Budd v. Max International, LLC, 2011 Tex. App. LEXIS 3387

Budd became a Max Associate and independent contractor in February 2007; Max terminated the relationship in February 2010, leading Budd to sue for DTPA, breach of contract, quantum meruit, fraud, and promissory estoppel.
Max moved to compel arbitration and dismiss the action, asserting the independent contractor agreement incorporated Max policies and procedures and any amendments.
Effective August 3, 2007, Max adopted a comprehensive Statement of Policies and Procedures, incorporated into the Associate Agreement and subject to amendments at Max’s sole discretion.
The policies included an arbitration clause (8.3) stating disputes would be settled by FAA arbitration with a waiver of jury trial, and the clause survived termination.
Szczesny (Max) testified that Budd accepted the policies by cashing a May 15, 2008 check and by renewing access to Budd’s account after annual renewals, which required agreement to current policies.
Amendments on May 11, 2009 added a non-binding mediation step before arbitration and altered the numbering; further amendments occurred October 9, 2009, with the same mediation requirement, but claims arose while the policies were in effect.
The trial court granted Max’s motion to compel arbitration and dismiss the case without prejudice in favor of arbitration, a ruling Budd challenged on the ground that the arbitration clause was illusory.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is the arbitration agreement illusory because Max can unilaterally modify policies?	Budd argues Max could amend or delete the arbitration clause at will.	Max contends amendments do not retroactively defeat the promise to arbitrate.	Not illusory; amendments prospective, clause survives termination, not retroactive to pending claims.

In re 24R, Inc., 324 S.W.3d 564 (Tex.2010) (mutual promises support arbitration; illusory only if promise not binding)
In re Halliburton Co., 80 S.W.3d 566 (Tex.2002) (modification/termination provisions not retroactive to avoid arbitration)
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex.2003) (unilateral right to alter policies may render clause illusory if ambiguity remains)
In re AdvancePCS Health L.P., 172 S.W.3d 603 (Tex.2005) (30-day notice window preserves arbitration; termination for breach does not retroactively cancel)
In Odyssey Healthcare, Inc., 310 S.W.3d 419 (Tex.2010) (arbitration not illusory if no retroactive effect on disputes)
AdvancePCS Health, 172 S.W.3d 607-08 (Tex.2005) (not illusory where obligations survive and retroactivity is limited)
In re Polymerica, LLC, 296 S.W.3d 74 (Tex.2009) (agreement not illusory where termination provisions apply prospectively)