to terminate its obligation to arbitrate.” Though he argued that DISH Network’s employee guidelines and handbook allowed it to amend its policies at any time, neither of the internal documents suggested that the employer had the ability to modify the arbitration agreement. The appeals court also rejected his contention that a provision allowing either party to seek attorneys’ fees in certain circumstances conflicted with various fee-awarding statutes.

Dismissal reversed. However, the Fifth Circuit reversed the district court’s dismissal of the employee’s case, effectively with prejudice, noting that even though his claims remained pending in arbitration with the American Arbitration Association, dismissal deprived him of potential remedies. Notably, at the time the court dismissed his lawsuit it was entitled to do so based on pre-Spizzirri precedent allowing dismissal when all of the issues raised must be submitted to arbitration. But as the Supreme Court announced in Spizzirri, “When a federal court finds that a dispute is subject to arbitration, and a party has requested a stay of the court proceeding pending arbitration, the court does not have discretion to dismiss the suit on the basis that all the claims are subject to arbitration.”

“Separate reason.” The Spizzirri Court stated that a court may still dismiss the suit “if there is a separate reason to dismiss, unrelated to the fact that an issue in the case is subject to arbitration,” and the district court held that dismissal was allowed under this “separate reason” language due to the parties’ failure to file a joint status update. But the Fifth Circuit disagreed, finding that this alleged “separate reason,” was inadequate since it did not comport with the requisite “heightened dismissal with prejudice standard.”

The case is No. 24-50580.

Judge: King, C.

Attorneys: Katie P. Klein (Dale & Klein) for Jesus Yanez. David M. Noll (Hagan Noll & Boyle) for Dish Network, LLC.

Companies: Dish Network, LLC

Cases: Arbitration ContractClaims Discrimination Procedure LouisianaNews MississippiNews TexasNews GCNNews