Jottings By An Employer's Lawyer

Friday, January 27, 2006

Like Horseshoes and Hand Grenades - Close Is Enough for Arbitration Clause in Texas

Reversing the lower courts refusal to compel arbitration, the Texas Supreme Court today dealt with the scope of such agreements when a former employee sued for defamation. In re Dillard Department Stores, Inc. (Tex. 1/27/06). The arbitration agreement in question applied to "claims arising from employment that were violations of the law ... or personal injuries arising from termination. "

Plaintiff first argued that "personal injuries" does not include defamation. Unfortunately for her, the Court found that Texas courts have interpreted "personal injury" to include injury to reputation. More importantly, even if an argument could be made that the phrase pertained only to bodily injuries that would not be enough. The standard for interpreting the scope of an arbitration agreement, which the Supreme Court reiterates again today, is that it must be enforced "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue."

Plaintiff also argued that since her defamation claim was based on post-termination comments, it was excluded since the arbitration agreement covered only "claims arising from employment". The Court:
We disagree. Martinez's claims are tied to her termination. Martinez alleges defamation based on comments made near the time of her termination and she seeks damages including "loss of earnings and earning capacity." Any damages in this case could be viewed as intertwined with her employment and termination, and any ambiguity as to whether "arising from" should mean intertwined, or occurring as a direct result from, is resolved in favor of arbitration.
Although the Court certainly didn't say it this way, given the mandate that a dispute is not covered by an arbitration agreement only if there is "positive assurance" that there is "no interpretation" that would include it, it appears that just like in horseshoes and hand grenades, close does count in Texas.


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