Plaintiffs’ attorneys in Texas have come up with a not-so-clever, but potentially effective way to circumvent mandatory arbitration agreements. In Adcock v. Five Star Rentals/Sales, Inc., (Fourth Court of Appeals, Texas, April 18, 2019), Plaintiff’s attorney sent a pre-litigation letter to the employer asking whether the employer had an arbitration agreement with Adcock, but the letter did more. The letter demanded that the employer produce any such agreement within thirty days, and stated that failure to do so would constitute an agreement not to arbitrate the claims. The employer never responded, and Plaintiff filed his lawsuit instead of initiating arbitration. That’s when things got a little weird.
As the litigation proceeded, the employer produced personnel documents and – lo and behold – they included an arbitration agreement. Plaintiff decided that he preferred to be in arbitration, and he moved the court to submit the case to arbitration based on the arbitration agreement. The trial court and the Texas Court of Appeals held that Plaintiff could not move the case to arbitration. The Court of Appeals specifically held that the letter from Plaintiff’s counsel coupled with the employer’s failure to produce the arbitration agreement within thirty days as demanded in the letter, constituted a subsequent, enforceable agreement between Plaintiff and the employer to rescind the arbitration agreement. What?????
If this ruling stands, plaintiffs can completely circumvent valid arbitration agreements using this thirty-day letter canard any time an employer casually tosses such a letter in the old circular file. The simple lesson, for now, is to take these silly letters very seriously. While we would not expect too many other appellate courts to follow the holding of this case, it stands as a warning for employers to respond to these letters—even if it is just with a rejection of the very idea of waiver. Otherwise, employers risk undermining their arbitration covenants.