Cline v. H.E. Butt Grocery Co.

• Decision Date: 23 December 1999
• Docket Number: No. CivA G-99-293.,CivA G-99-293.
• Citation: 79 F.Supp.2d 730
• Parties: Robert CLINE v. H.E. BUTT GROCERY COMPANY.
• Court: U.S. District Court — Southern District of Texas

Page 730

79 F.Supp.2d 730

Robert CLINE v. H.E. BUTT GROCERY COMPANY.

No. CivA G-99-293.

United States District Court, S.D. Texas, Galveston Division.

December 23, 1999.

Scott H. Pawgan, Houston, TX, for Robert Cline, plaintiff.

Barbara L. Johnson, Wickliff & Hall, Houston, TX, for HE Butt Grocery Co, defendant.

ORDER GRANTING DEFENDANT'S MOTION TO STAY PROCEEDINGS AND COMPEL ARBITRATION

KENT, District Judge.

Plaintiff Cline brings suit against his former employer, HEB Grocery Company, alleging causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. ("ADEA"), the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"), and state law claims for breach of contract and negligence. Now before the Court is Defendant's Motion to Stay Proceedings and Compel Arbitration. For the reasons set forth below, Defendant's Motion is GRANTED.

I. FACTUAL SUMMARY

Cline, who was forty-seven years of age at the time of his termination, served as a produce manager at Defendant's Friendswood store. He was earning $12 an hour, a wage at the high end of Defendant's pay range for produce managers. He was also guaranteed at least ten hours of overtime work per week.

In April 1997, Cline was working at the store when he injured his Achilles tendon. Cline learned shortly thereafter that the injury would require surgery. Because HEB does not subscribe to Texas workers' compensation, it is self-insured to cover injuries sustained by employees in the course of their employment. Cline sought to file a claim for his injury in order to cover the necessary surgery. However, the store manager allegedly refused on repeated occasions to file a claim.¹ The delay engendered by the failure to file allegedly aggravated the condition of Plaintiff's Achilles tendon, ultimately causing permanent damage.

On May 13, 1998, Cline was leaving the store at the end of his work day when a grocery stocker approached him in the parking lot and allegedly began verbally and physically threatening him. Subsequently, HEB fired Cline for that incident, allegedly placing the blame for it on him. Cline alleges that at the time of his firing, HEB was advertising openings for produce managers at an hourly wage of $8.50, with no guarantees of overtime.

HEB elected to discontinue coverage under the Texas Workers' Compensation Act and established a voluntary occupational benefit plan for on-the-job injuries known as HEB's SMART Work Injury Benefit Plan (the "SMART Plan"). The SMART Plan provides two level of benefits: Basic coverage and Comprehensive coverage. If the worker opts for Basic coverage, he retains his right to sue HEB for on the job injuries. If a worker elects Comprehensive coverage, he receives an increased level of benefits but agrees to waive his right to sue and must submit his disputes to binding resolution. On August 27, 1994 Cline signed an Election and Agreement Form, opting for Comprehensive coverage.

Cline subsequently brought suit against HEB, alleging causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. ("ADEA"), the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"), and state law claims for breach of contract and negligence. The ADEA claim is based on Plaintiff's contention that he was fired because of his age. The ERISA claims are based on Cline's contention that his termination deprived him of pension rights contrary to the provision of ERISA. The common-law negligence claim is based on Cline's contention that HEB failed to promptly process his medical claims under the SMART Plan, which Cline believes aggravated his medical condition.

On October 7, 1999 HEB filed its Motion to Stay Proceedings and Compel Arbitration. HEB seeks to steer Cline's negligence claim and all claims brought under ERISA, except those related to Defendant's pension plan, into binding arbitration pursuant to the terms of the SMART Plan.

II. ANALYSIS

At the outset, the Court observes that there is a strong federal policy favoring the arbitration process. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26 (1991) (noting that the Federal Arbitration Act manifests a liberal federal policy favoring arbitration agreements); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185 (1987) (observing that there is a strong national policy encouraging the use of arbitration); Life of America Ins. Co. v. Aetna Life Ins. Co., 744 F.2d 409, 412-13 (5th Cir.1984); see also Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1254 (7th Cir.1994) (defining arbitration as "a private system of justice offering benefits of reduced delay and expense").

The Federal Arbitration Act, 9 U.S.C. § 3, "mandates that when an issue is referable to arbitration pursuant to a written agreement, the district court must stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant is not in default in proceeding with such arbitration." Williams v. Cigna Financial Advisors, Inc., 56 F.3d 656, 659 (5th Cir. 1995) (emphasis added). Thus in deciding whether the grant Defendant's Motion to Stay Proceedings and Compel Arbitration, the Court need only decide if the dispute is covered by the terms of a valid arbitration agreement; if so, a stay must be granted. See id.

When confronted with the question of arbitrability, a District Court must determine, as a threshold matter, whether the grievance before it is subject to arbitration. See Folse v. Richard Wolf Med. Instruments Corp., 56 F.3d 603, 605 (5th Cir.1995); Oil, Chem. & Atomic Workers Int'l Union, Local 4-227, AFL-CIO v. Phillips 66 Co., 976 F.2d 277, 278 (5th Cir.1992). This determination involves two inquiries. First, the Court asks whether there is a valid agreement to arbitrate; if so, the Court then asks whether the issue in question is covered by the valid agreement. See Webb v. Investacorp, Inc., 89 F.3d 252, 257-58 (5th Cir.1996).

As to the first inquiry, the Court finds that the arbitration provision in the Smart Plan is valid, because it is a contractual provision supported by consideration and there are no equitable reasons to invalidate this private contractual agreement to arbitrate. Plaintiff's arguments to the contrary are examined below.

A. Illusory Promise

Cline first argues that the arbitration agreement is invalid for want of consideration. According to Cline, because workers cannot change their election to Basic coverage once they have elected Comprehensive coverage, although HEB reserves the right to amend or terminate the Plan, HEB made an illusory promise to its workers and the arbitration provision lacks consideration.

Cline's claim that HEB's promise was illusory is an attack on the Election and Agreement Plan as a whole, and not the arbitration provision itself. Questions related to the enforcement of a contract as a whole are properly referable to an arbitrator; it is only when an attack is made on the arbitration clause itself that a court, rather than an arbitrator, should decide questions of validity. See Rojas v. TK Communications, Inc., 87 F.3d 745, 749 (5th Cir.1996). The arbitration clause itself is supported by valid consideration: each party promised to relinquish their legal right to have a judicial forum adjudicate their disputes.

Even if this Court were empowered to consider the validity of the Election and Agreement as a whole, it would reject Cline's contention that HEB's right to terminate the Plan amounts to an illusory promise. If the Plan were to be terminated by HEB, the rights and obligations of the parties for on-the-job injuries incurred while the Plan was still in force would be governed by the terms of the Agreement, which is to say that the mutual promises of the parties would be enforceable. It is true that if HEB terminated the Plan, then with respect to injuries incurred after the Plan was terminated, HEB would no longer be obliged to treat those injuries in accordance with the terms of the Plan. But at the same time, a worker would no longer be bound by the promises he made under the Plan either, and would have the right to sue for his injuries. This is not an illusory promise situation.

B. Unconscionability of Fees

Cline contends that the arbitration agreement is unconscionable because it requires him to pay one half of the arbitration fees. Plaintiff fails to cites any authority for this proposition.

While the Fifth Circuit has apparently not addressed this issue, several other courts have concluded that the mere possibility that a plaintiff may have to share in the payment of the arbitrator's fees, without more, is not a sufficient reason to invalidate the arbitration agreement. See Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, 170 F.3d 1, 16 (1st Cir.1999) ("arbitration is often far more affordable to plaintiffs and defendants alike than is pursuing a claim in court."); Koveleskie v. SBC Capital Mkts., Inc., 167 F.3d 361, 366 (7th Cir.1999); Arakawa v. Japan Network Group, 56 F.Supp.2d 349, 354 (S.D.N.Y.1999) ("the mere fact that a plaintiff faces the possibility of being charged arbitration fees, including sharing the arbitrator's compensation if directed to do so by the arbitrator, does not make the agreement to arbitrate Title VII claims unenforceable as a matter of law.").

In light of the fact that Plaintiff is making an ERISA claim, and that ERISA permits the recovery of attorneys' fees and costs, it is entirely possible that Plaintiff will not pay any significant fees at all. Indeed, the Plan expressly allows the arbitrator to award reasonable fees if the employee prevails on such a statutory claim. Thus at this point it is not clear how much Cline must pay, or whether Cline will have to pay anything at all. Plaintiff offers no information as to Cline's financial status or his ability to...