in Re Autotainment Partners Limited Partnership D/B/A Planet Ford and Worldwide Autotainment Inc.

Petition for Writ of Mandamus Conditionally Granted and Opinion filed

January 20, 2006

Petition for Writ of Mandamus Conditionally Granted

and Opinion filed January 20, 2006.

In The

Fourteenth Court of Appeals

____________

NO. 14-05-01035-CV

____________

IN RE AUTOTAINMENT PARTNERS LIMITED

PARTNERSHIP

D/B/A PLANET FORD AND

WORLDWIDE AUTOTAINMENT, INC. ,

Relators

ORIGINAL

PROCEEDING

WRIT

OF MANDAMUS

O P I N I O N

Relators , Autotainment Partners Limited

Partnership, d/b/a Planet Ford ( A Planet Ford @ ) and Worldwide Autotainment, Inc.,

seek a writ of mandamus ordering respondent, the Honorable Sharolyn P. Wood, to

vacate an order denying their motion to compel arbitration. For the reasons that follow, we conditionally

grant relators = petition.

Background

Real party in interest, Solomon Israel, worked as a car

salesman for Planet Ford, a non‑subscriber under the Texas Workers = Compensation Act. [1] Upon accepting employment, Israel was advised

that as a condition of his employment, he would have to agree to arbitrate any

disputes with Planet Ford under Planet Ford = s A Dispute Resolution Program @ (the A Program @ ).

Israel signed an acknowledgment form stating he had received training on

the Program and a copy of the document.

In August 2003, Israel was injured while working on Planet

Ford = s premises. He was placed on paid leave and received

medical coverage through Planet Ford = s insurance plan. Israel returned to

work in April 2004, but suffered another injury, A off the job. @

Israel was again placed on paid leave.

In September 2004, Planet Ford determined that Israel = s injuries were not work related and

ceased paying him. Israel then wrote a

letter to Planet Ford claiming he was being retaliated against for A whistle blowing @ and copied the letter to local news

media and government entities. Planet

Ford investigated the claims made in the letter and upon completion of its

investigation terminated Israel = s employment effective March 2005. Shortly thereafter, Israel filed suit against

Planet Ford for the injuries he sustained in August 2003. Planet Ford moved to compel arbitration under

the terms of the Program.

At the hearing on the motion to compel, relators argued

Israel = s claim was subject to arbitration,

relying upon his signed acknowledgment, and asserted he was aware of that fact

because he filed a demand for arbitration on two occasions, in February 2005

and March 2005. Israel did not respond

to the motion to compel arbitration, but at the hearing his counsel argued (1)

the acknowledgment was not an agreement to arbitrate, and (2) relying on In

re Kepka , __ S.W.3d __, 2005 WL 1777996 (Tex. App. C Houston [1st Dist.] 2005, orig.

proceeding), that the Program was unenforceable because the Federal Arbitration

Act ( A FAA @ ) was reverse preempted. After hearing argument, the trial court

denied the motion to compel, concluding it was not a case subject to

arbitration. Relators filed a motion to

reconsider and, after a hearing, the trial court signed an order denying the

motion. In this court, relators seek a

writ of mandamus ordering the trial court judge to withdraw her ruling and

compel Israel to arbitrate his dispute.

Standard of Review

A party seeking to compel arbitration by mandamus must first

establish that an agreement subject to the FAA exists. In re FirstMerit Bank, N.A. , 52 S.W.3d

749, 753 (Tex. 2001) (orig. proceeding).

Once existence of the agreement is established, the movant must show

that the claims asserted are within the scope of the agreement. Id.

Because federal policy favors arbitration, a presumption exists favoring

agreements to arbitrate under the FAA, and any doubts about the agreement = s scope are resolved in favor of

arbitration. Id. If the movant proves existence of a valid

agreement governing the dispute, the burden then shifts to the opposing party

to present evidence of a defense to enforcing the agreement. J.M. Davidson, Inc. v. Webster , 128

S.W.3d 223, 227 (Tex. 2003). Absent a

defense to enforcing the arbitration agreement, the trial court has no

discretion but to compel arbitration and stay its proceedings once the

existence and application of the agreement has been shown. In re J.D. Edwards World Solutions Co. ,

87 S.W.3d 546, 549 (Tex. 2002). When a

trial court erroneously denies a party = s motion to compel arbitration under

the FAA, the party has no adequate remedy at law and is entitled to a writ of

mandamus. See, e.g. , In re

FirstMerit Bank , 52 S.W.3d at 753 .

Analysis

Relators argue the trial court abused its discretion by not

compelling arbitration because they furnished (1) a copy of a binding

arbitration agreement, governed by the FAA;

(2) the acknowledgment signed by Israel indicating he had received a

copy of the agreement and training on the Program; and (3) established that

Israel = s claim falls within the scope of the

agreement. Israel argues the signed

acknowledgment form is not an arbitration agreement and therefore, relators

failed to prove there is an agreement to arbitrate. He further argues that, even if he is

contractually bound to arbitration, (1) the Program expressly does not apply to

workers = compensation claims, and (2) the

McCarran-Ferguson Act reverse preempts the FAA.

1.

Did Relators Establish There is a Valid Agreement to Arbitrate?

Under the FAA, an agreement to arbitrate that is valid under

general principles of state contract law and involves interstate commerce is A valid, irrevocable, and enforceable. @ [2]

9 U.S.C. ' 2; In re Halliburton Co. , 80 S.W.3d 566, 568 (Tex.

2002). The trial court = s determination of the arbitration

agreement = s validity is a legal question

subject to de novo review. J.M.

Davidson , 128 S.W.3d at 223 .

Here, relators provided a verified copy of the Program,

stating that employee disputes will be submitted to binding arbitration and

governed by the FAA. The Program also

provides that its terms modify the at-will employment relationship and

acceptance or continuation of employment means the individual is A bound by the terms of the Program as

contained in the Plan Document and Rules. @

Israel = s signed acknowledgment states the

following:

I, ___________ hereby acknowledge

that I have received a copy of the World Class Automotive Group Dispute

Resolution Program. In addition I have

been provided with training/orientation on the [Program] and understand that

World Class Automotive Group has implemented such a program. I have been given the opportunity to ask any

questions that I may have and I further understand should I have any questions

in the future, I may talk with my supervisor or utilize the employee hotline as

outlined in the [Program].

In sum, relators showed there is a valid arbitration agreement that is

subject to the FAA. See Smith v. H.E.

Butt Grocery Co. , 18 S.W.3d 910, 911-12 (Tex. App. C Beaumont 2000, pet. denied) (finding

evidence of agreement with broadly worded scope met movant = s burden to compel arbitration under

FAA).

Israel argues, however, that the acknowledgment is not proof

of a binding contract because (1) he did not sign it, and (2) it does not

apprise him that he will be bound to arbitration. But, the FAA does not require an arbitration

clause be signed, so long as it is written and agreed to by the parties. In re AdvancePCS Health L.P. , 172

S.W.3d 603, 606 (Tex. 2005). Nor does an

arbitration agreement have to be contained in each of the contract documents it

purports to cover. Id. Here, the acknowledgment expressly states

Israel received a copy of the Program, received training on the Program, and

understood such a Program was in use. By

signing the acknowledgment, and by accepting employment, Israel agreed to the

terms contained in the Program documents.

See, e.g. , id. (finding parties agreed to arbitrate

disputes based on signed enrollment forms, which did not contain arbitration

clause but explicitly referenced and agreed to terms of the agreement that did

contain arbitration clause); see also In re Halliburton , 80 S.W.3d at

568 B 69; In re Big 8 Food Stores, Ltd. ,

166 S.W.3d 869, 877 (Tex. App. C El Paso 2005, orig. proceeding) (finding party agreed to

arbitration by signing employee benefit plan, evidence showed she attended a

benefits meeting, attended training, and that the statements at the meeting

were translated into Spanish).

Further, as evidence Israel was aware of the arbitration

agreement and its application to his claim, relators furnished a copy of a

demand for arbitration, dated February 15, 2005, filed by Israel, in which he

listed the nature of the dispute as A [c]laimant was injured on the

job. Employer stopped paying disability

payments and cancelled medical services. @

In the trial court, Israel argued the demand did not concern his

underlying claim, but in his brief, Israel describes his second injury as

occurring A off the job @ ; presumably then, the February

demand for arbitration was in reference to his August 2003 injury, the subject

of the underlying suit. Regardless, the

demand for arbitration refutes Israel = s contention that he was unaware of

the arbitration agreement. See, e.g. ,

In re Big 8 Food Stores , 166 S.W.3d at 877 (noting that evidence other

than a signature can indicate assent to arbitrate). Israel acknowledges he also received benefits

under the Program. We conclude relators

established there is a valid arbitration agreement. We turn to the agreement = s scope.

2.

Does the Arbitration Agreement Encompass Israel = s Claim?

The scope of the Program is very broad and applies to A any legal or equitable claim, demand

or controversy, in tort, in contract, under statutory or common law doctrines .

. . or alleging violation of any legal obligation @ that relates to or arises from the

employment relationship. The Program

expressly encompasses disputes arising from (1) the Program itself; (2)

employment of an employee, including the terms, conditions, or termination of

such employment; (3) benefits incident to employment; and (4) A any other matter related to the

relationship between @ Planet Ford and its employees, past or present. Israel does not deny that the Program = s scope is broad. He argues that his claim is one for workers = compensation benefits and therefore,

is expressly excluded under the Program.

When determining whether a claim falls within the scope of an

arbitration clause, we focus on the factual allegations of the complaint,

rather than the legal causes of action asserted. Dewey v. Wegner , 138 S.W.3d 591, 602

(Tex. App. C Houston [14th Dist.] 2004, no

pet.). In his first amended petition,

Israel seeks damages against relators as a result of his fall on Planet Ford = s premises. The petition states that relators owed a duty

to Israel to keep their premises in a safe condition, relators = negligent disregard of that duty

caused him to suffer damages, and they breached the standard of care to

properly maintain the premises. These

are allegations of negligence and, as a tort, fall within the plain language of

the Program = s provisions.

Israel does not cite to any authority that establishes a

negligence claim against a non-subscriber constitutes a claim for workers = compensation benefits under the

Workers = Compensation Act. Israel acknowledges that Planet Ford is a

nonsubscriber under the Act and therefore, his remedy is governed by principles

of common-law negligence. (Resp. p. 1). See

Tex. Lab. Code Ann. ' 406.033 (Vernon Supp. 2005). Finally, Israel does not argue, and there is

no indication in the Program, that the parties intended A workers = compensation benefits @ to mean benefits other than those

provided for under the Workers = Compensation Act. For

these reasons, coupled with the presumption favoring arbitration, we reject

Israel = s argument and conclude that his

claim falls within the scope of the arbitration agreement.

Because relators established the existence of a valid

arbitration agreement encompassing the dispute, the burden shifted to Israel to

prove the agreement is unenforceable.

Israel asserts his claim is not subject to arbitration because the

McCarran-Ferguson Act reverse preempts application of the FAA. He does not

contend that the arbitration agreement is unenforceable under principles of

contract law.

3. Does the McCarran-Ferguson Act Preempt

Application of the FAA Here?

To the extent a state statute is inconsistent with the FAA,

the state statute is preempted. In re

R & R Pers. Specialists of Tyler, Inc. , 146 S.W.3d 699, 703 (Tex. App. C Tyler 2004, orig. proceeding). Israel does not argue that the FAA preempts

any particular provisions of the Workers = Compensation Act; rather, he

contends that his claims are for benefits under the Act and that, even if the

FAA preempts the Act, the McCarran-Ferguson Act ( A MFA @ ) reverse preempts the FAA.

In part, the MFA provides as follows:

No Act of Congress shall be construed

to invalidate, impair, or supersede any law enacted by any State for the

purpose of regulating the business of insurance, or which imposes a fee or tax upon

such business, unless such Act specifically relates to the business of

insurance

15 U.S.C. ' 1012(b). In short,

under the MFA, state laws enacted for the purpose of regulating insurance

prevail over general federal laws that do not specifically relate to the

business of insurance. See id. ; see

also In re Kepka , 2005 WL 1777996, at *5 .

In determining whether the MFA applies to reverse preempt a federal

statute, the following requirements must be met: 1) the federal statute at issue does not A specifically relate[] to the business

of insurance @ ; 2) the state law was A enacted . . . for the purpose of regulating

the business of insurance @ ; and 3) application of the federal statute would A invalidate, impair, or supersede @ the state insurance law. Lovilia

Coal Co. v. Williams , 143 F.3d 317, 324 (7th Cir. 1998) (citing U.S. Dep = t of Treasury v. Fabe , 508 U.S. 491 , 500 B 01 (1993)); In re Kepka , 2005

WL 1777996, at *5 . All three factors

must be satisfied to preclude application of a federal statute. Lovilia , 143 F.3d at 324 .

In support of his reverse preemption argument, Israel relies

upon In re Kepka , a case in which, the relator sued a nursing home for

negligence in caring for her deceased husband.

When the nursing home moved to compel arbitration in accordance with an

agreement signed by the relator, she argued the arbitration agreement failed to

comply with Revised Civil Statute article 4590i, [3]

the health care liability law in effect.

In re Kepka , 2005 WL 1777996 , at *2 B 3.

Under that statute, a health care provider could not require execution

of an arbitration agreement unless the form of agreement was written in ten

point boldface type, clearly and conspicuously informing the patient that he

should consult with an attorney prior to signing the agreement because he was

waiving his legal rights. Id. at

*4. The nursing home argued the FAA

preempted application of article 4590i, and relator argued the FAA was reverse

preempted under the MFA. Id. Agreeing with relator, the appellate court

held the MFA prevented the FAA from preempting the notice requirements under

article 4590i. Id. at *8. Kepka is distinguishable.

Under the circumstances in Kepka , the notice

requirements contained in the state statute were not required in the FAA, and

it was evident that application of the FAA interfered with the requirements of

the state statute. Id. at 4;

see also In re AdvancePCS Health , 172 S.W.3d at 606 n.5 (stating FAA

preempts state contractual requirements that apply only to arbitration

clauses). This is not the case here.

Israel = s reverse preemption argument depends upon a state law that

is preempted by the FAA. The FAA preempts

a state law only when that state law is inconsistent with the FAA = s policy favoring arbitration. Even were we to hold that Israel = s claim is governed by the Workers = Compensation Act, which we do not,

he has not shown that any provision in the Act that might be applicable to his

claim is inconsistent with the FAA.

Thus, there is no state law preempted by the FAA and there can be no

reverse preemption by the MFA.

In sum, relators established the existence of a valid

arbitration agreement, encompassing Israel = s claim, and he has failed to show

that the arbitration agreement is otherwise unenforceable. Therefore, the trial court abused its

discretion in denying relators = motion to compel arbitration. We conditionally grant relators = petition for writ of

mandamus. The writ will issue only

if the trial court fails to comply with our holding.

/s/ J. Harvey

Hudson,

Justice

Petition Conditionally Granted and Opinion filed

January 20, 2006.

Panel consists of Justices Hudson, Frost and Seymore.

[1] See generally Tex. Lab. Code Ann. ' ' 401.001 B 410.301

(Vernon 1996 & Supp. 2005).

[2] Whether the agreement involves interstate commerce is

not at issue in this case.

[3] See Act of

May 30, 1977, 65th Leg., R.S., ch. 817, 1977 Tex. Gen. Laws 2039 , 2039‑64,

repealed by Act of June 2, 2003, 78th Leg., R.S., ch. 204, ' 10.09, 2003 Tex. Gen. Laws 847 , 884 (current version

at Tex. Civ. Prac. & Rem. Code Ann. ' ' 74.001‑.507 (Vernon Supp. 2004 B 2005)) .