Ensign Group, Inc., Savoy Healthcare, Inc., and Xavier Pruitt, Individually v. Erica Mammen ( 2015 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00317-CV
ENSIGN GROUP, INC., SAVOY APPELLANTS
HEALTHCARE, INC., AND XAVIER
PRUITT, INDIVIDUALLY
V.
ERICA MAMMEN APPELLEE
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FROM THE 431ST DISTRICT COURT OF DENTON COUNTY
TRIAL COURT NO. 14-04607-431
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MEMORANDUM OPINION1
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Appellants Ensign Group, Inc.; Savoy Healthcare, Inc.; and Xavier Pruitt,
individually, appeal the trial court’s interlocutory order denying their motion to
compel arbitration of Appellee Erica Mammen’s claims. See Tex. Civ. Prac. &
Rem. Code Ann. § 51.016 (West 2015). We will reverse and remand.
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See Tex. R. App. P. 47.4.
Mammen began working for Savoy Healthcare, Inc. d/b/a Heritage
Gardens Rehabilitation and Healthcare in May 2010. Heritage Gardens
terminated Mammen’s employment on April 18, 2014, and Mammen sued
Appellants soon thereafter, on June 18, 2014. According to Mammen’s first
amended original petition, on or about May 28, 2014, a prospective employer
informed Mammen that she was going to receive “an offer letter of employment.”
Shortly thereafter, however, the prospective employer rescinded the offer letter
“because of a bad reference” from Appellants. Mammen alleged that Pruitt had
made the following statements about her: (i) “upon her termination, [Mammen]
was escorted out of the building by Police”; (ii) “[Mammen] worked two (2) years
for Defendants, not six (6)”; and (iii) “[Mammen] was a ‘lazy’ worker and not re-
hirable.” Mammen averred that Appellants were negligent and had committed
slander and tortious interference with prospective contract.
Appellants answered and moved to compel arbitration of Mammen’s
claims, arguing that she had executed a written arbitration agreement that
covered each of her claims. The agreement, signed by Mammen on May 3,
2010, states in relevant part as follows:
Heritage Gardens Rehabilitation and Healthcare
(referred to throughout as “the Employer”)
AGREEMENT TO ARBITRATE CLAIMS (New Employees)
Alternative Dispute Resolution (ADR) is the preferred method
for collegially and internally resolving differences that may arise in
the workplace through grievance and staff complaint procedures.
The Agreement to Arbitrate Claims (“Agreement”) establishes the
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method chosen by the Employer and Employee (hereafter “Parties”)
to resolve disputes if informal internal ADR methods prove
unsuccessful. The Employee agrees to submit all claims, as
outlined below, to binding arbitration, in exchange for employment
with this Employer. The Employee is required to sign this
Agreement prior to the commencement of employment with the
Employer.
Article 1. The Employer and the Employee, named below,
agree as Parties to this contract, to the resolution by binding
arbitration of all claims, except: (1) criminal proceedings, (2) breach
of confidentiality obligations, and (3) any other claims not subject to
arbitration under federal and Texas law. The claims that otherwise
would have been decided in a court of law, whether local, state or
federal, will instead be decided by arbitration, whether or not the
claims subject to this Agreement arise out of the Employee’s
employment, remuneration or termination, that the Employee may
have against the Employer . . . .
Article 2. The claims covered by this Agreement include, but
are not limited to, . . . claims for personal, physical or emotional
injury arising from negligence, any intentional tort, . . . and claims for
violation of any federal law, state or other governmental law, statute
or regulation not otherwise excluded under Article 1 of this
Agreement. The Parties agree that final and binding arbitration shall
be the sole and exclusive remedy for resolving any claims covered
by this Agreement, except as state and federal law provides for
judicial review of arbitration proceedings. By entering into this
contract the Parties are accepting the use of arbitration and
voluntarily giving up their right to have such disputes decided in a
court of law before a jury.
Article 3. The Federal Arbitration Act (FAA) will govern the
interpretation, enforcement, and all judicial proceedings under
and/or related to arbitration under this Agreement. . . . The
Employer shall pay for up to $1,000.00 of the arbitrator’s fees and
the parties shall split the remaining arbitrator’s fees, if any, equally.
Each party shall bear its own fees and costs for the arbitration and
shall be responsible for their own attorney’s fees, if any, in
arbitration. . . .
Article 4. . . . This Agreement shall survive the termination of
Employee’s employment . . . . This Agreement is binding on all
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Parties, including the Employee, their personal representatives,
spouse, children, agents, successors, and heirs.
....
Article 6. The terms of this Agreement are severable. If any
term or provision of this agreement is determined to be illegal or
unenforceable by a court of competent jurisdiction, the remaining
terms and provisions of this agreement shall remain in full force and
effect.
In response to Appellants’ motion to compel, Mammen argued that the
agreement does not cover her claims, is substantively unconscionable, and
violates her procedural due process rights. The trial court denied Appellants’
motion.
Appellants argue in their only issue that the trial court erred by denying
their motion to compel arbitration. They contend that the valid arbitration
agreement covers Mammen’s claims and that it is neither substantively nor
procedurally unconscionable.
Mammen responds that her claims, which arose from tortious conduct that
occurred after her employment was terminated, fall outside the scope of the
arbitration agreement because the agreement is limited (i) to claims arising in the
workplace and (ii) for which internal alternative dispute resolution procedures
have failed, as specified in the agreement’s introductory paragraph.
Alternatively, Mammen argues that Article 3’s cost-splitting provision renders the
agreement substantively unconscionable and that her inability to utilize
Appellants’ internal alternative dispute resolution procedures, which are
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“conditions precedent” to arbitration, render the agreement procedurally
unconscionable.
We review de novo whether an enforceable agreement to arbitrate exists.
See In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig.
proceeding). We defer to the trial court’s factual determinations that are
supported by the record and review legal questions de novo. Id.; Garcia v.
Huerta, 340 S.W.3d 864, 868‒69 (Tex. App.—San Antonio 2011, pet. denied).
A party seeking to compel arbitration must establish (1) a valid arbitration
agreement (2) whose scope includes the claims asserted. In re Kellogg Brown &
Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding). Under the
Federal Arbitration Act (FAA), an agreement to arbitrate is valid if it meets the
requirements of the general contract law of the applicable state. In re
AdvancePCS Health, L.P., 172 S.W.3d 603, 606 (Tex. 2005) (orig. proceeding);
see Paragon Indus. Applications, Inc. v. Stan Excavating, LLC, 432 S.W.3d 542,
547 (Tex. App.—Texarkana 2014, no pet.) (“The elements of a valid contract are
(1) an offer, (2) an acceptance, (3) a meeting of the minds, (4) each party’s
consent to the terms, and (5) execution and delivery of the contract with the
intent that it be mutual and binding.”). To determine whether an arbitration
agreement covers a party’s claims, a court must focus on the complaint’s factual
allegations rather than the legal causes of action asserted. In re FirstMerit Bank,
N.A., 52 S.W.3d 749, 754 (Tex. 2001) (orig. proceeding); see In re Bath Junkie
Franchise, Inc., 246 S.W.3d 356, 366 (Tex. App.—Beaumont 2008, orig.
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proceeding) (stating that to come within the scope of an arbitration provision, a
party’s allegations need only be factually intertwined with arbitrable claims or
otherwise touch upon the subject matter of the agreement containing the
arbitration provision). We resolve doubts as to scope in favor of finding
coverage. In re Bank One, N.A., 216 S.W.3d 825, 826 (Tex. 2007) (orig.
proceeding).
The written arbitration agreement’s introductory paragraph clarifies that
Mammen entered into the agreement in exchange for and before she began her
employment with Heritage Gardens. Mammen signed the agreement and noted
the date. The following conspicuous language is located just above her
signature: “THE UNDERSIGNED CERTIFIES THAT HE/SHE HAS READ THIS
AGREEMENT, UNDERSTANDS THIS AGREEMENT, HAS BEEN GIVEN A
COPY OF THE AGREEMENT AND AGREES THAT BY SIGNING THIS
AGREEMENT, HE/SHE AND THE EMPLOYER ARE GIVING UP THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL.” Therefore, the arbitration
agreement is valid.
Turning to the agreement’s scope, we disagree with Mammen that the
agreement applies only to claims arising in the workplace and for which internal
alternative dispute resolution procedures have failed. This language—contained
at the outset of the agreement—is akin to recitals in a contract, which generally
will not control the operative clauses in a contract unless the latter are
ambiguous. See City of the Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699,
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722 (Tex. App.—Fort Worth 2008, pet. dism’d). More importantly, however,
Mammen relies on this language to the exclusion of the rest of the agreement,
which unambiguously identifies its scope. The introductory paragraph states that
the employee agrees “to submit all claims, as outlined below, to binding
arbitration.” [Emphasis added.] Article 1 outlines the claims that are subject to
arbitration: “all claims, except: (1) criminal proceedings, (2) breach of
confidentiality obligations, and (3) any other claims not subject to arbitration
under federal and Texas law.” [Emphasis added.] Mammen’s tort claims do not
fall within any of the three exceptions; therefore, the agreement covers her
claims.
Mammen complains about the agreement’s broad scope, figuring that if
Appellants’ interpretation is correct, then “any claim arising outside of the
workplace and at any time in the future would have to be arbitrated.” The
agreement expressly addresses Mammen’s concern, leaving no doubt about its
expansive coverage. The three exceptions aside, arbitration is required “whether
or not the claims subject to this Agreement arise out of the Employee’s
employment, remuneration or termination.” [Emphasis added.] Mammen’s
claims plainly arise from her employment, remuneration, or termination, and are
therefore subject to arbitration, see Bath Junkie Franchise, 246 S.W.3d at 366,
but even if they did not so arise, the claims would still be arbitrable. See, e.g.,
Wee Tots Pediatrics, P.A. v. Morohunfola, 268 S.W.3d 784, 791 (Tex. App.—Fort
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Worth 2008, orig. proceeding) (enforcing arbitration agreement that required
arbitration of “[a]ll controversies which may arise between the parties”).
Once the party seeking arbitration establishes both validity and scope, the
trial court must compel arbitration unless the party opposing arbitration proves a
defense precluding enforcement. See J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 227 (Tex. 2003). Mammen argues that the arbitration agreement is
substantively unconscionable because Article 3 requires her to pay half of the
arbitration fees after Appellants pay the first $1,000 due, and “[i]t was undisputed
before the trial court that [she] was unemployed since her termination and lacked
resources sufficient to pay for half of the arbitration costs.” 2 However, a party
seeking to invalidate an arbitration agreement on the ground that arbitration
would be prohibitively expensive bears the burden of showing the likelihood of
incurring excessive costs. In re Olshan Found. Repair, 328 S.W.3d 883, 895
(Tex. 2010) (orig. proceeding). “[P]arties must at least provide evidence of the
likely cost of their particular arbitration, through invoices, expert testimony,
reliable cost estimates, or other comparable evidence.” Id. “Evidence that
merely speculates about the risk of possible cost is insufficient.” Id. Inconsistent
with the burden that Olshan places upon Mammen, she has provided no
evidence about the arbitration fees that she will likely incur; she merely
speculates that they will be unaffordable, whatever they are. Moreover,
2
Appellants did not somehow waive their argument that Mammen’s
unconscionability defense lacks merit.
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Appellants confirmed in the trial court that they “are willing to assume
responsibility for the balance of the arbitrator’s fees based on a showing that
[Mammen] i[s] unable to afford same.” Consequently, Mammen’s substantive
unconscionability defense is unpersuasive.
Again referencing part of the arbitration agreement’s introductory
language, Mammen argues that the agreement is procedurally unconscionable
because, as an employee who has been terminated, she is unable to utilize
Appellants’ internal alternative dispute resolution procedures. But as explained
above, the valid arbitration agreement covers Mammen’s claims and is not so
limited.
The trial court erred by denying Appellants’ motion to compel arbitration.
Accordingly, we sustain Appellants’ sole issue, reverse the trial court’s order
denying Appellants’ motion to compel arbitration, and remand this cause to the
trial court for further proceedings consistent with this opinion.
/s/ Bill Meier
BILL MEIER
JUSTICE
PANEL: LIVINGSTON, C.J.; GARDNER and MEIER, JJ.
DELIVERED: May 14, 2015
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