Fifth Circuit Invalidates Arbitration Agreement After Company Fails to Sign It
In a ruling that could have lawyers double-checking the signature blocks on all manner of arbitration clauses, the U.S. Court of Appeals for the Fifth Circuit has invalidated an agreement because the employer failed to sign it.
June 13, 2018 at 03:53 PM
4 minute read
In a ruling that could have lawyers double-checking the signature blocks on all manner of arbitration clauses, the U.S. Court of Appeals for the Fifth Circuit has invalidated an agreement because the employer failed to sign it.
The case, Huckaba v. Ref-Chem, involves a sex discrimination and retaliation lawsuit filed by Kimberly Huckaba against her former employer, Ref-Chem, in a U.S. District Court in Midland. Ref-Chem moved to dismiss the lawsuit and compel arbitration, and provided the court with an arbitration agreement that had been signed by Huckaba, according to the decision.
While Huckaba signed the agreement, the signature block for Ref-Chem on the document was blank. And the agreement, committing any disputes between the parties to binding arbitration, expressly required signatures, the court said, stating: “by signing this agreement the parties are giving up any right they may have to sue each other” and that the agreement “may not be changed, except in writing and signed by all parties.”
In response, the court noted, Huckaba testified that she signed the agreement with the expectation and intent that it would be passed on for the signature of the appropriate Ref-Chem officer. She also testified that it was her intention that, in order to be bound by the agreement to arbitrate, Ref-Chem would also have to sign the agreement and agree in writing to be bound by its terms.
Based on the agreement, the trial court granted Ref-Chem's motion to compel and dismissed the case pending arbitration, concluding that Huckaba's continued employment after signing the arbitration agreement constituted acceptance of the agreement by both her and Ref-Chem.
Huckaba appealed the decision to the Fifth Circuit, arguing that the agreement was invalid without Ref-Chem's signature.
And in a June 11 decision, the Fifth Circuit agreed with Huckaba, reversing and remanding the case for further proceedings.
Writing for the panel, Circuit Judge Jennifer Walker Elrod noted that Ref-Chem was correct when it argued that Texas courts have held that a blank signature block by itself is insufficient to establish the parties' intent to require signatures.
“But in this case, we have more than a blank signature block that speaks to the parties' intent,” Elrod wrote. “The agreement also contains language that the parties needed to sign the agreement to give it effect or to modify it. Thus, the question of Ref-Chem's intention is answered by the agreement that it drafted.”
Elrod also rejected Ref-Chem's argument that it intended to be bound by the arbitration agreement it had with Huckaba because it kept the document as a business record.
“Considering the record as a whole, this evidence does not satisfy Ref-Chem's burden that it intended to be bound without signing the agreement,” Elrod wrote. “Indeed, if it were, then Ref-Chem could have it both ways—argue that it did not intend to be bound because it did not sign the agreement or it did because it kept the agreement and sought to compel arbitration. We give meaning to the words Ref-Chem used in its agreement.”
Allen Stroder, an Odessa lawyer who represents Huckaba, is pleased with the decision, which will allow his client to present her case to a federal jury.
“There are cases where the employers didn't sign it and it is still valid,” Stroder said of arbitration clause litigation. “But if you look at the language of the contract, it required [Ref-Chem] to sign it—so there we go.''
Jose “Abe” Gonzalez, a partner in El Paso's Kemp Smith who represents Ref-Chem, declined to comment on the decision.
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