Forged Components, Inc. v. Guzman

• Decision Date: 02 August 2013
• Docket Number: No. 01–11–00563–CV.,01–11–00563–CV.
• Parties: FORGED COMPONENTS, INC., Appellant v. Ricky GUZMAN, Appellee.
• Court: Texas Court of Appeals

409 S.W.3d 91

FORGED COMPONENTS, INC., Appellant

v.Ricky GUZMAN, Appellee.

No. 01–11–00563–CV.

Court of Appeals of Texas,

Houston (1st Dist.).

June 25, 2013.

Rehearing Overruled Aug. 2, 2013.

Preempted

V.T.C.A., Civil Practice & Remedies Code § 171.002(c)(2)Alan N. Magenheim, Magenheim & Associates, Houston, TX, for Appellant.

Darrin M. Walker, Law Offices of Darrin Walker, Kingwood, TX, Michael Stephen Callahan, Casey Michael Brown, The Callahan Law Firm, Houston, TX, for Appellee.

Panel consists of Justices JENNINGS, MASSENGALE, and HUDDLE.

OPINION

REBECA HUDDLE, Justice.

This is a case about competing arbitration agreements. Appellee, Ricky Guzman, sued his employer, Forged Components, Inc. (FCI), for negligence after he suffered an on-the-job injury. The trial court denied FCI's motion to compel arbitration under an arbitration provision in FCI's Occupational Disease and Injury Employee Welfare Benefit Plan (Plan), which Guzman signed before becoming an FCI employee. But it later granted Guzman's motion to compel arbitration under a Rule 11 agreement the parties' attorneys signed while the lawsuit was pending.

The arbitrator issued an award in Guzman's favor, and the trial court entered judgment on the award and added an award of post-judgment interest. On appeal, FCI complains that the trial court erred by (1) denying FCI's motion to compel arbitration under the arbitration agreement in the Plan, (2) compelling arbitration under the Rule 11 agreement, (3) refusing to vacate the award, and (4) awarding post-judgment interest. In his sole cross-point, Guzman asserts that the trial court erred in failing to award pre-judgment interest.

We modify the trial court's judgment to exclude the award of post-judgment interest and affirm as modified.

Background

Guzman was pinned by a forklift at work. He underwent surgery and was hospitalized for twenty-seven days. On August 4, 2008, Guzman sued FCI, his employer and a non-subscriber under the Texas Workers' Compensation Statute, for negligence. FCI generally denied Guzman's allegations and asserted that Guzman's intoxication caused the accident. SeeTex. Lab.Code § 406.033(c)(2) (West Supp.2012).

In September 2009, after the case had been removed, remanded, and appealed to the Fifth Circuit, FCI moved to compel arbitration under the terms of the Plan. Section 11 of the Plan states:

AGREEMENT TO ARBITRATE: In the event there is any dispute arising out of any work related Accident or Occurrence, or any claim for or regarding benefits under this Plan ... the Covered Employee and the Company agree to submit all such disputes exclusively to final and binding arbitration. Arbitration shall be conducted pursuant to these procedures and the provisions of the Federal Arbitration Act....

Guzman opposed FCI's motion, contending that his negligence claim fell outside the scope of the Plan's arbitration agreement. He also argued that the Plan's arbitration procedures were unconscionable and rendered the agreement unenforceable.

The trial court held a hearing on FCI's motion and, on November 12, 2009, entered an order denying the motion. FCI contends it did not receive notice of the trial court's ruling until March 2010, because the order was mailed to the wrong address. But on November 18, 2009, six days after the trial court denied FCI's motion, FCI's counsel faxed Guzman's counsel the following proposed Rule 11 agreement:

This will serve as the agreement between Plaintiff and Defendant pursuant to TRCP 11 to abate the above-referenced matter and submit this dispute to binding arbitration before Judge Katie Kennedy of Judicial Workplace Arbitrations. If this correctly sets out our agreement, please sign where provided below and return your signature to me.

On the same day, Guzman's attorney signed the Rule 11 agreement and penned the following handwritten note next to his signature:

By agreeing to arbitrate w[ith] Judge Kennedy, Plaintiff is not agreeing to be bound by the terms of the [F]orged [C]omponents Arbitration Plan which Plaintiff has previously contested both in his Response to Defendant's Motion to Compel Arbitration and Plaintiff Counsel's letter dated Oct. 28, 2009.

Guzman's counsel returned the signed Rule 11 agreement with his handwritten notation to FCI's counsel, who filed the Rule 11 agreement in the trial court on December 7, 2009. That same day, FCI's counsel's assistant sent a copy of the Rule 11 agreement to Guzman's counsel under a cover letter stating: “Enclosed please find the Rule 11 agreement regarding arbitration that was filed with the Court today.”

After an unsuccessful mediation in December 2009, Guzman's counsel wrote FCI's counsel on January 5, 2010: “As you are aware we agreed to arbitrate this matter with Katie Kennedy through Judicial Workplace Arbitrations. I would like to set up the arbitration with JWA and see if we can agree on an Arbitration Plan. Please call me as soon as possible so we can begin working out these details.” On January 27, 2010, Guzman's counsel sent a letter to JWA, copying FCIs counsel. The letter informed JWA of the parties' agreement to arbitrate the matter with former district court judge Kennedy through JWA, requested that a scheduling conference be set as soon as possible, and enclosed the parties' live pleadings, the Rule 11 agreement, and documents identifying each party's witnesses.

On March 10, 2010, FCI filed a “Notice of Revocation of Consent to Proposed Rule 11 Agreement.” In it, FCI asserted that “Plaintiff's return of the [Rule 11] with altered terms [i.e., Guzman's counsel's handwritten notation] was a mere counter-offer. Therefore, no enforceable Rule 11 agreement existed.” FCI separately advised Guzman that FCI did not intend to arbitrate and served Guzman with a deposition notice and written discovery.

On March 24, 2010, Guzman moved to enforce the Rule 11 agreement, abate the case, and compel arbitration. In response, FCI argued that no Rule 11 agreement was formed, and that, even if one had been formed, FCI had withdrawn its consent to arbitrate, and Guzman had waived his right to arbitrate by opposing arbitration under the Plan. The trial court granted Guzman's motion to compel arbitration under the Rule 11 agreement.

The parties arbitrated the dispute before Katie Kennedy, who awarded Guzman damages in the amount of $1,312,518.23. Guzman moved to confirm the award and for entry of judgment, and FCI moved to vacate the award. On June 13, 2011, the trial court entered judgment awarding Guzman $1,312,518.23 in damages, plus post-judgment interest and taxable costs. FCI appeals.

Which law governs?

Before turning to the merits, we address the parties' threshold choice-of-law dispute. The parties agree that the Federal Arbitration Act (FAA) governs the arbitration agreement in the Plan,¹ but they disagree about which law governs the Rule 11 arbitration agreement. FCI contends that because the Rule 11 agreement does not expressly invoke the FAA and does not involve interstate commerce, the FAA is inapplicable, and the Texas Arbitration Act (TAA) alone governs. It further argues that the Rule 11 agreement is unenforceable because it does not meet the TAA's requirement that it be signed by the parties and their counsel. SeeTex. Civ. Prac. & Rem.Code Ann. § 171.002(a)(3), (c)(2) (West 2011). Guzman argues that the FAA applies to the Rule 11 arbitration agreement and renders irrelevant the TAA's requirement that an arbitration agreement be signed by the parties.

The FAA applies to an arbitration agreement arising out of a contract evidencing a transaction involving commerce. See9 U.S.C.S. § 2 (Lexis Nexis 2008). Therefore, if the employment relationship between FCI and Guzman involves “commerce,” as defined in section 2, then the FAA governs the arbitration agreement. See id.

The United States Supreme Court has interpreted the term “involving commerce” in the FAA “as the functional equivalent of the more familiar term ‘affecting commerce’—words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 2040, 156 L.Ed.2d 46 (2003) (per curiam); see also In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127 (Tex.1999) (per curiam) (the provision of the FAA that makes enforceable a written arbitration provision in “ ‘a contract evidencing a transaction involving commerce’ extends to any contract affecting commerce, as far as the Commerce Clause of the United States Constitution will reach”).

In the employment context, the “relationship between an employer who is regularly engaged in activities related to interstate commerce and its employees is affected by interstate commerce as a matter of law and implicates commerce clause issues.” In re Big 8 Food Stores, Ltd., 166 S.W.3d 869, 880 (Tex.App.-El Paso 2005, orig. proceeding). Whether the FAA governs the Rule 11 arbitration agreement thus turns on whether FCI is regularly engaged in activities related to interstate commerce. The record demonstrates that FCI manufactures steel, primarily for the oil and gas industry. In general, FCI takes raw bar steel, then forges and machines it into finished product. FCI's head office is in Humble, Texas, and it has a sales office in Canada, meaning that FCI, at a minimum, engages in trade, commerce, or communication between Texas and Canada. See Robinson v. TCI/US West Commc'ns Inc., 117 F.3d 900, 904 (5th Cir.1997) (noting interstate commerce includes “trade, commerce, transportation, or communication ... between any foreign country and any ... place or ship outside thereof”). Based on these facts, and the fact that FCI does not dispute that it regularly engaged in activities related to interstate commerce, we conclude that the relationship between Guzman and FCI involves interstate commerce such that the FAA applies to the arbitration provision in the Rule 11 agreement. See In re Border Steel, Inc., 229...