D.R. Horton, Inc. v. Brooks, 14-06-00099-CV.

• Decision Date: 02 November 2006
• Docket Number: No. 14-06-00152-CV.,No. 14-06-00099-CV.,14-06-00099-CV.,14-06-00152-CV.
• Citation: 207 S.W.3d 862
• Parties: D.R. HORTON, INC., Appellant, v. Aurora BROOKS, Appellee. In re D.R. Horton, Relator.
• Court: Texas Court of Appeals

207 S.W.3d 862

D.R. HORTON, INC., Appellant, v. Aurora BROOKS, Appellee In re D.R. Horton, Relator.

No. 14-06-00099-CV.

No. 14-06-00152-CV.

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

November 2, 2006.

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Michael D. Mitchell, Houston, for appellant.

Andrew S. Golub, Houston, for appellee.

Panel consists of Chief Justice HEDGES, and Justices YATES and GUZMAN.

OPINION

LESLIE B. YATES, Justice.

Two causes are before us, both involving the enforceability of an arbitration clause contained in D.R. Horton, Inc.'s employee handbook acknowledgment form. D.R. Horton filed a motion to compel arbitration in the trial court pursuant to the arbitration clause, and the trial court denied the motion. D.R. Horton sought review of the trial court's order in this Court, filing an interlocutory appeal and a petition for a writ of mandamus. For the reasons discussed below, we conditionally grant D.R. Horton's petition for mandamus, Cause No. 14-06-00152-CV, and, having granted full relief under our mandamus jurisdiction, we dismiss as moot D.R. Horton's interlocutory appeal, Cause No. 14-06-00099-CV. See In re D. Wilson Constr. Co., 196 S.W.3d 774, 780 (Tex.2006) (orig.proceeding).¹

BACKGROUND

Aurora Brooks was hired by D.R. Horton in April of 2004. Upon employment, Brooks, an at-will employee, received a copy of D.R. Horton's Employee Handbook ("Handbook") and signed the attached "Employee Acknowledgment Form" (the "EAF"). The EAF contains five paragraphs, four of which acknowledge Brooks's receipt of the Handbook and affirm her understanding of D.R. Horton's employment policies. One paragraph contains an agreement to submit any disputes arising from her employment, or its termination, to arbitration.

When Brooks's employment was terminated, she filed suit against D.R. Horton under the Texas Commission on Human Rights Act,² claiming she had been treated in a discriminatory manner due to her age. D.R. Horton filed its motion to dismiss and compel arbitration and attached a copy of the EAF signed by Brooks. The trial court denied the motion without explanation. D.R. Horton then filed its interlocutory appeal and petition for mandamus relief. We begin by determining which of these procedural vehicles should be used to challenge the trial court's denial of arbitration in this case.

INTERLOCUTORY APPEAL OR MANDAMUS?

If arbitration is denied under the Texas Arbitration Act ("TAA"),³ the trial court's order may be challenged through an interlocutory appeal. See Tex. Civ. Prac. & Rem.Code Ann. § 171.098(a); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271-72 (Tex.1992). However, relief from a denial of arbitration under the Federal Arbitration Act ("FAA")⁴ must be pursued through mandamus. See In re Nexion Health at Humble, Inc., 173 S.W.3d 67, 69-70 (Tex.2005); Jack B. Anglin Co., 842 S.W.2d at 272; see also In re D. Wilson Constr. Co., 196 S.W.3d at 780 n. 4 (reaffirming that review of denial of arbitration under the FAA by interlocutory appeal falls outside of appellate jurisdiction).

Here, the arbitration clause provides that arbitration is pursuant to the provisions of the FAA or, if inapplicable, a state arbitration statute. Neither party contends the FAA is inapplicable and, in the trial court, D.R. Horton sought to compel arbitration under the FAA.⁵ When an employment agreement references both the FAA and the TAA, the FAA prevails. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 91 (Tex.1996). Thus, we review denial of arbitration through D.R. Horton's mandamus proceeding.

STANDARD OF REVIEW

A writ of mandamus will issue to correct a clear abuse of discretion when there is no adequate remedy by appeal. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992); see also In re Nexion Health, 173 S.W.3d at 69-70. A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if it clearly fails to correctly analyze or apply the law. In re Ford Motor Co., 165 S.W.3d 315, 317 (Tex.2005). The relator has the burden to establish that the trial court abused its discretion. See id. There is no other adequate remedy at law when a trial court improperly denies a motion to compel arbitration under the FAA. In re Nexion Health, 173 S.W.3d at 69-70.

DISCUSSION

A party moving to compel arbitration must prove the existence of a valid arbitration agreement and a dispute falling within the scope of the agreement. In re AdvancePCS Health L.P., 172 S.W.3d 603, 605 (Tex.2005); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). If the trial court finds there is a valid agreement to arbitrate, the burden shifts to the party opposing arbitration to prove his defenses. Davidson, 128 S.W.3d at 227. The trial court's determination of the arbitration agreement's validity is a legal question subject to de novo review. Id.

There is a strong presumption in favor of arbitration once the existence of a valid arbitration agreement has been shown. See id. If there is a valid arbitration agreement encompassing the claims and the party opposing arbitration fails to prove his defenses, the trial court has no discretion but to compel arbitration. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753-54 (Tex.2001). In this case, the parties do not dispute that Brooks's claim falls within the scope of the arbitration clause; the issue presented concerns the validity of the agreement.

We determine the validity of arbitration agreements by applying state-law contract principles. Davidson, 128 S.W.3d at 227. When construing the agreement, our primary concern is to ascertain the intent of the parties as expressed in the instrument. Id. at 229. In doing so, we examine the entire writing as a whole and give effect to all its provisions. Id.

The EAF signed by Brooks and attached to D.R. Horton's motion to compel contains the following arbitration clause:

In the event there is any dispute arising out of your employment with D.R. Horton, Inc., or the termination thereof, which the parties are unable to resolve through direct discussion or mediation, regardless of the kind or type of dispute, you and D.R. Horton, Inc. agree to submit all such disputes exclusively to final and binding arbitration pursuant to the provisions of the Federal Arbitration Act, or, if inapplicable, any applicable state arbitration stature (sic), or any successor or replacement statutes, upon a request submitted in writing to the Legal Department in the Corporate office within one (1) year of the date when the dispute first arose, or within (1) year of the termination of employment, whichever occurs first. Any failure to request arbitration timely shall constitute a waiver of all rights to raise any claims in any forum arising out of any dispute that was subject to arbitration. The limitations period set forth in this paragraph shall not be subject to tolling, equitable or otherwise.

Because this provision expressly requires both parties to arbitrate disputes regarding Brooks's employment, D.R. Horton contends the trial court had no discretion but to compel arbitration. We agree.

An at-will employee who receives notice of an employer's arbitration policy and continues or commences employment accepts the terms of the agreement as a matter of law. In re Dallas Peterbilt, Ltd., L.L.P., 196 S.W.3d 161, 162 (Tex. 2006); see In re Halliburton Co., 80 S.W.3d 566, 568 (Tex.2002). Therefore, by signing the EAF and commencing employment, Brooks accepted the terms of this arbitration provision as a matter of law, and a valid agreement to arbitrate was formed. See, e.g., In re Dallas Peterbilt, 196 S.W.3d at 162; In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006); see also Davidson, 128 S.W.3d at 229. Brooks does not deny that she signed the EAF nor argue she did not have notice of its provisions. Instead, Brooks claims the arbitration provision is unenforceable because it is illusory, its terms are too indefinite to form a binding contract, and it is unconscionable.

1. Is the Arbitration Agreement Illusory?

An illusory promise is one that fails to bind the promisor because he retains the option of discontinuing performance without notice. See O'Farrill Avila v. Gonzalez, 974 S.W.2d 237, 244 (Tex. App.-Austin 1998, pet. denied). Like other contracts, arbitration agreements must be supported by consideration. In re Palm Harbor Homes, 195 S.W.3d at 676.

Under Texas law, at-will employment does not preclude formation of other contracts between employer and employee, so long as neither party relies on continued employment as consideration for the contract. Davidson, 128 S.W.3d at 228. Mutual promises to submit employment disputes to arbitration constitute sufficient consideration to support an arbitration agreement; however, if the employer can avoid its promise to arbitrate, the agreement is illusory. See, e.g., id.; In re Halliburton, 80 S.W.3d at 569-70 (concluding agreement was binding on both the employer and the employee and therefore, was not illusory).

To support her argument of illusoriness, Brooks relies on the following provisions:

Since the information, policies and benefits described here are subject to change, I acknowledge that revisions to the handbook may occur. . . . I understand that revised information may supersede, modify, or eliminate existing policies.

[T]his handbook is neither a contract of employment nor a legal document.

D.R. Horton, Inc. reserves the right to revise, supplement, or rescind any policies or portion of the handbook from time to time as it deems appropriate, in its sole and absolute discretion. The only exception to any changes is our employment-at-will policy. . . .

Policies set forth in this handbook are not intended to create a contract, nor are they to be construed to constitute contractual obligations of any kind . . . between D.R. Horton, Inc. and any of its employees. The provisions of the...