United States District Court, W.D. Texas, Austin Division
OLIVER STREET DERMATOLOGY, LLC, D/B/A U.S. DERMATOLOGY PARTNERS, PLAINTIFF,
DAN CREGER, DEFENDANT.
MEMORANDUM OPINION AND ORDER
YEAKEL UNITED STATES DISTRICT JUDGE
the court are Defendant/Counter-Plaintiff Creger's Motion
to Compel Arbitration and Motion to Dismiss filed October 26,
2017 (Clerk's Doc. No. 20), Plaintiffs Response to
Defendant's Motion to Compel Arbitration and Motion to
Dismiss filed November 2, 2017 (Clerk's Doc. No. 22),
Defendant/Counter-Plaintiff Creger's Reply to Oliver
Street's Motion to Compel Response filed November 16,
2017 (Clerk's Doc. No. 24), Defendant/Counter-Plaintiff
Creger's Motion for Protective order filed October 31,
2017 (Clerk's Doc. No. 21), Motion for Leave to Serve
Additional Discovery on Issues of Agency, Authority and
Estoppel Raised by Reply to Response to Motion to Compel and
Motion for Leave to File Sur-Reply filed December 8, 2017
(Clerk's Doc. No. 31), Defendant/Counter-Plaintiff
Creger's Response to Oliver Street's Motion for Leave
to File Supplemental Discovery Requests filed December 15,
2017 (Clerk's Doc. No. 33), and Reply to Response to
Motions for Leave to Serve Additional Discovery and Motion
for Leave to File Sur-Reply filed December 18, 2017
(Clerk's Doc. No. 36).
considered the motions, responses, replies, and applicable
law, the court concludes that the parties' Rule 11
agreement is unenforceable because it was not filed with the
court. The arbitration clause in Oliver Street
Dermatology's employee handbook is also unenforceable,
and Creger's motion to compel arbitration will be denied.
For these reasons, Oliver Street Dermatology's motion to
serve additional discovery will be denied, because further
discovery on issues of agency, authority, and estoppel is
April 14, 2017, Oliver Street Dermatology ("Oliver
Street") filed a declaratory-judgment suit in state
court to resolve a contract dispute between it and Creger.
Creger's attorney informed Oliver Street on April 25,
2017, that he intended to remove the case to the United
States District Court for the Western District of Texas. On
May 16, 2017, the attorney told Oliver Street that he changed
his mind and wished to remove the case to the Northern
District of Texas.
25, 2017, the parties agreed that Oliver Street would nonsuit
the state litigation and refile in the Western District of
Texas. Both parties now refer to this arrangement as a Rule
11 agreement under the Texas Rules of Civil Procedure.
See Tex. R. Civ. P. 11. In accordance with the
agreement, Oliver Street filed this suit on June 2, 2017.
Creger then filed a motion to compel arbitration on October
26, 2017, arguing that the arbitration clause in Oliver
Street's employee handbook should be enforced. The
relevant clause reads:
As a condition of employment, [Oliver Street] and its
employees agree to submit all disputes and claims arising
from an employee's tenure with [Oliver Street] to binding
arbitration under the rules of the American Arbitration
Street argues that this clause is an unenforceable illusory
promise, because the employee handbook also states that
Oliver Street "reserves the right to rescind, modify or
deviate from these and other policies, practices and
guidelines at its sole discretion . . . with or without
notice." Oliver Street additionally claims that it
detrimentally relied on Creger's promise to litigate in
federal court. Creger responds that the agreement to litigate
in federal court is unenforceable under Texas Rule of Civil
Procedure 11, because the agreement was not filed with a
court, as required by the rule. See Tex. R. Civ. P.
11 ("[N]o agreement between attorneys or parties
touching any suit pending will be enforced unless it be in
writing, signed and filed with the papers as part of the
record, or unless it be made in open court and entered of
record."). Creger also claims that estoppel should apply
to compel arbitration since he detrimentally relied on Oliver
Street's agreement to arbitrate employment disputes.
the "Rule 11 agreement" nor the arbitration clause
is enforceable. Promissory estoppel does not apply in either
party's favor-a contrary decision would allow one party
to renege on its own representations, thus creating
injustice. The parties are will be left to litigate their
dispute unimpeded by their prior arrangements.
diversity cases such as this, "substantive law ... is
established by the usual principles of conflict of laws, but
procedural rules are the rules of the forum." Condit
Chem. & Grain Co. v. Helena Chem. Corp., 789 F.2d
1101, 1102 (5th Cir. 1986); see Erie R. Co. v.
Tompkins, 304 U.S. 64, 78 (1938) (state law applies
except when issue is governed by federal law). The court must
therefore determine whether Texas Rule of Civil Procedure 11
or a Federal Rule of Civil Procedure applies to the
parties' agreement to litigate in federal court. This
analysis turns on whether the Texas rule is substantive or
Rule of Civil Procedure 11 states the following:
Unless otherwise provided in these rules, no agreement
between attorneys or parties touching any suit pending will
be enforced unless it be in writing, signed and filed with
the papers as part of the record, or unless it be made in
open court and entered of record.
Tex. R. Civ. P. 11. The Fifth Circuit has likened the rule to
the parol-evidence rule. ConditChem. &
Grain Co., 789 F.2d at 1102. The parol-evidence rule,
though labeled a rule of evidence, is a rule of substance.
Id. (citing Restatement (Second) of Conflict of Laws
§ 140 (Am. Law Inst. 1971); 3 Corbin, Contracts §
573 (rev'd ed. 1960); 16 American Jurisprudence, Conflict
of Laws § 132 (2d ed. 2018)). Likewise, the Texas rule
is substantive despite its label. Id. This court
therefore looks to Texas law, not the Federal Rules of Civil