MEMORANDUM OPINION AND ORDER

BAREFOOT SANDERS, Senior District Judge

Before the Court is Defendant's Motion to Compel Arbitration and Dismiss or Stay, filed July 26, 2004; Plaintiff's Response, filed August 23, 2004; and Defendant's Reply, filed September 7, 2004. For the reasons stated below, Defendant's Motion is DENIED.

I. Background

This case arises out of Plaintiff Syed M. Nasir's termination of employment by Defendant Air Liquide America, L.P. Plaintiff alleges four causes of action: three employment discrimination claims under 42 U.S.C. §§ 2000e- 2000e-17 and 1981; and one retaliatory discharge claim under 42 U.S.C. § 1981.

The undisputed factual background is as follows. Plaintiff began working for Defendant on December 28, 1992. On September 21, 1995, Plaintiff confirmed receipt of the Air Liquide America Corporation Employee Handbook ("Handbook") by signing and dating an Acknowledgment of Receipt of the Handbook ("Acknowledgment"). (Def.'s App. at 9.) In the Acknowledgment, Plaintiff confirms his understanding that he is responsible for reading the Handbook. ( Id.) The Acknowledgment states that the Handbook supersedes any previous Employee Handbook. ( Id.) The Acknowledgment also states that the Handbook provisions "do not alter my at-will employment or constitute a contract . . . The information contained in the Employee Handbook represents guidelines only and Air Liquide may revise, amend or terminate its policies, practices or employee benefits at any time." ( Id.) The Handbook contains a provision whereby "all disputes over Involuntary Termination of employment at Air Liquide shall be resolved through Alternative Dispute Resolution[.]" (Def.'s App. at 7.) On or about May 15, 2002, Plaintiff went on sick leave and was terminated on June 4, 2002.

Defendant moves to compel arbitration on the grounds that: (1) a valid arbitration agreement exists between the parties thus contractually binding the parties to arbitration; (2) Plaintiff's claims fall squarely within the arbitration agreement; and (3) no federal statute or policy renders Plaintiff's claims non-arbitrable. Defendant also moves to dismiss or stay pending compelled arbitration.

Plaintiff relies solely on his argument that the arbitration agreement is invalid. (Pl.'s Resp. at 2, 4, 5, 9.) Plaintiff contends that the arbitration agreement is a modification of his at-will employment contract (Pl.'s Resp. at 3) and as such fails as a matter of law because it lacks the contractual requirements of "[1] a meeting of the minds [2] supported by consideration." ( Id.) Plaintiff has not argued or briefed whether the claims are within the scope of the 1995 arbitration provision or whether a federal statute or policy renders the claims non-arbitrable. (Pl.'s Resp. at 13, ¶¶ D, E.)

II. Standard of Review and Applicable Law

"Courts adjudicating a motion to compel arbitration engage in a two-step process." Hadnot v. Bay, Ltd., 344 F.3d 474, 476 (5th Cir. 2003). The Court's adjudication begins by determining if the parties agreed to arbitrate the dispute. Id. (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)). Whether the parties agreed to arbitrate is determined on the basis of "ordinary state-law principles that govern the formation of contracts." Id. at 476 n. 2 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). In the instant case, both parties agree that Texas state law controls the validity of the arbitration agreement. (Def.'s Mot. at 5; Pl.'s Resp. at 2.) The second step is to determine "whether legal constraints external to the parties' agreement foreclose" arbitration of the claims. Hadnot, 344 F.3d at 476 (citing Mitsubishi Motors, 473 U.S. at 628).

In Hathaway v. General Mills, Inc., the Texas Supreme Court articulated the rule with respect to employment contract modifications:

The burden of proving modification rests on the party asserting the modification. . . . Generally, when the employer notifies an employee of changes in employment terms, the employee must accept the new terms or quit. If the employee continues working with knowledge of the changes, he has accepted the changes as a matter of law. Thus, to prove a modification of an at will employment contract, the party asserting the modification must prove two things: (1) notice of the change; and, (2) acceptance of the change.

. . . .

. . . If the employer proves that he has unequivocally notified the employee of the changes, the employee's continuing employment will constitute acceptance as a matter of law.

Texas' highest court has not decided whether an arbitration agreement is illusory when the employer retains the unilateral, unrestricted right to modify or terminate its arbitration policy. The issue was brought to the Texas Supreme Court in J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003), however the court did not reach the question because six of the nine justices found the agreement ambiguous and remanded. See Davidson, 128 S.W.3d at 229-30. Accordingly, this Court proceeds cautiously in "mak[ing] an educated guess as to how the Texas Supreme Court would rule." Dean v. Dean, 821 F.2d 279, 283-84 (5th Cir. 1987). In a footnote the Davidson majority intimated its approval of In re C H News Co, 133 S.W.3d 642 (Tex.App.-Corpus Christi 2003, orig. proceeding). See Davidson, 128 S.W.3d at 230 n. 2 (quoting four circuit courts, two Federal District courts, and one state court for the proposition that if a party retains the unilateral, unrestricted right to modify or terminate the arbitration agreement, without notice, the agreement is illusory). Two dissenting justices fully agreed with the line of cases footnoted by the majority. See id. at 235-37. The Court believes that, in addressing the issue, the Texas Supreme Court would rule that where an employer retains the unilateral, unrestricted right to modify or terminate its arbitration policy, any agreement to arbitrate under such terms is illusory.

III. Analysis

A. Hathaway Requirements: Offer and Acceptance

The issue of whether Plaintiff was on notice as to any changes in the terms of his employment turns on Plaintiff's acknowledgment of such changes. The record is devoid of any arbitration provision existing on December 28, 1992, when Plaintiff was hired; but the record is clear that Plaintiff signed an Acknowledgment of Receipt of Air Liquide America Corporation Employee Handbook, dated September 21, 1995. (Def's App. at 9; Pl.'s Aff. ¶ 3.) Plaintiff does not refute Defendant's contention that the Handbook of which Plaintiff acknowledges receipt is the same handbook excerpted in Defendant's Appendix pp. 4-8. (Def.'s App. at 1, ¶¶ 2.a, b.) Plaintiff does not dispute that the Acknowledgment "acknowledges . . . that [Plaintiff] has received and read the handbook." (Pl.'s Resp. at 6.) Plaintiff cannot not now assert that he did not read the Handbook in light of his signed acknowledgment that he did read it. Therefore the signed Acknowledgment is proof that in 1995 Defendant unequivocally notified Plaintiff of the changes to the at-will employment contract.

The record is devoid of any arbitration agreement superceding the 1995 Acknowledgment. Defendant has submitted its arbitration policy in effect at the time of Plaintiff's Acknowledgment (Def.'s App. at 1, ¶¶ 2.a, b; Def.'s App. 4-8) and its arbitration policy effective February 1, 2001. (Def.'s App. at 2, ¶ 2.e; Def.'s App. at 17-19.) Defendant confirms that "it does not have evidence, at this time, that it expressly advised [Plaintiff] of the fact that the Arbitration Agreement was revised." (Def.'s Reply at 8.) Indeed the record lacks any evidence proving that Defendant has unequivocally notified Plaintiff of the changes to the 1995 arbitration policy. Under Hathaway, Plaintiff cannot be held bound to Defendant's unilateral changes to the 1995 arbitration policy because Defendant never provided unequivocal notice. Accordingly, Plaintiff may only be bound by the 1995 arbitration policy.

Plaintiff has accepted the 1995 changes in employment terms. Acceptance of an offer is effective, as a matter of law, once an employee is notified of a policy and continues to work after such notification. Hathaway, 711 S.W.2d at 229. Both parties agree that subsequent to signing the Acknowledgment in 1995, Plaintiff continued working for defendant until his termination in 2002. Hence, Plaintiff has accepted the changes as a matter of law. The Court concludes that pursuant to Hathaway, the parties entered into an arbitration agreement in 1995, as a matter of law. The Court now considers whether the arbitration agreement is valid. B. Validity of the Agreement: Consideration

The Plaintiff misconstrues Davidson. Davidson, 128 S.W.3d 223 (Tex. 2003). The Texas Supreme Court, finding the arbitration agreement ambiguous, did not find it invalid as Plaintiff suggests. (Pl.'s Resp. at 6-7.) Plaintiff's suggestion notwithstanding, the Court finds the Acknowledgment here clear: "Air Liquide may revise, amend, or terminate its policies . . . at any time." As the arbitration policy is one of the policies acknowledged and agreed to by Plaintiff, the terms of the agreement are clear: Defendant reserves the right to revise, amend, or terminate its arbitration policy at any time.

Despite the high court not reaching the issue, Davidson does support Plaintiff's contention that the agreement is illusory. Although Davidson did not directly answer the question, two dissenters and the majority's footnote leads this Court to believe that at least eight of the nine Texas Supreme Court justices would affirm In re C H News Co, 133 S.W.3d 642 (Tex.App.-Corpus Christi 2003, orig. proceeding). In re C H News Co, 133 S.W.3d 642, parallels the case at bar. There, as here, the employee signed a one page acknowledgment acquiescing to changes in the terms of employment. Id. at 646; (Def.'s App. at 9.). There, as here, the one page acknowledgment incorporated by reference every policy to which the employee was assenting. C H News, 133 S.W.3d at 646; (Def.'s App. at 9.) In both cases the one page "handbook receipt acknowledgment, signed by the [employee], provides that the handbook consists of general guidelines[.]" C H News, 133 S.W.3d at 646; (Def.'s App. at 9 ("The information contained in the Employee Handbook represents guidelines only and Air Liquide may revise, amend or terminate its policies, practices or employee benefits at any time.").) The Texas Court of Appeals found that the employer "reserved the right to unilaterally amend the handbook, and in so doing, has reserved the right to unilaterally amend the "Mutual Arbitration Policy/Procedures" contained in the handbook." C H News, 133 S.W.3d at 646. The Court adopts C H News' reasoning that because the Acknowledgment (1) incorporates by reference the Handbook policies, including the arbitration policy; (2) provides that the Handbook consists of guidelines only that Defendant may revise, amend or terminate at any time; and (3) lacks any prior notification requirement, the Defendant has retained the unilateral right to amend the Handbook, including the arbitration agreement at issue today. See id. The Court concludes that the promise to arbitrate is illusory and thus insufficient consideration to support the agreement to arbitrate.

The Court's holding that the arbitration agreement is invalid vitiates Defendants remaining argument that Plaintiff's claims are within the scope of the arbitration agreement. Likewise, the Court deems moot whether any federal statute or policy renders Plaintiff's claims non-arbitrable. Other than the Court's discussion of illusory promises, the Court does not reach the second step in its adjudication: "whether legal constrains external to the parties' agreement foreclose" arbitration of the claims. Hadnot, 344 F.3d at 476 (emphasis added).

IV. Conclusion

The Court holds that in 1995, Plaintiff and Defendant entered into an agreement when (1) Defendant unequivocally notified Plaintiff of the changes to his at-will employment and (2) Plaintiff accepted the changes as a matter of law. The Court further holds that the agreement is invalid and unenforceable due to the illusory nature of Defendant's promise to arbitrate. For the reasons discussed above, Defendant's Motion to Compel Arbitration and Dismiss or Stay is hereby DENIED.

SO ORDERED.