In=20 The
For=20 The
MEENA =
MATTHEWS,=20
SHUBHRA BROWN, BHARATI DHYANI, SUNNY JOSEPH, RUCHI JOSHI, BOBBY =
KHANNA,=20
ANITA PANDE, ANURAG PATHAK, VANDANA SHOKEEN, PREETIKA RANDIVE, =
GARIMA=20
MALHOTRA, AND NALLANI SRIRAM, Appellants USA =
EMPLOYMENT,=20
L.L.C., Appellee
On =
Appeal from=20
County Civil Court at Law No. 4 Harris =
County,=20
Texas Trial =
Court Cause=20
No. 812,373
NO.=20
01-07-00001-CV MEENA =
MATTHEWS,=20
SHUBHRA BROWN, BHARATI DHYANI, SUNNY JOSEPH, RUCHI JOSHI, BOBBY =
KHANNA,=20
ANITA PANDE, ANURAG PATHAK, VANDANA SHOKEEN, PREETIKA RANDIVE, =
GARIMA=20
MALHOTRA, AND NALLANI SRIRAM, Relators
ORIGINAL =
PROCEEDING ON =
PETITION FOR WRIT=20
OF MANDAMUS
MEMORANDUM=20
OPINION We=20
conditionally grant the petition for writ of mandamus and dismiss =
the=20
related interlocutory appeal as moot From 2002 to 2003, each of the =
Teachers=20
executed a "Teacher Service Agreement" ("the Agreement") with =
USAE.=20
Pursuant to the Agreement, USAE was to assist the Teacher with =
finding a=20
teaching position in the United States in exchange for a fee. It =
is=20
undisputed that the Agreements were identical, with the exception =
of the=20
duration of each, which ranged from one to three years, and the =
fees=20
charged, which ranged from $6,500 to $18,000. The Agreement obligated the =
Teacher to=20
pay the fee when USAE "produce[d] a job offer from any employer =
who=20
interviewed" the Teacher. Upon receiving a job offer, the Teacher =
was to=20
mail, from India, 36 checks of $500 USD each to USAE. Upon the =
Teacher's=20
arrival in the United States on a work visa, the Teacher was to =
again mail=20
36 checks of $500, this time drawn on a United States bank, to =
USAE. Upon=20
receipt of the second set of checks, USAE promised to return the =
overseas=20
checks within a week. Should the teacher fail to accept the =
position=20
offered, USAE would cash the 36 checks or institute collection=20
efforts. Pursuant to the Agreement, the =
Teacher=20
was obligated to pay the fee if any United States employer hired =
her "in=20
any capacity" during the duration of the Agreement and even if the =
Teacher=20
secured a "non-teaching position with an employer not introduced =
by=20
[USAE]." In addition, the Agreement required the Teacher to =
assign any income beyond the =
base salary=20
of the TEACHER (i.e., any sign-up bonus, cafeteria plan, tuitions, =
payments by schools for attending courses or seminars, etc.) to =
[USAE],=20
assign half of the net monthly salary of the spouse, sign any loan =
papers=20
with a bank or credit union, sign any forms needed by the =
employing school=20
for payroll deduction of $500 per month, and pay $500 . . . per =
month to=20
[USAE] on the first day of each month after the TEACHER arrives in =
USA=20
[sic] on a work visa, till [sic] the $18,000 agency fee is fully=20
paid. In addition, pursuant to the =
Agreement,=20
the Teacher was to "exclusively use the services of [USAE] and its =
associates for all . . . visa[s] or petitions for all family =
members for=20
labor certification" and all other immigration related work, and =
"[t]he=20
expenses for such services will be equal to that charged by the =
law firm=20
of Tindall & Foster, P.C., Houston, Texas." If the Teacher =
failed to=20
pay the visa and attorney fees, USAE would cash the Teacher's 36 =
checks or=20
institute collection efforts. The Agreement contained an =
arbitration=20
provision as follows, in pertinent part: Except for breaches or =
threatened=20
breaches of the provisions of Paragraphs 9 and 10 relating to =
equitable=20
relief, any controversy or claim arising out of or in any way =
between [the=20
teacher] and [USAE], for any cause or event, including but not =
limited to=20
claims arising out of the employment relationship and/or =
termination of=20
employment, including without limitation: claims for wages or =
other=20
compensation; claims for any breach of contract or covenant =
(except for=20
violations of Paragraphs 9 and 10); all tort claims; claims of=20
constructive discharge; claims for discrimination; including but =
not=20
limited to any and all past or present controversies, claims, =
disputes or=20
issues of which [the teacher] is or should be aware of against =
[USAE]=20
which are related to or arise out of the employment relationship,=20
including claims . . . relating to or regarding the arbitrability =
of any=20
controversy, claim, dispute or issue, except for claims for =
workman's=20
compensation benefits, shall be FINALLY settled without =
recourse to=20
the Courts and in accordance with the provisions of the =
American=20
Arbitrator's Association and the United States Federal and Texas =
State=20
laws. (Italics added.) The arbitration agreement =
excepted=20
certain claims under Paragraph 9, "Termination of Employment," =
which=20
provided that if the Teacher terminated the Agreement prior to =
completing=20
the term of employment with the school, then the Teacher was =
liable for=20
the total fee as damages. In addition, the arbitration agreement =
excepted=20
claims under Paragraph 10, "Confidentiality and Non-Disclosure," =
which=20
governed the return of USAE materials and prohibited unauthorized=20
disclosure of employment terms and proprietary information. =
In addition to the Agreement, =
each of the=20
Teachers executed a Promissory Note ("Note"), in which she agreed =
to pay=20
the fee as outlined in the Agreement. Each Note contained an =
arbitration=20
provision identical to that contained in the Agreement except for =
the=20
omission in the Note of the language, emphasized above: "shall =
be=20
FINALLY settled without recourse to the Courts." In late 2003 and early 2004, =
fee disputes=20
arose between USAE and individual teachers. On March 12, 2004, =
USAE filed=20
an original petition against each of the twelve Teachers. Subsequently, the twelve =
individual suits=20
were consolidated. On September 5, 2006, the Teachers filed an =
Amended=20
Answer, contending that the Agreements were unenforceable on the =
basis of=20
illegality, fraud, duress, usury, and failure of consideration, =
and that=20
the USAE signatory, Jay Kumar, lacked capacity to bind USAE. In =
addition,=20
the Teachers asserted that USAE breached the Agreements by failing =
to=20
place the Teachers with employment as promised. The Teachers =
contended=20
that, before leaving India, they were promised jobs in the United =
States=20
with specific attributes and salaries and that, upon their arrival =
in the=20
United States, they learned that such jobs were not available to =
them. The=20
Teachers allege that they were forced to secure substandard =
positions on=20
their own and that USAE wrongfully continued to demand payment. =
The=20
Teachers counterclaimed for breach of contract, fraud, and =
violations of=20
the Texas Deceptive Trade Practices Act, seeking actual and =
exemplary=20
damages, and rescission of each Agreement and Note. On September =
18, 2006,=20
USAE moved for summary judgment, the grounds of which are not in =
the=20
record. On October 19, 2006, the =
Teachers moved=20
to compel arbitration, pursuant to the arbitration provision in =
the=20
Agreements. In its response to the motion, USAE contended that its =
claims=20
were excepted from the arbitration provision and that the Teachers =
had=20
waived any right to arbitration by waiting two years after the =
case was=20
set on the trial court's docket to seek arbitration. On October =
26, 2006,=20
after a hearing, the trial court denied the Teachers' motion to =
compel=20
arbitration. This action gave rise to the Teachers' petition for =
mandamus=20
relief. Applicable=20
Law A. Procedural=20
Posture The Teachers have filed an =
interlocutory=20
appeal and petition for writ of mandamus. We must first determine =
the=20
proper procedural posture for reviewing this case. See Jack B. =
Anglin=20
Co. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992); Hou-Scape =
Inc. v.=20
Lloyd, 945 S.W.2d 202, 204-05 (Tex. App.--Houston [1st Dist.] =
1997,=20
orig. proceeding). When an arbitration provision is governed by =
the Texas=20
General Arbitration Act ("TGAA"), an interlocutory appeal is the=20
appropriate mechanism to challenge a denial of arbitration. =
Tex.=20
Civ. Prac. & Rem. Code Ann. =A7 171.098 (Vernon 2005); =
Jack B.=20
Anglin Co., 842 S.W.2d at 272 n.11. When an arbitration =
provision is=20
governed by the Federal Arbitration Act ("FAA"), a petition for =
writ of=20
mandamus is the proper mechanism to challenge a denial of =
arbitration. 9=20
U.S.C. =A7 2 (1999); In re D. Wilson Constr. Co., =
196 S.W.3d=20
774, 779 (Tex. 2006). When the FAA applies to a specific contract, =
it=20
preempts state law to the extent that state law is inconsistent =
with the=20
FAA. D. Wilson Constr. Co., 196 S.W.3d at 779-80. =
Here, the Agreement does not =
specify=20
governance by or exclusion of either the FAA or the TGAA. The =
Agreement=20
merely states that disputes shall be settled "in accordance with =
the=20
provisions of the American Arbitrator's [sic] Association and the =
United=20
States Federal and State laws," that "[t]he laws of the State of =
Texas and=20
the United States of America shall govern," and that "[a]ny action =
brought=20
involving . . . Arbitration" must be brought in Houston, =
Texas. The=20
trial court's order does not specify which act governs. The FAA applies to all suits in =
state or=20
federal court when the dispute concerns a "contract evidencing a=20
transaction involving commerce." Jack B. Anglin Co., 842 =
S.W.2d=20
at 269-70 & n.6. A contract evidences interstate commerce if =
it=20
affects state commerce. In re L&L Kempwood Assocs., =
L.P., 9=20
S.W.3d 125, 127 (Tex. 1999). When, as here, the agreement is =
silent as to=20
whether the FAA applies, the question of whether the transaction =
affects=20
interstate commerce is one of fact. In re Educ. Mgmt. =
Corp., 14=20
S.W.3d 418, 422-23 (Tex. App.--Houston [14th Dist.] 2000, orig.=20
proceeding). An employment relationship =
involving=20
commerce is a sufficient transaction to fall within the FAA. =
BWI Co.=20
v. Beck, 910 S.W.2d 620, 622 (Tex. App.--Austin 1995, orig.=20
proceeding). Here, if the Teachers' relationship with USAE =
involves=20
"commerce," then the FAA governs. In re Anaheim Angels =
Baseball Club,=20
Inc., 993 S.W.2d 875, 877 (Tex. App.--El Paso 1999, orig.=20
proceeding). "Commerce" is "broadly construed and encompasses =
contracts=20
relating to interstate commerce." Hou-Scape, Inc., 945 =
S.W.2d at=20
205. It is undisputed that USAE's principal place of =
business is=20
in Houston, Texas, and that USAE contracted with residents of =
India for=20
employment in public and private schools in Arizona, Mississippi, =
and New=20
York. Thus, USAE conducted its business across state lines. =
See=20
L&L Kempwood Assocs., L.P., 9 S.W.3d at 126-27 (finding=20
interstate commerce when parties to contract reside in different =
states).=20
In addition, the Teachers' contracts inured to the benefit of =
public and=20
private schools in Arizona, Mississippi, and New York, where the =
Teachers=20
performed teaching services. Hence, the Agreements at issue relate =
to=20
interstate commerce. See id. (finding interstate commerce =
when=20
parties contracted in one state for performance in another =
state);=20
Anaheim Angels Baseball Club, Inc., 993 S.W.2d at 878 (same). =
Because=20
the undisputed evidence clearly evidences a transaction involving=20
commerce, we conclude that the FAA governs the arbitration =
agreement.=20
Accordingly, we address the Teachers' petition for writ of =
mandamus.=20
See 9 U.S.C. =A7 2 (1999); D. Wilson Constr. =
Co., 196=20
S.W.3d at 779. B. Standard of=20
Review Mandamus will issue only when =
the trial=20
court violates a duty imposed by law or clearly abuses its =
discretion and=20
there is no adequate remedy by appeal. D. Wilson Constr. =
Co., 196=20
S.W.3d at 780. "A trial court abuses its discretion when 'it =
reaches a=20
decision so arbitrary and unreasonable as to amount to a clear and =
prejudicial error of law.'" See Walker v. Packer, 827 =
S.W.2d 833,=20
839 (Tex. 1992). If a trial court erroneously denies a party's =
motion to=20
compel arbitration under the FAA, the movant has no adequate =
remedy at law=20
and is entitled to a writ of mandamus. In re FirstMerit Bank,=20
N.A., 52 S.W.3d 749, 753 (Tex. 2001). Scope of =
the=20
Arbitration Agreement In issue one, the Teachers =
contend that=20
the trial court improperly denied their motion to compel =
arbitration=20
because a valid agreement to arbitrate covers the claims at issue. =
To compel arbitration under the =
FAA, a=20
party must prove (1) the existence of a valid agreement to =
arbitrate and=20
(2) that the subject claims fall within the scope of that =
agreement.=20
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 =
(Tex.=20
2005); Here, it is undisputed that a =
valid=20
agreement to arbitrate exists in the Agreements between the =
parties. USAE=20
contends, rather, that the trial court properly denied the =
Teachers'=20
motion to compel arbitration because USAE's claims do not fall =
within the=20
scope of that agreement. Whether a claim falls within =
the scope of=20
an agreement to arbitrate presents a matter of contract =
interpretation=20
subject to de novo review. J.M. Davidson, Inc. v. =
Webster, 128=20
S.W.3d 223, 227 (Tex. 2003); Here, the arbitration provision =
covers=20
"any controversy or claim arising out of . . . the employment=20
relationship" and includes, "claims for any breach of contract or=20
covenant," "all tort claims," and any claims "relating to or =
regarding the=20
arbitrability of any controversy, claim, dispute or issue." =
In each of its petitions, =
USAE's factual=20
allegation to support its claim, which it titled an "Action for =
Debt," is=20
that the named teacher "breached the contract and note by failing =
to pay=20
as agreed." To each petition, USAE appended a "Past Due Statement" =
listing=20
each payment missed. In addition, USAE appended to each petition =
the=20
affidavit of its agent, Vijay Gupta, who verified the total sum of =
the=20
debt. These claims fall squarely within the broad scope of the =
arbitration=20
provision in the Agreement, which expressly covers "any =
controversy or=20
claim arising out of . . . the employment relationship" and =
includes,=20
"claims for any breach of contract." See D. Wilson Constr. =
Co.,=20
196 S.W.3d at 783 (considering alleged defects of performance =
under=20
contract). The Teachers counterclaimed for =
breach of=20
contract, fraud, and violations of the Texas Deceptive Trade =
Practices=20
Act. The factual allegations to support these counterclaims are =
that USAE=20
failed to perform as promised under the Agreements by failing to =
place the=20
Teachers with employment. In their answer and petition for =
counterclaims,=20
the Teachers allege that, before leaving India, they were promised =
jobs in=20
the United States with specific attributes and salaries and that, =
upon=20
their arrival in the United States, they learned that such jobs =
were not=20
available to them. The Teachers allege that they were forced to =
secure=20
substandard positions on their own and that USAE wrongfully =
continued to=20
demand payment. These breach of contract and tort claims are also=20
encompassed by the plain language in the arbitration provision, =
which=20
covers "any controversy or claim arising out of . . . the =
employment=20
relationship" and includes, "claims for any breach of contract" =
and "all=20
tort claims." See Hou-Scape Inc., 945 S.W.2d at 205-06; =
see=20
also In re Jim Walter Homes, Inc., 207 S.W.3d 888, =
895 (Tex.=20
App.--Houston [14th Dist.] 2006, orig. proceeding) (recognizing as =
broad=20
language encompassing tort and other claims relating to the =
contractual=20
relationship: "any" dispute "arising out of or relating =
to"). USAE contends that its claims =
do not fall=20
within the scope of the agreement to arbitrate because the =
agreement=20
excepts "claims under paragraphs 9 and 10." Paragraph 9, =
"Termination of=20
Employment," provides that "[i]f the TEACHER terminates this =
Agreement=20
prior to completing [specific duration of one to three years] of=20
employment with the school, then the TEACHER shall be liable to =
pay=20
[USAE], damages equal to [the sum of =
the fee]."=20
Paragraph 10, addresses violations of "Confidentiality and=20
Non-Disclosure." USAE does not, in its petitions, allege facts =
that the=20
named teacher terminated her employment prematurely under the =
Agreement or=20
that she violated her contractual duties of confidentiality. =
Moreover, to=20
the degree that the arbitration agreement excepts "breaches or =
threatened=20
breaches of the provisions of Paragraphs 9 and 10 relating to=20
equitable relief," USAE did not seek any specific equitable =
relief=20
based on violations of paragraphs 9 or 10. We conclude that the scope of =
the=20
arbitration agreement covers the claims at issue and that the =
exceptions=20
in the arbitration provision that USAE relies upon are not =
applicable in=20
this suit. We cannot conclude "with positive assurance" that the =
agreement=20
to arbitrate is not susceptible to an interpretation that would =
cover=20
claims at issue. See FirstMerit Bank, 52 S.W.3d at =
754.=20
We hold that the Teachers carried their burden to show that there =
is a=20
valid agreement to arbitrate between the parties and that the =
claims at=20
issue fall within the scope of that agreement. Accordingly, the Teachers' =
first issue is=20
sustained.Waiver Whether a=20
party has waived its right to arbitration is a question of law =
that we=20
review de novo. In re Bruce Terminix Co., 988 S.W.2d 702, =
703-04=20
(Tex. 1998); Williams Indus., 110 S.W.3d at 136. Because =
public=20
policy favors arbitration, there is a strong presumption against =
finding=20
that a party waived its right to arbitration. Bruce Terminix =
Co.,=20
988 S.W.2d at 704; Williams Indus., 110 S.W.3d at 135. A =
party=20
does not waive its right to arbitration merely by delay; rather, =
waiver=20
must be intentional. EZ Pawn Corp. v. Mancias, 934 S.W.2d =
87, 89=20
(Tex. 1996). Waiver will be found only when the party seeking =
arbitration=20
"has substantially invoked the judicial process to its opponent's=20
detriment." In re Vesta Ins. Group, Inc., 192 S.W.3d 759, =
763=20
(Tex. 2006); Williams Indus., 110 S.W.3d at 135. The =
judicial=20
process has been substantially invoked when the party seeking =
arbitration=20
has taken specific and deliberate actions, after the filing of =
suit, that=20
are inconsistent with a right to arbitrate or has actively tried, =
but=20
failed, to achieve a satisfactory result through litigation before =
turning=20
to arbitration. Vesta Group, Inc., 192 S.W.3d at 763;=20
Williams Indus., 110 S.W.3d at 135. USAE contends that the Teachers =
substantially invoked the judicial process for over two years =
after the=20
case was set on the trial court's docket before seeking =
arbitration.=20
Specifically, USAE contends that the Teachers filed a motion to =
dismiss=20
for lack of jurisdiction; original and amended answers and =
counterclaims;=20
a request for jury trial; a motion to quash depositions; and a =
notice of=20
intent to depose USAE's corporate representative. The Teachers =
also took=20
the deposition of USAE's corporate representative on December 8, =
2005. In=20
addition, contends USAE, it "drafted and signed an agreement to=20
consolidate the cases and an agreement to complete all discovery =
by May=20
28, 2004." Further, USAE contends that the Teachers "invoked the =
judicial=20
process by informally requesting [that USAE] pass on the hearings =
on its=20
motion for summary judgment." Generally, participating in =
pre-trial=20
discovery and motion practice will not support a defense of =
waiver.=20
Bruce Terminix Co., 988 S.W.2d at 704; EZ Pawn =
Corp.,=20
934=20
S.W.2d at 90 (holding no =
waiver=20
although movant answered suit, participated in docket-control =
conference,=20
sent interrogatories and requests for production, noticed =
deposition, and=20
entered into agreed orders resetting case). In Vesta, as =
the=20
Teachers contend, the Supreme Court of Texas refused to find =
waiver even=20
on the basis of two years of litigation in the trial court =
involving over=20
$200,000 in expenses and fees incurred by the non-movant due to =
"prolonged=20
and extensive discovery." 192 S.W.3d at 763. In concluding that =
the=20
non-movant failed to show prejudice, the court considered that the =
movant=20
had made only standard requests for disclosure and had noticed =
four=20
depositions, but had not "showered" the non-movant with discovery=20
requests. Id. Even if the Teachers =
substantially=20
invoked the judicial process, they did not waive their arbitration =
rights=20
unless USAE proved that it suffered actual prejudice as a =
result.=20
Bruce Terminix Co., 988 S.W.2d at 704. =
"Prejudice" may=20
occur when the movant gains information that is not discoverable =
in=20
arbitration or the party opposing arbitration incurs costs due to =
the=20
movant's actions or delay. See Bruce Terminix =
Co., 988=20
S.W.2d at 704 USAE does not complain that the =
Teachers=20
gained information that is not discoverable or that USAE incurred =
costs=20
due to the Teachers' actions or delay. Rather, USAE specifically =
contends=20
that it has suffered prejudice because "the relevant facts have =
already=20
been litigated in the companion case" brought by USAE against 13 =
other=20
teachers. In addition, USAE contends that =
it "will=20
be prejudiced because this case was already presented to the trial =
court for=20
a decision on the merits--through USAE's Motion for Summary =
Judgment."=20
Arbitration can be waived if the movant for arbitration also moves =
for=20
summary judgment in the trial court. See Williams, 110 =
S.W.3d at=20
135. However, here, it is USAE who presented a motion for summary =
judgment=20
to the trial court. The Teachers, as the movants for arbitration, =
have not=20
sought a judicial resolution of any claims. See Southwind =
Group Inc.=20
v. Landwehr, 188 S.W.3d 730, 736 (Tex. App.--Eastland 2006, =
orig.=20
proceeding). USAE has not, in the record =
before us,=20
demonstrated that it suffered sufficient prejudice to overcome the =
strong=20
presumption against waiver. A party denied the right to =
arbitration=20
under the FAA has no adequate remedy by appeal and is entitled to =
mandamus=20
relief to correct a clear abuse of discretion. See L&L =
Kempwood=20
Assocs., L.P., 9 S.W.3d at 128. Because we conclude that the =
trial=20
court clearly abused its discretion in denying arbitration of the =
parties'=20
dispute, we conditionally grant mandamus relief. We direct the =
trial court=20
to vacate its order denying arbitration and to issue an order =
compelling=20
arbitration. We are confident that the trial court will comply and =
our=20
writ will issue only if it does not. Having finally disposed of =
the=20
Teachers' issues by petition for writ of mandamus, we dismiss the=20
Teachers' interlocutory appeal as moot. Laura Carter Higley Justice Panel consists of Justices =
Nuchia, Keyes,=20
and Higley. 1. ' " " " " ' =A7=A7 =20
3. --=20
5. " "=20
7. - - " " =