Readyone Indus., Inc. v. Carreon

• Decision Date: 10 December 2014
• Docket Number: No. 08–13–00150–CV.,08–13–00150–CV.
• Citation: 458 S.W.3d 621
• Parties: READYONE INDUSTRIES, INC., Appellant, v. Roberto CARREON, Appellee.
• Court: Texas Court of Appeals

458 S.W.3d 621

READYONE INDUSTRIES, INC., Appellant

v.Roberto CARREON, Appellee.

No. 08–13–00150–CV.

Court of Appeals of Texas, El Paso.

Dec. 10, 2014.

Alex Acosta, Scherr & Legate, PLLC, El Paso, TX, for Appellee.

Darryl Vereen, Mounce, Green, Myers, Safi & Galatzan, P.C., El Paso, TX, for Appellant.

Before McCLURE, C.J., RIVERA (not participating), and RODRIGUEZ, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Judge.

ReadyOne Industries, Inc. is appealing the trial court's order denying its motion to compel arbitration. For the following reasons, we sustain Issue One, reverse the order denying the motion to compel arbitration, and remand to the trial court with instructions to enter an order compelling arbitration.

PROCEDURAL BACKGROUND

Roberto Carreon filed suit against his employer, ReadyOne, alleging that the failure to provide a safe work environment caused him to suffer an on-the-job injury to his shoulder, elbow, wrist, and other parts of his body on November 1, 2011. ReadyOne filed a motion to compel arbitration and to stay the proceedings pending arbitration. It supported the motion with the affidavit of Wes Schotten, Director of Human Resources and Compliance, and four exhibits: (1) the English language version of the Mutual Agreement to Arbitrate (MAA) adopted by ReadyOne effective October 1, 2007; (2) the Spanish language version of the MAA adopted by ReadyOne effective October 1, 2007; (3) a Receipt and Arbitration Acknowledgment dated August 30, 2010 signed by Roberto Carreon; and (4) the Employee Injury Benefit Plan/Summary Plan Description (SPD). Carreon filed a response alleging that the Franken Amendment made the MAA unenforceable. He also complained of fraudulent inducement and lack of mental capacity to enter into a contract. Carreon filed a motion to compel limited discovery related to arbitration which the trial court granted. ReadyOne challenged that order by filing a mandamus petition in this Court. We held that the Franken Amendment does not apply to this personal injury suit. In re ReadyOne Industries, Inc., 394 S.W.3d 689, 693–95 (Tex.App.-El Paso 2012, orig. proceeding). We also concluded that Carreon failed to show a colorable basis or reason to believe that discovery would be material in establishing that the arbitration agreement was invalid because he lacked the mental capacity to understand what he was signing. Id., 394 S.W.3d at 696–97. Finding that ReadyOne did not have an adequate remedy by appeal, we conditionally granted mandamus relief. Id. at 697.

Carreon subsequently filed a supplemental response raising a new argument that the MAA is illusory because it permits ReadyOne to amend, modify, or terminate the arbitration at any time. This argument is based on an assertion that the MAA is incorporated by reference in the SPD, and therefore, the SPD's provisions for termination and amendment apply rather than the termination provision set forth in the MAA. The trial court denied ReadyOne's motion to compel arbitration on the ground that the MAA is illusory. ReadyOne brought this accelerated interlocutory appeal to challenge that order. See Tex.Civ.Prac. & Rem.Code Ann. § 51.016 (West Supp.2014)(permitting an interlocutory appeal from the denial of a motion to compel arbitration under the Federal Arbitration Act).

ILLUSORY ARBITRATION AGREEMENT

In its sole issue on appeal, ReadyOne contends that the trial court erred by refusing to compel arbitration on the ground that the MAA is illusory. We agree.

Relevant Law and Standard of Review

We review a trial court's decision to grant or deny a motion to compel arbitration under an abuse of discretion standard. Ellman v. JC General Contractors, 419 S.W.3d 516, 520 (Tex.App.-El Paso 2013, no pet.). Under this standard, we defer to a trial court's factual determinations if they are supported by evidence, but we review a trial court's legal determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex.2009). Ellman, 419 S.W.3d at 520.

A party seeking to compel arbitration must (1) establish the existence of a valid arbitration agreement; and (2) show that the claims asserted are within the scope of the agreement. See In re AdvancePCS Health L.P., 172 S.W.3d 603, 605 (Tex.2005) ; Delfingen US–Texas, L.P., v. Valenzuela, 407 S.W.3d 791, 797 (Tex.App.-El Paso 2013, no pet.). It is undisputed that the Federal Arbitration Act governs the arbitration at issue in this case. Under the FAA, we apply state contract law principles to determine whether a valid arbitration agreement exists. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003) ; Delfingen, 407 S.W.3d at 797. Once the party seeking to compel arbitration proves that a valid arbitration agreement exists, a presumption attaches favoring arbitration and the burden shifts to the party resisting arbitration to establish a defense to enforcement. Delfingen, 407 S.W.3d at 797. In the context of enforcement, defenses refer to unconscionability, duress, fraudulent inducement, and revocation. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex.2001) ; Delfingen, 407 S.W.3d at 797. Because the law favors arbitration, the burden of proving a defense to arbitration is on the party opposing it. IHS Acquisition No. 171, Inc. v. Beatty–Ortiz, 387 S.W.3d 799, 807 (Tex.App.-El Paso 2012, no pet.), citing J.M. Davidson, 128 S.W.3d at 227.

Analysis of the MAA and SPD/Employee Injury Benefit Plan

An arbitration agreement is illusory if one party can avoid its promise to arbitrate by unilaterally amending the provision or terminating it altogether. In re Odyssey Healthcare, Inc., 310 S.W.3d 419, 424 (Tex.2010) ; In re ReadyOne Industries, Inc., 400 S.W.3d 164, 170 (Tex.App.-El Paso 2013, orig. proceeding). The MAA is a four-page agreement consisting of thirteen paragraphs. It requires ReadyOne and Carreon to arbitrate covered claims which occur on or after the effective date of the agreement, October 1, 2007. Paragraph 5 addresses the scope of the agreement to arbitrate and provides that all claims that ReadyOne or claimant may have which arise from any injury suffered by claimant in the course and scope of employment, including but not limited to, claims for negligence, gross negligence, and all claims for personal injuries. Paragraph 10, titled “Termination of Agreement” provides that:

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.

Paragraph 10 is not illusory because it does not permit ReadyOne to unilaterally or retrospectively terminate the agreement and it requires ReadyOne to provide ten days' notice to prospectively terminate. See In re Halliburton Co., 80 S.W.3d 566, 569–70 (Tex.2002) ; In re ReadyOne, 400 S.W.3d at 170–71 (finding the same provision contains the proper savings clause under Halliburton and is not illusory).

Carreon counters that the MAA is not a stand-alone arbitration agreement, but rather is incorporated by reference in the SPD/Employee Injury Benefit Plan. This ERISA plan contains the following provision:

AMENDMENT OR TERMINATION OF PLAN

The Company presently intends to continue the Plan indefinitely, but the Company reserves the right to amend, modify, or terminate the Plan at any time; provided, however, no amendment or termination of the Plan will reduce the amount of any benefit then due and payable under the Plan to or with respect to you in connection with an Injury occurring prior to the date of such amendment or termination. Any such amendment or termination will be adopted pursuant to formal written action of a representative authorized to

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