Opinion Issued October 9, =
2008
<=
BR>
In=20
The
Court of=20
Appeals
For=20
The
First =
District of=20
Texas
____________________
NO.=20
01-08-00296-CV
____________________
IN RE TEXAS BEST =
STAFF=20
LEASING, INC. D/B/A ALT-SOURCE, =
Relators
Original =
Proceeding on=20
Petition for Writ of Mandamus
* *=20
*
_____________________
NO. 01-08-00418-CV
_______________
TEXAS BEST STAFF LEASING, INC. D/B/A=20
ALT-SOURCE,
Appellant
V.
GERARDO =
HERRERA,
Appellee
On Appeal from the =
280th=20
Judicial District Court
Harris County,=20
Texas
Trial Court Cause =
No.=20
2007-33595
MEMORANDUM=20
OPINION
=
By=20
way of interlocutory appeal and petition for writ of mandamus,=20
Texas =
Best=20
Staff Leasing, Inc. d/b/a Alt-Source =
(=E2=80=9CAlt-Source=E2=80=9D) seeks relief from the=20
trial court=E2=80=99s denial of its motion to compel =
arbitration. ![3DFootnote](3D"")
In its sole issue, =
Alt-Source contends that the trial court abused its discretion by =
denying=20
the motion. We conclude =
that the=20
Federal Arbitration Act (FAA) applies to this =
agreement=20
and that the trial court did =
not abuse=20
its discretion by denying the motion to compel arbitration because =
Alt-Source waived its argument under section 5 of the FAA by failing to =
present that=20
argument to the trial court. Accordingly, we dismiss the =
interlocutory=20
appeal=20
and deny the petition for writ of mandamus.
Background
<=
/SPAN>In=20
September 2006, Alt-Source, a staff leasing company, hired real =
party in=20
interest, Gerardo Herrera. Herrera was assigned to work at Strong=20
Industries Inc. (=E2=80=9CStrong=E2=80=9D), a client company of =
Alt-Source.=20
=
Prior=20
to employment with Strong, Herrera signed an Applicant =
Acknowledgment of=20
Terms & Conditions of Application and/or Employment =
(=E2=80=9Cthe=20
Acknowledgment=E2=80=9D) and a New Employee Acknowledgment List =
(=E2=80=9Cthe=20
Acknowledgment List=E2=80=9D) (collectively, =E2=80=9Cthe =
Agreement=E2=80=9D) with Alt-Source. The=20
Acknowledgment stated, in part,
13. The Employee =
Handbook is=20
provided to you for information and immediate reference. Not only =
will you=20
be issued your own personal handbook, there will be a copy in the =
office=20
for your reference. Please read this booklet carefully and =
completely.=20
Policies included in this booklet except for the =
Employment-At-Will Policy=20
and the Dispute Resolution Agreement are subject to unilateral =
change by=20
the Company from time to time. Please acknowledge receipt of the =
Employee=20
Handbook by signing below. I hereby acknowledge that I have been =
advised=20
that Alt-Source is a Professional Employer Organization. I further =
acknowledge that Alt-Source has entered into a staffing =
arrangement with=20
my assigned worksite employer. I also certify that I have had, or =
will=20
have, an opportunity to read and become familiar with the terms of =
the=20
Employee Handbook before beginning work for Alt-Source and my =
assigned=20
worksite employer . . . .
The Acknowledgment =
List=20
stated, in part,
2. I will read =
this=20
handbook=E2=80=94specifically the sections regarding: Drug Free =
Workplace Policy,=20
Occupational Accident Insurance, Re-Assignment Policy, Company =
Rules and=20
Regulations, Workplace Harassment Policy, Separation Policy, =
Payroll=20
Deductions, Dispute Resolution System . . . =
.
5. Yo entiendo que =
el=20
Manual de Politica esta escrito en Ingles. Tambien entiendo =
que soy=20
responsable de entender el contenido de este manual. Es mi =
responablidad=20
de traducir este manual por medio de una person[a] con quien =
trabajo o un=20
miembro de mi familia.
Si tiene alguna =
pregunta,=20
por favor preguntele a su supervisor.
I understand the =
Employee=20
Handbook is written in English. I also understand I am responsible =
for=20
understanding the contents of this manual. It is my responsibility =
to have=20
this manual translated by a trusted co-worker or family=20
member.
If you have any =
questions,=20
please see your supervisor.
The Employee =
Handbook (=E2=80=9Cthe=20
Handbook,=E2=80=9D also encompassed by =E2=80=9Cthe =
Agreement=E2=80=9D) included a section titled=20
=E2=80=9CDispute Resolution System=E2=80=94Mediation & =
Arbitration,=E2=80=9D which stated, in=20
part,
This Company, all =
of the=20
members thereof, their parents, subsidiaries, affiliated =
organizations and=20
each, every and all of its and their other employees, officers, =
directors,=20
co-employers and / or shareholders, and / or all of their =
subcontractors,=20
customers, clients and You, the Employee, individually and on =
behalf of=20
your heirs, spouse, representatives, attorneys, successors, and =
assigns,=20
mutually contract and agree that, each, every, any and all claims, =
disputes or controversies, now existing or hereafter arising, =
whether now=20
known or unknown, including the arbitrability of any claim, =
dispute or=20
controversy, shall be exclusively resolved by the mediators of =
National=20
Mediation Arbitration, Inc.; if mediation is unsuccessful, the =
settlement=20
of the dispute shall be by final and binding arbitration =
exclusively=20
conducted under the Arbitration Rules of, administered by the =
staff of,=20
and conducted before (an) arbitrator(s) of National Mediation =
Arbitration,=20
Inc. The Mediation and Arbitration Rules of National Mediation=20
Arbitration, Inc. as respectively then in effect on the date of a =
request=20
for mediation, and / or on the date of a timely demand, request or =
submission to arbitration, respectively, are expressly stipulated =
and=20
agreed to be incorporated into this agreement as though set forth =
at=20
length herein. All such mediation and or arbitration =
proceedings shall=20
be exclusively pursuant to the provisions of, and jurisprudence=20
interpreting, the Federal Arbitration Act . . . =
.
You the Employee, =
and your=20
Employer, mutually contract and agree that the procedures set =
forth herein=20
shall be the sole and exclusive remedies or process available for=20
resolving and finally settling each, every, any and all claims, =
between or=20
among them, and all other persons named, described, referred to, =
and / or=20
stated anywhere in this agreement; such claims, disputes and =
controversies=20
shall include. . . . [T]heories of contract, quasi-contract, duty=20
obligation, death, personal injury, tort . . . .
The parties . . . =
. further=20
agree and stipulate that this agreement shall constitute, and may =
be used=20
as, a full and complete judicial and / or arbitral admission that =
their=20
transaction(s) may affect and / or do constitute interstate =
commerce. The=20
parties expressly agree to pay their respective share of all fees =
and=20
expenses for each mediation and / or arbitration, unless otherwise =
agreed=20
or determined according to the N.M.A.I. Mediation or Arbitration =
Rules.=20
=
(emphasis added). =
National=20
Mediation Arbitration, Inc. (=E2=80=9CNMAI=E2=80=9D), the =
arbitrator exclusively=20
designated in the Handbook for resolution of disputes, forfeited =
its right=20
to do business in the state of Texas on August 22, 2003. Herrera =
signed=20
the Agreement on September 12, 2006, which was over three =
years after=20
NMAI ceased doing business in Texas.
=
While=20
at Strong, Herrera was injured when a co-worker caused a container =
to run=20
over his foot. Herrera sued Strong and Alt-Source under theories =
of=20
negligence and vicarious liability. Alt-Source moved to abate and =
compel=20
arbitration, which the trial court denied. Alt-Source seeks =
mandamus=20
relief (1) to vacate the order denying its motion to abate and =
compel=20
arbitration, and (2) for an order granting its motion. =
Appellate=20
Jurisdiction
=
In this petition =
for writ of=20
mandamus and interlocutory appeal, Alt-Source posits that the Agreement =
incorporates both the=20
FAA and the TAA. Herrera responds that the Agreement is =
exclusively=20
governed by the FAA. =
&nbs=
p;When=20
a trial court denies a motion to compel based on the =
FAA,
the motion is =
reviewed by=20
mandamus. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 =
(Tex.=20
1992). When a trial court denies a motion to compel based on the =
Texas=20
Arbitration Act (TAA),
the motion is =
reviewed by=20
interlocutory appeal. Tex. Civ.=20
Prac. & Rem. Code Ann. =C2=A7 171.098 (Vernon =
2005).
<=
/SPAN>Parties=20
may validly contract for application of the FAA. See In re =
Kellogg=20
Brown & Root, 80 S.W.3d 611, 617 (Tex. =
App.=E2=80=94Houston [1st Dist.]=20
2002, orig. proceeding). The FAA also =
applies to=20
contracts evidencing transactions that involve interstate =
commerce. 9=20
U.S.C.A. =C2=A7=C2=A7 1=E2=80=932 (West 1999); Tipps, 842 =
S.W.2d at 269=E2=80=9370.=20
=
In=20
the briefs filed in this court and in the documents signed by the =
parties,=20
the parties agree that the FAA applies. The Handbook states that =
all=20
mediation and arbitration proceedings =E2=80=9Cshall be =
exclusively pursuant=E2=80=9D to=20
the FAA. The employer and employee also agree in the Handbook to =
an=20
=E2=80=9Carbitral admission that their transaction(s) may affect =
and / or do=20
constitute interstate commerce.=E2=80=9D
=
The=20
parties dispute whether, in addition to the FAA, the TAA applies.=20
Alt-Source contends in the interlocutory appeal that =E2=80=9Cthe =
Agreement=20
incorporates both the FAA and the TAA.=E2=80=9D However, Alt-Source =
does not explain=20
why the TAA applies. The Agreement does not reference the TAA =
anywhere.=20
The only references to arbitration in the Agreement are to the FAA =
and to=20
interstate commerce. Because the Agreement exclusively references =
the FAA=20
and law pertaining to the FAA, we conclude that only law =
pertaining to the=20
FAA applies. See Kellogg Brown & Root, 80 S.W.3d at=20
617.
&nbs=
p;Alt-Source=20
cites EZ Pawn Corp. v. Mancias as precedent in which a =
party seeks=20
relief by petition for writ of mandamus and by application for =
writ of=20
error. 934 S.W.2d 87, 88 (Tex. 1996). However, Mancias is=20
distinguishable from the instant matter because the arbitration =
agreement=20
in Mancias incorporated both the FAA and the TAA. Id.; see also In re D. Wilson =
Constr.=20
Co., 196 S.W.3d 774, 779 (Tex. 2006) (holding FAA and TAA both =
invoked=20
when contract says it shall be governed by law of place where =
project is=20
located and does not reference either FAA or TAA).
=
We=20
conclude that only the FAA governs and review the trial =
court=E2=80=99s decision=20
by virtue of Alt-Source=E2=80=99s mandamus petition. See =
Kellogg Brown=20
& Root, 80 S.W.3d at 617. Because nothing =
suggests=20
that the parties intended the Agreement to invoke the TAA, we =
dismiss=20
Alt-Source=E2=80=99s interlocutory appeal.
The Petition for=20
Mandamus
=
In=20
its sole issue, Alt-Source contends that the trial court abused =
its=20
discretion by denying the motion to compel arbitration.
A. Applicable=20
Law
=
Mandamus=20
relief is available only to correct a =E2=80=9Cclear abuse of =
discretion=E2=80=9D when=20
there is no adequate remedy by appeal. Walker v. =
Packer,=20
827 S.W. 2d 833, 839 (Tex. 1992) (orig. proceeding). A clear abuse =
of=20
discretion occurs when a trial court =E2=80=9Creaches a decision =
so arbitrary and=20
unreasonable as to amount to a clear and prejudicial error of =
law.=E2=80=9D=20
Id. (quoting Johnson v. Fourth Court of Appeals, =
700 S.W.2d 916, =
917 (Tex.=20
1985) (orig. proceeding) (internal quotation marks omitted)). The=20
reviewing court may not substitute its judgment for that of the =
trial=20
court when reviewing factual issues. Id. at =
839=E2=80=9340. Even if the=20
reviewing court would have decided the issue differently, it =
cannot=20
disturb the trial court=E2=80=99s decision unless the decision is =
shown to be=20
arbitrary and unreasonable. Id. at 840. When a =
motion to=20
compel arbitration under the FAA has been erroneously denied, =
there is no=20
adequate remedy by appeal, and mandamus will issue. In re =
Merrill Lynch=20
Trust Co. FSB, 123 S.W.3d 549, 553 (Tex. App.=E2=80=94San =
Antonio 2003, orig.=20
proceeding).
=
Federal=20
law strongly favors arbitration. See Cantella & Co., Inc. =
v.=20
Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (per curiam). A =
presumption=20
exists in favor of agreements to arbitrate under the FAA. See =
id.=20
Courts must resolve any doubts about an agreement to arbitrate in =
favor of=20
arbitration. See id. A party seeking to compel arbitration =
must=20
establish the existence of a valid arbitration agreement and show =
that the=20
claims in dispute fall within the scope of that agreement. In =
re Bank=20
One, N.A., 216 S.W.3d 825, 826 (Tex. 2007) (per curiam); In =
re=20
FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. =
2001). In determining the =
validity=20
of arbitration agreements under the FAA, we generally apply =
state-law=20
principles governing the formation of contracts. In re Palm =
Harbor=20
Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006). Whether a valid=20
arbitration agreement exists is a legal question subject to de =
novo=20
review. D. Wilson Constr. Co., 196 S.W.3d at 781. Once the =
trial=20
court determines that a valid arbitration agreement exists, the =
burden=20
shifts to the party opposing arbitration to prove its defenses. =
J.M.=20
Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).=20
B. Analysis<=
/SPAN>
<=
/SPAN>There=20
is no dispute between the parties that if the Agreement is =
enforceable,=20
Herrera=E2=80=99s claims fall within the scope of the Agreement, which =
he signed.=20
The dispute =
between the=20
parties only concerns whether Herrera met his burden to prove his =
defenses=20
in opposition to arbitration. Alt-Source contends that the =
Agreement=20
is enforceable, even though NMAI was not in existence at the time =
the=20
Agreement was signed by Herrera. Herrera responds that the =
Agreement was=20
void from its inception on two alternative grounds. Herrera claims =
Alt-Source waived reliance on the gap-filling section 5 of the FAA =
because=20
it never presented that theory to the trial court. Herrera also =
responds=20
that although Alt-Source relied on the TAA in its arguments to the =
trial=20
court, the TAA is inapplicable to this case because the Agreement=20
specifically provides that it is governed by the FAA. =
Alternatively,=20
Herrera contends that merely naming an arbitrator is insufficient =
to=20
compensate for NMAI=E2=80=99s absence because NMAI was the sole =
and exclusive=20
forum for any dispute resolution, which was =E2=80=9Ccentral to =
the entire=20
alternative dispute resolution system foisted by Alt-Source on =
Herrera.=E2=80=9D=20
We do not reach the alternate argument because we conclude that =
the trial=20
court did not err by rejecting the arguments presented by =
Alt-Source.=20
=
1. Law=20
Concerning Waiver
=
=E2=80=9CEquity=20
is generally not served by issuing an extraordinary writ against a =
trial=20
court on a ground that was never presented to the court and that =
the court=20
thus had no opportunity to address.=E2=80=9D In re Bank of =
America,=20
N.A., No.=20
01-02-00867-CV, 2003 WL 22310800, at *2 (Tex. App.=E2=80=94Houston =
[1st Dist.]=20
Oct. 9, 2003, orig. proceeding) (not designated for publication).=20
Mandamus relief=20
generally requires a predicate request for an action and a refusal =
of that=20
request. In re Perritt, 992 S.W.2d 444, 446 (Tex. 1999) =
(citing=20
Axelson, Inc. v. McIlhany, 798 S.W.2d 550, 556 (Tex. =
1990)).=20
However, the requirement that there =
be a=20
predicate request and adverse ruling is excused =
=E2=80=9Cwhen the request=20
would have been futile and refusal little more than a =
formality.=E2=80=9D=20
Terrazas v. Ramirez, 829 S.W.2d 712, 723 (Tex. 1991). To =
determine=20
whether a request would have been futile, courts examine whether =
or not=20
the request would have added anything for the court=E2=80=99s =
consideration.=20
Perritt, 992 S.W.2d at 446.=20
=
&=
nbsp; 2.=20
Waiver Analysis
&nbs=
p;In=20
seeking mandamus relief, Alt-Source contends that section =
171.041(b) of=20
the TAA and section 5 of the FAA jointly apply to remedy the =
nonexistence=20
of NMAI. Alt-Source=20
asserts that =E2=80=9Cthere is a specific statutory mechanism in =
both the TAA and=20
the FAA that addresses this issue.=E2=80=9D According to =
Alt-Source, the FAA, like=20
the TAA, permits the trial court to choose an alternate set of=20
arbitrators. See FirstMerit Bank, N.A., 52 S.W.3d at=20
757.=20
To remedy=20
the nonexistence of NMAI, Alt-Source urges that the trial court =
should=20
choose another arbitrator and enforce the Agreement under the TAA =
and=20
FAA.
=
Alt-Source correctly notes =
that the=20
TAA and FAA each address the appointment of arbitrators. =
Section=20
171.041(b) provides:
The court, on =
application of=20
a party stating the nature of the issues to be arbitrated and the=20
qualifications of the proposed arbitrators, shall appoint one or =
more=20
qualified arbitrators if: (1) the agreement to arbitrate does not =
specify=20
a method of appointment; (2) the agreed method fails or cannot be=20
followed; or (3) an appointed arbitrator fails or is unable to act =
and a=20
successor has not been appointed.
Tex. Civ. Prac. & Rem. Code =
Ann. =C2=A7 171.041(b). Section 5 of the =
FAA=20
provides:
If in the =
agreement=20
provision be made for a method of naming or appointing an =
arbitrator or=20
arbitrators or an umpire, such method shall be followed; but if no =
method=20
be provided therein, or if a method be provided and any party =
thereto=20
shall fail to avail himself of such method, or if for any other =
reason there shall be a lapse in the naming of an arbitrator =
or=20
arbitrators or umpire, or in filling a vacancy, then upon the =
application=20
of either party to the controversy the court shall designate and =
appoint=20
an arbitrator or arbitrators or umpire, as the case may require, =
who shall=20
act under the said agreement with the same force and effect as if =
he or=20
they had been specifically named therein; and unless otherwise =
provided in=20
the agreement the arbitration shall be by a single=20
arbitrator.
9 U.S.C.A. =C2=A7 =
5 (emphasis added).=20
=
Although in its petition for =
mandamus=20
Alt-Source argues that section 171.041(b) of the TAA and section 5 =
of the=20
FAA jointly apply, it did not =
reference=20
section 5 of the FAA in any way to the trial court. At trial, Alt-Source relied =
exclusively on=20
section 171.041(b) of the TAA to present its theory =
that=20
NMAI=E2=80=99s forfeiture of the right to do business in Texas did =
not render the=20
entire Agreement void.=20
See Tex. Civ. =
Prac. &=20
Rem. Code Ann. =C2=A7=20
171.041(b). =
Alt-Source =
contended that=20
while the FAA controlled the Agreement, Texas procedure should be =
applied=20
under section 171.041(b) of the TAA. In its =
reply to=20
plaintiff=E2=80=99s response to defendant=E2=80=99s motion to =
compel arbitration,=20
Alt-Source claimed that a =E2=80=9Cspecific statutory =
mechanism,=E2=80=9D section=20
171.041(b) of the Texas Civil Practice and Remedies Code, =
addressed the=20
nonexistence of NMAI. In the same reply, Alt-Source stated that =
=E2=80=9Cthe Court=20
should simply appoint a qualified arbitrator pursuant to the Texas =
Civil=20
Practice and Remedies Code.=E2=80=9D In short, counsel for =
Alt-Source never=20
gave the trial court a chance to rule on whether section 5 of the =
FAA=20
would allow the selection of a replacement arbitrator. =
Because Alt-Source never requested =
that the=20
trial court apply the FAA=E2=80=99s provisions in section =
5 concerning =
selection of an=20
arbitrator, we conclude that it has waived any complaint =
concerning the=20
trial court=E2=80=99s failure to apply that section in deciding =
whether an=20
alternate arbitrator could be chosen.
&nbs=
p;Alt-Source contends that an =
exception to=20
waiver is present in the instant matter because arguing the =
application of=20
section 5 to the trial court would have been futile. See =
Perritt,=20
992 S.W.2d at 446. Perritt examined the issue of an =
argument=E2=80=99s=20
futility by examining whether or not the unprovided argument would =
have=20
added anything for the court=E2=80=99s consideration. =
Id. Here, it would =
not have=20
been futile for Alt-Source to present the theory that the =
FAA=E2=80=99s provisions=20
in section 5=20
apply to=20
this case because the trial court could then have addressed that =
claim in=20
deciding whether to enforce the arbitration agreement. We hold the trial =
court did=20
not err by not considering section 5 of the FAA as a basis for =
selection of=20
a replacement arbitrator.
=
3. The=20
TAA
=
Having=20
determined that the trial court did not err by not applying the =
FAA=E2=80=99s=20
provisions in section 5, we must next =
determine=20
whether the trial court erred by failing to select an alternate =
arbitrator=20
under the TAA, section 171.041(b) of the Texas Civil Practice and =
Remedies=20
Code.
&nbs=
p;As we noted above, =
here the=20
parties validly contracted for the exclusive application of the =
FAA.=20
See Kellogg Brown & Root, 80 S.W.3d at 617. =
The=20
parties did not contract for the application of the TAA. Moreover, =
the TAA=20
is inapplicable in this personal injury case because =E2=80=9Cthe =
TAA has imposed=20
an enforceability requirement not found in the FAA.=E2=80=9D =
See In re D.=20
Wilson Const. Co., 196 S.W.3d at 780 (citing In re Nexion =
Health at=20
Humble, Inc., 173 S.W.3d 67, 69 (Tex. 2005)) (=E2=80=9CThe TAA =
interferes with=20
the enforceability of the arbitration agreement by adding an =
additional=20
requirement=E2=80=94the signature of a party=E2=80=99s =
counsel=E2=80=94to arbitration agreements=20
in personal injury cases.=E2=80=9D). Thus, the law pertaining to =
the=20
enforceability of this agreement is under the FAA only.
<=
/SPAN>We have determined that the =
trial court=20
did not abuse its discretion by not considering section 5 of the =
FAA=20
because that argument was not presented to the trial court.=20
We also =
have determined that =
the trial=20
court did not abuse its discretion by rejecting =
Alt-Source=E2=80=99s reliance on=20
TAA section 171.041(b) of the Texas Civil Practice and Remedies=20
Code =
because=20
that section is inapplicable. We therefore =
conclude that=20
the =
trial court=20
did not abuse its discretion by determining that the absence of =
NMAI made=20
the arbitration agreement unenforceable when NMAI was designated =
as the=20
exclusive arbitral forum. See Reddam v. KPMG =
LLP, 457 F.3d =
1054, 1061=20
(9th Cir. 2006); In=20
re Salomon Inc. S=E2=80=99holders=E2=80=99 Derivative Litig., =
68 F.3d 554, 559=E2=80=9361 (2d=20
Cir. 1995).
<=
/SPAN> We hold that Alt-Source has =
not shown=20
that the trial court abused its discretion by refusing to enforce =
the=20
arbitration agreement, which relied upon the exclusive use of an=20
arbitrator who was not in existence at the time the agreement was =
signed=20
and where no replacement arbitrator was selected. We therefore =
need not=20
reach the alternative arguments presented by Alt-Source that =
assert that=20
the Agreement included adequate consideration and was not =
unenforceable on=20
grounds of mistake and fatal indefiniteness; the Agreement was not =
induced=20
by fraud; the Agreement was not procedurally or substantively=20
unconscionable; and the trial court could have only reached one =
decision=20
concerning the agreement.
Conclusion
By denying the =
motion to=20
abate and compel arbitration on March 28, 2008, the trial court =
did not=20
abuse its discretion. Consequently, we dismiss the interlocutory =
appeal=20
and deny the petition for writ of mandamus. =
=
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Elsa=20
Alcala,
=
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Justice
Panel consists of =
Justices=20
Nuchia, Alcala, and Hanks.
|