Académique Documents
Professionnel Documents
Culture Documents
, 2003)
an Arbitration Tribunal of the National reason. I understand and agree that, in the
Association for Dispute Resolution, Inc., event of my separation from any employment
pursuant to the provisions of the Federal with the "Company", any and all information
Arbitration Act and/or any applicable concerning my employment history may be
Alternative Dispute Resolutions Act, furnished to any other employer with whom I
whichever shall have the broadest effect, all seek employment and I hereby release and
claims of any rights to the contrary, including hold harmless the "Company", its affiliates,
any right to trail [sic] by jury, being hereby parents, subsidiaries, and successors, and its
expressly waived. The Arbitration Tribunal and their officers, directors, trustees,
shall be the sole and existence [sic] of its employees and agents from and against any
jurisdiction over all parties and issues. and all claims and liability for furnishing such
Judgment upon any award may be entered in information. No supervisor or person other
any CourtState or Federalhaving than the President of the "Company", can
jurisdiction. change or otherwise modify any employment
agreement. The "Company" reserves the right
I hereby certify that all of the information to unilaterally abolish or modify any
and statements made or furnished on this personnel policy without prior notice. I
application are true and correct and I hereby understand that this application will be
grant the "Company" permission to verify considered valid and current for a period of
such information and statements. I not more than thirty (30) days.
understand that any false statement or
omission on this application may be In November 1998, Webster was injured
considered as sufficient cause for rejection of at work and subsequently filed a workers'
this application, or for dismissal, if such false compensation claim. Although his condition
statement or omission is discovered improved temporarily, his doctor eventually
subsequent to my employment. I further placed him on "no work" status. Shortly
understand that the "Company" may perform thereafter, Webster's employment with
a pre-employment investigation to determine Davidson ceased. The parties dispute whether
my suitability for employment and I authorize Webster quit or was terminated.
the "Company" to have access to any and all
records concerning my education or Webster sued Davidson for wrongful
employment background. I hereby authorize termination under section 451 of the Texas
any person or Entity having such information Labor Code, alleging he was terminated in
to release same to the "Company". I retaliation for filing a workers' compensation
understand that the pre-employment claim. See TEX. LAB. CODE 451.001.
investigation may include contacting my Davidson denied Webster's allegations and
previous employers, and I hereby authorize filed a motion to compel binding arbitration
such previous employers to release any and under the company's alternative dispute
all information relating to my employment to resolution policy. Webster
the "Company". I understand that if I am
extended an offer of employment, I will have [128 S.W.3d 227]
to pass a physical examination as a condition
of such employment. If employed, I agree to responded that the arbitration agreement was
abide by and comply with all of the rules, unenforceable because it was illusory,
policies and procedures of the "Company." I unconscionable, and lacked mutuality.
understand that if I am employed by the Following a hearing, the trial court denied
"Company", such employment will be "at- Davidson's motion without explanation.
will" and that the "Company" may terminate
my employment at any time and for any
-2-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
dispute whether the reciprocal promises to Id. Because the express terms of the policy
arbitrate are sufficient consideration to provided that both the employee and
support enforcing the arbitration agreement. Halliburton were bound to their promises to
arbitrate, we held the agreement was not
We recently considered whether an illusory. Id. at 570. Here, we are asked to
arbitration agreement between an employer decide whether the terms of the agreement
and at-will employee was supported by between Davidson and Webster are
sufficient consideration. See In re distinguishable from Halliburton.
Halliburton Co., 80 S.W.3d at 566. We note,
however, that the court of appeals' decision Davidson argues that its dispute
and both parties' submissions to this Court resolution policy is enforceable because, like
occurred before we decided Halliburton. In Halliburton, the agreement includes
Halliburton, the employer notified employees reciprocal promises to waive the right to
of a new alternative dispute resolution litigation and submit all employment disputes
program that required both the employer and to binding arbitration. See In re Alamo
the employees to submit all employment- Lumber Co., 23 S.W.3d 577, 579-80 (Tex.
related disputes to binding arbitration. Id. at App.-San Antonio 2000, pet. denied) ("Since
568. The terms included the employer's right the parties surrendered their rights to trial by
to modify or discontinue the program, but jury, these mutual promises supply valid
also required the employer to give its consideration."). Thus, Davidson contends
employees notice of changes and stated that there is sufficient consideration to support
any amendments would apply only the arbitration agreement. On the other hand,
prospectively. Id. at 569-70. Webster argues that the arbitration
agreement is illusory because the express
We upheld the arbitration agreement terms of the agreement provide that Davidson
between Halliburton and its employee. Id. at was not bound by its terms.
570. We concluded that the employee's at-will
employment status did not render the [128 S.W.3d 229]
agreement illusory because Halliburton did
not rely on continued employment as It is clear that Davidson and Webster
consideration for the agreement. Instead, "mutually agree[d] and contract[ed]" to
mutual promises to submit all employment submit disputes to arbitration. At the end of
disputes to arbitration constituted sufficient the one-page document containing their
consideration, because both parties were agreement, however, is the following
bound to the promises to arbitrate. Id. at 569. statement: "The Company reserves the right
to unilaterally abolish or modify any
Halliburton's right to modify or personnel policy without prior notice." Our
terminate the policy did not allow the resolution of this case depends on the
employer to avoid its promise to arbitrate relationship between those two provisions.
because it was limited by express contract
provisions. Id. at 569-70. First, the policy In construing this agreement, we first
stated that any changes only applied determine whether it is possible to enforce
prospectively to unknown claims. Id. And the contract as written, without resort to
second, if Halliburton terminated the policy, parol evidence. Deciding whether a contract is
such termination required notice and applied ambiguous is a question of law for the court.
to both Halliburton's and the employees' Coker v. Coker, 650 S.W.2d 391, 394
rights. Id. Therefore, Halliburton could not (Tex.1983). In construing a written contract,
avoid its promise to arbitrate by amending or the primary concern of the court is to
terminating the dispute resolution program. ascertain the true intentions of the parties as
-4-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
expressed in the instrument. R & P Enters. v. check and physical examination. He promised
LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d to abide by company policies and
517, 518 (Tex. 1980); City of Pinehurst v. acknowledged that his employment was at-
Spooner Addition Water Co., 432 S.W.2d 515, will. The "personnel policy" language is not in
518 (Tex. 1968). To achieve this objective, we the first paragraph, which contains the
must examine and consider the entire writing promise to arbitrate, but appears only in the
in an effort to harmonize and give effect to all second paragraph, which discusses these
the provisions of the contract so that none other, unrelated employment issues.
will be rendered meaningless. Universal
C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, In their attempt to construe the
243 S.W.2d 154, 158 (1951). No single agreement, the court of appeals' justices could
provision taken alone will be given controlling not agree on the scope of Davidson's right to
effect; rather, all the provisions must be terminate the agreement. Although silent on
considered with reference to the whole ambiguity, the majority held that the
instrument. Myers v. Gulf Coast Minerals "personnel policy" language permitted
Mgmt. Corp., 361 S.W.2d 193, 196 Davidson to terminate the arbitration
(Tex.1962); Citizens Nat'l Bank v. Tex. & P. agreement at any time. 49 S.W.3d at 514
Ry. Co., 136 Tex. 333, 150 S.W.2d 1003, 1006 ("Although Davidson agreed to submit `any
(1941). A contract is unambiguous if it can be and all claims, disputes or controversies'
given a definite or certain legal meaning. arising between it and appellee to arbitration,
Columbia Gas Transmission Corp. v. New it explicitly retained the absolute right to
Ulm Gas, Ltd., 940 S.W.2d 587, 589 modify or terminate the policy at any time.").
(Tex.1996). On the other hand, if the contract Conversely, the dissent held that Davidson's
is subject to two or more reasonable unilateral right to terminate or modify
interpretations after applying the pertinent personnel policies did not
rules of construction, the contract is
ambiguous, creating a fact issue on the [128 S.W.3d 230]
parties' intent. Id.
affect the parties' separate agreement to
In this case, we cannot give the arbitrate; in fact, the dissent noted that "[i]n
arbitration agreement a definite or certain the event the employer exercised that right [to
legal meaning because it is unclear whether modify or terminate] the employee retained
Davidson's unrestricted right to "unilaterally the right to force arbitration on the issue."
abolish or modify any personnel policies" Id. at 518 (emphasis added). If the dissent
gives it the right to terminate the arbitration had interpreted the "personnel policy"
agreement without notice. (Emphasis added.) language as applying to the arbitration
Stated more succinctly, is the arbitration agreement itself, Webster would not have the
agreement a "personnel policy"? right to seek arbitration on the issue following
termination of the arbitration agreement.
We cannot answer this question by
reading the agreement's terms. The The proper interpretation of this
agreement is titled "Alternative Dispute language is critical.2 In Halliburton, we
Resolution Policy" on one line, and rejected the argument that the arbitration
"Employment Application Language" on the agreement at issue was illusory because,
next. The document addresses several issues among other things, it required ten days
that refer specifically to the employment notice of any modification or termination and
application process but have no bearing on stated that any such amendment would apply
alternative dispute resolution. For example, prospectively only. 80 S.W.3d at 569-70.
Webster agreed to submit to a background Thus, we held that "Halliburton cannot avoid
-5-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
its promise to arbitrate by amending the S.W.3d at 239. Indeed, the one-page
provision or terminating it altogether." Id. at document is rife with grammatical errors,
570. The termination provision in this case misspellings, and omitted words. Webster
does not contain similar limitations. waived his right to "trail by jury," even for
Accordingly, we hold that the agreement is claims "based on the Construction of ... he
ambiguous and must be remanded to the trial United States." He also agreed that "[t]he
court to determine what the parties intended Arbitration Tribunal shall be the sole and
by the clause "The `Company' reserves the existence of its jurisdiction over all parties
and issues," whatever that means. While we
[128 S.W.3d 231] generally favor arbitration agreements, we
should not reflexively endorse an agreement
right to unilaterally abolish or modify any so lacking in precision that a court must first
personnel policy without prior notice." edit the document for comprehension, and
then rewrite it to ensure its enforceability.
We add a brief response to the dissents.
The proper interpretation of this document Justice Schneider implies that, because
has split both the court of appeals and this the parties do not contend the agreement is
Court. Justice Smith contends the agreement ambiguous, we may not hold that it is. This is
is unambiguous and clearly compels Webster contrary to Texas law. See Sage St. Assoc. v.
to arbitrate. Justice Schneider says the Northdale Constr. Co., 863 S.W.2d 438, 444-
agreement is unambiguous but clearly 45 (Tex.1993) (holding jury question was
illusory. We will not reiterate our thoughts on presented by ambiguity in construction
ambiguity, but believe it helpful to respond to agreement; a court may conclude that a
some of the dissents' concerns. Both dissents contract is ambiguous even in the absence of
assert that the title of the document must be such a pleading by either party); Coker, 650
considered insofar as it references arbitration, S.W.2d at 393 (concluding agreement was
but they omit from consideration that portion ambiguous even though both parties asserted
of the title, and contents of the document, property settlement agreement was
that pertain to personnel policies. Justice unambiguous and moved for summary
Smith determines that the document is judgment); Acadian Geophysical Servs., Inc.
"primarily devoted to setting forth an v. Cameron, 119 S.W.3d 290, 302 (Tex.App.-
arbitration policy," even though arbitration is Waco 2003, no pet. h.); W.W. Laubach
discussed in only the first paragraph, which Trust/The Georgetown Corp. v. The
comprises less than fifty percent of the text Georgetown Corp./W.W. Laubach Trust, 80
(and, as Justice Schneider points out, only S.W.3d 149, 155 (Tex.App.-Austin 2002, pet.
two of fifteen sentences). 128 S.W.3d at 240. denied); Arredondo v. City of Dallas, 79
The document is set out in full in this opinion, S.W.3d 657, 667 (Tex. App.-Dallas 2002, pet.
and we need not belabor the point. Suffice it denied); Z.A.O., Inc. v. Yarbrough Drive Ctr.
to say thatas evidenced by the multiple Joint Venture, 50 S.W.3d 531, 540 (Tex.App.-
disagreements about its meaning among this El Paso 2001, no pet.); N. Cent. Oil Corp. v.
Court's justicesthe agreement is subject to Louisiana Land & Exploration Co., 22
more than one reasonable interpretation. S.W.3d 572, 576 (Tex.App.-Houston [1st
Under our precedent, the document is Dist.] 2000, pet. denied); Curbo v. State, 998
ambiguous. Columbia, 940 S.W.2d at 589. S.W.2d 337, 343 (Tex.App.-Austin 1999, no
pet.).
Rather than follow this precedent,
however, Justice Smith would enforce a Finally, Justice Schneider states that he is
deeply flawed agreement that he admits is reluctant to send this matter back to the trial
"far from a model of precise drafting." 128 court "because [he] cannot imagine what such
-6-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
a hearing would look like." 128 S.W.3d at 232. beginning his employment. When the
It is not necessary to speculate on the company sought to enforce the arbitration
character of that proceeding: the trial court policy, the trial court denied the motion to
will conduct an evidentiary compel arbitration. A divided court of appeals
affirmed the trial court's order. The Court
[128 S.W.3d 232] says that the wording in the arbitration policy
is ambiguous and that the case should be sent
hearing to determine the parties' intent. See back to the trial court to hear evidence
Anglin, 842 S.W.2d at 269 (noting that, "if concerning the parties' intent. But I would not
the material facts necessary to determine [a be as hasty as the Court to send this matter
motion to compel arbitration] are back to the trial court because I cannot
controverted, by an opposing affidavit or imagine what such a hearing would look like.
otherwise admissible evidence, the trial court I would, in the first instance, hold that the
must conduct an evidentiary hearing to policy provisions are not ambiguous. Then, in
determine the disputed material facts"); see the second instance, I would hold the
also Armijo v. Prudential Ins. Co., 72 F.3d employee is entitled to complete relief in this
793, 801 (10th Cir.1995) (Jenkins, J., Court. The arbitration promise made by the
concurring) (if arbitration agreement is company is illusory, and because it is, I would
ambiguous "the issue then becomes a factual affirm the court of appeals' judgment denying
question, to be decided from external the motion to compel arbitration.
evidence of the parties' intent, unless only one
conclusion can be drawn from the undisputed FACTS
evidence"); Montgomery County Cmty. Coll.
Dist. v. Donnell, Inc., 141 Ohio App.3d 593, Chelsey Webster ("Webster") went to
752 N.E.2d 342, 345 (2001) (holding that "an work for J.M. Davidson, Inc. ("Davidson"). A
ambiguity in the [arbitration] agreement... few days after beginning employment,
must be resolved by an evidentiary hearing"). Webster signed the agreement that is at the
heart of the controversy in this matter. The
Because we cannot discern whether document, prepared by Davidson, is titled
Davidson's unilateral right to terminate "Alternative Dispute Resolution Policy"
"personnel policies" applies to the agreement ("ADR Policy").1 It is undisputed that
to arbitrate, we conclude that the arbitration
agreement is ambiguous. We reverse the [128 S.W.3d 233]
court of appeals' judgment and remand this
case to the trial court for further proceedings Webster was employed by Davidson at the
consistent with this opinion. TEX. R. APP. P. time he signed the agreement.
60.2(d).
Approximately eleven months after
Justice SCHNEIDER filed a dissenting commencing his employment, Webster was
opinion, joined by Justice O'NEILL. injured on the job. Webster filed for workers'
compensation benefits. Then, about one
Justice SMITH filed a dissenting opinion. month later, Davidson terminated Webster.
Webster filed suit, alleging Davidson fired
Justice SCHNEIDER, joined by Justice him in retaliation for filing a workers'
O'NEILL, dissenting. compensation claim. Davidson sought to
enforce the arbitration clause contained in the
I respectfully dissent. The controversy in ADR Policy that Webster had signed.
this case involves a company's arbitration
policy that an employee agreed to sign after
-7-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
the document itself whether the unilateral arbitration provision is a personnel policy of
termination right applies to the parties' the company, it is unreasonable to reach any
agreement to arbitrate, or only to `personnel other conclusion. The Court seems to suggest
policies' concerning the at-will employment that the "personnel policy" must be one or the
relationship." 128 S.W.3d at 225. But neither othereither a policy, or an agreement.
Webster, Davidson, the trial court, nor the Surely a reasonable interpretation is that it
Court of Appeals have suggested the language could be both.
quoted above is ambiguous. I would hold that
this language regarding the unilateral Webster even promises to abide by all of
termination right unambiguously applies to Davidson's "policies" in the ADR Policy, and
the entire agreement, including the it is reasonable to conclude that Davidson
agreement to arbitrate. Although ultimately wanted to retain the right to unilaterally
the contract fails for lack of consideration (see terminate all parts of the ADR Policy because
discussion below), it cannot be said that the the policy did not specifically exempt the
ADR Policy is ambiguous. arbitration agreement from the unilateral
termination right.
1. The ADR Policy is not ambiguous.
Finally, neither Davidson nor Webster
There are several reasons why the have ever argued that the unilateral
document can be unambiguously read so that termination right did not apply to the
the universal termination right language arbitration agreement. The actions of both the
applies to the entire document. First, the parties throughout their litigation reflect the
document is entitled "Alternative Dispute belief that the arbitration policy is a
Resolution Policy," which suggests that the personnel policy. They both came to the
unilateral termination right contained within Motion to Compel Arbitration hearing
it would apply to arbitration, as the title arguing about several issues, none of which
would be applicable to the entire document. ever raised the question of whether the
See e.g. Neece v. A.A.A. Realty Co., 159 Tex. arbitration policy was a personnel policy. All
403, 322 S.W.2d 597, 606 (1959) (Calvert, J., of their actions throughout the litigation are
dissenting) (recognizing that the title of an consistent with the notion that the right to
agreement can have the legal effect of unilaterally terminate applied to the
importing words into the contract). arbitration policy.
Here, the ADR Policy reserves Davidson's because the agreement we upheld in
right to "unilaterally abolish or modify any Halliburton required notice and prospective
personnel policy without prior notice." Under application, the same protective language can
the plain language of the contract, Davidson be implied here. I disagree.
reserved the right to abolish or modify any
personnel policy. As explained above, the In Halliburton, we relied on the ADR
unilateral termination right would also apply policy's notice provisions to conclude that
to the agreement to arbitrate all claims. By Halliburton could not "avoid its promise to
retaining the right to terminate the ADR arbitrate by amending the [policy] or
Policy at any time, Davidson can avoid terminating it altogether." Halliburton, 80
arbitration. Thus, Davidson is not bound to S.W.3d at 570. Here, we cannot imply the
its promise to arbitrate, and its promise to obligations that precluded Halliburton from
avoid litigation does not amount to avoiding its promise to arbitrate. The
consideration. See In re Halliburton, 80 agreement's plain language establishes
S.W.3d 566, 570 (Tex.2002) (reciprocal Davidson's unhindered right to modify or
promises are not sufficient if one party can terminate the agreement without notice. It is
avoid its promise). Because there is no not proper to imply terms that contradict the
consideration for the ADR Policy, the express contract language. See Haws &
agreement is illusory and unenforceable. Garrett Gen. Contractors, Inc. v. Gorbett
Bros. Welding Co., 480 S.W.2d 607, 609-610
2. Davidson's attempts to create (Tex.1972) (the terms of an implied contract
consideration fail. are inferred from the circumstances).
The Court sends this case back for the Justice Smith is essentially inserting a
trial court to consider parol evidence, finding qualifying phrase into Davidson's unilateral,
that a fact issue exists concerning the unqualified right to terminate. Even
applicability of the language in question to
the arbitration agreement. But, as discussed [128 S.W.3d 238]
above, the language unambiguously gives
Davidson the right to unilaterally terminate though the ADR Policy permits Davidson to
any part of the agreement. Thus, there is no "unilaterally abolish or modify any personnel
fact issue to be determined by the trial court policy without prior notice," Justice Smith
and there is no need for parole evidence to be interprets this as requiring contemporaneous
taken. notice. The agreement contains no such
limitation.
4. The unilateral termination right does
not only apply prospectively. Justice Smith also attempts to
distinguish our holding in Hathaway by
Although I agree with Justice Smith that noting that in that case, while we required an
the contract is unambiguous and the employer making a change to an at-will
arbitration agreement is a personnel policy employment policy to provide notice, we did
-12-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
not specify that the notice had to be given 131770 at *4 (Tex.App.-Corpus Christi 2003,
before the change was made. Justice Smith orig. proceeding). Thus, the arbitration clause
contends that under our decision in would still be illusory and unenforceable.
Hathaway, notice could be "either in advance
of or contemporaneous with the policy D. Enforceable arbitration agreements
change." 128 S.W.3d 242. However, Justice must bind both the employer and the
Smith misunderstands our holding in employee.
Hathaway. In Hathaway, we explained the
employee must have knowledge of the There is no mystery to drafting an
employer's proposed modification to an at- enforceable arbitration agreement. Capable
will employment policy to constitute effective counsel know that limitations on an
notice; that is, the employee must "know the employer's right to terminate the agreement
nature of the changes and the certainty of are necessary so the agreement is not illusory.
their imposition." Hathaway, 711 S.W.2d at See, e.g., In re Tenet Healthcare, Ltd., 84
229. Requiring the employer to prove S.W.3d at 766-67 (arbitration provision was
unequivocal notification of changes to the enforceable because the right to terminate the
employment terms was based, in part, on agreement specifically excepted the
fairness to the employee. See id. The arbitration agreement); In re Kellogg Brown
requirement that an employee be aware that & Root, 80 S.W.3d 611, 616 (Tex.App.-
changes to the employment policy are certain Houston [1st Dist.] 2002, orig. proceeding)
to be imposed implies that there must be (arbitration agreement enforceable because it
prior notice. It is unreasonable to conclude provided that it could be amended or
contemporaneous notice of a policy change is terminated by the company by giving at least
permissible under Hathaway. Indeed, 10 days notice to employees and that such
permitting an employer to give amendment would not apply to a dispute that
contemporaneous notice of changed had been initiated); In re Jebbia, 26 S.W.3d
employment terms undermines Hathaway's 753, 758 (Tex. App.-Houston [14th Dist.]
concerns for fairness to an employee and 2000, orig. proceeding).
stretches our holding in Hathaway too far.
In this agreement, however, there was no
Moreover, Justice Smith confuses the limitation to Davidson's right to terminate,
Hathaway requirements for changes to an at- amend, or cancel the agreement.
will employment agreement with the
requirements for a valid, enforceable [128 S.W.3d 239]
arbitration agreement. They are two separate
The only consideration for the agreement was
inquiries. Even assuming Justice Smith is
continued at-will employment, which
correct that Davidson may give
amounts to no consideration. Light, 883
contemporaneous notice of a change to the
S.W.2d at 644. Thus, the arbitration
terms of Webster's employment terms under
agreement is illusory and unenforceable.
Hathaway, the arbitration clause of the ADR
Policy remains illusory and unenforceable. If
CONCLUSION
contemporaneous notice to cancel the
arbitration agreement is permissible,
I disagree with the Court's determination
Davidson retains the right to discontinue
that the arbitration agreement is ambiguous.
performance at any time. Under this scenario,
I also believe the agreement is illusory. In
there is no consideration, as Davidson is not
Halliburton, we said that an arbitration
giving up a benefit or suffering a detriment.
agreement's terms must bind both the
See e.g., In re C & H News Co., No. 13-02-
employer and employee if the agreement
529-CV, ___ S.W.3d ___, ___, 2003 WL
-13-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
I share the Court's view that the contract The one-page contract was the only
executed by the parties is far from a model of evidence presented by the parties in the trial
precise drafting, but I disagree that the court. Accordingly, the only issues on appeal
phrase "any personnel policy" cannot be given are the legal questions of whether the
a definite legal meaning. Like Justice contract is ambiguous and illusory. I apply de
Schneider, I believe that the arbitration policy novo review to both.
falls within the ambit of the phrase "any
personnel policy." However, I disagree with II
the portion of Justice Schneider's dissent that
concludes the entire contract is The contract states that Davidson
unenforceable. "reserves the right to unilaterally abolish or
modify any personnel policy without prior
I would hold that the contractual notice." The Court professes an inability to
provision allowing Davidson to "abolish or decipher whether the arbitration policy
modify any personnel policy without prior ratified by the contract is a "personnel
notice" applies to the company's alternative
dispute resolution policy, but that it does not [128 S.W.3d 240]
waive Webster's right under Texas at-will
employment law to contemporaneous notice policy" and, sua sponte, therefore concludes
of any change in Davidson's ADR policy. The that the contract is ambiguous. However,
rules of contract interpretation counsel uncertainty or lack of clarity is not enough to
against construing termination clauses as render a contract ambiguous. Universal C.I.T.
being retroactively exercisable and in favor of Credit Corp. v. Daniel, 150 Tex. 513, 243
interpreting contracts to be valid. Because the S.W.2d 154, 157 (1951) ("It must be conceded
relevant provision is properly construed as that there is an absence of artistry in the
applying only prospectively to disputes grammatical construction and punctuation of
arising after contemporaneous notice to paragraph 1 of the contract, but is its meaning
Webster of Davidson's decision to abolish or when properly read and interpreted so
modify its ADR policy, it does not render dubious as to subject the contract to the
illusory the parties' otherwise clearly charge of ambiguity, thereby justifying the
enforceable arbitration agreement. court in calling into play the rule of strong
construction against the author of an
I instrument? We think not."); Preston Ridge
-14-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
Fin. Servs. Corp. v. Tyler, 796 S.W.2d 772, obligation to Webster, and therefore
777 (Tex.App.-Dallas 1990, writ denied); Med. Davidson's promise to arbitrate does not
Towers, Ltd. v. St. Luke's Episcopal Hosp., constitute consideration for Webster's
750 S.W.2d 820, 822 (Tex.App.-Houston reciprocal promise.1 In my view, the
[14th Dist.] 1988, writ denied). provision's "without prior notice" language
does not disclaim the requirement set forth in
Contractual provisions must be Hathaway v. General Mills, Inc., 711 S.W.2d
considered with reference to the entire 227 (Tex.1986) of contemporaneous notice
instrument. Myers v. Gulf Coast Minerals for modifications to the at-will employment
Mgmt. Corp., 361 S.W.2d 193, 196 (Tex. relationship. The provision is properly
1962). The main heading of the parties' construed as applying only prospectively to
contract reads "Alternative Dispute disputes arising after contemporaneous
Resolution Policy" and the text below notice to Webster of Davidson's decision to
purports to determine the relationship abolish or modify its ADR policy.
between Davidson and its personnel. See E.H.
Perry & Co. v. Langbehn, 113 Tex. 72, 252 It is significant that the word "prior"
S.W. 472, 474-75 (1923) (title of an precedes "notice" in the relevant provision.
instrument, like every other portion of a We must presume that each word in a
contract, may be consulted in determining its contract has some significance and meaning.
meaning). In this context, we must give the Gates v. Asher, 154 Tex. 538, 280 S.W.2d
phrase "any personnel policy" its natural and 247, 249 (1955). For example, courts presume
obvious import. See, e.g., Pagel v. Pumphrey, that words that follow one another are not
204 S.W.2d 58, 64 (Tex.Civ. App.-San intended to be redundant. See Gulf Metals
Antonio 1947, writ ref'd n.r.e.). Indus., Inc. v. Chicago
A clause providing for termination of the We did not indicate when the notice had to be
scheme by the employer "without prior provided, thereby implying it could be given
notice" means without notice in advance. either in advance of or contemporaneous with
Those words do not suggest that notice does the policy change.5
not have to be given to effect termination of
rights under the contract of employment. The The Hathaway requirements are
clause puts the employee on warning that the applicable here because the parties sought to
scheme might not be permanent and that the modify their pre-existing at-will employment
employer reserves the right to terminate it relationship to include binding arbitration.
without giving advance warning, but it does The contract, including the arbitration
not mean that the employer's obligations can agreement therein, is incident to the at-will
end without the employee being told. employment relationship between Davidson
and Webster and refers to this relationship in
Bainbridge v. Circuit Foil (UK) Ltd. several places. Therefore, if Davidson
[1997], Industrial Relations Law Reports abolished or modified its arbitration policy,
(IRLR) 305 (Eng.C.A.). While authority this would effect a change in the terms of the
authored on this side of the Atlantic is at-will employment relationship between it
obviously preferable, an opinion issued by an and Webster.
English appellate court can surely be
considered on a question such as the one "Words of promise which by their terms
presented here that does not involve make performance entirely optional with the
interpretation of a statutory or constitutional `promisor' do not constitute a promise."
provision, but rather interpretation of three RESTATEMENT (SECOND) OF CONTRACTS
basic English words contained in a private 77 cmt. a (1981). However, "[a] limitation on
employment contract. the promisor's freedom of choice need not be
stated in words. It may be an implicit term of
Consistent with the well-established rule the promise, or it may be supplied by law." Id.
that each word in a contract be given effect, cmt. d. The provision at issue here, while
the phrase "without prior notice" contained in disclaiming advance notice, is consistent with
the parties' contract should be interpreted to Hathaway's contemporaneous notice
mean without notice in advance rather than requirement and, as such, should not be read
without any notice. Therefore, the "without as an attempt to disclaim this implied, default
prior notice" language does not disclaim the legal prerequisite for modifying the
contemporaneous notice that is required by conditions of an at-will employment
Texas common law to effect a change in the relationship.6
terms of an at-will employment relationship.4
Other courts have determined that when
In Hathaway, we held that the party a contractual termination or modification
asserting a change to an at-will employment provision does not state whether it applies
contract "must prove two things: (1) notice of prospectively or retroactively, the default
the change; and, (2) acceptance of the interpretation should be prospective only, as
change." 711 S.W.2d at 229. We noted that this avoids nullifying the intent of the parties
"[t]o prove notice, an employer to form an agreement. See Barker v. Ceridian
Corp., 122 F.3d 628, 638 (8th Cir.1997)
[128 S.W.3d 242] (where retirement plan was silent regarding
whether terms could be modified
asserting a modification must prove that he retroactively, prospective application favored
unequivocally notified the employee of because it avoids finding promise illusory);
definite changes in employment terms." Id.
-16-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
Kemmerer v. ICI Ams., Inc., 70 F.3d 281, alter the arbitration agreement, I would
287-88 (3d Cir.1995). follow the rule that, unless expressly stated
otherwise, such provisions should be
Several other courts have adopted interpreted to apply only prospectively.
Kemmerer's rationale: Consequently, Davidson would be perpetually
bound to arbitrate any dispute that arose
The court's reasoning [in Kemmerer] can prior to Davidson informing Webster of a
be captured in a simple illustration. If an change in its arbitration policy. As such,
employee is promised $10 per hour effective Davidson could not, after a dispute had
Monday, and told that her wage can be arisen, let alone during the final stages of
reduced at any time, and on Wednesday her binding arbitration, implement a change in its
wage is cut to $5 effective Thursday, her arbitration policy that would be applicable to
employer cannot refuse on pay day to give her that dispute.
$10 per hour for her work on Monday
through Wednesday. Far from requiring that Finally, reading the contract as allowing
the employer express an explicit intent to pay Davidson to unilaterally abolish or modify the
$10 per hour for Monday through arbitration policy only prospectively with
Wednesday's work notwithstanding the contemporaneous notice is supported by the
employer's freedom to reduce wages at any long-standing rule that contracts should be
time, the Third Circuit held that what would construed in favor of validity. See Wood
have to be preserved explicitly would be an Motor Co., Inc. v. Nebel, 150 Tex. 86, 238
employer's right to S.W.2d 181, 183 (1951) ("It is elementary that
if a contract is susceptible of two
[128 S.W.3d 243] constructions, one of which would render it
valid and the other void, the former will be
apply the reduced wage retroactively to adopted."); Harris v. Rowe, 593 S.W.2d 303,
Monday through Wednesday's work. A 306 (Tex.1979); Lavaca Bay Autoworld v.
contrary rule would lack any basis in contract Marshall Pontiac Buick Oldsmobile, 103
law.... S.W.3d 650, 657 (Tex. App.-Corpus Christi
2003, no pet.). Since the parties are
Abbott v. Schnader, Harrison, Segal &
presumed to know the law and intend their
Lewis, LLP, 805 A.2d 547, 559
contract to have legal effect, their contract
(Pa.Super.Ct.2002) (quoting Amatuzio v.
will be construed in view of this presumption.
Gandalf Sys. Corp., 994 F.Supp. 253, 266
Foard County v. Sandifer, 105 Tex. 420, 151
(D.N.J. 1998)).
S.W. 523, 524 (1912); Dewhurst v. Gulf
Marine Inst. of Tech., 55 S.W.3d 91, 97
Indeed, Justice Schneider's dissent7 and,
(Tex.App.-Corpus Christi 2001, pet. denied).
if its second footnote is more than mere dicta,
We have specifically held that contracts
the Court's opinion, would render the entire
should be construed in favor of mutuality.
at-will employment contract between
Tex. Gas Utils. Co. v. Barrett, 460 S.W.2d
Webster and Davidson illusory because
409, 412 (Tex.1970).
Webster's rate of compensation and all other
"personnel policies" would be subject to
Under this prospective construction,
unilateral, retroactive change by Davidson.
whereby Davidson is free to alter its
Certainly, this is not a reasonable
arbitration policy after giving
interpretation.
contemporaneous notice only as to claims
that had not yet arisen, it is clear that the
Because the disputed provision did not
contract is not illusory. Once the parties'
expressly authorize Davidson to retroactively
contract is read as not disclaiming the
-17-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
contemporaneous notice requirement set 1216, 1219 (10th Cir.2002) ("We join other
forth in Hathaway, this case becomes circuits in holding that an arbitration
indistinguishable from In re Halliburton Co., agreement allowing one party the unfettered
80 S.W.3d 566 (Tex.2002) in which we held right to alter the arbitration agreement's
that a similar arbitration agreement was not existence or its scope is illusory."); Floss v.
illusory because the unilateral termination Ryan's Family Steak Houses, Inc., 211 F.3d
provision could be exercised only with notice. 306, 315-16 (6th Cir.2000) (arbitration
agreement was "fatally indefinite" and
IV illusory because employer "reserved the right
to alter applicable rules and procedures
By binding itself to arbitration until it without any obligation to notify, much less
provides contemporaneous notice of a new receive consent from," other parties) (citing 1
dispute resolution policy that will apply only SAMUEL WILLISTON, CONTRACTS 43, at
prospectively, Davidson has provided 140 (3d ed.1957)); Hooters of Am., Inc. v.
consideration to Webster, and the parties' Phillips, 173 F.3d 933, 939 (4th Cir.1999)
contract is therefore not illusory. If the (arbitration agreement unenforceable in part
because Hooters, but not employee, could
[128 S.W.3d 244] cancel agreement with 30 days notice, and
Hooters reserved the right to modify the rules
contract were interpreted as allowing
"without notice"; "[n]othing in the rules even
Davidson to retroactively revoke the
prohibits Hooters from changing the rules in
arbitration agreement without
the middle of an arbitration proceeding.");
contemporaneous notice, it would either be
Gibson v. Neighborhood Health Clinics, 121
illusory or unconscionable, as Davidson could
F.3d 1126, 1133 (7th Cir.1997) (Cudahy, J.,
decide after a dispute arises whether it prefers
concurring) (promise to arbitrate was illusory
to arbitrate or go to court. However, that is
in part because employer retained the right to
not this case.
change or revoke the agreement "at any time
and without notice"); Snow v. BE & K Constr.
Based on the foregoing, I conclude that
Co., 126 F.Supp.2d 5, 14-15 (D.Maine 2001)
the contract is neither ambiguous nor
(citations omitted)(arbitration agreement
illusory, and therefore validly compels the
illusory because employer "reserve[d] the
parties to arbitrate their dispute. Accordingly,
right to modify or discontinue [the
I respectfully dissent.
arbitration] program at any time";
"Defendant, who crafted the language of the
---------------
booklet, was trying to `have its cake and eat it
Notes: too.' Defendant wished to bind its employees
to the terms of the booklet, while carving out
1. Davidson has not filed a petition for writ of an escape route that would enable the
mandamus with this Court under the Federal company to avoid the terms of the booklet if it
Arbitration Act, see Jack B. Anglin Co. v. later realized the booklet's terms no longer
Tipps, 842 S.W.2d 266, 272-73 (Tex.1992), served its interests."); Trumbull v. Century
and does not dispute that the Texas Mktg. Corp., 12 F.Supp.2d 683, 686
Arbitration Act controls. (N.D.Ohio 1998)(no binding arbitration
agreement because "the plaintiff would be
2. We note that most courts that have bound by all the terms of the handbook while
considered this issue have held that, if a party defendant could simply revoke any term
retains the unilateral, unrestricted right to (including the arbitration clause) whenever it
terminate the arbitration agreement, it is desired. Without mutuality of obligation, a
illusory. Dumais v. Am. Golf Corp., 299 F.3d contract cannot be enforced."); Simpson v.
-18-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
Grimes, 849 So.2d 740, 748 2. Neither the Court nor Justice Schneider
(La.Ct.App.2003) (arbitration agreement attributes any meaning to "prior" and both
lacked mutuality, making it "unconscionable repeatedly refer to the disputed provision as
and unenforceable": "By retaining the right to stating "without notice," thereby, sub silentio,
modify at will any and all provisions of the writing the word "prior" out of the parties'
agreement in question, Argent allows itself an contract.
escape hatch from its promise to be similarly
bound to arbitrate all disputes arising 3. Justice Schneider argues that Shumway v.
between the parties. Argent's ability to modify Horizon Credit Corp., 801 S.W.2d 890 (Tex.
the specific terms of the agreement at will is 1991) and Musgrave v. HCA Mideast, Ltd.,
not shared by the potential customer signing 856 F.2d 690 (4th Cir.1988) are "applicable
the agreement."); In re C & H News Co., No. precedent." 128 S.W.3d at 234. However,
13-02-529-CV, ___ S.W.3d ___, ___ _ ___, neither case is on point. In both Shumway
2003 WL 131770, *3, 2003 Tex.App. LEXIS and Musgrave, whether the phrase "without
393, *11-*12 (Tex.App.-Corpus Christi prior notice" should be given a different
January 16, 2003, orig. proceeding) meaning from "without notice" was not at
(employer's right to change, modify, delete, or issue and, therefore, was neither addressed
amend the arbitration agreement "with or nor decided.
without prior notification to employees" made
4. Another factor counseling in favor of
the arbitration agreement illusory).
interpreting the relevant provision as
1. The ADR Policy Webster signed contained applying only prospectively without
only two paragraphs. The first paragraph had disclaiming Texas common law requiring
two sentences covering thirteen lines, and the contemporaneous notice is the use of the
second paragraph had thirteen sentences and word "reserves." This word choice suggests
nineteen lines, for a total of fifteen sentences that Davidson is memorializing a right that is
spanning twenty-seven lines of text. consistent with its existing legal rights. "This
Arbitration is only discussed in two of the word [reserves] means to keep or retain; that
fifteen sentences. The body of the document is to say, to keep what one already has. You do
occupied approximately half of a letter size not reserve a right which you do not possess."
page. The ADR Policy has the company name, Baldwin v. Bd. of Tax-Roll Corrs., 331 P.2d
J.M. Davidson, Inc., at the top of the page in 412, 414 (Okla.1958).
an all capitals, bold face font similar to a
5. Justice Schneider argues that the relevant
company letterhead. The title of the
provision "contradict[s] the Hathaway
agreement, also in all capital, bold letters, is
requirements." 128 S.W.3d at 237. However,
"ALTERNATIVE DISPUTE
in Hathaway we required only notice, not
RESOLUTION POLICY." The sub-title of
advance notice.
the document is "EMPLOYMENT
APPLICATION LANGUAGE," styled in all 6. This case is distinguishable from the
capitals under the title. following cases cited in the Court's second
footnote in which arbitration agreements
1. However, there is no evidence that
were held to be illusory because the provision
Davidson ever attempted to abolish or modify
at issue allowed one party to terminate the
the arbitration agreement or that Webster
agreement at any time without any notice.
ever harbored any doubt that he could compel
Floss v. Ryan's Family Steak Houses, Inc.,
arbitration for any dispute that arose,
211 F.3d 306, 315-16 (6th Cir.2000)
including the one before the Court.
(arbitration agreement was "fatally indefinite"
and illusory because employer reserved the
right to alter applicable rules and procedures
-19-
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex., 2003)
---------------
-20-