Albertson's Holdings, LLC, Albertson's, LLC, and New Albertson's, Inc. v. Ruth Kay and Frank Kay
514 S.W.3d 878
| Tex. App. | 2017Background
- Ruth Kay, employed by Albertson’s LLC since 1972, signed the employer’s Texas Workplace Injury Benefit Plan in 2010, which contains a mandatory arbitration clause covering certain injury-related claims and expressly extends to an Associate’s spouse.
- In 2013 Ruth was injured at work; she sued Albertson’s entities (and contractors) for negligence, and her husband Frank sued for loss of consortium.
- Albertson’s moved to compel arbitration under the Plan; the Kays opposed, arguing substantive unconscionability and that Frank (a nonsignatory) cannot be bound.
- The trial court denied the motion, finding the arbitrator-selection process “sufficiently shocking and/or gross,” the clause substantively unconscionable, that unconscionability was not delegable to an arbitrator, and that Frank cannot be bound.
- On interlocutory appeal, the Court of Appeals reviewed (abuse of discretion for denial; de novo for legal questions) and considered whether a valid arbitration agreement exists and whether defenses to arbitration were preserved and meritorious.
Issues
| Issue | Plaintiff's Argument (Kays) | Defendant's Argument (Albertson’s) | Held |
|---|---|---|---|
| 1. Validity/scope of arbitration as to Ruth | Ruth implicitly accepted Plan but argues clause unconscionable so unenforceable | Arbitration clause is valid, Ruth accepted by continued employment and signed acknowledgment; claims fall within scope | Court: Clause valid and applies to Ruth; portion of denial reversed (Ruth compelled to arbitrate) |
| 2. Binding nonsignatory spouse (Frank) | Frank argues he never agreed or signed; loss of consortium is independent so he is not bound | Albertson’s contends Plan expressly binds spouses, or Frank is agent, third-party beneficiary, or claim is derivative | Court: Frank is not bound; agency, third-party beneficiary, and derivative-claim theories fail; portion of denial affirmed |
| 3. Waiver of unconscionability defense pleading | Kays: did not need to plead defenses in an amended petition in response to a motion; preserved via response | Albertson’s: Rule 94 required pleading affirmative defenses or they’re waived | Court: Kays preserved unconscionability argument in response to motion; Rule 94 inapplicable; no waiver (defense reached) |
| 4. Substantive unconscionability re: arbitrator selection | Kays: Employer’s control of arbitration-firm selection is one-sided and creates risk of bias, rendering clause unconscionable | Albertson’s: Plan requires an approved regional firm, panel of ≥7 Texas attorneys experienced in PI, standard selection process or alternating strikes; not one-sided | Court: No specific evidence of forum inadequacy or bias; selection scheme is not unconscionable on its face; Kays failed to meet burden; trial court erred to the extent it invalidated clause on unconscionability |
Key Cases Cited
- In re Labatt Food Servs., L.P., 279 S.W.3d 640 (Tex. 2009) (standard for validity of arbitration agreement and nonsignatory binding under equitable theories)
- In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001) (party seeking to compel arbitration must show valid agreement and scope)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (theories to bind nonsignatories to arbitration clauses)
- Venture Cotton Coop. v. Freeman, 435 S.W.3d 222 (Tex. 2014) (unconscionability requires specific proof that arbitral forum is inadequate to vindicate rights)
- In re Dallas Peterbilt, Ltd., L.L.P., 196 S.W.3d 161 (Tex. 2006) (employer must prove employee had notice of and accepted arbitration policy)
- In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002) (inequality of bargaining power alone does not render arbitration agreement unenforceable)