Supreme Court of Texas.
In re ODYSSEY HEALTHCARE, INC. and George Portillo, Relators.
May 7, 2010.
Attorneys & Firms
*421 R. Michael Perez, Owen & Fazio, P.C., Dallas, TX, for Relator.
Joseph Gabriel Isaac, Scherr & Legate, PLLC, El Paso, TX, for Real Party in Interest.
In this negligence case, we must decide whether the trial court abused its discretion by refusing to grant the relator’s motion to compel arbitration. We conclude that it did. Here, the real party in interest failed to prove a valid defense against enforcement of her agreement to arbitrate disputes with her employer. Accordingly, we conclude the trial court abused its discretion in failing to compel arbitration, and we conditionally grant the writ of mandamus.
Guadalupe Morales worked in El Paso for Odyssey Healthcare, Inc., which provides hospice care. Morales alleges that she was injured at work when she tripped on an uneven step at a patient’s home. She sued Odyssey and her supervisor, George Portillo, for negligence.
Odyssey is a non-subscriber and, in lieu of workers’ compensation insurance, it provided its workers with an “Occupational Injury Benefit Plan.” Morales enrolled in this plan as a condition of her employment. Upon being sued, Odyssey moved to compel arbitration, relying on the arbitration clause contained in the plan.
The agreement between Morales and Odyssey provides in relevant part:
• All claims or disputes described below [including injury caused by negligence] that cannot otherwise be resolved between the Company and you are subject to final and binding arbitration. This binding arbitration is the only method for resolving any such claim or dispute. (emphasis in original)
• The Company is engaged in transactions involving interstate commerce ... and your employment involves such commerce. The Federal Arbitration Act will govern the interpretation, enforcement, and proceedings under this arbitration requirement.
• Unless otherwise agreed to in writing by the parties, the arbitrator selected by the parties ... shall be selected from a panel of arbitrators located in Dallas County, Texas.
• Adequate consideration for this arbitration requirement is represented by, among other things, your eligibility for (and not necessarily any receipt of) benefits under this Plan and the fact that it is mutually binding on both the Company and you.
• [T]he Company reserves the right to amend, modify, or terminate the Plan at any time; provided, however, that no such amendment or termination will alter the arbitration provisions incorporated into this booklet with respect to, or reduce the amount of any benefit payable to or with respect to you under the Plan in connection with, an Injury occurring prior to the date of such amendment or termination. In addition, any such amendment or termination of the arbitration provisions incorporated into this booklet shall not be effective until at least 14 days after written notice has been provided to you.
After a hearing, the trial court denied Odyssey’s motion to compel arbitration. The court found that the arbitration provision forcing Morales to arbitrate in Dallas *422 was unconscionable.1 The court of appeals denied Odyssey’s petition for writ of mandamus. 310 S.W.3d 464 (Tex.App.-El Paso 2009).
Mandamus will issue if the relator establishes a clear abuse of discretion for which there is no adequate remedy by appeal. FirstMerit Bank, 52 S.W.3d at 756. Morales does not dispute that her claims are covered by the agreement and subject to arbitration if the arbitration clause is valid and enforceable.
Morales asserts several grounds for why the arbitration clause here is invalid and unenforceable, including substantive unconscionability, a non-waiver provision of the Texas Workers’ Compensation Act, a Tenth Amendment violation by the Federal Arbitration Act, and illusory promises or lack of mutual consideration. We address these arguments in turn.
First, we conclude that Morales failed to establish that the arbitration clause is unconscionable. Substantive unconscionability refers to whether the arbitration provision ensures preservation of the substantive rights and remedies of a litigant. In re Poly–America, L.P., 262 S.W.3d 337, 357 (Tex.2008).
Next, Morales is incorrect that a certain non-waiver provision of the Texas Workers’ Compensation Act defeats the arbitration provision. section 406.033(e) does not render the arbitration agreement void.” (internal citations omitted)).
Third, we conclude that the Federal Arbitration Act does not violate the Tenth Amendment by encroaching on a state power to enact and regulate its own workers’ compensation system. The Tenth Amendment provides: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Id. at 288 n. 29, 101 S.Ct. 2352.
We have recognized that a state has a Tenth Amendment power to enact and regulate its own workers’ compensation system, protecting workers’ claims against employers. Hodel, 452 U.S. at 288, 101 S.Ct. 2352 (internal quotation omitted).
Finally, Morales is incorrect that the arbitration provision lacks consideration and is illusory for lack of mutual obligation. Mutual promises to submit all employment disputes to arbitration is sufficient consideration for such agreements. Id. at 569–70. Here, too, the agreement provided that “no such amendment or termination [by Odyssey] will alter the arbitration provisions incorporated into this booklet with respect to, or reduce the amount of any benefit payable to ... you under the Plan in connection with, an Injury occurring prior to the date of such amendment or termination,” and that “any such amendment or termination of the arbitration provisions incorporated into this booklet shall not be effective until at least 14 days after written notice has been provided to you.” Thus, because of these limitations on Odyssey’s right to amend or terminate the agreement, the arbitration agreement did not contain an illusory promise by Odyssey.
For these reasons, we conclude that the arbitration clause at issue was valid and enforceable, and the trial court abused its discretion by failing to grant Odyssey’s motion to compel arbitration. Mandamus relief is appropriate because Odyssey has no adequate remedy by appeal. See TEX R.APP. P. 52.8(c), we conditionally grant the writ of mandamus and direct the trial court to vacate its prior order and grant Odyssey’s motion to compel arbitration. We are confident the trial court will comply, and the writ will issue only if it fails to do so.
The trial court also found unconscionable a provision in the agreement that employees must “allow an authorized representative of the Company to go with you to appointments with health care providers.” However, in considering an arbitration clause, unconscionability “must specifically relate to the [arbitration clause] itself, not the contract as a whole, if [unconscionability is] to defeat arbitration.” In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex.2001). Therefore, we express no opinion as to this determination of unconscionability, as it does not relate to whether to enforce the arbitration clause at issue.
Texas Labor Code section 406.033(a) refers to causes of action against a non-subscriber employer “to recover damages for personal injuries or death sustained by an employee in the course and scope of the employment.”