Stage Stores, Inc. v. Joe Eufracio ( 2019 )

NUMBER 13-18-00281-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
STAGE STORES, INC., Appellant,
v.
JOE EUFRACIO, Appellee.
On appeal from the County Court at Law No. 2
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Benavides and Longoria
Memorandum Opinion by Chief Justice Contreras
Appellant Stage Stores, Inc. (Stage) challenges the trial court’s denial of its motion
to compel arbitration in a discrimination suit brought by appellee Joe Eufracio, a former
Stage employee. We reverse and remand.
I. BACKGROUND
Eufracio was employed as a “Market Asset Protection Manager” at Stage’s
department stores in south Texas from 1999 until 2016. According to Stage, upon his
hiring, Eufracio signed an “Alternative Dispute Resolution Acknowledgement” form which
stated in its entirety as follows:
Notice of Dispute Resolution Program. The Stage Stores Inc. Dispute
Resolution Program requires that any dispute between myself and Stage
Stores Inc. or its subsidiaries or affiliates (collectively, the “Company”), or
claim by either of us against the other, must be resolved through internal
Company procedures or through mediation or final and binding
arbitration. NO SUCH DISPUTE OR CLAIM CAN BE TAKEN TO COURT
OR HEARD BY A JURY. This includes, but is not limited to, any claim or
dispute I might have involving a Company officer, director, owner, affiliate,
representative, or employee. It also includes, but is not limited to, any claim
based upon a failure or refusal to hire. I acknowledge that a copy of the
complete Dispute Resolution Program is available to me upon request. I
understand and agree that any offer of employment by the Company will be
in consideration for and subject to my agreement to be bound by the Dispute
Resolution Program which I show by my signature below. If I choose now,
or in the future, not to comply with the Dispute Resolution Program or any
policy or procedure described in the Employee Handbook, my employment
may be terminated. Even if my employment is terminated (voluntarily or
involuntarily, for any reason), the Dispute Resolution Program will continue
to apply.
(Emphasis in original.)
In 2015, Eufracio invoked Stage’s dispute resolution process by filing an internal
complaint alleging that he had been subject to race/national origin and age discrimination.
The complaint alleged, among other things, that Eufracio’s supervisor had made offensive
and racially disparaging remarks to him on multiple occasions. Subsequently, in February
2016, Stage terminated Eufracio’s employment, ostensibly due to “poor performance.”
Eufracio filed the instant suit in Hidalgo County Court at Law Number 2 on May 22,
2017, contending that Stage’s actions constituted discrimination on the basis of age, race,
national origin, and/or disability, in violation of the Texas Commission on Human Rights
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Act (TCHRA). See TEX. LAB. CODE ANN. § 21.051. The petition additionally alleged that
Stage unlawfully retaliated against Eufracio by firing him. See id. § 21.055.
Stage moved to compel arbitration, arguing that Eufracio signed the “Alternative
Dispute Resolution Acknowledgement” form in 1999 when he was hired. The motion
included a copy of the form which appeared to be signed by Eufracio and was dated
January 11, 1999. Stage’s motion also included a copy of its Dispute Resolution Program,
a 20-page pamphlet which sets forth mandatory procedures for certain claims, including
a formal internal review, mediation, and binding arbitration. The document states that
“[c]laims for discrimination” are subject to all of those procedures. In response to the
motion to compel, Eufracio argued that the arbitration agreement is unenforceable for
various reasons, which we categorize as follows: (1) it is illusory due to a lack of
consideration; (2) it is procedurally unconscionable; (3) it is “indefinite”; and (4) it “deprives
[him] of an equivalent and accessible forum in which to effectively prosecute his claims.”
At a hearing on April 23, 2018, Eufracio testified that he first learned of Stage’s
Dispute Resolution Program when he was “presented by [his counsel] the documents of
the lawsuit.” When asked whether the signature on the “Alternative Dispute Resolution
Acknowledgement” form was his, Eufracio replied: “It looks to be but it’s not.” He
explained that he never signed the form, and he observed that the form was incomplete
because the spaces for “Associate Number,” “Date of Hire,” and “Store Number” were left
blank. Eufracio also denied that he was ever “given” the Dispute Resolution Program
pamphlet. Following Eufracio’s testimony, his counsel stated to the court: “[I]f I had my
preferences on this particular case I would like the opportunity to go to mediation and if it
doesn’t settle at mediation then at some point arbitration would be discussed and if the
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Court orders arbitration at that point then so be it.”
Nevertheless, the trial court signed an order denying the motion to compel in its
entirety on May 11, 2019, and this interlocutory appeal followed. See TEX. CIV. PRAC. &
REM. CODE ANN. § 51.016. On July 10, 2018, we abated the appeal to allow the parties
to engage in mediation. Because no agreement was reached at mediation, we reinstated
the appeal on September 13, 2018.
II. DISCUSSION
Stage argues by one issue that the trial court erred in denying its motion to compel
arbitration. Eufracio has not filed a brief to assist the Court in the resolution of this
appeal.1
A. Standard of Review
Generally, a trial court’s denial of a motion to compel arbitration is reviewed for
abuse of discretion. Beldon Roofing Co. v. Sunchase IV Homeowners’ Ass’n, Inc., 494
S.W.3d 231, 238 (Tex. App.—Corpus Christi–Edinburg 2015, no pet.). In such a review,
while we defer to the trial court’s factual determinations that are supported by evidence,
we review the trial court’s legal determinations de novo. Rachal v. Reitz, 403 S.W.3d
840, 843 (Tex. 2013). Whether an arbitration agreement is enforceable is a question of
law that is subject to de novo review. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643
(Tex. 2009) (orig. proceeding).
Where, as here, the trial court makes no written findings of fact or conclusions of
law in support of its ruling, “all facts necessary to support the judgment and supported by
1 On May 31, 2019, Stage filed an “Unopposed Motion to Set Case for Submission Without Oral
Argument” with this Court, noting that Eufracio has not filed an appellee’s brief. Stage also stated in its
motion that Eufracio’s counsel “recently confirmed that he did not intend to file a brief and does not oppose
the relief requested in [Stage]’s brief.” We granted the motion on June 3, 2019.
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the evidence are implied.” Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d
333, 337 (Tex. 2009) (citing BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795
(Tex. 2002)). We will affirm the ruling if it can be upheld on any legal theory supported
by the evidence. In re W.E.R., 669 S.W.2d 716, 716 (Tex. 1984).
B. Applicable Law
A party seeking to compel arbitration under the Federal Arbitration Act (FAA)2 must
establish that (1) there is a valid arbitration agreement, and (2) the claims raised fall within
that agreement’s scope. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig.
proceeding); see 9 U.S.C.A. §§ 2, 4. Arbitration is strongly favored; therefore, once it is
established that an arbitration agreement exists and that the claims in question are within
the scope of the agreement, a presumption arises in favor of arbitrating those claims and
the party opposing arbitration has the burden to prove a defense to arbitration. Royston,
Rayzor, Vickery & Williams, LLP v. Lopez, 467 S.W.3d 494, 499–500 (Tex. 2015). “A trial
court that refuses to compel arbitration under a valid and enforceable arbitration
agreement has clearly abused its discretion.” In re 24R, Inc., 324 S.W.3d 564, 566 (Tex.
2010) (orig. proceeding) (citing In re Halliburton Co., 80 S.W.3d 566, 573 (Tex. 2002)
(orig. proceeding)).
In determining whether there is a valid agreement to arbitrate, we apply ordinary
principles of state contract law. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738
(Tex. 2005) (orig. proceeding).
2 Stage’s Dispute Resolution Program pamphlet states that “[t]o the maximum extent possible, the
[FAA] will govern the interpretation and enforcement of the arbitration proceedings.”
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C. Analysis
There appears to be no dispute that Eufracio’s claims fall within the scope of the
arbitration agreement at issue; thus, the only question is whether that agreement is valid
and enforceable. See In re Rubiola, 334 S.W.3d at 223. Stage argues that there is no
merit to any of the defenses to enforceability raised by Eufracio in his written response to
the motion to compel. Stage further contends that, to the extent the trial court’s ruling
was based on Eufracio’s hearing testimony that he did not sign the arbitration agreement,
that was error because Eufracio did not set forth that denial in any verified pleading. We
agree with Stage on both points.
First, we address the defenses raised in Eufracio’s written response. The
response initially argued that the arbitration agreement is unenforceable because it is
illusory—specifically, it alleged there was no “mutuality of obligation” because the
agreement “only purports to bind [Eufracio] to arbitrate his claims.” See In re 24R, Inc.,
324 S.W.3d at 567 (“When illusory promises are all that support a purported bilateral
contract, there is no mutuality of obligation, and therefore, no contract.”); Light v. Centel
Cellular Co., 883 S.W.2d 642, 645 (Tex. 1994) (noting that a promise is illusory if it fails
to bind the promisor). But in a section describing the “External Procedures” of mediation
and arbitration, the Dispute Resolution Program pamphlet states as follows in bold, capital
letters:
BOTH YOU AND THE COMPANY ARE REQUIRED TO FOLLOW THESE
EXTERNAL PROCEDURES FOR ALL COVERED CLAIMS. YOU
CANNOT PURSUE A LAWSUIT IN COURT AGAINST THE COMPANY
AND THE COMPANY CANNOT PURSUE A LAWSUIT IN COURT
AGAINST YOU ON THE BASIS OF ANY OF THESE COVERED CLAIMS.
The agreement was not illusory because it bound both Eufracio and Stage to arbitrate
claims within its scope. Cf. Light, 883 S.W.2d at 645.
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Next, Eufracio’s response argued that the agreement is unconscionable because
he was “acting under duress when he signed” it. Agreements are unenforceable if they
are substantively or procedurally unconscionable. Royston, 467 S.W.3d at 499.
“Substantive unconscionability refers to the fairness of the arbitration provision itself,
whereas procedural unconscionability refers to the circumstances surrounding the
adoption of the arbitration provision.” Id. (citing In re Palm Harbor Homes, Inc., 195
S.W.3d 672, 677 (Tex. 2006) (orig. proceeding)). Though Eufracio alleged in his written
response that he signed the agreement under duress, he did not offer any evidence, such
as an affidavit, to support this assertion. Instead, he testified at the hearing that he never
signed the agreement at all, which directly contradicts his unconscionability argument.
For this reason, the trial court abused its discretion if it denied the motion to compel based
on unconscionability.
Third, Eufracio argued in his response that the agreement “fails for indefiniteness”
because “it omits essential terms” such as “the procedure to be used in conducting the
arbitration, what rules of discovery, evidence or procedure, if any, will apply, and whether
the proceedings will be ‘of record.’” See Fort Worth Indep. Sch. Dist. v. City of Fort Worth,
22 S.W.3d 831, 846 (Tex. 2000) (“[W]hen an agreement leaves material matters open for
future adjustment and agreement that never occur, it is not binding upon the parties and
merely constitutes an agreement to agree.”); T.O. Stanley Boot Co. v. Bank of El Paso,
847 S.W.2d 218, 221 (Tex. 1992) (“In order to be legally binding, a contract must be
sufficiently definite in its terms so that a court can understand what the promisor
undertook.”). Eufracio did not cite any authority establishing that these terms in particular
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are essential to an arbitration agreement, and we find none.3 In any case, the Dispute
Resolution Program pamphlet explained that the parties must choose a dispute resolution
organization (DRO), an arbitrator, and arbitration procedures, and it specifically provided
which DRO would be used in the event the parties could not agree. We conclude the trial
court erred if it denied the motion to compel on the basis of indefiniteness.
Fourth, Eufracio’s response alleged that the arbitration agreement is
unenforceable because it “deprives [him] of an equivalent and accessible forum in which
to effectively prosecute his claims.” He appeared to argue that his claims brought under
the TCHRA may not be arbitrated because arbitration is inadequate to protect his rights
under that statute. See Williams v. Cigna Fin. Advisors Inc., 197 F.3d 752, 763 (5th Cir.
1999) (“[W]hether a federal statutory claim can be subjected to compulsory arbitration
depends upon whether the particular arbitral forum involved provides an adequate
substitute for a judicial forum in protecting the particular statutory right at issue.”).
Eufracio did not cite any authority, and we find none, indicating that arbitration as called
for in the agreement and Stage’s Dispute Resolution Program is inadequate to protect his
statutory right to be free from discrimination under the TCHRA. As Stage notes, the
statute itself states that the use of alternative means of dispute resolution, such as
arbitration, is “encouraged to resolve disputes arising under [the TCHRA].” TEX. LAB.
CODE ANN. § 21.203(a). The trial court erred if it found the arbitration agreement
unenforceable on this basis.
3 Following the April 2018 hearing, the trial court mentioned Eufracio’s observation that the
“Alternative Dispute Resolution Acknowledgement” form did not contain an “Associate Number,” “Date of
Hire,” or “Store Number” on the spaces provided. However, Eufracio has never alleged that these particular
pieces of missing information were essential such that their absence made the arbitration agreement
unenforceable.
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Finally, Eufracio testified at the hearing on the motion to compel that he never
signed the arbitration agreement. This contradicted his written response, which
acknowledged that he signed the agreement but alleged that he did so under duress. The
rules of civil procedure require that certain pleadings must be verified by affidavit,
including “[d]enial of the execution by himself or by his authority of any instrument in
writing, upon which any pleading is founded, in whole or in part and charged to have been
executed by him or by his authority, and not alleged to be lost or destroyed.” TEX. R. CIV.
P. 93(7). Eufracio never filed any pleading or document, verified or otherwise, denying
that he signed the arbitration agreement; instead, as noted, he conceded that he signed
the agreement in his response to the motion to compel.
Moreover, the trial court erred if it excused Eufracio’s failure to file a verified denial
on the basis that the issue was tried by consent. See TEX. R. CIV. P. 67 (“When issues
not raised by the pleadings are tried by express or implied consent of the parties, they
shall be treated in all respects as if they had been raised in the pleadings.”).4 Trial by
consent is intended to cover only the “exceptional” case in which it “clearly appears from
the record as a whole that the parties tried the unpleaded issue”; it “should be applied
with care” and “is not intended to establish a general rule of practice.” Guillory v. Boykins,
442 S.W.3d 682, 690 (Tex. App.—Houston [1st Dist.] 2014, no pet.); Greene v. Young,
174 S.W.3d 291, 301 (Tex. App.—Houston [1st Dist.] 2005, pet. denied). A party’s
unpleaded issue may be deemed tried by consent when evidence on the issue is
4 Rule 67 is clear that “issues not raised by the pleadings” may be tried by consent. TEX. R. CIV. P.
67. Though Stage addresses this issue in its brief, it cites no authority explicitly indicating that the trial-by-
consent doctrine may also operate to excuse a party’s failure to file a verified plea as required by Rule 93.
See TEX. R. CIV. P. 93. For purposes of this opinion, we assume but do not decide that a party’s failure to
file a verified plea pursuant to Rule 93 may be excused if the issue is tried by consent.
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developed under circumstances indicating both parties understood the issue was present
in the case, and the other party failed to make an appropriate complaint. Prize Energy
Res., L.P. v. Cliff Hoskins, Inc., 345 S.W.3d 537, 567 (Tex. App.—San Antonio 2011, no
pet.). Here, Stage’s counsel alerted the trial court to the lack of a verified denial
immediately after Eufracio’s hearing testimony. After the hearing, Stage filed a
supplemental brief with the trial court again objecting to consideration of the unpleaded
issue. See id. We cannot say that this is an “exceptional” case warranting application of
the trial-by-consent doctrine. See Guillory, 442 S.W.3d at 690.
Because the defenses raised by Eufracio lack merit, the arbitration agreement was
valid and enforceable, and the trial court’s refusal to compel arbitration was an abuse of
discretion. See In re 24R, Inc., 324 S.W.3d at 566. Stage’s issue on appeal is sustained.
III. CONCLUSION
The trial court’s judgment is reversed. We remand with instructions to grant the
motion to compel arbitration and for further proceedings consistent with this opinion.
DORI CONTRERAS
Chief Justice
Delivered and filed the
1st day of August, 2019.
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