Aerotek, Inc. v. Boyd

• Citation: 598 S.W.3d 373 (Mem)
• Decision Date: 25 February 2020
• Docket Number: No. 05-18-00579-CV,05-18-00579-CV
• Parties: AEROTEK, INC. and JR Butler, Inc., Appellants v. Lerone BOYD, Michael Marshall, Jimmy Allen, and Trojuan Cornett, Appellees
• Court: Court of Appeals of Texas

598 S.W.3d 373 (Mem)

AEROTEK, INC. and JR Butler, Inc., Appellants

v.Lerone BOYD, Michael Marshall, Jimmy Allen, and Trojuan Cornett, Appellees

No. 05-18-00579-CV

Court of Appeals of Texas, Dallas.

Opinion Filed February 25, 2020

Rehearing En Banc Denied February 25, 2020

Chalon Clark, Jason Heep, Husch Blackwell LLP, Dallas, TX, Heidi Rasmussen, Jeffery Taylor Nobles, Husch Blackwell, LLP, Houston, TX, William E. Corum, Husch Blackwell LLP, Kansas City, MO, for Appellant Aerotek, Inc.

Thomas E. Reddin, Polsinelli PC, Dallas, TX, for Appellant HCBeck Ltd.

Carrie B. Hoffman, Sandra Jonas, Gardere Wynne Sewell L.L.P., Stacy R. Obenhaus, Foley & Lardner LLP, Dallas, TX, for Appellant JR Bulter, Inc.

Matthew R. Scott, Carson Bridges, Javier Perez, Scott Perez, LLP, Dallax, TX, Hannah Parks, Russell Daniel Cawyer, Kelly, Hart, & Hallman LLP, Fort Worth, TX, for Appellee.

Reconsideration En Banc Denied

OPINION DISSENTING FROM THE DENIAL OF MOTION FOR EN BANC RECONSIDERATION

Opinion by Justice Schenck, dissenting.

I respectfully dissent from the Court's denial of appellants' Motion for En Banc Reconsideration. This is one of a series of recent cases in this Court that have posed questions about enforcement of arbitration contracts and also, albeit less directly but perhaps more fundamentally, about the role of federal law in state court and of judges in ensuring that the results in these and other controversies adhere to that law. Appellants urge that the introduction of a contract containing an arbitration clause should have resolved any debate over the arbitrability question here despite the fact that the document was electronically executed and stored. I agree.

As detailed below, I do not believe the trial court's decision can be upheld without either acknowledging that in doing so we have crafted special rules for arbitration contracts, which would violate the governing federal law and the Constitution's Supremacy Clause, or holding every contract involving a computer open to costly nuisance-value litigation and abuse.

I.

Congress enacted the FAA in 1925 to reverse the longstanding judicial hostility to arbitration agreements and to place arbitration agreements on "the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp. , 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). The FAA thus manifests an "emphatic federal policy in favor of arbitral dispute resolution," Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc. , 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), and requires that courts, state or federal, "rigorously enforce agreements to arbitrate," Dean Witter Reynolds, Inc. v. Byrd , 470 U.S. 213, 221, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).

Section 2 of the FAA is its "primary substantive provision." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). This section "provides that written agreements to arbitrate controversies arising out of an existing contract ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ " Dean Witter Reynolds , 470 U.S. at 218, 105 S.Ct. 1238 (quoting 9 U.S.C. § 2 ). It, together with the rest of the FAA, applies to the full reach of the federal commerce power¹ and preempts and supplants any state law, whether labeled as a rule of substance or procedure,² that would conflict with the FAA's policy and goal of enforcing agreements to resolve controversies by arbitration rather than litigation. ASW AllState Painting v. Lexington Ins. , 188 F.3d 307, 311 (5th Cir. 1999) (FAA "does not preempt state arbitration rules as long as the state rules do not undermine the goals and policies of the FAA. ") (emphasis added).

A court interpreting an arbitration agreement is obliged to apply "ordinary contract principles" in determining the existence and reach of the agreement. Any other result is barred by federal law and, in turn, the Supremacy Clause. Epic Sys. v. Lewis , ––– U.S. ––––, 138 S. Ct. 1612, 1622, 200 L.Ed.2d 889 (2018) ("Under our precedent, [rules] that target arbitration either by name or by more subtle methods, such as by ‘interfer[ing] with fundamental attributes of arbitration’ [are preempted]."); Kindred Nursing Ctrs. Ltd. P'ship v. Clark , ––– U.S. ––––, 137 S. Ct. 1421, 1428, 197 L.Ed.2d 806 (2017) ; DIRECTV, Inc. v. Imburgia , ––– U.S. ––––, 136 S. Ct. 463, 471, 193 L.Ed.2d 365 (2015) (citing Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) ); AT & T Mobility LLC v. Concepcion , 563 U.S. 333, 352, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) ; Prima Paint Corp. v. Flood & Conklin Mfg. Co. , 388 U.S. 395, 404, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (noting "the unmistakably clear congressional purpose that the arbitration procedure, when selected by the parties to a contract, be speedy and not subject to delay and obstruction in the courts").

If a party opposing an application to compel arbitration denies "the existence of the agreement," the Texas procedural rules, in keeping with the FAA, require a trial judge to "summarily determine [the] issue". TEX. CIV. PRAC. & REM. CODE ANN. § 171.021. "Because Texas courts favor arbitration as a means of settling disputes between parties, the party opposing arbitration bears the burden of proving that no valid arbitration agreement exists as to the dispute." ASW , 188 F.3d at 311 (citing Fridl v. Cook , 908 S.W.2d 507, 511 (Tex. App.—El Paso 1995, writ dism'd w.o.j.) ). "If the material facts necessary to determine the issue are controverted by an opposing affidavit or otherwise admissible evidence, the trial court must conduct an evidentiary hearing to determine the disputed material facts." Id. (citing Howell Crude Oil Co. v. Tana Oil & Gas Corp. , 860 S.W.2d 634, 639 (Tex. App.—Corpus Christi–Edinburgh 1993, no writ)).

The Texas Supreme Court, recognizing that the essential point of arbitration is to avoid the tortuous and costly process associated with plenary trial and motion practice, has made clear that the issue should be decided "summarily" and that the party seeking enforcement should have access to immediate review by extraordinary writ, though it is now also available by statutory amendment via the interlocutory appeal at issue here. See PRAC. & REM. § 51.016; In re Nexion Health at Humble, Inc. , 173 S.W.3d 67, 68 (Tex. 2005) (orig. proceeding); Jack B. Anglin Co. v. Tipps , 842 S.W.2d 266, 272 n.10 (Tex. 1992) (orig. proceeding).

II.

In this case, appellants urged that each of the appellees had entered into a contract, which is itself the source of the claim they have filed. That contract was both executed and preserved electronically, as countless modern documents and agreements are. The copies of the agreements filed by appellants as part of their motion to compel arbitration included a clause directing the claims to arbitration. Appellees responded in opposition, urging not that they did not recall whether the electronic version they executed contained an arbitration clause, but that each was able to recall the entire electronic offering in full and that it did not contain the arbitration clause now shown in the electronically stored and printed copies. Following the Texas state procedural path laid out in Tipps , the trial court found this conflict to warrant a hearing.

In Tipps , the Texas Supreme Court construed what is now section 171.021 of the Texas Civil Practice & Remedies Code :

PROCEEDING TO COMPEL ARBITRATION.

(a) A court shall order the parties to arbitrate on application of a party showing:

(1) an agreement to arbitrate; and

(2) the opposing party's refusal to arbitrate.

(b) If a party opposing an application made under Subsection (a) denies the existence of the agreement, the court shall summarily determine that issue. The court shall order the arbitration if it finds for the party that made the application. If the court does not find for that party, the court shall deny the application.

(c) An order compelling arbitration must include a stay of any proceeding subject to Section 171.025.

Analogizing to summary-judgment rules and drawing on the need to align the statute with the purpose of arbitration—namely, to avoid litigating in court in the first instance—the supreme court held that a full evidentiary hearing was not likely envisaged by the directive that "the court shall decide the issue summarily." Tipps , 842 S.W.2d at 269. A full evidentiary hearing would be proper only where the "material facts necessary to determine the issue are controverted." Id. (emphasis added). As this case comes to us after the trial court proceeded to such a hearing, we look to the record of that hearing. As detailed below, I do not believe Tipps 's language or its resort to summary-judgment norms would support the conclusion that any affidavit purporting to contest the existence of the arbitration clause would permit such a hearing. Absent some relevant and lawful indication that a reasonable and fair-minded fact finder might decide the dispute either way, there seems little purpose to delaying the arbitration—and adding to the costs—by proceeding to an evidentiary hearing. Lujan v. Navistar, Inc. , 555 S.W.3d 79, 87–88 (Tex. 2018) (elucidating meaning of "genuine" in summary-judgment parlance).

III.

At the hearing on the motion in this case, appellants produced and secured admission of the printed copies of the electronic agreements, including the disputed arbitration language, and offered live testimony detailing the operation of the software that yielded it, including unchallenged testimony that the software would not permit the signatory to advance to the final signature page without assenting to each of the preceding pages, including the page containing the arbitration clause. Appellees merely reintroduced their affidavits by agreement of the parties. The trial court evidently regarded this impasse, such as it is, as...