Opinion
Civil Action No. 3:03-CV-227-L.
August 4, 2004
ORDER
Before the court is Defendant's Motion to Dismiss Plaintiff's Cause of Action, filed December 23, 2003. After careful consideration of the motion, response, reply, record and applicable law, the court denies Defendant's Motion to Dismiss Plaintiff's Cause of Action.
The docket sheet reflects two entries for Defendant's Motion to Dismiss Plaintiff's Cause of Action on December 23, 2003. Both motions are identical, except that Docket Entry #9 has an exhibit attached while Docket Entry #10 does not. Given the references to the attached exhibit in the motions, it is clear that Defendant intended to attach an exhibit to its motion. The court therefore denies as moot Defendant's Motion to Dismiss Plaintiff's Cause of Action (Docket Entry # 10), as it is duplicative of Defendant's Motion to Dismiss Plaintiff's Cause of Action (Docket Entry #9).
Defendant titled its reply as "Defendant's Rebuttal to Plaintiff's Response to Dismiss Cause of Action." The court will refer to this document as Defendant's reply.
I. Factual and Procedural Background
Plaintiff Monique Copeland ("Plaintiff" or "Copeland") was employed as a Sales Counselor by Defendant KB Home ("Defendant" or "KB Home"). On December 18, 2000, Plaintiff signed a Salesperson Employment Agreement ("Agreement"), which contained, among other things, a section regarding binding arbitration. Plaintiff contends that during her employment with Defendant, she was subjected to sexual harassment and retaliation.
On January 22, 2002, Plaintiff filed a charge of discrimination with the Equal Employment Opportunity Commission and the Texas Commission on Human Rights, alleging retaliation and sex discrimination. On November 2, 2002, Plaintiff received her Right-to-Sue letter. On January 31, 2003, Plaintiff filed this lawsuit against KB Home and Ron Reyes ("Reyes"), contending sex discrimination and retaliation in violation of Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991 ("Title VII") and assault and battery. On December 23, 2003, Defendant moved to dismiss Plaintiff's lawsuit pursuant to Fed.R.Civ.P. 41(b) "so that this dispute may be presented for binding arbitration. . . ." Def. Mtn. at 1. Although Defendant refers to the motion as one to dismiss, it is more properly characterized as one to compel arbitration and dismiss. The court now considers this motion.
At all times relevant to this lawsuit, Reyes was a Regional Sales Manager for KB Home. Copeland has not served Reyes with her Complaint.
II. Analysis
Defendant requests that the court dismiss Plaintiff's lawsuit without prejudice and compel arbitration. Plaintiff counters that dismissal pursuant to Fed.R.Civ.P. 41(b) is not the appropriate relief for a party seeking to compel arbitration and that pursuant to the Federal Arbitration Act ("FAA"), a court must stay, not dismiss, lawsuits involving arbitrable issues pending arbitration. Plaintiff further contends that dismissal and arbitration are unwarranted because an arbitration agreement does not exist, and even if an arbitration agreement exists, it is invalid and unenforceable because it is unconscionable. Lastly, Plaintiff contends that Defendant waived its right to arbitration.
There appears to be no dispute that if an arbitration agreement exists, it would be governed by the FAA. The FAA provides, in relevant part:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.9 U.S.C. § 3. "This rule, however, was not intended to limit dismissal of a case in the proper circumstances." Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992). Dismissal is appropriate "when all of the issues raised in the district court must be submitted to arbitration." Alford, 975 F.2d at 1164. The court must therefore decide whether to compel arbitration before it can determine if dismissal is warranted.
The court must apply a two-step inquiry when determining whether to compel arbitration. Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004). "First, the court must determine whether the parties agreed to arbitrate the dispute. Once the court finds that the parties agreed to arbitrate, it must consider whether any federal statute or policy renders the claims non-arbitrable." Banc One, 367 F.3d at 429 (quoting R.M. Perez Assocs., Inc. v. Welch, 960 F.2d 534, 538 (5th Cir. 1992)).
In the first step, the court must determine "whether there is a valid agreement to arbitrate between the parties; and . . . whether the dispute in question falls within the scope of that arbitration agreement." Banc One, 367 F.3d at 429 (citing Webb v. Investacorp, Inc., 89 F.3d 252, 256 (5th Cir. 1996)). The court must apply state contract law in deciding these questions. Id.; see also Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003).
Under Texas law, a valid contract requires "(1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding." Coffel v. Styker Corp., 284 F.3d 625, 640 n. 17 (5th Cir. 2002) (quoting Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex.App.-San Antonio 1999, no pet.)).
Plaintiff contends that no agreement to arbitrate exists because Defendant did not comply with a condition precedent. Specifically, Plaintiff refers to Defendant's failure to initial the space provided for in the Salesperson Employment Agreement to indicate its intent to submit to binding arbitration. The Salesperson Employment Agreement provides as follows:
By initialing in the space below and signing this Agreement at the bottom, [Plaintiff] and [Defendant] indicate their voluntary agreement to the terms of this arbitration procedure. Both parties understand that by voluntarily agreeing to the terms of the arbitration procedure described herein, both are giving up any constitutional or statutory right they may possess to have covered claims decided in a court of law before a judge or jury.
Def. Mtn., Ex. A, p. 10 (emphasis omitted). Below this paragraph are two spaces, one labeled "Initials of Company Representative" and the other labeled "Initials of Employee." Plaintiff initialed the space labeled "Initials of Employee," while the other space was not initialed. The Salesperson Employment Agreement, however, was signed by both Plaintiff and an employee of Defendant.
Defendant does not dispute that it failed to initial the space provided in the Agreement to indicate its intent to submit to binding arbitration. Instead, Defendant contends that Plaintiff "fails to [c]ite any authority that the agreement would be unenforceable absent initials at the bottom of the page." Def. Reply at 3. It is, however, the burden of the party seeking to compel arbitration to establish "its contractual right to arbitration, which contractual right was dependent on compliance with an express condition precedent." Weekley Homes, Inc. v. Jennings, 936 S.W.2d 16, 19 (Tex.App.-San Antonio 1996, writ denied) (citing City of Alamo v. Garcia, 878 S.W.2d 664, 665 (Tex.App.-Corpus Christi 1994, no writ)).
If the parties to a contract intend for their signatures to be a condition precedent to the formation of a contract, then a contract is not formed unless both parties sign the contract. Simmons and Simmons Constr. Co v. Rea, 286 S.W.2d 415, 419 (Tex. 1955); cf. ABB Kraftwerke Aktiengesellschaft v. Brownsville Barge Crane, Inc., 115 S.W.3d 287, 292 (Tex.App. — Corpus Christi 2003, pet. denied) (Signatures are not required where there is no evidence of the parties' intent to require signatures as a condition precedent to the agreement becoming a binding contract.).
The plain, unequivocal language of the arbitration provision in question establishes that the parties intended and expected the Agreement to be initialed and signed as a condition precedent for the formation of an arbitration agreement. The page of the Agreement that contained the arbitration provision was the only page of the Agreement that required both parties to initial it. In this case, Defendant, through an agent or employee, failed to initial the Agreement. In light of the plain and unambiguous language, that an employee of Defendant signed the Agreement but failed to initial the space provided for after the section relating to arbitration establishes, as far as the court is concerned, that Defendant agreed to all the provisions in the Agreement, except for those relating to arbitration. The evidence is undisputed that Defendant did not initial the Agreement, as required by its express terms. The court therefore determines that Defendant did not satisfy a condition precedent to the formation of a contract, and thus no contract to arbitrate exists. Moreover, Defendant has set forth no evidence or authority that would relieve it of its failure to initial the page relating to arbitration. As no contract or agreement to arbitrate exists, the court cannot and will not compel arbitration. Accordingly, Defendant's Motion to Dismiss Plaintiff's Cause of Action is denied.
Having found that no valid agreement to arbitrate exists, the court need not address Plaintiff's remaining grounds in opposition of Defendant's Motion to Dismiss Plaintiff's Cause of Action.
III. Service on Defendant Ron Reyes
The court notes that Defendant Reyes has not been served. This action was filed on January 31, 2003. Well over 120 days have passed, and the clerk's docket sheet reflects that no service has been made on Defendant Reyes. Fed.R.Civ.P. 4(m) provides that when service is not made on a defendant within 120 days after filing of the complaint, the court may, after notice to the plaintiff, dismiss the action as to that defendant without prejudice or instruct the plaintiff to effect service within a specific time.
Copeland is hereby directed to effect service on Defendant Ron Reyes no later than September 3, 2004, or show good cause in writing for the failure or inability to effect service on Defendant Ron Reyes by September 3, 2004. Failure of Copeland to effect service or show good cause will result in dismissal of this action without prejudice.
IV. Conclusion
For the reasons stated herein, the court denies Defendant's Motion to Dismiss Plaintiff's Cause of Action, and directs Plaintiff to serve Defendant Ron Reyes no later than September 3, 2004, or show good cause in writing for the failure or inability to effect service on Defendant Ron Reyes by September 3, 2004.