Supreme Court forces Defamation Claim to Arbitration

This morning, the Texas Supreme Court issued a mandamus opinion in an arbitration case holding that a fired worker’s defamation claim against her erstwhile employer was subject to an arbitration agreement, which required arbitration of personal injury claims. According to the Court, since the agreement was susceptible to two reasonable interpretations, one holding that defamation is a personal injury and one holding that it is not, arbitration was required.

The opinion also raises an interesting procedural issue. The arbitration agreement was similar to the one from Halliburton, in that it was given to a longtime employee who was told “to continue working here you must sign this.” The agreement, which was signed in 2000, was replaced by a slightly different version in 2002, but the employee was not required to sign the 2002 version. The 2002 version specifically provided that defamation cases must be arbitrated, so the employer initially argued that it applied, rather than the 2000 version.

Eventually, however, the employer apparently shifted tactics, and argued instead that the 2000 agreement clearly applied, and it covered defamation (which makes one wonder why they felt the need to amend it). So, the Court did not really reach the issue of the extent to which an employer can modify these kind of agreements by simply providing an employee with a new version – an issue which comes up all the time, particularly in the credit card context. The Court seems to imply, however, that it would not look favorably on an agreement to arbitrate which allowed the employer to “retain a unilateral right to modify the agreement.”

In Re: Dillard Department Stores, Inc., Cause No. 05-0250

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