Nelson v. Watch House Int'l, LLC, No. 15-10531 (5th Cir. 2016)Annotate this Case
Plaintiff filed suit against his former employer, Watch House, alleging that he was discharged in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq., and Chapter 21 of the Texas Labor Code. The district court granted Watch House's motion to compel arbitration and dismissed plaintiff's suit without prejudice. The court concluded that the three-part test in Lizalde v. Vista Quality Markets remains an accurate statement of Texas law and applied Lizalde to the language of Watch House's Arbitration Plan at issue. The court agreed with plaintiff that the Plan is illusory because it fails to include an In re Halliburton-type savings clause that requires advance notice of termination. In this case, the Plan provides that Watch House may make unilateral changes to the Plan, purportedly including termination, and that such a change “shall be immediately effective upon notice to” employees. Watch House’s retention of this unilateral power to terminate the Plan without advance notice renders the Plan illusory under a plain reading of Lizalde, which is supported by recent decisions from Texas intermediate courts. Consequently, plaintiff is not bound by the Plan and Watch House may not compel arbitration. The court reversed and remanded for further proceedings.