April 16, 2020

April 16, 2020:

Houston First Court of Appeals, in an employment dispute, reverses denial of a motion to compel arbitration, finding the dispute arbitrable, even though the employer never signed the arbitration agreement.  SK Plymouth, LLC v. Simmons, No. 01-19-00433-CV (Tex. App. -- Houston [1st Dist.] Apr. 16, 2020, no pet. h.).

Company hires new employee.  Employee signs new hire paperwork, including an arbitration agreement.  Stuff happens.  Folks get busy.  The paperwork gets filed away with the company never having signed the arbitration agreement.  The employment relationship sours.  Employee quits or is fired and sues the company.  Company pulls the arbitration agreement from the employee's file and realizes:  Yikes!  Houston, we have a problem.  No one ever signed the arbitration agreement for us.  On facts like these, a Harris County district court denied a motion to compel arbitration.  The Houston First Court of Appeals reversed, holding that the arbitration agreement was valid and enforceable and that the district court had abused its discretion in concluding otherwise.       

Ordinary principles of contract law require that one seeking to enforce a contract show "execution and delivery of the contract with the intent that it be mutual and binding."  Slip op. at 15.  Typically, a party manifests its intent to be bound by a contract by signing the contract.  "However, 'while signature and delivery are often evidence of the mutual assent required for a contract, they are not essential.'"  Id. at 16.  

Many contracts provide that the parties must sign for the contract to be binding.  But in this case, "the Arbitration Agreement does not contain any provision expressly requiring the agreement to be signed by the parties in order to make it binding or to modify it."  Id. at 19.  "[A] blank signature block alone does not establish that a signature is a condition precedent to the agreement's enforceability."  Id.  And in this case, the language above the signature blocks for the parties (signed by employee, blank for company employer) said only "Acknowledgment of Receipt," suggesting the purpose of the signature block for the employer was merely "to ensure that it could demonstrate that [the employee] had received notice of the agreement."  Id. at 20.             

But finding no evidence that the parties intended signature by the employer to be a condition precedent to enforceability did not end the inquiry.  "Even when there is no evidence to show that the parties intended the signing of the agreement to be a condition precedent, the evidence must still demonstrate that the non-signatory party intended to be bound by the agreement."  Id. at 21.  The court of appeals found such evidence on the facts before it.  The arbitration agreement recited that the parties had a "mutual desire" to enter into the agreement.  The agreement had a modification provision that required only written notice (not signatures) for modification.  The employer drafted the agreement, maintained the unsigned agreement as a business record, and sought to enforce the agreement when a dispute arose.              

"We conclude that Appellants' evidence, offered in support of their motion to compel arbitration, established that SKEPOA assented to the Arbitration Agreement and intended to be bound by it, but no evidence showed that SKEPOA's signature was a condition precedent to its enforceability."  Id. at 27.         

There are two obvious lessons here.  First, if you have HR responsibility for an organization, implement policies that will ensure that the organization signs new hire paperwork, including any arbitration agreement.  This is not rocket science, take care of the paperwork.  Second, if you are a lawyer and a client asks you to enforce an arbitration agreement that the client never signed, all is not necessarily lost.  Read Simmons and the cases it cites and determine if you can meet the dual burden articulated by this decision -- your client assented to the agreement and intended to be bound, and the parties did not intend for signature to be a condition precedent to enforceability.                     

  

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