Dallas COA Orders AdvoCare Employment Dispute to Arbitration

Texas’ Fifth District Court of Appeals in Dallas has ordered a former AdvoCare board member to arbitrate his claims against the company.  In AdvoCare GP, LLC, et al. v. Heath, No. 05-16-00409-CV (Tex.-App.—Dallas, Jan. 5, 2017), Richard Heath was hired to act as a board member for a nutrition company, AdvoCare, in June 2015.  As part of the hiring process, Heath was required to sign a non-disclosure agreement that included a binding arbitration clause.

A little more than one month later, Heath was terminated.  Following his termination, Heath demanded additional compensation based on a purported oral contract with the company.  After his request was refused, Heath filed a multi-million dollar lawsuit against AdvoCare and several company executives in Dallas County, Texas.

In response to Heath’s complaint, the defendants filed an answer as well as a motion to compel the dispute to arbitration based the arbitral provision included in the parties’ NDA.  They also sought to abate the trial court proceedings.  The court granted the defendants’ motion in part, but refused to compel most of Heath’s claims to arbitration.  The trial court also declined to abate the proceedings pending arbitration.  The defendants then filed an interlocutory appeal with Texas’ Fifth District.

On appeal, the Dallas court stated neither party disputed that a valid agreement to arbitrate existed.  After that, the appellate court turned to the question of scope.

According to the Fifth District, “[o]nce the existence of an arbitration agreement has been shown, the party resisting arbitration bears the burden of proving that the dispute at issue falls outside of the arbitration agreement’s scope.”  The court next said, “[b]oth the Supreme Court and the Fifth Circuit have characterized arbitration provisions that are similar to the one at issue here as broad arbitration clauses capable of expansive reach.”  The Dallas court then added, “Texas courts, including this Court, have reached similar conclusions.”

Next, the Fifth District Court of Appeals rejected Heath’s contention that the language included in the arbitration provision narrowed its application to include only the NDA.  The court stated:

Appellee’s argument also overlooks several notable facts: The offer letter specifically references the NDA in the first paragraph, the NDA was attached to the offer letter, and both documents were signed on the same day as part of a contemporaneous transaction. Under general principles of contract law, separate documents executed at the same time, for the same purpose, and in the course of the same transaction are to be construed together. See, e.g., Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984). Therefore, the offer letter and the NDA are effectively part of the same agreement and should be construed together.

After that, the appellate court distinguished the case law offered by Heath in support of his position.  The court then said:

In light of the decisions cited above interpreting similar language, we conclude the arbitration provision at issue here should be read as requiring that any controversy, dispute, or claim “arising out of or in any way related to or involving” the interpretation, performance, or breach of the NDA must be resolved in arbitration. Thus, the arbitration provision encompasses this suit and the claims asserted therein because appellants claim appellee was terminated due to his breach of the NDA.

Ultimately, Texas’ Fifth District Court of Appeals reversed the trial court’s order and remanded the case with instructions to compel the entire dispute to arbitration.

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