in Re Senior Living Properties, L.L.C.

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-05-00610-CV

In re Senior Living Properties, L.L.C.

ORIGINAL PROCEEDING FROM LLANO COUNTY

M E M O R A N D U M O P I N I O N

Relator Senior Living Properties, L.L.C. has filed its petition for writ of mandamus,

complaining of the trial court's refusal to abate the lawsuit brought by real party in interest Betty

Robinett and require Robinett to participate in mediation and, if necessary, binding arbitration. We

conditionally grant the petition for writ of mandamus. See Tex. R. App. P. 52.8.

Robinett was hired as an hourly employee by Senior Living in March 2002. On

March 4, shortly after she began working for Senior Living, Robinett was asked to sign a "waiver

and arbitration agreement," under which she agreed to enroll in Senior Living's "Employee Injury

Benefit Plan" and to waive her right to sue for any injuries (the "March arbitration agreement").

Under that agreement, Robinett and Senior Living mutually agreed to resolve any disputes through

binding arbitration and that the agreement could only be revoked or modified with mutual written

consent. Robinett testified that she was told she had to sign the agreement to continue her

employment with Senior Living. In late April or early May 2002, Robinett was shifted from an

hourly position into a salaried position and was informed that her insurance had changed because

"higher level employee[s] had a different insurance plan than the hourly employees." She was sent

a packet of information, which included a "Summary Plan Description" of Senior Living's

Associate/Employment Protection Plan. The Summary explains that Senior Living is not a

subscriber of the Texas Worker's Compensation Act and instead had established its own

occupational injury benefit plan for its employees ("the Plan"). As in the March arbitration

agreement, according to the Summary, Senior Living and its participating employees mutually agreed

to resolve Plan-related disputes through binding arbitration and waived their rights to sue in court.

The Summary provided that the arbitration agreement could be revoked or modified only by mutual

consent. The Summary concludes with an "Enrollment and Arbitration Agreement" (the

"Agreement"), which states that the employee, by signing the Agreement, understood that she was

eligible to participate in the Plan and waived her rights to resolve disputes other than through

arbitration. Robinett did not sign the Agreement.

On August 5, 2002, Robinett was injured on the job. She sought benefits from Senior

Living but was denied. She alleged that she attempted to appeal that denial but that Senior Living

refused to process her claim. In August 2005, Robinett sued Senior Living, asserting claims for

negligence and breach of contract by Senior Living's refusal to pay benefits. Robinett stated that

Senior Living "was not a subscriber to the Texas Workers Compensation Insurance Program. As

part of her agreement of employment with [Senior Living], Plaintiff is entitled to all benefits as

described in the 'Associate/Employee Protection Plan' provided to her by" Senior Living.

Senior Living filed a plea in abatement, asserting that Robinett was obligated to

resolve her dispute through mediation and arbitration, rather than the court system. Robinett

disputed that a valid arbitration agreement existed, arguing that the March arbitration agreement

applied only while she was an hourly employee and did not carry over when she changed

employment status. Because she did not sign anything when her status changed, she argued that she

was not bound by the arbitration agreement. The trial court conducted a hearing and overruled

Senior Living's plea, finding no evidence that an arbitration agreement existed at the time Robinett

was injured; trial was set for October 30. Senior Living then filed its petition for writ of mandamus. (1)

Discussion

Mandamus is appropriate only to correct a clear abuse of discretion and where the

party seeking relief has no adequate remedy at law. In re J.D. Edwards World Solutions Co. , 87

S.W.3d 546, 549 (Tex. 2002). Mandamus relief is proper when a trial court wrongly denies

arbitration under the Federal Arbitration Act. In re AdvancePCS Health L.P. , 172 S.W.3d 603, 608

(Tex. 2005). If a valid arbitration agreement exists and encompasses the claims raised in the suit,

the trial court has no discretion but to stay its proceedings and compel arbitration. J.D. Edwards ,

87 S.W.3d at 549 . There is a strong presumption in favor of arbitration, but that presumption arises

only after the party seeking to compel arbitration establishes the existence of a valid arbitration

agreement. J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 227 (Tex. 2003).

Senior Living urges two bases for arbitration: (1) the arbitration agreement signed by

Robinett in March 2002 shortly after she began her employment, and (2) the Agreement contained

in the Summary Plan Description. Robinett argues that she should not be bound by the March

arbitration agreement because it is an incomplete and therefore invalid contract and because there

was a failure of consideration that rendered it invalid. Robinett argues that the second arbitration

agreement is invalid because she did not sign it.

Both the March arbitration agreement and the Summary explain that Senior Living

is a nonsubscriber under the Texas Workers' Compensation Act and instead provides its own

Employee Injury Benefit Plan. The March agreement recites that Robinett "received a copy of the

Summary Plan Description of the Plan," and refers to "Section IX of the Summary Plan Description"

as setting forth the arbitration procedures. The Summary states that all employees of Senior Living

are participants in the Associate/Employment Protection Plan and that participation begins upon

employment and continues until termination of employment or of the Plan. Section IX of the

Summary explains that if a participant is dissatisfied with the Plan's claim process, her "sole

remaining remedy shall be to arbitrate the claims," and goes on to describe the mediation and

arbitration procedure to be applied. The Summary concludes with an Enrollment and Arbitration

Agreement providing that "[b]y signing this Enrollment and Arbitration Agreement," the employee

agreed to waive her legal rights and resolve claims through mediation and arbitration instead. The

Agreement also states: "I agree that each and every time that I receive Plan benefits, or have Plan

benefits paid to a medical provider on my behalf, I ratify and reaffirm this Agreement the same as

if I had signed this Agreement again on the date the benefits were paid." The Agreement is not

signed by Robinett. This, she argues, means that she is not bound by the arbitration clause.

Whether an arbitration agreement is a valid contract is determined under traditional

contract principles. Id .; see AdvancePCS Health , 172 S.W.3d at 606 . A party's signature is relevant

to determining whether a contract is binding on the parties, In re Bunzl USA, Inc. , 155 S.W.3d 202,

209 (Tex. App.--El Paso 2004, orig. proceeding), but generally is not a necessary element of a valid

contract. AdvancePCS Health , 172 S.W.3d at 606 ; ABB Kraftwerke Aktiengesellschaft v.

Brownsville Barge & Crane, Inc. , 115 S.W.3d 287, 292 (Tex. App.--Corpus Christi 2003, pet.

denied). If the parties unconditionally assent to terms set out in a document, that document amounts

to a binding contract even if it is not signed. Bunzl USA , 155 S.W.3d at 209 (citing 1 Arthur Linton

Corbin, Corbin on Contracts § 2.10, at 168 (Joseph M. Perillo rev., 1993)). Without a party's

signature, the proponent of the alleged contract must produce other evidence to prove the contract's

validity. Id .

A non-signatory, even if not a party to the contract in question, "may be compelled

to arbitrate 'if it seeks, through the claim, to derive a direct benefit from the contract containing the

arbitration provisions.'" In re Weekley Homes, L.P. , 176 S.W.3d 740 , 743 (Tex. 2005) (quoting In

re Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 741 (Tex. 2005)); see In re FirstMerit Bank, N.A. ,

52 S.W.3d 749, 755 (Tex. 2001) ("a litigant who sues based on a contract subjects him or herself to

the contract's terms"); Nationwide of Bryan, Inc. v. Dyer , 969 S.W.2d 518, 520 (Tex. App.--Austin

1998, no pet.) ("While attempting to enforce the terms of the sales contract, Sherry cannot pick and

choose which provisions apply; she is bound by all the contract terms."). Whether a claim is brought

on a contract depends on the substance of the claim, not artful pleading, and whether the alleged

liability arises "solely from the contract or must be determined by reference to it." Weekley Homes ,

176 S.W.3d at 743.

Robinett sued Senior Living, alleging that she was "entitled to all benefits as

described in the 'Associate/Employee Protection Plan' provided to her by" Senior Living and that

Senior Living had breached its contract with her by "failing to pay damages including medical

expenses related to her injuries and lost wages." In other words, the basis of Robinett's claims is that

Senior Living failed to pay her benefits owed under the Plan--the same Plan containing the

Arbitration Agreement that she urges should not be construed as valid. Robinett's claims that Senior

Living breached its obligations to pay benefits under the Plan are surely encompassed by the

Arbitration Agreement. By suing on the contract for Plan benefits, Robinett subjected herself to the

terms of the Plan, including the agreement to settle claims through arbitration. (2) See FirstMerit Bank ,

52 S.W.3d at 755 ; see also Weekley Homes , 176 S.W.3d at 745 ("[W]hen a nonparty consistently

and knowingly insists that others treat it as a party, it cannot later 'turn[] its back on the portions of

the contract, such as an arbitration clause, that it finds distasteful.' A nonparty cannot both have his

contract and defeat it too.") (quoting E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin

Intermediates, S.A.S. , 269 F.3d 187, 200 (3d Cir. 2001)) (footnotes omitted); Associated Glass, Ltd.

v. Eye Ten Oaks Invs., Ltd. , 147 S.W.3d 507, 512-13 (Tex. App.--San Antonio 2004, no pet.)

("[T]he nonsignatory's claim must seek to enforce the terms of the written agreement containing the

arbitration provision in order for the nonsignatory to be bound to arbitrate. The nonsignatory cannot

enforce specific terms of the agreement while seeking to avoid the arbitration provision.") (citations

omitted).

Finally, although Robinett asserts a claim of negligence as well as breach of contract,

her tort claim is based on the same factual allegations as the breach of contract claim. In determining

whether a tort claim falls within an arbitration agreement, we look to the factual allegations made

in the complaint rather than focusing on the legal causes of action asserted. Prudential Sec. Inc. v.

Marshall , 909 S.W.2d 896, 900 (Tex. 1995). Texas courts apply one of two tests in deciding

whether a tort claim is encompassed by an arbitration agreement. See Dennis v. College Station

Hosp., L.P. , 169 S.W.3d 282, 285-86 (Tex. App.--Waco 2005, pet. denied). The "close view,"

usually applied to cases involving arbitration agreements with narrow language, holds that if a tort

claim is so interwoven with a contract that it cannot stand alone, it will be held to fall within the

contractual arbitration agreement; if the tort claim "is completely independent of the contract and

could be maintained without reference to the contract," it will fall outside the arbitration agreement.

Associated Glass , 147 S.W.3d at 513 ; see In re Kirby Highland Lakes Surgery Ctr., L.L.P. , No.

03-05-00502-CV, 2006 Tex. App. LEXIS 334 , at *16 n.7 (Tex. App.--Austin Jan. 13, 2006, orig.

proceeding). A broader standard, similar to the federal approach and applied to agreements with

broad language, (3) asks whether the alleged facts touch on, have a significant relationship to, are

enmeshed or intertwined with the contract; if so, the tort claim will be arbitrable. Dennis , 169

S.W.3d at 285 (quoting Pennzoil Co. v. Arnold Oil Co. , 30 S.W.3d 494, 498 (Tex. App.--San

Antonio 2000, no pet.)); see Kirby , 2006 Tex. App. LEXIS 334 , at *16 n.7 (comparing "close" view

set out in Associated Glass with federal standard applied in Dennis ). "A broad arbitration clause

gives rise to a presumption in favor of arbitration," and "[a]ny doubt as to whether a dispute falls

within the scope of an arbitration clause is resolved in favor of arbitration." In re Sun

Communications , 86 S.W.3d 313, 318 (Tex. App.--Austin 2002, orig. proceeding) (citing AT & T

Techs., Inc. v. Communications Workers of Am. , 475 U.S. 643, 650 (1986); Moses H. Cone Mem'l

Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24-25 (1983)).

Under either standard, Robinett's tort claims fall within the arbitration agreement

here. Robinett asserts that Senior Living's negligence caused her injuries. However, those injuries

were allegedly incurred in the course and scope of her employment. The contract in question is the

Employee Protection Plan, the handbook provided by Senior Living that describes an employee's

rights if injured on the job and uses broad language in reference to arbitration of disputes. Any harm

suffered by Robinett due to Senior Living's alleged negligence arose out of her status as an

employee. Resolving doubts in favor of arbitration, see Sun Communications , 86 S.W.3d at 318 , we

hold that Robinett's negligence claim falls within the arbitration agreement. See Dennis , 169 S.W.3d

at 284-85 ; Associated Glass , 147 S.W.3d at 513 .

Conclusion

Assuming that the March arbitration agreement was superceded by a new benefits

package for salaried employees, Robinett's claims relate to Senior Living's alleged failure to provide

benefits under the Plan, as described in the Summary, which explicitly and clearly states that

participants of the Plan must arbitrate any disputes. By suing for benefits under the Plan, Robinett

bound herself to the Plan's terms, as set out in the Summary and its incorporated arbitration

agreement. FirstMerit Bank , 52 S.W.3d at 755 . Robinett's tort claim falls within the arbitration

agreement and thus is also subject to arbitration. See Dennis , 169 S.W.3d at 284-85 ; Associated

Glass , 147 S.W.3d at 513 .

We conditionally grant the writ of mandamus with instructions for the trial court to

abate the proceedings and require Robinett to mediate and arbitrate her dispute with Senior Living

according to the terms of the Summary. Writ will issue only in the unlikely event that the trial court

does not act in accordance with this opinion.

__________________________________________

David Puryear, Justice

Before Chief Justice Law, Justices B. A. Smith and Puryear

Filed: March 27, 2006

1. Senior Living also filed a motion for emergency relief. We granted temporary emergency relief,

staying the trial setting until we resolved Senior Living's petition for writ of mandamus.

2. Further, Robinett signed the March arbitration agreement, which we believe refers to the same

benefits plan as the Summary Plan Description. Both documents explain that Senior Living is a

nonsubscriber to the Workers' Compensation Act and provides its own benefits plan, described in

the Summary. The March arbitration agreement refers to the Summary, including specific reference

to Section IX, which describes the arbitration procedures to be followed. The March arbitration

agreement's reference to "Section I, Paragraph B" does not refer to the Summary, as Robinett asserts.

Instead, the March agreement states that the arbitration procedures are described in the Summary and

in "Section I, Paragraph B of the Plan." In other words, the arbitration procedures are set out both

in the Summary and in the Plan itself.

The fact that the March arbitration agreement was copyrighted in 2000 whereas the Summary

was copyrighted in 2001 does not mean that they do not refer to the same benefits plan. The

documents appear to be form documents created by third parties and tailored to Senior Living's

needs. That Senior Living obtained an updated Summary from a new company does not render the

earlier arbitration agreement void. According to the Summary, the Plan originated on January 21,

2001, and the March agreement and the Summary were drafted well before Robinett was hired.

Robinett also argues that the March agreement is void due to a lack of consideration. It is true

that Robinett was required to sign the agreement after she had already started work. However,

continued employment was not the consideration on which the agreement was based. Instead, the

agreement states that both Robinett and Senior Living mutually agreed to arbitrate any disputes that

arose between them and that it could be revoked or modified only through mutual, written consent.

Therefore, the contract is not based on an illusory promise of continued employment and is not void

for want of consideration. See In re Halliburton Co. , 80 S.W.3d 566, 569-70 (Tex. 2002).

3. The Employee Protection Plan, which contains the arbitration agreement in question, refers to

arbitration several times. Early in the document, it states that a Plan participant agrees "to submit

to binding arbitration [of] all types of disputes, differences or claims that may arise" between the

participant and Senior Living, regardless of whether the dispute is related to the participant's

employment. The "Enrollment and Arbitration Agreement" at the end of the document provides that

the parties will arbitrate "any and all . . . differences (including any on-the-job injury claims)."