486 F.Supp.3d 1052
W.D. Tex.2020Background
- Carrillo, a Spanish-only speaker, began working for ROICOM (an affiliate/subsidiary of ReadyOne) in late 2017 and later sued for retaliation under the False Claims Act.
- At hire Carrillo signed an English "Receipt and Arbitration Acknowledgement" form presented by a ROICOM HR representative who told her she had to sign to be put on payroll; Carrillo says she could not read English and was not told the form imposed arbitration.
- ROICOM produced an arbitration policy (Mutual Agreement to Arbitrate) adopted by ReadyOne and asserted it applies to affiliates including ROICOM; Carrillo never saw or received the arbitration agreement itself in English or Spanish.
- In reply ROICOM produced an Acknowledgement Form showing English on the front and an unsigned Spanish text on the back; Carrillo maintains she was never given or shown a Spanish side and was misled about the form’s nature.
- ROICOM moved to compel arbitration and stay proceedings; the magistrate judge found ROICOM established a facial agreement but concluded the Agreement (via the Acknowledgement Form) was procedurally unconscionable and denied the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a valid arbitration agreement exists between Carrillo and ROICOM | Carrillo: ROICOM failed to prove formation; Arbitration Agreement references ReadyOne, not ROICOM, and Carrillo did not sign the agreement itself | ROICOM: Carrillo signed an Acknowledgement Form acknowledging receipt/opportunity to read the arbitration policy; ReadyOne’s arbitration applies to affiliates including ROICOM | Court: ROICOM met initial burden to show a facial agreement between ROICOM and Carrillo (Acknowledgement + arbitration policy) |
| Whether ReadyOne’s arbitration clause binds affiliated company ROICOM | Carrillo: corporate affiliates typically not bound by parent contracts unless agreement references affiliates | ROICOM: the Agreement expressly includes affiliates/related companies and ROICOM is an affiliate | Court: Agreement’s definition of "Company" includes affiliates and ROICOM is an affiliate, so ROICOM is bound |
| Whether the Agreement is procedurally unconscionable (formation defense) | Carrillo: she is Spanish-only, was misled by HR that the form was for payroll, never received the arbitration agreement in any language, and was prevented from understanding what she signed | ROICOM: documents existed in Spanish; Carrillo signed the form and is presumed to have read it; any Spanish side was available on the reverse | Held: Court found procedural unconscionability — misrepresentation + Carrillo’s inability to read English + failure to provide the arbitration agreement amount to a "trick or artifice" preventing meaningful assent, so arbitration unenforceable |
| Whether the existence of a Spanish reverse-side would cure the defect | Carrillo: she was not informed of or shown any Spanish side and lacked opportunity to read it | ROICOM: the form was two-sided with Spanish on back, so notice existed | Court: even assuming a Spanish backside existed, the HR representative’s conduct, the form’s format, and ROICOM’s failure to provide the arbitration agreement meant Carrillo was effectively prevented from reading it; procedural unconscionability remains |
Key Cases Cited
- Dealer Computer Services, Inc. v. Old Colony Motors, Inc., 588 F.3d 884 (5th Cir. 2009) (describing the two-step FAA inquiry for motions to compel arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (U.S. 1985) (court must first determine whether parties agreed to arbitrate)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (distinguishes challenges to contract formation from challenges to enforcement)
- Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294 (5th Cir. 2004) (state-law contract principles govern agreement formation and unconscionability defense burden)
- In re Merrill Lynch Tr. Co. FSB, 235 S.W.3d 185 (Tex. 2007) (corporate affiliates generally not bound by a parent’s arbitration clause absent express reference)
- Delfingen US-Texas, L.P. v. Valenzuela, 407 S.W.3d 791 (Tex. App. 2013) (employer representative’s affirmative misrepresentation can render arbitration agreement procedurally unconscionable)
- In re Palm Harbor Homes, Inc., 195 S.W.3d 672 (Tex. 2006) (third-party beneficiary may enforce contract if parties intended to benefit the third party)
- Prevot v. Phillips Petroleum Co., 133 F. Supp. 2d 937 (S.D. Tex. 2001) (English-only arbitration agreements presented to non-English-speaking employees without translation or explanation may be procedurally unconscionable)