Court Opinion

ID: 3101205
Source: CourtListenerOpinion
Date Created: 2015-10-16 05:10:44.237951+00
Date Added: 2024-06-11T12:59:03.934635
License: Public Domain

COURT OF APPEALS
                                 EIGHTH DISTRICT OF TEXAS
                                      EL PASO, TEXAS
 SUN FAB INDUSTRIAL                               §
 CONTRACTING, INC.,                                                No. 08-10-00340-CV
                                                  §
                   Appellant,                                        Appeal from the
                                                  §
 v.                                                        County Court at Law Number Seven
                                                  §
 ERIC LUJAN,                                                    of El Paso County, Texas
                                                  §
                   Appellee.                                         (TC# 2009-5207)
                                                  §

                                           OPINION

       In its sole issue, Appellant, Sun Fab Industrial Contracting, Inc. (Sun Fab), an employer, files

this interlocutory appeal challenging the trial court’s denial of its motion to compel arbitration and

stay proceedings in an employee-discrimination case filed by Appellee, Eric Lujan, a former Sun Fab

employee. Finding error, we reverse the trial court’s order.

                                         BACKGROUND

       When Sun Fab hired Lujan, it provided him with an employee handbook. The table of

contents within the employee handbook lists four non-enumerated headings: (1) Introduction; (2)

Handbook Receipt & Acknowledgment; (3) Cell Phone Use Policy; and (4) Agreement to Arbitrate

Claims. Only the Introduction of the employee handbook contains sections and sub-sections. All

headings, sections, and subsections within the table of contents are followed by dot leaders which

fail to identify the pages on which these portions of the employee handbook are located. Each page

within the employee handbook is numbered sequentially, the Handbook Receipt and

Acknowledgment (“handbook receipt”) are contained on page 13, and the Agreement to Arbitrate

Claims (“arbitration agreement”) is on page 15.
        Lujan filed an employment discrimination lawsuit alleging that Sun Fab terminated his

employment after he filed a worker’s compensation claim.1 Sun Fab thereafter filed a motion to

compel arbitration and stay proceedings pursuant to the arbitration agreement signed by Sun Fab and

Lujan on July 2, 2008. Opposing Sun Fab’s motion to compel arbitration, Lujan argued in part: (1)

because the arbitration agreement is listed in the table of contents of the employee handbook and is

numbered in sequence with all other documents contained within the handbook which were signed

on the same date, it is a component of the employee handbook; (2) because both the handbook and

the arbitration agreement incorporate each other by reference; and (3) because the arbitration

agreement is subject to revocation, alteration, or modification at any time by Sun Fab under the terms

set forth in the employee handbook, the arbitration agreement is unenforceable and illusory.

        At the motion-to-compel hearing, the trial court asked Sun Fab if it had given Lujan “one

physical handbook with page 15 as part of the whole deal.” Sun Fab admitted that a single

document, consecutively numbered 1 through 15, had been provided to Lujan. Sun Fab argued that

the arbitration agreement was a separate agreement signed by both parties and was not a policy. The

trial court posed a hypothetical and asked if, under the provisions of the employee handbook, Sun

Fab could decide that it wanted to eliminate the arbitration agreement. Sun Fab answered that a

Texas employer could “change to an arbitration agreement or away from an arbitration agreement,

if they give the employees notice and there are no pending claims . . . and there were

documentation[.]” Sun Fab argued that nothing in the handbook, other than the table of contents,

        1
           The record indicates that at the end of a workday, Lujan was leaving his workplace and had removed his
acid gear when a supervisor allegedly instructed him to provide some additional work. Lujan was allegedly informed
by an operator that the only safety equipment he would need to perform the work was gloves. Lujan did not equip
himself with acid gear and as he attempted to perform the requested work, acid allegedly spilled onto Lujan’s chest,
gloves, and overalls. Lujan reported the incident to a safety employee and was terminated after being injured.

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referred to the arbitration agreement, which it asserted was an enforceable contract. The arbitration

agreement, Sun Fab noted, expressly “includes, but is not limited to, any claim relating to the

purported validity, interpretation, enforceability or breach of the employee handbook” and must,

therefore, be a separate document. Sun Fab argued that until there is a dispute, it has the unfettered

discretion to interpret and enforce the employee handbook and, after a dispute arises, the arbitration

agreement governs the events that follow.

       After considering Sun Fab’s arguments, the pleadings and evidence, the trial court denied

Sun Fab’s motion to compel arbitration and stay proceedings. In its written order, the trial court

explained that:

       Amongst the reasons for denying the Motion, the basis for the Court’s ruling is the
       Defendant maintained the right, under the Employee Handbook, to modify or
       eliminate the Agreement to Arbitrate without notice and completely based on the
       Defendant’s discretion. This rendered the Defendant’s promise to arbitrate illusory
       and unenforceable.

                                           DISCUSSION

       Section 51.016 of the Texas Civil Practice and Remedies Code now permits the interlocutory

appeal of an order denying a motion to compel arbitration under the Federal Arbitration Act. TEX.

CIV. PRAC. & REM. CODE ANN. § 51.016 (West Supp. 2011). Whether an arbitration agreement is

enforceable is a question of law which we review de novo. J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 227 (Tex. 2003). A trial court abuses its discretion when it refuses to compel

arbitration pursuant to a valid and enforceable arbitration agreement. In re Halliburton Co., 80
S.W.3d 566, 573 (Tex. 2002) (orig. proceeding). If a promise to arbitrate cannot be avoided by

amendment or termination, the arbitration agreement is valid and non-illusory. Id. at 569; In re

Datamark, Inc., 296 S.W.3d 614, 616 (Tex. App. – El Paso 2009, no pet.).

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       On appeal, Sun Fab contends that the trial court abused its discretion when it found that Sun

Fab retained the unilateral right to modify or eliminate provisions within the employee handbook

and held that the arbitration agreement that is “attached to” the employee handbook was illusory and

unenforceable. Although Sun Fab admits that the arbitration agreement is attached to and listed as

part of the employee handbook, it contends that the trial court erred in denying its motion to compel

arbitration because: (1) the arbitration agreement is a stand-alone, legally-distinct document signed

by both Sun Fab and Lujan; (2) the arbitration agreement contains no language permitting Sun Fab

to unilaterally amend or rescind it; (3) neither the arbitration agreement nor the employee handbook

refer to, incorporate, or otherwise relate to each other; and (4) Sun Fab’s right to unilaterally modify

or terminate its policies and procedures is set forth in and is restricted to the employee handbook

alone. We agree.

       At the time the trial court heard Sun Fab’s motion, neither the trial court nor the parties had

the benefit of the Texas Supreme Court’s holding in In re 24R, Inc., d/b/a The Boot Jack, 324
S.W.3d 564 (Tex. 2010). There, the Supreme Court considered an employee’s contentions that the

employer’s arbitration agreement was both unenforceable due to lack of consideration and also

illusory because: (1) the employee manual allegedly reserved to the employer the right to revoke,

change, or supplement guidelines, including an arbitration agreement, at any time without notice;

and (2) provided that there were a number of the employer’s policies that a job applicant must

understand and agree to prior to employment, including “the arbitration policy.” Id. at 566, 567.

The Supreme Court noted that the stand-alone arbitration agreement neither addressed the right of

any party to change its terms nor mentioned or incorporated by reference the employee policy

manual. Id. at 567. Because the employee policy manual included an express disclaimer that the

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manual’s policies and procedures were not intended to be contractual commitments by the employer,

the Supreme Court determined that the manual was not a contract and proceeded to analyze whether

the validity of the arbitration agreement was affected by the language contained in the non-

contractual employee policy manual. Id. Finding that the In re 24R, Inc. employer did not retain any

right to modify or abolish the terms within the arbitration agreement, that the arbitration agreement

was a stand-alone contract that did not incorporate the employee policy manual, and that the validity

of the stand-alone arbitration agreement was not diminished by language contained within the

employee policy manual that recognized the existence of an arbitration agreement, the Supreme

Court held that the arbitration agreement was not illusory and did not require a “Halliburton-type

savings clause.”2 Id. at 567-68; In re Halliburton, 80 S.W.3d at 570; compare In re C & H News

Co., 133 S.W.3d 642, 646-47 (Tex. App. – Corpus Christi 2003, orig. proceeding) (because the

arbitration agreement required arbitration “as provided in the Handbook” and had incorporated the

handbook by reference, and because the employer had retained the right to unilaterally change the

handbook at any time without prior notice to the employee, the Court of Appeals determined that a

one-page arbitration document was illusory and unenforceable).

Sun Fab Employee Handbook

         Three pages are relevant to our consideration of Sun Fab’s issue, including page iii of the

         2
            In In re Halliburton Co., 80 S.W.3d 566, 569 (Tex. 2002) (original proceeding), the Texas Supreme
Court considered an arbitration agreement wherein the company retained the right to modify or terminate the
arbitration clause. However, the agreement also provided that any modification to the arbitration clause was not to
apply retroactively to a dispute of which Halliburton had notice on the day of the amendment and further stated that
if Halliburton terminated the arbitration program, the “termination shall not be effective until 10 days after
reasonable notice of termination is given to Employees or as to Disputes which arose prior to the date of
termination.” Id. at 569-70. Consequently, because these two provisions were present in the arbitration agreement,
Halliburton could not “avoid its promise to arbitrate by amending the provision or terminating it altogether” and the
provision was not illusory. Id. at 570.

                                                          5
Introduction to the employee handbook which provides:

          Any statement or policy herein contained may be altered, amended or dispensed
          with entirely or in part at any time by the Company or new policies added without
          advance notice. Sun Fab Industrial Contracting, Inc. also reserves the right to
          interpret all statements and policies. (Emphasis added).

The handbook receipt on page 13, which was signed solely by Lujan on July 2, 2008, expressly

states:

          I understand that the policies in the guide are not a contract and they are not a
          guarantee of employment. They may be changed, interpreted, or withdrawn by
          Sun Fab Industrial Contracting, Inc. at any time. My employment with Sun Fab
          is entered into voluntarily and I am free to resign at any time. Similarly, Sun Fab
          Industrial Contracting, Inc. is free to conclude the employment relationship at any
          time, with or without notice, for any reason not prohibited by law. I further
          understand that no one other than the President of the Company has any authority to
          alter the relationship, and any such alteration must be in writing and signed by the
          President, or _______ not binding upon Sun Fab Industrial Contracting, Inc.
          (Emphasis added).

          As in In re 24R, Sun Fab’s employee handbook is clearly not a contract as it contains an

express disclaimer declaring that the policies in the handbook are not a contract and are not a

guarantee of employment which Sun Fab may conclude without notice for any reason not prohibited

by law. In re 24R, Inc., 324 S.W.3d at 567. The employee handbook does not incorporate the

arbitration agreement by reference. Id. at 567-68.

Sun Fab Agreement to Arbitrate Claims

          The arbitration agreement is a one-page document separately located on page 15, two pages

after the handbook receipt. The signatures of both Lujan and a Sun Fab representative follow the

recitation of the terms of the arbitration agreement, which was executed on the same date that Lujan

signed the handbook receipt. The arbitration agreement states in relevant part:

          Any and all disputes, controversies or claims arising between me and Sun Fab out of

                                                   6
       my employment or the termination thereof shall be settled by arbitration utilizing the
       American Arbitration Association, or some other arbitrator as agreed to by Sun Fab
       and the employee. This agreement shall apply to any and all such disputes,
       controversies or claims whether asserted against Sun Fab and/or against any
       employee, officer, alleged agent, director or affiliate of the Company with regard to
       any matter arising out of my employment or the termination of my employment.
       This Agreement includes, but is not limited to, any claim relating to the
       purported validity, interpretation, enforceability or breach of the employee
       handbook or other purported employment agreement; any other claim or controversy
       arising out of the employment relationship (or the nature of the relationship) or the
       commencement or termination of that relationship, including, but not limited to,
       claims for violation of any state or federal statute and/or for breach of covenant,
       breach of implied covenant of good faith and fair dealing, wrongful termination,
       breach of contract, or intentional infliction of emotional distress, defamation, breach
       of right of privacy, interference with the advantageous or contractual relations,
       conspiracy or other tort claims of any kind.

                                               . . .

       This Agreement is equally binding on both parties and both parties are waiving
       their right to a jury trial for claims covered by this Agreement. (Emphasis added).

       The only consideration required of both parties to create a stand-alone arbitration agreement

is a binding promise of each party. In re AdvancePCS Health L.P., 172 S.W.3d 603, 607 (Tex.

2005). A mutual agreement to arbitrate claims provides sufficient consideration for an arbitration

agreement. In re U.S. Home Corp., 236 S.W.3d 761, 764 (Tex. 2007). Here, the terms of the

arbitration agreement expressly provide that the agreement is equally binding on both parties who

each waive their right to a jury trial for claims covered by the agreement. Consequently, we find the

arbitration agreement to be supported by sufficient consideration and is not illusory. Id.

       The arbitration agreement appears after the handbook receipt, consists of a single page

bearing the heading, “Agreement to Arbitrate Claims,” and does not retain any right to Sun Fab to

unilaterally modify or abolish its terms. Moreover, although the term “employee handbook” is

present within the arbitration agreement, we do not find that language applying the arbitration

                                                 7
agreement to claims relating to the “validity, interpretation, enforceability or breach of the employee

handbook” to be an incorporation of the handbook within the arbitration agreement or of the

agreement within the handbook. Unlike the facts in In re C & H News, Co., the arbitration

agreement here does not require arbitration “as provided in the Handbook.” In re C & H News Co.,
133 S.W.3d at 646-47 (emphasis added). The phrase, “as provided in the Handbook,” suggests that

an arbitration agreement is subject to the provisions of the handbook. Id. No such suggestion may

be gleaned from the terms “claim relating to” or “employee handbook” as they exist in the

arbitration agreement before us nor do we find that the language diminishes the validity of the

agreement to arbitrate. In re 24R, Inc., 324 S.W.3d at 567-68. We do not find the listing of the

arbitration agreement within the employee handbook’s table of contents, the inclusion of the

heading, “Agreement to Arbitrate Claims” therein, nor the fact that both the handbook and the

Agreement to Arbitrate Claims were signed on the same day to constitute an incorporation of the

arbitration agreement within Sun Fab’s employee handbook. Rather, we find the arbitration

agreement to be a contract that exists independently of the employee handbook. Compare YMCA

of Greater El Paso, Texas and Rio Grande Valley and Fred & Maria Loya YMCA v. Garcia, No. 08-

11-00096-CV, 2011 WL 5110224, at *3-4 (Tex. App. – El Paso October 26,2011, no pet. h.) (where

dispute resolution policy was not a separate, stand-alone document but was contained amidst

numerous other policies within employee policy manual, which did not create any contractual

obligations in favor of the employer or the employee, no valid arbitration agreement existed).

       Because Sun Fab’s and Lujan’s promises to arbitrate cannot be avoided by amendment or

termination and are supported by consideration, the arbitration agreement is valid and non-illusory.

In re Halliburton Co., 80 S.W.3d at 569; In re Datamark, Inc., 296 S.W.3d at 616. Because the

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arbitration agreement is valid, non-illusory, and enforceable, the trial court’s denial of Sun Fab’s

motion to compel arbitration and stay proceedings constitutes an abuse of discretion. In re 24R, Inc.,
324 S.W.3d at 566 (citations omitted). Appellant’s issue is sustained.

                                          CONCLUSION

       The trial court’s judgment is reversed and the case is remanded for further proceedings.

                                               GUADALUPE RIVERA, Justice
November 9, 2011

Before McClure, C.J., Rivera, J., and Antcliff, J.

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