COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS
§ ALORICA, Individually and d/b/a No. 08-18-00008-CV ALORICA, INC., § Appeal from the Appellant, § 327th District Court v. § of El Paso County, Texas MARY LOU TOVAR, § (TC# 2016-DCV-3173) Appellee. §
OPINION
Mary Lou Tovar sued her former employer Alorica following her termination, alleging
disability discrimination and workers’ compensation retaliation claims. Alorica moved to arbitrate
Tovar’s claims, asserting that the company’s electronic records showed that Tovar received notice
of a mandatory arbitration agreement and accepted its terms both explicitly and impliedly by
continuing to show up for work. In a sworn affidavit and again at a Tipps1 hearing, Tovar denied
ever seeing, receiving, or agreeing to the terms of the arbitration agreement. The trial court,
crediting Tovar’s evidence over that of Alorica, denied the motion to compel arbitration. Alorica
appealed, asking this Court to credit the company’s electronic records over Tovar’s sworn denial
1 Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (1992). as a matter of law and compel arbitration on that basis.
We cannot do so. Our prior decision in Kmart Stores of Texas, L.L.C. v. Ramirez2 controls
here. The trial court was presented with conflicting evidence regarding contract formation. Its
judgment resolving this formation dispute rested on legally sufficient evidence, meaning that we
cannot disturb the decision. We will affirm the order denying the motion to compel arbitration.
BACKGROUND
In response to Alorica’s motion to compel arbitration, Tovar contested the existence of an
arbitration agreement and submitted a sworn affidavit to the trial court. In her affidavit, she
testified that she had never seen or heard of the arbitration agreement at issue in this case until
January 2017, after she filed suit. She averred that she was never presented with the arbitration
agreement either in paper or electronic form, nor was she informed by anybody that she was subject
to an arbitration policy. She denied signing or clicking anything to indicate that she knew, agreed
to, or received notice of the agreement. She testified that if she had known of the arbitration
agreement, she would not have signed it and did not and does not agree to its terms.
In response to Tovar’s filing, the trial court forewent summary disposition and held two
Tipps hearings.3 At the first hearing on January 9, 2017, Tovar gave live testimony. She
acknowledged having used the company’s internal email system before but she again denied
receiving notice of the arbitration agreement at all and stated that she would have never agreed to
the document. When asked on cross-examination if it was possible that she had received it and
did not remember, Tovar replied, “No. I never received it.” She testified that she had not given
out her login credentials to anyone and that she did not know why Alorica’s records reflected she
2 510 S.W.3d 559 (Tex.App.--El Paso 2016, pet. denied). 3 A non-movant who submits evidence raising an issue of material fact as to the existence of an arbitration agreement can trigger an evidentiary hearing. See In re DISH Network, L.L.C., No. 08-17-00161-CV, 2018 WL 5276720, at *4- *5 (Tex.App.--El Paso Oct. 24, 2018, orig. proceeding).
2 received notice.
During summation at the first hearing, Alorica referenced an affidavit attached to its motion
to compel arbitration that was written by Susannah Lawler, Alorica’s regional senior human
resources manager, in which Lawler vouched for a series of substantive and demonstrative
screenshots taken from the EIS portal purportedly showing that Tovar’s login credentials were
used to access a messaging center and view the arbitration agreement. At the end of the hearing,
the trial court permitted limited discovery related to “this procedure for the process of sending out
these forms,” allowing Lawler to be deposed, and invited supplemental briefing. The parties
indicated that they agreed to additional discovery on the limited issues identified by the trial court.
At the second Tipps hearing on December 5, 2017, Alorica called Venu Thadisetti as a live
witness. Thadisetti was Alorica’s solution development manager based out of an office in Florida,
where he worked with information systems, web applications, and CI systems that were part of
Alorica’s overall I.T. structure. Thadisetti explained that Alorica used an application known as
the Employee Information System (EIS) to keep track of timekeeping, as an internal messaging
platform, and for hosting training and coaching tools. Thadisetti identified Exhibit 1 as being a
screenshot of an EIS inquiry for Mary Tovar’s information. Thadisetti explained that all Alorica
employees had an employee ID number identifying the employee across different Alorica systems,
as well as a user ID number used internally within the EIS portal. Tovar’s employee ID number
was 403727 and her user ID for the EIS portal was 1003373.
Thadisetti identified Exhibit 2 as a screenshot he took of log activity for Tovar’s user ID
between April 26, 2014 and April 27, 2014, which included the user name, the domain name, the
computer that was used, the website that was accessed, and the date and time it was accessed.
According to Thadisetti, the log activity showed that Tovar’s user ID was entered on a specific
3 computer located within El Paso (ELP-37183) to start a session. During that active login session,
Tovar’s credentials were used to sign in to the EIS system. Thadisetti testified that records showed
the user attempted to access a page related to overtime pay, but that the EIS system automatically
redirected the user to the portal mailbox where the mandatory arbitration agreement would have
been contained in a message. Navigation away from the page to access other EIS functions was
not possible unless the user first acknowledged the agreement. Based on Thadisetti’s records
review, the user attempted to navigate away from the page several times before finally clicking
through the acknowledgment. The acknowledgment process required clicking through two
screens. The first screen had the arbitration agreement with a link that stated “I have read and
understand this Company Policy” at the bottom of the page. After clicking the acknowledgement
link, the user was directed to a second screen with a link that stated, “I understand this Company
Policy and agree to its terms and conditions.” Clicking through these screens would automatically
update Alorica’s electronic records. Thadisetti believed that the user was Mary Tovar based solely
on the fact that her login credentials were used and by policy nobody at Alorica had access to
employee passwords, but he admitted on cross-examination that he had no personal knowledge of
whether the user was in fact Mary Tovar.
At the conclusion of the second hearing, the trial court denied the motion to compel
arbitration. This interlocutory appeal followed.
DISCUSSION
In its sole appellate issue, Alorica contends the trial court erred by refusing to compel
arbitration. We disagree.
Standard of Review and Applicable Law
A party seeking to compel arbitration must (1) establish the existence of a valid arbitration
4 agreement and (2) show that the claims asserted are within the scope of the agreement. Delfingen
US-Tex., L.P. v. Valenzuela, 407 S.W.3d 791, 797 (Tex.App.--El Paso 2013, no pet.). The parties
do not dispute that if this arbitration agreement is valid, it covers the claims subject to this
litigation. We limit our discussion accordingly.
While Texas and federal law both strongly favor arbitration, “a valid agreement to arbitrate
is a settled, threshold requirement to compel arbitration[,]” and “when we are called upon to decide
whether the parties have agreed to arbitrate, we do not resolve doubts or indulge a presumption in
favor of arbitration, because no party may be forced to submit to arbitration in the absence of [a]
sufficient showing that the parties entered into a valid and binding arbitration agreement.”
[Internal citations and alterations omitted]. Kmart Stores of Tex., 510 S.W.3d at 564. “The burden
of establishing an arbitration agreement’s existence is evidentiary and runs with the party seeking
to compel arbitration.” Id. at 565. “Whether the parties agreed to be bound to an arbitration
agreement is a contract formation question we review de novo, deferring to the trial court’s findings
of historical fact as between the parties so long as those determinations are supported by evidence.”
Id.
Analysis
A signature, electronic or otherwise, is generally deemed to be sufficient to show assent to
an arbitration agreement. However, signatures are not always required in order to demonstrate
contract formation. Wright v. Hernandez, 469 S.W.3d 744, 756-57 (Tex.App.--El Paso 2015, no
pet.)(presence or absence of signature is relevant to determining intent to be bound but is not
necessarily dispositive). In Texas, an employer may condition an at-will employee’s continued
employment on assent to binding arbitration, even if the employee was initially hired in the absence
of an arbitration agreement. See In re Halliburton Co., 80 S.W.3d 566, 568-69 (Tex. 2002)(orig.
5 proceeding). So long as an employee receives proper notice of the arbitration agreement, our
courts will infer that the employee’s decision to continue showing up for work thereafter
demonstrates the employee’s consent to arbitrate employment disputes. Id.; Firstlight Federal
Credit Union v. Loya, 478 S.W.3d 157, 167-70 (Tex.App.--El Paso 2015, no pet.). While this
maneuver spares an employer from having to get an employee’s physical signature on an
arbitration agreement as a prerequisite to arbitral forum access, this practice is not without risk, as
relying on implied consent by notice can create potential fact issues on formation that can
undermine an arbitration agreement’s validity more easily than would a physical signature
indicating that an employee affirmatively assents to arbitration. Kmart Stores of Tex., 510 S.W.3d
at 570-71 (outlining risks).
This is not the first time this Court has been asked to find that an employer’s electronic
records indicating that an employee received notice of a Halliburton-style arbitration agreement
conclusively establish notice as a matter of law. We recognized in Firstlight that an employee
could be bound to arbitrate claims if the employee received electronic notice of an arbitration
agreement and the employee continued showing up for work thereafter. Firstlight Fed. Credit
Union, 478 S.W.3d at 168-69. In Firstlight, the employee did not contest the issue of notice,
which made the arbitration agreement binding as a matter of law. Id. By contrast, in Kmart Stores
of Texas, L.L.C. v. Ramirez, we declined to hold that a corporation’s electronic records showing
the purported log-in and viewing of a document by an employee conclusively established notice
sufficient to create a Firstlight agreement in light of the employee’s sworn statements that she
never saw the arbitration agreement at issue. Kmart Stores of Tex., 510 S.W.3d at 569-70. Instead,
we found that the conflict between the employer’s records and the employee’s sworn denial created
a fact issue on contract formation, meaning that the trial court could find in either the employer or
6 employee’s favor. Id. While we noted that we were “not unsympathetic” to “concerns that if we
credit[ed] the trial judge’s findings” that the strength of many electronically noticed Halliburton-
style arbitration agreements could be undermined by an employee’s sworn denial should the trial
court believe the employee, under the legal sufficiency standard of review, that was “a gamble
every employer takes any time it foregoes an employee signature and instead hangs its hat on a
fact finder’s determination of whether it met Halliburton’s notice requirements.” Kmart Stores of
Tex., 510 S.W.3d at 570.
After full merits briefing, the Texas Supreme Court denied Kmart’s petition for review on
February 17, 2017, after the date of the final Tipps hearing in this case. See Kmart Stores of Tex.
v. Ramirez, No. 16-0306 (order)(Tex. Feb. 17, 2017), available online at
http://search.txcourts.gov/Case.aspx?cn=16-0306&coa=cossup. To our knowledge, no
subsequent decision from the Texas Supreme Court or this Court has abrogated Kmart. Alorica
also does not ask us to overturn Kmart. Therefore, under the principles of stare decisis, Kmart
remains binding in this Court. The only question remaining before this Court is whether the facts
of this case bring it inside Kmart’s ambit.
At first blush, the similarities between this case and Kmart are striking. Both cases involve
an employee’s sworn denial of notice or login and an employer’s proffer of electronic records
seeming to indicate otherwise. Alorica attempts to distinguish Kmart in several ways, none of
which we find persuasive. First, Alorica argues that the quality of evidence in this case is different
because Kmart involved an employee giving live testimony that was contravened by an affidavit
from a human resources professional, whereas here, Alorica offered live testimony from its in-
house I.T. professional that it contends was clear, direct, and positive and rebutted Tovar’s live
sworn denial of notice as a matter of law. But the dispositive issue in Kmart did not necessarily
7 hinge on live testimony-versus-affidavit; we simply held that the employer-witness’s testimony
vouching for electronic records raised more than a scintilla of evidence of notice, and that the
employee-witness’s sworn denial of notice raised more than a scintilla of evidence of no notice,
thereby creating a fact issue on contract formation that was ripe for trial court resolution either
way. Kmart Stores of Tex., 510 S.W.3d at 570-71 (holding in light of conflicting evidence that
neither side could establish its position as a matter of law and deferring to the trial court’s
credibility and demeanor assessments). Here, we have the same type of conflicting evidence as
we did in Kmart.4 The distinction in the form with respect to how the evidence is presented is not
material.
Second, Alorica maintains that Thadisetti “testified at length” about the security measures
used by Alorica’s I.T. department. However, it is not clear from Alorica’s briefing how Alorica’s
I.T. security set-up differed at all from the one employed in Kmart. Alorica does point out that
Thadisetti testified that in order to access EIS, a user would have to use an Alorica computer and
thereby pass through two log-in hurdles: first, the user must be logged in to a computer on Alorica’s
network generally, which requires a unique domain-level user-ID/password combination (log-in
point #1); and second, the user must also specifically access the EIS portal using a second, unique
user-ID/password combination (log-in point #2). Alorica seems to distinguish Kmart, which
turned on the use of one set of log-in credential to access an online portal, by arguing that in this
case, an employee needed to use two sets of log-in credentials—domain-level credentials and
portal-level credentials—to access an online portal, meaning that the security procedures that
Alorica implemented were more stringent than those in Kmart.
4 Although the parties’ briefs largely analyzed this as an implied consent Firstlight agreement, the outcome here under these facts would be the same regardless of whether we treated this as an agreement that was expressly accepted by clicking the link on the second screen, as Tovar unequivocally denied receipt, acknowledgement, or acceptance of the agreement under oath.
8 Although Alorica does not explicitly state such in its brief, by directing our attention to this
testimony, Alorica appears to imply that the two sets of login credentials show that the I.T.
department implemented a variation of a widely-implemented security procedure known as two-
step authentication or two-factor authentication to ensure identity integrity. “Multifactor
authentication is a process by which online accounts and services confirm the identity of a user
through a series of verification steps (known as ‘factors’), each of which provides additional
evidence that the user is who she claims to be.” Kyle Swan, Comment, Multifactor Authentication:
Access Control Made Easy?, 2 GEO.L.TECH.REV. 123, 124 (2017). The three primary factors used
in this procedure are knowledge factors (something the user knows, e.g., log-in credentials), (2)
possession factors (something the user has, e.g. access cards), and (3) inherence factors (something
the user is, e.g. biometric data). Id. at 124. While variation between types of factors can lead to
more effective protection, a security system may use multiple forms of authentication within one
factor-category type to ensure identity. Id. at 124. “Each additional factor required for
authentication significantly increases protection.” Id. Examples of two-factor authentication
include entering a password and then a passcode texted to a mobile phone (both knowledge factors)
to access a Gmail account; entering a debit card (possession factor) and a PIN number (knowledge
factor) into an ATM to receive cash from a bank account; or gaining access to information on an
iPhone (possession factor) by unlocking it with a fingerprint, facial recognition, or other biometric
factor (inherence). Id. at 125; see also Eric Griffith, Two-Factor Authentication: Who Has It and
How to Set It Up, PC MAGAZINE (Feb. 16, 2018, 2:56 P.M.),
https://www.pcmag.com/feature/358289/two-factor-authentication-who-has-it-and-how-to-set-it-
up (providing examples); Multi-factor authentication, WIKIPEDIA,
https://en.wikipedia.org/wiki/Multi-factor_authentication (last visited Nov. 14, 2018).
9 We express no opinion on whether the use of two-factor authentication is necessary or
sufficient to defeat an employee’s sworn lack-of-notice claim as a matter of law because there is
no legally sufficient evidence showing that two-factor authentication actually occurred in this case.
As we understand it, two-factor authentication is conditional, and while Thadisetti testified that
EIS could only be accessed on an Alorica network, he never testified that the use of a unique user-
ID/password combination to access the EIS portal at the second log-in point was conditioned on
the correct entry of another unique user-ID/password combination granting a specific user access
to an Alorica computer at the first log-in point. In other words, there is no evidence that the unique
log-in credentials needed to access a computer connected to Alorica’s network as “Mary Tovar”
for general purposes needed to be entered before the second set of unique log-in credentials
granting the user access to the EIS portal as “Mary Tovar” would be accepted. There is no
testimony that the two sets of log-in credential are used conjunctively and sequentially. As such,
we cannot pass on the question of two-factor authentication.
Nevertheless, there is evidence that during an active session initiated with Mary Tovar’s
login credentials, the EIS portal was accessed using another set of Mary Tovar’s login credentials.
However, Mary Tovar made several sworn denials of ever receiving notice of the agreement or
clicking to agree with an arbitration agreement in a trial court. Alorica insists that in order for a
court to credit Tovar’s “self-serving” testimony over Thadisetti’s testimony, Tovar must also
explain how it was that her login credentials could have been used by someone else. That is not
currently required under Texas law. We declined to adopt that extra requirement in Kmart, and
we will not impose that requirement today. Whether the employee’s sworn denial is credible in
light of the circumstances is a question for the trial court, not this Court. As we noted in Kmart, a
sworn denial has traditionally been sufficient to create a fact issue triggering a Tipps hearing as to
10 whether an apparently valid signature acknowledging receipt of an arbitration agreement has been
forged in the paper context. Kmart Stores of Tex., 510 S.W.3d at 569, citing Gunda Corp., L.L.C.
v. Yazhari, No. 14-12-00263-CV, 2013 WL 440577 (Tex.App.--Houston [14th Dist.] Feb. 5, 2013,
no pet.)(mem.op.)(reversing summary arbitration order and remanding for factual hearing where
employer had a purported signed copy of arbitration agreement that employee denied ever seeing
or signing). We extended the same principle by analogy to electronic signatures in Kmart, and we
continue to stand by that logic. Indeed, while the Texas Uniform Electronic Transactions Act
permits the use of electronic signatures and other means to transact business, it does so against the
backdrop of Texas common law regarding contracts, and generally speaking brings electronic
transactions within the common law contracting framework rather than supplanting that
framework. See, e.g., TEX.BUS.&COM.CODE ANN. §§ 322.003(d)(“A transaction subject to this
chapter is also subject to other applicable substantive law”); 322.005(e)(“Whether an electronic
record or electronic signature has legal consequences is determined by this chapter and other
applicable law”); 322.006(1)(TUETA should be interpreted “to facilitate electronic transactions
consistent with other applicable law”); 322.009(a)-(b)(electronic record or signature is attributable
to a person if it was that person’s “act” which like that of a physical signature is determined from
context and surrounding circumstances “and otherwise as provided by law”). Thus, applying the
analogy we set down in Kmart, we believe that Tovar’s sworn denials here are sufficient under
these circumstances to create a fact issue that the trial court could resolve in her favor after a Tipps
hearing, even if this case involves two sets of non-conditional, non-sequential login credentials
rather than one.
The remainder of the arguments Alorica advances were addressed in Kmart. As we read
Alorica’s brief, Alorica essentially asks us to re-weigh the evidence and find that the quality of
11 evidence it furnished outweighs Tovar’s sworn denial of notice. But as we observed in Kmart, it
is not clear that this Court is actually able to engage in a factual sufficiency review of Tipps hearing
evidence. We are only explicitly permitted to use the legal sufficiency standard in measuring fact
questions related to arbitration. Kmart Stores of Tex., 510 S.W.3d at 570. And under the standard,
we must uphold the trial court’s decision if there is some evidence more than a scintilla to support
it unless Alorica establishes notice as a matter of law. Here, as in Kmart, the employee’s sworn
denial of notice was legally competent evidence, and here, as in Kmart, Alorica failed to establish
notice as a matter of law. At best, the conflict created a fact issue ripe for trial court resolution.
We cannot disturb that resolution, especially given how much it hinges on the trial court’s
evaluation of credibility and demeanor. We continue to “trust in the ability of the lower courts to
resolve factual discrepancies, to discern the truth, and to ferret out dishonest or perjurious attempts
by employees to avoid the ramifications of failing to read employer notices.” Id. at 571.
Alorica also directs this Court’s attention to a handful of federal district court cases in
which judges faced with the same factual dilemma presented here decided in favor of the employer,
not the employee. See generally, e.g., Holmes v. Air Liquide USA, L.L.C., No. H-11-2580, 2012
WL 267194 (S.D.Tex. Jan. 30, 2012)(memo. & order), aff’d, No. 12-20129, 498 Fed.Appx. 405
(5th Cir. 2012);5 Walker v. Tao Operating, L.L.C., No. 1:13-CV-619, 2014 WL 11904577
(E.D.Tex. Aug. 14, 2014); Washington v. Sears Logistics Servs., Inc., No. 3:13-CV-3060-L, 2014
WL 2159253 (N.D. Tex. May 23, 2014); Grynko v. Sears Roebuck & Co., No 1:13 CV 2482, 2014
WL 66495 (N.D. Ohio Jan. 6, 2014). As we stated in Kmart, these “federal district cases only
demonstrate how various trial judges resolved evidentiary discrepancies in the record[,]” but they
5 On appeal before the Fifth Circuit, the employee in Holmes abandoned any challenges to the district court’s findings that the agreement was valid and instead argued that provisions of the Dodd-Frank Act altered the ability to arbitrate certain classes of claims. See 498 Fed.Appx. at 406. The Fifth Circuit thus did not rule on the formation issue.
12 “do not address the dispositive appellate issue of whether the employee’s denial of notice raised a
fact issue ripe for trial court resolution” or otherwise “answer whether we as a Texas appellate
court must reverse the trial court’s decision here, when the judge decides under this set of facts
that the scales tip towards the employee” rather than the employer. [Emphasis added]. Kmart
Stores of Tex., 510 S.W.3d at 569. Kmart specifically deals with the issue of appellate resolution,
and under stare decisis, it binds us here. The trial court’s decision here was proper.
CONCLUSION
The trial court’s decision rested on legally sufficient evidence. Issue One is overruled. The
trial court’s order denying Alorica’s motion to compel arbitration is affirmed.
November 26, 2018 YVONNE T. RODRIGUEZ, Justice
Before McClure, C.J., Rodriguez, J., and Larsen, Senior Judge Larsen, Senior Judge (Sitting by Assignment)