Denise Longoria v. CKR Property Management, LLC , 577 S.W.3d 263 ( 2018 )

Reversed and Remanded and Majority Opinion and Concurring Opinion filed
December 21, 2018.
In The
Fourteenth Court of Appeals
NO. 14-18-00100-CV
DENISE LONGORIA, Appellant
V.
CKR PROPERTY MANAGEMENT, LLC, Appellee
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Cause No. 2017-72827
MAJORITY OPINION
Appellant Denise Longoria signed an arbitration agreement before beginning
her employment with appellee CKR Property Management, LLC (“CKR Property”).
The parties’ arbitration agreement states that Longoria and CKR Property agree to
arbitrate “any claim or dispute between them or against the other . . . whether related to
the employment relationship or otherwise . . . .” Longoria resigned from CKR
Property and was rehired by CKR Property approximately ten months later. Longoria
did not sign a separate arbitration agreement before beginning her second period of
employment.
CKR Property fired Longoria six months after she was rehired and sued her for
claims arising from her second employment period. Longoria moved to compel
arbitration and the trial court denied Longoria’s motion. For the reasons outlined
below, we reverse the trial court’s order denying arbitration and remand the cause to
the trial court for proceedings consistent with this opinion.
BACKGROUND
CKR Property, which manages multi-family residential apartment
complexes, hired Longoria in June 2015 to supervise operations at multiple
properties. Before beginning her employment at CKR Property, Longoria signed
an arbitration agreement entitled “Acknowledgement of Receipt of Arbitration
Agreement.” The arbitration agreement states, in relevant part:
Denise N. Longoria and CKR Property Management agree that they
prefer and choose to arbitrate any dispute they may have instead of
litigating in court before a judge or jury. Therefore, they agree that
any claim or dispute between them or against the other or any agent or
employee of the other, whether related to the employment relationship
or otherwise, including those created by practice, common law, court
decision, or statute now existing or created later, including any related
to allegations of violations of state or federal statutes related to
discrimination, and all disputes about the validity of this arbitration
clause, shall be resolved by final binding arbitration by the American
Arbitration Association, under the National Rules for the Resolution
of Employment Disputes. CKR Property Management agrees to pay
all costs of the arbitration, except in that [sic] each party will bear
their own legal fees. Fees paid are subject to the award of fees by the
arbitrator, as provided by law and arbitration rules. This agreement
shall be governed by and interpreted under the Federal Arbitration Act
....
Longoria signed the agreement and dated it June 15, 2015. The record does not
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contain any other documents Longoria signed before beginning her first
employment period. Longoria resigned from CKR Property in June 2016.
CKR Property rehired Longoria in April 2017. Before beginning her second
period of employment, Longoria signed a “Confidentiality and Non-Competition
Agreement.” This second agreement does not contain any provisions addressing
either (1) the previously signed arbitration agreement; or (2) the arbitrability of
claims arising under the non-compete agreement. Longoria did not sign a separate
arbitration agreement before beginning her second employment period. CKR
Property terminated Longoria’s employment six months later.
CKR Property sued Longoria in October 2017, asserting claims arising from
Longoria’s alleged breach of the non-compete agreement. Longoria filed a general
denial and asserted affirmative defenses.
Longoria filed a motion to compel arbitration under the Federal Arbitration
Act (“FAA”). See generally 9 U.S.C.A. §§ 1-16 (West 2009). CKR Property
responded and the trial court held a hearing on the motion. The trial court signed
an order on January 30, 2018, denying Longoria’s motion to compel arbitration.
Longoria timely appealed.
STANDARD OF REVIEW
We review the trial court’s denial of a motion to compel arbitration under an
abuse of discretion standard. Branch Law Firm L.L.P. v. Osborn, 532 S.W.3d 1,
12 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). “‘An order denying
arbitration must be upheld if it is proper on any basis considered by the trial
court.’” Id. (quoting In re Weeks Marine, Inc., 242 S.W.3d 849, 854 (Tex. App.—
Houston [14th Dist.] 2007, orig. proceeding [mand. denied])).
A trial court abuses its discretion if it acts arbitrarily or unreasonably or
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without reference to any guiding rules or principles. Id. “Under this standard, we
defer to a trial court’s factual determinations if they are supported by evidence, but
[we] review a trial court’s legal determinations de novo.” Id. (citing In re Labatt
Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding)).
ANALYSIS
Asserting that the trial court erred by denying her motion to compel
arbitration, Longoria argues that she and CKR Property executed a valid arbitration
agreement and that CKR Property’s claims fall within the scope of that agreement.
CKR Property contends that the arbitration agreement does not apply to its claims
because the agreement was executed as part of Longoria’s first employment period
from June 2015 to June 2016, and applies only to claims arising from that period.
Pointing out that its claims arose from the non-compete agreement Longoria signed
as part of her second employment period from April 2017 to October 2017, CKR
Property asserts that the trial court correctly denied Longoria’s motion to compel.
The parties agree that the FAA governs here. “A party seeking to compel
arbitration under the FAA must establish that (1) there is a valid arbitration clause;
and (2) the claims in dispute fall within that agreement’s scope.” In re Rubiola,
334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding); see also Branch Law Firm
L.L.P., 532 S.W.3d at 12. We analyze these prongs separately.
I. Validity of the Arbitration Agreement
The existence of a valid arbitration agreement between specific parties
generally is a “gateway matter” for the court to decide. In re Weekley Homes, L.P.,
180 S.W.3d 127, 130 (Tex. 2005) (orig. proceeding). Under the FAA, ordinary
principles of state contract law determine whether there is a valid arbitration
agreement that meets all requisite contract elements. In re Rubiola, 334 S.W.3d at
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224; J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). A mutual
agreement to arbitrate provides sufficient consideration to support an arbitration
agreement. In re 24R, Inc., 324 S.W.3d 564, 566 (Tex. 2010) (orig. proceeding)
(per curiam).
When an arbitration agreement is unambiguous, its construction is governed
by the parties’ objective intent as expressed in the agreement. In re Dillard Dept.
Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006) (orig. proceeding) (per curiam).
Challenges to an arbitration agreement’s validity generally focus on contractual
issues related to the agreement’s enforceability, such as unconscionability, duress,
fraudulent inducement, and revocation. See Royston, Rayzor, Vickery, & Williams,
LLP v. Lopez, 467 S.W.3d 494, 500 (Tex. 2015) (orig. proceeding) (agreements to
arbitrate are valid unless grounds exist in law or in equity for non-enforcement,
such as fraud, unconscionability, or voidness under public policy); Venture Cotton
Coop. v. Freeman, 435 S.W.3d 222, 227 (Tex. 2014) (an arbitration agreement
may be “invalidated by generally applicable contract defenses, such as fraud,
duress, or unconscionability” (internal quotation omitted)); see also Klein v.
Nabors Drilling USA L.P., 710 F.3d 234, 237 (5th Cir. 2013) (“the initial question
of whether there is a valid agreement to arbitrate usually concerns matters of
contract formation”).
Here, Longoria asserts that she and CKR Property have a valid and
enforceable arbitration agreement. We agree and conclude that the unambiguous
terms of the parties’ arbitration agreement express an objective intent to arbitrate
“any claim or dispute between them.” See In re Dillard Dept. Stores, Inc., 186
S.W.3d at 515. The parties’ mutual agreement to arbitrate provides sufficient
consideration for the agreement’s enforcement. See In re 24R, Inc., 324 S.W.3d at
566.
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Although only Longoria signed the arbitration agreement, CKR Property’s
signature was not necessary to bind CKR Property to the agreement. See In re
Polymerica, LLC, 296 S.W.3d 74, 76 (Tex. 2009) (orig. proceeding) (per curiam)
(“we have never held that the employer must sign the arbitration agreement before
it may insist on arbitrating a dispute with its employee”); In re Macy’s Tex., Inc.,
291 S.W.3d 418, 419-20 (Tex. 2009) (orig. proceeding) (per curiam) (“The FAA
contains no requirements for the form or specificity of arbitration agreements
except that they be in writing; it does not even require that they be signed.”). CKR
Property does not contend otherwise.
Looking at the substance of its arguments, CKR Property does not challenge
the validity of the parties’ arbitration agreement and does not assert the agreement
is unenforceable under general contract law principles based on unconscionability,
duress, fraudulent inducement, or revocation. See Royston, Rayzor, Vickery, &
Williams, LLP, 467 S.W.3d at 500; Venture Cotton Coop., 435 S.W.3d at 227.
Counsel for CKR Property acknowledged at oral argument that the parties’
“agreement in and of itself is valid.” CKR Property contends that its claims in the
underlying proceeding are not among those covered by the arbitration agreement;
this contention is properly analyzed as a challenge to the agreement’s scope — not
to its validity. See In re Rubiola, 334 S.W.3d at 223-24 (the issue of whether “the
arbitration clause cover[ed] the [plaintiffs’] claims” was one that “question[ed] the
clause’s scope”); see also Mendez v. New Bell Gen. Servs., L.P., 727 F. Supp. 2d
585, 595 (W.D. Tex. 2010) (when analyzing scope, “the Court must decide
whether the claim asserted is the type of claim the parties have agreed to
arbitrate”).
Even if treated for argument’s sake as a threshold validity challenge, CKR
Property’s arguments would provide no basis for denying Longoria’s motion to
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compel arbitration because the arbitration agreement’s terms specifically refer “all
disputes about the validity of this arbitration clause” to arbitration. See Ernst &
Young LLP v. Martin, 278 S.W.3d 497, 500-01 (Tex. App.—Houston [14th Dist.]
2009, orig. proceeding) (where the arbitration clause stated that the parties agreed
to arbitrate “any contention that all or part of these procedures are invalid or
unenforceable,” appellees’ challenge to contract’s validity was subject to
arbitration). While validity usually is a gateway matter for the court to decide, an
arbitration agreement may properly refer these issues to arbitration and remove
them from the court’s consideration. See In re Weekley Homes, L.P., 180 S.W.3d
at 130 (the court generally decides whether an arbitration clause is valid unless
there is “unmistakable evidence that the parties intended the contrary”); Ernst &
Young LLP, 278 S.W.3d at 500-01.
Our analysis now turns to the agreement’s scope. See In re Rubiola, 334
S.W.3d at 225.
II. Scope of the Arbitration Agreement
Federal law governs the scope of an arbitration agreement under the FAA.
In re Labatt Food Serv., L.P., 279 S.W.3d at 643; see also Klein, 710 F.3d at 237
(when “determining the scope of a valid arbitration agreement,” the court
“appl[ies] federal policy”).
“[O]nce the party seeking arbitration proves the existence of an enforceable
agreement to arbitrate, Texas and federal law recognize a strong presumption in
favor of arbitration” and courts should “resolve any doubts regarding the scope of
the arbitration agreement in favor of arbitration.” Branch Law Firm L.L.P., 532
S.W.3d at 18 (internal quotation omitted); see also In re Rubiola, 334 S.W.3d at
225. “Courts should not deny arbitration unless they can say with positive
assurance that an arbitration clause is not susceptible of an interpretation that
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would cover the dispute at issue.” Branch Law Firm L.L.P., 532 S.W.3d at 18; see
also In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex. 2006) (orig.
proceeding).
According to its unambiguous terms, the arbitration agreement between
Longoria and CKR Property encompasses “any claim or dispute between them . . .
whether related to the employment relationship or otherwise.” The arbitration
agreement contains no temporal or subject matter limitations. Applying the
presumption favoring arbitration, we conclude that the parties’ arbitration
agreement is reasonably susceptible of an interpretation that would encompass the
dispute at issue. See In re D. Wilson Constr. Co., 196 S.W.3d at 783; Branch Law
Firm L.L.P., 532 S.W.3d at 18.
CKR Property asserts that the parties’ arbitration agreement expired at the
end of Longoria’s first employment period in June 2016; CKR Property further
contends that “post-expiration” claims asserted after June 2016 must arise from
pre-June 2016 facts and circumstances for either party to invoke the “expired”
arbitration agreement. Arguing that “the factual bases for [its] claims only arose
from the second employment period” beginning after April 2017, CKR Property
contends that Longoria cannot compel arbitration based on an arbitration
agreement signed at the beginning of the earlier June 2015-June 2016 employment
period.
We are not persuaded by CKR Property’s arguments because CKR Property
relies primarily on cases involving collective bargaining agreements. See Litton
Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. N.L.R.B., 501 U.S. 190 (1991);
Williamsbridge Manor Nursing Home v. Local 144 Div. of 1199, Nat’l Health &
Human Servs. Emp’rs Union, ALF-CIO, 107 F. Supp. 2d 222 (S.D.N.Y. 2000).
Litton held that an arbitration clause in an expired collective bargaining agreement
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compelled arbitration of post-expiration disputes only if those disputes arose under
the expired agreement. 501 U.S. at 205-06. Williamsbridge Manor applied
Litton’s reasoning and concluded that the plaintiff’s suit did not arise under an
expired collective bargaining agreement as necessary to compel arbitration under
the expired agreement’s arbitration clause. 107 F. Supp. 2d at 224-25.
These cases are distinguishable. Unlike the stand-alone arbitration
agreement at issue here, the arbitration clauses in Litton and Williamsbridge Manor
were part of broader, detailed collective bargaining agreements. See Litton, 501
U.S. at 193-94; Williamsbridge Manor Nursing Home, 107 F. Supp. 2d at 223-24.
Those clauses operated in the context of the comprehensive contracts that
encompassed them — a circumstance that does not apply to the freestanding
arbitration agreement at issue here.
CKR Property also looks for help from Mendez v. Puerto Rican
International Companies, Inc., Nos. 05-CV-00174-LDD, 05-CV-00199-LDD,
2010 WL 2654439 (D.V.I. July 1, 2010), and Frank v. 84 Components Co., No.
NA02-14-CH/H, 2002 WL 1364168 (S.D. Ind. June 18, 2002). These cases do not
guide our decision.
The Mendez plaintiffs signed arbitration agreements with two non-party
companies; the plaintiffs later were employed by the defendant companies. 2010
WL 2654439, at *1. The plaintiffs sued the defendant companies and the
defendants sought to compel arbitration pursuant to the non-party companies’
arbitration agreements with the plaintiffs. Id. at *2.
Rejecting the defendant companies’ attempt to invoke the arbitration
agreements, the court stated that the plaintiffs “reasonably expected their promises
to arbitrate to be effective and endure only in regard to the particular employment
relationship that generated” the agreements, namely, the plaintiffs’ employment
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relationships with the non-party companies. Id. at *4. Noting that the plaintiffs’
claims did not arise from “their application or candidacy for employment and their
employment with” the non-party companies, the court concluded that the plaintiffs
“ha[d] no duty to arbitrate their claims” brought against the defendant companies.
We are not bound by Mendez and we decline to follow it. Longoria sought
to compel arbitration under an agreement to which she and CKR Property were
parties. Unlike the agreement in Mendez, the arbitration agreement between
Longoria and CKR Property covers any dispute between them, whether related to
employment or not. Unlike the defendant companies in Mendez, Longoria’s
motion to compel did not depend on an agreement executed with a non-party. See
id. at *5 (“Plaintiffs’ claims do not arise out of the employment transactions in
which they signed the [arbitration agreements]: their application or candidacy for
employment and their employment with [the non-party companies].”). And, unlike
Mendez, Longoria does not contend that the agreement at issue is a contract of
adhesion. See id. at *4.
The plaintiff in Frank signed an arbitration agreement before beginning her
first period of employment with the defendant. 2002 WL 1364168, at *1 The
agreement in Frank stated that it applied to all claims “[m]ade or which arise
during and following [the plaintiff’s] voluntary or involuntary termination of
employment.” Id. The defendant terminated the plaintiff’s employment several
months later. Id. The plaintiff was rehired by the defendant but did not sign a
second arbitration agreement. Id.
The defendant again terminated the plaintiff and sued her for claims arising
from the second termination. The court rejected the defendant’s attempt to compel
arbitration based on the agreement signed as part of the plaintiff’s first
employment period, stating that the defendant did “not come forward with any
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evidence of words or actions that [the plaintiff] should have interpreted as meaning
that she was agreeing to arbitration when [the defendant] hired her for the second
time.” Id. at *3.
We decline to follow Frank’s reasoning. Frank demands additional
evidence showing the arbitration agreement was intended to apply to the plaintiff’s
second employment period. See id. This approach contravenes the “strong
presumption in favor of arbitration” and case law instructing courts to “resolve any
doubts regarding the scope of the arbitration agreement in favor of arbitration.”
Branch Law Firm L.L.P., 532 S.W.3d at 18; see also In re Rubiola, 334 S.W.3d at
225. In addition, the arbitration clause in this case is broader than the language
used in Frank. We rely on the broad, unambiguous language to which the parties
agreed viewed in light of the applicable presumption. See Branch Law Firm
L.L.P., 532 S.W.3d at 18.
Our analysis is guided instead by Utility Trailer Sales Southeast Texas, Inc.
v. Lozano, No. 04-16-00644-CV, 2017 WL 3045861 (Tex. App.—San Antonio
July 19, 2017, pet. denied) (mem. op.), in which the court analyzed a similar
scenario and arbitration agreement.
The plaintiff in Lozano signed an arbitration agreement before beginning his
first period of employment with the defendant; the plaintiff did not sign a second
arbitration agreement before beginning his second employment period. Id. at *1.
The agreement stated that it:
[C]ommences on the Acceptance Date and applies to all Covered
Claims which occurred on or after the effective date.
This Agreement shall survive the employer-employee relationship
between the Company and the Claimant and shall apply to any
Covered Claim whether it arises or is asserted during or after
termination of the Claimant’s employment with the Company or the
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expiration of any benefit plan.
Id. at *2. The plaintiff was injured during his second employment period and sued
the defendant for negligence. Id. at *1. Giving the parties’ arbitration agreement
its “plain meaning,” the San Antonio Court of Appeals concluded that the
agreement was applicable to the plaintiff’s claims that arose during his second
period of employment. Id. at *2.
Unlike the agreement analyzed in Lozano, the arbitration agreement here
does not specifically state that it survives the termination of the employment
relationship. But like the Lozano agreement, the arbitration agreement in today’s
case clearly is intended to have a broad reach because it lacks any temporal
limitations and applies to any dispute between CKR Property and Longoria
“whether related to the employment relationship or otherwise.” Giving the
agreement its plain meaning, it encompasses CKR Property’s claims in the
underlying proceeding even though they arose from Longoria’s second
employment period. See id.
We conclude that CKR Property’s claims in the underlying proceeding fall
within the scope of the parties’ arbitration agreement.
III. Waiver
In response to Longoria’s motion to compel arbitration, CKR Property
asserted an express-waiver and an implied-waiver argument. CKR Property asserts
that, because Longoria did not address on appeal CKR Property’s express waiver
argument, the court must affirm the trial court’s denial of Longoria’s motion to
compel.
An express waiver in the arbitration context “arises when a party
affirmatively indicates that it wishes to resolve the case in the judicial forum rather
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than in arbitration.” Branch Law Firm L.L.P., 532 S.W.3d at 22. Implied waiver
examines “whether a party has substantially invoked the judicial process” resulting
in prejudice to the opposing party. Id.
The section addressing waiver in Longoria’s opening appellate brief
discusses the elements necessary to show an implied waiver, with argument
focusing on whether Longoria “substantially invoked” the judicial process. In her
opening brief, Longoria broadly asserted that she “did not waive her right to
compel arbitration.” We conclude that Longoria also sufficiently challenged the
trial court’s implied finding of express waiver. And, in her reply brief, Longoria
provided briefing on the express-waiver issue.
With respect to CKR Property’s express waiver contention, the record does
not contain any evidence showing that Longoria “affirmatively indicate[d]” she
wished to resolve the case in a judicial forum rather than in arbitration. See id.
The non-compete agreement does not satisfy this showing because it does not state
that (1) it is fully integrated; (2) it supersedes all prior agreements; (3) all future
claims between CKR Property and Longoria must be resolved in court; or (4) the
arbitration agreement is invalid.
With respect to CKR Property’s implied waiver argument, Longoria filed
her motion to compel arbitration before (1) the trial court entered a docket control
order; (2) the parties took any depositions, and (3) the parties exchanged anything
other than written discovery requests. These actions do not constitute a substantial
invocation of the judicial process. See id.; see also RSL Funding, LLC v. Pippins,
499 S.W.3d 423, 430 (Tex. 2016) (per curiam) (“[p]arties seeking to arbitrate have
taken several different types of action without substantially invoking the judicial
process” including “filing suit, conducting discovery, noticing depositions, taking
depositions, agreeing to trial settings, and moving for procedural disposition”).
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Longoria did not waive her right to compel arbitration pursuant to the
parties’ arbitration agreement.
CONCLUSION
We conclude that the parties executed a valid arbitration agreement and that
CKR Property’s claims in the underlying proceeding fall within the scope of that
agreement. Longoria did not waive her arbitration rights. The trial court therefore
erred in denying Longoria’s motion to compel arbitration. The trial court’s
January 30, 2018 order is reversed and the cause is remanded to the trial court for
proceedings consistent with this opinion.
/s/ William J. Boyce
Justice
Panel consists of Chief Justice Frost and Justices Boyce and Busby (Frost, C.J.,
concurring).
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