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concluding narrow arbitration provision in distributorship agreement did not reach dispute arising from separate purchase agreement, where contracts were not integrated, and defined terms in distributorship agreement circumscribed breadth of its scope
Summary of this case from Allcapcorp, Ltd. v. SloanOpinion
No. 05-03-01618-CV.
Opinion issued June 1, 2004.
On Appeal from the 101st Judicial District Court, Dallas County, Texas, Trial Court Cause No. 03-2532-E.
Dismissed and Writ of Mandamus Denied.
Before Justices MORRIS, WHITTINGTON, and JAMES.
MEMORANDUM OPINION
Sino Swearingen Aircraft Corporation ("SSAC") seeks relief from the trial judge's October 30, 2003 order denying its motion to compel arbitration and stay proceedings. SSAC has filed (i) an interlocutory appeal of the order denying the motion to compel arbitration as permitted by the Texas Arbitration Act and (ii) a motion for leave to file a petition for writ of mandamus under the Federal Arbitration Act. The facts of this original proceeding and appeal are known to the parties, and we do not recite them here. Further, because all dispositive issues are clearly settled in law, we issue this memorandum opinion. See Tex.R.App.P. 47.4; Tex.R.App.P. 52.8(d). We conclude the Federal Arbitration Act governs this dispute and that the trial judge did not abuse his discretion in denying the motion to compel arbitration. We therefore dismiss the interlocutory appeal as moot and deny the petition for writ of mandamus.
Initially, we conclude the Federal Arbitration Act governs this action because the Distributorship Agreements containing the arbitration provision at issue relate to interstate commerce. See Perry v. Thomas, 482 U.S. 483, 489 (1987); Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269-70 (Tex. 1992) (orig. proceeding). The agreements involve the marketing, sale, and distribution of SJ30-2 series jet aircraft throughout thirty-three U.S. states, the Caribbean, and the southern half of the African continent. Under the Federal Act, we review the trial judge's decision regarding enforcement of an arbitration agreement by mandamus. See Jack B. Anglin Co., 842 S.W.2d at 272 (review by mandamus from denial of arbitration under Federal Act); TransCore Holdings, Inc. v. Rayner, 104 S.W.3d 317, 319-21 (Tex. App.-Dallas 2003, pet. denied) (stock purchase agreement involved interstate commerce where there were parties and debts in five different states, so Federal Act applied). Mandamus issues only to correct a clear abuse of discretion or the violation of a duty imposed by law when there is no other adequate remedy by law. In re Bass, 113 S.W.3d 735, 738 (Tex. 2003) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding).
SSAC contends the trial judge abused his discretion in denying its motion to compel arbitration because the arbitration provision in the Distributorship Agreements encompasses the parties' disputes under the Aircraft Purchase Agreements. We disagree. Arbitration is a matter of contract between the parties, and a court cannot compel a party to arbitrate a dispute unless the court determines the parties agreed to arbitrate the dispute in question. Pennzoil Exploration and Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1064 (5th Cir. 1998) (citing AT T Tech., Inc. v. Communications Workers, 475 U.S. 643, 648 (1986)). Determining whether the parties agreed to arbitrate the dispute in question involves two considerations: (1) whether a valid agreement to arbitrate between the parties exists; and (2) whether the dispute in question falls within the scope of that arbitration agreement. Pennzoil, 139 F.3d at 1065. Under the Federal Arbitration Act, any doubts as to whether a claim falls within the scope of an arbitration agreement must be resolved in favor of arbitration. Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995) (per curiam) (original proceeding).
SSAC contends the agreement to arbitrate contained in the Distributorship Agreements should require arbitration of disputes arising out of the Aircraft Purchase Agreements. The Distributorship Agreements provide:
10.15 Arbitration of Disputes/Injunctive Relief.
(a) Negotiation. The parties will first attempt in good faith to resolve any claim or controversy arising out of this Agreement or the breach, termination or validity thereof (hereafter known as: "Dispute") by negotiation between an officer of each party. . . .
(b) Arbitration. If the parties cannot resolve the Dispute through negotiation within 30 days or such longer period as may be agreed upon by the parties in writing, the parties agree and consent to resolve the Dispute solely through arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. . . .
The arbitration provision uses terms that are defined in the Distributorship Agreements. The parties agreed to arbitrate "the Dispute." "Dispute" is defined in the Distributorship Agreements as "any claim or controversy arising out of this Agreement or the breach, termination, or validity thereof." "Agreement" is defined as "this Distributorship Agreement as modified or amended from time to time." The definition of "Agreement" does not include the Aircraft Purchase Agreements, which are the subject of a separate definition: "`Purchase Agreement' shall mean the Aircraft Purchase Agreement to be executed by Distributor and SSAC for the purchase of an Aircraft substantially in the form of Exhibit B attached hereto." The Distributorship Agreements in their "entire agreement" clauses incorporate by reference all of the exhibits, including the form Aircraft Purchase Agreement. The form Aircraft Purchase Agreement does not incorporate the Distributorship Agreement by reference.
The parties do not dispute the Aircraft Purchase Agreements are related to the Distributorship Agreements. Through use of the Aircraft Purchase Agreements, appellees would fulfill contractual obligations of the Distributorship Agreements. However, the parties agreed to arbitrate disputes "arising out of this Agreement," and specifically defined "Agreement" to include only the Distributorship Agreement itself. The court in Pennzoil noted "courts distinguish `narrow' arbitration clauses that only require arbitration of disputes `arising out of' the contract from broad arbitration clauses governing disputes that `relate to' or `are connected with' the contract." Pennzoil, 139 F.3d at 1067, but see Sedco, Inc. v. Petroleos Mexicanos Mexican Nat. Oil Co., 767 F.2d 1140, 1144-45 and n. 8 (5th Cir. 1985) (holding clause "any dispute or difference between the parties arising out of this Charter" is "of the broad type").
Appellees also argue the "entire agreement" provision in the Aircraft Purchase Agreements shows the parties' intent that the Aircraft Purchase Agreement be a separate contract, not subject to the conditions and provisions of the Distributorship Agreement. SSAC rejects this argument, citing B.F. Goodrich Co. v. McCorkle, 865 S.W.2d 618, 620 (Tex. App.-Houston [14th Dist.] 1993, orig. proceeding). B.F. Goodrich, however, is distinguishable because in that case, the contract not containing an arbitration clause stated it was "entered into pursuant to, and as an integral part of" the contract containing the arbitration clause. B.F. Goodrich, 865 S.W.2d at 620. Here, SSAC does not point to similar language in the Aircraft Purchase Agreements suggesting the parties intended the Aircraft Purchase Agreements to be an "integral part" of the Distributorship Agreements.
SSAC also relies on Neal v. Hardee's Food Sys., Inc., 918 F.2d 34 (5th Cir. 1990). In Neal, the court held the parties' inclusion of a broad arbitration clause to cover "any and all disputes between them" showed their intent that the clause "reach all aspects of the parties' relationship." Neal, 918 F.2d at 38. Here, in contrast, the arbitration clause is limited to disputes arising out of the Distributorship Agreement or the breach, termination, or validity of that agreement. The parties chose to use a more limited clause in the Distributorship Agreements and failed to include an arbitration clause in the Aircraft Purchase Agreements.
Appellees have conceded their claims under the Distributorship Agreements must be arbitrated, and have asserted those claims in an arbitration proceeding. Their remaining claims arise out of the Aircraft Purchase Agreements or allege tortious conduct relating to those agreements. SSAC urges that because appellees complain of wrongful termination of both the Distributorship Agreements and the Aircraft Purchase Agreements, and the terminations occurred in a single letter, appellees' claims are factually intertwined and all must be arbitrated. Each agreement, however, contains its own provisions regarding termination. The parties provided for arbitration of claims arising out of the termination of only one of the agreements. We conclude the arbitration clause in the Distributorship Agreements does not encompass the parties' dispute under the Aircraft Purchase Agreements. See Prudential Secs., 909 S.W.2d at 899.
We cannot conclude the trial judge abused his discretion in denying SSAC's motion to compel arbitration. We therefore deny the petition for writ of mandamus.