In re David's Supermarkets Inc.

• Citation: 43 S.W.3d 94
• Decision Date: 11 April 2001
• Docket Number: No. 10-01-011-CV,10-01-011-CV
• Parties: (Tex.App.-Waco 2001) IN RE DAVID'S SUPERMARKETS, INC.
• Court: Court of Appeals of Texas

Page 94

43 S.W.3d 94 (Tex.App.-Waco 2001)

IN RE DAVID'S SUPERMARKETS, INC.

No. 10-01-011-CV

IN THE TENTH COURT OF APPEALS OF TEXAS, WACO.

April 11, 2001

Original Proceeding.

[Copyrighted Material Omitted] Before Chief Justice Davis, Justice Vance, and Justice Gray.

OPINION

DAVIS, Judge.

Dennis Taylor filed suit against his employer David's Supermarkets, Inc. ("David's") for damages he sustained from work-related injuries. David's filed a motion to compel arbitration of Taylor's claims pursuant to the company's dispute resolution plan. Respondent, the Honorable F. B. McGregor, Jr., Judge of the 66th District Court of Hill County, denied the motion. David's seeks a writ of mandamus from this Court compelling Respondent to send Taylor's case to arbitration.

BACKGROUND

When Taylor became a David's employee in February 1999, the company provided him copies of its Dispute Resolution Plan and its Occupational Injury Benefits Program. David's Dispute Resolution Plan (the "Plan") governs "any and all disputes between [David's] and its Employees." The Plan provides for the appointment by David's of a "Plan Director" who administers the Plan. An employee must notify the Plan Director in writing of any "on-the-job injury immediately or as soon as is reasonably practical." The Plan Director must review the claim and act on it within forty-five days after receipt, subject to one forty-five day extension in specified circumstances.

If the Plan Director denies the claim, the employee must apply with the Plan Director for a review of that denial. If the Plan Director again denies the claim, the employee may appeal that decision to a Review Committee appointed by David's.¹ If the Review Committee rejects the claim, the employee may then pursue nonbinding mediation. If mediation does not result in a satisfactory resolution, the employee may pursue binding arbitration. According to David's Rules of Mediation and Arbitration, the employee bears one-half the costs of arbitration, exclusive of attorney's fees.² The Federal Arbitration Act (the "FAA") governs this arbitration.

David's does not maintain workers' compensation insurance. Instead, it provides compensation for work-related injuries through its Occupational Injury Benefits Program (the "Benefits Program"). The Benefits Program pays 100 percent of covered medical expenses up to $150,000.00 per incident for as many as fifty-two weeks.³ The Benefits Program requires an employee to notify his supervisor of a work-related injury "immediately upon the occurrence of the injury." A request for benefits is submitted to "the Committee" at that time.⁴ If benefits are denied, an employee may appeal that denial to the Committee. According to the terms of the Benefits Program, "The Committee has discretionary and final authority to interpret and implement the provisions of the [Benefits Program]." Presumably, an employee who is dissatisfied with the Committee's final decision on a request for benefits can then seek review of the matter under the terms of David's Dispute Resolution Plan.⁵

Taylor alleges in his petition in the underlying lawsuit that he suffered an on-the-job injury on or about August 13, 1999. He claims that when he reported this injury he was sent to "the company doctor" who ordered an x-ray but refused to have an MRI done because of the cost. The doctor sent Taylor back to work wearing a back brace. Taylor further alleges:

On or about December 23, 1999, Plaintiff's legs went numb. This time, Plaintiff sought medical care from a physician of his own choosing. An MRI and x-rays revealed that Plaintiff had two ruptured disks as well as a broken fusion, which fusion had been performed in 1985.

Taylor filed suit on July 3, 2000. David's filed the motion to compel arbitration on October 10. Taylor contended in his November 16 response that arbitration in this case is against public policy because the benefits provided under David's Benefits Program are significantly less than those provided by the Texas workers' compensation system. Respondent heard David's motion on November 21 and denied the motion by written order signed December 16. David's filed this original proceeding on January 12, 2001.

THE FEDERAL ARBITRATION ACT

Taylor does not dispute the applicability of the FAA to disputes arising under the Dispute Resolution Plan. The FAA manifests "a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765 (1983); accord Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (orig. proceeding).

To decide whether a dispute must be arbitrated under the FAA, a court must determine: (1) whether a valid arbitration agreement exists; (2) whether the dispute falls within the scope of that arbitration agreement; and (3) "whether legal constraints external to the parties' agreement foreclose[ ] the arbitration of those claims."⁶ Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 3355, 87 L. Ed. 2d 444 (1985)).

Under the first step of this analysis, a party may challenge the validity of an arbitration agreement under general contract law principles.⁷ See 9 U.S.C.A. § 2 (West 1999); Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 281, 115 S. Ct. 834, 843, 130 L. Ed. 2d 753 (1995); In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 n.3 (Tex. 1999) (orig. proceeding). The second step focuses on the breadth of the arbitration agreement to determine whether the parties' dispute comes within its reach.

Regarding the third step of the analysis, the Supreme Court has explained that the only "legal constraints external" to the arbitration agreement which are of significance are those evidencing "a contrary congressional command." Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S. Ct. 2332, 2337, 96 L. Ed. 2d 185 (1987); see also Mitsubishi Motors, 473 U.S. at 627-28, 105 S. Ct. at 3354-55; In re Conseco Fin. Servicing Corp., 19 S.W.3d 562, 571 (Tex. App.--Waco 2000, orig. proceeding); In re Van Blarcum, 19 S.W.3d 484, 490 (Tex. App.--Corpus Christi 2000, orig. proceeding [mand. filed]).⁸

Like any statutory directive, the Arbitration Act's mandate may be overridden by a contrary congressional command. The burden is on the party opposing arbitration, however, to show that Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue. If Congress did intend to limit or prohibit waiver of a judicial forum for a particular claim, such an intent "will be deducible from [the statute's] text or legislative history," or from an inherent conflict between arbitration and the statute's underlying purposes.

Shearson/Am. Express, 482 U.S. at 226-27, 107 S. Ct. at 2337-38 (quoting Mitsubishi Motors, 473 U.S. at 628, 105 S. Ct. at 3354) (citations omitted).

Because the third step of the inquiry focuses on conflicting federal legislation, a contention that federally-mandated arbitration runs afoul of a state statutory scheme is generally irrelevant.⁹ See Swenson v. Management Recruiters Int'l, Inc., 858 F.2d 1304, 1309 (8th Cir. 1988), overruled on other grounds by Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991); DeSapio v. Josephthal & Co., Inc., 143 Misc. 2d 611, 616, 540 N.Y.S.2d 932, 936 (N.Y.Sup.Ct.1989). This is so because the Supremacy Clause of the United States Constitution dictates that the FAA "takes precedence over state attempts, legislative or judicial, to undercut the enforceability of arbitration agreements." In re Turner Bros. Trucking Co., 8 S.W.3d 370, 374 (Tex. App.--Texarkana 1999, orig. proceeding [mand. denied]); accord Perry v. Thomas, 482 U.S. 483, 492 n.9, 107 S. Ct. 2520, 2527 n.9, 96 L. Ed. 2d 426 (1987) (citing Southland Corp. v. Keating, 465 U.S. 1, 10-11, 104 S. Ct. 852, 858, 79 L. Ed. 2d 1 (1984)); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271 (Tex. 1992) (orig. proceeding); Conseco Fin. Servicing, 19 S.W.3d at 571.

Nevertheless, there is some authority for the proposition that a state-based claim with a parallel federal underpinning is not arbitrable if the parallel federal statutory scheme reflects a congressional intent that such claims not be arbitrated. See, e.g., Duffield v. Robertson Stephens & Co., 144 F.3d 1182, 1187 n.3 (9th Cir.), cert. denied, 525 U.S. 982, 119 S. Ct. 445, 142 L. Ed. 2d 399 (1998); Swenson, 858 F.2d at 1309; DeSapio, 143 Misc. 2d at 616, 540 N.Y.S.2d at 936.

APPLICATION

David's contends that the trial court abused its discretion by refusing to send Taylor's case to arbitration. Mandamus will issue to compel arbitration when a court has abused its discretion by denying a party the right to arbitrate under the FAA. See In re L & L Kempwood Assocs., 9 S.W.3d 125, 128 & n.18 (Tex. 1999) (citing Jack B. Anglin Co., 842 S.W.2d at 271-73).

Before Respondent, Taylor relied on a decision by the federal district court in Galveston involving a similar factual scenario. See Strawn v. AFC Enters., Inc., 70 F. Supp. 2d 717 (S.D. Tex. 1999), vacated, 240 F.3d 1074 (5th Cir. 2000) (opinion not designated for publication). In Strawn, the district court followed the Webb three-step analysis and concluded: (1) the arbitration agreement at issue was otherwise valid; and (2) the claims at issue were within the scope of the arbitration agreement; but (3) "the agreement [wa]s void as contrary to Texas public policy with respect to the workers' compensation system." Strawn, 70 F. Supp. 2d at 722 (citing Webb, 89 F.3d at 257-58). As indicated however, the Fifth Circuit vacated the district court's ruling in an unpublished opinion.

Like the plaintiff in Strawn, Taylor does not seriously question the validity of the Dispute Resolution Plan or...