Readyone Indus., Inc. v. Flores

• Decision Date: 10 December 2014
• Docket Number: No. 08–13–00161–CV.,08–13–00161–CV.
• Citation: 460 S.W.3d 656
• Parties: READYONE INDUSTRIES, INC., Appellant, v. Joel Antonio FLORES, Appellee.
• Court: Texas Court of Appeals

460 S.W.3d 656

READYONE INDUSTRIES, INC., Appellant

v.Joel Antonio FLORES, Appellee.

No. 08–13–00161–CV.

Court of Appeals of Texas, El Paso.

Dec. 10, 2014.

Joseph Isaac, 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 Justice.

ReadyOne Industries, Inc. appeals from an 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.

FACTUAL AND PROCEDURAL SUMMARY

This is a non-subscriber negligence case. Joel Antonio Flores filed suit against his employer, ReadyOne, alleging he suffered an on-the-job injury to his hands and fingers on October 20, 2011. Flores also served ReadyOne with his requests for discovery. ReadyOne filed a motion to compel arbitration and to stay the proceedings pending arbitration. In support of its motion, ReadyOne attached the affidavit of Lupe Madrid, the Director of Human Resources and Compliance for ReadyOne Industries and the following documents: (1) the Mutual Agreement to Arbitrate adopted by NCED¹ on October 1, 2005; (2) the Spanish language version of the Mutual Agreement to Arbitrate adopted by NCED on October 1, 2005; (3) a Receipt and Arbitration Acknowledgment written in Spanish and signed by Flores on February 23, 2006; (4) NCED's Employee Injury Benefit Plan effective after October 2, 2005; (5) the Spanish language version of NCED's Employee Injury Benefit Plan effective after October 1, 2005; (6) the English and Spanish language versions of the Mutual Agreement to Arbitrate adopted by ReadyOne with an effective date of October 1, 2007; (7) the Summary Plan Description/Employee Injury Benefit Plan for injuries after October 1, 2007; and (8) the Spanish language version of the Summary Plan Description/Employee Injury Benefit Plan for injuries after October 1, 2007.

In his response, Flores raised several defenses to arbitration. He also sought discovery related to his defenses of fraudulent inducement and illusory agreement. The trial court deferred ruling on the motion to compel arbitration and entered an order compelling the deposition of ReadyOne's authorized representative. ReadyOne challenged that order by filing an original proceeding in this Court. We conditionally granted mandamus relief because Flores had failed to provide a colorable or reasonable basis for believing that discovery would materially aid him in establishing his defenses to the validity of an arbitration agreement. See In re ReadyOne Industries, Inc., 400 S.W.3d 164 (Tex.App.-El Paso 2013, orig. proceeding). In reaching that decision, we concluded that Flores had failed to present evidence of fraudulent inducement. In re ReadyOne, 400 S.W.3d at 169. We also held that the Arbitration Acknowledgement signed by Flores did not incorporate by reference the Summary Plan Description (SPD) for the Employee Injury Benefit Plan, and therefore, the Mutual Agreement to Arbitrate (MAA) was not illusory. In re ReadyOne, 400 S.W.3d at 170–72. Likewise, we concluded that the SPD did not incorporate the MAA. Id., 400 S.W.3d at 172–73.

Flores subsequently filed a supplemental response to the motion to compel arbitration asserting that the MAA is illusory because ReadyOne had judicially admitted the MAA and SPD are one agreement in response to a request for admission in this case and in pleadings filed in this and other cases. Flores also contended that if the MAA is a stand-alone agreement, it is procedurally unconscionable. Finally, he continued to assert his fraudulent inducement defense and attached evidence in support of it. Following two hearings, the trial court entered an order denying ReadyOne's motion to compel arbitration. ReadyOne then brought this accelerated interlocutory appeal. 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).

DENIAL OF ARBITRATION

In its sole issue, ReadyOne challenges the order refusing to compel arbitration. Flores raised several arguments in opposition to the motion to compel arbitration and the trial court denied the motion without specifying the basis for the ruling. ReadyOne has addressed each of these arguments and defenses on appeal. Additionally, ReadyOne challenges the ground raised by the trial court sua sponte .

Standard of Review and Relevant Law

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.). 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.

The Federal Arbitration Act Applies

We will begin our review by examining whether the Federal Arbitration Act is inapplicable. Citing Bernhardt v. Polygraphic Company of America, 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. 199 (1956), Flores argues that the FAA does not govern the MAA because there is no evidence he was personally engaged in interstate commerce. In Bernhardt, the plaintiff entered into an employment contract with Polygraphic to become superintendent of the company's lithograph plant in Vermont. Bernhardt v. Polygraphic Company of America, 218 F.2d 948, 949 (2nd Cir.1955). The employment contract contained an arbitration provision. Id. Following his discharge, Bernhardt sued Polygraphic in a Vermont state court for breach of contract. Id. The Second Circuit held that the FAA applied to the employment contract, Bernhardt, 218 F.2d at 949–50, but the Supreme Court reversed because it concluded that the contract did not evidence a transaction involving commerce within the meaning of section 2 of the FAA, and there was no evidence that Bernhardt, while performing his duties under the employment contract, was working in commerce, producing goods for commerce, or was engaging in activity that affected commerce. Bernhardt, 350 U.S. at 200–01, 76 S.Ct. at 275.

The instant case is distinguishable from Bernhardt because the MAA specifically provides that ReadyOne is engaged in commerce as that term is defined in Section 1 of the Federal Arbitration Act and the “FAA governs all aspects of this Agreement.” It is well established that parties may expressly agree to arbitrate under the FAA. In re Rubiola, 334 S.W.3d 220, 223 (Tex.2011) ; Lucchese, Inc. v. Solano, 388 S.W.3d 343, 348 (Tex.App.-El Paso 2012, no pet.). Further, ReadyOne submitted evidence that it was regularly engaged in interstate commerce in that it purchases and receives goods and services from outside the state of Texas and it manufactures goods that are shipped and used outside of the state. We conclude that the FAA applies to the MAA. See In re Border Steel, Inc., 229 S.W.3d 825, 830–31 (Tex.App.-El Paso 2007, orig. proceeding) (holding that the FAA applied where the defendant presented evidence that it engaged in interstate commerce and the arbitration agreement contained a provision that the FAA governed).

The Date Discrepancies on the MAA and Acknowledgement

ReadyOne challenges the trial court's determination that the MAA is illegal and unenforceable because the MAA recited an effective date of “99/99/9999” and the arbitration acknowledgement stated that Flores had been provided with a MAA effective “10/1/200.” Flores did not raise these date discrepancies as a ground for avoiding arbitration.

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, 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. ReadyOne presented the trial court with copies of the MAA adopted by NCED/ReadyOne on October 1, 2005, the Receipt and Arbitration Acknowledgement signed by Flores on February 23, 2006, and the MAA adopted by ReadyOne with an effective date of October 1, 2007. These documents are authenticated by the affidavit of ReadyOne's Director of Human Resources and...