Weekley Homes, L.P. v. Rao, 336 S.W.3d 413

Len Rao, a former Weekley Homes executive, sued Weekley Parties for multiple tort and contract-based claims arising from his employment.
Rao received the David Weekley Homes Team Member Handbook, which contains a Dispute Resolution Policy linked within the Handbook.
The Handbook includes a disclaimer that it is not a contract of employment and contains a unilateral modification/policy-change provision.
The Dispute Resolution Policy states that employment-related disputes shall be resolved by arbitration under the FAA, and the Policy is linked from the Handbook.
Rao acknowledges receipt of the Handbook but claims the arbitration promise is illusory because the Handbook’s modification language allows unilateral changes without adequate notice.
The trial court denied Weekley Parties’ plea in abatement and motion to compel arbitration; Weekley Parties appeal asserting a valid, enforceable arbitration agreement.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is the arbitration agreement valid and enforceable against Rao?	Rao contends the promise to arbitrate is illusory due to unilateral modification rights in the Handbook.	Weekley Parties argue the Dispute Resolution Policy is a valid, enforceable arbitration agreement incorporated by reference.	Arbitration agreement is unenforceable; illusory promise.
Does the Handbook’s modification provision apply to the Dispute Resolution Policy and render the arbitration agreement illusory?	Modification language makes agreements optional and unbinding at Weekley’s discretion.	Modification language does not apply to the separate Dispute Resolution Policy and any notice provisions suffice.	Modification clause renders the arbitration promise illusory; not enforceable.
Does incorporation by reference of the Dispute Resolution Policy into the Handbook make the arbitration agreement enforceable?	Incorporation by reference would bind Rao to arbitrate.	Incorporation is insufficient if the promise is illusory due to modification rights.	Incorporation by reference does not create a binding arbitration agreement; illusory promise controls.

In re Bank One, 216 S.W.3d 825 (Tex. 2007) (documents incorporated by reference are part of the contract)
Halliburton Co., 80 S.W.3d 566 (Tex. 2002) (notice and acceptance required to enforce arbitration in at-will employment)
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (state contract law governs validity of arbitration agreements)
In re 24R, Inc., 324 S.W.3d 564 (Tex. 2010) (illusory promises and unilateral modification affect enforceability)
Tenet Healthcare Ltd. v. Cooper, 960 S.W.2d 386 (Tex. App.—Houston [14th] 1998) (unilateral modification without notice can render arbitration unenforceable)
In re C & H News Co., 133 S.W.3d 642 (Tex. App.—Corpus Christi 2003) (unilaterally changing policies may render arbitration unenforceable)
In re Dallas Peterbilt Ltd., L.L.P., 196 S.W.3d 161 (Tex. 2006) (notice of arbitration policy changes matters to enforceability)
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (strong presumption in favor of arbitration after existence of valid agreement)