Texas’ Twelfth COA Holds Arbitration Agreement in Employer’s Workplace Injury Plan Does Not Bind Worker’s Spouse

Texas’ Twelfth District Court of Appeals in Tyler has ruled that a nonsignatory spouse may not be bound by an arbitration agreement his wife entered into with her employer.  In Albertson’s Holdings, LLC v. Kay, No. 12-16-00181-CV (Tex. App. – Tyler, February 8, 2017), a woman, Ruth Kay, was apparently injured while working for a grocery store chain, Albertson’s, in 2013.  About three years before she was hurt, Kay signed a “Workplace Injury Benefit Plan” (the “Plan”) that included an agreement to resolve all claims against the company through binding arbitration. Interestingly, the Plan also stated any claims that may be brought by the spouse of an Albertson’s employee must also be resolved through arbitral proceedings.

Following her workplace injury, Kay and her husband filed a negligence and loss of consortium lawsuit against Albertson’s and two contractors who were engaged in remodeling the store in which she worked.  In response, Albertson’s filed a motion to compel the dispute to arbitration pursuant to the terms of the Plan.  Kay successfully argued the agreement to arbitrate was unconscionable and did not apply to her husband because he was not a signatory to the Plan.  As a result, the trial court denied Albertson’s motion.  After that, Albertson’s filed an interlocutory appeal with Texas’ Twelfth District Court of Appeals.

On appeal, the Tyler court first stated whether Kay was a party to the arbitration agreement was not in dispute.  Next, the court turned to Albertson’s claim that Kay’s husband should be bound by the arbitration provision.  According to the company, the man was bound despite that he was a nonsignatory because the agreement stated so.  In addition, the company claimed Kay signed as her husband’s agent, her spouse was a third party beneficiary under the Plan, and his loss of consortium claim was derivative of his wife’s negligence claim.  After examining the case law offered by Albertson’s in support of the company’s claims, the appeals court stated Albertson’s failed to show “any theory applicable to bind” Kay’s spouse “to Albertson’s LLC’s arbitration agreement.”  As a result, the court found that “the trial court did not err in determining that” Kay’s husband “is not bound by the arbitration agreement.”

The court then examined whether the agreement to arbitrate was unconscionable.  The court said:

While there is no language stating directly how the employee can participate in the firm selection process, neither does it include limiting language to prevent the employee’s participation in that process. Ruth has not proven that the arbitration agreement is so one-sided as to be unfair. See Ayala, 180 S.W.3d at 215. Additionally, Ruth has not presented any evidence of bias in the selection of the arbitrator or in the arbitral forum as a whole. We will not invalidate the arbitration agreement based on speculation of possible bias. See Freeman, 435 S.W.3d at 232. Finally, the FAA provides that either party may request the court to appoint an arbitrator if the parties are unable to agree. See 9 U.S.C.A. § 5 (Westlaw through Pub. L. No. 114-254); Hafer v. Vanderbilt Mortg. & Fin., Inc., 793 F. Supp. 2d 987, 1008 (S.D. Tex. 2011). We conclude that Ruth did not meet her burden to prove that the arbitration agreement is unconscionable.

Finally, the Twelfth District Court of Appeals in Tyler reversed the trial court’s order denying Albertson’s motion to compel arbitration of Kay’s negligence claim, affirmed the lower court’s order with regard to her husband’s loss of consortium claim, and remanded the case.

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