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May 19, 2016

THE INFAMOUS “ARBITRATION AGREEMENT” - WHO MAKES THE INITIAL DETERMINATIONS ON ENFORCEABILITY, VALIDITY AND SCOPE: THE COURT OR THE ARBITRATOR?

In FirstLight Federal Credit Union v. Loya, 478 S.W.3d 157 (Tex. App. – El Paso, Oct. 7, 2015), the appellate Court reversed and remanded the trial court’s decision denying FirstLight Federal Credit Union’s (“FirstLight”)Motion to Compel Arbitration.

Former employee, Martha Loya, filed claims of discrimination and retaliatory discharge against FirstLight based on age, sex, and race and for reporting an inappropriate relationship involving a supervisor.  After filing the required Charge of Discrimination with the TCHR, Martha received her Notice of Right to Sue and filed her petition in state court.  FirstLight filed a motion to compel arbitration based on a 2011 arbitration agreement that it asserted applied to Martha’s claims.

The major questions that were answered by the Court in determining that the trial court abused its discretion in failing to enforce the arbitration agreement were:

Did an arbitration agreement actually exist, in other words was a contract properly formed to begin with?

The initial issue in this case was whether Martha was required to arbitrate her claims when she never signed the signature block on the arbitration agreement at issue.  The Court decided that a contract was formed even without her signature because (1) there was uncontroverted evidence that she was notified electronically of the arbitration agreement and she electronically acknowledged receipt and (2) the arbitration agreement specifically said that she would be bound by it by continuing her employment with FirstLight after receiving electronic notice, which she did. 

Under the Federal Arbitration Act, it is not required that an arbitration agreement be signed by the parties.  The Court further stated that “to make a signature a condition precedent to enforcement of a contract – including an arbitration agreement – the agreement must clearly and explicitly require a signature before it becomes binding.”  FirstLight’s arbitration agreement had no such signature requirement.


What effect does a delegation clause have on the power of the Court to resolve gateway issues regarding the validity and enforceability of the arbitration agreement?

Since the Court found that even without a signature, the arbitration agreement was an existing contract, it next looked to the delegation clause contained within the arbitration agreement to determine its jurisdiction in deciding validity and enforceability.  A delegation clause is contractual language contained in the arbitration agreement where the parties can agree to delegate to the arbitrator the power to resolve issues regarding the validity and enforceability of the arbitration agreement instead of leaving this power with the Courts if/when a lawsuit is filed.

The Court determined that FirstLight’s arbitration agreement did contain a delegation clause that “clearly and unmistakably provides that the issues of validity and enforceability are to be decided by the arbitrator and not the court.” 


The next question for the Court was… What is the reach of the delegation clause?  Or, in other words, what specific matters fall within, “validity and enforceability”?

Martha claimed that the arbitration agreement was illusory because it contained a modification provision.  The Court determined that because of the delegation clause, the determination of whether the arbitration agreement was illusory was a matter of its validity and thus, was to be determined by the arbitrator.

Further, the Court analyzed whether the delegation clause put the determination of whether Martha’s claims fell within the scope of the arbitration agreement in the hands of an arbitrator or the Court?

The Court determined that the issue of scope was not covered by the arbitration agreement’s delegation clause because it only provided for a delegation of issues of validity and enforceability to the arbitrator.  The Court warned, “[W]e must be mindful that delegation clauses must “clearly and unmistakably” delegate issues to the arbitrator.”  Since the arbitration agreement did not specifically delegate issues concerning the scope of the arbitration agreement to the arbitrator than scope was rightfully an issue for the trial court.

Inevitably, the Court determined that the claims alleged in Martha’s lawsuit fell within the scope of the arbitration agreement and therefore would not be decided by the Court.

 

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September 9, 2015

Rosenberg & Sprovach Open New Fort Worth Office

Gregg Rosenberg, Managing Partner of the Houston based law firm of Rosenberg & Sprovach, announced that the firm will be opening their second Texas office in Fort Worth. The office will be located at 1301 Ballinger Street. The new office is being opened in response to the firm's increased business in the Dallas Forth Worth metroplex area.  As with its Houston office, Rosenberg & Sprovach focus will be on employment law representing individuals in claims against their employers in the State of Texas.  Initially, Mr. Rosenberg and Ellen Sprovach will handle the cases being serviced by the new office, with plans to expand the professional staff within the next month.


 

April 6, 2015

Tortious Interference, Unfair Competition

THE
SOUTHERN DISTRICT OF TEXAS ADDRESSES CLAIMS AGAINST UBER AND LYFT BROUGHT BY EXISTING TAXI CAB COMPANIES AND OPERATORS IN TEXAS FOR TORTIOUS INTERFERENCE, UNFAIR COMPETITION AND FALSE ADVERTISING.

Different modes of transportation, especially in established and growing cities, is a consistently expanding industry. Lately, at the forefront of the cab transportation industry right now is a company called Uber Technologies, Inc. (“Uber”). Lyft Inc. (“Lyft”) is also a major competitor in this relatively new “app” based cab industry. As commuters across the nation rave about this new age transportation, which basically provides riders with an impromptu cab they can hail within minutes right from an app on their phone, the traditional cab industry is not so welcoming of the overwhelming competition. In Texas, the Greater Houston Transportation Company and nine (9) other taxi-cab companies and licensed taxi-operators have filed a lawsuit against Uber and Lyft for tortious interference with business relations, unfair competition, and false advertising under the Lanham Act, 15 U.S.C. §1125(a). In response Uber and Lyft filed a Motion to Dismiss.

The law does have protections for existing businesses when other companies enter an industry and in some way, interfere or compete with their business. This also applies when former employees start new companies within the same industry as their former employer if they take steps that violate the law. In this case, Greater Houston Transportation Co., et al. v. Uber Technologies, Inc. and Lyft Inc., the Greater Houston Transportation Company and the other plaintiffs will have to meet the following four elements to establish their claim that Uber and Lyft are tortuously interfering with their business: (1) the existence of a contract subject to interference, (2) willfull and intentional interference, (3) interference that proximately caused damages, and (4) actual damage or loss. A large part of the Plaintiffs’ claim in this case is that Uber and Lyft are soliciting their independent contract drivers inducing them to breach contracts they have with Plaintiffs to jump ship and work for the new companies. However, the Court determined that Plaintiffs did not provide enough information in their pleading to establish that Uber or Lyft were aware of the contracts. On those grounds, the Court dismissed the tortious interference with existing contracts claim as well as the tortious interference with prospective business relations claim.

The Plaintiffs did claim some victory at this stage of their lawsuit as the Court denied Uber and Lyft’s motion to dismiss Plaintiffs’ Lanham Act Claims (in part) and request for a permanent injunction. The Court decided that because Uber and Lyft were allegedly making misleading comparisons between their products or services and that of Plaintiffs’, a permanent injunction was appropriate. For example, Uber claims that it carries insurance with 20x the requirements taxis have in Houston but the Court determined this could be misleading because the public could believe that Uber’s insurance policy is the same type of insurance as the taxi companies have, which it is not. Because a “presumption of irreparable injury” could result from that type of misleading comparison diminishing the value of Plaintiffs’ product or services in the minds of consumers, the permanent injunction request was not dismissed.

This is just a brief summary focusing on some of the many issues that were addressed by the Southern District of Texas in this early stage of litigation. The Court’s opinion highlights the legal avenues a business can take to defend its products and services and also to protect its position in its respective industry from competitors.

Greater Houston Transp. Co., et al. v. Uber Tech., Inc. and Lyft, Inc., No. 4:14-0941, 2015 WL 1034254 (S.D. Tex. March 10, 2015).



 

Feburary 19, 2015

AN EMPLOYER WITH ANNUAL GROSS SALES OR BUSINESS DONE UNDER $500,000.00 AND THUS NOT CONSIDERED AN “ENTERPRISE” UNDER THE FAIR LABOR STANDARDS ACT COULD STILL BE LIABLE IN AN OVERTIME COMPENSATION CLAIM IF THE EMPLOYEE IS ENGAGED IN COMMERCE.

The Southern District of Texas recently answered an important question that is relevant to both employers and employees regarding the payment of overtime compensation:

Does the Fair Labor Standards Act apply only to employees of an “enterprise” or does it apply to an employee of a business too small to qualify as an enterprise so long as the employee engages in commerce as part of his/her job duties?

The Court gave a clear answer: the Fair Labor Standards Act and in turn the requirement that an employer pay a non-exempt employee working over forty hours per work week overtime compensation does in fact apply to a business that is too small to qualify as an enterprise if that employee is engaged in commerce or in the production of goods in commerce.  In Holland v. DA Tencil, Inc., et. al., the Court rejected an employer’s argument that it was not covered by the Fair Labor Standards Act because its annual sales were below $500,000.  The court stated that even though the Fair Labor Standards Act states that to qualify as an “enterprise” an employer must “have an annual gross volume of sales made or business done not less than $500,000” the general provision of the Fair Labor Standards Act provides “individual coverage” that covers an employee engaged in commerce even if the employer does not meet the definition of “enterprise” based on its annual sales.  The employer’s attempt to avoid a Fair Labor Standards Act overtime compensation lawsuit here failed and the Court pointed out the employer’s argument as a “mistake” in that the employer only looked at the definition of enterprise and not the FLSA coverage provision itself.  Accordingly, the Court denied the employer’s motion for Summary Judgment based on that flawed argument and this case will proceed to trial.  This is an important answer from the Court for employers who may assume that they are exempt from the FLSA standards on overtime pay.

Holland v. DA Tencil, Inc., et. al., Civ. A. No. 3:14-CV-00086, 2015 WL 631389 (S.D. Tex. Feb. 12, 2015).

 



 

Feburary 9, 2015

COURT DECIDED AGE DISCRIMINATION CASE SHOULD PROCEED TO TRIAL BECAUSE OF FACTUAL INCONSISTENCIES IN WHO ACTUALLY REPLACED THE TERMINATED EMPLOYEE AND THE SUPERVISOR WHO MADE THE TERMINATION DECISION AS WELL AS THE EMPLOYER’S FAILURE TO FOLLOW ITS PROGRESSIVE DISCIPLINARY POLICY.

In a recent decision, the Southern District of Texas, Corpus Christi Division, decided that there was enough evidence for an age discrimination case to proceed to the jury and denied the employer’s motion for summary judgment where there were discrepancies in the facts as to whether the person who replaced the terminated employee was outside the protected class (ie. over 40 years of age), the employer’s failure to follow its progressive discipline policy and the employer’s inability to accurately identify who made the termination decision.

In Gutierrez v. City of Corpus Christi, the City of Corpus Christi, filed a motion for summary judgment after Armando Gutierrez, a 55 year-old employee filed an age discrimination case against it after he was terminated from his position as a professional engineer. When he was terminated for alleged poor performance in 2012, Mr. Gutierrez claimed he had never been reprimanded or disciplined over his four-year tenure with the City. The City on the other hand claimed he was terminated for his poor attitude and work performance in the two departments he worked in. In considering the City’s Motion for Summary Judgment, the Court determined that there were too many facts in dispute and the case needed to proceed to trial.

In denying the City of Corpus Christi’s motion for summary judgment on Gutierrez’s claim for age discrimination, the Court first looked at whether Gutierrez as the plaintiff was able to meet the prima facie elements of an
age discrimination case under the Age Discrimination in Employment Act (“ADEA”). Under the ADEA, to establish a prima facie case of age discrimination, the plaintiff must establish he is (1) within the protected class (ie. over 40 years old); (2) qualified for the position, (3) suffered an adverse employment decision and (4) was either replaced by someone younger, replaced by someone outside the protected class or otherwise discharged because of his age. In this case, the dispute centered around the fourth element of the prima facie case because the City of Corpus Christi argued that Gutierrez was replaced by someone who was 52 years old.

When the Court looked deeper into the facts it found discrepancies with whether the position filled by the 52 year old was in fact Gutierrez’ position prior to his
termination. The Court stated that “it is difficult to determine who actually replaced Plaintiff, whether it be the person hired with the job classification number of Plaintiff’s position in the Engineering department or the persons hired who completed Plaintiff’s actual job duties…” The Court concluded that since there was a dispute as to the fourth element of the prima facie case, Gutierrez was able to satisfy the prima facie case of age discrimination for the purposes of summary judgment.

As is often the case in age discrimination cases, the City of Corpus argued the Gutierrez was not fired for age discrimination but was instead fired for poor performance. Because the City of Corpus provided this non-discriminatory reason for Gutierrez’s termination, he was required to present evidence that that reason was merely a pretext for discrimination. Gutierrez presented evidence that all of the supervisors involved in his termination gave conflicting testimony as to who decided to terminate him. For example, one supervisor stated that the Director of Development Services was the primary decision maker in Gutierrez’ termination while that Director testified that he was not involved in the termination and it was in fact the Director of Engineering Services that made the decision. The Court pointed out that the City of Corpus Christi’s “difficulty in identifying who was involved in the decision to terminate [Gutierrez] casts doubt on the explanation.” The Court also negatively viewed the fact that the City did not follow it progressive disciplinary policy, which was in place when Gutierrez was terminated.

In light of all the discrepancies in the facts in this age discrimination case, the Court decided that summary judgment was not appropriate and Gutierrez should be able to have his day in court and proceed with a trial on the merits.

Gutierrez v. City of Corpus Christi, No. 2:13-CV-359, 2015 WL 150445 (S.D. Texas, Jan. 12, 2015).