Court Opinion

ID: 7804347
Source: CourtListenerOpinion
Date Created: 2022-08-29 00:19:28.211578+00
Date Added: 2024-06-11T16:29:49.764819
License: Public Domain

Affirmed and Memorandum Opinion filed August 23, 2022.

                                     In The

                      Fourteenth Court of Appeals

                              NO. 14-21-00082-CV

         PRECISION DIRECTIONAL SERVICES, INC., Appellant

                                        V.
                          CHRIS FERRON, Appellee

                   On Appeal from the 269th District Court
                           Harris County, Texas
                     Trial Court Cause No. 2020-25247

                         MEMORANDUM OPINION

      Appellee Chris Ferron was allegedly injured while working for appellant
Precision Directional Services, Inc. as part of a drilling crew on an oil rig.
Appellee filed suit against appellant seeking relief for his alleged injuries.
Appellant moved to compel the matter to arbitration.       The trial court denied
appellant’s motion.    In one issue, appellant argues the trial court abused its
discretion in denying the motion to compel arbitration. We affirm.
                        MOTION TO COMPEL ARBITRATION

       Appellant argues that the trial court abused its discretion in denying its
motion to compel arbitration because appellee executed an agreement containing
an arbitration provision with a separate company and appellant was a third-party
beneficiary of the arbitration provision in that agreement. Appellant argues that it
proved that a valid arbitration agreement exists and it is entitled to compel
arbitration.

A.     General Legal Principles

       A party seeking to compel arbitration bears the burden to establish that an
arbitration agreement exists and that the claims presented fall within its scope.
Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018); Nationwide Coin &
Bullion Resrv., Inc. v. Thomas, 625 S.W.3d 498, 503 (Tex. App.—Houston [14th
Dist.] 2020, pet. denied). If this burden is met, then the burden shifts to the party
opposing arbitration to prove an affirmative defense to the provision’s enforcement
to avoid arbitration. See Henry, 625 S.W.3d at 115. “If there is conflicting
evidence as to the material facts necessary to determine the issues, the trial court is
to conduct an evidentiary hearing to resolve the dispute.” Thomas, 625 S.W.3d at
503.

       “Whether a non-signatory can compel arbitration pursuant to an arbitration
clause questions the existence of the arbitration clause between specific parties and
is . . . a gateway matter for the court to decide.” In re Rubiola, 334 S.W.3d 220,
224 (Tex. 2011).     “Under the FAA, ordinary principles of state contract law
determine whether there is a valid agreement to arbitrate.” Id. The question of
who is bound by an arbitration agreement is a function of the intent of the parties
as expressed in the agreement. Id. Where an agreement “expressly provides that

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certain non-signatories are considered parties,” then such parties may compel
arbitration. Id. at 225.

       When a motion to compel arbitration is denied, we apply an abuse-of-
discretion standard. Thomas, 625 S.W.3d at 503. We defer to the trial court’s
factual determinations if they are supported by the evidence and review the legal
determinations de novo. Id. Whether a valid arbitration agreement exists is a legal
question. In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex. 2006).

B.     Background

       In July 2018, appellee executed an “independent professional agreement”
(Agreement) with RigUp., Inc.1 RigUp has an online service where it connects
workers with companies in the oil and gas industry. Appellee likens the platform
to an “online job board.” Appellant uses RigUp to hire independent contractors for
various jobs it has available.

       In August 2019, RigUp updated its “terms” to “make it clearer that its
customers, like [appellant], are intended beneficiaries of the arbitration provision
contained in Section 24 of the Terms.” The August 2019 Terms provided that
continuing use of RigUp’s service after the effective date of the new terms was an
agreement to be bound by such terms. The August 2019 Terms were posted on
RigUp’s website.2

       Sometime after August 7, 2019,3 appellee applied for and accepted a job
from appellant. While on this job for appellant, appellee was allegedly injured.

       1
        The Agreement was subject to the terms on RigUp’s website at the time the Agreement
was executed.
       2
          The August 2019 Terms were “last revised” on August 7, 2019. There is no indication
in the record of when the terms were posted on RigUp’s website.
       3
          It is not clear from the record when appellee applied for and accepted work from
appellant, no date is provided by either of the parties. Appellant asserts that it was after August 7,
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Appellee filed a lawsuit against appellant, but not RigUp, to recover damages for
his personal injuries.      Appellant moved to compel arbitration pursuant to the
Agreement.

       Attached to its motion to compel arbitration was the Agreement, the August
2019 Terms, and a declaration from Olivia Howe, the head of Legal and
government relations at RigUp. The Agreement was the version executed by
appellee; however, appellant did not provide the terms as they existed when
appellee executed the Agreement. The Agreement indicated that appellee had
“read, understood, and agreed to” the “RigUp Terms of Service located at [web
address listed] (‘Terms’)” and that such terms were “incorporated into this
Agreement by reference.” Paragraph fourteen of the Agreement, entitled “Dispute
Resolution,” provides, “You acknowledge and agree that the terms of this
Agreement are subject to Section 24 of the Terms.” The Agreement does not
otherwise provide or detail any terms or agreement to arbitration.

       In her declaration, Howe attested that “Section 3 of the Terms have not been
revised since at least February 12, 2016” and was in place when appellee signed
the Agreement. Section three of the August 2019 Terms provides that:

       3. Changes to these Terms. We may revise these Terms at any time
       to take account of changes in the law, or for any other reason. If we
       update these Terms, we will post a new version on the Website. If a
       change materially impacts your rights or obligations, we will use
       commercially reasonable efforts to give you at least 30 days’ notice of
       the upcoming changes via email or on the Service before the change
       takes effect. Immaterial modifications are effective upon publication.
       As soon as you use the Service after the updated version of these
       Terms is posted and effective, you will be deemed to have agreed to
       the updated version. Your continued use of the Service after a change

2019. Appellee does not dispute this.

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      to these Terms constitutes your binding acceptance of the updated
      version.
Howe further attested that the “prior versions of the Terms provided that disputes
relating to work performed under the [Agreement] would be resolved by binding
arbitration,” however the terms that were in effect when appellee signed the
Agreement were not provided to the trial court. In the August 2019 Terms, section
twenty-four contains the arbitration provisions. In pertinent part, it provides:

      a. Generally. In the interest of resolving disputes between you and
      RigUp, or you and RigUp’s customers . . . you and RigUp agree that
      every dispute arising in connection with these Terms will be resolved
      by binding arbitration. . . . This agreement to arbitrate disputes
      includes all claims arising out of or relating to any aspect of these
      Terms, whether based in contract, tort, statute, fraud,
      misrepresentation, or any other legal theory, and regardless of whether
      a claim arises during or after the termination of these Terms. YOU
      UNDERSTAND AND AGREE THAT, BY ENTERING INTO
      THESE TERMS, YOU AND RIGUP ARE EACH WAIVING THE
      RIGHT TO A TRIAL BY JURY OR TO PARTICIPATE IN A
      CLASS ACTION.
Howe attested that “prior versions of the Terms provided that disputes relating to
work performed under the [Agreement] would be resolved by binding arbitration”
but did not attest as to the prior terms and did not provide them.

      Appellee filed a response, attaching as exhibits the Agreement, the August
2019 Terms, and the affidavit of his counsel requesting a continuance.             No
additional evidence was offered by appellee.

      The trial court rendered an order denying appellant’s motion without making
any fact findings or indicating the reason for the denial.

C.    Analysis

      Appellant argues that appellee is bound to the August 2019 Terms because
he agreed to be bound to any changes in the terms in the Agreement and by his
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continued use of RigUp’s service after the August 2019 Terms went into effect.
Because the August 2019 Terms provide for the arbitration of “disputes between
[appellee] and . . . RigUp’s customers . . . every dispute arising in connection with
these Terms will be resolved by binding arbitration,” appellant argues it has shown
that arbitration should be compelled. Appellee argues that he was not provided
any notice of the August 2019 Terms pursuant to the Agreement, so he cannot be
bound to the arbitration provision therein due to a lack of mutual assent. Appellee
argues that because he is not bound by the August 2019 Terms due to the lack of
notice and appellant has not provided the original terms (or at least terms that
appellee agreed to), appellant has failed to prove that a valid arbitration agreement
exists between the parties.

      Howe attested that RigUp modified their terms to include appellant “more
clearly” in the arbitration provision. See Hathaway v. General Mills, Inc., 711
S.W.2d 227, 228 (Tex. 1986) (“Parties have the power to modify their contracts.”).
It is through this modification that appellant seeks to compel arbitration. The
burden of proving modification is on appellant in this case, as the party asserting a
modification. See id. However, “modification must satisfy the elements of a
contract: a meeting of the minds supported by consideration.” Id. Appellee argues
that there was no meeting of the minds because he was never provided notice of
the change in terms. As the party asserting modification, appellant must also prove
that appellee agreed to the modification. See id.; see also In re Halliburton, Co.,
80 S.W.3d 566, 568 (Tex. 2002) (“[T]he party asserting a change to an at-will
employment contract must prove two things: (1) notice of the change, and (2)
acceptance of the change.”). Whether a contract is modified depends on the
parties’ intention and is a question of fact. Hathaway, 711 S.W.2d at 228–29.

                                         6
      Appellant argues that because appellee agreed that RigUp could change the
terms at any time and because appellee continued to use RigUp’s service after the
changes in August 2019, appellee has accepted the August 2019 Terms. However,
in all of appellant’s cited cases concluding that acceptance of modified contractual
terms was shown through the actions of a party (such as continued use, acceptance
of benefits, or continued employment), each of the parties had “undisputed” notice
of the modification. See In re Halliburton, 80 S.W.3d at 568–69 (“Here, it is
undisputed that Halliburton notified Myers of the proposed changes [to the
contract]. . . . After receiving this notice, Myers continued to work for Halliburton
after [the effective date of the changes], thus accepting the changes as a matter of
law.”); Koontz v. Citibank (S. Dakota), N.A., No. 01-08-00495-CV, 2010 WL
2545583, at *3 (Tex. App.—Houston [1st Dist.] June 24, 2010, no pet.) (mem. op.)
(“[I]t is undisputed that after receiving the Notice of Change in Terms and the
accompanying arbitration agreement, Koontz continued to use the card and did not
‘opt out’ of the arbitration agreement. Koontz’s continued use of the card after
receiving the arbitration agreement established her assent to its terms.”). Without
notice, a different result is compelled.      See Hathaway, 711 S.W.2d at 229
(concluding modification not proven where notice not shown); Price Pfister, Inc. v.
Moore & Kimmey, Inc., 48 S.W.3d 341, 350 (Tex. App.—Houston [14th Dist.]
2001, pet. denied) (same).

      Appellant’s argument further ignores the contract’s requirement to provide
notice of changes to appellee. See Seagull Energy E&P, Inc. v. Eland Energy, Inc.,
207 S.W.3d 342, 345 (Tex. 2006) (“[W]e examine and consider the entire writing
in an effort to harmonize and give effect to all the provisions of the contract so that
none will be rendered meaningless.”). Section three of the terms indicates that:

      If we update these Terms, we will post a new version on the Website.
      If a change materially impacts your rights or obligations, we will use
                                          7
      commercially reasonable efforts to give you at least 30 days’ notice of
      the upcoming changes via email or on the Service before the change
      takes effect. Immaterial modifications are effective upon publication.
Appellant provided no evidence that RigUp gave notice to appellee by email or on
the “Service”4 before the change took effect, let alone thirty days before the change
took effect. Thus, appellant has not shown that the notice provision for a change
that “materially impacts” appellee’s rights was provided. Instead, Howe attested in
her affidavit that “when the Terms are revised, RigUp posts a new version of the
Terms on its website.” There is no indication of when the August 2019 Terms
were posted on RigUp’s website. Even assuming RigUp posted the August 2019
Terms on its website on or before August 7, 2019, appellant has not shown that the
changes in the terms were immaterial and, thus, notice was effective under section
three of the terms.

      Without the benefit of the prior terms and with no indication, evidence, or
argument from appellant whether the changes to the terms were material or
immaterial, we cannot determine whether the notice provided through the website
was effective under the parties’ agreement. Notice of a change in terms and
acceptance is required to prove assent to the modification of the parties’
agreement. See In re Halliburton, Co., 80 S.W.3d 569–70 (rejecting contention
that arbitration agreement was illusory because, among other things, it required ten
days’ notice of any modification or termination and stated that any such
amendment would apply prospectively only); see also J.M. Davidson, Inc. v.
Webster, 128 S.W.3d 223, 229–230 (Tex. 2003) (noting that most courts have
considered and concluded that a contract is illusory if it provides an “unrestricted
right to terminate the arbitration agreement”); see also In re C & H News Co., 133

      4
          “Service” is defined in the August 2019 Terms, but it is unknown whether this
definition also remains unchanged from the previously effective terms.

                                          8
S.W.3d 642, 646–47 (Tex. App.—Corpus Christi—Edinburgh 2003, no pet.)
(employer’s right to change, modify, delete, or amend arbitration agreement “with
or without prior notification” made the arbitration agreement illusory).

       Thus, it was appellant’s burden to show that the notice RigUp provided
through the website was effective because the change made to the terms was
immaterial. Conversely, if the change was material, it was appellant’s burden to
show that RigUp provided notice in accordance with section three of the terms.
Without the prior terms, we have no way of evaluating the materiality issue based
on the record before us, because appellant provided no evidence. As a result,
appellant failed to establish the existence of the August 2019 Terms and, therefore,
the arbitration agreement.5         See Hathaway, 711 S.W.2d at 229 (concluding
modification not proven where notice not shown).

       Because appellant failed to prove that it provided the appropriate notice to
appellee of the change in the terms, appellant has failed to show that appellee
assented to the modification when he continued to use the service. Failure to
demonstrate notice disposes of any claim that a party ratified the agreement by
continued use. See Big Bass Towing Co. v. Akin, 409 S.W.3d 835, 842 (Tex.
App.—Dallas 2013, no pet.) (“[N]othing in the record to show . . . any knowledge
of the arbitration agreement when he accepted benefits under the . . . plan. [The
appellant] therefore failed to show that [the appellee] ratified the arbitration
agreement by accepting [other] benefits of the plan.”); Barrand, Inc. v.
Whataburger, Inc., 214 S.W.3d 122, 146 (Tex. App.—Corpus Christi–Edinburgh
2006, pet. denied) (“[I]f a party by its conduct recognizes a contract as valid,
having knowledge of all relevant facts, it ratifies the contract.”). Having failed to

       5
        Appellant further did not provide the prior terms and makes no argument that arbitration
should be compelled under the prior terms.

                                               9
prove the existence of the August 2019 Terms, appellant has not shown that the
trial court abused its discretion in denying appellant’s motion to compel
arbitration. We overrule appellant’s sole issue.6

                                        CONCLUSION

       Because appellant failed to meet its burden to show that an arbitration
agreement exists, it has not shown that the trial court abused its discretion in
denying the motion to compel arbitration.              We affirm the trial court’s order
denying appellant’s motion to compel arbitration.

                                            /s/     Ken Wise
                                                    Justice

Panel consists of Justices Wise, Poissant, and Wilson.

       6
         Appellant presented its sole issue through three “sub-issues.” The first sub-issue we
have resolved above against appellant. The other sub-issues regard appellant’s status as a third-
party beneficiary. Because we resolved the first sub-issue against appellant, we do not reach the
other sub-issues because they are not necessary to the disposition of this appeal. See Tex. R.
App. P. 47.1.

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