Presta v. Omni Hotels Management Corporation

Filing 22

MEMORANDUM AND ORDER Defendant Omni Hotels Management CorporationsMotion to Dismiss, or, in the Alternative, Motion to Compel Arbitration and StayLitigation [Doc. # 10] is DENIED. It is furtherORDERED that Plaintiff Lia Prestas Motion for Partial SummaryJudgment [Doc. # 11] is GRANTED.(Signed by Judge Nancy F Atlas) Parties notified.(sashabranner, 4)

UNITED STATES DISTRICT COURT
SOURTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LIA PRESTA,
Plaintiff,
v.
OMNI HOTELS MANAGEMNT
CORPORATION,
Defendant

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§

CASE NO. 4:17-cv-0912

MEMORANDUM AND ORDER
Pending before the Court in this disability and age discrimination action is
Defendant Omni Hotels Management Corporation’s (“Defendant” or “Omni”)
“Motion to Dismiss, or, in the Alternative, Motion to Compel Arbitration and Stay
Litigation” (collectively, the “Omni Motion”) [Doc. # 10].

Also pending is

Plaintiff Lia Presta’s (“Presta” or “Plaintiff”) “Motion for Partial Summary
Judgment” [Doc. # 11].

1

The Motions are fully briefed1 and are ripe for

See Presta’s Response to [the Omni Motion] [Doc. # 12]; Omni’s Objections to
Declaration of Lia Presta and Reply in Support of [the Omni Motion] (“Objections
& Reply”) [Doc. # 17]; Omni’s Response to Presta’s Motion for Partial Summary
Judgment [Doc. # 16]; Presta’s Reply in Support of her Motion for Partial
Summary Judgment [Doc. # 18].
In its Objections & Reply [Doc. # 17], Omni objected to the Declaration of Lia
Presta, attached as Exhibit 1 to Presta’s Response to the Omni Motion. See
Declaration of Lia Presta [Doc. # 12-1]. Omni contends that certain statements in
the Declaration are conclusory and constitute hearsay, among other things. See
(continued…)

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determination.

Having carefully considered the parties’ briefs, all matters of

record, and the applicable legal authorities, the Court grants Presta’s Motion for
Partial Summary Judgment [Doc. # 11] and denies the Omni Motion [Doc. # 10].
I.

BACKGROUND

The following facts are gleaned from Presta’s First Amended Complaint
[Doc. # 3] and the undisputed matters of record. Presta, born in 1928, worked for a
hotel located at Four Riverway in Houston, Texas, for approximately thirty-five
years, including as a seamstress and in the laundry and housekeeping departments.2
Omni alleges that it assumed management of the hotel in February 1995.3 On
February 6, 2014, during the course of her employment, Presta signed a “Summary
of the Amended and Restated Alternative Dispute Resolution Program,” thereby
affirming her acceptance of and participation in Omni’s Dispute Resolution
Program (“Program”).4

Presta’s acceptance of the Program also constituted

(continued…)
Omni Objections & Reply [Doc. # 17], at 2. Because the Court does not rely on
Presta’s Declaration in deciding the pending Motions, Omni’s objections are
denied as moot.
2

See Plaintiff’s First Amended Complaint [Doc. # 3], at 3; Omni Motion [Doc.
# 10], at 2.

3

Omni Motion [Doc. # 10], at 2.

4

Summary of Omni Alternative Dispute Resolution Program, Exh. A to Affidavit
of Kimberly Cook, Exh. A to Motion to Dismiss [Doc. # 10-1], at ECF 5.

2
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acceptance of a “Mutual Agreement to Arbitrate Claims on an Individual Basis”
(“Arbitration Agreement”), which mandates arbitration as a condition of
employment for any disputes “arising out of [an employee’s] application with,
employment with, or termination from, [Omni].”5 The Arbitration Agreement is
governed by the Federal Arbitration Act6 and covers, among other things, “claims
for discrimination, harassment or retaliation of any kind[.]”7 Section 16.3 of the
Arbitration Agreement, the so-called “savings clause,” provides for revocation or
modification of the Agreement as follows:
This program can be modified or revoked in writing only by the
Company’s corporate general counsel or vice president of human
resources. Such modification or revocation will only take place with
14 days’ notice to the Associates. Further, any modification or
revocation will not apply to any claim that has already been submitted
under this Program.8
Omni temporarily closed the hotel in May or June of 2015 to repair flood
damage and informed all employees not to report to work until Omni was able to

5

Amended and Restated Alternative Dispute Resolution Program, Exh. B to
Affidavit of Kimberly Cook, Exh. A to Motion to Dismiss (“Arbitration
Agreement”) [Doc. # 10-1], at 1, at ECF 7, § 2.

6

Id. at 2, at ECF 8, § 4.1

7

Id. at 1, at ECF 7, § 2.

8

Id. at 5, at ECF 11, § 16.3.

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assess the damage.9 Presta alleges that Omni never allowed her to return to work
and rejected her attempts to return.10 According to Presta, Omni allowed other,
younger employees to return to work.11 Subsequently, on July 20, 2016, Presta
filed a charge of discrimination based on age and disability with the Equal
Employment Opportunity Commission (“EEOC”) and the Texas Workforce
Commission (“TWC”).12 Presta asserts, and Omni does not deny, that during the
course of the EEOC’s investigation the EEOC contacted Omni regarding the
dispute, and Omni responded in its defense.13

Plaintiff received right-to-sue

notices from the EEOC and TWC on February 28, 2017, and April 10, 2017,
respectively.14
Having exhausted her administrative remedies, Presta filed her original

9

Defendant’s Original Answer to Plaintiff’s First Amended Complaint [Doc. # 8],
at 3.  

10

Plaintiff’s First Amended Complaint [Doc. # 3], at 3-5.

11

See id. at 5.

12

Charge of Discrimination, Exh. 2 to Presta’s Motion for Partial Summary
Judgment [Doc. # 11-2], at ECF 1-2.

13

See Presta’s Motion for Partial Summary Judgment [Doc. # 11], at 5.

14

See U.S. Equal Employment Opportunity Commission Notice of Right to Sue,
Exh. 3 to Presta’s Motion for Partial Summary Judgment [Doc. # 11-3], at ECF 15; Texas Workforce Commission Notice of Complainant’s Right to File Civil
Action, Exh. 4 to Presta’s Motion for Partial Summary Judgment [Doc. # 11-4], at
ECF 1.

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complaint in federal court on March 24, 2017, and an amended complaint on April,
13, 2017,15 alleging violations of the Age Discrimination in Employment Act, the
Americans with Disabilities Act of 1990, as amended, and Chapter 21 of the Texas
Labor Code or the Texas Commission on Human Rights Act.16 Specifically, Presta
alleges that Omni discriminated against her based on her disability or perceived
disability, failed to accommodate her for her disability to the extent she has one,
and discriminated against her based on her age.17
Omni contends that Presta’s claims are subject to the Omni Hotels Dispute
Resolution Program and the mandatory arbitration provided thereunder. Presta
contends that the Arbitration Agreement is unenforceable because it is illusory,
unconscionable, and because there was no mutual assent.18 The parties’ Motions
address the enforceability of the Arbitration Agreement and are ripe for

15

See Plaintiff’s Original Complaint [Doc. # 1]; Plaintiff’s First Amended
Complaint [Doc. # 3].

16

Plaintiff’s First Amended Complaint [Doc. # 3], at 1.

17

Id. at 5.

18

See Presta’s Motion for Partial Summary Judgment [Doc. # 11] at 1, 6; Presta’s
Response to [the Omni Motion] [Doc. # 12], at 1-2.
In support of her “meeting of the minds” argument, Presta alleges that Omni knew
Presta has difficulty reading and understanding English, told Presta the Arbitration
Agreement was unimportant, did not translate it for her, and “had her sign it.” See
Presta’s Response to [the Omni Motion] [Doc. # 12], at 2. Omni contests this
narrative.

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disposition.
II.

STANDARD OF REVIEW

A.

Motion to Compel Arbitration

Section 3 of the Federal Arbitration Act provides that, where claims in a
lawsuit are properly referable to arbitration, the Court “shall” stay the trial of a
lawsuit until the arbitration is complete. See 9 U.S.C. § 3; E.E.O.C. v. Waffle
House, Inc., 534 U.S. 279, 289 (2002). Evaluating a motion to compel arbitration
requires determining “(1) whether there is a valid agreement to arbitrate between
the parties; and (2) whether the dispute in question falls within the scope of that
arbitration agreement.” Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205
(5th Cir. 2007) (internal quotation marks omitted). The federal policy favoring
arbitration, however, “does not apply to the determination of whether there is a
valid agreement to arbitrate between the parties.” Morrison v. Amway Corp., 517
F.3d 248, 254 (5th Cir. 2008). “Instead, ‘to determine whether an agreement to
arbitrate is valid, courts apply ordinary state-law principles that govern the
formation of contracts.’” Nelson v. Watch House Int’l, L.L.C., 815 F.3d 190, 193
(5th Cir. 2016) (citing Carey, 669 F.3d at 205).
The Court may dismiss a lawsuit “when all of the issues raised in the district
court must be submitted to arbitration.”

Adam Techs. Int’l, S.A. de C.V. v.

Sutherland Global Servs., Inc., 729 F.3d 443, 447 n.1 (5th Cir. 2013) (quoting
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Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (holding
district court has discretion to dismiss case where all issues are referred to
arbitration)); see also Armstrong v. Assocs. Int’l Holdings Corp., 242 F. App’x
955, 959 (5th Cir. 2007) (noting that the Fifth Circuit “encourages district courts to
dismiss cases with nothing but arbitrable issues because staying the action serves
no purpose”); Grether v. South Point Pontiac/Cadillac, 2014 WL 1350907, *3
(W.D. Tex. Apr. 3, 2014).
B.

Motion for Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure mandates the entry of
summary judgment against a party who fails to make a sufficient showing of the
existence of an element essential to the party’s case for which that party will bear
the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); see also Baton
Rouge Oil and Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, 375 (5th
Cir. 2002). In deciding a motion for summary judgment, the Court must determine
whether the movant has shown “that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a); see also Celotex Corp., 477 U.S. at 322-23; Rodgers v. United States, 843
F.3d 181, 190 (5th Cir. 2016); Weaver v. CCA Indus., Inc., 529 F.3d 335, 339 (5th
Cir. 2008).
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Where the movant bears the burden of proof at trial on the issues at hand, as
is the case here, it “bears the initial responsibility of demonstrating the absence of a
genuine issue of material fact with respect to those issues.” Transamerica Ins. Co.
v. Avenell, 66 F.3d 715, 718 (5th Cir. 1995); see also Brandon v. Sage Corp., 808
F.3d 266, 269-70 (5th Cir. 2015); Lincoln Gen. Ins. Co. v. Reyna, 401 F.3d 347,
349 (5th Cir. 2005). If the moving party fails to meet its initial burden, the motion
for summary judgment must be denied, regardless of the non-movant’s response.
ExxonMobil Corp., 289 F.3d at 375.
If the moving party meets its initial burden, the non-movant must go beyond
the pleadings and designate specific facts showing that there is a genuine issue of
material fact for trial. Brandon, 808 F.3d at 270; Littlefield v. Forney Indep. Sch.
Dist., 268 F.3d 275, 282 (5th Cir. 2001). “A fact issue is ‘material’ if its resolution
could affect the outcome of the action.” Hemphill v. State Farm Mut. Auto. Ins.
Co., 805 F.3d 535, 538 (5th Cir. 2015); DIRECT TV Inc. v. Robson, 420 F.3d 532,
536 (5th Cir. 2006). Summary judgment “will not lie . . . if the evidence is such
that a reasonable jury could return a verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Hyatt v. Thomas, 843 F.3d 172, 177
(5th Cir. 2016).

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III.

ANALYSIS
The parties’ pending Motions turn on the validity of the Arbitration

Agreement.

Omni maintains that the Arbitration Agreement is valid and

enforceable and therefore moves to compel arbitration and to dismiss this suit or
stay the litigation.19

Presta contends that the Arbitration Agreement is

unenforceable for the following three reasons: (1) the promise to arbitrate is
illusory because the Arbitration Agreement allows Omni to unilaterally modify or
revoke the agreement before an arbitration claim is filed; (2) the Arbitration
Agreement is unconscionable because it imposes limitations designed to prevent
employees from vindicating their rights; and (3) there was no mutual assent
because Plaintiff did not understand the Arbitration Agreement when she signed
it.20 The Court finds the Arbitration Agreement illusory as to this dispute for the
reasons explained below, and thus does not reach Presta’s additional arguments.
A.

Standard for Whether an Arbitration Agreement is Illusory

The Arbitration Agreement must be valid and enforceable in order for this
Court to consider compelling arbitration. Under Texas law, agreements to arbitrate
must be supported by consideration. Lizalde v. Vista Quality Markets, 746 F.3d

19

See Omni’s Motion to Dismiss [Doc. # 10].

20

Presta’s Motion for Summary Judgment [Doc. # 11], at 4-6; Presta’s Response to
[the Omni Motion] [Doc. # 12], at 3. 

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222, 225 (5th Cir. 2014); Nelson, 815 F.3d at 193 (citing Lizalde, 746 F.3d at 225).
If a “purported bilateral contract is supported only by illusory promises, there is no
contract.” Lizalde, 746 F.3d at 225 (quoting Mendivil v. Zanios Foods, Inc., 357
S.W.3d 827, 832 (Tex. App. – El Paso 2012)). An arbitration agreement is illusory
“[w]here one party has the unrestrained unilateral authority to terminate its
obligation to arbitrate.” Lizalde, 746 F.3d at 225. See Nelson, 815 F.3d at 193
(quoting Lizalde, 746 F.3d at 225); see also In re 24R, Inc., 324 S.W.3d 564, 567
(Tex. 2010) (“An arbitration clause is not illusory unless one party can avoid its
promise to arbitrate by amending the provision or terminating it altogether.”).
An arbitration agreement that allows one party to modify or terminate the
agreement, however, does not automatically render the agreement illusory. See
Lizalde, 746 F.3d at 226. In the seminal Texas case, In re Halliburton Co., 80
S.W.3d 566 (Tex. 2002), the Texas Supreme Court held that an employee’s
arbitration agreement was not illusory because “Halliburton [could not] avoid its
promise to arbitrate by amending the provision or terminating it all together.” Id.
at 570. Although the Halliburton agreement allowed the employer to modify or
terminate certain provisions, the agreement also included a savings clause
providing that (1) “no amendment shall apply to a Dispute of which the Sponsor
had actual notice on the date of amendment[]” and (2) “termination shall not be
effective until 10 days after reasonable notice is given to Employees or as to
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Disputes which arose prior to the date of termination.” Id. at 569-70. “Because of
these two provisions, the Texas Supreme Court held that the employer could not
‘avoid its promise to arbitrate by amending or terminating [the arbitration
agreement] altogether.’” Nelson, 815 F.3d at 193 (quoting Carey, 669 F.3d at
206); see also In re 24R, Inc., 324 S.W.3d at 567 (explaining that the Halliburton
court “held that because the [arbitration agreement] contained a ‘savings clause’—
including a ten-day notice provision and a provision that any amendments would
only apply prospectively—that prevented the employer from avoiding its promise,
the arbitration agreement was not illusory” (citing Halliburton, 80 S.W.3d at 570)).
In Lizalde v. Vista Quality Markets, the Fifth Circuit presented a three-part
test to determine whether a “Halliburton-type savings clause sufficiently restrains
an employer’s unilateral right to terminate its obligation to arbitrate.” See Nelson,
815 F.3d at 193-94. “[R]etaining termination power does not make an agreement
illusory so long as that power (1) extends only to prospective claims, (2) applies
equally to both the employer’s and employee’s claims, and (3) so long as advanced
notice to the employee is required before termination is effective.” Id. at 194
(quoting Lizalde, 746 F.3d at 226). “Though the Texas Supreme Court has not yet
had the occasion to discuss Lizalde’s three-part formulation, numerous decisions
from Texas’ intermediate appellate courts suggest that Lizalde appropriately
tracked Halliburton and its progeny.” Id. (citing Temp. Alts., Inc. v. Jamrowski,
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511 S.W.3d 64, 68-70 (Tex. App.—El Paso 2014)); see Henry & Sons
Construction Co. v. Campos, 510 S.W.3d 689, 695 (Tex. App.— Corpus ChristiEdinburg 2016) (“We believe that the Fifth Circuit has correctly assessed Texas
law: where promises are to serve as the consideration for an arbitration agreement,
the promise to arbitrate must remain mutually binding, with any modification or
termination power subject to both advance notice and prospective application.”)
It is clear that the Agreement in this case satisfies the second prong of
Lizalde by applying equally to claims made both by Omni and by Presta.21 See
Lizalde, 746 F.3d at 226.

Rather, the parties debate whether the Arbitration

Agreement satisfies the first prong of Lizalde, i.e., whether the Agreement in fact
extends only to prospective claims.22
1.

“Prospective” Claims

As noted, the Arbitration Agreement contains the following savings clause:
This program can be modified or revoked in writing only by the
Company’s corporate general counsel or vice president of human
resources. Such modification or revocation will only take place with
14 days’ notice to the Associates. Further, any modification or

21

See Arbitration Agreement [Doc. # 10-1], at 1, at ECF 5, § 1.

22

Certain of the parties’ arguments regarding the exhaustion requirement, see infra
note 24, also implicate the third prong of Lizalde, notice. See Lizalde v. Vista
Quality Markets, 746 F.3d 222, 226 (5th Cir. 2014). The Court does not reach
these arguments. See infra note 24.

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revocation will not apply to any claim that has already been submitted
under this Program.23
Presta argues that the Arbitration Agreement is illusory because, under the savings
clause, “Omni has the unilateral ability to modify or revoke [the Arbitration
Agreement] after a dispute arises but before a claim is filed with the Judicial
Arbitration Mediation Services (“JAMS”)[,]” as required for a claim to be
submitted “under the Program.”24

According to Omni, Presta’s argument is

essentially that “to be valid and enforceable, a savings clause must expressly
restrict a party’s right to modify or terminate arbitration rights as to any disputes
23

Arbitration Agreement [Doc. # 10-1], at 5, at ECF 11, § 16.3.

24

See Presta’s Motion for Partial Summary Judgment [Doc. # 11], at 1. Presta’s
argument, expressly based on Judge Hittner’s reasoning in an Order dated March
24, 2016, in Long v. Omni Hotels Management Corp., Case No. 4:15-cv-1283
(S.D. Tex.), is two-fold. First, as noted, Presta asserts simply that Omni has the
unilateral ability to modify or revoke the Arbitration Agreement after a dispute
arises but before a claim is filed with JAMS. See Presta Motion for Partial
Summary Judgment [Doc. # 11], at 1. Second, Presta contends that a signatory to
the Arbitration Agreement who files a claim with the EEOC must exhaust
administrative requirements under the EEOC before filing a claim under the
Arbitration Agreement. One such requirement for filing suit in court on an
adverse treatment claim under the ADA, ADEA, or the Texas Labor Code is that
the employee file a charge of discrimination and obtain a right-to-sue notice from
the government agency, which notice is not available until at least 180 days after
the charge has been filed. Presta argues that notwithstanding the Arbitration
Agreement’s fourteen day notice period, Omni has the unilateral ability to modify
or terminate the Arbitration Agreement during that 180 day period. See Presta’s
Reply [Doc. # 18], at 1-2. Omni disagrees. See Omni’s Objections & Reply [Doc.
# 17], at 5; Omni’s Response to Presta’s Motion for Partial Summary Judgment
[Doc. # 16], at 7-8. Because the Court concludes the Arbitration Agreement is
illusory in connection with Presta’s first argument, it does not reach this
contention.

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that arose prior to the date of the modification.”25 This position, Omni contends,
misconstrues Halliburton and is at odds with federal and state court decisions.
Omni argues that Halliburton did not hold that savings clauses must track, or be as
broad as, the savings clause at issue before that court, and that the savings clause in
the parties’ Arbitration Agreement—providing that “any modification or
revocation will not apply to any claim that has already been submitted under th[e]
Program”— is “prospective” under the first prong of Lizalde.
While the Texas Supreme Court has not explicitly defined the minimum
requirements of an arbitration savings clause, see Temp. Alts., Inc., 511 S.W.3d at
67, the Fifth Circuit provided important guidance. “[A]rbitration agreements fail[]
to meet Halliburton solely because the agreement contain[s] no express limitation
on an employer’s power to make unilateral changes to an arbitration agreement
that have ‘retroactive effect,’ meaning changes . . . that would strip the right of
arbitration from an employee who has already attempted to invoke it, or changes
that apply to disputes which had arisen and of which [the employer] had notice
prior to the change . . . .” Nelson, 815 F.3d at 194 (internal citations and quotation
marks omitted).

25

See Omni’s Response to Presta Motion for Partial Summary Judgement [Doc.
# 16], at 4.

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In Morrison v. Amway Corp., for example, the Fifth Circuit addressed the
enforceability of an arbitration program of Amway Corporation, a nationwide
seller of household products, which program governed Amway’s relationship with
its distributors. See Morrison, 517 F.3d at 250. Under the arbitration program’s
“Rules of Conduct” (“Rules”), Amway could amend the Rules upon publication in
official Amway literature. See id. at 251, 253. The distributors argued that the
arbitration agreement was illusory because, in part, it allowed Amway to apply the
arbitration program to claims known to Amway prior to the program’s
establishment. See id. at 253. The Fifth Circuit agreed, noting that “[t]here are no
Halliburton type savings clauses which preclude application of such amendments
to disputes which arose (or of which Amway had notice) before the amendment.”
Id. at 257.
Likewise, in Carey v. 24 Hour Fitness, USA, Inc., the Fifth Circuit held that
an arbitration agreement was illusory because its savings clause would not
“prevent [the employer] from retroactively eliminating its arbitration policy, which
is the critical inquiry for determining whether an agreement is illusory.” See
Carey, 669 F.3d at 207. Though the Fifth Circuit described retroactivity in terms
of an employer’s ability to make “changes to the policy that would strip the right of
arbitration from an employee who has already attempted to invoke it[,]” see id. at
205, the Court drew on Morrison and that case’s reasoning regarding disputes of
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which both parties had notice. See id. (“Because Amway was able to amend its
policy and thus renege on its promise to arbitrate even in the context of disputes
already underway, we held that its agreement to arbitrate was illusory.” (citing
Morrison, 517 F.3d at 257)). The Fifth Circuit stated in Nelson that “unilateral
changes to an arbitration agreement that have ‘retroactive effect’” include changes
that apply to disputes of which an employer “had notice prior” to the change,
Nelson, 815 F.3d at 194, thus drawing on both Morrison and Carey.
Because the savings clause in the Arbitration Agreement permits Omni to
alter the terms of the Arbitration Agreement with respect to claims of which Omni
is aware but which are not formally brought under the Program, the Agreement is
illusory in violation of Texas law. The Agreement allows Omni to change or
revoke the Agreement with respect to disputes of which Omni had prior notice.
Omni does not deny that it received notice of the dispute at issue during the course
of an EEOC investigation prompted by Presta’s July 2016 charges.
Omni’s contention that the employer’s receipt of notice of an employee’s
claim is not determinative under Halliburton or Lizalde is unpersuasive. Omni
invokes four state court decisions, two of which superficially support its position.
The courts in Nabors Drilling USA, LP v. Pena and In re Champion Techs., Inc.
upheld a savings clause that “no amendment shall apply to a Dispute for which a
proceeding has been initiated pursuant to the [company’s dispute resolution
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program] Rules . . . .” See Nabors Drilling USA, LP, 385 S.W.3d 103, 105 (Tex.
App.–San Antonio 2012, pet. denied); In re Champion Techs., Inc., 222 S.W.3d
127, 131 (Tex. App.–Eastland 2006, pet. denied).26 The courts concluded that the
employer’s power to modify or terminate the relevant arbitration agreement is
limited with respect to claims that have been formally presented to the company
pursuant to company policy, and such limitation is adequate under Halliburton.
See Nabors Drilling USA, 385 S.W.3d at 108; In re Champion Techs., 222 S.W.3d
at 131-32. The Court is unpersuaded that these rulings are consistent with the
Texas Supreme Court authority on which the intermediate courts purported to
rely.27 In any event, these decisions preceded the Fifth Circuit’s analysis in Lizalde
26

The two policies contained similar termination provisions. See Nabors Drilling
USA, LP, 385 S.W.3d at 105; In re Champion Techs., 222 S.W.3d at 131.

27

In re Champion Techs., Inc., which Nabors cites, points to In re Advance PCS
Health L.P., 172 S.W.3d 603 (Tex. 2005) as “address[ing] an analogous
situation[.]” See In re Champion Techs., Inc., 222 S.W.3d at 132; Nabors Drilling
USA, 385 S.W.3d at 108-09. In Advance PCS Health, the Texas Supreme Court
pointed out that the arbitration agreement at issue contained a provision that “any
obligations that arise prior to the termination of the Agreement shall survive such
termination.” See id. at 607. Advance PCS Health therefore did not “address an
analogous situation,” because the savings clauses in Nabor and In re Champion
pose less limitations on the employer’s power to modify the arbitration agreement
than the agreement in Advance PCS Health.
Omni also cites Watts Regulator Co. v. Foremost Cnty. Mutual Ins. Co., No. 0916-00033-CV, 2016 WL 4045502 (Tex. App.–Beaumont 2016, pet. filed). On
July 14, 2017, the Texas Supreme Court granted review and vacated judgement of
a similar case, Watts Regulator Co. v. Tex. Farmers Ins. Co., 498 S.W.3d 643
(Tex. App.–Fort Worth 2016).

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as reaffirmed by Nelson, and this Court is bound by the Fifth Circuit’s
interpretation of Halliburton.28
Omni also cites Henry & Sons Construction Co. v. Campos, in which the
court held a different savings clause was illusory because it did not guarantee
advance notice of any modification to the terms of the arbitration agreement. See
510 S.W.3d at 696-97. The agreement in Campos limited application of revisions
of the arbitration agreement to claims based on events that took place after the
revision’s effective date, and thus to claims of which the employer necessarily did
not have notice.29 The Arbitration Agreement’s savings clause provides no similar
limitation.

28

Under the rule of orderliness, the Fifth Circuit, and thus this Court, is bound by
Lizalde unless a subsequent Texas appellate court has clearly rejected the Fifth
Circuit’s prior interpretation of Texas law. See, e.g., Nelson v. Watch House Int’l,
815 F.3d 190, 195 (5th Cir. 2016) (citing F.D.I.C. v. Abraham, 137 F.3d 264, 26869 (5th Cir. 1998)). None have done so.

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In Campos, the savings clause provided that “[r]evisions to this Policy shall only
apply prospectively. In other words, revisions will apply only to those claims
based upon actions or events that occur following the effective date of the
revisions. Unless all parties to an arbitration proceeding agree otherwise[,]
revisions to this Policy shall not apply to any arbitration proceeding that exists as
of the time that the revised Policy is issued.” Henry & Sons Const. Co. v.
Campos, 510 S.W.3d 689, 696 (Tex. App.— Corpus Christi-Edinburg 2016)
(emphasis added).
In dicta, the Campos court noted an alternative reading of this savings clause that
construes the meaning of “an action or event upon which a claim is based” as
referring to the filing of an arbitration proceeding. See id. at 696-97.

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The Court is bound and persuaded by the reasoning in Halliburton, Lizalde,
and Nelson. Halliburton held that the savings clause at issue was not illusory
partly because amendments to or termination of the arbitration agreement by the
employer would not apply to claims of which the employer had “actual notice.”
See Halliburton, 80 S.W.3d at 569-70. The Fifth Circuit therefore has concluded
that arbitration agreements failed to meet Halliburton “solely because the
agreement contained no express limitation on an employer’s power to make
unilateral changes to an arbitration agreement that have retroactive effect,”
including “changes that apply to disputes which had arisen and of which [the
employer] had notice prior to the change.” Nelson, 815 F.3d at 194 (internal
citations and quotation marks omitted).
In the present case, the Arbitration Agreement’s savings clause fails to
restrict Omni’s unilateral power to modify or terminate the arbitration agreement to
“retroactive effect” with respect to claims, such as Presta’s, of which Omni had
prior notice. See id.; Halliburton, 80 S.W.3d at 569-70. Savings clauses that fail
to do so are illusory under Halliburton and Nelson. See Nelson, 815 F.3d at 194;
Morrison, 517 F.3d at 257. The Arbitration Agreement is likewise illusory as to
this dispute.
IV.

CONCLUSION
The mandatory arbitration provision in Defendant Omni’s Arbitration
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Agreement does not contain an express limitation on Omni’s power to make
unilateral changes to the Agreement that apply to disputes that have arisen and of
which Omni had notice. It therefore renders the Arbitration Agreement illusory as
to this dispute. Accordingly, it is
ORDERED that Defendant Omni Hotels Management Corporation’s
“Motion to Dismiss, or, in the Alternative, Motion to Compel Arbitration and Stay
Litigation” [Doc. # 10] is DENIED. It is further
ORDERED that Plaintiff Lia Presta’s Motion for Partial Summary
Judgment [Doc. # 11] is GRANTED.
Signed at Houston, Texas, this __ day of July, 2017.
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NAN Y F. ATLAS
SENIOR UNI
STATES DISTRICT JUDGE

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