ReadyOne Industries, Inc. v. Joel Antonio Flores

Opinion

COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS

§ READYONE INDUSTRIES, INC., No. 08-13-00161-CV § Appellant, Appeal from § v. 171st District Court § JOEL ANTONIO FLORES, of El Paso County, Texas § Appellee. (TC # 2012-DCV-02074) §

OPINION

ReadyOne Industries, Inc. appeals from an order denying its motion to compel

arbitration. For the following reasons, we sustain Issue One, reverse the order denying the

motion to compel arbitration, and remand to the trial court with instructions to enter an order

compelling arbitration.

FACTUAL AND PROCEDURAL SUMMARY

This is a non-subscriber negligence case. Joel Antonio Flores filed suit against his

employer, ReadyOne, alleging he suffered an on-the-job injury to his hands and fingers on

October 20, 2011. Flores also served ReadyOne with his requests for discovery. ReadyOne filed

a motion to compel arbitration and to stay the proceedings pending arbitration. In support of its

motion, ReadyOne attached the affidavit of Lupe Madrid, the Director of Human Resources and

Compliance for ReadyOne Industries and the following documents: (1) the Mutual Agreement to Arbitrate adopted by NCED1 on October 1, 2005; (2) the Spanish language version of the

Mutual Agreement to Arbitrate adopted by NCED on October 1, 2005; (3) a Receipt and

Arbitration Acknowledgment written in Spanish and signed by Flores on February 23, 2006; (4)

NCED’s Employee Injury Benefit Plan effective after October 2, 2005; (5) the Spanish language

version of NCED’s Employee Injury Benefit Plan effective after October 1, 2005; (6) the English

and Spanish language versions of the Mutual Agreement to Arbitrate adopted by ReadyOne with

an effective date of October 1, 2007; (7) the Summary Plan Description/Employee Injury Benefit

Plan for injuries after October 1, 2007; and (8) the Spanish language version of the Summary

Plan Description/Employee Injury Benefit Plan for injuries after October 1, 2007.

In his response, Flores raised several defenses to arbitration. He also sought discovery

related to his defenses of fraudulent inducement and illusory agreement. The trial court deferred

ruling on the motion to compel arbitration and entered an order compelling the deposition of

ReadyOne’s authorized representative. ReadyOne challenged that order by filing an original

proceeding in this Court. We conditionally granted mandamus relief because Flores had failed to

provide a colorable or reasonable basis for believing that discovery would materially aid him in

establishing his defenses to the validity of an arbitration agreement. See In re ReadyOne

Industries, Inc., 400 S.W.3d 164 (Tex.App.--El Paso 2013, orig. proceeding). In reaching that

decision, we concluded that Flores had failed to present evidence of fraudulent inducement. In

re ReadyOne, 400 S.W.3d at 169. We also held that the Arbitration Acknowledgement signed

by Flores did not incorporate by reference the Summary Plan Description (SPD) for the

Employee Injury Benefit Plan, and therefore, the Mutual Agreement to Arbitrate (MAA) was not

illusory. In re ReadyOne, 400 S.W.3d at 170-72. Likewise, we concluded that the SPD did not

1 ReadyOne was formerly known as the National Center for Employment of the Disabled (NCED) and it was known as NCED at the time Flores began his employment.

-2- incorporate the MAA. Id., 400 S.W.3d at 172-73.

Flores subsequently filed a supplemental response to the motion to compel arbitration

asserting that the MAA is illusory because ReadyOne had judicially admitted the MAA and SPD

are one agreement in response to a request for admission in this case and in pleadings filed in this

and other cases. Flores also contended that if the MAA is a stand-alone agreement, it is

procedurally unconscionable. Finally, he continued to assert his fraudulent inducement defense

and attached evidence in support of it. Following two hearings, the trial court entered an order

denying ReadyOne’s motion to compel arbitration. ReadyOne then brought this accelerated

interlocutory appeal. See TEX.CIV.PRAC.&REM.CODE ANN. § 51.016 (West Supp. 2014)

(permitting an interlocutory appeal from the denial of a motion to compel arbitration under the

Federal Arbitration Act).

DENIAL OF ARBITRATION

In its sole issue, ReadyOne challenges the order refusing to compel arbitration. Flores

raised several arguments in opposition to the motion to compel arbitration and the trial court

denied the motion without specifying the basis for the ruling. ReadyOne has addressed each of

these arguments and defenses on appeal. Additionally, ReadyOne challenges the ground raised

by the trial court sua sponte.

Standard of Review and Relevant Law

We review a trial court’s decision to grant or deny a motion to compel arbitration under

an abuse of discretion standard. Ellman v. JC General Contractors, 419 S.W.3d 516, 520

(Tex.App.--El Paso 2013, no pet.). Under this standard, we defer to a trial court’s factual

determinations if they are supported by evidence, but we review a trial court’s legal

determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009).

-3- Ellman, 419 S.W.3d at 520.

A party seeking to compel arbitration must (1) establish the existence of a valid

arbitration agreement; and (2) show that the claims asserted are within the scope of the

agreement. See In re AdvancePCSHealth L.P., 172 S.W.3d 603, 605 (Tex. 2005); Delfingen US-

Texas, L.P. v. Valenzuela, 407 S.W.3d 791, 797 (Tex.App.--El Paso 2013, no pet.). We apply

state contract law principles to determine whether a valid arbitration agreement exists. J.M.

Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003); Delfingen, 407 S.W.3d at 797.

Once the party seeking to compel arbitration proves that a valid arbitration agreement exists, a

presumption attaches favoring arbitration and the burden shifts to the party resisting arbitration

to establish a defense to enforcement. Delfingen, 407 S.W.3d at 797. In the context of

enforcement, defenses refer to unconscionability, duress, fraudulent inducement, and revocation.

In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001); Delfingen, 407 SW.3d at 797.

Because the law favors arbitration, the burden of proving a defense to arbitration is on the party

opposing it. IHS Acquisition No. 171, Inc. v. Beatty-Ortiz, 387 S.W.3d 799, 807 (Tex.App.--El

Paso 2012, no pet.), citing J.M. Davidson, 128 S.W.3d at 227.

The Federal Arbitration Act Applies

We will begin our review by examining whether the Federal Arbitration Act is

inapplicable. Citing Bernhardt v. Polygraphic Company of America, 350 U.S. 198, 76 S.Ct. 273,

100 L.Ed. 199 (1956), Flores argues that the FAA does not govern the MAA because there is no

evidence he was personally engaged in interstate commerce. In Bernhardt, the plaintiff entered

into an employment contract with Polygraphic to become superintendent of the company’s

lithograph plant in Vermont. Bernhardt v. Polygraphic Company of America, 218 F.2d 948, 949

(2nd Cir. 1955). The employment contract contained an arbitration provision. Id. Following his

-4- discharge, Bernhardt sued Polygraphic in a Vermont state court for breach of contract. Id. The

Second Circuit held that the FAA applied to the employment contract, Bernhardt, 218 F.2d at

949-50, but the Supreme Court reversed because it concluded that the contract did not evidence a

transaction involving commerce within the meaning of section 2 of the FAA, and there was no

evidence that Bernhardt, while performing his duties under the employment contract, was

working in commerce, producing goods for commerce, or was engaging in activity that affected

commerce. Bernhardt, 350 U.S. at 200-01, 76 S.Ct. at 275.

The instant case is distinguishable from Bernhardt because the MAA specifically

provides that ReadyOne is engaged in commerce as that term is defined in Section 1 of the

Federal Arbitration Act and the “FAA governs all aspects of this Agreement.” It is well

established that parties may expressly agree to arbitrate under the FAA. In re Rubiola, 334

S.W.3d 220, 223 (Tex. 2011); Lucchese, Inc. v. Solano, 388 S.W.3d 343, 348 (Tex.App.--

El Paso 2012, no pet.). Further, ReadyOne submitted evidence that it was regularly engaged in

interstate commerce in that it purchases and receives goods and services from outside the state of

Texas and it manufactures goods that are shipped and used outside of the state. We conclude

that the FAA applies to the MAA. See In re Border Steel, Inc., 229 S.W.3d 825, 830-31

(Tex.App.--El Paso 2007, orig. proceeding)(holding that the FAA applied where the defendant

presented evidence that it engaged in interstate commerce and the arbitration agreement

contained a provision that the FAA governed).

The Date Discrepancies on the MAA and Acknowledgement

ReadyOne challenges the trial court’s determination that the MAA is illegal and

unenforceable because the MAA recited an effective date of “99/99/9999” and the arbitration

acknowledgement stated that Flores had been provided with a MAA effective “10/1/200.” Flores

-5- did not raise these date discrepancies as a ground for avoiding arbitration.

A party seeking to compel arbitration must (1) establish the existence of a valid

arbitration agreement; and (2) show that the claims asserted are within the scope of the

agreement. See In re Advance PCS Health L.P., 172 S.W.3d 603, 605 (Tex. 2005); Delfingen,

407 S.W.3d at 797. Once the party seeking to compel arbitration proves that a valid arbitration

agreement exists, a presumption attaches favoring arbitration and the burden shifts to the party

resisting arbitration to establish a defense to enforcement. Delfingen, 407 S.W.3d at 797.

ReadyOne presented the trial court with copies of the MAA adopted by NCED/ReadyOne on

October 1, 2005, the Receipt and Arbitration Acknowledgement signed by Flores on February

23, 2006, and the MAA adopted by ReadyOne with an effective date of October 1, 2007. These

documents are authenticated by the affidavit of ReadyOne’s Director of Human Resources and

Compliance, Lupe Madrid. This was sufficient to satisfy ReadyOne’s burden to establish the

existence of a valid agreement to arbitrate. See In re Jim Walters Homes, Inc., 207 S.W.3d 888,

897 (Tex.App.--Houston [14th Dist.] 2006, orig. proceeding)(finding that the submission of an

authenticated copy of the agreement containing the arbitration clause satisfied the movant’s

initial burden). Further, Flores’s negligence claim is a covered claim under the MAA. At this

point, the burden shifted to Flores to establish a defense to enforcement of the MAA. To the

extent the trial court denied ReadyOne’s motion to compel arbitration on the basis that

ReadyOne failed to satisfy its initial burden, the trial court erred. As we have already noted,

Flores did not raise any defenses based on the erroneous dates contained in the MAA adopted by

NCED/ReadyOne on October 1, 2005 or in the Arbitration Acknowledgement signed by Flores

on February 23, 2006. The trial court erred by refusing to compel arbitration on a ground not

raised by Flores.

-6- The MAA is not Ambiguous or Illusory

ReadyOne next contends that the trial court erred by impliedly concluding that the MAA

is illusory. An arbitration agreement is not illusory unless one party can avoid its promise to

arbitrate by amending the provision or terminating it altogether. In re Odyssey Healthcare, Inc.,

310 S.W.3d 419, 424 (Tex. 2010); In re ReadyOne, 400 S.W.3d at 170. Flores contended in the

trial court that the MAA is illusory because it permits ReadyOne to unilaterally modify or amend

the agreement. We held in the prior mandamus that the MAA’s termination provision complies

with Halliburton2 because it requires ReadyOne to give reasonable notice ten days prior to the

date of termination and provides that termination is not effective for those covered claims which

occurred prior to the date of the termination. In re ReadyOne, 400 S.W.3d at 170-71. Flores has

consistently argued that the MAA is not a stand-alone document because it is incorporated-by-

reference in the SPD. We rejected this argument in the mandamus proceeding, but we observed

in a footnote that one phrase in the MAA might be ambiguous. See In re ReadyOne, 400 S.W.3d

at 170-72 & n.4. Flores continued to maintain the same incorporation-by-reference argument in

the trial court but he raised two new arguments in a supplemental response. First, he asserted

that that the MAA is ambiguous based on footnote 4 in the mandamus opinion. See In re

ReadyOne, 400 S.W.3d at 170 n.4. Second, he claimed that ReadyOne judicially admitted that

the MAA is not a stand-alone agreement and is instead part of the Employee Injury Benefit Plan.

We will consider first the ambiguity argument. Flores suggests that the trial court

resolved the ambiguity to conclude that the parties intended the SPD and Employee Injury

Benefit Plan to be part of the MAA, and therefore, the agreement to arbitrate is illusory because

the SPD’s termination and amendment provision permits ReadyOne to unilaterally modify or

amend the MAA without notice. Whether an arbitration agreement is ambiguous is a question of 2 In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002).

-7- law subject to de novo review. In re D. Wilson Construction Company, 196 S.W.3d 774, 781

(Tex. 2006). Ambiguity is determined by examining the contract as a whole in light of the

circumstances existing when the contract was entered into. Coker v. Coker, 650 S.W.2d 391,

394 (Tex. 1983); IHR Security, LLC v. Innovative Business Software, Inc., 441 S.W.3d 474, 478

(Tex.App.--El Paso 2014, no pet.). We examine the entire document and consider each part with

every other part so that the effect and meaning of one part on any other part may be determined.

Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996); IHR Security, 441

S.W.3d at 478. The entire document is examined in an effort to harmonize and give effect to all

of the provisions of the contract so that none will be rendered meaningless. MCI

Telecommunications Corporation v. Texas Utilities Electric Co., 995 S.W.2d 647, 652 (Tex.

1999); IHR Security, 441 S.W.3d at 478. We presume that the parties to a contract intend every

clause to have some effect. Heritage Resources, 939 S.W.2d at 121; IHR Security, 441 S.W.3d

at 478.

Contract language that can be given a certain or definite meaning is not ambiguous and is

construed as a matter of law. Chrysler Insurance Company v. Greenspoint Dodge of Houston,

Inc., 297 S.W.3d 248, 252 (Tex. 2009); Coker, 650 S.W.2d at 393. If the contract is subject to

two or more reasonable interpretations after applying the pertinent rules of construction, then the

contract is ambiguous, and it creates a fact issue concerning the parties’ intent. J.M. Davidson,

128 S.W.3d at 229; IHR Security, 441 S.W.3d at 478; Daftary v. Prestonwood Market Square,

Ltd., 404 S.W.3d 807, 813 (Tex.App.--Dallas 2013, pet. denied).

The MAA is a four-page agreement consisting of thirteen paragraphs. Throughout the

MAA, the agreement is referred to as the “Agreement,” but in Paragraph 8, it is also referred to

as the “Arbitration Program.” In Paragraph 12, entitled “Sole and Entire Agreement,” the MAA

-8- provides as follows:

This Program Agreement constitutes the parties’ complete agreement and supersedes any prior agreement regarding arbitration of Covered Claims which occur during the Term of this Agreement. Any agreement contrary to, or modifying, any of the provisions included in this Agreement must be entered into, in writing, by the chief executive officer of Company. Oral representations made before or after Employee is hired do not alter this Agreement.

Flores argues that the phrase “This Program Agreement” found at the beginning of paragraph 12

is ambiguous. Flores is correct that this specific phrase is not used anywhere else in the MAA,

but that does not necessarily mean that the phrase is susceptible to more than one meaning.

Paragraph 12 provides that the agreement supersedes any “prior agreement regarding arbitration

of Covered Claims which occur during the Term of this Agreement.” The MAA defines

“Covered Claims” as any and all claims included in or described by Paragraph 5(a) of the

Agreement and it specifically excludes from its reach “[c]laims for benefits under the

Company’s Employee Injury Benefit Plan.” When paragraph 12 is considered as part of the

entire MAA, it is apparent that the phrase “This Program Agreement” is referring only to the

parties’ agreement to arbitrate covered claims. We conclude that the MAA is not ambiguous.

We turn now to Flores’s argument that ReadyOne judicially admitted that the MAA is

incorporated by reference into Employee Injury Benefit Plan. ReadyOne contends that its “so-

called admissions are of no effect because whether documents are incorporated by reference is a

legal issue not subject to judicial admission.” Flores relied on ReadyOne’s response to a request

for admission which asked ReadyOne to admit that: “An unseparable [sic] provision of this plan

is a provision for mandatory Arbitration.” ReadyOne objected to the request because it required

a legal conclusion, but it admitted, subject to its objection, as follows: “Admitted that binding

arbitration is one of the provisions of Defendant’s injury plan. All other aspects denied.” Flores

also relied on the following statements made by ReadyOne in the motion to compel arbitration

-9- filed in other cases:

Defendant was a non-subscriber to the Texas Workers’ Compensation Act, and provided Plaintiff with an employee injury benefit plan and mutual agreement to arbitrate claims (hereinafter referred to as ‘The Plan’). Pursuant to ‘The Plan’, Plaintiff agreed to submit her [sic] claims in this lawsuit to binding arbitration.3

Additionally, Flores pointed to a statement in ReadyOne’s motion for a protective order

that: “As part of her [sic] benefits, Plaintiff agreed to submit claims such as this to binding

arbitration . . . .” Any matter admitted in response to a request for admissions is conclusively

established unless the court on motion permits withdrawal or amendment of the admission.

TEX.R.CIV.P. 198.3; Marshall v. Vise, 767 S.W.2d 699, 700 (Tex. 1989); Neal v. Wisconsin

Hard Chrome, Inc., 173 S.W.3d 891, 894 (Tex.App.--Texarkana 2005, no pet.). It constitutes a

judicial admission, and the answering party may not then introduce evidence to controvert it.

Marshall, 767 S.W.2d at 700; Neal, 173 S.W.3d at 894. These principles apply only to answers

to a request for admissions about facts. Neal, 173 S.W.3d at 894. An answer which constitutes

an admission of law is not binding on the court. Id.

Similarly, a judicial admission is an assertion of fact, usually found in pleadings or

stipulations of the parties, that acts as a formal waiver of proof. Mendoza v. Fidelity & Guaranty

Insurance Underwriters, Inc., 606 S.W.2d 692, 694 (Tex. 1980); see Ehler v. LVDVD, 319

S.W.3d 817, 824 (Tex.App.--El Paso 2010, no pet.)(judicial admissions are assertions of fact, not

pleaded in the alternative, in the live pleadings of a party). A judicial admission that is clear and

unequivocal has conclusive effect and bars the admitting party from later disputing the admitted

fact. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001).

We have already determined as a matter of law that the MAA is unambiguous and it is a

3 The cases are Margarita Simental v. ReadyOne Industries, Inc. (cause number 2011-2790), Roberto Carreon v. ReadyOne Industries, Inc., (cause number 2011-DCV-00940), and Maria G. Guillen-Chavez v. ReadyOne Industries, Inc., (cause number 2011-DCV-00615).

- 10 - stand-alone agreement which is not incorporated by reference into the acknowledgement or

Employee Injury Benefit Plan. The request for admission asked ReadyOne to admit a legal

conclusion. As such, it is not binding. See Neal, 173 S.W.3d at 894 (admission that plaintiff was

not defendant’s employee was a legal conclusion and was not binding). Likewise, the statements

made in pleadings filed by ReadyOne in this and other cases which could be read as admitting

the MAA is not a stand-alone agreement are legal conclusions, not judicial admissions of fact.

Consequently, they are not judicial admissions.

Finally, we note that both parties have fully briefed whether the MAA is a stand-alone

agreement and whether it is incorporated by reference in the SPD and Employee Injury Benefit

Plan. These issues were addressed in depth in the prior mandamus proceeding and we decline to

reconsider them here. See In re ReadyOne, 400 S.W.3d at 170-72.

Fraudulent Inducement

ReadyOne next contends that Flores failed to establish that he was fraudulently induced

to enter into the MAA. A contract is subject to avoidance on the ground of fraudulent

inducement. Italian Cowboy Partners, Ltd. v. Prudential Insurance Company of America, 341

S.W.3d 323, 331 (Tex. 2011). The elements for fraudulent inducement are the same as for fraud:

(1) that a material representation was made, (2) the representation was false, (3) when the

representation was made, the speaker knew it was false or made it recklessly without any

knowledge of the truth and as a positive assertion; (4) the speaker made the representation with

the intent that the other party would act upon it; (5) the party acted in reliance on the

representation; and (6) the other party thereby suffered injury. Aquaplex, Inc. v. Rancho La

Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009); In re ReadyOne, 400 S.W.3d at 169.

In his affidavit attached to his supplemental response, Flores claimed that he did not

- 11 - remember signing the acknowledgement and he was required to sign many documents but did

not know why. He was told by someone from Human Resources “that the documents are for

benefits if you get hurt on the job, just sign them” or words to that effect. Flores claimed he was

“misled into believing that the documents were not important and were just routine documents

that the company needed to complete their paperwork on my employment and so I could receive

benefits if I was hurt on the job.” He also asserted that no one told him he was giving up

important rights and he did not know he was signing an arbitration agreement.

Flores’s affidavit failed to establish that ReadyOne made a material representation that

was false. See In re ReadyOne Industries, Inc., 420 S.W.3d 179, 186-87 (Tex.App.--El Paso

2012, orig. proceeding)(plaintiff failed to show or provide a colorable basis or reason to believe

that discovery would be material in establishing that the arbitration agreement was invalid based

on fraudulent inducement where the plaintiff stated in her affidavit that she “was given a few

documents to sign during [her] brief orientation,” that she “was only given signature pages and

was not explained what the documents related to,” and that she “assumed the documents

related to [her] W-2 tax forms....”); In re ReadyOne Industries, Inc., 394 S.W.3d 680, 687-88

(Tex.App.--El Paso 2012, orig. proceeding)( plaintiff failed to show or provide a colorable basis

or reason to believe that discovery would be material in establishing that the arbitration

agreement was invalid based on fraudulent inducement where she stated in her affidavit that she

was given many documents to sign, she took them home so that her husband could review them,

she did not remember signing them, and that no one told her that she was signing an arbitration

agreement or what that meant; plaintiff failed to offer any proof of fraud). Consequently, we

conclude that the trial court erred by impliedly finding that Flores established this defense to

enforcement of the MAA.

- 12 - Procedural and Substantive Unconscionability

Flores also raised the defense of unconscionability in the trial court. Agreements to

arbitrate disputes between employers and employees are generally enforceable under Texas law.

In re Poly-America, L.P., 262 S.W.3d 337, 348 (Tex. 2008). There is nothing per se

unconscionable about an agreement to arbitrate employment disputes and Texas law has

historically favored agreements to resolve such disputes. Id. But an arbitration agreement is

invalid if it is unconscionable. See In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677-79

(Tex. 2006); In re Halliburton Company, 80 S.W.3d 566, 572 (Tex. 2002). Because the law

favors arbitration, the party opposing arbitration bears the burden to prove unconscionability.

See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001).

Unconscionability of an arbitration agreement may exist in one or both of two forms: (1)

procedural unconscionability, which refers to the circumstances surrounding the adoption of the

arbitration provision, and (2) substantive unconscionability, which refers to the fairness of the

arbitration provision itself. In re Halliburton, 80 S.W.3d at 571; Pilot Travel Centers, LLC v.

McCray, 416 S.W.3d 168, 180 (Tex.App.--Dallas 2013, no pet.). Unconscionability has no

precise legal definition because it is not a concept but a determination to be made in light of a

variety of factors. Delfingen, 407 S.W.3d at 798, citing Southwestern Bell Telephone Company

v. DeLanney, 809 S.W.2d 493, 498 (Tex. 1991) (Gonzalez, J. concurring). In determining

whether a contract is procedurally unconscionable, we must examine (1) the “entire atmosphere”

in which the agreement was made; (2) the alternatives, if any, available to the parties at the time

the contract was made; (3) the “non-bargaining ability” of one party; (4) whether the contract

was illegal or against public policy; and (5) whether the contract is oppressive or unreasonable.

Delfingen, 407 S.W.3d at 798; Ski River Development, Inc. v. McCalla, 167 S.W.3d 121, 136

- 13 - (Tex.App.--Waco 2005, pet. denied). The totality of the circumstances must be assessed as of

the time the contract was formed. Delfingen, 407 S.W.3d at 798; Ski River, 167 S.W.3d at 136.

The circumstances surrounding the negotiations must be sufficiently shocking to compel the

court to intercede. Delfingen, 407 S.W.3d at 798; Ski River, 167 S.W.3d at 136. We apply the

abuse of discretion standard articulated in Delfingen to this issue. See Delfingen, 407 S.W.3d at

799-800 (concluding that unconscionability is a legal question which is reviewed de novo by the

appellate court, but the court must defer to the trial court’s fact findings if they are supported by

the evidence).

We begin by examining the issue of procedural unconscionability. The evidence

established that Flores was provided with both English and Spanish language versions of the

documents at issue. Flores averred in his affidavit that he has limited ability to read, write, or

understand English, and each sentence of his affidavit was translated to him in Spanish. He did

not remember signing the acknowledgement dated 2/23/06. He recalled going to the facilities

from time to time to sign numerous documents related to his employment, but he did not know

why he was required to sign the documents. ReadyOne did not explain the documents to him in

an orientation session, and he was told by someone from Human Resources “that the documents

are for benefits if you get hurt on the job, just sign them” or words to that effect. Flores also

asserted that he was “misled into believing that the documents were not important and were just

routine documents that the company needed to complete their paperwork on my employment and

so I could receive benefits if I was hurt on the job.” Flores additionally stated he did not know

he was signing an arbitration agreement and he was not told that he was giving up important

rights.

Citing Delfingen, Flores argues that the trial court could have believed his affidavit and

- 14 - could have concluded that the statements made in that affidavit establish procedural

unconscionability. In Delfingen, we upheld the trial court’s order refusing to compel arbitration

because the evidence showed that the plaintiff was illiterate in English, Spanish language

versions of the documents in question were not provided to the plaintiff, and according to the

plaintiff, a representative of the defendant affirmatively misrepresented the contents of the

arbitration agreement. Delfingen, 407 S.W.3d at 801-02.

The instant case is distinguishable from Delfingen. While Flores offered evidence that he

is unable to read English, ReadyOne provided him with Spanish language versions of the

documents in question. We observed in Delfingen that a person who signs a contract must be

held to have known what words were used in the contract and to have known their meaning, and

he must be held to have known and fully comprehended the legal effect of the contract.

Delfingen, 407 S.W.3d at 801; In re Big 8 Food Stores, Ltd., 166 S.W.3d 869, 878 (Tex.App.--

El Paso 2005, orig. proceeding). Absent proof of mental incapacity, a person who signs a

contract is presumed to have read and understood the contract unless he was prevented from

doing so by trick or artifice. Delfingen, 407 S.W.3d at 802. There is no evidence in the record

before us that ReadyOne affirmatively misrepresented the contents of the documents or that

Flores was prevented by trick or artifice from reading the MAA and Arbitration

Acknowledgement. Consequently, it must be presumed that he read and understood these

documents. The record does not support the trial court’s implied conclusion that Flores

established his defense of procedural unconscionability.

We turn now to the issue of substantive unconscionability. Flores argued in the trial

court that the MAA is substantively unconscionable because it attempts to alter his substantive

rights “under the pretext of an agreement to arbitrate,” it “attempts to prohibit Plaintiff from

- 15 - filing suit,” and it “attempts to require Plaintiff to provide its own self-defined ‘notice’ that

purportedly is not affected by filing or serving suit.” Flores did not direct the trial court’s

attention to any specific provisions which render the MAA procedurally unconscionable.

Contrary to Flores’ argument, the MAA does not contain any type of notice provision or

requirement. Further, the MAA does not prohibit Flores from filing suit and it contains a

provision which preserves the parties’ substantive rights and remedies. As observed by

ReadyOne, the MAA contains language that the parties are waiving all rights to trial in state and

federal court, but it provides that the parties are entitled to allege any claims, obtain any remedy

and assert any legal or equitable defenses that the party could allege, obtain, or assert in a Texas

state or federal court. Given that the MAA ensures preservation of the substantive rights and

remedies of the litigants, we conclude that it is not substantively unconscionable.

Other Defenses to Enforcement of the MAA

Flores raised several other arguments as defenses to enforcement of the MAA. First, he

alleged that the MAA is unenforceable under Section 406.033(a) of the Texas Labor Code. This

statute provides that a non-subscriber negligence cause of action may not be waived by an

employee before the employee’s injury and any pre-injury agreement by an employee to waive a

cause of action is void and unenforceable. TEX.LABOR CODE ANN. § 406.033(e)(West Supp.

2014). Section 406.033(a) does not render the MAA void because it is not a pre-injury waiver of

his non-subscriber negligence cause of action. See In re Odyssey Healthcare, Inc., 310 S.W.3d

at 423; In re Golden Peanut Co., LLC, 298 S.W.3d 629, 631 (Tex. 2009).

Second, Flores asserted that the MAA is unenforceable under Section 171.002 of the

Texas Civil Practice and Remedies Code because his attorney did not sign the arbitration

agreement. This statute provides that Chapter 171 (the Texas General Arbitration Act) does not

- 16 - apply to a claim for personal injury unless the arbitration agreement is signed by each party and

each party’s attorney. TEX.CIV.PRAC.&REM.CODE ANN. § 171.002(a)(3), (c)(West 2011).

Section 2 of the FAA preempts state law that would otherwise render arbitration agreements

unenforceable in a contract involving interstate commerce. 9 U.S.C.A. § 2 (West 2009);

Southland Corp. v. Keating, 465 U.S. 1, 10-11, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984). This

preemption has been applied to Section 171.002 of the Civil Practice and Remedies Code. See In

re Olshan Foundation Repair Company, LLC, 328 S.W.3d 883, 890 (Tex. 2010)(holding that the

FAA preempts the provisions of Section 171.002 that would otherwise render an arbitration

agreement unenforceable).

Finally, Flores argued in the trial court that compliance with the FAA violates the Tenth

Amendment by interfering with the Workers’ Compensation Act. The Texas Supreme Court has

decided this contention adversely to Flores. See In re Odyssey Healthcare, Inc., 310 S.W.3d at

423-24 (holding that the FAA does not violate the Tenth Amendment by encroaching on a state

power to enact and regulate its own workers’ compensation system.).

ReadyOne carried its burden of establishing the existence of an agreement to arbitrate the

claims raised by Flores in his suit. Flores did not establish that there are any valid defenses to

enforcement of the MAA. Accordingly, the trial court erred by denying ReadyOne’s motion to

compel arbitration. Issue One is sustained. We reverse the order denying ReadyOne’s motion to

compel arbitration and remand the cause to the trial court with instructions to enter an order

granting ReadyOne’s motion to compel arbitration.

December 10, 2014 ANN CRAWFORD McCLURE, Chief Justice

Before McClure, C.J., Rivera, and Rodriguez, JJ. (Rivera, J., not participating)

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