AUSTIN - On Friday, the Texas Supreme Court reversed a ruling finding that an arbitration agreement is unconscionable in an employment-discrimination lawsuit brought against AutoNation USA Houston.
According to the high court’s opinion, the issue in the suit was whether an arbitration agreement is unconscionable, and therefore unenforceable, on the ground that the costs associated with arbitration are so excessive they would foreclose the employee from pursuing his claims.
AutoNation hired Walter Shattenkirk in May 2017 to be the dealership’s general manager. According to AutoNation, as part of the onboarding process Shattenkirk electronically signed and accepted an arbitration agreement requiring arbitration of all claims and disputes arising from, related to, or connected with Shattenkirk’s employment, including termination and discrimination claims.
Shattenkirk alleges that in August 2017, he heard one of his superiors make racist comments and reported the incident to a senior director, the opinion states. The following month, AutoNation placed Shattenkirk on a Performance Improvement Plan. On Nov. 6, 2017, AutoNation terminated Shattenkirk’s employment.
Shattenkirk claims his termination was due to discrimination and in retaliation for his reporting the racist comments. AutoNation contends that it terminated Shattenkirk for poor performance.
Court records show a trial court denied AutoNation’s motion to compel arbitration, which was affirmed on appeal.
The Texas Supreme Court, however, reversed the court of appeals because “the burden is on the party resisting arbitration to prove unconscionability, and because the evidence does not rise above the speculative ‘risk’ that the employee will actually incur prohibitive costs…”
“Accordingly, we hold that, at this point, the evidence is legally insufficient to support a finding that excessive arbitration fees prevent Shattenkirk from effectively pursuing his claims in the arbitral forum,” the opinion states. “Because the court of appeals erroneously held that the evidence supports the trial court’s finding that the arbitration agreement is unconscionable, we reverse the court of appeals’ judgment.
“We remand the case to that court to address in the first instance the parties’ issues regarding whether Shattenkirk signed the agreement.”
Case No. 22-0214