Opinion
01-21-00351-CV
07-21-2022
LUPE HOLDINGS, LP, TRES HABANEROS/PEARLAND, LTD, AND TRES HABANEROS, LTD, Appellants v. TOMAS SANCHEZ, Appellee
On Appeal from the 189th District Court Harris County, Texas Trial Court Case No. 2020-46140
Panel consists of Justices Hightower, Countiss, and Guerra.
MEMORANDUM OPINION
Richard Hightower Justice
Appellants-Lupe Holdings, LP, Tres Habaneros/Pearland, Ltd, and Tres Habaneros, Ltd-challenge the trial court's order denying their motion to compel arbitration in a lawsuit filed against them by appellee Tomas Sanchez. In its order, the trial court specified that Appellants' arbitration request was "barred" because they had failed to "timely invoke" arbitration by the deadline in the arbitration agreement. On appeal, Appellants contend that the trial court abused its discretion in denying their motion to arbitrate because whether Appellants' arbitration demand was barred by a lack of timely notice of their intent to arbitrate was a matter of procedural arbitrability for the arbitrator-not the trial court-to decide. Because we agree with Appellants, we reverse and remand.
Background
On July 31, 2020, Sanchez sued Appellants, which he claimed were his non-subscribing employers, for negligence and gross negligence. Sanchez alleged that on August 1, 2018, he had sustained an on-the-job injury to his foot while he was working as a dishwasher at a restaurant. As a result of his injury, Sanchez sought to recover (1) damages for mental anguish and pain and suffering, (2) lost wages, (3) medical expenses, and (4) punitive damages.
On January 9, 2021, Appellants answered, generally denying Sanchez's claims, and asserting the "affirmative defense" of arbitration. Two months later, on March 19, 2021, Appellants filed a motion to stay judicial proceedings and to compel arbitration under the Federal Arbitration Act (FAA), pursuant to a "Mutual Agreement to Arbitrate" (Arbitration Agreement). Among the evidence supporting the motion, Appellants attached the Arbitration Agreement and an "Employee Acknowledgment and Agreement Concerning Binding Arbitration Agreement" (Employee Acknowledgment) signed by Sanchez on June 5, 2018. The Employee Acknowledgement reflected that Sanchez had received a copy of the Arbitration Agreement and that, by his signature, Sanchez agreed to "adhere to and follow" the agreement. He also acknowledged that his "continued employment with the Company" constituted his acceptance of the Arbitration Agreement's terms as a condition of his employment. Sanchez further acknowledged that he understood "that as a result of the Arbitration Agreement, any legal claims or disputes between myself [sic] and the Company, or any of its . . . affiliates" would be "decided by an arbitrator and not a jury or judge."
The Arbitration Agreement stated that it was subject to the FAA. See 9 U.S.C. §§ 1-16.
The Arbitration Agreement defined "the Company" as RDM Inc., including its affiliates. In support of its motion, Appellants offered the affidavit of Judson Holt, RDM's chief executive officer. Holt testified that, as referenced in the Arbitration Agreement, Appellants were RDM's "affiliates."
The opening paragraph of the Arbitration Agreement provided,
As a part of, and in consideration for employment and/or continued employment and compensation, and in consideration of the Company's mutual agreement to arbitrate, each employee agrees that any claim or controversy ("Dispute") that he or she may have against the Company arising out of or in any way relating to an employee's employment with the Company or termination of employment with the Company shall be submitted to and settled by final and binding arbitration.
Under the heading "Covered Disputes," the Arbitration Agreement stated:
This Arbitration Agreement between the Company and each employee to arbitrate all Disputes includes, but is not limited to: (i) all claims under [listed state and federal employee-rights statutes]; (ii) any claims based upon any federal, state, or local statute, law, ordinance, or regulation; (iii) all tort and other common law claims, including without limitation breach of fiduciary duty; (iv) all contract disputes, if any, including breaches of express or implied covenants; (v) all wage and compensation disputes; (vi) all claims of discrimination or harassment; (vii) any benefit disputes; and (viii) any claims that could be tried to a jury in the absence of this Arbitration Agreement.
Appellants asserted that the trial court should grant their motion to compel because the Arbitration Agreement was a valid and enforceable agreement between them and Sanchez. They also contended that Sanchez's personal-injury claim was a "covered dispute" within the scope of the agreement.
Sanchez responded to the motion, asserting that it should be denied for several reasons. Sanchez argued that there was no contract to arbitrate between him and Appellants because RDM, not Appellants, had signed the agreement. He asserted that Holt's affidavit stating that Appellants were RDM's "affiliates" was not sufficient to show they were parties to the agreement.
Sanchez also argued that his negligence claims were not within the scope of the Arbitration Agreement because the agreement expressly provided that it did not apply to claims "for workers' compensation benefits." He acknowledged that Appellants were non-subscribers under the Texas Workers Compensation Act but claimed that his work-related negligence claims were nonetheless governed by the act's provisions, thus the agreement did not apply.
Sanchez further argued that the Arbitration Agreement was not enforceable because the circumstances under which he signed the Employee Acknowledgement were procedurally unconscionable. In his affidavit supporting his response, Sanchez testified that he speaks, reads, and understands Spanish but does not speak, read, or understand English. He stated that "the paperwork" he was required to sign to start his job was only in English. He testified that he was told that the paperwork was about workers' compensation insurance and was not told it was about arbitration. He stated that he would not have agreed to arbitrate his claims had he known that was what the paperwork said.
Finally, Sanchez argued that the motion to compel should be denied because Appellants did not satisfy a condition precedent to arbitration by giving him timely notice of their intent to arbitrate. Sanchez relied on the following provision in the Arbitration Agreement to support this assertion:
Notice of Claims
All Disputes must be raised by a written notice of intent to arbitrate containing a statement setting forth the nature of the dispute, the amount involved, if any, and the remedy sought. The notice of intent to arbitrate must be received by the other party within any applicable statue [sic] of limitations period as if such claim were filed in court in the absence of this Arbitration Agreement. If notice is not timely received, such claim shall be barred. Notice must be sent by certified or registered mail, return receipt requested.
Written notice of intent to arbitrate by an employee must be forwarded to the Company's Human Resources Director. Written notice of intent to arbitrate by the Company must be forwarded to the employee's last known address, as provided by the employee to the Company.
Sanchez interpreted the Notice of Claims Provision as requiring Appellants to provide him with written notice of their intent to arbitrate his negligence claims by the expiration of the applicable two-year limitations period for his August 1, 2018 injury. See Tex. Civ. Prac. & Rem. Code § 16.003(a). Sanchez argued that, because they "did not provide written notice of [their] intent to arbitrate within two years after [his injury]," Appellants "were untimely in providing to [him] notice of intent to arbitrate and thus failed to comply with a mandatory condition precedent to arbitration." He pointed to a letter, dated November 30, 2018, sent by his attorney to Lupe Holdings (one of the Appellants here) stating that the attorney's law firm represented Sanchez regarding an on-the-job injury that Sanchez had suffered on August 1, 2018. The letter also asked Lupe Holdings to preserve evidence related to the injury and warned it that Sanchez would file suit if there was no response to the letter. Sanchez asserted that the letter showed that Appellants were aware of his injury before the statute of limitations expired on August 1, 2020. Sanchez asserted that Appellants' motion to compel arbitration was therefore "time barred by [their] failure to comply with a condition precedent to arbitration."
Replying to Sanchez's response, Appellants asserted that Sanchez misinterpreted the Arbitration Agreement's Notice of Claims Provision to require Appellants to raise Sanchez's claim in a notice of intent to arbitrate. Specifically, they contended that Sanchez incorrectly read the provision to require Appellants "to give [Sanchez] notice setting forth the nature of [Sanchez's] dispute against themselves, the amount involved against themselves, and the remedy sought against themselves." Appellants asserted that it made "zero sense" that they would "initiate a dispute against themselves for the benefit of [Sanchez]." Appellants also asserted that, "given [Sanchez's] logic that the Notice of Claims [provision] states that if notice is not timely received, such claim shall be barred[,] means that [Sanchez] by implication would agree that his claims are barred against [Appellants] because [Appellants] failed to give him notice of their intent to arbitrate." Appellants stated that would "simply not make sense."
Appellants also replied to (1) Sanchez's assertion that they were not parties to the Arbitration Agreement, (2) his assertion that his claims were not within the scope of the Arbitration Agreement, and (3) and his claim that the Arbitration Agreement was procedurally unconscionable. Sanchez filed a sur-reply in which he reiterated his arguments offered in his initial response to the motion to compel arbitration.
On June 9, 2021, the trial court signed an order denying Appellants' motion to compel arbitration. In the order, the trial court stated, "The court finds the arbitration agreement is binding upon the parties. However, the employer did not timely invoke the arbitration clause. Therefore, the employer's right to arbitrate the dispute is barred."
The trial court then quoted the full Notice of Claims Provision, underlining the following sentence: "The notice of intent to arbitrate must be received by the other party within any applicable statue [sic] of limitations period as if such claim were filed in court in the absence of this Arbitration Agreement." The order concluded by stating, "The above provisions applied equally to both parties by the express terms of the agreement. The court finds the employer did not timely invoke the arbitration clause and thereby is barred from invoking the arbitration clause." Other than the statute-of-limitations deadline in the Notice of Claims Provision, the trial court cited no other basis to deny Appellants' motion to compel arbitration.
Appellants now appeal the June 9 order.
See Tex. Civ. Prac. & Rem. Code § 51.016 (permitting interlocutory appeal from order denying motion to compel arbitration under FAA).
Motion to Compel Arbitration
Appellants present three issues on appeal. Appellants' first issue globally asserts that the trial court abused its discretion when it denied their motion to compel arbitration. In their second and third issues, Appellants argue that the trial court abused its discretion in denying their motion because the parties' dispute regarding whether their arbitration demand is barred based on the statute-of-limitations deadline found in the Notice of Claims Provision is a matter of procedural arbitrability that should be decided by the arbitrator, not by the courts.
A. Standard of Review
"We review a trial court's order denying a motion to compel arbitration for abuse of discretion." Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018). A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner or acts without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). "We defer to the trial court's factual determinations if they are supported by evidence but review its legal determinations de novo." Henry, 551 S.W.3d at 115. A trial court has no discretion in determining what the law is, which law governs, or how to apply the law. Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 38 (Tex. App.-Houston [1st Dist.] 2009, pet. denied).
When an order denying a motion to compel arbitration does not state the grounds for the denial, we must affirm the order if any of the grounds asserted in the trial court for denying the motion are meritorious. See In re Estate of Guerrero, 465 S.W.3d 693, 701 (Tex. App.-Houston [14th Dist.] 2015, pet. denied). However, when the trial court's order specifies the ground on which it denied the motion, we limit our review to the reason expressly stated in the trial court's order. Leyendecker Constr., Inc. v. Berlanga, No. 04-13-00095-CV, 2013 WL 4009752, at *4 (Tex. App.-San Antonio Aug. 7, 2013, no pet.) (mem. op.) (limiting review of order denying motion to compel to reason stated in order) (citing In re Zotec Partners, LLC, 353 S.W.3d 533, 537 (Tex. App.-San Antonio 2011, no pet.)).
B. Analysis
Here, the crucial question is whether the trial court or the arbitrator should decide whether the statute-of-limitations deadline in the Notice of Claims Provision bars Appellants' demand for arbitration. "Ultimately, this is a question of the parties' intent as expressed in their written agreement. When parties have contractually agreed to arbitrate their future disputes, the courts' obligation to honor and enforce that agreement requires that they refer those disputes to arbitration." G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 519 (Tex. 2015) (G.T. Leach Builders II).
A party seeking to compel arbitration must first establish that a valid arbitration agreement exists and that the claims are within the agreement's scope. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding). "Once the trial court concludes that the arbitration agreement encompasses the claims, and that the party opposing arbitration has failed to prove its defenses, the trial court has no discretion but to compel arbitration and stay its own proceedings." In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753-54 (Tex. 2001).
Here, the trial court stated in its order that "the arbitration agreement is binding upon the parties," indicating that the trial court determined that Appellants had proven that the parties had entered into an agreement to arbitrate. But it is less clear if, before denying the motion to compel based on the issue of timely notice, the trial court determined whether Sanchez's negligence claims were within the scope of the Arbitration Agreement or whether the agreement was unconscionable-issues of substantive arbitrability raised by Sanchez in his response.
In its order, the trial court stated that it denied Appellants' motion to compel arbitration based on its determination that Appellants were barred from demanding arbitration because they had not invoked arbitration by the contractual deadline, i.e., the expiration of the limitations period on Sanchez's negligence claims. The trial court identified no other basis for the denial. Thus, it is unclear whether, when disposing of the motion to compel, the trial court bypassed the substantive-arbitrability issues raised by Sanchez and went directly to the issue of timeliness.
In any event, because timeliness was the only reason specified by the trial court for denying Appellants' motion to compel, we limit our review to that expressly stated reason. See Leyendecker Constr., 2013 WL 4009752, at *4. Appellants argue that the trial court abused its discretion when it determined that the contractual deadline barred their arbitration request because the trial court never should have addressed the issue. Appellants contend that only the arbitrator-and not the trial court-may decide whether the statute-of-limitations deadline bars their demand for arbitration, which they assert is a matter of procedural arbitrability.
Both the United States Supreme Court and the Supreme Court of Texas have recognized the distinction between questions of substantive arbitrability-which courts decide-and procedural arbitrability-which courts must refer to the arbitrator to decide. See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83-85 (2002); G.T. Leach Builders II, 458 S.W.3d at 520. In Howsam, a brokerage firm argued that its client could not initiate arbitration because the client had not initiated arbitration within a six-year deadline as required in their arbitration agreement. 537 U.S. at 81-82. The Supreme Court held that this was not a question of arbitrability for the courts to decide. Id. at 85. "Linguistically speaking, one might call any potentially dispositive gateway question a 'question of arbitrability,'" but the Court explained that "the phrase 'question of arbitrability' has a far more limited scope" and does not encompass "'procedural' questions which grow out of the dispute and bear on its final disposition" or "allegation[s] of waiver, delay, or a like defense." Id. at 83-84 (citation omitted). Absent an agreement to the contrary, courts decide issues of substantive arbitrability such as "whether the parties are bound by a given arbitration clause," or "whether an arbitration clause in a concededly binding contract applies to a particular type of controversy." Id. at 84. On the other hand, issues of procedural arbitrability, such as "whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the arbitrators to decide." Id. at 85.
In BG Group PLC v. Republic of Argentina, the Supreme Court further clarified the difference between substantive arbitrability questions addressing the existence, enforceability, and scope of an agreement to arbitrate (which courts decide), and procedural arbitrability questions addressing the construction and application of limits on that agreement (which only arbitrators can decide):
On the one hand, courts presume that the parties intend courts, not arbitrators, to decide what we have called disputes about arbitrability. These include questions such as whether the parties are bound by a given arbitration clause, or whether an arbitration clause in a concededly binding contract applies to a particular type of controversy.
572 U.S. 25, 34 (2014) (quotation marks and citations omitted).On the other hand, courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration. These procedural matters include claims of waiver, delay, or a like defense to arbitrability. And they include the satisfaction of prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.
In G.T. Leach Builders II, the Supreme Court of Texas also recognized the distinction between questions of substantive arbitrability and questions of procedural arbitrability and addressed whether a dispute regarding a contractual deadline to demand arbitration was a matter of substantive or procedural arbitrability. 458 S.W.3d at 520. There, a property developer-Sapphire-sued several insurance brokers over a coverage dispute relating to a development on South Padre Island. Id. at 509. The insurance brokers brought a general contractor, G.T. Leach, and other parties into the suit as responsible third parties, after which Sapphire added them to the lawsuit as defendants. Id. The new parties were added after the two-year statute of limitations for a negligence claim had expired, but at the time, the law allowed a plaintiff to bring claims against a party designated as a responsible third party after the statute of limitations had run. Id. at 510. G.T. Leach moved to compel arbitration based on its contract with Sapphire, and the trial court denied the motion. Id. The parties' contract had required that
Id. at 515-16 (ellipsis in original).demand for arbitration shall be made within . . . a reasonable time after the Claim has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such Claim would be barred by the applicable statute of limitations as determined pursuant to Section 13.7.
In the court of appeals, Sapphire asserted that the motion to compel was properly denied because the parties' contract "prohibited the parties from seeking arbitration if the statute of limitations for the claims made had expired." G.T. Leach Builders, L.L.C. v. Sapphire, VP, LP, 456 S.W.3d 570, 577 (Tex. App-Corpus Christi 2013), aff'd in part, rev'd in part G.T. Leach Builders, LLC v. Sapphire VP, LP, 458 S.W.3d 502 (Tex. 2015) (G.T. Leach Builders I).
Sapphire pointed out that the statute of limitations had already expired when G.T. Leach filed its motion to compel arbitration. Id. at 578. G.T. Leach did not dispute that the statute of limitations for Sapphire's claims had expired when it filed its motion to compel arbitration but instead asserted that the parties did not intend for the statute of limitations to bar its demand for arbitration. Id. at 579. G.T. Leach asserted that because Section 13.7 of the contract-setting out the statute of limitations-had been deleted from the contract, the contract no longer prohibited arbitration of claims after the statute of limitations had expired. Id. at 578. G.T. Leach also asserted that, because Sapphire had filed suit against it after the statutory limitations period had expired (as permitted by the law at the time), it had been impossible for G.T. Leach to file its motion to compel arbitration before the statute of limitations expired. Id. at 579. G.T. Leach claimed that the intent of the parties was to allow for a reasonable time to demand arbitration even after limitations expired, as shown by the parties' deletion of Section 13.7. Id.
The court of appeals applied principles of contract construction to resolve the parties' dispute about the meaning and effect of the provision containing the deadline to demand arbitration. See id. The court rejected G.T. Leach's arguments and agreed with Sapphire's contractual interpretation that the demand was required to be made by the stated deadline (that is, by expiration of the statute of limitations for Sapphire's negligence claim) without exception. Id. The court concluded that the trial court had not abused its discretion when it denied G.T. Leach's motion to compel arbitration. Id.
The Supreme Court of Texas reversed, concluding that whether the deadline for demanding arbitration applied to G.T. Leach's arbitration demand was a matter of procedural arbitrability for the arbitrator, not the courts, to determine. See G.T. Leach Builders II, 458 S.W.3d at 521. The court wrote:
In this case, the contractual deadline in the general contract falls squarely within the category of matters that grow out of the dispute and bear on [the arbitrators'] final disposition of the claims. See Perry Homes [v. Cull], 258 S.W.3d [580,] 588 [(Tex. 2008)]. The deadline does not determine the present existence, enforceability, or scope of the agreement to arbitrate the parties' disputes, but instead imposes a procedural limit on the parties' rights under that agreement. It bears on the arbitrators' final disposition of Sapphire's claims-specifically, whether the arbitrators can award Sapphire a remedy on its negligence claims in light of Sapphire's more than two-year delay in asserting them. More pointedly, it involves an alleged "delay beyond a limitations deadline." Perry Homes, 258 S.W.3d at 589; see also id. at 588 (noting that "federal courts . . . consistently [defer to arbitrators] when waiver concerns limitations periods"). We explained in Perry Homes that, absent express contractual agreement to the contrary, issues of this nature must be resolved by arbitrators rather than courts. See id. at 588-89; see also BG Grp., 134 S.Ct. at 1207 (observing that "satisfaction of 'prerequisites such as time limits'" are questions of procedural arbitrability for the arbitrator to decide).
Id. at 521-22.Stated another way, the parties' dispute over the meaning and effect of the contractual deadline does not touch upon the issue of whether an enforceable agreement to arbitrate Sapphire's claims exists. Neither party disputes that such an agreement does exist. Instead, they dispute whether, in light of the contractual deadline, the existing, enforceable agreement limits G.T. Leach's rights under the agreement itself. . . .
Here, like in G.T. Leach, the statute-of-limitations deadline in the Arbitration Agreement's Notice of Claims Provision fits in the category of matters that grow out of the dispute and bears on the arbitrator's final disposition of the claims. See id. "The deadline does not determine the present existence, enforceability, or scope of the agreement to arbitrate the parties' disputes, but instead imposes a procedural limit on the parties' rights under that agreement." Id. It bears on the arbitrator's final disposition of Sanchez's claims-specifically, whether the arbitrator can award Sanchez a remedy for his negligence claims in light of the provision's language that, "[i]f notice is not timely received, such claim shall be barred." See id. Thus, the parties' dispute over the meaning and effect of the statute-of-limitations deadline in the Arbitration Agreement presents questions of procedural arbitrability, which both the United States Supreme Court and the Supreme Court of Texas have held are for the arbitrator, not the courts, to decide. See id. at 520; see also Gen. Warehousemen & Helpers Union Local 767 v. Albertson's Distribution, Inc., 331 F.3d 485, 488 (5th Cir. 2003) ("Questions of timeliness are ones of procedural, not substantive, arbitrability.").
The court clarified that it "[did] not hold that disputes over a contractual deadline in an arbitration agreement will always present questions of procedural arbitrability that arbitrators must decide." G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 522 (Tex. 2015). "If a party contends, for example, that a contractual deadline renders the agreement to arbitrate unconscionable or that the deadline operates to limit the scope of the claims the parties agreed to arbitrate, those contentions might raise issues of substantive arbitrability for the courts to decide." Id. Here, as in G.T. Leach, Sanchez "asserts no such contentions." See id.
Citing a "narrow exception" to the rule that arbitrators, not courts, decide questions of procedural arbitrability, Sanchez contends that the trial court did not abuse its discretion in deciding the question of procedural arbitrability regarding the statute-of-limitations deadline. See Amir v. Int'l Bank of Commerce, 419 S.W.3d 687, 692 (Tex. App.-Houston [1st Dist.] 2013, no pet.). The narrow exception cited by Sanchez has its origin in the United States Supreme Court's decision of John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964). There, the Supreme Court stated that when procedural arbitrability matters are at issue, "a court [can] deny arbitration only if it [can] confidently be said not only that a claim was strictly 'procedural' . . . but also that it should operate to bar arbitration altogether." Id. at 557-58 (emphasis added).
In Bonsmara Natural Beef Co., LLC v. Hart of Texas Cattle Feeders, LLC, the Supreme Court of Texas discussed and applied the John Wiley exception, as interpreted by the Fifth Circuit. 603 S.W.3d 385, 399 (Tex. 2020). The court recognized: "The Fifth Circuit has 'interpreted this rare exception to mean that a court will not order arbitration if 'no rational mind' could question [(1)] that the parties intended for a procedural provision to preclude arbitration and [(2)] that breach of the procedural requirement was clear." Id. (quoting Gen. Warehousemen, 331 F.3d at 488 (brackets and emphasis added in Bonsmara)). "If a rational mind could differ as to the resolution of the procedural question, the court leaves the issue of procedural compliance to the arbitrator." Perez v. Lemarroy, 592 F.Supp.2d 924, 937 (S.D. Tex. 2008) (citing Gen. Warehousemen, 331 F.3d at 488).
The Bonsmara court analyzed whether the two-prong John Wiley exception applied to a matter of procedural arbitrability involving the availability of an arbitral forum. 603 S.W.3d at 398-99. The court held that "the first prong [was] unmet." Id. at 399. The court stated, "[W]e cannot say no rational mind could question that the parties intended [the pertinent procedural provision] to preclude arbitration altogether if unmet." Id. Because the first prong of the exception had not been met, the court held that it "need not address the second [prong]." Id. at 400.
Relevant to the first prong of the John Wiley exception, Appellants assert that the Notice of Claims Provision was not intended to be "a procedural mechanism to preclude arbitration." To reiterate, the Notice of Claims Provision in the Arbitration Agreement requires:
All Disputes must be raised by a written notice of intent to arbitrate containing a statement setting forth the nature of the dispute, the amount involved, if any, and the remedy sought. The notice of intent to arbitrate must be received by the other party within any applicable statue [sic] of limitations period as if such claim were filed in court in the absence of this Arbitration Agreement. If notice is not timely received, such claim shall be barred. Notice must be sent by certified or registered mail, return receipt requested.
Written notice of intent to arbitrate by an employee must be forwarded to the Company's Human Resources Director. Written notice of intent to arbitrate by the Company must be forwarded to the employee's last known address, as provided by the employee to the Company.
Appellants argue that it is not reasonable to interpret this provision to bar a defending party's arbitration request on the basis that it failed to "raise" its opponent's claim in a notice of intent to arbitrate-which must contain specific information about the claim-before the expiration of the statute of limitations when the provision does not require the claimant to provide the defendant information about the claim in time for the defendant to meet the deadline. Appellants point out that they were not provided the type of information about Sanchez's claim required by the provision until they received Sanchez's original petition. The petition was filed on July 31, 2020, and alleged that Sanchez's injury occurred on August 1, 2018, indicating that it was filed the day before the statute-of-limitations deadline. Appellants contend that this demonstrates the unreasonableness of interpreting the provision to bar arbitration because a defending party may not know that a claim exists or know the claim's details in time to meet the deadline.
Appellants also contend that their contractual interpretation-that the Notice of Claims Provision was not intended to preclude arbitration-is supported by the provision's language barring the "claim," meaning Sanchez's claims, if the notice of intent to arbitrate is not provided before limitations expires. They emphasize that the provision does not state that arbitration will be barred as a consequence of non- compliance with the deadline. Appellants' argument suggests that the purpose of the Notice of Claims Provision is not to bar the defending party from enforcing its contractual right of arbitration if the provision's requirements are unmet but rather to provide an arbitral analogue to the process of filing a lawsuit in a judicial forum to initiate the prosecution of a claim.
Under Appellants' reading, the notice of intent to arbitrate serves as the functional equivalent of a state-court petition. See Tex. R. Civ. P. 22 ("A civil suit in the district or county court shall be commenced by a petition filed in the office of the clerk."). The type of information required to be included in the notice-such as the amount of the claim and the remedy sought-is analogous to the type of information included in a petition. See Hefley v. Sentry Ins. Co., 131 S.W.3d 63, 65 (Tex. App.-San Antonio 2003, pet. denied) ("The purpose of the plaintiff's petition is to inform the court and the defendant of what its contentions will be at trial . . . ."). And like a petition, the notice of intent to arbitrate is the procedural vehicle used to preserve the plaintiff's claims for limitations purposes. See Olson v. Success Motivation Inst., Inc., 528 S.W.2d 111, 113 (Tex. App.-Waco 1975, writ ref'd n.r.e.) ("The bringing of suit before the expiration of the statutory period interrupts the running of a statute of limitation."). Appellants contend it is no more reasonable to require them to initiate and preserve Sanchez's claims in the arbitral forum than it would be to require a defendant to file a petition to initiate and preserve a plaintiff's claims against a defendant in a judicial forum.
In response, Sanchez relies on the second sentence in the provision, which states that "[t]he notice of intent to arbitrate must be received by the other party within any applicable statue [sic] of limitations period as if such claim were filed in court in the absence of this Arbitration Agreement." He points out that the provision's requirements are mutual, applying to both parties. Sanchez contends that the provision constitutes a condition precedent for arbitration requiring Appellants to provide him a notice of intent to arbitrate his claims before limitations expire. Sanchez asserts that, because there is no factual dispute that Appellants did not provide him notice before limitations ran, the trial court properly denied the motion to compel.
To support his position, Sanchez cites Grand Texas Homes, Inc. v. Hill as being "directly on point." 02-07-00352-CV, 2008 WL 2168147 (Tex. App.-Fort Worth May 22, 2008, no pet.) (mem. op.). In Hill, the arbitration agreement required a demand for arbitration to be served on the opposing parties. See id. at *1-2. The appellant, Grand Homes, disputed whether the provision was a condition precedent for arbitration. Id. at *4. The court disagreed, concluding that, "under the plain language of the parties' agreement, a timely demand for arbitration was a condition precedent to the enforceability of the arbitration clause." Id.
Grand Homes also asserted that "it did not have the burden to initiate arbitration prior to the filing of the Hills' suit." Id. It argued that it was "the Hills' responsibility-as claimants-to initiate arbitration proceedings." Id. The court rejected that argument as well "because the plain language of the contract gives 'either party' the right to refer any claim or dispute to arbitration." Id. The court then held that Grand Homes had failed to serve its arbitration demand within 100 days of receiving notice of the claim from the Hills. Id. at *5. The court affirmed the trial court's denial of Grand Homes' motion to compel arbitration. Id. at *6.
We disagree with Sanchez that Hill is "directly on point" or that it negates Appellants' interpretation of the Notice of Claims Provision. The provision in Hill, governing when an arbitration demand must be served on the opposing party, differs from the Notice of Claims Provision here. In Hill, the 100-day deadline for serving an arbitration demand ran from the date that "notice of a claim or dispute is delivered by either party to the other party." Id. at *1. Thus, a party defending against a claim in Hill was not required to send an arbitration demand until after it had received notice of the other party's claim. See id. Here, the Notice of Claims Provision contains no comparable language. In this respect, the contrasting language in Hill supports Appellants' argument that the Notice of Claims Provision was not intended to preclude their arbitration demand as indicated by the lack of requirement for Sanchez to first provide them a notice of his claim.
Sanchez notes that Appellants had notice of his claim because he filled out two incident reports soon after he was injured. He also points out that his attorney sent a letter to Lupe Holdings in November 2018, notifying it of his July 2018 injury and warning that he would file suit if there was no response to the letter. Appellants counter that, even if they initially knew about the injury, they did not know with certainty that Sanchez would pursue a legal claim. With respect to the letter, Appellants point out that it did not provide the information required to be included in the notice of intent to arbitrate, such as the amount of Sanchez's claim. That information was first provided to Appellants in Sanchez's petition. And, regardless of whether the letter was received before limitations expired, the Notice of Claims Provision does not predicate the requirement of sending notice of intent to arbitrate on the receipt of information about the claim. Under Sanchez's interpretation of the provision, Appellants would still have been barred from demanding arbitration if they did so after limitations had run, even if Sanchez's attorney had not sent the letter regarding his claim and regardless of whether, as here, an arbitration demand was made in a suit filed on the eve of limitations. Appellants suggest that such a result highlights why Sanchez's construction of the provision is incorrect.
Sanchez also argues that the trial court was permitted to determine whether the Notice of Claims Provision barred arbitration because there is no factual dispute that Appellants did not provide a timely notice of intent to arbitrate. For support, he cites Burke v. Roberson, a case involving mediation as a condition precedent to arbitration. 01-19-00920-CV, 2020 WL 7391707 (Tex. App.-Houston [1st Dist.] Dec. 17, 2020, no pet.) (mem. op.). There, this Court held that whether the condition precedent of mediation had been satisfied or waived should have been determined by the trial court, not the arbitrator, because the facts were undisputed regarding whether the mediation requirement had been met or waived. Id. at *4. However, in Burke, there was no dispute that the condition precedent of mediation was intended to preclude arbitration if not met. See id. In other words, unlike here, there was no dispute regarding the first John Wiley prong. When facts pertinent to whether a condition precedent is met or waived are undisputed, those undisputed facts are relevant to the second John Wiley prong, not the first. See Bonsmara, 603 S.W.3d at 399 (recognizing that second prong pertains to whether there was clear breach of provision intended to preclude arbitration). Therefore, our holding in Burke is of limited instruction in this case.
Sanchez also cites Amir v. International Bank of Commerce in which this Court recognized that there is a "narrow exception" when a court, rather than the arbitrator, may decide issues of procedural arbitrability. 419 S.W.3d 687, 692 (Tex. App.- Houston [1st Dist.] 2013, no pet.). Unlike here, the appellants in Amir did not dispute that the trial court, rather than the arbitrator, could determine a timeliness issue under the facts of that case. Instead, the parties disputed whether the appellants' motion to compel arbitration functioned as a notice of intent to arbitrate. Id.
Given the parties' arguments as discussed-and reading the provision as a whole-it is in no way clear that the parties intended the Notice of Claims Provision to function as a bar to arbitration rather than as a procedural mechanism to initiate and preserve a party's claims within the arbitral forum. In other words, we cannot say that no rational mind could question that the parties' intended the provision to preclude arbitration altogether if unmet. See Bonsmara, 603 S.W.3d at 399. Thus, the first prong of the John Wiley exception is not satisfied. See id. (recognizing that first prong of exception is whether parties intended for procedural provision to preclude arbitration). Because the first John Wiley prong is not met here, we need not address the second. See id.
In sum, we hold that whether the statute-of-limitations deadline in the Notice of Claims Provision bars Appellants' arbitration demand is a matter of procedural arbitrability for the arbitrator to decide. See G.T. Leach Builders II, 458 S.W.3d at 522. As in G.T. Leach, here, the parties dispute the meaning and the effect of a contractual, statute-of-limitations deadline, a dispute that must be resolved by the arbitrator. See id. We further hold that the rare John Wiley exception, permitting a court to determine a question of procedural arbitrability, does not apply here. See Bonsmara, 603 S.W.3d at 399. Accordingly, we hold that the trial court abused its discretion when it denied Appellants' motion to compel on the basis that Appellants had not complied with the Notice of Claims Provision by failing to timely invoke arbitration. If, on remand, the trial court maintains its determination that "the arbitration agreement is binding upon the parties" and answers any issues that may be pending-such as whether Sanchez's claims are within the agreement's scope or whether the agreement is unconscionable-in Appellants' favor, then the question of whether Appellants made a timely demand for arbitration will be a matter of procedural arbitrability for the arbitrator to determine. See G.T. Leach Builders II, 458 S.W.3d at 523.
We sustain Appellants' three issues.
Conclusion
We reverse the trial court's June 9, 2021 order denying Appellants' motion to stay judicial proceedings and compel arbitration. We remand the case to the trial court for further proceedings consistent with this opinion.