Texas Appellate Courts Continue to Enforce Arbitration Clauses in Favor of Nonsubscribers

by Winstead PC

Regardless of whether you have a favorable opinion of arbitration, one thing is clear:  Texas appellate courts continue to enforce arbitration clauses and agreements. In at least two opinions this year, the First District Court of Appeals in Houston has enforced arbitration agreements in cases filed by injured employees.

First, in Superbag Operating Co., Inc. v. Donato Sanchez, Donato Sanchez sued his employer claiming its alleged negligence caused his workplace injury. Superbag moved to compel arbitration based on its ERISA plan documents, which require arbitration of employment-related disputes that fall within the scope of the agreement. After conducting a hearing, the trial court denied the motion to compel and Superbag appealed that ruling.

Documentary evidence produced by the employer reflected that Sanchez signed an employee acknowledgment in Spanish at the time he was hired that clearly stated he had read the company’s ERISA benefit plan and agreed to, among other things, binding arbitration in the event of a dispute. Sanchez alleged that he never received the documents referenced in his acknowledgements and that his employer fraudulently procured his consent to arbitration.

The First Court of Appeals rejected Sanchez’s argument and concluded that by signing the employee acknowledgment, “Sanchez received notice of the mutual agreement to arbitrate claims.” The Court also rejected Sanchez’s argument concerning procedural unconscionability, stating “Superbag supplied Spanish versions of its policies to its prospective employees, including Sanchez.” Notably, Sanchez signed the Spanish versions of the agreements and nothing in the record suggested that Sanchez made any attempts to obtain more information or that Superbag refused to provide more information concerning the arbitration clause.

“[T]he basic test for unconscionability is whether, given the parties’ general commercial background and the commercial needs of the particular trade or case, the clause involved is so one-sided that it is unconscionable under the circumstances existing when the parties made the contract.” Under the facts of this case, the Court of Appeals concluded there was insufficient evidence of procedural unconscionability. “A suggestion that Sanchez would not have agreed to the arbitration policy had he better understood it, without more, does not demonstrate procedural unconscionability.” In sum, the Court reiterated the FAA’s strong presumption in favor of arbitration, reversed the trial court’s order and remanded for entry of an order compelling arbitration.

In Forged Components, Inc. v. Ricky Guzman, appellee Ricky Guzman sued his employer after he suffered an on-the-job injury. The trial court denied the employer’s motion to compel arbitration, but later enforced the parties’ subsequent letter agreement to arbitrate the dispute. Following an unfavorable arbitration award, the employer appealed and argued that the Rule 11 agreement to arbitrate had been retracted and/or did not constitute a binding agreement because of unilateral handwritten additions made by plaintiff’s counsel. The employer further argued the trial court had erred in refusing to enforce the employer’s arbitration clause in its employment agreement.

On appeal, the employer asserted that the arbitration procedures dictated by its arbitration clause would have impacted the outcome of the arbitration and the trial court erred by failing to compel arbitration pursuant to that clause instead of the subsequent letter agreement (which contained different procedural terms, including deposition time limits). The First District Court of Appeals concluded that the employer, FCI, “failed to demonstrate that the trial court’s error in denying its motion to compel, if any, probably caused the rendition of an improper judgment.” The dispute was ultimately arbitrated and there was no evidence that different arbitration procedures would have impacted the outcome of arbitration. Accordingly, the trial court did not err by enforcing the parties’ letter agreement to arbitrate. In this author’s opinion, the appellate court would likely have reached a different result if the dispute had not been arbitrated at all (i.e., on these facts the appellate court would have likely reversed the trial court’s initial refusal to compel arbitration).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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