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Presta v. Omni Hotels Managemnt Corp.

United States District Court, S.D. Texas, Houston Division

July 18, 2017

LIA PRESTA, Plaintiff,



         Pending before the Court in this disability and age discrimination action is Defendant Omni Hotels Management Corporation's (“Defendant” or “Omni”) “Motion to Dismiss, or, in the Alternative, Motion to Compel Arbitration and Stay Litigation” (collectively, the “Omni Motion”) [Doc. # 10]. Also pending is Plaintiff Lia Presta's (“Presta” or “Plaintiff”) “Motion for Partial Summary Judgment” [Doc. # 11]. The Motions are fully briefed[1] and are ripe for determination. Having carefully considered the parties' briefs, all matters of record, and the applicable legal authorities, the Court grants Presta's Motion for Partial Summary Judgment [Doc. # 11] and denies the Omni Motion [Doc. # 10].

         I. BACKGROUND

The following facts are gleaned from Presta's First Amended Complaint [Doc. # 3] and the undisputed matters of record. Presta, born in 1928, worked for a hotel located at Four Riverway in Houston, Texas, for approximately thirty-five years, including as a seamstress and in the laundry and housekeeping departments.[2] Omni alleges that it assumed management of the hotel in February 1995.[3] On February 6, 2014, during the course of her employment, Presta signed a “Summary of the Amended and Restated Alternative Dispute Resolution Program, ” thereby affirming her acceptance of and participation in Omni's Dispute Resolution Program (“Program”).[4] Presta's acceptance of the Program also constituted acceptance of a “Mutual Agreement to Arbitrate Claims on an Individual Basis” (“Arbitration Agreement”), which mandates arbitration as a condition of employment for any disputes “arising out of [an employee's] application with, employment with, or termination from, [Omni].”[5] The Arbitration Agreement is governed by the Federal Arbitration Act[6] and covers, among other things, “claims for discrimination, harassment or retaliation of any kind[.]”[7] Section 16.3 of the Arbitration Agreement, the so-called “savings clause, ” provides for revocation or modification of the Agreement as follows:

This program can be modified or revoked in writing only by the Company's corporate general counsel or vice president of human resources. Such modification or revocation will only take place with 14 days' notice to the Associates. Further, any modification or revocation will not apply to any claim that has already been submitted under this Program.[8]

         Omni temporarily closed the hotel in May or June of 2015 to repair flood damage and informed all employees not to report to work until Omni was able to assess the damage.[9] Presta alleges that Omni never allowed her to return to work and rejected her attempts to return.[10] According to Presta, Omni allowed other, younger employees to return to work.[11] Subsequently, on July 20, 2016, Presta filed a charge of discrimination based on age and disability with the Equal Employment Opportunity Commission (“EEOC”) and the Texas Workforce Commission (“TWC”).[12] Presta asserts, and Omni does not deny, that during the course of the EEOC's investigation the EEOC contacted Omni regarding the dispute, and Omni responded in its defense.[13] Plaintiff received right-to-sue notices from the EEOC and TWC on February 28, 2017, and April 10, 2017, respectively.[14]

         Having exhausted her administrative remedies, Presta filed her original complaint in federal court on March 24, 2017, and an amended complaint on April, 13, 2017, [15] alleging violations of the Age Discrimination in Employment Act, the Americans with Disabilities Act of 1990, as amended, and Chapter 21 of the Texas Labor Code or the Texas Commission on Human Rights Act.[16] Specifically, Presta alleges that Omni discriminated against her based on her disability or perceived disability, failed to accommodate her for her disability to the extent she has one, and discriminated against her based on her age.[17]

         Omni contends that Presta's claims are subject to the Omni Hotels Dispute Resolution Program and the mandatory arbitration provided thereunder. Presta contends that the Arbitration Agreement is unenforceable because it is illusory, unconscionable, and because there was no mutual assent.[18] The parties' Motions address the enforceability of the Arbitration Agreement and are ripe for disposition.


         A. Motion to Compel Arbitration

         Section 3 of the Federal Arbitration Act provides that, where claims in a lawsuit are properly referable to arbitration, the Court “shall” stay the trial of a lawsuit until the arbitration is complete. See 9 U.S.C. § 3; E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 289 (2002). Evaluating a motion to compel arbitration requires determining “(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.” Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 2007) (internal quotation marks omitted). The federal policy favoring arbitration, however, “does not apply to the determination of whether there is a valid agreement to arbitrate between the parties.” Morrison v. Amway Corp., 517 F.3d 248, 254 (5th Cir. 2008). “Instead, ‘to determine whether an agreement to arbitrate is valid, courts apply ordinary state-law principles that govern the formation of contracts.'” Nelson v. Watch House Int'l, L.L.C., 815 F.3d 190, 193 (5th Cir. 2016) (citing Carey, 669 F.3d at 205).

         The Court may dismiss a lawsuit “when all of the issues raised in the district court must be submitted to arbitration.” Adam Techs. Int'l, S.A. de C.V. v. Sutherland Global Servs., Inc., 729 F.3d 443, 447 n.1 (5th Cir. 2013) (quoting Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (holding district court has discretion to dismiss case where all issues are referred to arbitration)); see also Armstrong v. Assocs. Int'l Holdings Corp., 242 F.App'x 955, 959 (5th Cir. 2007) (noting that the Fifth Circuit “encourages district courts to dismiss cases with nothing but arbitrable issues because staying the action serves no purpose”); Grether v. South Point Pontiac/Cadillac, 2014 WL 1350907, *3 (W.D. Tex. Apr. 3, 2014).

         B. Motion for Summary Judgment

         Rule 56 of the Federal Rules of Civil Procedure mandates the entry of summary judgment against a party who fails to make a sufficient showing of the existence of an element essential to the party's case for which that party will bear the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); see also Baton Rouge Oil and Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, 375 (5th Cir. 2002). In deciding a motion for summary judgment, the Court must determine whether the movant has shown “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp., 477 U.S. at 322-23; Rodgers v. United States, 843 F.3d 181, 190 (5th Cir. 2016); Weaver v. CCA Indus., Inc., 529 F.3d 335, 339 (5th Cir. 2008).

         Where the movant bears the burden of proof at trial on the issues at hand, as is the case here, it “bears the initial responsibility of demonstrating the absence of a genuine issue of material fact with respect to those issues.” Transamerica Ins. Co. v. Avenell, 66 F.3d 715, 718 (5th Cir. 1995); see also Brandon v. Sage Corp., 808 F.3d 266, 269-70 (5th Cir. 2015); Lincoln Gen. Ins. Co. v. Reyna, 401 F.3d 347, 349 (5th Cir. 2005). If the moving party fails to meet its initial burden, the motion for summary judgment must be denied, regardless of the non-movant's response. ExxonMobil Corp., 289 F.3d at 375.

         If the moving party meets its initial burden, the non-movant must go beyond the pleadings and designate specific facts showing that there is a genuine issue of material fact for trial. Brandon, 808 F.3d at 270; Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir. 2001). “A fact issue is ‘material' if its resolution could affect the outcome of the action.” Hemphill v. State Farm Mut. Auto. Ins. Co., 805 F.3d 535, 538 (5th Cir. 2015); DIRECT TV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 2006). Summary judgment “will not lie . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Hyatt v. Thomas, 843 F.3d 172, 177 (5th Cir. 2016).

         III. ANALYSIS

         The parties' pending Motions turn on the validity of the Arbitration Agreement. Omni maintains that the Arbitration Agreement is valid and enforceable and therefore moves to compel arbitration and to dismiss this suit or stay the litigation.[19] Presta contends that the Arbitration Agreement is unenforceable for the following three reasons: (1) the promise to arbitrate is illusory because the Arbitration Agreement allows Omni to unilaterally modify or revoke the agreement before an arbitration claim is filed; (2) the Arbitration Agreement is unconscionable because it imposes limitations designed to prevent employees from vindicating their rights; and (3) there was no mutual assent because Plaintiff did not understand the Arbitration Agreement when she signed it.[20] The Court finds the Arbitration Agreement illusory as to this dispute for the reasons explained below, and thus does not reach Presta's additional arguments.

         A. Standard for Whether an Arbitration Agreement is Illusory

         The Arbitration Agreement must be valid and enforceable in order for this Court to consider compelling arbitration. Under Texas law, agreements to arbitrate must be supported by consideration. Lizalde v. Vista Quality Markets, 746 F.3d 222, 225 (5th Cir. 2014); Nelson, 815 F.3d at 193 (citing Lizalde, 746 F.3d at 225). If a “purported bilateral contract is supported only by illusory promises, there is no contract.” Lizalde, 746 F.3d at 225 (quoting Mendivil v. Zanios Foods, Inc., 357 S.W.3d 827, 832 (Tex. App. - El Paso 2012)). An arbitration agreement is illusory “[w]here one party has the unrestrained unilateral authority to terminate its obligation to arbitrate.” Lizalde, 746 F.3d at 225. See Nelson, 815 F.3d at 193 (quoting Lizalde, 746 F.3d at 225); see also In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (“An arbitration clause is not illusory unless one party can avoid its promise to arbitrate by amending the provision or terminating it altogether.”).

         An arbitration agreement that allows one party to modify or terminate the agreement, however, does not automatically render the agreement illusory. See Lizalde, 746 F.3d at 226. In the seminal Texas case, In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002), the Texas Supreme Court held that an employee's arbitration agreement was not illusory because “Halliburton [could not] avoid its promise to arbitrate by amending the provision or terminating it all together.” Id. at 570. Although the Halliburton agreement allowed the employer to modify or terminate certain provisions, the agreement also included a savings clause providing that (1) “no amendment shall apply to a Dispute of which the Sponsor had actual notice on the date of amendment[]” and (2) “termination shall not be effective until 10 days after reasonable notice is given to Employees or as to Disputes which arose prior to the date of termination.” Id. at 569-70. “Because of these two provisions, the Texas Supreme Court held that the employer could not ‘avoid its promise to arbitrate by amending or terminating [the arbitration agreement] altogether.'” Nelson, 815 F.3d at 193 (quoting Carey, 669 F.3d at 206); see also In re 24R, Inc., 324 S.W.3d at 567 (explaining that the Halliburton court “held that because the [arbitration agreement] contained a ‘savings clause'- including a ten-day notice provision and a provision that any amendments would only apply prospectively-that prevented the employer from avoiding its promise, the arbitration agreement was not illusory” (citing Halliburton, 80 S.W.3d at 570)).

         In Lizalde v. Vista Quality Markets, the Fifth Circuit presented a three-part test to determine whether a “Halliburton-type savings clause sufficiently restrains an employer's unilateral right to terminate its obligation to arbitrate.” See Nelson, 815 F.3d at 193-94. “[R]etaining termination power does not make an agreement illusory so long as that power (1) extends only to prospective claims, (2) applies equally to both the employer's and employee's claims, and (3) so long as advanced notice to the employee is required before termination is effective.” Id. at 194 (quoting Lizalde, 746 F.3d at 226). “Though the Texas Supreme Court has not yet had the occasion to discuss Lizalde's three-part formulation, numerous decisions from Texas' intermediate appellate courts suggest that Lizalde appropriately tracked Halliburton and its progeny.” Id. (citing Temp. Alts., Inc. v. Jamrowski, 511 S.W.3d 64, 68-70 (Tex. App.-El Paso 2014)); see Henry & Sons Construction Co. v. Campos, 510 S.W.3d 689, 695 (Tex. App.- Corpus Christi-Edinburg 2016) (“We believe that ...

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