law-arbitration-non-signatories | arbitration cases | arbitration mandamus | Federal Arbitration Act FAA
challenging arbitration agreements |
CAN NON-SIGNATORIES BE COMPELLED TO ARBITRATE?
In Re Golden Peanut Co.,LLC, No. 09-0122 (Tex. Nov. 20, 2009)(per curiam)(mandamus compelling arbitration
granted) (arbitration and nonsignatories, wrongful death plaintiffs bound by arb agreement signed by worker killed
on the job as derivative claimants and must arbitrate claim against employer,
pre-injury waivers, forum selection vs. waiver of substantive rights)
IN RE GOLDEN PEANUT COMPANY, LLC; from Gaines County;
11th district (11 08 00215 CV, 269 SW3d 302, 11 13 08)
Pursuant to Texas Rule of Appellate Procedure 52.8(c), without hearing oral argument, the Court conditionally
grants the petition for writ of mandamus.
Whether Nonsignatory Is Bound Is a Gatway/Threshold Matter for the Court to Determine
[W]e have concluded that whether an arbitration agreement binds a nonsignatory is a gateway matter to be
determined by the court, rather than the arbitrator, unless the parties clearly and unmistakably provide otherwise.
In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005); see also In re Labatt Food Serv., L.P., 279 S.W.3d.
640, 643 (Tex. 2009) (when “arbitration agreement is silent about who is to determine whether particular persons
are bound by the agreement, courts, rather than the arbitrator, should determine the issue”). In re Morgan Stanley
& Co, Inc. No. 07-0665 (Tex. Jul. 3, 2009)(Medina) (arbitration vs. litigation: legal capacity of party to arbitration
agreement, does the court or the arbitrator decide the issue?)
Nonsignatories Bound by Arbitration Agreement Signed by Worker Who Died On the Job
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 Texas law. In re
Labatt Food Service, LP, No. 07-0419 (Tex. 2009)(Johnson)
(arbitration mandamus granted, arbitration of wrongful death claim by nonsignatories compelled)
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 (Tex. 1992). The Legislature enacted the Wrongful Death Act
in order to create a cause of action to allow a deceased tort victim’s surviving parents, children, and
spouse to recover damages for their losses from the victim’s death. Shepherd v. Ledford, 962 S.W.2d 28,
31 (Tex. 1998); see Tex. Civ. Prac. & Rem. Code §§ 71.002-.004. Under the Wrongful Death Act as it
applies here, wrongful death beneficiaries may pursue a cause of action “only if the individual injured
would have been entitled to bring an action for the injury if the individual had lived.” Tex. Civ. Prac. & Rem.
Code § 71.003(a). This language is not a recent innovation but is a recodification of language which has
consistently been part of the Wrongful Death Act. See Russell, 841 S.W.2d at 346. And we have
consistently held that the right of statutory beneficiaries to maintain a wrongful death action is entirely
derivative of the decedent’s right to have sued for his own injuries immediately prior to his death. See id.
at 345-47. Thus, it is well established that statutory wrongful death beneficiaries’ claims place them in the
exact “legal shoes” of the decedent, and they are subject to the same defenses to which the decedent’s
claims would have been subject. Id. at 347.
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 (Tex. 1913); Thompson v. Fort Worth & R.G. Ry. Co., 80 S.W. 990, 992 (Tex. 1904); see also Russell,
841 S.W.2d at 347 (affirming holdings in Thompson and Sullivan-Sanford Lumber Co.). In Thompson, R.
K. Thompson sued to recover damages for injuries he suffered while riding a train. He accepted a
settlement offer and executed a full release of the railway company. 80 S.W. at 990. Shortly after signing
the release, Thompson died from his injuries. Id. at 991. His wife and children then sued the railway
company seeking to recover damages for his death. Id. at 990. The Court noted that if Thompson had
survived, he would not have been entitled to bring suit because of the contractual release and because the
Wrongful Death Act provided, in language similar to the current Act, that beneficiaries were only entitled to
bring suit if the decedent would have been entitled to maintain an action for the injury. Id. at 991-92. The
Court held that although the beneficiaries were not parties to the release, the contractual release signed
by Thompson barred their wrongful death claims because they stood in the same legal shoes as
Thompson and were subject to the same contractual defenses. Id. at 992.
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 (Tex. 1913). J.A. Watson was
riding a train courtesy of a boarding pass when the train collided with another train killing Watson. Id. His
wife and children sued the Lumber Company. Id. The Court held, as it did in Thompson, that the
beneficiaries were not entitled to recover under the Wrongful Death Act because Watson himself could not
have recovered for his injuries if he had survived, and his wrongful death beneficiaries were subject to the
same contractual defenses that Watson would have been subject to had he sued. 155 S.W. at 180.
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 Texas would be bound by a
decedent’s contractual agreement that completely disposes of the beneficiaries’ claims, but they would
not be bound by a contractual agreement that merely changes the forum in which the claims are to be
resolved. Not only would this be an anomalous result, we believe it would violate the FAA’s express
requirement that states place arbitration contracts on equal footing with other contracts. 9 U.S.C. § 2; see
Volt Info. Scs., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 474 (1989).
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 (Tex. 1990). Their lost consortium claims would be
derivative in the sense that the beneficiaries would be required to establish Labatt was liable for their
father’s underlying injury in order to recover damages. Whittlesey v. Miller, 572 S.W.2d 665, 668 (Tex.
1978). But loss of consortium claims are not entirely derivative as are wrongful death claims; instead, they
are separate and independent claims distinct from the underlying action. Id. at 667, 669. Thus, a
settlement agreement signed by an injured spouse does not bar a subsequent loss of consortium claim by
the non-injured spouse. Id. at 669.
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 (Colo. 2003) (beneficiaries bound when contract reflects intent of
the parties to bind beneficiaries); Herbert v. Superior Court, 215 Cal. Rptr. 477, 480 (Cal. Ct. App. 1985)
(beneficiaries bound when contract reflects intent of the parties to bind beneficiaries).
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 Texas statute and
have considered the issue.
Some Texas courts of appeals have held that wrongful death beneficiaries are not bound by a decedent’s
agreement to arbitrate. See In re Kepka, 178 S.W.3d 279, 288 (Tex. App.—Houston [1st Dist.] 2005,
orig. proceeding [mand. dismissed]); Gomez v. Zardenetta, No. 04-97-0019-CV, 1998 WL 19858, at *7
(Tex. App.—San Antonio Jan. 21, 1998, no pet.) (not designated for publication). To the extent the
holdings of courts of appeals conflict with our decision, we disapprove of them.