Opinion ID: 894889
Heading Depth: 1
Heading Rank: 2

Heading: Arbitration with Corporate Employees: Henry Medina

Text: The claims against Merrill Lynch's employee, Henry Medina, must go to arbitration for two reasons. First, parties to an arbitration agreement may not evade arbitration through artful pleading, such as by naming individual agents of the party to the arbitration clause and suing them in their individual capacity. [5] Corporations can act only through human agents, and many business-related torts can be brought against either a corporation or its employees. [6] If a plaintiff's choice between suing the corporation or suing the employees determines whether an arbitration agreement is binding, then such agreements have been rendered illusory on one side. [7] As we recently noted, this would not place arbitration agreements on equal footing with other contracts: When contracting parties agree to arbitrate all disputes under or with respect to a contract (as they did here), they generally intend to include disputes about their agents' actions because [a]s a general rule, the actions of a corporate agent on behalf of the corporation are deemed the corporation's acts. If arbitration clauses only apply to contractual signatories, then this intent can only be accomplished by having every officer and agent (and every affiliate and its officers and agents) either sign the contract or be listed as a third-party beneficiary. This would not place such clauses on an equal footing with all other parts of a corporate contract. [8] Second, the substance of the plaintiffs' suit here is against Merrill Lynch, even though it has not been named as a party. While the plaintiffs allege they are suing Medina only for his actions while wearing the hat of the insurance agent, brokers do not change employers every time they sell someone else's product. The commission on this insurance transaction was paid directly to Merrill Lynch, not Medina; if the latter was acting as an agent for ML Life or ML Trust, then so was the former. As there is no question Medina was acting in the course and scope of his employment, if he is liable for the torts alleged against him, then Merrill Lynch is too. [9] While the plaintiffs have not sued Merrill Lynch yet, they have not disavowed such claims (as Justice Hecht asserts). They have never so stipulated under oath or in their pleadings, and their appellate brief says only that the defendants have not shown that Merrill Lynch has any potential liability, thus carefully leaving the door open for the plaintiffs to pursue precisely that option. [10] Nor do the plaintiffs' trial court pleadings focus solely on the insurance sale (again per Justice Hecht); to the contrary, they focus entirely on the alleged misrepresentations, omissions, and fiduciary breaches leading up to it. While only ML Trust might be liable for the transaction itself, Medina and his employer would both be liable for the preliminary tort and statutory claims the plaintiffs have actually alleged. [11] Finally, the plaintiffs also assert their arbitration agreements were illusory as Merrill Lynch could modify or rescind those agreements at any time. As this defense relates to the parties' entire contract rather than the arbitration clause alone, it is a question for the arbitrators. [12] Additionally, the plaintiffs' testimony that they failed to read the arbitration provisions until this dispute arose is not a valid ground for setting aside their signed agreements. [13] We do not hold today that employees can always invoke an employer's arbitration agreement. When actions outside the course of employment cannot be attributed to an employer, the latter would have no need to invoke its arbitration protections. [14] But under both Texas and federal law, arbitrability turns on the substance of a claim, not artful pleading. [15] Because the plaintiffs' claims against Medina are in substance claims against Merrill Lynch, they must abide by their agreement to arbitrate those claims. [16]