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Three Recent Texas Appellate Cases Examine the Standard for Obtaining Limited Discovery on the Enforceability of an Employment Injury Arbitration Agreement

On Behalf of | May 8, 2013 | Firm News

In this recent case, Maria Figueroa sued her employer VNA in state court for negligence due to an on-the-job injury. In re VNA, Inc., 2013 WL 1776079 (Tex. App.-El Paso 2013, no. pet. h.) VNA moved to compel arbitration on the basis of an agreement between Figueroa and VNA that employee injury claims would be arbitrated. Figueroa requested limited discovery on the enforceability of the arbitration agreement.

At the hearing for VNA’s motion to compel arbitration, Figueroa provided an affidavit that (1) she was unaware she signed the agreement and (2) she was not told of the consequences of signing the agreement by VNA. Figueroa argued this was substantively unconscionable. Figueroa requested limited discovery regarding the enforceability of the arbitration agreement.

Figueroa convinced the trial court to order preliminary discovery from VNA solely on the enforceability of the arbitration agreement. The trial court allowed Figueroa to depose a VNA representative on the enforceability of the arbitration agreement, and specifically held that it was not ruling on the Motion to Compel arbitration until after the discovery was taken.

VNA sought mandamus relief from the trial court’s order permitting discovery.[1] The Appellate Court granted mandamus, finding that Figueroa failed to provide reasonable evidence that discovery would materially aid her in establishing her defense to the validity of the arbitration agreement.

The Appellate Court analyzed Figueroa’s trial court affidavit and found it made the following key claims:

· ‘No one at VNA ever explained the Injury Benefit Plan. I first became aware of the injury plan when the lawyer explained it to me.’

· ‘I do not remember ever signing an arbitration agreement nor did I understand that my work related injuries were subject to an arbitration agreement.’

The Appellate Court interpreted Figueroa’s affidavit as a claim of fraudulent inducement, although Figueroa never made that characterization. Once the Appellate Court made this interpretation, it found that “mere assertion that a defendant did not explain an arbitration agreement do[es] not constitute evidence of fraud.” Id. at 3. The Appellate Court further held that the party opposing arbitration bears the burden to “show or provide a colorable basis or reason to believe that pre-arbitration discovery is necessary before it may be ordered.” Id.

What Does This Case Mean?

This case holds that a party opposing arbitration and requesting limited discovery on the issue of the enforceability of the arbitration agreement must provide more than conclusory statements that they were fraudulently induced into signing an on-the-job injury arbitration agreement.

Because Texas law favors arbitration, the evidentiary burden for the opponent of arbitration requires more than just face-value assertions.[2] The opponent’s evidence must provide specific details of how the employee was misled or how fraud was committed before that limited discovery can be granted.

[1] VNA also sought an interlocutory appeal contemporaneously with its writ of mandamus. VNA, Inc. v. Figueroa, 2013 WL 1776071 (Tex. App.-El Paso 2013, no. pet. h.) However, the interlocutory appeal was denied due to lack of jurisdiction, “because the trial court did not rule on the merits of VNA’s motion to compel arbitration, but rather postponed the ruling.” Id. at 1. Under Tex. Civ .Prac. & Rem. Code Ann. §51.016, interlocutory appeals are only proper when the merits of a motion are ruled upon.

[2] See Also In re ReadyOne Indus., Inc., 2012 WL 6643692 (Tex. App.-El Paso 2012, no pet.)


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