in Re: Swift Transportation Company, Inc. ( 2009 )

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
§
IN RE: SWIFT TRANSPORTATION No. 08-08-00348-CV
COMPANY, INC., §
AN ORIGINAL PROCEEDING
Relator. §
IN MANDAMUS
§
§
OPINION ON PETITION FOR WRIT OF MANDAMUS
Relator, Swift Transportation Company, Inc., seeks a writ of mandamus to require the
Honorable David C. Guaderrama, Judge of the 243rd District Court, to grant its motion to compel
arbitration. For the reasons that follow, we deny relief.
FACTUAL SUMMARY
Jose Valtierra, the real party in interest, has been employed by Swift since August 31, 2005
as an over-the-road truck driver. Swift is a non-subscriber to the Texas Workers’ Compensation
insurance system. Instead, it has an Injury Benefit Plan for its Texas employees. Under the terms
of the Plan, Valtierra became a participant in the Plan on the date of employment--August 31, 2005.
Section 2.3 of the Plan contains a mandatory arbitration provision. It requires arbitration of
any legal or equitable claim by a participant for any form of physical or psychological damage, harm,
or death which relates to an accident, including claims of negligence and negligent
hiring/training/supervision/retention and violation of any noncriminal federal, state, or other
governmental common law, statute, regulation or ordinance in connection with a job-related injury.
The Plan also provides that Swift and its employees engage in transactions involving interstate
commerce and that the arbitration provision is governed by the Federal Arbitration Act (FAA). The
Injury Benefit Plan states that the arbitration provisions apply to all participants without regard to
whether they have completed and signed a “Receipt, Safety Pledge, and Arbitration
Acknowledgment” form. Finally, it recites that the Plan and arbitration requirement do not change
the “at will” employment status of any participant not covered by a collective bargaining agreement.
Appendix B to the Plan is a form entitled “RECEIPT, SAFETY PLEDGE, AND
ARBITRATION ACKNOWLEDGMENT.” By signing the document, the employee acknowledges
receipt of and an opportunity to read a Summary Plan Description (SPD) of the Injury Benefit Plan.
The arbitration section states in pertinent part:
I also acknowledge that this SPD includes a mandatory company policy requiring that
certain claims or disputes relating to an on-the-job injury (that cannot otherwise be
resolved between the Company and me) must be submitted to an arbitrator, rather
than a judge and jury in court. I understand that by receiving this SPD and becoming
employed (or continuing my employment) with the Company at any time on or after
April 1, 2005, I am accepting and agreeing to comply with these arbitration
requirements. I understand that the Company is also accepting and agreeing to
comply with these arbitration requirements.
It is undisputed that Swift does not have an acknowledgment form signed by Valtierra.
Valtierra and a co-driver were transporting goods in Illinois on December 1, 2006. They
stopped to change drivers and Gutierrez instructed Valtierra to place chains on the tires because it
was icy. Valtierra broke his arm. His claim for benefits under the Plan was initially denied, but
following an appeal, he received benefits. Valtierra filed a negligence suit against Swift and alleging
claims of negligence.
Swift filed a motion to compel arbitration based on the arbitration clause in its Injury Benefit
Plan. It contended Valtierra agreed to--and enrolled in--the Plan, was provided a copy of the Plan,
and acknowledged its terms. The trial court denied the motion to compel arbitration without
specifying the basis for its ruling. Swift filed this mandamus proceeding.
STANDARD OF REVIEW
To be entitled to mandamus relief, a relator must meet two requirements. First, the relator
must show that the trial court clearly abused its discretion. In re Prudential Insurance Company of
America, 148 S.W.3d 124, 135 (Tex. 2004). Second, the relator must demonstrate he has no
adequate remedy by appeal. Id. at 136. A trial court abuses its discretion if it acts in an arbitrary or
unreasonable manner without reference to any guiding rules or principles. Cire v. Cummings, 134
S.W.3d 835, 838-39 (Tex. 2004); Bowie Memorial Hospital v. Wright, 79 S.W.3d 48, 52 (Tex.
2002). When reviewing the trial court’s decision for an abuse of discretion, the reviewing court may
not substitute its judgment for that of the trial court with respect to resolution of factual issues or
matters committed to the trial court’s discretion. Downer v. Aquamarine Operators, Inc., 701
S.W.2d 238, 242 (Tex. 1985); see Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992). Review of
the trial court’s determination of the legal principles controlling its ruling is much less deferential.
Walker, 827 S.W.2d at 840. A trial court has no discretion in determining what the law is or
applying the law to the facts, even when the law is unsettled. In re Prudential, 148 S.W.3d at 135.
A clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of
discretion. Walker, 827 S.W.2d at 840.
A party seeking to compel arbitration must (1) establish the existence of a valid arbitration
agreement; and (2) show that the claims asserted are within the scope of the agreement. See In re
AdvancePCS Health L.P., 172 S.W.3d 603, 605 (Tex. 2005). The trial court’s determination of the
arbitration agreement’s validity is a legal question subject to de novo review. J.M. Davidson, Inc.
v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Once the party seeking to compel arbitration proves
that a valid arbitration agreement exists, a presumption attaches favoring arbitration and the burden
shifts to the party resisting arbitration to establish a defense to enforcing arbitration. See In re
AdvancePCS, 172 S.W.3d at 607; In re J.M. Davidson, 128 S.W.3d at 227. When a trial court
erroneously denies a party’s motion to compel arbitration under the federal act or Texas common
law, the movant has no adequate remedy at law and is entitled to a writ of mandamus. In re
FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001); In re Paris Packaging, 136 S.W.3d 723,
727 & n.7 (Tex.App.--Texarkana 2004, orig. proceeding).
APPLICABILITY OF FAA
In its sole issue for review, Swift maintains that the trial court abused its discretion by
denying the motion to compel arbitration. Valtierra responds that the arbitration clause is not
enforceable under Section 1 of the Federal Arbitration Act (FAA) because it is included in an
employment contract of a transportation worker. Swift counters that since the Injury Benefit Plan
is a not a contract of employment, Section 1’s exemption is inapplicable.
The FAA compels judicial enforcement of a wide range of written arbitration agreements.
Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111, 121 S. Ct. 1302, 1307, 149 L. Ed. 2d 234
(2001). The FAA’s coverage provision is found in Section 2:
A written provision in any maritime transaction or a contract evidencing a transaction
involving commerce to settle by arbitration a controversy thereafter arising out of
such contract or transaction, or the refusal to perform the whole or any part thereof,
or an agreement in writing to submit to arbitration an existing controversy arising out
of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C.A. § 2 (West 1999).
The United States Supreme Court has interpreted Section 2 as implementing Congress’ intent “to
exercise [its] commerce power to the full.” Circuit City, 532 U.S. at 112, 121 S.Ct. at 1307, quoting
Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 277, 115 S. Ct. 834, 841, 130
L. Ed. 2d 753 (1995). Section 1 of the Act is an exemption provision and it provides the FAA does
not apply “to contracts of employment of seamen, railroad employees, or any other class of workers
engaged in foreign or interstate commerce.” 9 U.S.C.A. § 1. The Supreme Court has interpreted the
phrase “other class of workers engaged in foreign or interstate commerce” as exempting from the
FAA’s coverage employment contracts of transportation workers “actually engaged in the movement
of goods in interstate commerce.” Circuit City, 532 U.S. at 112, 121 S.Ct. at 1307. Truck drivers,
such as Valtierra, are considered transportation workers within the meaning of this exemption
provision, and Swift does not contend otherwise. See e.g., Harden v. Roadway Package Systems,
Inc., 249 F.3d 1137, 1140 (9th Cir. 2001); Lorntzen v. Swift Transportation, Inc., 316 F. Supp. 2d
1093, 1095 (D. Kan. 2004).
Swift argues that the Injury Benefit Plan is not a contract of employment within the meaning
of Section 1, but rather is a separate agreement providing benefits incident to employment. Swift
also places particular reliance on Section 9.4 of the Plan which states that the establishment of the
Plan does not affect an employee’s “at will” status. We understand Swift to argue that since
Valtierra remains an “at will” employee, the Plan cannot be an employment contract. Implicit in
Swift’s argument is the notion that there is no employment contract in an at-will employment
relationship. This is incorrect. Texas courts have for many years considered an employment-at-will
agreement to be a contract. See Sterner v. Marathon Oil Company, 767 S.W.2d 686, 689 (Tex.
1989). A contract of employment may be terminable at will or for cause.
There are other problems with Swift’s interpretation of the phrase “contract of employment”
as used in Section 1 of the FAA. First, it would attribute an intent on the part of Congress to draw
a distinction between employees who are terminable at will and those who are terminable for cause.
There is no evidence Congress intended to draw such a distinction in determining which employees
would be subject to the reach of the FAA. Second, Swift’s interpretation of the phrase is based on
Texas employment law. We do not determine the meaning of a federal statute by examining state
law.
Swift also relies upon In re Mission Petroleum Carriers, Inc., No. 13-04-00550-CV, 2005
WL 326848 (Tex.App.--Corpus Christi Feb. 11, 2005, orig. proceeding). There, a truck driver
employed by Mission was injured in an accident while in the course and scope of her employment.
She filed suit against Mission but the employer moved to compel arbitration pursuant to an
agreement to arbitrate contained within Mission’s employee health and safety plan. The trial court
denied the motion and Mission sought mandamus relief. The Corpus Christi Court of Appeals held
that the FAA applied because the arbitration provision was included in the health and safety plan
rather than an employment contract. Id. at *2. The court of appeals emphasized that the health and
safety plan expressly stated that it was not a contract of employment. Id.
Federal courts which have considered the meaning of the phrase “employment contract” as
used in Section 1 have defined it as a “contract between an employer and an employee in which the
terms and conditions of employment are stated.” See Carr v. Transam Trucking, Inc., No. 3-07-CV-
1944-BD, 2008 WL 1776435 (N.D. Texas April 14, 2008); Awe v. I & M Rail Link, L.L.C., No. C04-
3011-PAZ, 2007 WL 2572405 at *4 (N.D. Iowa Sept. 4, 2007), quoting BLACK’S LAW DICTIONARY
321 (7th ed. 1999); Brown v. Nabors Offshore Corporation, 339 F.3d 391, 394 (5th Cir. 2003);
Buckley v. Nabors Drilling USA, Inc., 190 F. Supp. 2d 958, 960 (S.D. Tex. 2002), aff’d, No. 02-
40477, 2002 WL 31415106 (5th Cir. Oct. 8, 2002). In Carr, the federal district court determined
that the arbitration agreement was an employment contract within the meaning of Section 1 because
it was conditioned on commencement of or continued employment with the defendant, and as such,
formed part of the employment contract with the defendant. Carr, 2008 WL 1776435 at * 2.
One federal district court has addressed whether Swift’s Injury Benefit Plan1 is an
employment contract within the meaning of Section 1. In Shanks v. Swift Transportation Company,
Inc., the federal district court held that the Injury Benefit Plan is a component of the employee’s
contract of employment because it is a mandatory company policy which the employee accepted as
a condition of becoming employed and it provided benefits tied to continued employment. Shanks
v. Swift Transportation Company, Inc., No. L-07-55, 2008 WL 2513056 at *3 (S.D. Tex. June 19,
2008). This conclusion is consistent with the definition adopted in Carr and the other federal cases
cited in the previous paragraph.
It is unclear from the appellate court’s memorandum opinion in Mission Petroleum whether
the health and safety plan was a condition of employment. The court did not consider whether the
health and safety plan was a component of the employee’s contract of employment. Rather than
looking to narrowly-focused state employment law to determine whether the Injury Benefit Plan is
a contract of employment as that term is used in Texas, we believe the better approach in
determining the meaning of a federal statute is to look at a broader definition as done by the federal
courts in Carr and Shanks. Consequently, we decline to follow Mission Petroleum because we find
the analyses in Carr and Shanks2 to be more persuasive.
Swift’s Injury Benefit Plan is a mandatory company policy and it includes an arbitration
provision. Under the terms of the Plan, each “covered employee”3 becomes a participant in the Plan
1
The Injury Benefit Plan at issue in Shanks appears to be the same Plan at issue in this case.
2
On issues of federal law, such as the proper interpretation of the FAA, we must follow the decisions of the
United States Supreme Court and the Texas Supreme Court. See Roehrs v. FSI Holdings, Inc., 246 S.W .3d 796, 803
(Tex.App.--Dallas 2008, pet. denied). The decisions of other courts, by contrast, may be persuasive but are not binding
on us. Id.
3
The Plan defines “covered employee” as an employee whose employment with Swift is principally located
within Texas or whose assigned terminal is located within the state.
on April 1, 2005, or the time and date of his or her employment if employed after April 1, 2005, and
it provides benefits tied to continued employment. According to Appendix B attached to the Plan,
Valtierra accepted the mandatory arbitration provision on the date he became employed by Swift,
August 31, 2005. We conclude that the Injury Benefit Plan is an employment contract within the
meaning of Section 1 because the Plan and agreement to arbitrate are conditions of Valtierra’s
employment and formed part of his at-will employment contract with Swift. The FAA is therefore
inapplicable to the Plan’s arbitration provision.
APPLICABILITY OF TAA
Swift argued in the trial court that if the arbitration provision is not enforceable under the
FAA, it should be enforced under the Texas General Arbitration Act (TAA). Valtierra maintains that
the Texas Arbitration Act does not apply because this is a personal injury suit and he did not sign
an agreement to arbitrate. Under the Texas Arbitration Act, an agreement to arbitrate a personal
injury claim is enforceable only if each party to the claim agrees to arbitrate on the advice of counsel,
and the agreement is signed by each party and each party’s attorney. TEX .CIV .PRAC.&REM .CODE
ANN . § 171.002(c)(Vernon 2005). The record does not contain a signed agreement to arbitrate.
Accordingly, the Texas Arbitration Act does not apply.4
TEXAS COMMON LAW
The inapplicability of the FAA and TAA does not automatically render the arbitration
agreement unenforceable. Arbitration clauses may also be enforced under Texas common law. In
re Green Tree Servicing LLC, 275 S.W.3d 592, 599 (Tex.App.--Texarkana 2008, orig. proceeding);
see L.H. Lacy Company v. City of Lubbock, 559 S.W.2d 348, 351-52 (Tex. 1977)(common law
4
Even if we concluded that the TAA applied, mandamus review would be unavailable. A trial court’s order
denying arbitration, if based upon the Texas Arbitration Act, is subject to interlocutory appeal. T EX .C IV .P RAC .&R EM .
C O D E A N N . § 171.098(a)(Vernon 2005).
arbitration and statutory arbitration are “cumulative” and part of a “dual system”); Carpenter v.
North River Insurance Company, 436 S.W.2d 549, 553 (Tex.Civ.App.--Houston [14th Dist.] 1969,
writ ref’d n.r.e.)(“In the many other states having arbitration statutes similar to our 1965 statute, it
is almost uniformly held that the statutory remedy is cumulative and that the common law remedy
remains available to those who choose to use it.”). Mandamus is the appropriate procedure by which
we may review the trial court’s ruling on a motion to compel arbitration under the common law. See
In re Paris Packaging, 136 S.W.3d 723, 727 & n.7 (Tex.App.--Texarkana 2004, orig. proceeding).
Valtierra raised numerous arguments in the trial court by which he sought to establish that
the arbitration agreement is invalid and unenforceable. In addition to asserting that there is no
evidence he was ever aware of or accepted the arbitration agreement, Valtierra relied on Section
406.033 of the Texas Labor Code to argue that the arbitration agreement is void. That section
provides:
A cause of action described in Subsection (a)5 may not be waived by an employee
before the employee’s injury or death. Any agreement by an employee to waive a
cause of action or any right described in Subsection (a) before the employee’s injury
or death is void and unenforceable.
TEX .LAB.CODE ANN . § 406.033(e)(Vernon 2006).6 Ordinarily, Section 406.033(e) is preempted by
the FAA because it takes precedence over state attempts to undercut the enforceability of arbitration
agreements. See In re Border Steel, Inc., 229 S.W.3d 825, 831-32 (Tex.App.--El Paso 2007, orig.
proceeding)(holding that Section 406.033(e) is preempted by FAA); In re R & R Personnel
5
Subsection (a) pertains to a cause of action against an employer who does not have workers’ compensation
insurance coverage to recover damages for personal injuries or death sustained by an employee in the course and scope
of the employment. T EX .L AB .C O D E A N N . § 406.033(a)(Vernon 2006).
6
The Legislature enacted Section 406.033(e) in 2001 in response to Lawrence v. CDB Servs., Inc., 44 S.W .3d
544, 551-53 (Tex. 2001), which rejected public-policy challenges to the validity of an employee’s pre-injury agreement
to limit a nonsubscriber employer’s liability in exchange for benefits. See Storage & Processors, Inc. v. Reyes, 134
S.W .3d 190, 192 (Tex. 2004).
Specialists of Tyler, 146 S.W.3d 699, 703-04 (Tex.App.--Tyler 2004, orig. proceeding)(same). We
have determined that the FAA is inapplicable to the arbitration clause at issue here. Applying
Section 406.033(e) to this case, we hold that Swift’s arbitration agreement with Valtierra is void and
unenforceable. Because the trial court did not abuse its discretion by denying Swift’s motion to
compel arbitration, we deny mandamus relief.
July 8, 2009
ANN CRAWFORD McCLURE, Justice
Before McClure, Rivera, JJ., and Barajas, C.J. (Ret.)
Barajas, C.J. (Ret.), sitting by assignment