Berry Y&V Fabricators, LLC v. Bambace

• Decision Date: 16 June 2020
• Docket Number: NO. 14-19-00258-CV,14-19-00258-CV
• Citation: 604 S.W.3d 482
• Parties: BERRY Y&V FABRICATORS, LLC, Appellant v. Stefani BAMBACE, Appellee
• Court: Texas Court of Appeals

604 S.W.3d 482

BERRY Y&V FABRICATORS, LLC, Appellant

v.Stefani BAMBACE, Appellee

NO. 14-19-00258-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed June 16, 2020

Ernest W. Boyd Jr., Elizabeth B. Pratt, Jeremy Richard Stone, Houston, for Appellant.

Michael Todd Slobin, Ricardo Prieto, Houston, for Appellee.

Panel consists of Justices Wise, Jewell, and Poissant.

Kevin Jewell, Justice

Appellant Berry Y&V Fabricators, LLC ("Berry Company") appeals the denial of its motion to compel arbitration of appellee Stefani Bambace's employment-related claims. The trial court denied the motion to compel on the ground that the parties' arbitration agreement was void and unenforceable. Specifically, the court ruled that agreed arbitration of sexual harassment claims, such as the one Bambace asserts, violates public policy.

We conclude, however, that the threshold issue of the agreement's enforceability against a public policy challenge was a matter delegated to the arbitrator under this agreement. The trial court therefore erred in denying the motion to compel. We reverse the order and remand the case with instructions that the trial court proceeding be stayed and the parties compelled to arbitration.

Background

Berry Company hired Bambace as a private tutor for the children of its president, Lawrence Berry. When she was hired, Bambace signed an arbitration agreement. Bambace worked principally in Lawrence's home, but it is also alleged that she accompanied the children on family trips. Bambace alleges that after the children began attending school, she became a personal assistant for Lawrence's wife, Danielle. Bambace asserts that during her employment she worked in a sexually charged and hostile work environment and was repeatedly subjected to sexual harassment.

After seven months, Bambace reported the sexual harassment and hostile work environment to Berry Company's human resources department. Bambace was placed on paid leave while the company investigated her complaints. Three weeks after reporting her claim, Berry Company terminated Bambace's employment because, she was told, there was no longer a need for her position.

Bambace filed a "Charge of Discrimination" with the Texas Workforce Commission and received in response a "Notice of Right to File a Civil Action." Bambace then filed the present civil suit against Berry Company, asserting claims for sexual harassment, discrimination, and retaliation under the Texas Commission on Human Rights Act.¹ Bambace also sought a declaratory judgment that the parties' arbitration agreement is void as against public policy and therefore her claims are not subject to arbitration.

Berry Company moved to abate the case and compel arbitration, citing the arbitration agreement and asserting that Bambace's claims came within the agreement's scope. Bambace filed a response in which she opposed arbitration because any confidential arbitration of her sexual harassment claim violates public policy.

The trial court granted Berry Company's plea in abatement and motion to compel arbitration. Bambace appealed that order, and this court dismissed the appeal for want of jurisdiction. See Bambace v. Berry Y & V Fabricators, LLC , No. 14-18-00889-CV, 2018 WL 6217502, at *1 (Tex. App.—Houston [14th Dist.] Nov. 29, 2018, no pet.) (mem. op.) (per curiam) (orders compelling arbitration are not appealable on interlocutory basis). Bambace also filed a petition for writ of mandamus. A panel of this court issued an opinion denying mandamus relief. See In re Bambace , No. 14-18-00953-CV, 2018 WL 5914863, at *1 (Tex. App.—Houston [14th Dist.] Nov. 13, 2018, orig. proceeding) (per curiam) (mem. op.). In the meantime, the trial judge who granted Berry Company's motion to compel arbitration ceased to hold office.

Bambace filed motions for rehearing and en banc reconsideration of the panel's denial of mandamus relief. The panel denied the motion for rehearing. The en banc court abated the mandamus proceeding to allow the successor trial judge an opportunity to reconsider the order compelling arbitration. See Tex. R. App. P. 7.2(b).

On March 8, 2019, the successor trial judge signed an order that (1) vacated the predecessor judge's order abating the case and compelling arbitration, and (2) denied Berry Company's plea in abatement and motion to compel arbitration. In the March 8 order, the trial court ruled that the arbitration agreement requires Bambace to litigate her sexual harassment claim in confidential and binding arbitration and therefore violates Texas public policy. The court stated that neither the United States Congress nor the Texas Legislature have passed legislation addressing the issue, but cited a letter addressed to Congress signed by fifty-six attorneys general, including Texas's, urging Congress to end forced arbitration in sexual harassment cases due to the confidentiality that may envelop such proceedings. Although no legislative measures preclude arbitration of sexual harassment claims on public policy or other grounds, the trial court determined that the mandatory arbitration provision in the parties' arbitration agreement for sexual harassment claims "violates public policy and is therefore void and unenforceable." Further, the trial court rejected Berry Company's additional arguments in support of compelling arbitration, including its position that the parties' agreement reserves to the arbitrator questions of arbitrability, such as whether any of Bambace's claims are subject to arbitration.

Berry Company timely appealed the order. We have jurisdiction over the interlocutory order.²

Analysis

Berry Company presents four issues for our review, three of which can be distilled to whether an agreement mandating arbitration of sexual harassment claims is contrary to public policy and thus unenforceable, and whether state policy in that regard is properly established by the legislative or judicial branch. In a fourth issue, Berry Company contends alternatively that the parties delegated to the arbitrator any disputes concerning whether Bambace's claims are subject to arbitration, including her challenge to the enforceability of the arbitration agreement on public policy grounds. Our answer to this last point is dispositive, so we confine our opinion solely to that issue. See Tex. R. App. P. 47.1.

A. Standard of review

We review the denial of a motion to compel arbitration for abuse of discretion. See Okorafor v. Uncle Sam & Assocs., Inc. , 295 S.W.3d 27, 38 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). When an appeal from such an order turns on a legal determination, however, we apply a de novo standard. Forest Oil Corp. v. McAllen , 268 S.W.3d 51, 55 & n.9 (Tex. 2008).

B. The trial court abused its discretion in denying the motion to compel arbitration because Bambace's challenge is for the arbitrator to decide

The contract is entitled "Arbitration Agreement" and is between Bambace and Berry Company. It provides in relevant part:

In exchange for Company accepting and considering the application, or if applicable, as part of the consideration for Company tendering an offer for employment, or if applicable, retaining [Bambace's] services, [Bambace] and Company agree that upon the demand of either ... all disputes, claims, damages, injuries, losses, and causes of action (hereinafter collectively known as "Claims") that [Bambace], [her] family, heirs, representatives and assigns may have or to which any of the foregoing may be entitled against the Company ... shall be submitted to binding arbitration according to the rules of the Commercial Arbitration Section of the American Arbitration Association. To also be included in matters subject to arbitration shall be any question or dispute concerning whether any Claims are subject to arbitration.

A party moving to compel arbitration must establish (1) the existence of a valid, enforceable arbitration agreement and (2) that the claims asserted fall within the scope of that agreement. In re Rubiola , 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding) (addressing movant's burden under the FAA); In re AdvancePCS Health L.P. , 172 S.W.3d 603, 605 (Tex. 2005) (orig. proceeding) (per curiam). Both Texas and federal law require the enforcement of valid agreements to arbitrate. 9 U.S.C. § 2 ; Tex. Civ. Prac. & Rem. Code § 171.021. If the movant establishes that an arbitration agreement governs the dispute, the burden then shifts to the party opposing arbitration to establish a defense to the arbitration agreement.

In re Provine , 312 S.W.3d 824, 829 (Tex. App.—Houston [1st Dist.] 2009, orig. proceeding). A party may defend against the enforceability of the agreement only on a ground that exists at law or in equity for the revocation of a contract. See 9 U.S.C. § 2 ; Tex. Civ. Prac. & Rem. Code § 171.001(b).

Bambace contends that an agreement to arbitrate sexual harassment claims is unenforceable because it violates public policy. Thus, the first prong of Berry Company's burden is at issue—the existence of an enforceable arbitration agreement. Our state supreme court has made clear that there are three distinct ways to challenge the validity of an arbitration clause: (1) challenging the validity of the contract as a whole; (2) challenging the validity of the arbitration provision specifically; and (3) challenging whether an agreement exists at all. RSL Funding, LLC v. Newsome , 569 S.W.3d 116, 124 (Tex. 2018) ; In re Morgan Stanley & Co. , 293 S.W.3d 182, 187 (Tex. 2009) (orig. proceeding). The arbitrator decides the first type of challenge as a matter of law. Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 446, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) ; RSL Funding , 569 S.W.3d at 124. The second type of challenge generally must be resolved by the court. Rent-A-Ctr., W., Inc. v. Jackson , 561 U.S. 63, 70, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) ; Prima Paint Corp. v. Flood & Conklin Mfg. Co. , 388 U.S. 395, 402-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)...