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In re Labatt Food Service, L.P., Relator
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On Petition for Writ of Mandamus
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Justice Johnson delivered the opinion of the Court.
Under
I. Background
Labatt Food Service, L.P. does not provide workers’ compensation insurance to cover its employees in the event of on-the-job injuries. Rather, it provides an “occupational injury plan” (the plan) under which its employees may elect to participate. To become participants in the plan, employees sign an agreement entitled “Election of Comprehensive Benefits, Indemnity, and Arbitration Agreement.” The agreement contains several numbered paragraphs. Of primary relevance to this proceeding are three of those paragraphs. Paragraph three provides that the employee elects to be covered under the plan “individually and on behalf of heirs and beneficiaries.” Paragraph three also provides that the employee will indemnify Labatt from claims and suits based on injury to or death of the employee from occupational causes, except for claims filed pursuant to the plan. Paragraph four consists of an arbitration clause providing that disputes related to either the agreement, the plan, or to an employee’s occupational injury or death must be submitted to binding arbitration pursuant to the Federal Arbitration Act (FAA). See 9 U.S.C. §§ 1-16. Paragraph eight provides for the severability of any invalid provision.
Carlos Dancy, Jr., an employee of Labatt, elected to participate in the plan and signed an agreement. Dancy later died from an apparent asthma attack that occurred while he was working. His parents and children filed a wrongful death action against Labatt. Labatt responded by filing a motion to compel arbitration in which it asserted the arbitration agreement bound the wrongful death beneficiaries. The beneficiaries argued they were not bound by Dancy’s arbitration agreement for two reasons: (1) they were not signatories to the agreement, and (2) the entire agreement was void because the indemnity clause was a pre-injury waiver in violation of Texas Labor Code section 406.033(e).
The trial court denied Labatt’s motion without stating its reasons. The court of appeals denied mandamus relief. Labatt now seeks mandamus relief from this Court.
II. Are the Beneficiaries Bound to Arbitrate?
A. Standard of Review
A party denied the right to
arbitrate pursuant to an agreement subject to the FAA does not have an adequate
remedy by appeal and is entitled to mandamus relief to correct a clear abuse of
discretion. In re L & L Kempwood
Assocs., L.P., 9 S.W.3d 125, 128 (
B. Governing Law
Under the FAA, whether an
arbitration agreement binds a nonsignatory is a
gateway matter to be determined by courts rather than arbitrators unless the
parties clearly and unmistakably provide otherwise. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (
We apply
Mindful of the foregoing, we move to the issue before us—whether an arbitration agreement governed by the FAA binds the nonsignatory wrongful death beneficiaries of a party to the agreement.
C. Beneficiaries as Nonsignatories
We have previously determined that nonsignatories to an agreement subject to the FAA may be
bound to an arbitration clause when rules of law or equity would bind them to
the contract generally. In re Weekley Homes,
180 S.W.3d at 131 (noting that if state law would bind a nonparty to a contract
generally, the FAA appears to preempt an exception for arbitration clauses
because the FAA requires states to place arbitration contracts on equal footing
with other contracts); see also Allied-Bruce Terminix
Cos., Inc. v. Dobson, 513 U.S. 265, 281 (2005) (noting that a state “may
not . . . decide that a contract is fair enough to enforce all its basic terms
. . . [yet] not fair enough to enforce its arbitration clause”). Therefore, we
look to whether the agreement signed by Dancy would
generally bind his beneficiaries under
Several rules of law and equity may bind nonsignatories to a contract. For example, we have held that the principles of equitable estoppel and agency may bind nonsignatories to an arbitration agreement. In re Weekley Homes, 180 S.W.3d at 131-35; see also In re Kellogg Brown & Root, 166 S.W.3d at 739 (noting nonsignatories may be bound to arbitration agreement under “direct benefits estoppel”); In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191-95 (Tex. 2007) (recognizing estoppel may bind a nonsignatory to an arbitration agreement but holding plaintiffs were not bound to arbitration agreement under “concerted misconduct estoppel” because it was not a recognized theory of estoppel under Texas law); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 755-56 (Tex. 2001) (holding a nonsignatory who sues based on a contract subjects himself to the contract’s terms, including its arbitration agreement).
Labatt argues that under these circumstances the beneficiaries should be bound by the agreement because (1) they are third party beneficiaries of the agreement; (2) they are bound by the agreement because of the derivative nature of their claims; and (3) Texas Family Code section 151.001 afforded Dancy the legal authority to bind his minor children to the agreement. Because we determine it is dispositive, we first consider Labatt’s argument that the beneficiaries are bound to arbitrate due to the derivative nature of their claims.
At common law there was no recognized
cause of action for the wrongful death of another person. Russell
v. Ingersoll-Rand Co., 841 S.W.2d 343, 344 (
Accordingly, we long ago held that a
decedent’s pre-death contract may limit or totally bar a subsequent action by
his wrongful death beneficiaries. See Sullivan-Sanford Lumber Co. v. Watson,
155 S.W. 179, 180 (
In Sullivan-Sanford Lumber Co., the Court again held that a pre-death contractual release signed by a decedent barred a subsequent action by his wrongful death beneficiaries. 155 S.W. at 180. The Sullivan-Sanford Lumber Company allowed non-employees to ride their trains without charge but issued them boarding passes containing the following language:
The user of this pass rides only on the following conditions: (1) This permit is accepted with the understanding that the person using it assumes all risk of injury of any character while using the same and hereby waives any claim for damages in case of injury . . . .
135 S.W. 635,
636 (Tex. Civ. App.—Texarkana 1911), rev’d, 155 S.W. 179 (
Consistent with our holdings in Thompson and Watson, many courts of appeals have held that a decedent’s pre-death contract may limit or bar a subsequent wrongful death action. See Newman v. Tropical Visions, Inc., 891 S.W.2d 713, 719 (Tex. App.—San Antonio 1994, writ denied) (pre-injury liability release signed by decedent before taking scuba diving lessons barred subsequent wrongful death and survival action against scuba instructor); Winkler v. Kirkwood Atrium Office Park, 816 S.W.2d 111, 115 (Tex. App.—Houston [14th Dist.] 1991, writ denied) (release executed by decedent before joining health club precluded his beneficiaries from bringing wrongful death and survival action); McClellan v. Boehmer, 700 S.W.2d 687, 690 (Tex. App.—Corpus Christi 1985, no writ) (release and settlement signed by automobile accident victim barred survival and wrongful death actions after victim died from injuries sustained in accident).
Despite this line of authority, the
wrongful death beneficiaries argue that agreements to arbitrate are different
than other contracts, and they should not be bound by Dancy’s
agreement. We reject their argument. If we agreed with them, then wrongful
death beneficiaries in
The beneficiaries also argue that they should not be bound because Dancy did not have the authority to bind them to the arbitration agreement when the wrongful death cause of action actually belongs to the surviving spouse, children, and parents of the deceased. While it is true that damages for a wrongful death action are for the exclusive benefit of the beneficiaries and are meant to compensate them for their own personal loss, the cause of action is still entirely derivative of the decedent’s rights. Tex. Civ. Prac. & Rem. Code §§ 71.003(a), .004(a); Russell, 841 S.W.2d at 347. Thus, regardless of the fact that Dancy’s beneficiaries are seeking compensation for their own personal loss, they still stand in Dancy’s legal shoes and are bound by his agreement.
In the alternative, the
beneficiaries urge us to circumvent the derivative claim rule by holding that
wrongful death actions are analogous to and should be treated similarly to loss
of consortium claims. A tort action seeking damages for loss of consortium,
however, is fundamentally different than a statutory wrongful death action. If Dancy had suffered a severe but nonfatal injury, his
children would have been entitled to bring a claim to recover for the loss of
care, guidance, love, and protection ordinarily provided by their father.[1] Reagan v. Vaughn,
804 S.W.2d 463, 466 (
A wrongful death action is different than a loss of consortium claim because the Wrongful Death Act expressly conditions the beneficiaries’ claims on the decedent’s right to maintain suit for his injuries. Tex. Civ. Prac. & Rem. Code § 71.003(a); see Russell, 841 S.W.2d at 346. The Legislature created an entirely derivative cause of action when it enacted the Wrongful Death Act, and Dancy’s beneficiaries are bringing an entirely derivative claim. Their wrongful death action is not in the same category as a loss of consortium claim for purposes of derivative status analysis. We decline their invitation to circumvent the clear language of the Wrongful Death Act.
In addition, other states have
resolved this issue based on whether the wrongful death action is an
independent or derivative cause of action under state law. See Cleveland v.
Mann, 942 So.2d 108, 118-19 (Miss. 2006) (beneficiaries bound by decedent’s
arbitration agreement because under Mississippi Wrongful Death Act,
beneficiaries may bring suit only if decedent would have been entitled to bring
action immediately before death); Briarcliff Nursing Home, Inc. v. Turcotte, 894 So.2d 661, 665 (Ala. 2004) (administrator
of estate bringing wrongful death claim bound because administrator stands in
legal shoes of decedent); Ballard v. Sw. Detroit
Hosp., 327 N.W.2d 370, 372 (Mich. Ct. App. 1982) (administrator bringing
wrongful death action bound by arbitration agreement because wrongful death is
a derivative cause of action under Michigan law); but see Bybee v. Abdulla, 189 P.3d
40, 43 (Utah 2008) (beneficiaries not bound because wrongful death is an
independent cause of action under Utah law); Finney v. Nat’l Healthcare
Corp., 193 S.W.3d 393, 395 (Mo. Ct. App. 2006) (beneficiary not bound
because under Missouri law the wrongful death act creates a new cause of action
belonging to the beneficiaries). Other states, however, resolve the issue based
on what the contracting parties intended. Allen v. Pacheco, 71 P.3d 375,
379-80 (
A review of the cases decided based
on statutory language indicates that courts in states where wrongful death
actions are recognized as independent and separate causes of action are more
likely to hold that the beneficiaries are not bound by a decedent’s agreement
to arbitrate, see, e.g., Bybee, 189
P.3d at 46-47; Finney, 193 S.W.3d at 395, while beneficiaries in states
where wrongful death actions are wholly derivative in nature are generally held
to be bound by a decedent’s arbitration agreement. See Cleveland, 942
So.2d at 118-19; Ballard, 327 N.W.2d at 372; Bybee,
189 P.3d at 46 (“Courts that compel nonsignatory
heirs to abide by arbitration agreements often do so because under their law a
wrongful death cause of action is wholly derivative of and dependent on the
underlying personal injury claim.”). Our holding is consistent with those in
the majority of states that have statutes similar to the
Some
III. The Indemnity Clause
The Labor Code provides that an employee’s cause of action against a non-subscriber employer to recover damages for personal injuries or death sustained in the course and scope of employment
may not be waived by an employee before the employee’s injury or death. Any agreement by an employee to waive [such] a cause of action . . . before the employee’s injury or death is void and unenforceable.
Tex. Lab. Code § 406.033(e). The beneficiaries challenge the validity of the entire agreement on the basis that the indemnification clause in paragraph three is in substance a pre-injury waiver that violates Labor Code section 406.033(e). They, however, specify that their challenge to the agreement’s validity “is not dependent on or directed solely to the arbitration provision.” Instead, they argue that the contract as a whole, including its arbitration clause, is rendered invalid by the allegedly illegal indemnity clause because the clause is not severable.
There are two types of challenges to
an arbitration provision: (1) a specific challenge to the validity of the
arbitration agreement or clause, and (2) a broader challenge to the entire
contract, either on a ground that directly affects the entire agreement, or on
the ground that one of the contract’s provisions is illegal and renders the
whole contract invalid. Buckeye Check Cashing, Inc. v. Cardegna, 546
We recently considered the first
type of challenge in In re Poly-America,
L.P., 262 S.W.3d 337 (
The case now before us presents a
challenge of the second type that we refer to above: a broad challenge to the
entire contract on the ground that one of the contract’s provisions is illegal
and renders the whole contract invalid, but not specifically challenging the
arbitration clause. The Supreme Court addressed a similar challenge in Buckeye.
546
Like the plaintiffs in Buckeye,
the beneficiaries in this case challenge the contract on the ground that an
illegal clause renders the whole contract void. The beneficiaries challenge the
arbitration clause only in the sense that they also challenge all parts of the
agreement because the parts comprise the whole. But, unless a challenge is to
the arbitration clause or arbitration agreement itself, as it was in In re Poly-America, the question of a contract’s
validity is for the arbitrator and not the courts. Accordingly, the
beneficiaries’ challenge to the validity of the agreement must be determined by
the arbitrator, and we do not address it. Buckeye, 546
Because of our disposition of the
case, we do not address Labatt’s alternative argument
that the FAA preempts Labor Code section 406.033(e) to the extent the state
statute would prevent or restrict enforcement of the arbitration provision. See
In re Bison Bldg. Materials, Ltd., Nos. 01-07-00003-CV, 01-07-00029-CV, 2008
WL 2548568, at *8 (
IV. Conclusion
If Dancy had sued Labatt for his own injuries immediately prior to his death, he would have been compelled to arbitrate his claims pursuant to his agreement. His beneficiaries, therefore, must arbitrate as their right to maintain a wrongful death action is entirely derivative of Dancy’s rights. The trial court clearly abused its discretion by refusing to compel arbitration.
We conditionally grant Labatt’s petition for writ of mandamus. The trial court is directed to enter an order compelling arbitration of the beneficiaries’ claims. We are confident the trial court will comply, and the writ will issue only if it fails to do so.
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Phil Johnson
Justice
OPINION DELIVERED: February 13, 2009
[1] Dancy’s parents
would not have been entitled to recover lost consortium damages had he survived
his injuries. See Roberts v. Williamson, 111 S.W.3d
113, 119 (