In re Golden Peanut Co., LLC

• Decision Date: 13 November 2008
• Docket Number: No. 11-08-00215-CV.,11-08-00215-CV.
• Citation: 269 S.W.3d 302
• Parties: In re GOLDEN PEANUT COMPANY, LLC.
• Court: Texas Court of Appeals

269 S.W.3d 302

In re GOLDEN PEANUT COMPANY, LLC.

No. 11-08-00215-CV.

Court of Appeals of Texas, Eastland.

November 13, 2008.

Kent D. Williamson, Mark T. Craig, The Silvera Firm, Rick Thompson, Deborah G. Hankinson, Hankinson Levinger LLP, Dallas, TX, for appellant.

Fred Bowers, Bowers Law Office, Lubbock, Russell Casselberry, Fulbright & Casselberry, Lamesa, TX, for appellee.

Panel consists of: WRIGHT, C.J., McCALL, J., and STRANGE, J.

OPINION

RICK STRANGE, Justice.

This is a mandamus proceeding complaining of the trial court's order denying Golden Peanut Company, LLC's motion to abate and compel arbitration. We deny the petition.

I. Background Facts

Golden Peanut did not subscribe to workers' compensation insurance. It instead provided employees with an Employee Injury Benefit Plan under the Employee Retirement Income Security Act.¹ That plan included medical and disability benefits for injured employees and a death benefit in the case of job-related fatalities. Golden Peanut also gave its employees a document entitled Mutual Agreement to Arbitrate. Grant Drennan was an employee of Golden Peanut and acknowledged receiving Golden Peanut's benefit plan and arbitration agreement and agreed to comply with the arbitration agreement.

Drennan was killed while in the course and scope of his employment. Drennan's estate applied for and received plan benefits, but his widow Mindi Drennan elected to file suit against Golden Peanut on behalf of herself, their children, and Drennan's estate rather than claim the plan's death benefit. Drennan's parents, Louie and Joyce Drennan, were subsequently added as plaintiffs. Golden Peanut filed a motion to abate and compel arbitration. Plaintiffs amended their petition and dropped the estate as a party. The trial court conducted a hearing and denied Golden Peanut's motion.

II. Issues

Golden Peanut contends that the trial court abused its discretion by denying the motion to abate and compel arbitration. Plaintiffs respond that the arbitration agreement is void under Texas law, that it is not supported by consideration, and that it does not bind nonsignatories.

III. Standard of Review

Golden Peanut contends, and plaintiffs do not dispute, that the arbitration agreement is subject to the Federal Arbitration Act (FAA)² and that an order denying a motion to compel arbitration is properly reviewable by mandamus.³ Even though federal law applies, we still utilize Texas procedural rules when reviewing a petition for writ of mandamus. In re Champion Technologies, Inc., 173 S.W.3d 595, 598 (Tex.App.-Eastland 2005, orig. proceeding). We review orders denying a motion to compel arbitration under the FAA for an abuse of discretion. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271 (Tex.1992) (orig.proceeding). A trial court abuses its discretion if it acts without reference to any guiding rules or principles or acts in an arbitrary or unreasonable manner. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985). When reviewing matters committed to a trial court's discretion, an appellate court may not substitute its own judgment for that of the trial court. Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992) (orig.proceeding). Nor may a reviewing court set aside the trial court's determination unless it is clear from the record that the trial court could only reach one decision. Id. at 840.

The trial court's interpretation of the arbitration agreement itself is a legal question subject to de novo review. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). Arbitration agreements are interpreted under traditional contract principles. Id. Our primary concern is to ascertain the true intentions of the parties as expressed in the instrument. R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980). We examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 158 (1951). No single provision taken alone will be given controlling effect. All the provisions must be considered with reference to the whole instrument. Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193, 196 (Tex.1962). The contracts are construed from a utilitarian standpoint, bearing in mind the particular business activity sought to be served. Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex.1987).

IV. Analysis

A party seeking to compel arbitration under the FAA must establish that there is a valid arbitration clause and that the claims raised fall within its scope. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 754 (Tex.2001) (orig.proceeding). The first element includes gateway matters such as whether a valid arbitration clause exists and whether an arbitration clause is binding on a nonparty. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (orig.proceeding). Courts may not order parties to arbitrate unless they have agreed to do so. Belmont Constructors, Inc. v. Lyondell Petrochem. Co., 896 S.W.2d 352, 356-57 (Tex.App.-Houston [1st Dist.] 1995, no writ [appeal and orig. proceeding]). Consequently, despite a presumption favoring arbitration, a valid agreement to arbitrate remains a threshold requirement. See In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737-38 (Tex. 2005) (orig.proceeding) (presumption favoring arbitration arises only after party seeking to compel arbitration establishes valid agreement to arbitrate because purpose of FAA is to make arbitration agreements as enforceable as other contracts, not more so).⁴

A. Is the Arbitration Agreement Void?

Plaintiffs argue initially that the arbitration agreement is void under Texas law because it violates TEX. LAB.CODE ANN. § 406.033 (Vernon 2006). This statute provides in relevant part:

(a) In an action against an employer who does not have workers' compensation insurance coverage to recover damages for personal injuries or death sustained by an employee in the course and scope of the employment, it is not a defense that:

(1) the employee was guilty of contributory negligence;

(2) the employee assumed the risk of injury or death; or

(3) the injury or death was caused by the negligence of a fellow employee.

(e) A cause of action described in Subsection (a) may not be waived by an employee before the employee's injury or death. Any agreement by an employee to waive a cause of action or any right described in Subsection (a) before the employee's injury or death is void and unenforceable.

Plaintiffs argue that the arbitration agreement violates this provision and is void because it contains a provision allowing parties "to allege any claim, obtain any remedy, and assert any legal or equitable defense that the party could allege, obtain or assert in a Texas state or federal court." As we understand plaintiffs' position, they contend that the agreement allows Golden Peanut to assert a common law defense in arbitration that would be unavailable in court. We disagree. The agreement does not broaden Golden Peanut's rights in an arbitration but merely confirms that both parties can assert the same claims and defenses in arbitration that they could in court.

Plaintiffs also complain that, because the arbitration agreement allows parties to use Texas discovery devices and file dispositive motions, Golden Peanut will be allowed to indiscriminately choose which provisions of Texas law will apply and which will not. First, we are not sure why the use of discovery devices and dispositive motions during arbitration makes an arbitration agreement void. The FAA gives contracting parties broad authority to determine their own dispute resolution process. Second, the agreement does not allow Golden Peanut to retroactively define the arbitration process. The process is defined by the contract, and it is up to the arbitrator to resolve any disputes over its administration.

Finally, we note that three of our sister courts have considered whether an arbitration agreement violates Section 406.033(e), and each concluded that it did not.⁵ We find their reasoning persuasive. The El Paso court recognized that the FAA represents a federal policy favoring arbitration—notwithstanding any state substantive or procedural policies to the contrary—writing that, under the Supremacy Clause,⁶ the FAA "takes precedence over state attempts, legislative or judicial, to undercut the enforceability of arbitration agreements." In re Border Steel, Inc., 229 S.W.3d 825, 831 (Tex.App.-El Paso 2007, orig. proceeding) (citing In re Turner Bros. Trucking Co., 8 S.W.3d 370, 374 (Tex.App.-Texarkana 1999, orig. proceeding [mand. denied])). Plaintiffs' position is directly contrary to this legislative intent. Accordingly, we find that the arbitration agreement is not void.

B. Is the Arbitration Agreement Supported by Consideration?

Plaintiffs next argue that the arbitration agreement fails for lack of consideration both generally and then specifically as applied to Louie and Joyce Drennan. The latter argument is actually a restatement of plaintiffs' contention that the agreement cannot be applied to nonsignatories and will, therefore, be addressed separately. Plaintiffs recognize that a mutual promise to waive the right to litigate can constitute consideration for an arbitration agreement but argue that there was no mutual promise here because Golden Peanut retained the right to unilaterally terminate the agreement. The arbitration agreement included the following clause:

11. Termination of Agreement

Company shall have the right to prospectively terminate this Agreement. Termination is not effective for Covered Claims which accrued or occurred prior to the date of the termination. Termination is also not effective until ten (10) days after reasonable notice is given to Claimant.

Plaintiffs contend that this provision means only Drennan waived his right to a...