Court Opinion

ID: 4693459
Source: CourtListenerOpinion
Date Created: 2021-06-08 09:16:00.263733+00
Date Added: 2024-06-11T08:05:23.340619
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                      NO. 03-19-00820-CV

  St. David’s Healthcare Partnership, LP; St. David’s Healthcare Partnership, LP, LLP;
 Round Rock Hospital, Inc.; St. David’s Healthcare System, Inc.; St. David’s Partnership,
                  LP, LLP; and St. David’s Medical Center, Appellants

                                                 v.

                   Kristi Elaine Fuller f/k/a Kristi Elaine Baezetero, Appellee

               FROM THE 200TH DISTRICT COURT OF TRAVIS COUNTY
     NO. D-1-GN-19-003798, THE HONORABLE DARLENE BYRNE, JUDGE PRESIDING

                                          OPINION

                 Appellee Kristi Elaine Fuller sued St. David’s Healthcare Partnership, LP (the

“Hospital”) and related entities (collectively with the Hospital, the “Hospital Defendants”)

after she was terminated from her employment with the Hospital. In response, The Hospital

Defendants filed a motion to stay Fuller’s suit and to compel arbitration under the Federal

Arbitration Act. After the trial court denied the motion, the Hospital Defendants filed this

interlocutory appeal. See Tex. Civ. Prac. & Rem. Code § 171.098. We will affirm the trial

court’s order.

                                         BACKGROUND

                 Fuller, a registered nurse, was hired by the Hospital to begin work in June 2018.

In connection with her hiring, on April 16, 2018, Fuller executed and agreed to be bound by the
Hospital’s Nurse Residency Program Agreement (“Employment Agreement”). In general, the

Employment Agreement outlined the terms of Fuller’s employment with the Hospital, including

her hiring date, compensation, and treatment of confidential information. While the Employment

Agreement included a provision whereby Fuller agreed to waive her right to a jury trial in the

event of litigation arising out of the Agreement, the Agreement did not expressly require the

parties to submit to arbitration or any other means of alternative dispute resolution.

               In June 2018, Fuller completed mandatory Facility Orientation. During Facility

Orientation, Fuller signed a document acknowledging that she had reviewed various Hospital

policies made accessible to her through a web portal maintained by the Hospital. In part, Fuller

acknowledged having reviewed, and agreed to abide by, the Hospital’s “Mandatory Binding

Arbitration Policy,” which included the following:

       Under the Mandatory Binding Arbitration Policy, both the employee and the
       [Employer] agree to give up any right either of them might have to a jury or judge
       trial regarding any issue governed by the Mandatory Binding Arbitration Policy.
       All disputes governed by the Mandatory Binding Arbitration Policy shall be
       submitted to final and binding arbitration to be conducted by an experienced
       arbitrator from the American Arbitration Association (“AAA”) chosen by the
       employee and the company. . . . The employee and the Employer will be bound
       by the decision made by the third party neutral arbitrator except as allowed by law
       to appeal to a court.

               Fuller was terminated from her employment in January 2019. In her lawsuit, she

contends that she was “wrongfully terminated, and retaliated against, in violation of Texas law,

more specifically Section 161.134 of the Texas Health and Safety Code.” See Tex. Health &

Safety Code § 161.134 (providing that healthcare facilities may not retaliate against employees

for reporting “a violation of law”). In their motion to stay and to compel arbitration, the Hospital

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Defendants asserted that Fuller’s claims fall within the scope of, and are subject to, the

Mandatory Binding Arbitration Policy.

                  BACKGROUND LAW AND STANDARD OF REVIEW

               A party seeking to compel arbitration under the Federal Arbitration Act must

establish that (1) there is a valid arbitration agreement, and (2) the claims in dispute fall within

the scope of that agreement. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding).

The burden of establishing the existence of an arbitration agreement is on the party seeking to

compel arbitration, see Fitness Entm’t Ltd. v. Hurst, 527 S.W.3d 699, 703 (Tex. App.—El Paso

2017, pet. denied), and no presumption of arbitration exists until after the party seeking to compel

arbitration meets this burden, see J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.

2003). “Whether parties have agreed to arbitrate is a gateway matter ordinarily committed to the

trial court and controlled by state law governing ‘the validity, revocability, and enforceability of

contracts generally.’” Jody James Farms, JV. v. Altman Grp., Inc., 547 S.W.3d 624, 631 (Tex.

2018) (quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009)).

               We review a trial court’s order denying a motion to compel arbitration for an

abuse of discretion. Henry v. Cash Biz, L.P., 551 S.W.3d 111, 115 (Tex. 2018). We defer to

the trial court’s factual determinations if they are supported by evidence but review its legal

determinations de novo. Id.

                                           ANALYSIS

               On appeal, the Hospital Defendants assert that the trial court abused its discretion

in denying their motion to compel arbitration because, in the view of the Hospital Defendants,

the undisputed evidence establishes that Fuller received notice of the Mandatory Binding

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Arbitration Policy and accepted its terms; the Policy is enforceable; and Fuller’s claims fall

within the scope of the Policy.

               In response, Fuller contends, in part, that the trial court did not abuse its discretion

in denying the motion because the Hospital Defendants failed to meet their initial burden to

prove the existence of a binding arbitration agreement. In support of her argument, Fuller points

out that the Employment Agreement expressly states:

       Sole and Entire Agreement. This Agreement . . . constitutes the sole, complete,
       and entire agreement between [the Hospital] and [Fuller] concerning the
       employment. This Agreement supersedes all prior negotiations and/or agreements
       between the parties, whether oral or written, concerning the employment.

Further, as to amendments, the Employment Agreement states:

       Amendment. No amendment or other modification of this Agreement will be
       effective unless and until it is embodied in a written document signed by the [the
       Hospital] and [Fuller].

Based on these provisions, Fuller contends that the Mandatory Binding Arbitration Policy

is unenforceable because it is an “amendment or other modification of [the Employment

Agreement]”; under the express terms of the Employment Agreement, it must be signed by both

parties; and the record establishes that the Mandatory Binding Arbitration Policy was not signed

by the Hospital.

               Under Texas law, a binding contract requires: (1) an offer; (2) an acceptance in

strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party’s consent

to the terms; (5) consideration; and, if the contract is in writing (6) execution and delivery of the

contract with the intent that it be mutual and binding. Hi Tech Luxury Imps., LLC v. Morgan,

No. 03-19-00021-CV, 2019 Tex. App. LEXIS 3429, at *3 (Tex. App.—Austin Apr. 30, 2019, no

                                                  4
pet.) (mem. op.) (citing Huckaba v. Ref-Chem, L.P., 892 F.3d 686, 689 (5th Cir. 2018) (applying

Texas law to analyze existence of valid arbitration agreement); E-Learning LLC v. AT&T Corp.,

517 S.W.3d 849, 858 (Tex. App.—San Antonio 2017, no pet.); Cessna Aircraft Co. v. Aircraft

Network, L.L.C., 213 S.W.3d 455, 465 (Tex. App.—Dallas 2006, pet. denied); Advantage Physical

Therapy, Inc. v. Cruse, 165 S.W.3d 21, 24 (Tex. App.—Houston [14th Dist.] 2005, no pet.).

               “Contracts require mutual assent to be enforceable.” Baylor Univ. v. Sonnichsen,

221 S.W.3d 632, 635 (Tex. 2007). While, in the case of a written contract, mutual assent is often

evidenced by signature and delivery, they are not required. Phillips v. Carlton Energy Grp., LLC,

475 S.W.3d 265, 277 (Tex. 2015). Similarly, the Texas Supreme Court has recognized that the

Federal Arbitration Act does not require an employer’s signature on an arbitration agreement for

it to be valid “so long as [the agreement] is written and agreed to by the parties.” Wright v.

Hernandez, 469 S.W.3d 744, 758 (Tex. App.—El Paso 2015, no pet.) (quoting In re Polymerica,

LLC, 296 S.W.3d 74, 76 (Tex. 2009) (orig. proceeding)).

               Nevertheless, parties to a contract may express an intent to require signatures as a

condition precedent to the contract becoming effective. Hi Tech Luxury Imps, 2019 Tex. App.

LEXIS 3429, at *3; Wright, 469 S.W.3d at 758. “Thus, when the terms of the contract make it

clear that a signature is required, a party’s failure to sign the agreement will render the agreement

unenforceable.” Wright, 469 S.W.3d at 758 (citing Simmons & Simmons Constr. Co. v. Rea,

286 S.W.2d 415, 418-19 (Tex. 1955)). In addition, when the parties’ intention to require

signatures as a condition precedent can be ascertained from the unambiguous language of the

contract itself, we may decide the issue of that intent as a matter of law. See Hi Tech Luxury

Imps., 2019 Tex. App LEXIS 3429, at *3-4.

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               Here, the clear and unambiguous language of the Employment Agreement

establishes that the parties intended to require any amendment or modification to the terms of

Fuller’s employment to be in writing and signed by both parties. In addition, the parties agreed

that the satisfaction of this requirement would serve as a condition precedent to the enforceability

of the amendment or modification. The Mandatory Binding Arbitration Policy is a subsequent

agreement concerning Fuller’s employment and therefore constitutes an “amendment or other

modification” to the Employment Agreement. As such, to be enforceable, the signatures of both

Fuller and the Hospital were required. Because the undisputed evidence establishes that the

Hospital did not sign the Mandatory Binding Arbitration Policy, it is not enforceable. See

Huckaba, 892 F.3d at 690-91 (concluding that under Texas contract law, there was no valid

agreement to arbitrate because agreement contained language requiring parties’ signatures for

enforceability and employer did not sign arbitration agreement); see Hi Tech Luxury Imps.,

2019 Tex. App LEXIS 3429, at *2 (same).

               On appeal, the Hospital Defendants do not dispute that the Hospital failed to sign

the Mandatory Binding Arbitration Policy. Instead, the Hospital Defendants argue that despite

the Hospital’s failure to sign the Policy, it is enforceable against Fuller.      Specifically, the

Hospital Defendants argue that the Policy was incorporated by reference into the Employment

Agreement, and therefore, separate assent to the Policy by the parties was not required. In

other words, in the Hospital Defendants’ view, the Policy was not an “amendment or other

modification” to the Employment Agreement but, instead, was effectively made part of the

Employment Agreement itself.       In support of this incorporation-by-reference argument, the

Hospital Defendants rely on a provision in the Employment Agreement stating that “[u]pon

execution of this Agreement . . . , [Fuller] will be employed by [the Hospital] for the duration of

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the Program. [Fuller] will remain in the employment of [the Hospital] for the duration of the

Program . . . subject to [the Hospital’s] policies and procedures applicable to employees.”1

(Emphasis added.)

               It is well established that documents, even unsigned documents, may be

incorporated into a contract when the parties refer to the document in the contract. In re 24R,

Inc., 324 S.W.3d 564, 567 (Tex. 2010) (orig. proceeding).         While no specific language is

necessary to incorporate a document by reference, the contract must plainly refer to the other

document or otherwise show that the parties intended for the other document to become part of

or incorporated into the contract. Santander Consumer USA, Inc. v. Mata, No. 03-14-00782-CV,

2017 Tex. App. LEXIS 2631, at *6 (Tex. App.—Austin Mar. 29, 2017, no pet.) (mem. op.); Bob

Montgomery Chevrolet, Inc. v. Dent Zone Cos., 409 S.W.3d 181, 189 (Tex. App.—Dallas 2013,

no pet.) (citing Owen v. Hendricks, 433 S.W.2d 164, 167 (Tex. 1968)). When a document is

incorporated into another by reference, both instruments must be read and construed together.

Bob Montgomery Chevrolet, 409 S.W.3d at 189 (citing In re C & H News Co., 133 S.W.3d 642,

645-46 (Tex. App.—Corpus Christi 2003, orig. proceeding)).

               Applying these legal principles to this dispute, we disagree with the Hospital

Defendants’ contention that the “subject to” language in the Employment Agreement effectively

       1
             On appeal, Fuller asserts that the Hospital Defendants cannot rely on this
incorporation-by-reference argument in this appeal because they failed to raise the argument in
the trial court. See Tex. R. App. P. 33.1; see also Santander Consumer USA, Inc. v. Mata,
No. 03-14-00782-CV, 2017 Tex. App. LEXIS 2631, at *6 (Tex. App.—Austin Mar. 29, 2017, no
pet.) (mem. op.) (concluding that appellant could not rely on incorporation-by-reference argument
in appeal of denial of motion to compel arbitration because appellant did not raise argument in
trial court). In response, the Hospital Defendants contend that they adequately raised the issue at
the hearing on the motion by specifically pointing out that this “subject to” language required
Fuller to comply with the Mandatory Binding Arbitration Policy. We will assume without
deciding that the Hospital Defendants have adequately preserved this issue for appeal.
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incorporated by reference the Mandatory Binding Arbitration Policy. First, we note that no

specific document is mentioned after the “subject to” phrase, and we cannot conclude that the

term “policies and procedures” plainly refers to the Mandatory Binding Arbitration Policy—a

document that, when the parties entered into the Employment Agreement, Fuller had not seen

and was not aware existed. See Owen, 433 S.W.2d at 167; see also One Beacon Ins. v. Crowley

Marine Servs., Inc., 648 F.3d 258, 268 (5th Cir. 2011) (“Terms incorporated by reference will be

valid so long as it is ‘clear that the parties to the agreement had knowledge of and assented to

the incorporated terms.’”). In short, nothing in the language of the Employment Agreement

evidences an intent by the parties to incorporate the Mandatory Binding Arbitration Policy.2

Moreover, to construe the “subject to” language as broadly as the Hospital Defendants suggest—

that is, as incorporating all “policies and procedures” of the Hospital, including the Arbitration

Policy, into Fuller’s Employment Agreement—would conflict with the provision of the

Agreement stating that it “constitutes the sole, complete and entire agreement between [the

Hospital] and [Fuller] concerning the employment.” See Cavazos v. Cavazos, 941 S.W.2d 211,

215 (Tex. App.—Corpus Christi 1996, writ denied) (concluding that merger clause expressly

negated incorporation of document that was not specifically referenced).

               The burden was on the Hospital Defendants to establish that the parties entered

into a valid arbitration agreement. Based on the plain language of the documents governing this

2
  At best, the language relied on by the Hospital Defendants evidences an intent to make Fuller’s
continued employment with Hospital contingent upon her compliance with policies and
procedures generally applicable to Hospital employees. See Frost Nat’l Bank v. L& F Distribs.,
165 S.W.3d 310, 312 (Tex. 2005) (explaining that in construing contracts, courts “consider the
entire agreement and attempt to harmonize to give effect to all the provisions of the contract by
analyzing the provisions with reference to the whole agreement”). Even under that interpretation,
however, once Fuller’s employment with the Hospital was terminated, she was no longer
obligated to comply with those policies and procedures, and her post-termination lawsuit would
not be subject to the Mandatory Binding Arbitration Agreement.
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dispute, we conclude that the Hospital Defendants failed to satisfy that burden. Accordingly, we

cannot conclude that the trial court abused its discretion in denying their motion to compel

arbitration.

                                         CONCLUSION

               We affirm the order of the trial court.

                                              __________________________________________
                                              Chari L. Kelly, Justice

Before Justices Baker, Triana, and Kelly

Affirmed

Filed: June 3, 2021

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