In Re: Dillard Department Stores Inc.

The defamation claim does not fall within the scope of arbitrable claims as a violation of common law"affecting economic terms of employment,as nothing asserted in the claim touched on issues generally regarded as economic terms of employment. Because the employee's defamation claim did not fall within the scope of the 2000 Rules of Arbitration, the trial court abused its discretion by denying the motion to compel arbitration.

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Click here for the full text of this decision FACTS:Andrea Martinez was fired from Dillard’s Department Stores after 19 years of employment for allegedly misusing gift cards and violating both the Texas Labor Code and store policy. Alleging that a district manager, Grizelda Reeder, told the manager of the Cielo Vista store where Martinez worked that Reeder had evidence of these abuses, Martinez sued both Reeder and Dillard’s for defamation. Dillard’s generally denied Martinez’s claims and filed a motion to compel arbitration. Dillard’s produced a copy of an August 2000 agreement to arbitrate certain claims that Martinez signed, as well as the rules of arbitration introduced in 2002. The 2000 rules provided that arbitration would apply to violations of “federal, state, county, municipal or other governmental, constitution, statute, ordinance, regulation, public policy or common law, affecting economic terms of employment,” as well as to “[p]ersonal injuries arising from a termination, except those covered by workers’ compensation.” Martinez resisted the motion to compel arbitration by arguing that her claims were not of the kind covered by the agreement. Even if they were, she argued, the agreement was not valid, because the underlying consideration for the agreement was illusory. Specifically, Martinez argued that, as it was Dillard’s who introduced these 2002 rules for arbitration, Dillard’s had judicially admitted that it had a right to modify its arbitration agreement with Martinez, and therefore the arbitration promise itself was illusory. Dillard’s retained the power to change the arbitration agreement unilaterally, arbitrarily and without notice or agreement, Martinez continued, which made the consideration for the original agreement to arbitrate illusory. Dillard’s responded by offering the testimony of the Cielo Vista store manager that the 2002 rules were not the rules to which Martinez agreed. He stated that the 2002 rules applied to employees who signed the arbitration agreement after those rules were amended; they did not apply to people like Martinez who earlier agreed to the 2000 rules. The trial court denied Dillard’s motion to compel. Dillard’s sought a writ of mandamus ordering the trial court to compel arbitration. HOLDING:Writ denied. Here, the court found there was neither an express nor implicit provision in the arbitration agreement indicating that Dillard’s retained any unilateral right to modify the parties’ agreement. It was clear, however, that Dillard’s did, in fact, modify its arbitration agreement, since the parties presented two different versions of the rules of arbitration that were to apply. The court agreed with Dillard’s that the initial reference by Dillard’s to the 2002 rules did not constitute a judicial admission that Dillard’s reserved the right to amend the rules or that the 2002 rules applied to Martinez. Dillard’s instead established that the parties entered into a valid written agreement to arbitrate certain claims under the 2000 rules. Nonetheless, the court ruled that Martinez’s defamation claim did not fall within the scope of the 2000 arbitration agreement. Though courts have broadly construed the term “personal injury” in various statutes to include defamation and thus have not limited the term to bodily injury as it is commonly understood, in examining the term as it is used in this context, the court found that it was clear that the parties’ intent was to cover bodily injuries other than those included in workers’ compensation coverage. In addition, the defamation claim does not fall within the scope of arbitrable claims as a violation of common law “affecting economic terms of employment,” as nothing asserted in the defamation claim touched on issues generally regarded as economic terms of employment, such as wage levels, overtime pay, and so forth.” OPINION:David Wellington Chew, J.; Barajas, C.J., Larsen and Chew, JJ.

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