J.M. Davidson, Inc. v. Webster

49 S.W.3d 507, 2001 WL 587037

Opinions

OPINION

Opinion by

Justice HINOJOSA.

This is an interlocutory appeal from the trial court’s denial of a motion to compel arbitration. In the alternative, appellant, J.M. Davidson, Inc. (“Davidson”), asks this Court to issue a writ of mandamus ordering the trial court to grant the motion to compel arbitration. We affirm the trial court’s order, and deny appellant’s request for a writ of mandamus.

A. BACKGROUND AND PROCEDURAL HISTORY

At the hearing on the motion to compel, the trial court heard only argument from the parties’ counsel. Neither party presented evidence. No affidavits, discovery, or stipulations were offered into evidence. Based on the pleadings,¹ the following are the undisputed facts. On December 1, 1997, Davidson hired appellee, Chelsey Webster, as a mechanic. On December 15, 1997, Davidson required that appellee sign an “Alternative Dispute Resolution Policy,” which states, in relevant part, as follows:

J.M. Davidson, Inc. ALTERNATIVE DISPUTE RESOLUTION POLICY

EMPLOYMENT APPLICATION LANGUAGE

I, the applicant whose signature is affixed hereto, and the above listed Company, (hereinafter referred to as the “Company”), for itself and all of its officers, directors, agents and employees, all of which mutually agree and contract that any and all claims, disputes or controversies, whether based on the Construction [sic], Statutes, Code(s), Ordinances, Rules, Orders, Regulations, and/or common law of he [sic] United States and/or of all subdivisions, of either, and/or asserted on the basis of contract, quasi-contract, personal injury, tort, offenses, quasi-offenses or otherwise, or arising out of, or in any way relating to this application for employment, or any other application for employment that I may have previously submitted, or may submit in the future, or the Company’s decision to hire or not to hire me; including the arbitrability of any claim, dispute, or controversy shall be exclusively and finally settled by binding arbitration administered by, Conducted [sic] under the Arbitration Rules of, and before the Arbitrator(s) of an Arbitration Tribunal of the National Association for Dispute Resolution, Inc., pursuant to the provisions of the Federal Arbitration Act and/or any applicable Alternative Dispute Resolutions Act, whichever shall have the broadest effect, all claims of any rights to the contrary, including any right to trail [sic] by jury, being hereby expressly waived.

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If employed, I agree to abide by and comply with all of the rules, policies and procedures of the “Company.” I understand that if I am employed by the “Company,” such employment will be “at-will” and that the “Company” may terminate my employment at any time and for any reason.

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No supervisor or person other than the President of the “Company” can change or otherwise modify any employment agreement. The “Company” reserves the right to unilaterally abolish or modify any personnel policy without prior notice.

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ACCEPTED AND AGREED TO:

APPLICANT: [signed] PRINTED NAME: C.J. Webster DATE; 12-15-97 S.S. # [social security number]

Appellee sustained an on-the-job injury on November 3, 1998, and filed for workers’ compensation benefits. He subsequently returned to work. However, ap-pellee’s condition deteriorated and his treating physician placed him on “no work” status. Soon thereafter, appellee’s employment with Davidson ceased.

Appellee sued Davidson, alleging he had been terminated in retaliation for filing a workers’ compensation claim.² Davidson filed a motion to compel arbitration. Davidson asserted that the arbitration policy appellee had signed was a binding arbitration agreement and that appellee’s claims fell within the scope of the agreement. The trial court denied the motion without stating a reason. Davidson then filed this interlocutory appeal and mandamus action. Davidson seeks to compel arbitration under the Texas Arbitration Act³ and the Federal Arbitration Act.⁴

B. Jurisdiction

Under the Texas Arbitration Act, an interlocutory appeal may be taken from a trial court’s denial of a motion to compel arbitration. See Tex.Civ.PRAc. & Rem.Code Ann. § 171.098(a)(1) (Vernon Supp.2001). Mandamus is the appropriate remedy when the trial court improperly denies a motion to compel arbitration pursuant to the Federal Arbitration Act. In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 128 (Tex.1999) (per curiam); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 91 (Tex.1996). Mandamus will issue only to correct a clear abuse of discretion or the violation of a duty imposed by law when there is no other adequate remedy by law. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex.1992). When a party seeks to compel arbitration under both the Texas Arbitration Act and the Federal Arbitration Act, he must pursue parallel proceedings: an interlocutory appeal of the order denying arbitration under the Texas act, and a request for a writ of mandamus from the denial under the federal act. Jack B. Anglin Co. ., Inc. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992); Stewart Title Guar. Co. v. Mack, 945 S.W.2d 330, 331 (Tex.App.—Houston [1st Dist.] 1997, pet. dism’d w.o.j., mand. denied).

C. STANDARD OF REVIEW

A party seeking to compel arbitration must establish the existence of an arbitration agreement and show that the claims raised fall within the scope of that agreement. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex.1999) (per curiam); In re H.E. Butt Grocery Co., 17 S.W.3d 360, 366-67 (Tex.App.—Houston [14th Dist.] 2000, orig. proceeding). When one party denies he is bound by an arbitration agreement, the trial court must summarily determine whether an agreement to arbitrate exists between the parties. Tex.Civ.Prac. & Rem. Code Ann. § 171 .021 (Vernon Supp.2001); Southwest Tex. Pathology Assocs., L.L.P. v. Roosth, 27 S.W.3d 204, 207 (Tex.App.—San Antonio 2000, pet. filed); ANCO Ins. Servs. of Houston, Inc. v. Romero, 27 S.W.3d 1, 3 (Tex.App.—San Antonio 2000, pet. denied). A court may summarily decide whether to compel arbitration on the basis of affidavits, pleadings, discovery, and stipulations. Anglin, 842 S.W.2d at 269. However, if material facts necessary to determine the issue are controverted, the trial court must conduct an evidentiary hearing to determine the material facts in dispute. Id. Once a party establishes a claim within the scope of the arbitration agreement, the trial court must compel arbitration and stay its own proceedings unless the party opposing arbitration meets its burden of presenting evidence that prevents enforcement. Oakwood, 987 S.W.2d at 573; Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex.1996) (per curiam).

We review a trial court’s determination concerning the existence of an arbitration agreement under an abuse of discretion standard. Roosth, 27 S.W.3d at 207; ANCO Ins. Servs., 27 S.W.3d at 3; Hardin Const. Group, Inc. v. Strictly Painting, Inc., 945 S.W.2d 308, 312 (Tex.App.—San Antonio 1997, orig. proceeding [mand. denied]). Under this standard, we must uphold the trial court’s decision unless we conclude that the trial court could reasonably have reached only one decision. Roosth, 27 S.W.3d at 207; Hardin, 945 S.W.2d at 312. Where, as here, the trial court does not enter findings of facts and conclusions of law, we must affirm the trial court’s decision if there is sufficient evidence to support it upon any legal theory asserted. Pepe Internat'l Dev. Co. v. Garcia, 915 S.W.2d 925, 929 (Tex.App.—Houston [1st Dist.] 1996, no writ). Even if we would have decided the issue differently, we cannot disturb the trial court’s finding unless it is shown to be arbitrary and unreasonable. Walker, 827 S.W.2d at 840. Legal conclusions, however, are reviewed de novo. Id.; Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 820 (Tex.App.—San Antonio 1996, no writ). Whether an agreement imposes a duty on the parties to arbitrate a dispute is a matter of contract interpretation and a question of law for the court. Tenet Healthcare Ltd. v. Cooper, 960 S.W.2d 386, 388 (Tex.App.— Houston [14th Dist.] 1998, writ dism’d w.o.j.); Kline v. O’Quinn, 874 S.W.2d 776, 782 (Tex.App.-Houston [14th Dist.] 1994, writ denied).

D. Is TheRe a Binding ÁRBitration Agreement?

Arbitration is a contractual proceeding by which the parties, in order to obtain a speedy and inexpensive final disposition of disputed matters, consent to submit the controversy to arbitrators for determination. See Porter & Clements, L.L.P. v. Stone, 935 S.W.2d 217, 221 (Tex.App.—Houston [1st Dist.] 1996, no pet.). Arbitration is a creature of contract and a clause requiring arbitration is interpreted under contract principles. Tenet Healthcare, 960 S.W.2d at 388; Belmont Constructors, Inc. v. Lyondell Petrochemical Co., 896 S.W.2d 352, 356-57 (Tex.App.—Houston [1st Dist.] 1995, no writ); City of Alamo v. Garcia, 878 S.W.2d 664, 665 (Tex.App.—Corpus Christi 1994, no writ). The Federal Arbitration Act and the Texas Arbitration Act both provide that a contract to submit to arbitration is valid and enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2 (2000); Tex.Civ.Prac. & Rem.Code Ann. § 171.001 (Vernon Supp.2001); Tenet Healthcare, 960 S.W.2d at 387-88. Arbitration agreements are subject to the same defenses as any other contract. See Garcia, 878 S.W.2d at 665-66.

A party seeking to compel arbitration must first establish his right to that remedy under a contract. Garcia, 878 S.W.2d at 665. Texas law favors arbitration. Brazoria County v. Knutson, 142 Tex. 172, 176 S.W.2d 740, 743 (1943). Although there is a presumption in favor of arbitration, a court may not order arbitration in the absence of a valid arbitration agreement. Tenet Healthcare, 960 S.W.2d at 388; Belmont, 896 S.W.2d at 356-57. Whether an agreement imposes a duty on the parties to arbitrate a dispute is a matter of contract interpretation and, thus, a question of law for the court. Tenet Healthcare, 960 S.W.2d at 388; Kline, 874 S.W.2d at 782. The existence of a valid agreement is determined by the substantive contract law of Texas. See Tenet Healthcare, 960 S.W.2d at 388. Under Texas law, parties enter into a binding contract when the following elements exist: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party’s consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Buxani v. Nussbaum, 940 S.W.2d 350, 352 (Tex.App.—San Antonio 1997, no writ); McCulley Fine Arts Gallery, Inc. v. “X” Partners, 860 S.W.2d 473, 477 (Tex.App.—El Paso 1993, no writ). Furthermore, consideration is a fundamental element of any valid contract. Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex.App.—San Antonio 1999, pet. denied); Smith v. Renz, 840 S.W.2d 702, 702 (Tex.App.—Corpus Christi 1992, writ denied).

In Tenet Healthcare, Cooper, a longtime employee, was given a new employee handbook, which said that the employer would “assure access to binding arbitration procedures for solving disputes, if necessary,” but that the handbook was not intended to constitute a legal contract “because that can only occur with a written agreement executed [by certain company executives].” Tenet Healthcare, 960 S.W.2d at 387. The last page of the handbook was an “acknowledgment form,” which included the following language:

[A]ll AMI employees are employed on an “at-will” basis.

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No written agreement regarding employment will be honored unless approved in writing by Executive director and above.... I understand AMI makes available arbitration for resolution of grievance. I also understand that as a condition of employment and continued employment, I agree to submit any complaints to the published process and agree to abide by and accept the final decision of the arbitration panel as ultimate resolution of my complaint(s) for any and all events that arise out of employment or termination of employment.

Id. Cooper signed the acknowledgment form. Id. She was later discharged, and sued Tenet Healthcare for wrongful discharge. Id. The trial court denied the employer’s motion to compel arbitration, without stating a reason. Id. In affirming the trial court’s decision, the First Court of Appeals held there was no enforceable contract between the parties because, while the language of the handbook and acknowledgment purported to bind the employee, it explicitly did not bind the company. Id. at 388. The court stated:

The preface to the handbook has been quoted above. It explicitly states that the handbook was not intended to constitute a legal contract “because that can only occur with a written agreement executed by a facility Executive director and an AMI Senior Executive Officer.” The evidence shows that no such written agreement was ever so executed.

The acknowledgment form has also been quoted above and the language explicitly states that nothing about the document is binding on the employer, and the employer reserved the right to amend or rescind any provisions of the handbook “as it deemed appropriate” within its sole discretion. It was further set out that Cooper was an “at will” employee and that as a condition of continued employment, she agreed to submit any complaints concerning her employment to arbitration.

Id.

The court of appeals also cited the Texas Supreme Court’s holding in Light v. Centel Cellular Co., 883 S.W.2d 642, 644-45 (Tex.1994). Tenet Healthcare, 960 S.W.2d at 388. In Light, the supreme court held that consideration for a valid contract between an employer and an at-will employee cannot depend on continued employment because such a promise is illusory. The supreme court stated:

Consideration for a promise, by either the employee or the employer in an at-will employment, cannot be dependent on a period of continued employment. Such a promise would be illusory because it fails to bind the promisor who always retains the option of discontinuing employment in lieu of performance. When illusory promises are all that support a purported bilateral contract, there is no contract.

Light, 883 S.W.2d at 644-45 (citation omitted).

The Tenet Healthcare court noted that under the doctrine of employment at-will, the company “could have fired Cooper the very minute she signed the acknowledgment form.” Tenet Healthcare, 960 S.W.2d at 389 n. 5. The court of appeals then held the arbitration clause was unenforceable for two reasons: (1) because the employee was an at-will employee, there was no contract between the parties (all that existed between the parties was the illusory promise of at-will employment); and (2) the disclaimer language in the handbook and on the acknowledgment form expressly denied that the employer was bound by the policies set out in the handbook. Id. at 388-89. We agree with the reasoning of the court of appeals in Tenet Healthcare.

In the instant case, the “Alternative Dispute Resolution Policy-Employment Application Language” shows that appellee’s employment was at-will; that only Davidson’s president could modify an employment agreement; and that Davidson “reserve[d] the right to unilaterally abolish or modify any personnel policy without prior notice.” Furthermore, just like Cooper in Tenet Healthcare, appellee was compelled to sign the agreement after his employment had already begun.

We conclude that the alternative resolution dispute policy in this case is not binding on both parties. Although Davidson agreed to submit “any and all claims, disputes or controversies” arising between it and appellee to arbitration, it explicitly retained the absolute right to modify or terminate the policy at any time.

Further, we conclude that Davidson gave no consideration for the purported arbitration agreement. Appellee was already working for Davidson when he signed the alternative resolution dispute policy, and the implied benefit of continued employment is illusory for an at-will employee.

In its reply brief, Davidson cites In re Jebbia, 26 S.W.3d 753 (Tex.App.—Houston [14th Dist.] 2000, orig. proceeding), and In re Alamo Lumber Co., 23 S.W.3d 577 (Tex. App.—San Antonio 2000, orig. proceeding), in support of its contention that “mutual promises by an employer and employee giving up the right to litigate are sufficient consideration to support an arbitration agreement.” However, in both these cases, the language of the arbitration agreement showed that it was binding upon both parties. See Jebbia, 26 S.W.3d at 758 (“The language of the arbitration agreement indicates it is binding upon both parties.”); Alamo Lumber, 23 S.W.3d at 579-80 (“Since the parties surrendered their rights to trial by jury, these mutual promises supply valid consideration.”). Because we have held in this case that the “Alternative Dispute Resolution Policy-Employment Application Language” sought to bind only the employee, not the company, we conclude these cases are not controlling.

We hold that Davidson failed to meet its burden of proof that a binding arbitration agreement exists. Accordingly, the trial court did not err in denying Davidson’s motion to compel arbitration. Appellant’s sole issue is overruled.

The trial court’s order denying Davidson’s motion for compel arbitration is affirmed. Davidson’s petition for a writ of mandamus is denied.

Dissenting Opinion by Justice CASTILLO.

Footnotes

1

. A court may summarily decide whether to compel arbitration on the basis of affidavits, pleadings, discovery, and stipulations. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex.1992).

2

. See Tex.Lab.Code Ann. § 451.001 (Vernon 1996) (an employer may not discharge an employee because the employee has filed a workers’ compensation claim in good faith).

3

. TexCiv.Prac. & Rem.Code Ann. § 171.001 (Vernon Supp.2001)

4

. 9 U.S.C. § 2 (2000).