Court Opinion

ID: 43097
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:50:44+00
Date Added: 2024-06-11T17:16:59.512558
License: Public Domain

United States Court of Appeals
                                                                  Fifth Circuit

                          In the                              FILED
                                                             May 18, 2006
     United States Court of Appeals
                                                        Charles R. Fulbruge III
                for the Fifth Circuit                           Clerk
                    _______________

                       m 05-51549
                    Summary Calendar
                     ______________

                 MARIA JUANA GOINS,
              ALSO KNOWN AS JUANY GOINS;
               MARIA E. DE LA CRUZ;
                LYDIA M. SALDANA;
             CAROLINA RIOJAS-SALDANA,
         ALSO KNOWN AS CARRIE RIOJAS-SALDANA,

                                         Plaintiffs-Appellees,

                         VERSUS

      RYAN’S FAMILY STEAKHOUSES, INC.; ET AL.,

                                         Defendants,

RYAN’S FAMILY STEAKHOUSES, INC., AND CURTIS DICKEY,

                                         Defendants-Appellants.

            _________________________

        Appeal from the United States District Court
             for the Western District of Texas
                      m 1:05-CV-46
              _________________________
Before SMITH, GARZA, and PRADO,                            ing and decision based on [his] claim or dis-
  Circuit Judges.                                          pute.” The agreement stipulates that the em-
                                                           ployee “[has] been given a copy of full EDSI
PER CURIAM:*                                               Rules and Procedures,” which give precise de-
                                                           tails on the nature of the proceedings provided
   This case concerns a “triangular” arbitration           by EDSI. Although the agreement gives EDSI
arrangement involving defendant Ryan’s                     the right to “amend the applicable Rules and
Family Steakhouses, Inc. (“Ryan’s”), plaintiff             Procedures from time to time, at its discre-
employees, and Employment Dispute Services,                tion,” it also provides that the employee may
Inc. (“EDSI”), a third-party provider of al-               choose whether a particular dispute will be
ternative dispute resolution services. Ryan’s              governed by the Rules in effect at the time the
appeals the denial of its motion to compel arbi-           agreement was signed or at the time the claim
tration and stay litigation of plaintiffs’ claims          was filed.
for race discrimination and sexual harassment
under title VII. We affirm because the                         The agreement notes, in the preamble, that
arbitration agreement between the plaintiffs               “[y]our potential Employer (“signatory com-
and EDSI lacks adequate consideration.                     pany” or “Company”) has entered into an
                                                           agreement with [EDSI] to arbitrate and re-
                       I.                                  solve any and all employment-related disputes
    All Ryan’s employees must sign a Job Ap-               between the Company’s employees (and job
plication Agreement to Arbitration of Employ-              applicants) and the Company under EDSI’s
ment-Related Disputes, which provides that                 program.” It further provides that “the Com-
employees waive their right to judicial deter-             pany agree[s] to use EDSI to resolve legal
mination of anyemployment-related claim aris-              claims concerning [the employee] that either
ing under federal or state law in exchange for             party would otherwise bring in state or federal
an unbiased arbitration forum provided by                  court.” It specifies, however, that “this agree-
EDSI. EDSI and Ryan’s’ employees are the                   ment is with EDSI, not with the Company,”
only parties to these agreements; Ryan’s and               and states that the contract is “a ‘selection of
its agents are merely third-party beneficiaries.           forum’ agreement by which you [i.e., the em-
                                                           ployee] agree” to submit all employment-re-
   The agreement provides that the employee                lated claims to arbitration.
“must use the EDSI forum for any and all em-
ployment-related disputes and/or claims and/or                The aforementioned agreement between
related tort claims [he] may have against                  Ryan’s and EDSI comprises the second side of
[Ryan’s] . . . which could otherwise be                    the arbitral triangle; it requires EDSI, in ex-
brought in court.” EDSI, in turn, agrees to                change for a fee, to “administer and provide
provide “an unbiased arbitration forum, im-                access to the EDSI alternative dispute resolu-
partial Rules and Procedures, and a fair hear-             tion procedures and forum for all Company job
                                                           applicants, employees, and the Companyitself,
                                                           as provided in the EDSI Rules and Pro-
   *
     Pursuant to 5TH CIR. R. 47.5, the court has           cedures;” but unlike the agreement between
determined that this opinion should not be pub-            the employee and EDSI, it does not require
lished and is not precedent except under the limited       Ryan’s to submit to arbitration. Walker v.
circumstances set forth in 5TH CIR. R. 47.5.4.

                                                       2
Ryan’s Family Steak Houses, Inc., 400 F.3d                 be supported by considerationSSthat is, “a
370, 380 (6th Cir. 2005). Ryan’s also can can-             present exchange bargained for in return for a
cel its contract with EDSI at any time with ten            promise”SSwhich may take the form of “a ben-
days’ written notice. See id. at 375. Ryan’s,              efit to the promisor or a detriment to the
as a third-party beneficiary, now seeks to                 promisee.” Roark v. Stallworth Oil & Gas,
enforce , as a third-party beneficiary, the con-           813 S.W.2d 492, 496 (Tex. 1991). Although
tract between its employees and EDSI to ar-                courts generally will not inquire into the ade-
bitrate claims brought against Ryan’s under                quacy of consideration,2 “[w]hen illusory
title VII.                                                 promises are all that support a purported bi-
                                                           lateral contract, there is no contract.” Light v.
                       II.                                 Centel Cellular Co., 883 S.W.2d 642, 645
    We have jurisdiction, under 9 U.S.C.                   (Tex. 1994).
§§ 16(a)(1)(A)and (B), to review the denial of
a petition to stay litigation and compel ar-                                         III.
bitration The Federal Arbitration Act (“FAA”)                   In a typical arbitration contract, where both
creates a “liberal federal policy favoring arbi-           parties mutually agree to submit to an arbitral
tration agreements, notwithstanding any state              forum to resolve claims arising between them,
substantive or procedural policies to the con-             it is easy to see that consideration exists.3 The
trary.” Moses H. Cone Mem’l Hosp. v.                       problem arises because of the peculiar nature
Mercury Constr. Corp., 460 U.S. 1, 24                      of this arrangement, where the employer and
(1983). When construing an arbitration                     employee entered into separate agreements
agreement, “any doubts concerning the scope                with a third-party arbitrator.
of arbitrable issues should be resolved in favor
of arbitration.” Id. at 24-25. Parties are free                The circuits that have previously considered
to make federal statutory claims the subject of            this arrangement found it unenforceable, citing
an arbitration agreement. See Gilmer v. Inter-             two critical defects. First, because EDSI
state/Johnson Lane Corp., 500 U.S. 20, 26                  initially could alter the rules governing
(1991).                                                    proceedings at its pleasure, without consent
                                                           from the employee, its promise to provide a
   The FAA also provides, however, that arbi-
tration agreements are subject to defenses that
are generally applicable to contracts under                   1
                                                               (...continued)
state law.1 Under Texas law, a contract must               principles of state law that govern all contracts.”).
                                                              2
                                                               See Nolan v. Young, 220 S.W. 154, 156 (Tex.
                                                           1920) (“It is not necessary that the consideration be
   1
     See 9 U.S.C. § 2 (stating that an arbitration         adequate in point of actual value. The slightest
contract “shall be valid, irrevocable, and enforce-        consideration, in the absence of fraud, is sufficient
able, save upon such grounds as exist at law or in         to make the most important agreement binding.”).
equity for the revocation of any contract”); Iberia
                                                              3
Credit Bureau, Inc. v. Cingular Wireless LLC,                    See J.M. Davidson, Inc. v. Webster, 128
379 F.3d 159, 166 (5th Cir. 2004) (“[A]s a matter          S.W.3d 223, 228 (Tex. 2003) (“[M]utual promises
of federal law, arbitration agreements and clauses         to submit all employment disputes to arbitration
are to be enforced unless they are invalid under           constituted sufficient consideration, because both
                                      (continued...)       parties were bound to the promises to arbitrate.”).

                                                       3
neutral arbitral forum was “fatally indefinite.”         much less this one.”
Floss v. Ryan’s Family Steak Houses, Inc.,
211 F.3d 306, 315 (6th Cir. 2000).4 EDSI has                But, when construing a contract, “[i]n the
since cured this defect, modifying its contract          usual case, the instrument alone will be
to allow the employee to choose whether the              deemed to express the intention of the parties
rules in effect at signing or the modified rules         for it is objective, not subjective, intent that
will govern his dispute.                                 controls.” Pinehurst v. Spooner Addition Wa-
                                                         ter Co., 432 S.W.2d 515, 518 (Tex. 1968). It
    Second, the Ryan’s/EDSI contract does not            is plain from the face of the employee/EDSI
contain any requirement that Ryan’s submit to            contract that Ryan’s is not bound by its terms
arbitration. Walker, 400 F.3d at 380. In fact,           and that the contract merely requires the em-
Ryan’s ability to withdraw from its contract             ployee to bring claims in a particular forum.
with EDSI after ten days’ written notice sug-            Therefore, Ryan’s private assurance that it will
gests it retains the ability to avoid arbitration        submit to arbitration in every case cannot
of any claim. The language in the employ-                supply the defect in the language of the con-
ee/EDSI agreement that suggests that Ryan’s              tract.6
would be bound to submit to the EDSI forum
is, therefore, a misrepresentation.5 Because                Finally, Ryan’s contends that it provided
Ryan’s has not yet cured this defect, EDSI               employees with adequate consideration by
cannot guarantee that Ryan’s will submit to ar-          agreeing to consider their applications for
bitration, so its promise to supply a neutral ar-        employment. The Seventh Circuit in Penn,
bitral forum to Ryan’s employees is illusory, 269 F.3d at 760, rejected the proposition that
and the contract cannot be enforced.                     “a benefit received from a third party, as op-
                                                         posed to a benefit received from the other con-
    Critical to our decision is Ryan’s apparent          tracting party in a contemporaneous docu-
concession in its brief that the “statement in           ment, can be sufficient to create mutuality.”
the preamble [of the employee/EDSI contract]             Indeed, where two promises do not relate to
is technically rendered a misrepresentation”             the same subject matter, and where they are
because Ryan’s “could theoretically invoke the
ten daycancellation provision in the underlying
                                                            6
EDSI-Ryan’s contract.” Ryan’s does not                        Ryan’s invokes the same principle of contract
contest this factual finding, but rather insists         interpretation to argue that we cannot look to the
the employee/EDSI contract is still enforceable          Ryan’s/EDSI agreement to determine whether the
because “there was absolutely no evidence in             employee/EDSI agreement is enforceable. See Hill
the Record that Ryan’s has ever sought to be             v. PeopleSoft USA, Inc., 412 F.3d 540, 544 (4th
relieved of its obligation to arbitrate any case,        Cir. 2005) (concluding that district court erred by
                                                         finding arbitration contract unenforceable based on
                                                         an internal company policy located outside the
                                                         “four corners” of the agreement). The Ry-
   4
     See also Penn v. Ryan’s Family Steak Hous-          an’s/EDSI contract, however, merely confirms our
es, 269 F.3d 753, 759-60 (7th Cir. 2001).                suspicion that EDSI did not provide the employees
                                                         with adequate consideration. The text of the
   5
     See In re McKinney, 167 S.W.3d 833, 835             employee/EDSI contract plainly provides that “this
(Tex. 2005) (noting that fraud, misrepresentation,       agreement is with EDSI, not with the Company;”
or deceit may void a contract).                          therefore, Ryan’s is not bound by its terms.

                                                     4
contained in two non-contemporaneous docu-
ments, we have insufficient evidence to con-
clude that “[t]he detriment . . . induce[d] the
making of the promise, and the promise . . . in-
duce[d] the incurring of the detriment.”
Roark, 813 S.W.2d at 496. Therefore, there is
no “present exchange bargained for in return
for a promise.” Id. (emphasis added).

   In summary, we agree with the reasoning of
the district court and AFFIRM the denial of
the motion to compel arbitration and stay
proceedings.

                                                   5