We have not been as diligent as we like to be recently with respect to this blog, due to, well, the practice of law. Anyhoo, as luck would have it, way back on May 24, when we ought to have been blogging but weren’t, the Third Court of Appeals issued a opinion denying a petition for writ of mandamus in an arbitration case. The issue is one that comes up a lot, and it’s an important one. We are just sorry we did not discuss it sooner.
The case involved a former Wendy’s employee’s personal injury suit against Wendy’s (Ms. Jimenez was injured when a drawer fell on her, apparently). Wendy’s moved to compel arbitration, based on its dispute resolution program which it required all employees, including Ms. Jimenez, to adhere to as a condition of their continuing at-will employment. The program consisted of four distinct steps an aggrieved employee and Wendy’s must undertake in the event of a potential dispute: 1) a one-on-one conversation between the employee and a store manager; 2) formal review by human resources; 3) mediation; and 4) arbitration. In this case, all parties agreed that no mediation occurred.
The program description, however, explicitly stated that “Each Step must be followed in sequence so that we have every opportunity to work together toward an aggreable resolution of the issue” and then “if you have a work-related problem that involves a legally protected right that could not be settled through Steps 1, 2 or 3 of the Program, you may request arbitration.” In other words, the Program clearly intended to require mediation as a pre-requisite to arbitration.
The trial court, therefore, refused to grant Wendy’s Motion to Compel Arbitration, and the Third Court of Appeals agreed with the decision, on the basis that since no mediation had occurred, Wendy’s right to arbitration had not accrued. The Court here conducts a thorough discussion of the seminal case in this area, John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964). In that case, the U.S. Supreme Court held that normally the question of whether or not a condition precedent to arbitration had been satisfied, and what to do if it has not been, ought to be up to the arbitrator.
Here, however, the Third Court laid out an exception to that general rule:
The FAA’s policy in favor of arbitration does not operate without regard to the wishes of the contracting parties. Here, the parties agreed to conditions precedent before arbitration can take place and, by placing those conditions in the contract, the parties clearly intended to make arbitration a dispute resolution mechanism of last resort.
(quoting the 11th Circuit). According to the Court, since the condition precedent has not been satisfied, the arbitration clause itself “has not been triggered.”
The Court ends its opinion with a foreshadowing of the problem this raises: “[we do not express any opinion] regarding whether this lawsuit should continue in the trial court despite the fact that an alternative dispute resolution and arbitration agreement exists (whether enforceable or not).” In other words, what now? Presumably, Wendy’s will attempt to set up a mediation with Ms. Jiminez. What if, however, Steps 1 and 2 never took place either? Since she is a former employee, what if she has no manager with whom to discuss the situation? At any rate, we appreciate the Third Court’s willingness to address the John Wiley & Sons case, since we’ve never been fully comfortable with the notion that an arbitrator has the authority to arbitrate whether or not a condition precedent to his or her contractual mandate has yet been met, when the facts unequivocally demonstrate that it has not.
In re: Pisces Foods d/b/a Weny’s Restaurants, ___ S.W.3d ___ (Tex. App. – Austin 2007) (Cause No. 03-06-00274-CV)
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