Court Opinion

ID: 3075738
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:13:11.581778+00
Date Added: 2024-06-11T09:49:33.244091
License: Public Domain

COURT OF APPEALS
                                       EIGHTH DISTRICT OF TEXAS
                                            EL PASO, TEXAS

    TEMPORARY ALTERNATIVES, INC.,                       §
    d/b/a dmDICKASON PERSONNEL                                   No. 08-13-00166-CV
    SERVICES OF EL PASO,                                §
                                                                    Appeal from the
                        Appellant,                      §
                                                             205th Judicial District Court
    v.                                                  §
                                                               of El Paso County, Texas
    MISTI K. JAMROWSKI,                                 §
                                                                 (TC# 2013DCV0105)
                        Appellee.                       §

                                                  OPINION

           Appellant Temporary Alternatives, Inc., d/b/a dmDickason Personnel Services of El Paso

(“dmDickason” or “Appellant”), seeks interlocutory review of the trial court’s denial of its

motion to stay proceedings and compel arbitration against a former employee who filed suit in

district court. In two issues, Appellant contends that an arbitration agreement it entered into with

Appellee Misti Jamrowski is not illusory because Appellant either lacks the power to alter the

agreement, or alternatively, it possesses alteration powers subject to a valid Halliburton1

“savings clause” that prevents it from unilaterally reneging on its promise to arbitrate disputes.

Because we find that Appellant does possess the power to unilaterally avoid arbitration by

amending the agreement without notice at any time before Jamrowski files an arbitration claim,

1
    In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002).
the agreement rested on an illusory promise and failed for lack of consideration, and therefore,

the trial court did not err in denying arbitration. We affirm.

                                         BACKGROUND

       Appellant is a temporary worker staffing company servicing client companies throughout

the El Paso region. Jamrowski, through Appellant, served as a temporary worker for one of

Appellant’s client companies, who is not a party to this appeal. Although the temporary workers

work on-site for Appellant’s client companies, the workers are ultimately employees of

dmDickason and are subject to Appellant’s corporate policies and procedures. The dmDickason

Employee Handbook (“Handbook”) contains an acknowledgement page at the outset of the

document stating that the employee acknowledges the Handbook does not cover all corporate

policies in detail. The acknowledgment page also contains the following language: “I also

understand that the provisions in the Handbook may be changed at any time by dmDickason and

that in certain circumstances; dmDickason may choose not to follow the provisions in the

Handbook.”

       Two copies of the Dispute Resolution and Arbitration Policy Agreement (“Agreement”)

are contained in the Handbook and listed in the Handbook’s table of contents as attachments.

One copy must be returned to dmDickason and one is for the employee’s records.              The

Agreement requires employees to submit any disputes between them, dmDickason, or

dmDickason’s client companies “relating to or arising out of an employee’s recruitment, hiring,

employment, or . . . termination of employment[]” to binding arbitration. The Agreement

contains the following provision:

       dmDickason may change or modify this arbitration policy from time to
       time without advance notice or the consent of employees. However, with
       respect to any claim for which a demand for arbitration has been filed with
       the AAA, dmDickason will not modify or change the agreement between

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       you and dmDickason to use final and binding arbitration to resolve
       employment-related disputes without notifying you and obtaining your
       agreement to such changes.

       Jamrowski filed suit in district court and brought employment claims against Appellant

and Appellant’s client company. Appellant moved to compel arbitration, which the trial court

denied. This appeal followed.

                                         DISCUSSION

       In its two issues on appeal, Appellant maintains that the trial court erred in finding that

the Agreement was illusory because the Agreement is a stand-alone document unaffected by a

Handbook clause permitting revisions to Handbook components, and because a savings clause

contained within the Agreement itself limits any residual revisionary powers Appellant may

possess to comply with Halliburton. We disagree.

                           Standard of Review and Applicable Law

       The courts of appeals may exercise interlocutory jurisdiction over trial court orders

pertaining to matters subject to the Federal Arbitration Act, 9 U.S.C.A. §§ 1–16 (West 2009).

See TEX.CIV.PRAC.&REM.CODE ANN. § 51.016 (West Supp. 2013). “To compel arbitration

under the FAA, a party must establish that there is a valid arbitration agreement and that the

claims fall within the scope of the agreement.” Mendevil v. Zanios Foods, Inc., 357 S.W.3d 827,

830 (Tex.App.--El Paso 2012, no pet.). We review a trial court’s FAA arbitration order on direct

appeal for abuse of discretion. Sun Fab Indus. Contracting, Inc. v. Lujan, 361 S.W.3d 147, 150

(Tex.App.--El Paso 2011, no pet.). Before the trial court may compel arbitration, the party

seeking arbitration must establish the existence of a valid and enforceable predicate contract not

subject to any valid legal or equitable defenses. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d
223, 227-28 (Tex. 2003)(arbitration agreement must exist and comport with traditional contract

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principles). A trial court abuses its discretion when it refuses to compel arbitration pursuant to a

valid and enforceable arbitration agreement. Lujan, 361 S.W.3d at 150. We review questions of

contract formation and construction de novo. Webster, 128 S.W.3d at 227.

       Consideration from each party is required before a binding contract forms. Texas Custom

Pools, Inc. v. Clayton, 293 S.W.3d 299, 309 (Tex.App.--El Paso 2009, no pet.). Arbitration

agreements are no exception to this rule. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676

(Tex. 2006). “Mutual, reciprocal promises which bind both parties may constitute consideration

for a contract.” Mendevil, 357 S.W.3d at 831. However, “[a] promise which does not bind the

promisor, as when the promisor retains the option to discontinue performance, is illusory.” Id. at

832. “An agreement to arbitrate may be illusory if a party can unilaterally avoid the agreement

to arbitrate.”   Id.   Where the promisor retains the right to unilaterally alter or terminate

arbitration agreement at its election, the agreement is illusory unless it contains a savings clause

that adequately restrains the promisor’s ability to avoid arbitration. In re Halliburton Co., 80
S.W.3d at 568-69.       The Texas Supreme Court has not explicitly defined the minimum

requirements of an arbitration savings clause, and the parties here ask us to resolve a split in

authorities as to when a savings clause is adequate under Halliburton. Compare In re Datamark,

Inc., 296 S.W.3d 614, 618 (Tex.App.--El Paso 2009, orig. proceeding)(savings clause adequate

where it provides employee with prior notice of planned changes), with Weekley Homes, L.P., v.

Rao, 336 S.W.3d 413, 421 (Tex.App.--Dallas 2011, pet. denied); Carey v. 24 Hour Fitness, USA,

Inc., 669 F.3d 202, 205 (5th Cir. 2012); and Peleg v. Neiman Marcus Group, Inc., 140
Cal. Rptr. 3d 38, 63-4 (Cal.Dist.Ct.App. 2012)(savings clause only effective where it prohibits

retroactive application of changes against known claims, even with prior notice).

       “In determining whether a [savings clause] is sufficient under Halliburton, we must

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decide whether the clause allows the employer[] to unilaterally alter or terminate the arbitration

agreement and if so, whether that right renders the agreement to arbitrate illusory.” In re

ReadyOne Industries, Inc., 400 S.W.3d 164, 170 (Tex.App.--El Paso 2013, orig. proceeding).

We address these issues in turn.

                             Stand-Alone Arbitration Agreement

       In Issue One, Appellant urges us to find that the arbitration agreement is non-illusory

because neither the Agreement nor the Handbook incorporated the other by reference, meaning

that language allowing Appellant to change the contents of and policies contained in the

Handbook at any time does not apply to the Agreement. We decline to reach this issue because

construction of the Handbook in relation to the Agreement is unnecessary to resolving the

ultimate controversy presented in this case.

       Again, the threshold question we answer in a Halliburton case is whether an employer

may unilaterally alter or terminate an agreement. In re ReadyOne Industries, Inc., 400 S.W.3d at

170. Assuming arguendo that Appellant is correct and that the Agreement stands alone, the plain

terms of the Agreement itself give Appellant the power to “change or modify this arbitration

policy from time to time without advance notice or the consent of employees[,]” except where

arbitration claims have already been filed. Thus, Appellant’s attempt to prove the Agreement is

not illusory because it is a stand-alone document unaffected by overriding modification language

from the Handbook is irrelevant and not outcome-determinative in this case. Cf. In re 24R, Inc.,

324 S.W.3d 564, 567-68 (Tex. 2010)(where employee manual language allowing for policy

alteration not incorporated against arbitration agreement by reference, and where terms of

agreement itself did not provide for alteration, no Halliburton savings clause required).

Appellant clearly possesses the power to alter the Agreement, if not by the general terms of the

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Manual, then by the specific, explicit terms of the Agreement itself.

       In light of the fact that the first ReadyOne Industries factor has been satisfied, the

ultimate issue of whether the alteration power renders the Agreement illusory under Halliburton

turns on whether the Agreement’s savings clause adequately cabins Appellant’s ability to avoid

arbitration, not on whether Appellant relies on the Manual or the Agreement itself as justification

for modifying the Agreement. Any assessment of the documents’ relationships to each other

would be advisory and an improper exercise of the judicial function. See In re S.N., 272 S.W.3d
45, 60 (Tex.App.--Waco 2008, no pet.)(courts of appeals should be wary of issuing advisory

opinions on issues unnecessary to an appeal’s resolution). We therefore decline to address this

issue as unnecessary to the appeal’s disposition. See TEX.R.APP.P. 47.1.

                                  Halliburton Savings Clause

       In Issue Two, Appellant and Appellee dispute whether the Agreement’s savings clause,

which prevents dmDickason from altering the Agreement only after an employee has submitted a

claim to arbitration, adequately restrains Appellant’s modification powers as required by

Halliburton.   In Halliburton, the Texas Supreme Court held that language preventing an

employer from retroactively applying arbitration agreement changes to claims of which it had

actual knowledge, combined with a provision providing 10 days advance notice to employees

before unilateral termination of the agreement, rendered the agreement non-illusory because it

restricted the employer from “avoid[ing] its promise to arbitrate by amending the provision or

terminating it altogether.” Halliburton, 80 S.W.3d at 570.

       Appellant contends that “Halliburton did not set the minimum floor restrictions that must

be contained in a savings clause” but that it only required some restrictions on the right to amend

or terminate. They urge us to adopt the approach of our sister court in San Antonio and hold that

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a savings clause is adequate under Halliburton where it prevents amendments from applying

retroactively only after arbitration has begun. See Nabors Drilling USA, L.P., v. Pena, 385
S.W.3d 103 (Tex.App.--San Antonio 2012, pet. denied).

       Appellant reads Nabors Drilling too narrowly and glosses over a key distinction between

the savings clause at play there and the one contained in their Agreement. Appellant’s claim that

the savings clause in Nabors Drilling was “worded nearly identically to the one in this case” is

incorrect. This Agreement’s savings clause provides for modification of the Agreement without

notice to Appellee, whereas the savings clause at issue in Nabors Drilling effectively gave

employees 10 days of prior notice before any changes took effect. See Nabors Drilling, 385
S.W.3d at 105. There, the prior notice provision and the freeze on applying modifications to

claims already under arbitration, when read together, created a 10-day notice window in which

an employee could file an arbitration claim and thereby estop the employer from avoiding its

arbitration commitment with respect to those claims. See id. at 107-08 (savings clause valid

because it gave employees 10-days’ notice before changes came into effect and prohibited

retroactive application of modifications to claims already submitted to arbitration). Likewise, the

Eastland, Corpus Christi, and Houston First District Courts of Appeals also upheld arbitration

agreements in the cases Appellant cites not solely because they prevented the employer from

reneging on the agreement once arbitration commenced, but because the savings clause

mechanisms as a whole created notice windows allowing employees to avail themselves of

opportunity to arbitrate outstanding claims before the policy changed.         See Nabors Wells

Services, Ltd. v. Herrera, Nos. 13-08-00397-CV, 13-08-00451-CV, 2009 WL 200987, at *4-*5

(Tex.App.--Corpus Christi Jan. 27, 2009, no pet.)(memo. op.)(agreement could be amended “at

any time by giving at least 10 days’ notice to current Employees”); In re Champion

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Technologies, Inc., 222 S.W.3d 127, 131 (Tex.App.--Eastland 2006, pet. denied)(program “may

be amended by [Champion] at any time by giving at least 30 days’ notice to current

Employees”); In re Kellogg Brown & Root, 80 S.W.3d 611, 616 (Tex.App.--Houston [1st Dist.]

2002, orig. proceeding)(“Kellogg agreed to give at least 10 days notice before modifying or

terminating the Plan . . .”).

         In reviewing our own prior precedent on this issue, we have previously placed great

emphasis on prior notice as a component of a Halliburton savings clause. In In re Datamark,

Inc., 296 S.W.3d 614 (Tex.App.--El Paso 2009, orig. proceeding), we held that an employer’s

“ability to modify or terminate” an arbitration agreement “at any time without giving prior notice

to its employees[,]” including after arbitration had already begun, rendered its promise to

arbitrate illusory under Halliburton. Id. at 618. Where a savings clause does not prohibit

retroactive application of modifications that take effect immediately, cf. In re Halliburton, 80
S.W.3d at 569-70,2 prior notice language is critical, since notice prior to an alteration gives

“employees ample time to file any requests for arbitration and ensure[] that the company

[can]not avoid the promise to arbitrate.” See In re Datamark, 296 S.W.3d at 618.

         Here, the language in the Agreement’s savings clause, like the savings clause in

Datamark, is so broad that once a claim arises, the forum in which that claim will be decided

hinges not on mutually binding promises, but on a race between employer and employee, with

the party who acts first controlling the outcome. See id. While dmDickason may force the

employee to fulfill her promise and arbitrate claims, the employer is bound to its own reciprocal

2
  The Court in Halliburton did not specify whether the savings clause at issue provided that modifications took
effect immediately or after some amount of notice, only that it prohibited retroactive application of modification to
known claims. As such, it is unclear whether the savings clause in Halliburton operated by creating a notice
window, or simply by prohibiting retroactive application of modifications that took immediate effect. By contrast,
the termination provision of the savings clause specifically provided that termination could only occur after 10 days’
notice to the employee. See Halliburton, 80 S.W.3d at 569-70.

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promise only when the employee reaches the arbitrator’s door before the employer can

unilaterally revise or terminate the agreement without notice and at its own discretion. See In re

Datamark, 296 S.W.3d at 618; see also Webster, 128 S.W.3d at 230 n.2 (listing federal cases

noting that scenario weighs in favor of illusoriness ruling). Because Appellant’s ability to select

which claims it arbitrates is restrained only by the speed at which it can alter or terminate the

Agreement before formal arbitration commences, its promise was illusory. Since an illusory

promise is not valid consideration, Appellee received nothing of value in exchange for her own

promise to arbitrate, and an enforceable contract never formed.

       Appellee asks us to go one step further and read Halliburton as requiring not only notice

prior to retroactive application of modifications, but a prohibition against all retroactive

applications of modifications to claims accrued before modification. In support of her position,

Appellee directs our attention to Peleg, 140 Cal. Rptr. 3d at 63-4, in which the California Court of

Appeals, interpreting Texas law under a contract’s choice-of-law provision, held that Halliburton

does set floor restrictions on a savings clause by requiring it to prohibit retroactive application of

any agreement modifications to claims that have already accrued, or of which the employer has

actual knowledge on the date of modification. Id. The California court, in turn, relies on a line

of Fifth Circuit cases holding that “notice is insufficient [under Halliburton] when retroactive

amendment is possible” because the arbitration agreement is still “capable of being retroactively

modified” to exclude certain accrued claims. Carey, 669 F.3d at 205, 207; see also Torres v.

S.G.E. Management, L.L.C., 397 Fed.Appx. 63, 67-8 (5th Cir. 2010)(not designated for

publication); Morrison v. Amway Corp., 517 F.3d 248, 254 (5th Cir. 2008). The Dallas Court of

Appeals has also held that notice alone is insufficient; a savings clause must “state that any

modifications will only apply prospectively” to be valid under Halliburton. See Rao, 336
9
S.W.3d at 421.

         In Peleg, the court criticizes the notice window mechanism established by the savings

clauses in Kellogg and Champion Technologies as being illusory per se under Halliburton,

noting the great potential for employers to abuse inside knowledge to manipulate the process,

and citing as an example a case where an employer changed the agreement “to provide greater

protection against liability” for a meritorious employment claim, then gave the employee 30

days’ notice, induced the employee to refrain from filing an arbitration claim by promising to

settle, and then refused to settle after the notice window has expired. See Peleg, 140 Cal. Rptr. 3d

at 62.

         We do not have occasion to consider whether a savings clause that creates a notice

window situation described above is illusory under Halliburton. The Agreement’s savings

clause at bar did not provide even cursory notice of an upcoming change to Appellee. Instead,

we assess whether the Agreement is illusory by its own terms. By reserving itself the plenary

power to unilaterally alter or terminate the agreement at any point prior to formal arbitration

without allowing Appellee the opportunity to avail herself of the procedure to which she initially

agreed, Appellant retained the power to avoid arbitration altogether. As such, its promise was

illusory, and the trial court did not err by refusing to compel arbitration in the absence of an

enforceable, mutually binding arbitration agreement. Issue Two is overruled.

         The judgment of the trial court is affirmed.

May 21, 2014
                                               YVONNE T. RODRIGUEZ, Justice

Before Rivera, J., Rodriguez, J., and Barajas, Senior Judge
Barajas, Senior Judge (Sitting by Assignment)

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