Tyler Court of Appeals Holds Routine Employment Practice Insufficient to Prove Arbitration Agreement Exists

The Twelfth District Court of Appeals of Texas has held that evidence of a routine employment practice was insufficient to prove an arbitration agreement existed.

In In re Astro Air, L.P., No. 12-10-00108-CV (Tex. App. – Tyler September 15, 2010), Sharron Hall was hired by Astro Air, L.P. in December 2005 and remained an employee of Astro until she suffered an on the job injury in July 2007. Hall sued Astro, alleging that her injury was result of Astro’s negligence and Astro filed a motion to abate the proceeding and compel arbitration.

Astro alleged that Hall’s claims were covered by an arbitration agreement which existed between Hall and Astro but the company was unable to produce a signed arbitration agreement. Astro presented an affidavit and deposition testimony from Astro’s human resources manager at the time Hall was hired, Lora Griffith Western. Western testified that Astro was a nonsubscriber to workers’ compensation at the time Hall was hired and that the “routine practice was to explain to any new employee that it was a nonsubscriber and that it had an ERISA complaint injury benefit plan that included an arbitration agreement.” Astro further required new employees to sign several documents, including an arbitration agreement, before the employee was permitted to begin work. These signed arbitration agreements, along with other documents, were routinely kept in each employee’s personnel file.

In August 2007, Astro was acquired by Luvata Grenada, L.L.C. and all personnel files were sent to Luvata. Astro was unable to locate the personnel file belonging to Hall when she brought her claim. Despite this fact, Astro argued that Western’s testimony and affidavit as to routine employment practice was sufficient to establish that an arbitration agreement existed between Hall and Astro and to support Astro’s motion to compel arbitration.

In response, Hall submitted an affidavit which stated that she did not recall being informed of an arbitration agreement, agreeing to be bound by an arbitration agreement as a condition of employment or signing any such agreement. She did, however, recall being informed that Astro was a nonsubscriber to workers’ compensation.

After hearing argument and reviewing the affidavits, a trial court denied Astro’s motion to compel arbitration and Astro filed a petition for writ of mandamus.

As an initial matter, the Twelfth District noted that because the arbitration agreement Astro was seeking to enforce was governed by the Federal Arbitration Act (FAA), a mandamus proceeding was appropriate because a denial of a motion to compel arbitration governed by the FAA leaves a party with no adequate remedy on appeal.

The court then noted that because arbitration agreements “are valid, irrevocable, and enforceable to the same extent as any other contract” the court must “first determine whether the arbitration agreement in this case satisfies Texas law governing contract formation.” Only after an arbitration agreement found to exist does the strong presumption in favor of arbitration apply. “[T]he initial determination of whether an enforceable agreement exists is determined through the neutral application of contract law.”

Under the Texas Rules of Evidence Section 406, evidence of an organization’s routine practice is relevant to prove the organization acted in accordance with that routine on a specific occasion. Establishing routine practice does not conclusively establish the fact, however, and the evidentiary burden belonged to Astro. In determining Astro’s evidentiary burden, the court noted that under established spoliation doctrine, the burden of prejudicial effects fall upon the party responsible for preserving the evidence.

Despite that Astro presented strong evidence of routine practice, Western testified that she could not be certain that Hall had in fact signed an arbitration agreement and Hall likewise swore that she could not recall signing an agreement. Therefore, it was not possible for the court to “say that the trial court could reasonably have reached but one decision about the existence of an agreement to arbitrate.”

The Twelfth District denied Astro’s writ of mandamus and held that the trial court did not abuse its discretion in when it denied Astro’s motion to compel arbitration.

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