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Xerox Commerical Solutions, LLC v. Segura

Court of Appeals of Texas, Eighth District, El Paso

July 30, 2019

XEROX COMMERICAL SOLUTIONS, LLC, Appellant,
v.
VICTOR SEGURA, Appellee.

          Appeal from 448th District Court of El Paso County, Texas (TC # 2016DCV4236)

          Before McClure, C.J., Rodriguez, and Palafox, JJ.

          OPINION

          ANN CRAWFORD MCCLURE, CHIEF JUSTICE

         Victor Segura filed an employment discrimination lawsuit suit against Xerox Commercial Solutions, LLC. But on the eve of a hearing on Xerox's motion to compel arbitration, he filed a nonsuit. The parties then tussled for a time over who would arbitrate their disputes. When an arbitrator was eventually agreed upon, Xerox prevailed in the arbitration based on the procedural defense that the arbitration was not timely initiated.

         Then, the district court allowed Segura to withdraw the nonsuit. Segura also filed a motion vacate the arbitration decision claiming that the arbitrator (1) failed to disclose a conflict-of-interest, and (2) committed misconduct by failing to hear evidence pertinent and material to the controversy. Conversely, Xerox asked the trial court to confirm the award. The trial court sided with Segura. Xerox now appeals the order to set aside the arbitrator's decision and the order refusing to confirm the arbitrator's decision.

         We conclude that none of the grounds raised by Segura below support vacatur of the arbitration award. Accordingly, we reverse the trial court's order and remand with instructions to confirm the arbitrator's final award.

         BACKGROUND

         This case arises out of a corporate downsizing. Victor Segura started with Xerox as a trainer in October 2009, but on March 18, 2016, he was laid off due to a reduction in force.[1] He believed, however, that younger trainers with less seniority were not laid off. He also believed that during his employment tenure other younger trainers were given a pay raise, when he was not. Unhappy with this state of affairs, Segura initiated an age discrimination claim.

         The Administrative Claim and Lawsuit

         Segura first timely filed an administrative charge of discrimination with the EEOC and Texas Workforce Commission Civil Rights Division. The EEOC issued a Notice of Right to Sue letter on November 3, 2016. On November 14, 2016, Segura timely filed suit against Xerox in the 448th District Court for El Paso County, alleging age discrimination under the Texas Labor Code. Xerox filed its answer on January 6, 2017 and asserted that Segura's claims were subject to binding arbitration. On the same day, Xerox filed a motion to compel arbitration, dismiss the lawsuit, or alternatively to stay the proceedings pending arbitration. The pleading set out Xerox's "Dispute Resolution Procedure" (DRP) which requires that "[a]ll Disputes not [informally] resolved by the Parties shall be finally and conclusively resolved through arbitration under this DRP, instead of through trial before a court (including a jury trial)." The term "Dispute" under the DRP is broadly defined and expressly includes age discrimination claims. The DRP provides: "[u]nless otherwise required by law, proceedings under the DRP shall be the exclusive method by which Disputes are resolved. Arbitration under the DRP shall be final and binding, subject only to review as provided for in the [Federal Arbitration Act]."

         Segura contested the motion to compel arbitration. He claimed that he never agreed to the DRP and that Xerox had thus failed to establish the existence of an agreement to arbitrate. Conversely, Xerox claimed that Segura agreed to the arbitration provisions on three separate occasions.[2] The motion to compel arbitration was set for an evidentiary hearing on May 9, 2017. Xerox subpoenaed Segura and disclosed the names of four other witnesses it intended to call at the hearing.

         But on May 5, 2017--four days before the hearing--Segura filed a nonsuit without prejudice. The notice of nonsuit recites that Segura had submitted his "legal claims" to arbitration with arbitrator William Hardie of Hardie Mediation. Xerox, however, promptly notified Segura's counsel that it objected to William Hardie arbitrating the case. It claimed that the DRP incorporated its own set of rules that required any arbitration be conducted by either the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Services (JAMS). When Hardie Mediation billed for its anticipated services in late May, Xerox declined to pay the bill and again stated that any arbitration under the DRP must proceed before AAA or JAMS. Segura's counsel then corresponded with Hardie on May 31, 2017 asking him to construe the DRP and decide if AAA or JAMS are the only designated arbitrators. On two other occasions, Xerox's counsel disclaimed any intent to use Hardie Mediation for the arbitration. Finally, on August 14, 2017, William Hardie informed the parties that a court of competent jurisdiction needed to resolve whether Segura had waived his right to a jury trial, whether AAA or JAMS must arbitrate the case, or if not, who the court would appoint. Two days later (August 16, 2017), Segura submitted the matter to JAMS for arbitration.

         The Arbitration

         JAMS arbitrator Jerry Grissom heard the case. The DRP allows for an arbitration motion practice governed by the Federal Rules of Civil Procedure. In the arbitration, Xerox filed a Fed.R.Civ.P. 12(b)(6) motion to dismiss the claim, arguing that Segura's eventual request for arbitration with JAMS was untimely. To explain the argument, we briefly digress to set out the terms of the DRP regarding when arbitration must be requested.

         The DRP came with its own set of rules, labeled appropriately enough, Dispute Resolution Rules. Under the rules, either party could initiate arbitration "at any time" but subject to any defenses, timeliness of the claim, and specifically Dispute Resolution Rule 34 (titled "Limitations"). Rule 34 requires that a party must initiate "arbitration proceedings . . . within the time allowed by applicable law for the filing of a judicial complaint [and the] [f]ailure to do so will bar the claim." But Rule 34 also makes allowance for when a party has first initiated a judicial proceeding rather than proceeding directly to arbitration under the DRP. In that case, the deadline for initiating arbitration is the later of: (1) ninety days after the date a party is ordered by the court to arbitration (or disposition of an appeal of that order); (2) ninety days after the date the parties agree to submit the dispute to arbitration under the DRP; or (3) the remaining time allowed by the applicable law for filing a complaint in a court of competent jurisdiction. A party initiates arbitration by notifying either AAA or JAMS of the dispute and tendering a $50 fee, or the employee could serve a written request on a plan administrator who would then contact AAA or JAMS.

         In its 12(b)(6) motion to dismiss, Xerox argued that by law Segura had sixty days following the receipt of the EEOC's Notice of Right to Sue to file suit under Tex.Labor Code Ann.§ 21.254. ("Within 60 days after the date a notice of the right to file a civil action is received, the complainant may bring a civil action against the respondent."). Segura of course did file suit within that time-period, but Xerox claimed the act of later nonsuiting the litigation effectively wiped the slate clean such that the arbitrator must treat the lawsuit as if it was never filed. Xerox cited several cases supporting that proposition, such as Bailey v. Gardner where the court upheld the dismissal of a suit on statute of limitation grounds when the plaintiff nonsuited and then refiled his case out of time. 154 S.W.3d 917, 920 (Tex.App.--Dallas 2005, no pet.)("Thus, Bailey's voluntary nonsuit is treated as though the first lawsuit had never been filed."); see also Armstrong v. Ablon, 686 S.W.2d 194, 196 (Tex.App.--Dallas 1984, no pet.)(treating dismissal for discovery abuse the same as a dismissal for want of prosecution "with the result that limitations ran as if the suit had never been filed."); Irwin v. Basham, 507 S.W.2d 621, 625 (Tex.Civ.App.--Dallas 1974, writ refd n.r.e.)(collecting case for the "general rule" that "a suit voluntarily abandoned does not interrupt the statute of limitations"). Applying this reasoning, Xerox contended that a request for arbitration must have been made sixty days from November 3, 2016 (the date of the right to sue letter) and the eventual request on August 16, 2017 was therefore late.

         Alternatively, Xerox argued that even if the deadline was defined under the Rule 34 alternatives triggered by the filing of the suit, the request for arbitration was still late. If Segura was allotted ninety days from the date of the May 5, 2017 nonsuit--assuming that to be the date he "agreed" to arbitrate--he did not initiate arbitration with JAMS until August 16, 2017, which was some 100 days later. The attempt to set up an arbitration with William Hardie (who is neither with JAMS or AAA) was not arbitration "under the DRP" and thus was of no effect.

         Segura filed a response to the Rule 12(b)(6) motion and advanced four substantive counterarguments: (1) the limitations portions of DRP are unenforceable; (2) Xerox was estopped from enforcing the limitations clause because it persistently demanded arbitration; (3) the August 16, 2017 filing for the arbitration with JAMS relates back to date the lawsuit was timely filed; and (4) there was no substantial or material failure to comply with the agreement, and thus no prejudice to Xerox.

         On June 5, 2018, the arbitrator issued a thirteen-page order that agreed with Xerox. The crux of the opinion states that Segura "did not directly address or contest [Xerox's] argument and supporting authority that [Segura's] voluntary dismissal of his lawsuit resulted in his claim being barred by limitations." The arbitrator then addressed each of Segura's other arguments. Segura had first argued that an arbitration agreement cannot eliminate a party's substantive rights, such as shortening a limitations period. See In re Poly-America, L.P., 262 S.W.3d 337, 352 (Tex. 2008) (provisions of arbitration agreement that negated retaliatory-discharge claim were void and would be severed from agreement); Long v. BDP International, Inc., 919 F.Supp.2d 832, 845 (S.D. Tex. 2013)(contractually imposed one-year limitation period for FLSA violations, which statutorily have either a two or three year limitations period, was unconscionable). The arbitrator reasoned, however, that Xerox was not shortening any limitations period. Segura had 60 days to file suit following the right to sue letter, which would similarly operate as a 60-day deadline to initiate arbitration. Because Segura nonsuited his lawsuit, however, it was as if the suit had never been filed, and the deadline to initiate arbitration was not met.

         Second, Segura urged a "relations-back" theory supported by analogy to Fed.R.Civ.P. 15 (c)(1)(B)("An amendment to a pleading relates back to the date of the original pleading when . . . the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out--or attempted to be set out--in the original pleading .....). The arbitrator rejected that argument, however, because following the nonsuit, there was no live operative original pleading to which the "amendment" could relate back to.

         Third, Segura argued that Xerox was estopped to seek the dismissal of the arbitration that it filed a motion to compel and which it persistently sought to enforce. The arbitrator rejected that argument because Xerox consistently sought arbitration pursuant to the terms of the DRP, and it was objecting to a delay caused by Segura first contesting arbitration, and then pursuing arbitration with a non-approved arbitrator. Arbitrator Grissom concluded that "[t]here is nothing inconsistent about [Xerox] efforts to enforce its contract rights to have the dispute arbitrated in a forum authorized by the parties' arbitration agreement and to assert its affirmative defenses of limitations and timeliness of claims in that forum." Finally, the arbitrator rejected Segura's substantial compliance/no prejudice argument based on the wording of the DRP. The arbitrator distinguished the authority that Segura had cited and concluded that a substantial compliance argument was inconsistent with the defined limitations period, particularly when the DRP explicitly states failure to comply with the limitations period "will bar the claim."

         Segura Moves to ...


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