Bits & Pieces

J.B. Hunt Transp., Inc. v. Lester

Court of Appeals of Texas, Second District, Fort Worth

June 8, 2023, Decided

No. 02-23-00035-CV

Reporter

2023 Tex. App. LEXIS 3967 *; 2023 WL 3876758

J.B. HUNT TRANSPORT, INC., Appellant v. KIM LESTER, Appellee

Prior History: [*1] On Appeal from the 415th District Court Parker County, Texas Trial Court No. CV22-1664.

Core Terms

arbitration, trial court, arbitration agreement, motion to compel arbitration, signature, exemption, parties, scope of arbitration, benefits, delegated, waived, compel arbitration, injuries, courts

Case Summary

Overview

HOLDINGS: [1]-Where appellant appealed the denial of its motion to compel arbitration of personal injury claims, appellant met its burden to establish the existence of a valid arbitration agreement because appellant’s signed copy of the arbitration agreement established a prima facie valid arbitration agreement; [2]-Appellee’s arguments were waived under Tex. R. App. P. 33.1(a) because she first asserted them in her appellate brief and not at trial; [3]-The trial court abused its discretion in denying appellant’s motion to compel arbitration because appellant satisfied its two-pronged burden to establish both the existence of a valid arbitration agreement and that the disputed claims fell within the scope of that agreement. Appellee failed under Tex. R. App. P. 33.1(a), to timely raise a valid defense to the agreement’s enforcement.

Outcome

Judgment reversed and remanded.

LexisNexis® Headnotes

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Judicial Review

Civil Procedure > Appeals > Standards of Review > Abuse of Discretion

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Validity of ADR Methods

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Orders to Compel Arbitration

HN1 Alternative Dispute Resolution, Judicial Review

An appellate court reviews a trial court’s decision to deny a motion to compel arbitration for abuse of discretion. A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner or acts without reference to any guiding rules or principles.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Evidence > Burdens of Proof > Allocation

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Orders to Compel Arbitration

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Validity of ADR Methods

HN2 Arbitration, Arbitrability

A party seeking to compel arbitration bears the burden to establish (1) the existence of a valid arbitration agreement and (2) that the disputed claims fall within the scope of that agreement. If the party seeking arbitration meets its two-pronged burden to establish the agreement’s validity and scope, then the burden shifts to the party opposing arbitration to raise a valid defense to the agreement’s enforcement, and absent evidence supporting such a defense, the trial court must compel arbitration.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Civil Procedure > Appeals > Standards of Review > De Novo Review

Civil Procedure > Appeals > Standards of Review > Questions of Fact & Law

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Judicial Review

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Validity of ADR Methods

HN3 Arbitration, Arbitrability

A trial court’s determinations as to whether a valid arbitration agreement exists and whether the claims fall within the scope of an arbitration agreement are legal determinations subject to de novo review. Similarly, all gateway matters are questions of law that an appellate court reviews de novo. If no findings or conclusions were entered, an appellate court must uphold the trial court’s decision on any appropriate legal theory urged below. Yet, as a corollary, the appellate court is limited to considering the grounds presented to the trial court by the party resisting arbitration.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Evidence > Burdens of Proof > Allocation

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Arbitration Agreements

Business & Corporate Compliance > … > Contracts Law > Contract Conditions & Provisions > Arbitration Clauses

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Validity of ADR Methods

HN4 Arbitration, Arbitrability

Because arbitration is a matter of contract, courts must first decide whether a valid arbitration agreement exists. The party seeking arbitration has the burden to establish the existence of a valid arbitration agreement.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Business & Corporate Compliance > … > Contracts Law > Contract Conditions & Provisions > Arbitration Clauses

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Arbitration Agreements

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Validity of ADR Methods

HN5 Arbitration, Arbitrability

Generally, a written arbitration agreement is prima facie valid and must be enforced unless the opposing party alleges and proves that the arbitration clause itself was a product of fraud, coercion, or such grounds as exist at law or in equity for the revocation of the contract. In addition, the uncontested existence of the non-movant’s signature on an arbitration agreement meets the evidentiary standard necessary to prove the prima facie existence of an arbitration agreement.

Civil Procedure > Appeals > Reviewability of Lower Court Decisions > Preservation for Review

HN6 Reviewability of Lower Court Decisions, Preservation for Review

A party should not be permitted to waive, consent to, or neglect to complain about an error at trial and then surprise his opponent on appeal by stating his complaint for the first time.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Labor & Employment Law > … > Conditions & Terms > Arbitration Provisions > Enforcement

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Arbitration Agreements

Business & Corporate Compliance > … > Contracts Law > Contract Conditions & Provisions > Arbitration Clauses

HN7 Arbitration, Arbitrability

The Texas Supreme Court has never held that the employer must sign the arbitration agreement before it may insist on arbitrating a dispute with its employee. Neither the Federal Arbitration Act nor Texas law requires that arbitration clauses be signed, so long as they are written and agreed to by the parties.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

HN8 Arbitration, Arbitrability

A dispute over whether parties agreed to resolve their controversies through arbitration—referred to as a dispute over the controversies’ “arbitrability”—typically encompasses three distinct disagreements: (1) the merits of the underlying controversy; (2) whether the merits must be resolved through arbitration instead of in the courts; and (3) who (a court or the arbitrator) decides the second question. The second question must be answered before the first, but the third must be answered before the second.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Business & Corporate Compliance > … > Pretrial Matters > Alternative Dispute Resolution > Validity of ADR Methods

HN9 Arbitration, Arbitrability

As a general rule, an agreement to arbitrate in accordance with the American Arbitration Association or similar rules constitutes a clear and unmistakable agreement that the arbitrator must decide whether the parties’ disputes must be resolved through arbitration.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Civil Procedure > Judgments > Preclusion of Judgments > Res Judicata

Business & Corporate Compliance > … > Contracts Law > Contract Conditions & Provisions > Conditions Precedent

HN10 Arbitration, Arbitrability

Whether certain claims are barred by res judicata should be referred to the arbitrator. Issues of substantive arbitrability are for a court to decide, and issues of procedural arbitrability, i.e., whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the arbitrators to decide. Courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration, including the satisfaction of prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.

Business & Corporate Compliance > … > Alternative Dispute Resolution > Arbitration > Arbitrability

Evidence > Burdens of Proof > Allocation

HN11 Arbitration, Arbitrability

In determining the arbitrability of a claim, once the questions of validity and scope are resolved affirmatively, the court then considers whether any statute or policy renders the claims non-arbitrable. The party seeking to invalidate an arbitration agreement bears the burden of proof on these matters.

Admiralty & Maritime Law > Arbitration > Federal Arbitration Act

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Arbitration Agreements

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Scope

HN12 Arbitration, Federal Arbitration Act

The Federal Arbitration Act does not apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce. 9 U.S.C.S. § 1.

Business & Corporate Compliance > … > Arbitration > Federal Arbitration Act > Orders to Compel Arbitration

Civil Procedure > Appeals > Reviewability of Lower Court Decisions > Preservation for Review

Labor & Employment Law > … > Conditions & Terms > Arbitration Provisions > Enforcement

HN13 Federal Arbitration Act, Orders to Compel Arbitration

As a general rule, a party is required to present a complaint to the trial court before being allowed to raise the complaint on appeal. Tex. R. App. P. 33.1. A party must present argument to the trial court or the argument is waived and cannot be considered for the first time on appeal. Regarding waiver of the 9 U.S.C.S. § 1 exemption, the Dallas Court of Appeals has summarized the applicable law in this area: Texas courts have held that an objection to arbitration under the 9 U.S.C.S. § 1 exemption from arbitration, must be raised before the trial court rules on a motion to compel arbitration. In determining whether an employee is a transportation worker for purposes of the 9 U.S.C.S. § 1 exclusion, appellate courts review affidavit and live testimony as well as other evidence presented to the trial court. Differentiating transportation workers from those who only incidentally aid in the transport of goods is a fact intensive inquiry.

Counsel: For Kim Lester, Appellee: Bonan Link, Stephen Burris.

For J.B. Hunt Transport, Inc., Appellant: Michael C. Wright, David F. Johnson.

Judges: Before Sudderth, C.J.; Birdwell and Womack, JJ. Memorandum. Opinion by Justice Womack.

Opinion by: Dana Womack Justice

Opinion

MEMORANDUM OPINION

I. Introduction

In one issue, Appellant J.B. Hunt Transport, Inc. appeals the denial of its motion to compel arbitration of personal injury claims by Appellee Kim Lester, an employee of J.B. Hunt who was driving a tractor trailer “in tandem” with another employee-driver but who was resting when her injuries occurred. We will reverse and remand.

II. Background

On November 3, 2020, Lester was an employee of J.B. Hunt, but as alleged in her pleadings, “was not on the clock or within the course and scope of her employment” because her shift had ended and Brian McCarthy had “swapped positions as driver and operator of the tractor trailer and assumed the role of driver.” Shortly after McCarthy began driving and Lester had moved to the sleeping compartment, McCarthy performed a “hard br[ake],” causing Lester “to fly forward and collide with the metal barrier [*2] between the driving area and the resting area.” Almost two years later, Lester filed suit against J.B. Hunt and McCarthy¹ for her injuries.

J.B. Hunt answered the lawsuit and filed a plea in abatement and motion to compel arbitration. Attached to the motion were the “relevant page[s]” of the “J.B. Hunt Texas Injury Benefit Plan” (the Plan). It contained what purported to be the signatures of Lester and an unidentified person representing J.B. Hunt. The Plan required that arbitration be administered by the American Arbitration Association (AAA) and that the Federal Arbitration Act (FAA) “govern the interpretation, enforcement, and proceedings under the arbitration provisions of [the] Plan.”

As relevant to this appeal, the Plan contained the following provisions:

The Employer hereby adopts a mandatory company policy requiring that the following claims or disputes must be submitted to final and binding arbitration under this Appendix: . . . any legal or equitable claim by or with respect to an Employee for any form of physical or psychological damage, harm or death which relates to an accident, occupational disease, or cumulative trauma . . . .

The determination of whether a claim is covered by this Appendix shall also [*3] be subject to arbitration under this Appendix. Neither an Employee nor an Employer shall be entitled to a bench or jury trial on any claim covered by this Appendix. . . . This binding arbitration will be the sole and exclusive remedy for resolving any such claim or dispute.

. . . .

The arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this agreement including, but not limited to, any claim that all or any part of this agreement is void or voidable.

In the paragraph before the signature lines, the signer acknowledged that the plan included a mandatory company policy requiring that “claims or disputes relating to the cause of an on-the-job injury” be submitted to an arbitrator. Two sentences before the signature lines and in bold type were the following words: “I understand that the arbitrator, and not a judge or jury, has the exclusive authority to resolve any dispute about the enforceability of this arbitration.”

In her response to the motion, Lester argued that her claims did not fall within the scope of the arbitration agreement because she [*4] was not within the course and scope of her employment at the time of her injuries. To support her argument, she pointed to the definition of “Course and Scope of Employment” contained in the Plan: “an activity of any kind or character for which the Participant was hired and that has to do with, and originates in, the work, business, trade or profession of an Employer, and that is performed by a Participant in the furtherance of the affairs or business of an Employer.” According to the Plan, the term does not include “any injury occurring before the Participant clocks in or otherwise begins work for an Employer or after the Participant clocks out or otherwise ceases work for an Employer.” Also in her response, Lester noted that, had J.B. Hunt accepted her claim for benefits under the Plan, she may not have needed to file suit. The only evidence attached to her response was a letter from the Plan’s administrator denying Lester’s claim for benefits. The letter stated that benefits were denied (1) for failure to timely report the injury as required by the Plan and (2) for insufficient evidence to support an accident or injury in the course and scope of employment.

At the non-evidentiary [*5] hearing on the motion,² Lester did not challenge the validity of the agreement. Rather, she referred to the letter attached to her response and argued that, based on the denial of benefits under the Plan, arbitration was not required. Lester’s attorney also noted that “to protect the statute of limitations, a concurrent arbitration” had been filed with the AAA. J.B. Hunt argued that Lester did not contest the arbitration agreement and that the only issue before the court was determining whether the claim fell within the scope of the arbitration agreement. Further, J.B. Hunt asserted that the trial court did not have the authority to make the scope determination as that issue should be sent to arbitration. At the conclusion of the hearing, the trial court took the matter under advisement. Later, the trial court signed an order denying the plea in abatement and the motion to compel arbitration. J.B. Hunt appeals from that order. See Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016, 171.098(a)(1); see also 9 U.S.C. § 16(a)(1)(B), (C).

III. Discussion

In one issue, J.B. Hunt complains that the trial court erred in denying its motion to compel arbitration “because the trial court’s order permits Lester to continue to litigate her claims in derogation of a broadly-worded, [*6] mandatory arbitration provision” in the Plan.

A. Standard of Review

HN1 We review a trial court’s decision to deny a motion to compel arbitration for abuse of discretion. Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018). A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner or acts without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).

HN2 A party seeking to compel arbitration bears the burden to establish (1) the existence of a valid arbitration agreement and (2) that the disputed claims fall within the scope of that agreement. Wagner v. Apache Corp., 627 S.W.3d 277, 284 (Tex. 2021); see J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003); see also Lennar Homes of Tex. Land & Constr., Ltd. v. Whiteley, No. 21-0783, 2023 Tex. LEXIS 407, 2023 WL 3398584, at *5 (Tex. May 12, 2023). If the party seeking arbitration meets its two-pronged burden to establish the agreement’s validity and scope, then the burden shifts to the party opposing arbitration to raise a valid defense to the agreement’s enforcement, and absent evidence supporting such a defense, the trial court must compel arbitration. J.M. Davidson, Inc., 128 S.W.3d at 227-28.

HN3 A trial court’s determinations as to whether a valid arbitration agreement exists and whether the claims fall within the scope of an arbitration agreement are legal determinations subject to de novo review. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding). Similarly, all “gateway matters” are questions of law that we review de novo. Lennar Homes of Tex. Land & Constr., Ltd., 2023 Tex. LEXIS 407, 2023 WL 3398584, at *5.

Because the trial court here did not enter specific [*7] findings of fact or conclusions of law to explain its denial of the motion to compel arbitration, we infer that the trial court made all necessary findings to support its ruling. Kmart Stores of Tex., L.L.C. v. Ramirez, 510 S.W.3d 559, 565 (Tex. App.—El Paso 2016, pet. denied). And, because no findings or conclusions were entered, “we must uphold the trial court’s decision on any appropriate legal theory urged below.” APC Home Health Servs., Inc. v. Martinez, 600 S.W.3d 381, 389 (Tex. App.—El Paso 2019, no pet.) (emphasis added). “Yet, as a corollary, we are limited to considering the grounds presented to the trial court by the party resisting arbitration.” Id.

B. Analysis

In its initial appellate brief, J.B. Hunt confines its arguments to those made at the trial court, namely that Lester’s claims “fall within the broad language of the arbitration clause,” and more fundamentally, that the issue as to whether her claims fall within the scope of the arbitration provision should have been sent to the arbitrator. In response, Lester raises several arguments that were neither in her response to the motion to compel arbitration nor in her arguments at the hearing below, including the following: (1) the “contract was improperly formed” because the Plan’s signature line for J.B. Hunt contains an illegible signature and fails to state that person’s position with J.B. Hunt; (2) under [*8] a state law analysis, no valid arbitration contract was ever formed because the contract did not show that each party and its attorney signed the agreement as required by Texas Civil Practice and Remedies Code Section 171.002(c); and (3) under a federal law analysis, an interstate truck driver like Lester cannot be compelled to arbitrate her claims under 9 U.S.C. § 1. In its reply brief, J.B. Hunt argues that all of Lester’s appellate arguments, with the exception of the scope argument and the right to delegate that issue to the arbitrator, cannot be considered due to Lester’s failure to present them to the trial court. We will address these issues in turn as necessary to the disposition of this appeal.

1. Did J.B. Hunt meet its burden to establish the existence of a valid arbitration agreement?

HN4 Because arbitration is a matter of contract, courts must first decide whether a valid arbitration agreement exists. See TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico, LLC, No. 21-0028, 2023 Tex. LEXIS 315, 2023 WL 2939648, at *19 (Tex. Apr. 14, 2023) (citing Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 530, 202 L. Ed. 2d 480 (2019)). As the party seeking arbitration, the burden was on J.B. Hunt to establish the existence of a valid arbitration agreement. See Henry, 551 S.W.3d at 115.

J.B. Hunt attached to its motion a copy of the Plan containing the arbitration agreement which was purportedly signed by Lester and an individual on behalf of J.B. Hunt. In the Plan, the parties agreed that [*9] “any legal or equitable claim by or with respect to an Employee for any form of physical or psychological damage, harm or death which relates to an accident, occupational disease, or cumulative trauma” would be submitted to “final and binding arbitration.” The Plan also stated that neither party “shall be entitled to a bench or jury trial on any claim covered” by the Plan. Further, “[t]he arbitrator, and not any federal, state, or local court or agency” has the “exclusive authority to resolve any dispute” regarding the agreement or the “enforceability of this arbitration.”

HN5 Generally, a “written arbitration agreement is prima facie valid and must be enforced unless the opposing party . . . ‘allege[s] and prove[s] that the arbitration clause itself was a product of fraud, coercion, or such grounds as exist at law or in equity for the revocation of the contract.'” Knox Waste Serv., LLC v. Sherman, No. 11-19-00407-CV, 2021 Tex. App. LEXIS 8010, 2021 WL 4470876, at *2 (Tex. App.—Eastland Sept. 30, 2021, no pet.) (mem. op.) (quoting Freudensprung v. Offshore Tech., Servs., Inc., 379 F.3d 327, 341 (5th Cir. 2004) (internal quotations omitted)). In addition, the uncontested existence of the non-movant’s signature on an arbitration agreement meets the evidentiary standard necessary to prove the prima facie existence of an arbitration agreement. APC Home Health Servs, Inc., 600 S.W.3d at 390.

On appeal, Lester argues that “the signature line labeled ‘For the Employer’ [*10] contains an illegible signature and does not identify the signer, their position with J.B. Hunt, or any indication that the signer has the authority to bind J.B. Hunt.” Therefore, Lester contends that J.B. Hunt failed to show prima facie evidence of a valid arbitration agreement between the parties. However, this argument was not raised in the trial court. Therefore, it cannot be considered on appeal. See HN6 Tex. R. App. P. 33.1(a)(1) (“As a prerequisite to presenting a complaint for appellate review, the record must show that . . . the complaint was made to the trial court . . . .”); see also Pirtle v. Gregory, 629 S.W.2d 919, 920 (Tex. 1982) (stating that a party “should not be permitted to waive, consent to, or neglect to complain about an error at trial and then surprise his opponent on appeal by stating his complaint for the first time”). HN7 Even if it was not waived for failure to present it to the trial court, the supreme court has “never held that the employer must sign the arbitration agreement before it may insist on arbitrating a dispute with its employee.” In re Polymerica, LLC, 296 S.W.3d 74, 76 (Tex. 2009) (orig. proceeding); In re AdvancePCS Health, L.P., 172 S.W.3d 603, 606 (Tex. 2005) (orig. proceeding) (“[N]either the FAA nor Texas law requires that arbitration clauses be signed, so long as they are written and agreed to by the parties.”).

J.B. Hunt attached [*11] the “relevant page[s]” of the Plan to its motion to compel.³ Lester does not dispute that she signed the document. Therefore, J.B. Hunt’s signed copy of the arbitration agreement contained within the Plan established a prima facie valid arbitration agreement and satisfied J.B. Hunt’s initial burden in seeking arbitration. See Wagner, 627 S.W.3d at 284; see also In re DISH Network, L.L.C., 563 S.W.3d 433, 439 (Tex. App.—El Paso 2018, orig. proceeding).

2. Did J.B. Hunt meet its burden to establish that the disputed claims fell within the scope of that agreement?

After establishing the existence of a valid arbitration agreement, it was J.B. Hunt’s next burden to establish that the claims at issue fell within the scope of that agreement. See Henry, 551 S.W.3d at 115; see also TotalEnergies, 2023 Tex. LEXIS 315, 2023 WL 2939648, at *19.

The scope of arbitration issue was recently discussed by the Texas Supreme Court. In TotalEnergies, the court addressed a dispute over whether the parties’ contracts required them to resolve their controversies through arbitration and whether they agreed that an arbitrator, rather than the courts, must resolve that dispute. TotalEnergies, 2023 Tex. LEXIS 315, 2023 WL 2939648, at *1. In resolving the case, the court first noted:

HN8 A dispute over whether parties agreed to resolve their controversies through arbitration—referred to as a dispute over the controversies'”arbitrability”—typically encompasses three [*12] distinct disagreements: (1) the merits of the underlying controversy [ ]; (2) whether the merits must be resolved through arbitration instead of in the courts; and (3) who (a court or the arbitrator) decides the second question.

2023 Tex. LEXIS 315, [WL] at *4 (citing RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 120 (Tex. 2018)). The court stated that “[t]he second question must be answered before the first, but the third must be answered before the second.” Id. Therefore, the court began with the third question. Id.

We too begin with the third question. In the Plan at issue here, the agreement expressly provided that the “determination of whether a claim is covered” by the Plan “shall also be subject to arbitration.” Further, the “arbitrator, and not any federal, state, or local court or agency” has the “exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation” of the agreement. Finally, any arbitration under the Plan “will be administered by the [AAA] under its then-current Employment Arbitration Rules and Mediation Procedures.” Rule 6(a) of the AAA Employment Rules states, “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” [*13] Am. Arb. Ass’n, Employment Arbitration Rules & Mediation Procedures Rule 6(a) (2023), http://adr.org/sites/default/files/EmploymentRules-Web.pdf.

Lester argues that her claims do not fall within the scope of the arbitration agreement because they are not based on work-related injuries as she was off the clock and not within the course and scope of her employment when she was injured. To support her argument, Lester refers to the letter from the Plan’s administrator denying Lester’s claim for benefits. However, as noted by J.B. Hunt, the “scope of the Plan benefits for injuries and the scope of the arbitration clause are not coextensive”; rather, they are different. Regardless of the scope of the Plan benefits, the arbitration provision applies to “any legal or equitable claim by or with respect to an Employee for any form of physical or psychological damage, harm or death which relates to an accident, occupational disease, or cumulative trauma.”

HN9 In TotalEnergies, the court held that it “agree[d] with the vast majority of courts that, as a general rule, an agreement to arbitrate in accordance with the AAA or similar rules constitutes a clear and unmistakable agreement that the arbitrator [*14] must decide whether the parties’ disputes must be resolved through arbitration.” TotalEnergies, 2023 Tex. LEXIS 315, 2023 WL 2939648, at *10. The court also explained that it “need not decide whether the arbitration agreement [was] ‘sufficiently’ broad, however, because . . . any limitation contained within these parties’ arbitration agreement d[id] not affect the agreement’s clear and unmistakable delegation of arbitrability issues to the arbitrator.” 2023 Tex. LEXIS 315, [WL] at *12. And, while one party argued that the parties had “agreed to arbitrate only certain controversies and carved out others,” id., the court rejected this argument because it “ignore[d] the severability rule and conflate[d] the parties’ agreement to arbitrate disputes with their agreement to delegate arbitrability issues to the arbitrator.” 2023 Tex. LEXIS 315, [WL] at *14.

Here, the parties not only expressly referred to arbitrability pursuant to the AAA but also specifically delegated the scope issue to the arbitrator. Further, the AAA rules require the arbitrator to rule on any objections “with respect to the existence, scope or validity of the arbitration agreement.” Am. Arb. Ass’n, Employment Arbitration Rules & Mediation Procedures Rule 6(a) (2023), http://adr.org/sites/default/files/EmploymentRules-Web.pdf. Therefore, similar [*15] to the TotalEnergies arbitration agreement, objections “with respect to the existence, scope or validity of the arbitration agreement” between J.B. Hunt and Lester were delegated to the arbitrator. TotalEnergies, 2023 Tex. LEXIS 315, 2023 WL 2939648, at *3, *5, *10. We conclude that the parties here have “clearly and unmistakably” delegated the arbitrability issue to the arbitrator.⁴ See 2023 Tex. LEXIS 315, [WL] at *19.

3. Were Lester’s appellate arguments waived because she failed to present them to the trial court?

HN11 Once the questions of validity and scope are resolved affirmatively, the court then considers whether any statute or policy renders the claims nonarbitrable. See In re W. Dairy Transp., 457 S.W.3d 467, 471 (Tex. App.—El Paso 2014, no pet.). The party seeking to invalidate an arbitration agreement bears the burden of proof on these matters. Id.

As noted above, on appeal Lester presents two arguments not presented to the trial court: (1) under a federal law analysis, an interstate truck driver like Lester cannot be compelled to arbitrate her claims under 9 U.S.C. § 1,⁵ and (2) under a state law analysis, no valid arbitration contract was ever formed because the contract did not show that each party and its attorney signed the agreement as required by Texas Civil Practice and Remedies Code Section 171.002(c).

Because of these new arguments, we must initially answer the question whether Lester [*16] has preserved them for our review. HN13 As a general rule, a party is required to present a complaint to the trial court before being allowed to raise the complaint on appeal. See Tex. R. App. P. 33.1; All Am. Excavation, Inc. v. Austin Materials, LLC, No. 04-15-000779-CV, 2016 Tex. App. LEXIS 3773, 2016 WL 1464409, at *4 (Tex. App.—San Antonio Apr. 13, 2016, no pet.) (mem. op.) (stating that a party must present argument to the trial court or the argument is waived and cannot be considered for the first time on appeal). Regarding waiver of the 9 U.S.C. § 1 exemption, the Dallas Court of Appeals has summarized the applicable law in this area:

Texas courts have held that an objection to arbitration under the 9 U.S.C. § 1 exemption from arbitration must be raised before the trial court rules on a motion to compel arbitration. See Conn Appliances, Inc. v. Puente, No. 09-18-00326-CV, 2020 Tex. App. LEXIS 6410, 2020 WL 4680283, at *4 (Tex. App.— Beaumont 2020, no pet.) (mem. op.) (failure to object to arbitration procedure on the ground that 9 U.S.C. § 1 exemption applied before the trial court rules on motion to compel arbitration waived the objection); J.B. Hunt Transp., Inc. v. Hartman, 307 S.W.3d 804, 809 (Tex. App.—San Antonio 2010, no pet.) (on appeal from denial of motion to compel arbitration, court of appeals refused to consider whether 9 U.S.C. § 1 exempted the dispute from arbitration when the appellee did not assert the application of the exemption in the trial court).

Gordon v. Trucking Res., Inc., No. 05-21-00746-CV, 2022 Tex. App. LEXIS 8379, 2022 WL 16945913, at *2 (Tex. App.—Dallas Nov. 15, 2022, no pet.) (mem. op.). In determining whether an employee is a transportation worker for purposes of the 9 U.S.C. § 1 exclusion, appellate courts review affidavit and live testimony as well as other [*17] evidence presented to the trial court. See OEP Holdings, LLC v. Akhondi, 570 S.W.3d 774, 778 (Tex. App.—El Paso 2018, pet. denied) (“Differentiating transportation workers from those who only incidentally aid in the transport of goods is a fact intensive inquiry.”).

In this case, Lester first asserted the 9 U.S.C. § 1 exemption from arbitration in her appellate brief. Before the trial court, other than attaching a letter from the Plan’s administrator to her response to the motion to compel arbitration, Lester offered no evidence and made no argument regarding any matter other than scope. Because she failed to timely assert the transportation-worker exemption to the trial court, we cannot rely on that ground to affirm the trial court’s ruling.⁶ See Tex. R. App. P. 33.1(a); J.B. Hunt, 307 S.W.3d at 809 (“The issue of whether section 1 of the FAA exempts Mr. Pilat from coverage was never presented to the trial court. Therefore, we conclude this issue was not preserved for our review.”); see also Duarte v. Mayamax Rehab. Servs., L.L.P., 527 S.W.3d 249, 257-58 (Tex. App.—El Paso 2016, pet. denied) (holding that because appellants failed to timely raise the argument regarding whether arbitrator or trial court determines the validity of any arbitration agreement contained in a challenged contract, appellants waived error on this argument).

Regarding the attorney’s signature on the arbitration agreement, under state law, an arbitration agreement [*18] is generally enforceable, but if it governs a personal injury claim, the agreement must be approved and signed by both parties and their attorneys. See Tex. Civ. Prac. & Rem. Code Ann. § 171.002(b)(3); see also APC Home Health Servs., Inc., 600 S.W.3d at 391; Chambers v. O’Quinn, 305 S.W.3d 141, 147 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). Once again, this issue was not raised before the trial court. Therefore, we cannot now consider it on appeal.⁷ See Tex. R. App. P. 33.1(a).

Also on appeal, Lester alludes to other vague “contract formation” arguments and “additional bar[s]” to arbitration. She argues, without support, that “no valid arbitration contract was ever formed” between J.B. Hunt and Lester. However, again, she never raised these arguments in the trial court. Instead, her written response to the motion was limited to the “course and scope” issue, and her attorney’s argument before the trial court began with the admission that “there’s an arbitration agreement. And the arbitration clause defines whether or not that arbitration agreement is going to apply.” J.B. Hunt’s counsel echoed this understanding as he began his argument to the trial court: “The court is correct, there is an arbitration agreement. And Ms. Lester does not contest that there’s an arbitration agreement. The issue before the court today is what can this court do with respect to determining if [*19] the claim falls within the arbitration?” Because she failed to present these arguments to the trial court, Lester cannot now raise these new arguments on appeal. See Tex. R. App. P. 33.1(a).

In summary, J.B. Hunt satisfied its two-pronged burden to establish both the existence of a valid arbitration agreement and that the disputed claims fell within the scope of that agreement. See Wagner, 627 S.W.3d at 284. Lester failed to timely raise a valid defense to the agreement’s enforcement. See J.M. Davidson, Inc., 128 S.W.3d at 227-28. Therefore, the trial court abused its discretion in denying J.B. Hunt’s motion to compel arbitration. We sustain J.B. Hunt’s sole issue.

IV. Conclusion

Having sustained J.B. Hunt’s sole issue, we reverse and remand for entry of an order compelling arbitration and staying the proceedings in the trial court pending completion of the arbitration proceedings. See Mid-Am. Apts., L.P. v. Trojan, No. 02-21-00204-CV, 2021 Tex. App. LEXIS 8776, 2021 WL 5028794, at *7 (Tex. App.—Fort Worth Oct. 28, 2021, no pet.) (mem. op.).

/s/ Dana Womack

Dana Womack

Justice

Delivered: June 8, 2023

End of Document

¹McCarthy is neither a party to this appeal nor a party to the underlying motion to compel arbitration.

²Whether or not an evidentiary hearing should be held depends on the circumstances. In re MP Ventures of S. Tx., Ltd., 276 S.W.3d 524, 528 n.4 (Tex. App.— San Antonio 2008, orig. proceeding). If material facts are uncontroverted, the trial court may decide whether to compel arbitration based on the affidavits, pleadings, discovery, and stipulations. Id. (citing Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269 (Tex. 1992) (orig. proceeding)). The trial court is only required to hold a hearing to resolve disputed facts. Id.

³On appeal, in her Statement of Facts, Lester for the first time states that “the record does not contain the whole contract (the Plan), only excerpts.” To the extent that this can be interpreted as an argument supporting the trial court’s ruling, the argument was never raised before the trial court and cannot be considered on appeal. See Tex. R. App. P. 33.1(a).

⁴In her appellate brief, Lester contends that “[t]o coerce the parties to arbitrate what they have not agreed to arbitrate would fly in the face of fairness,” and, under the doctrine of estoppel or quasi-estoppel, “a party seeking benefits from a contract cannot also avoid the burdens of a contract.” While Lester states that she made this argument below, it was only in her written response and was contained within her “course and scope” argument, where she stated that J.B. Hunt should be “estopped from taking the polar opposite position that [Lester’s] claims [were] within the course and scope of employment after all and must therefore be subject to arbitration.” Lester cited no authority below in support of this argument, and she did not raise it at the hearing on the motion to compel arbitration. HN10 Nevertheless, we have previously determined that whether certain claims are barred by res judicata should be referred to the arbitrator. Robinson v. Home Owners Mgmt. Enters. Inc., No. 02-20-00215-CV, 2021 Tex. App. LEXIS 1877, 2021 WL 924839, at *16 (Tex. App.—Fort Worth Mar. 11, 2021, pet. denied) (mem. op.). In making that decision, we relied on both United States Supreme Court and Texas Supreme Court precedent. See 2021 Tex. App. LEXIS 1877, [WL] at *5 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S. Ct. 588, 592, 154 L. Ed. 2d 491 (2002) (stating that “issues of substantive arbitrability . . . are for a court to decide[,] and issues of procedural arbitrability, i.e., whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the arbitrators to decide”) (emphasis added); and G.T. Leach Builders, L.L.C. v. Sapphire V.P., LP, 458 S.W.3d 502, 521 (Tex. 2015) (stating that courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration, including “the satisfaction of ‘prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate'”) (emphasis added) (quoting BG Grp., PLC v. Republic of Argentina, 572 U.S. 25, 34-35, 134 S. Ct. 1198, 1206-07, 188 L. Ed. 2d 220 (2014))). Similarly, we conclude here that any procedural matter relating to estoppel or quasi-estoppel should be decided by the arbitrator.

⁵HN12 The FAA does not apply “to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1; see Circuit City Stores v. Adams, 532 U.S. 105, 112, 121 S. Ct. 1302, 1307, 149 L. Ed. 2d 234 (2001).

⁶In its reply brief, J.B. Hunt argues that, even if not waived, the transportation-worker exemption does not apply in this case because the exemption applies only to “contracts of employment” and this was “an ERISA employee benefit plan that provides for certain non-fringe disability, death, dismemberment, and health care benefits.” See 9 U.S.C. § 1; see also In re Mission Petroleum Carriers, Inc., No. 13-04-00550-CV, 2005 Tex. App. LEXIS 1108, 2005 WL 326848, at *2 (Tex. App.—Corpus Christi—Edinburg, Feb. 11, 2005, orig. proceeding) (mem. op.) (stating that the transportation-worker exemption did not apply because “the arbitration clause at issue [was] found in the Mission employee health and safety plan, rather than an employment contract”). Because we conclude that this issue was not raised before the trial court, we need not address this alternative argument.

⁷In its reply brief, J.B. Hunt argues that the dual signature argument is meritless because the FAA, not the TAA, applies in this situation. J.B. Hunt avoids the Texas statute if the FAA—9 U.S.C. §§ 1-16—applies, because the FAA preempts conflicting state law. APC Home Health Servcs., Inc., 600 S.W.3d at 391. Here, the Plan specifically provided that the FAA would control: “The Federal Arbitration Act shall govern the interpretation, enforcement, and proceedings under the arbitration provisions of this Plan.” See Perry v. Thomas, 482 U.S. 483, 489, 107 S. Ct. 2520, 2525, 96 L. Ed. 2d 426 (1987) (stating that the FAA applies when the dispute concerns a “contract evidencing interstate commerce”). While the arbitrator could apply the substantive law of Texas, the arbitrator specifically could not apply the “Texas General Arbitration Act.” Where the FAA applies, the signature of counsel is not a prerequisite to enforcement of an arbitration agreement. See In re Nexion Health at Humble, Inc., 173 S.W.3d 67, 70 (Tex. 2005) (orig. proceeding) (“Because the TAA is preempted by the FAA in this case, the signature of Marjorie’s counsel was not a prerequisite to enforcement of the arbitration agreement.”). However, as in the transportation-worker-exemption argument, we need not address this alternative argument because it was not raised before the trial court.

A&R Logistics, Inc. v. American Zurich Ins. Co.

A&R LOGISTICS, INC., Plaintiff-Appellant,

AMERICAN ZURICH INSURANCE COMPANY and ZURICH AMERICAN INSURANCE COMPANY, Defendants-Appellees.

No. 1-22-1256

Order filed April 26, 2023

Appeal from the Circuit Court of Cook County.

Nos. 18 CH 4410, 18 CH 4471

Honorable Sophia H. Hall and Clare J. Quish, Judges, presiding.

ORDER

JUSTICE BURKE delivered the judgment of the court.

*1 ¶ 1 Held: We affirm the circuit court’s dismissal of plaintiff’s second amended complaint with prejudice pursuant to section 2-615 of the Code of Civil Procedure because a choice-of-law analysis establishes that Illinois law applies to this case, and plaintiff only alleged claims under West Virginia law.

¶ 2 Plaintiff, A&R Logistics, Inc. (A&R), sued defendants, American Zurich Insurance Company (American) and Zurich American Insurance Company (Zurich), for claims arising out of American’s denial of coverage for a workplace injury lawsuit that one of A&R’s employes filed against A&R in West Virginia.¹ The circuit court dismissed A&R’s second amended complaint pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2014)), finding that, under a choice-of-law analysis, Illinois law applies to this case and A&R cannot prevail under Illinois law. On appeal, A&R argues that (1) West Virginia law and Illinois law would produce different outcomes in this case and West Virginia law applies, (2) the circuit court erroneously decided the section 2-615 motion to dismiss on the merits of the case rather than on the face of the complaint, (3) two counts of the complaint should not have been dismissed because they stated claims under Illinois law, and (4) the circuit court should have granted A&R leave to amend the complaint rather than dismissing it. For the following reasons, we affirm.

¶ 3 I. BACKGROUND

¶ 4 Christopher Toth was employed as a truck driver at an A&R facility in West Virginia. In 2014, he was injured while unloading his truck during a delivery in Ohio.² Toth filed a workers’ compensation claim in West Virginia, which A&R settled. He also filed a lawsuit against A&R in West Virginia state court, which was removed to the United States District Court for the Southern District of West Virginia. Toth’s lawsuit against A&R was based on the deliberate intention exception to the West Virginia Workers’ Compensation Act, which allows an employee to sue his employer, in addition to collecting workers’ compensation, if the employer acted with “deliberate intention” in causing the employee’s injury (W. Va. Code Ann. § 23-4-2(d)(2) (West 2014)). A&R settled Toth’s lawsuit and incurred at least $380,000 in defense costs and settlements between Toth’s worker’s compensation claim and his lawsuit.

¶ 5 American insured A&R under a workers’ compensation and employer liability policy (the WC policy). The WC policy states that American has a duty to defend A&R for “any claim, proceeding or suit” against A&R for benefits payable under the policy. In turn, the policy covers “bodily injury by accident” sustained by A&R’s employees, but not “[b]odily injury intentionally caused or aggravated by [A&R].” In addition, a form entitled “West Virginia Employers Liability Insurance Intentional Act Exclusion Endorsement” (the intentional act exclusion) excludes from coverage “bodily injury intentionally caused or aggravated by [A&R] or which is the result of [A&R’s] engaging in conduct equivalent to an intentional tort, however defined, including by [A&R’s] deliberate intention as that term is defined by W. Va. Code § 23-4-2(d)(2).”

*2 ¶ 6 Zurich insured A&R under a commercial general liability policy (the CGL policy). The CGL policy contains a section titled “Stop Gap Employers Liability Coverage,” which states that Zurich has a duty to defend A&R in any lawsuit seeking damages for “bodily injury by accident” sustained by A&R’s employees. The CGL policy excludes from coverage bodily injury “intentionally caused or aggravated by A&R.” The policy also states that, “[f]or injury to ‘employees’ subject to West Virginia Workers’ Compensation Laws, this exclusion applies only if the act causing or aggravating the injury is of deliberate intent as defined by SB744 paragraph (2)(ii).”

¶ 7 A&R tendered Toth’s lawsuit to defendants and requested coverage in the form of defense and indemnification. American denied coverage under the WC policy based on the intentional act exclusion, but Zurich provided coverage under the CGL policy. Zurich conceded that the intentional injury exclusion in the CGL policy had become unenforceable due to the West Virginia Supreme Court’s decision in First Mercury Insurance Co. v. Russell, 239 W. Va. 773 (2017). According to A&R, defendants took this approach because the CGL policy has a higher deductible than the WC policy, so coverage under the CGL policy is more favorable to defendants and less favorable to A&R.

¶ 8 A&R subsequently filed this lawsuit against defendants in the circuit court of Cook County. A&R’s second amended complaint, which is at issue in this appeal, alleged that West Virginia law applies to this dispute and governed both the WC policy and the CGL policy. A&R alleged that the WC policy’s intentional act exclusion had been rendered unenforceable by the West Virginia Supreme Court in Russell. Count I of the complaint sought declaratory judgment that, under the WC policy, American owed a duty to provide coverage to, defend, and indemnify A&R for Toth’s lawsuit. Count II alleged breach of contract for American’s failure to provide coverage under the WC policy. Count III alleged breach of the implied covenant of good faith and fair dealing. Count IV alleged that American violated “West Virginia insurance regulations, standards and laws.”

¶ 9 Defendants filed a section 2-615 motion to dismiss the second amended complaint. They argued that A&R failed to allege a claim for which relief could be granted because all of A&R’s claims were premised on the application of West Virginia law, but A&R had not pled any facts to support the application of West Virginia law instead of Illinois law. In response, A&R argued that West Virginia law applied because “the incident giving rise to this coverage dispute stems from an accident at A&R’s West Virginia terminal, the workers’ compensation claim at issue was governed by West Virginia law and the exclusion (wrongly) relied upon by American [ ] is specific only to West Virginia’s employer’s liability claims.”

¶ 10 The circuit court performed a choice-of-law analysis and concluded that the WC policy’s intentional act exclusion would not be unenforceable in West Virginia under Russell, and “[t]here is no dispute that the Intentional Act Exclusion is valid under Illinois law.” Therefore, the circuit court concluded, West Virginia law and Illinois law would produce the same result, Illinois law applied, and the intentional act exclusion supported American’s denial of coverage. Because American had no duty to provide coverage, the court dismissed count I, and dismissed the remaining counts as moot. The dismissal was with prejudice.

¶ 11 A&R filed a motion to reconsider, arguing that its counts for declaratory relief and breach of contract stated claims under Illinois law, so the circuit court either should not have dismissed them or should have allowed A&R to replead them. Defendants responded that A&R forfeited its argument that those counts stated claims under Illinois law because it did not make that argument in response to the motion to dismiss, and because the second amended complaint explicitly alleged that West Virginia law applied. Defendants also argued that A&R necessarily took the position that the intentional act exclusion was unenforceable under West Virginia law, but enforceable under Illinois law, because that was the only way the two states’ laws could produce different outcomes such that West Virginia law could apply to this case. The circuit court denied A&R’s motion to reconsider, finding that A&R forfeited its argument that Illinois law applied to the counts for declaratory relief and breach of contract because it raised that argument for the first time in its motion to reconsider.

*3 ¶ 12 A&R timely appealed.

¶ 13 II. ANALYSIS

¶ 14 On appeal, A&R challenges the circuit court’s rulings on four grounds. First, A&R contends that the circuit court’s choice-of-law analysis was incorrect because Illinois and West Virginia laws would lead to different outcomes, and West Virginia law should apply. Second, A&R argues that the circuit court erred by deciding defendants’ section 2-615 motion to dismiss on the merits of A&R’s claims rather than the sufficiency of the second amended complaint on its face. Third, A&R argues that its counts for declaratory relief and breach of contract should not have been dismissed because they stated claims under Illinois law. Finally, A&R contends that the circuit court should have allowed A&R to file a third amended complaint rather than dismissing this case with prejudice.

¶ 15 A. Choice-of-Law

¶ 16 The central dispute of this appeal is whether Illinois law or West Virginia law applies to A&R’s claims. Our resolution of this issue will govern the resolution of this appeal as a whole. A&R argues that the application of Illinois law would produce a different outcome than the application of West Virginia law, and that West Virginia law should control.

¶ 17 We review the circuit court’s choice-of-law determination de novo (Townsend v. Sears, Roebuck and Co., 227 Ill. 2d 147, 153 (2007)), which means that we perform the same analysis as the circuit court (Khan v. BDO Seidman, LLP, 408 Ill. App. 3d 564, 578 (2011)). We apply Illinois’ choice-of-law rules, and the first step in Illinois’ choice-of-law analysis is to determine whether the application of different states’ laws would produce different outcomes. Townsend, 227 Ill. 2d at 155. A choice-of-law determination is only required when the party seeking that determination establishes an actual conflict between two states’ laws. Bridgeview Health Care Center, Ltd. v. State Farm Fire & Cas. Co., 2014 IL 116389, ¶ 25; see also Townsend, 227 Ill. 2d at 155 (“A choice-of-law determination is required only when a difference in law will make a difference in the outcome.”). If the outcome would be the same under the laws of either state, then Illinois law applies as the law of the forum. Chicago Board Options Exchange, Inc. v. International Securities Exchange, 2012 IL App (1st) 102228, ¶ 44.

¶ 18 1. West Virginia Law

¶ 19 The West Virginia Workers’ Compensation Act provides immunity to employers for employees’ lawsuits alleging work-related injuries. Smith v. Apex Pipeline Services, Inc., 230 W. Va. 620, 627 (2013); W. Va. Code Ann. § 23-2-6 (West 2014). However, an employer does not have immunity from suit when it acts with deliberate intention to cause the employee’s injury. Smith, 230 W. Va. at 627; W Va. Code Ann. § 23-4-2(d)(2) (West 2014). In that case, the employee may sue his employer for damages in addition to collecting workers’ compensation benefits. Smith, 230 W. Va. at 627; W. Va. Code Ann. §§ 23-4-6 and 2(c) (West 2014). To establish deliberate intention in West Virginia, an employee must prove that (1) an unsafe working condition with a high degree of risk and a strong probability of serious injury or death existed, (2) the employer had actual knowledge of the unsafe working condition, (3) the unsafe working condition violated a state or federal safety statute or commonly accepted industry standard, (4) the employer exposed the employee to the unsafe condition, and (5) the employee suffered serious compensable injury or death. Smith, 230 W. Va. at 628; W. Va. Code Ann. § 23-4-2(d)(2)(ii)(A-E) (West 2014).

*4 ¶ 20 Toth alleged a deliberate intention theory in his lawsuit against A&R, and American denied coverage under the WC policy’s intentional act exclusion. In West Virginia, “[a]n insurance company seeking to avoid liability through the operation of an exclusion has the burden of proving the facts necessary to the operation of that exclusion.” (Internal quotations and citations omitted.) State ex rel. Nationwide Mut. Ins. Co. v. Wilson, 236 W. Va. 228, 236 (2015) However, “[w]here the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended.” (Internal quotations and citations omitted.) Cherrington v. Erie Insurance Property and Casualty Co., 231 W. Va. 470, 486 (2013).

¶ 21 The language of the WC policy and the intentional act exclusion is unambiguous. The endorsement at issue is titled “Intentional Act Exclusion,” and it states that the WC policy does not cover an injury to an employee “which is the result of [A&R’s] engaging in conduct equivalent to an intentional tort, however defined, including by [A&R’s] deliberate intention as that term is defined by W. Va. Code § 23-4-2(d)(2).” That language precisely describes Toth’s lawsuit against A&R. Toth’s complaint, which is attached to A&R’s second amended complaint, alleged one count for deliberately intentional injury under section 23-4-2(d)(2). The West Virginia Supreme Court has held that an insurer can, under a workers’ compensation and employers’ liability policy, properly exclude coverage for an employee’s lawsuit alleging deliberate intention pursuant to section 23-4-2. W. Va. Employers’ Mutual Insuranc. Co. v. Summit Point Raceway Associates, 228 W. Va. 360, 371-73 (2011). So, West Virginia law would find that American’s denial of coverage under the WC policy was proper because the language of the intentional act exclusion unambiguously excludes coverage for Toth’s deliberate intent lawsuit under section 23-4-2.

¶ 22 A&R argues that American’s denial of coverage would be improper under the West Virginia Supreme Court’s decision in Russell. In that case, Jeffrey Russell, an employee of Kimes Steel, was injured in a workplace accident and sued the company, alleging that Kimes Steel acted with deliberate intention as defined in section 23-4-2. Russell, 239 W. Va. at 776. Kimes Steel was insured under a commercial general liability policy issued by First Mercury, which excluded from coverage employees’ claims of bodily injury. Id. However, the commercial general liability policy also contained an endorsement titled “Stop Gap – Employers Liability Coverage Endorsement – West Virginia,” which covered any damages that Kimes Steel was obligated to pay due to employees’ claims of bodily injury by accident. Id. at 776-78. First Mercury denied coverage for Russell’s lawsuit against Kimes Steel and the parties filed claims against each other arising out of that denial of coverage. Id. at 776. A West Virginia circuit court granted summary judgment for Kimes Steel, finding that the stop gap endorsement was ambiguous as to whether it covered Russell’s deliberate intent action, and that Kimes Steel had a reasonable expectation of coverage for Russell’s claims. Id. at 777.

¶ 23 The West Virginia Supreme Court agreed that the stop gap endorsement was ambiguous. Id. at 780. The court explained that, under West Virginia law, “stop gap” provisions are intended to provide “coverage for employers when employees are able to bring an action for injury despite workers’ compensation immunity.” Id. at 778 (citing Erie Insurance Property and Casualty Co. v. Stage Show Pizza, JTS, Inc., 210 W. Va. 63, 68 (2001)). So, the “Stop Gap” heading indicated coverage for Russell’s action alleging deliberately intentional injury, yet the body of the endorsement only provided coverage for bodily injury by accident and attempted to exclude coverage for injury caused by Kimes Steel’s deliberate intention. Id. at 778-79. This contradiction created an ambiguity that had to be construed in favor of coverage. Id. at 779. The West Virginia Supreme Court affirmed summary judgment in favor of Kimes Steel. Id. at 780.

*5 ¶ 24 A&R argues that Russell means that the WC policy’s intentional act exclusion is unenforceable in this case. However, the differences between Russell and this case are readily apparent. In Russell, the insurer denied coverage under a commercial general liability policy for the insured company’s employee’s lawsuit alleging deliberate workplace injury. In this case, Zurich accepted coverage under the CGL policy for Toth’s lawsuit alleging deliberate workplace injury. American denied coverage under the WC policy, a type of policy that was not at issue in Russell. Moreover, in Russell, the intentional injury exclusion was unenforceable because it was ambiguous when read with the stop gap endorsement as a whole. In this case, A&R does not argue that the WC policy or the intentional act exclusion are ambiguous. Unlike the stop gap endorsement in Russell, nothing in the WC policy or the intentional act exclusion suggests that American would provide coverage for a deliberately intentional injury or a lawsuit alleging one. Russell does not stand for a general principle of West Virginia law that means that the intentional act exclusion in this case is unenforceable.³ Accordingly, we find that West Virginia law would hold that American properly denied coverage under the unambiguous language of the WC policy’s intentional act exclusion.

¶ 25 2. Illinois Law

¶ 26 The Illinois Workers’ Compensation Act (820 ILCS 305/1 et seq. (West 2014)) makes workers’ compensation benefits the exclusive remedy for injuries arising out of the course of employment. Garland v. Morgan Stanley & Co., Inc., 2013 IL App (1st) 112121, ¶ 24. However, an employee can sue his employer, in addition to seeking workers’ compensation, when the employer deliberately injures the employee. Id. ¶¶ 25-29. An employee who brings an intentional tort claim against his employer must allege that the defendant acted deliberately with the specific intent to injure him. Id. ¶ 29.

¶ 27 In Illinois, a court must give the clear and unambiguous words of an insurance policy their plain, ordinary, and popular meaning. Empire Indemnity Insurance Co. v. Chicago Province of Society of Jesus, 2013 IL App (1st) 112346, ¶ 33. By contrast, if the policy’s language is susceptible to multiple reasonable interpretations, then it is ambiguous and must be strictly construed in favor of coverage. Id. However, a court must not strain to find ambiguity where none exists. Id. “ ‘To determine whether the insurer has a duty to defend the insured, the court must look to the allegations in the underlying complaint and compare these allegations to the relevant provisions of the insurance policy.’ ” Id. ¶ 34 (quoting Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 107-08 (1992)). If the underlying complaint alleges facts that fall within, or even potentially within, coverage, then the insurer must defend the insured even if the allegations are groundless, false, or fraudulent. Empire Indemnity, 2013 IL App (1st) 112346, ¶ 34. An insurer can only refuse to defend a lawsuit against the insured if it is clear from the face of the underlying complaint that the allegations fail to state facts that bring the case within, or potentially within, the policy’s coverage. Id. In determining whether the allegations in the underlying complaint meet that threshold, both the underlying complaint and the insurance policy must be liberally construed in favor of coverage. Id. ¶ 35. Phrases in the underlying complaint such as “intentionally” or “willfully” indicate intentional conduct to which an exclusionary clause for intentional conduct applies. Illinois State Bar Ass’n Mutual Insurance Co. v. Leighton Legal Group, LLC, 2018 IL App (4th) 170548, ¶ 38.

¶ 28 Toth’s underlying lawsuit alleged that A&R “deliberately formed the intention to produce the specific result of the injuries suffered by” him. (Emphasis added.) The WC policy states that it does not cover claims for “[b]odily injury intentionally caused or aggravated by [A&R].” Moreover, the intentional act exclusion states that it does not cover claims alleging an injury to an employee “which is the result of [A&R’s] engaging in conduct equivalent to an intentional tort.” (Emphasis added.). Toth’s lawsuit plainly alleged intentional misconduct by A&R that caused his injury, and both the WC policy and the intentional act exclusion unambiguously exclude such a claim from coverage. Illinois law would produce the same result as West Virginia law; namely, that American properly denied coverage under the WC policy. Because the two states’ laws would produce the same result, Illinois law applies as the law of the forum. See Chicago Board Options Exchange, 2012 IL App (1st) 102228, ¶ 44.

*6 ¶ 29 A&R argues that Illinois law and West Virginia law would produce different outcomes because there are “differences in the two states’ workers’ compensation statutory schemes.” We express no opinion on whether that is accurate. In any event, what matters is whether American’s denial of coverage would be improper under West Virginia law, yet proper under Illinois law. That is the only scenario that could produce a choice-of-law conflict that would result in West Virginia law applying to this case. However, as explained above, American’s denial of coverage would be proper under both states’ laws because the language of the WC policy and the intentional act exclusion are unambiguous. Therefore, Illinois law applies. A&R’s second amended complaint explicitly alleged that it sought relief under West Virginia law, stated no claims under Illinois law, and alleged no facts that would render the intentional act exclusion unenforceable in Illinois. Critically, A&R did not allege that the WC policy or the intentional act exclusion were unenforceable because they were ambiguous. A&R only alleged that the intentional act exclusion was unenforceable due to the West Virginia Supreme Court’s decision in Russell. Accordingly, A&R stated no claims for which relief could be granted under Illinois law, and we affirm the circuit court’s dismissal of the second amended complaint.

¶ 30 B. Dismissal Pursuant to Section 2-615

¶ 31 A&R next argues that the circuit court erred “because it decided the case on the merits, which is improper on a motion to dismiss under Section 2-615.” According to A&R, the circuit court should have instead analyzed the sufficiency of A&R’s claims on the face of the second amended complaint. The circuit court’s ruling was based on its choice-of-law analysis, which concluded that Illinois law applies to this dispute. This argument essentially presents the question of whether the circuit court properly resolved a section 2-615 motion to dismiss based on a choice-of-law analysis.

¶ 32 A section 2-615 motion to dismiss challenges the legal sufficiency of the complaint. Jane Doe-3 v. McLean County Unit District No. 5 Board of Directors, 2012 IL 112479, ¶ 15. The question is whether the facts alleged, viewed in the light most favorable to the plaintiff, and taking all well-pleaded facts and reasonable inferences as true, are sufficient to state a cause of action for which relief may be granted. Id. ¶ 16. The circuit court should only grant a section 2-615 motion to dismiss if no set of facts can be proved that would entitle the plaintiff to recovery. Id.

¶ 33 The alternative to a section 2-615 motion to dismiss is a section 2-619 motion to dismiss. A section 2-619 motion “ ‘admits the legal sufficiency of the plaintiff’s complaint but raises defects, defenses, or other affirmative matters that appear on the complaint’s face or that are established by external submissions acting to defeat the complaint’s allegations.’ ” Guarantee Trust Life Insurance Co. v. Kribbs, 2016 IL App (1st) 160672, ¶ 27 (quoting Burton v. Airborne Express, Inc., 367 Ill. App. 3d 1026, 1029 (2006)). Our review is de novo under either section 2-615 or 2-619. Patrick Engineering, Inc. v. City of Naperville, 2012 IL 113148, ¶ 31.

¶ 34 Caselaw regarding whether choice-of-law issues should be resolved under section 2-615 or 2-619 is limited. Our supreme court has indicated “choice of law [is] an affirmative matter” under section 2-619. Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 487 (1994) (citing Ingersoll v. Klein, 46 Ill. 2d 42 (1970)). More recently, the Fourth District concluded that choice-of-law issues “are properly considered and addressed in the context of a section 2-619 motion to dismiss, where a trial court may consider pleadings, depositions, and affidavits when making its ruling *** rather than in the context of a section 2-615 motion, where only the pleadings may be considered.” (Internal citation omitted.) Perkinson v. Courson, 2018 IL App (4th) 170364, ¶ 37. This is because the choice-of-law analysis often raises factual issues that cannot be resolved on the face of the complaint alone. Id. However, we have also affirmed a circuit court’s choice-of-law analysis concluding that Illinois law applies in the context of a section 2-615 motion. Miller v. Hayes, 233 Ill. App. 3d 847, 848 (1992).

¶ 35 Defendants’ motion to dismiss and the circuit court’s order granting it cited only section 2-615. That approach was proper. See id. The second amended complaint alleged sufficient facts to address the choice-of-law issue. A&R’s alleged that Toth was a West Virginia resident employed in West Virginia, that he was injured in Ohio, and that both his workers’ compensation claim and his lawsuit against A&R were filed and settled in West Virginia. It also alleged that A&R is an Illinois corporation with its principal place of business in Kentucky, that American is an Illinois corporation with its principal place of business in Illinois, and that Zurich is a New York corporation with its principal place of business in Illinois. Defendants do not appear to dispute any of these allegations. While choice-of-law issues sometimes raise factual questions that must be addressed with materials outside the pleadings, that is not the case here.

*7 ¶ 36 A&R argues that the circuit court did not identify defects apparent on the face of the second amended complaint and instead “jump[ed] straight to resolving the declaratory judgment issue on its merits.” Even if the circuit court treated the enforceability of the intentional act exclusion more like an affirmative matter that defeated A&R’s claims, we need not reverse on that basis. Dismissal under section 2-615 is warranted as well. See Coghlan v. Beck, 2013 IL App (1st) 120891, ¶ 24 (we review the judgment, not the reasoning, of the circuit court, and may affirm on any grounds in the record, regardless of whether the circuit court relied on those grounds or whether the circuit court’s reasoning was correct). A&R’s complaint alleged that West Virginia law applies to this case. It contained a section titled “Choice of Law,” which alleged that “West Virginia law applies to this coverage dispute.” The complaint also alleged that Russell rendered the WC policy’s Intentional Act Exclusion unenforceable. However, the circuit court correctly concluded that Illinois law applies to this case. A&R did not allege that the intentional act exclusion was unenforceable for any reason in Illinois, so it failed to state any grounds upon which relief could be granted in Illinois. That is precisely the section 2-615 analysis. See Doe-3, 2012 IL 112479, ¶ 16. Accordingly, we find that the circuit court’s dismissal of the second amended complaint pursuant to section 2-615 was appropriate.

¶ 37 C. Counts I and II Under Illinois Law

¶ 38 A&R next argues that count I, seeking declaratory judgment, and count II, alleging breach of contract, “are cognizable causes of action under Illinois law” and should not have been dismissed.⁴ Defendants maintain that A&R forfeited this argument by raising it for the first time in its motion to reconsider the dismissal of the second amended complaint. The circuit court agreed and denied the motion to reconsider based in part on A&R’s forfeiture of this argument.

¶ 39 “The purpose of a motion to reconsider is to bring to a court’s attention: (1) newly discovered evidence; (2) changes in the law; or (3) errors in the court’s previous application of existing law.” Liceaga v. Baez, 2019 IL App (1st) 181170, ¶ 25. A new legal theory cannot serve as the basis of a motion to reconsider. Id. So, a legal theory that was not advanced previously is forfeited. Id. We agree that A&R forfeited its argument that count II stated a claim under Illinois law because A&R made that argument for the first time in its motion to reconsider. See Evanston Insurance Co. v. Riseborough, 2014 IL 114271, ¶ 36 (“Arguments raised for the first time in motion for reconsideration in the circuit court are forfeited on appeal.”). But that is not true of count I. A&R’s response to defendants’ motion to dismiss the second amended complaint included a footnote stating that “[i]t is self-evident that the pleading requests relief in an Illinois court pursuant to the Illinois Declaratory Judgment Act.” That is sufficient to avoid forfeiture. See Tabora v. Gottlieb Memorial Hospital, 279 Ill. App. 3d 108, 114 (1996) (a footnote can be enough to avoid forfeiture).

¶ 40 However, that argument fails on the merits. Count I of the second amended complaint made no mention of Illinois law or the Illinois Declaratory Judgment Act (735 ILCS 5/2-701 (West 2014)). The complaint repeatedly alleged that West Virginia law governs this coverage dispute, going so far as to have a separate section dedicated to that proposition. As noted above, A&R alleged the intentional act exclusion is unenforceable only because of Russell, not because of ambiguity or any other issue in Illinois law.⁵ Illinois is a fact pleading jurisdiction, so we cannot infer through liberal construction that A&R meant to plead count I under Illinois law when the complaint explicitly alleged that West Virginia law applies. See Lake County Grading Co. of Libertyville, Inc. v. Advance Mechanical Contractors, Inc., 275 Ill. App. 3d 452, 456-57 (1995). Moreover, even if A&R had not forfeited its argument with respect to count II, that argument would fail on the merits for the same reasons. Count II alleged that American breached the insurance agreement by enforcing the intentional act exclusion when that exclusion had, in A&R’s view, been rendered unenforceable due to Russell. A West Virginia Supreme Court decision cannot serve as the basis for a breach of contract claim under Illinois law. Accordingly, we find that count I of the second amended complaint did not plead a claim for declaratory relief under Illinois law.

¶ 41 D. Leave to Amend

*8 ¶ 42 Finally, A&R contends that the circuit court’s dismissal of the second amended complaint was a harsh result, and that it should have allowed A&R to amend its complaint. “The decision whether to grant leave to amend a complaint rests within the sound discretion of the circuit court, and its decision will not be reversed absent an abuse of that discretion.” Atlas v. Mayer Hoffman McCann, P.C., 2019 IL App (1st) 180939, ¶ 39. To determine whether the circuit court abused its discretion in not granting leave to amend a pleading, we consider (1) whether the proposed amendment would cure any defects in the pleading, (2) whether the party opposing the amendment would be prejudiced, (3) the timeliness of the proposed amendment, and (4) whether the party seeking leave to amend had previous opportunities to amend. Abramson v. Marderosian, 2018 IL App (1st) 180081, ¶ 30 (citing Loyola Academy v. S & S Roof Maintenance, Inc., 146 Ill. 2d 263, 273 (1992)).

¶ 43 These factors lead us to conclude that the circuit court did not abuse its discretion in not allowing A&R to file a third amended complaint. Presumably, A&R would have amended counts I and II to plead them under Illinois law instead of West Virginia law. Even if this amendment would have cured facial defects of the complaint, it would have been untimely and prejudicial to defendants. From the outset of this case, defendants recognized that A&R was asking an Illinois court to enforce only West Virginia law and moved to dismiss A&R’s first three complaints. A&R was on notice that its choice-of-law argument might not be successful, and it could have pled alternative legal theories even if they were inconsistent. See Bureau Service Co. v. King, 308 Ill. App. 3d 835, 841 (1999); 735 ILCS 5/2-613(b) (West 2014) (allowing pleading in the alternative “regardless of consistency”). However, A&R never pled any grounds for relief under Illinois law. It was reasonable for the circuit court to conclude that A&R did not intend to seek relief under Illinois law and to dismiss the complaint rather than allowing A&R to amend yet again. Accordingly, we affirm the dismissal of A&R’s second amended complaint with prejudice.

¶ 44 III. CONCLUSION

¶ 45 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.

¶ 46 Affirmed.

Presiding Justice McBride and Justice Reyes concurred in the judgment.

All Citations

Not Reported in N.E. Rptr., 2023 IL App (1st) 221256-U, 2023 WL 3093577

Footnotes

A&R filed two separate lawsuits against American and Zurich, which were consolidated in the circuit court. According to A&R’s second amended complaint, American and Zurich are related insurance companies under common control. Defendants state that they are two different insurance carriers that are commonly owned and managed.
We refer to A&R by its name instead of “plaintiff” to avoid confusion between the plaintiff in this lawsuit and Toth, the plaintiff in his workplace injury lawsuit against A&R.
Our research indicates that Russell has not been extended to the language of any insurance policy aside from the policy that was before the West Virginia courts in that case.
A&R’s reply brief acknowledges that count III, alleging a breach of the implied covenant of good faith, and count IV, alleging violations of West Virginia insurance law, “require the application of West Virginia law to avoid dismissal since they are not viable causes of action under Illinois law.”
A&R’s reply brief states that A&R “is prepared to argue that the [Intentional Act] Exclusion would also be unenforceable under Illinois law for several reasons, including that the plain language of the Exclusion means it is only intended to apply to claims brought under West Virginia Workers’ Compensation Laws.” The second amended complaint did not allege that. In any event, the WC policy itself excludes coverage for intentional injury separately from the intentional act exclusion and without reference to any particular state.

End of Document