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Worth The Wait – Texas Supreme Court Tells The Trial Judge To Compel Arbitration Nine Years After The Lawsuit Was Filed – Arbitration & Dispute Resolution



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Seyfarth Synopsis: In 2013,
Yvonne Cardwell, a dishwasher at a Whataburger in El Paso, Texas, was injured
when a heavy object fell off of a top shelf and hit her in the
head. Whataburger moved to compel the lawsuit she filed against her
employer to arbitration, pursuant to its mandatory arbitration
policy
.

Whataburger’s mandatory arbitration policy
(“Policy”) required all employees, as a form of accepting
employment, to agree to submit all legally recognized claims and
disputes related to their employment to arbitration. The Policy
also bound Whataburger to the same terms, but included a provision
stating “any employee who continues to work for the company
for more than 30 days after any amendment in the company
Arbitration policy shall be deemed to have consented to the changes
in the Policy.” The exception to this provision, however, was
that once facts gave rise to a legally recognized claim or dispute,
Whataburger had no right to unilaterally modify the Policy relating
to the claim or dispute without the mutual consent of both parties.
The Policy also required Whataburger to give its employees at least
30 days advanced notice of the any amendment.

The Policy was contained in the Whataburger Employee Handbook
(“Handbook”). The Handbook was labeled as a
“guide”, and Whataburger reserved the right to modify or
delete any part of the Handbook without notice. Cardwell signed an
acknowledgement form indicating that she had received the Handbook
and Policy, and initialed a paragraph that expressly stated all
claims or disputes will be submitted to arbitration.

In August 2013 the trial court found the Policy to be
unconscionable and denied Whataburger’s motion to compel
arbitration. On appeal in October 2014, the court of appeals
rejected the trial court’s unconscionability analysis, reversed
its order, and remanded with instructions to grant
Whataburger’s motion to compel arbitration. But, the court of
appeals failed to adjudicate cross points Cardwell had briefed in
support of the trial court’s order. The Texas Supreme Court
granted Cardwell’s petition for review, and remanded to the
court of appeals to address Cardwell’s arguments.

On remand, the court of appeals rejected all of Cardwell’s
remaining arguments except one: that the Policy was illusory
because Whataburger could revoke it at any time. Conflating the
non-binding employee Handbook and binding arbitration Policy as one
entity, Cardwell argued that since the handbook could be modified
at any time and the arbitration policy was included within the
handbook, the entire policy was illusory because Whataburger
retained the right to unilaterally modify the Policy. The court of
appeals declined to resolve the issue and remanded the case back to
the trial court.

Nearly five years after the initial filing, the trial court
denied the motion to compel arbitration again. However, the trial
court clerk failed to give Whataburger or Cardwell notice of the
order denying the motion to compel arbitration. There is generally
a 20-day timeline to appeal this kind of order, and if a party does
not receive notice within 20 days after the order, the timeline for
appeal is extended to a maximum of 90 days. Whataburger was not
informed of the trial order until 153 days had passed, nearly five
months after the order was issued. Whataburger immediately
requested reconsideration from the trial court due to being
stripped of its right to appeal. The trial court denied the motion,
and Whataburger requested mandamus relief from the court of
appeals. The court of appeals also denied the relief, and
Whataburger then requested mandamus relief from the Supreme Court
of Texas.

Nine years after the initial filing of the lawsuit, the Texas
Supreme Court held that Whataburger was not given an adequate
chance to appeal, that its promise to arbitrate was not illusory or
unenforceable, and that the acknowledgement referring to the Policy
did not condition the parties’ promises to arbitrate on an
employee’s continued, at-will employment. The Court cited the
trial court clerk’s failure to notify the parties of its order
and the trial court’s erroneous interpretation of the Policy
and Acknowledgement as reasons for its deciding the trial court
abused its discretion in failing to compel arbitration.

TAKEAWAYS

Employers should be cautious about how an arbitration policy is
communicated to employees, including where it is placed. When
binding documents like an arbitration policy and non-binding
documents like an employee handbook are combined in a single
publication, there is room for employees to argue against the
binding nature of the arbitration policy.

To avoid this argument it is prudent to separate all binding and
non-binding documents so that there is very little potential for
confusion . Employers should also include language in the
arbitration agreement that expressly limits the employer’s
ability to unilaterally change the policy after an event giving
rise to a claim has occurred to reduce the chance of a court
finding that the agreement is unconscionable or illusory. However,
an employer still may have to wait a long time before the final
decision regarding compelling arbitration is made-but hopefully
less than 9 years.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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