Henry & Sons Construction Co., Inc. v. Pablo Campos
510 S.W.3d 689
| Tex. App. | 2016Background
- Plaintiff Pablo Campos was injured while employed by Henry & Sons Construction Co. (HSC) and sued for personal injuries; HSC moved to compel arbitration under its Dispute Resolution Policy (the Policy).
- The Policy (effective Jan. 1, 2006) required employees to arbitrate employment-related disputes and directed employees to sign an Employee Acknowledgement; Campos signed an acknowledgement in 2013 and sued in 2015.
- The Policy allowed HSC to modify or terminate the Policy at its sole discretion; it contained (a) a modification provision promising revised policies would be provided and employees asked to acknowledge receipt, and (b) a termination provision requiring 30 days’ notice and stating termination would not affect claims initiated before termination.
- Campos argued the Policy was illusory because HSC could avoid arbitration by unilaterally modifying the Policy without guaranteed advance notice, so there was no mutual consideration.
- HSC argued the 30-day termination notice and the Policy’s prospective-application language cured any illusory promise; HSC alternatively argued Campos ratified the Policy or was bound via the separate Employee Injury Benefit Plan.
- The trial court denied the motion to compel arbitration; HSC appealed. The appellate court affirmed, holding the Policy was illusory and not a binding arbitration agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Policy’s promise to arbitrate is illusory (mutuality/consideration) | Campos: Policy is illusory because HSC can unilaterally modify/avoid arbitration without guaranteed advance notice, so no mutual consideration | HSC: 30-day termination notice and prospective-application clause prevent avoidance and render promise binding | Held: Policy is illusory; no guaranteed advance notice of modifications, and prospective clause alone is insufficient — arbitration agreement unenforceable |
| Whether benefits received under the separate Employee Injury Benefit Plan provided alternative consideration or ratified the Policy | Campos: Acceptance of benefits did not ratify or supply consideration because Benefit Plan and Policy are distinct and expressly exclude ERISA/benefit claims from mandatory arbitration | HSC: Campos accepted ERISA plan benefits that reference arbitration, so acceptance ratified or provided consideration for arbitration | Held: Acceptance of benefits did not ratify nor constitute consideration for the separate Policy’s arbitration clause |
| Whether arbitrability/enforceability issues were delegated to the arbitrator | Campos: (implicit) Court should resolve enforceability | HSC: The Policy delegates arbitrability/enforceability questions to the arbitrator | Held: HSC waived this argument by not raising it in the trial court; appellate court declined to consider it |
| Whether a stay is required if arbitration is compelled on remand | N/A | HSC: If arbitration is required, stay is mandatory | Held: Not reached because arbitration was not compelled |
Key Cases Cited
- In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002) (upholding employer-modifiable arbitration clause where amendment/termination would not apply to disputes of which employer had notice and termination required notice)
- In re AdvancePCS Health LP, 172 S.W.3d 603 (Tex. 2005) (arbitration agreements must be supported by consideration; unilateral cancellation limited by protections can avoid illusory result)
- In re Odyssey Healthcare, Inc., 310 S.W.3d 419 (Tex. 2010) (discussing Halliburton savings clauses and holding employer protections like notice and prospective application preserve mutuality)
- Nelson v. Watch House Intern., LLC, 815 F.3d 190 (5th Cir. 2016) (articulating three-prong test: modification power must be prospective, apply equally, and require advance notice)
- In re Lucchese, Inc., 324 S.W.3d 214 (Tex. App.—El Paso 2010) (agreement found illusory where employer could unilaterally avoid arbitration)
- Mission Petroleum Carriers, Inc. v. Kelley, 449 S.W.3d 550 (Tex. App.—Houston [14th Dist.] 2014) (ratification by accepting benefits can bind employee where arbitration clause is part of the benefits agreement)
- Big Bass Towing Co. v. Akin, 409 S.W.3d 835 (Tex. App.—Dallas 2013) (distinguishing ratification where benefit plan and arbitration agreement are separate and exclude benefit claims from arbitration)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (FAA applies and state contract principles determine validity of arbitration agreements)