Mendivil v. Zanios Foods, Inc.

• Decision Date: 11 January 2012
• Docket Number: No. 08–10–00359–CV.,08–10–00359–CV.
• Citation: 357 S.W.3d 827
• Parties: Daniel MENDIVIL, Appellant, v. ZANIOS FOODS, INC., Appellee.
• Court: Texas Court of Appeals

357 S.W.3d 827

Daniel MENDIVIL, Appellant,

v.ZANIOS FOODS, INC., Appellee.

No. 08–10–00359–CV.

Court of Appeals of Texas, El Paso.

Jan. 11, 2012.

Roger C. Davie, El Paso, TX, for Appellant.

John L. Ross, Dallas, TX, for Appellee.

Before McCLURE, C.J., ANTCLIFF, J., and CHEW, C.J., (Senior), sitting by assignment.

OPINION

ANN CRAWFORD McCLURE, Chief Justice.

Daniel Mendivil appeals the trial court's order compelling arbitration, complaining that the arbitration provision was invalid, illusory, and unconscionable. For the reasons that follow, we reverse and remand.

FACTUAL SUMMARY

Mendivil was employed as a delivery-truck driver for Zanios Foods, Inc. in El Paso, Texas, and made deliveries both within El Paso and outside of Texas. Upon commencement of his employment, Mendivil was the sole signatory of an Arbitration Policy Statement (APS) prepared by Zanios, which states:

In consideration of Zanios Foods, Inc.'s offer to employ or to continue to employ me and my agreement to accept employment or continued employment under the terms set forth in this Arbitration Policy Statement, I acknowledge that my employment at Zanios is “at will”, meaning I can be terminated or quit my employment at any time for any or no reason and I further agree that any controversy, claim, or dispute against Zanios Foods, Inc. (“Zanios”) arising out of or relating to my employment with Zanios or the termination of my employment with Zanios ... shall be resolved exclusively by final and binding arbitration....

Arbitration shall be the sole and exclusive remedy for any such controversy, claim, or dispute against Zanios. I acknowledge that I am knowingly and voluntarily waiving the right to purse [sic] any such controversy, claim, or dispute against Zanios in any court or administrative forum and instead will pursue them through arbitration.

I understand that if I decide to submit any dispute to arbitration in accordance with this Arbitration Policy Statement, I must submit a written request for arbitration to Zanios's President within one (1) month from the date of the incident in question, and I must respond within ten (10) calendar days to each communication regarding the selection of an arbitrator, the scheduling of an arbitration hearing, or any other matters related to the arbitration proceeding. If Zanios does not receive a written request for arbitration from me within one (1) month, or if I do not respond to any communication about the arbitration proceeding within ten (10) calendar days, I understand and acknowledge that I will have knowingly and voluntarily waived my right to arbitration on the incident in question[.] The arbitration shall be held in Albuquerque, New Mexico. The parties shall each pay one-half of the cost of the arbitrator and each party shall otherwise pay its own costs and attorneys' fees.

If this Arbitration Policy Statement shall for any reason be declared unenforceable, I knowingly and voluntarily waive the right to a trial by jury in any action or judicial proceeding which would otherwise have been subject to arbitration.

By signing below, I acknowledge that I have read this Arbitration Policy Statement, understand its contents, and voluntarily agree to abide by its terms.

After Mendivil suffered an injury in the course of his employment, Zanios terminated his employment, allegedly for a reason unrelated to the injury. Mendivil filed suit against Zanios under Chapter 451 of the Texas Labor Code, which prohibits the discharge of or discrimination against an employee who files a workers' compensation claim in good faith or hires a lawyer to represent the employee in a claim. Tex. Lab. Code Ann. § 451.001 (West 2006).

In a motion to compel arbitration, Zanios alleged that Mendivil's signature on the APS represented his understanding that the offer of employment was conditioned upon a promise to arbitrate his claims. Mendivil countered that no valid arbitration agreement existed because the APS lacked proper consideration and mutual language requiring Zanios to arbitrate, to be bound by arbitration, or to perform any mutual promise. Mendivil maintained that the APS was illusory because it contained no provisions by which Mendivil could either enforce the arbitration agreement against Zanios or require Zanios to arbitrate because Zanios had not promised anything. Mendivil likewise declared the APS unconscionable in part because the provisions required that he arbitrate his claims in Albuquerque, New Mexico, give notice of his intent to arbitrate within thirty days of any incident or waive arbitration, respond to all letters from Zanios within ten days or risk waiving his opportunity to arbitrate, and pay one-half of any arbitration fees.

In response, Zanios argued that no case law requires an employer's reciprocal, mirrored promise to arbitrate any claims it might have against an employee in exchange for the employee's promise to arbitrate, and contended that an employer need only provide “some” consideration to render an arbitration agreement enforceable. According to Zanios, it had provided sufficient consideration to form a valid arbitration agreement with Mendivil by agreeing: (1) to binding arbitration; (2) to be bound by the result; (3) to arbitrate in a particular venue; (4) to have arbitration conducted under particular rules; (5) to pay for one-half of the arbitration fee; (6) to pay its own attorney's fees and costs; and (7) to forego recovery of its attorney's fees. Zanios informed the trial court that it would agree to conduct arbitration in El Paso and pay the entirety of arbitration costs up to $10,000.

Without expressly finding the APS to be a valid agreement, the trial court granted the motion to compel, ordered that the parties arbitrate in El Paso, and directed that Zanios pay all arbitration fees up to $10,000, after which Mendivil and Zanios would each pay one-half of the arbitration fees in excess of $10,000.

WAS THERE AN AGREEMENT TO ARBITRATE?

In Issues One and Five Mendivil generally challenges the order compelling arbitration as written and as modified by the trial court. In Issue Four, he contends the APS was unconscionable. In Issues Two and Three, he complains that the APS is illusory and invalid for lack of mutual consideration. We review de novo a trial court's determination regarding the validity of an agreement to arbitrate. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003).

Applicable Law

It is undisputed that the Federal Arbitration Act (FAA), which typically governs arbitration provisions in contracts involving interstate commerce, applies here. See 9 U.S.C.A. §§ 1–16 (West 2009); In re Rubiola, 334 S.W.3d 220, 223 (Tex.2011). To compel arbitration under the FAA, a party must establish that there is a valid arbitration agreement and that the claims fall within the scope of the agreement. In re Dillard Dep't Stores, Inc., 186 S.W.3d 514, 515 (Tex.2006). While a strong presumption favoring arbitration exists, “the presumption arises only after the party seeking to compel arbitration proves that a valid arbitration agreement exists.” J.M. Davidson, Inc., 128 S.W.3d at 227.

When determining the validity of arbitration agreements that are subject to the FAA, we apply state-law principles that govern the formation of contracts. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex.2006). When deciding whether a party has met its burden to establish a valid agreement to arbitrate, we do not resolve doubts or indulge a presumption in favor of arbitration. J.M. Davidson, Inc., 128 S.W.3d at 227. Rather, the party attempting to compel arbitration must show that the arbitration agreement meets all requisite contract requirements. Id. at 228. If the trial court determines that a valid agreement exists, the burden shifts to the party opposing arbitration to raise an affirmative defense to enforcement of the arbitration agreement. Id. at 227–28. Nonetheless, although a court may enforce agreements to arbitrate disputes, a court cannot order arbitration in the absence of such an agreement. Freis v. Canales, 877 S.W.2d 283, 284 (Tex.1994), citing United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1352–53, 4 L.Ed.2d 1409 (1960); see 9 U.S.C. § 2.

Contract Elements

The elements required for the formation of a valid and binding contract include: (1) an offer; (2) acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the term; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Cessna Aircraft Co. v. Aircraft Network, L.L.C., 213 S.W.3d 455, 465 (Tex.App.-Dallas 2006, pet. denied). An agreement to arbitrate, like other contracts, must also be supported by consideration. In re Palm Harbor Homes, Inc., 195 S.W.3d at 676; In re AdvancePCS Health L.P., 172 S.W.3d 603, 607 (Tex.2005) (per curiam).

Mutual Promises and Consideration

Mutual, reciprocal promises which bind both parties may constitute consideration for a contract. Texas Custom Pools, Inc. v. Clayton, 293 S.W.3d 299, 309 (Tex.App.-El Paso 2009, no pet.). Arbitration clauses generally do not require mutuality of obligation so long as adequate consideration supports the underlying contract. In re Lyon Financial Services, Inc., 257 S.W.3d 228, 233 (Tex.2008), citing In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex.2001). Thus, when an agreement to arbitrate is part of a larger underlying contract, the remainder of the contract may constitute sufficient consideration for the arbitration provision. In re Palm Harbor Homes, Inc., 195 S.W.3d at 676; In re AdvancePCS, 172 S.W.3d at 607.

However, stand-alone arbitration agreements require binding promises from both sides as they are the only consideration rendered to create a contract. In re AdvancePCS, 172 S.W.3d at 607; see also In re 24R, Inc., 324 S.W.3d 564, 566 (Tex.2010) (mutual promises to submit a...