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Longoria v. CKR Prop. Mgmt., LLC

Court of Appeals of Texas, Houston (14th Dist.).
Dec 21, 2018
577 S.W.3d 263 (Tex. App. 2018)

Opinion

NO. 14-18-00100-CV

12-21-2018

Denise LONGORIA, Appellant v. CKR PROPERTY MANAGEMENT, LLC, Appellee


Appellant Denise Longoria signed an arbitration agreement before beginning her employment with appellee CKR Property Management, LLC ("CKR Property"). The parties' arbitration agreement states that Longoria and CKR Property agree to arbitrate "any claim or dispute between them or against the other ... whether related to the employment relationship or otherwise...." Longoria resigned from CKR Property and was rehired by CKR Property approximately ten months later. Longoria did not sign a separate arbitration agreement before beginning her second period of employment.

CKR Property fired Longoria six months after she was rehired and sued her for claims arising from her second employment period. Longoria moved to compel arbitration and the trial court denied Longoria’s motion. For the reasons outlined below, we reverse the trial court’s order denying arbitration and remand the cause to the trial court for proceedings consistent with this opinion. BACKGROUND

CKR Property, which manages multi-family residential apartment complexes, hired Longoria in June 2015 to supervise operations at multiple properties. Before beginning her employment at CKR Property, Longoria signed an arbitration agreement entitled "Acknowledgement of Receipt of Arbitration Agreement." The arbitration agreement states, in relevant part:

Denise N. Longoria and CKR Property Management agree that they prefer and choose to arbitrate any dispute they may have instead of litigating in court before a judge or jury. Therefore, they agree that any claim or dispute between them or against the other or any agent or employee of the other, whether related to the employment relationship or otherwise, including those created by practice, common law, court decision, or statute now existing or created later, including any related to allegations of violations of state or federal statutes related to discrimination, and all disputes about the validity of this arbitration clause, shall be resolved by final binding arbitration by the American Arbitration Association, under the National Rules for the Resolution of Employment Disputes. CKR Property Management agrees to pay all costs of the arbitration, except in that [sic] each party will bear their own legal fees. Fees paid are subject to the award of fees by the arbitrator, as provided by law and arbitration rules. This agreement shall be governed by and interpreted under the Federal Arbitration Act....

Longoria signed the agreement and dated it June 15, 2015. The record does not contain any other documents Longoria signed before beginning her first employment period. Longoria resigned from CKR Property in June 2016.

CKR Property rehired Longoria in April 2017. Before beginning her second period of employment, Longoria signed a "Confidentiality and Non-Competition Agreement." This second agreement does not contain any provisions addressing either (1) the previously signed arbitration agreement; or (2) the arbitrability of claims arising under the non-compete agreement. Longoria did not sign a separate arbitration agreement before beginning her second employment period. CKR Property terminated Longoria’s employment six months later.

CKR Property sued Longoria in October 2017, asserting claims arising from Longoria’s alleged breach of the non-compete agreement. Longoria filed a general denial and asserted affirmative defenses.

Longoria filed a motion to compel arbitration under the Federal Arbitration Act ("FAA"). See generally 9 U.S.C.A. §§ 1 - 16 (West 2009). CKR Property responded and the trial court held a hearing on the motion. The trial court signed an order on January 30, 2018, denying Longoria’s motion to compel arbitration. Longoria timely appealed.

STANDARD OF REVIEW

We review the trial court’s denial of a motion to compel arbitration under an abuse of discretion standard. Branch Law Firm L.L.P. v. Osborn , 532 S.W.3d 1, 12 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). " ‘An order denying arbitration must be upheld if it is proper on any basis considered by the trial court.’ " Id. (quoting In re Weeks Marine, Inc. , 242 S.W.3d 849, 854 (Tex. App.—Houston [14th Dist.] 2007, orig. proceeding [mand. denied] ) ).

A trial court abuses its discretion if it acts arbitrarily or unreasonably or without reference to any guiding rules or principles. Id. "Under this standard, we defer to a trial court’s factual determinations if they are supported by evidence, but [we] review a trial court’s legal determinations de novo." Id. (citing In re Labatt Food Serv., L.P. , 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding) ).

ANALYSIS

Asserting that the trial court erred by denying her motion to compel arbitration, Longoria argues that she and CKR Property executed a valid arbitration agreement and that CKR Property’s claims fall within the scope of that agreement. CKR Property contends that the arbitration agreement does not apply to its claims because the agreement was executed as part of Longoria’s first employment period from June 2015 to June 2016, and applies only to claims arising from that period. Pointing out that its claims arose from the non-compete agreement Longoria signed as part of her second employment period from April 2017 to October 2017, CKR Property asserts that the trial court correctly denied Longoria’s motion to compel.

The parties agree that the FAA governs here. "A party seeking to compel arbitration under the FAA must establish that (1) there is a valid arbitration clause; and (2) the claims in dispute fall within that agreement’s scope." In re Rubiola , 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding); see also Branch Law Firm L.L.P. , 532 S.W.3d at 12. We analyze these prongs separately.

I. Validity of the Arbitration Agreement

The existence of a valid arbitration agreement between specific parties generally is a "gateway matter" for the court to decide. In re Weekley Homes, L.P. , 180 S.W.3d 127, 130 (Tex. 2005) (orig. proceeding). Under the FAA, ordinary principles of state contract law determine whether there is a valid arbitration agreement that meets all requisite contract elements. In re Rubiola , 334 S.W.3d at 224 ; J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 227 (Tex. 2003). A mutual agreement to arbitrate provides sufficient consideration to support an arbitration agreement. In re 24R, Inc. , 324 S.W.3d 564, 566 (Tex. 2010) (orig. proceeding) (per curiam).

When an arbitration agreement is unambiguous, its construction is governed by the parties' objective intent as expressed in the agreement. In re Dillard Dept. Stores, Inc. , 186 S.W.3d 514, 515 (Tex. 2006) (orig. proceeding) (per curiam). Challenges to an arbitration agreement’s validity generally focus on contractual issues related to the agreement’s enforceability, such as unconscionability, duress, fraudulent inducement, and revocation. See Royston, Rayzor, Vickery, & Williams, LLP v. Lopez , 467 S.W.3d 494, 500 (Tex. 2015) (orig. proceeding) (agreements to arbitrate are valid unless grounds exist in law or in equity for non-enforcement, such as fraud, unconscionability, or voidness under public policy); Venture Cotton Coop. v. Freeman , 435 S.W.3d 222, 227 (Tex. 2014) (an arbitration agreement may be "invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability" (internal quotation omitted) ); see also Klein v. Nabors Drilling USA L.P. , 710 F.3d 234, 237 (5th Cir. 2013) ("the initial question of whether there is a valid agreement to arbitrate usually concerns matters of contract formation").

Here, Longoria asserts that she and CKR Property have a valid and enforceable arbitration agreement. We agree and conclude that the unambiguous terms of the parties' arbitration agreement express an objective intent to arbitrate "any claim or dispute between them." See In re Dillard Dept. Stores, Inc. , 186 S.W.3d at 515. The parties' mutual agreement to arbitrate provides sufficient consideration for the agreement’s enforcement. See In re 24R, Inc. , 324 S.W.3d at 566.

Although only Longoria signed the arbitration agreement, CKR Property’s signature was not necessary to bind CKR Property to the agreement. See In re Polymerica, LLC , 296 S.W.3d 74, 76 (Tex. 2009) (orig. proceeding) (per curiam) ("we have never held that the employer must sign the arbitration agreement before it may insist on arbitrating a dispute with its employee"); In re Macy’s Tex., Inc. , 291 S.W.3d 418, 419-20 (Tex. 2009) (orig. proceeding) (per curiam) ("The FAA contains no requirements for the form or specificity of arbitration agreements except that they be in writing; it does not even require that they be signed."). CKR Property does not contend otherwise.

Looking at the substance of its arguments, CKR Property does not challenge the validity of the parties' arbitration agreement and does not assert the agreement is unenforceable under general contract law principles based on unconscionability, duress, fraudulent inducement, or revocation. See Royston, Rayzor, Vickery, & Williams, LLP , 467 S.W.3d at 500 ; Venture Cotton Coop. , 435 S.W.3d at 227. Counsel for CKR Property acknowledged at oral argument that the parties' "agreement in and of itself is valid." CKR Property contends that its claims in the underlying proceeding are not among those covered by the arbitration agreement; this contention is properly analyzed as a challenge to the agreement’s scope — not to its validity. See In re Rubiola , 334 S.W.3d at 223-24 (the issue of whether "the arbitration clause cover[ed] the [plaintiffs'] claims" was one that "question[ed] the clause’s scope"); see also Mendez v. New Bell Gen. Servs., L.P. , 727 F.Supp.2d 585, 595 (W.D. Tex. 2010) (when analyzing scope, "the Court must decide whether the claim asserted is the type of claim the parties have agreed to arbitrate").

Even if treated for argument’s sake as a threshold validity challenge, CKR Property’s arguments would provide no basis for denying Longoria’s motion to compel arbitration because the arbitration agreement’s terms specifically refer "all disputes about the validity of this arbitration clause" to arbitration. See Ernst & Young LLP v. Martin , 278 S.W.3d 497, 500-01 (Tex. App.—Houston [14th Dist.] 2009, orig. proceeding) (where the arbitration clause stated that the parties agreed to arbitrate "any contention that all or part of these procedures are invalid or unenforceable," appellees' challenge to contract’s validity was subject to arbitration). While validity usually is a gateway matter for the court to decide, an arbitration agreement may properly refer these issues to arbitration and remove them from the court’s consideration. See In re Weekley Homes, L.P. , 180 S.W.3d at 130 (the court generally decides whether an arbitration clause is valid unless there is "unmistakable evidence that the parties intended the contrary"); Ernst & Young LLP , 278 S.W.3d at 500-01.

Our analysis now turns to the agreement’s scope. See In re Rubiola , 334 S.W.3d at 225.

II. Scope of the Arbitration Agreement

Federal law governs the scope of an arbitration agreement under the FAA. In re Labatt Food Serv., L.P. , 279 S.W.3d at 643 ; see also Klein , 710 F.3d at 237 (when "determining the scope of a valid arbitration agreement," the court "appl[ies] federal policy").

"[O]nce the party seeking arbitration proves the existence of an enforceable agreement to arbitrate, Texas and federal law recognize a strong presumption in favor of arbitration" and courts should "resolve any doubts regarding the scope of the arbitration agreement in favor of arbitration." Branch Law Firm L.L.P. , 532 S.W.3d at 18 (internal quotation omitted); see also In re Rubiola , 334 S.W.3d at 225. "Courts should not deny arbitration unless they can say with positive assurance that an arbitration clause is not susceptible of an interpretation that would cover the dispute at issue." Branch Law Firm L.L.P. , 532 S.W.3d at 18 ; see also In re D. Wilson Constr. Co. , 196 S.W.3d 774, 783 (Tex. 2006) (orig. proceeding).

According to its unambiguous terms, the arbitration agreement between Longoria and CKR Property encompasses "any claim or dispute between them ... whether related to the employment relationship or otherwise." The arbitration agreement contains no temporal or subject matter limitations. Applying the presumption favoring arbitration, we conclude that the parties' arbitration agreement is reasonably susceptible of an interpretation that would encompass the dispute at issue. See In re D. Wilson Constr. Co. , 196 S.W.3d at 783 ; Branch Law Firm L.L.P. , 532 S.W.3d at 18.

CKR Property asserts that the parties' arbitration agreement expired at the end of Longoria’s first employment period in June 2016; CKR Property further contends that "post-expiration" claims asserted after June 2016 must arise from pre-June 2016 facts and circumstances for either party to invoke the "expired" arbitration agreement. Arguing that "the factual bases for [its] claims only arose from the second employment period" beginning after April 2017, CKR Property contends that Longoria cannot compel arbitration based on an arbitration agreement signed at the beginning of the earlier June 2015-June 2016 employment period.

We are not persuaded by CKR Property’s arguments because CKR Property relies primarily on cases involving collective bargaining agreements. See Litton Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. N.L.R.B. , 501 U.S. 190, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991) ; Williamsbridge Manor Nursing Home v. Local 144 Div. of 1199, Nat'l Health & Human Servs. Emp'rs Union, ALF-CIO , 107 F.Supp.2d 222 (S.D.N.Y. 2000). Litton held that an arbitration clause in an expired collective bargaining agreement compelled arbitration of post-expiration disputes only if those disputes arose under the expired agreement. 501 U.S. at 205-06, 111 S.Ct. 2215. Williamsbridge Manor applied Litton ’s reasoning and concluded that the plaintiff’s suit did not arise under an expired collective bargaining agreement as necessary to compel arbitration under the expired agreement’s arbitration clause. 107 F.Supp.2d at 224-25.

These cases are distinguishable. Unlike the stand-alone arbitration agreement at issue here, the arbitration clauses in Litton and Williamsbridge Manor were part of broader, detailed collective bargaining agreements. See Litton , 501 U.S. at 193-94, 111 S.Ct. 2215 ; Williamsbridge Manor Nursing Home , 107 F.Supp.2d at 223-24. Those clauses operated in the context of the comprehensive contracts that encompassed them — a circumstance that does not apply to the freestanding arbitration agreement at issue here.

CKR Property also looks for help from Mendez v. Puerto Rican International Companies, Inc. , Nos. 05-CV-00174-LDD, 05-CV-00199-LDD, 2010 WL 2654439 (D.V.I. July 1, 2010), and Frank v. 84 Components Co. , No. NA02-14-CH/H, 2002 WL 1364168 (S.D. Ind. June 18, 2002). These cases do not guide our decision. The Mendez plaintiffs signed arbitration agreements with two non-party companies; the plaintiffs later were employed by the defendant companies. 2010 WL 2654439, at *1. The plaintiffs sued the defendant companies and the defendants sought to compel arbitration pursuant to the non-party companies' arbitration agreements with the plaintiffs. Id. at *2.

Rejecting the defendant companies' attempt to invoke the arbitration agreements, the court stated that the plaintiffs "reasonably expected their promises to arbitrate to be effective and endure only in regard to the particular employment relationship that generated" the agreements, namely, the plaintiffs' employment relationships with the non-party companies. Id. at *4. Noting that the plaintiffs' claims did not arise from "their application or candidacy for employment and their employment with" the non-party companies, the court concluded that the plaintiffs "ha[d] no duty to arbitrate their claims" brought against the defendant companies.

We are not bound by Mendez and we decline to follow it. Longoria sought to compel arbitration under an agreement to which she and CKR Property were parties. Unlike the agreement in Mendez , the arbitration agreement between Longoria and CKR Property covers any dispute between them, whether related to employment or not. Unlike the defendant companies in Mendez , Longoria’s motion to compel did not depend on an agreement executed with a non-party. See id. at *5 ("Plaintiffs' claims do not arise out of the employment transactions in which they signed the [arbitration agreements]: their application or candidacy for employment and their employment with [the non-party companies]."). And, unlike Mendez , Longoria does not contend that the agreement at issue is a contract of adhesion. See id. at *4.

The plaintiff in Frank signed an arbitration agreement before beginning her first period of employment with the defendant. 2002 WL 1364168, at *1 The agreement in Frank stated that it applied to all claims "[m]ade or which arise during and following [the plaintiff’s] voluntary or involuntary termination of employment." Id. The defendant terminated the plaintiff’s employment several months later. Id. The plaintiff was rehired by the defendant but did not sign a second arbitration agreement. Id.

The defendant again terminated the plaintiff and sued her for claims arising from the second termination. The court rejected the defendant’s attempt to compel arbitration based on the agreement signed as part of the plaintiff’s first employment period, stating that the defendant did "not come forward with any evidence of words or actions that [the plaintiff] should have interpreted as meaning that she was agreeing to arbitration when [the defendant] hired her for the second time." Id. at *3.

We decline to follow Frank ’s reasoning. Frank demands additional evidence showing the arbitration agreement was intended to apply to the plaintiff’s second employment period. See id. This approach contravenes the "strong presumption in favor of arbitration" and case law instructing courts to "resolve any doubts regarding the scope of the arbitration agreement in favor of arbitration." Branch Law Firm L.L.P. , 532 S.W.3d at 18 ; see also In re Rubiola , 334 S.W.3d at 225. In addition, the arbitration clause in this case is broader than the language used in Frank . We rely on the broad, unambiguous language to which the parties agreed viewed in light of the applicable presumption. See Branch Law Firm L.L.P. , 532 S.W.3d at 18.

Our analysis is guided instead by Utility Trailer Sales Southeast Texas, Inc. v. Lozano , No. 04-16-00644-CV, 2017 WL 3045861 (Tex. App.—San Antonio July 19, 2017, pet. denied) (mem. op.), in which the court analyzed a similar scenario and arbitration agreement.

The plaintiff in Lozano signed an arbitration agreement before beginning his first period of employment with the defendant; the plaintiff did not sign a second arbitration agreement before beginning his second employment period. Id. at *1. The agreement stated that it:

[C]ommences on the Acceptance Date and applies to all Covered Claims which occurred on or after the effective date.

This Agreement shall survive the employer-employee relationship between the Company and the Claimant and shall apply to any Covered Claim whether it arises or is asserted during or after termination of the Claimant’s employment with the Company or the expiration of any benefit plan.

Id. at *2. The plaintiff was injured during his second employment period and sued the defendant for negligence. Id. at *1. Giving the parties' arbitration agreement its "plain meaning," the San Antonio Court of Appeals concluded that the agreement was applicable to the plaintiff’s claims that arose during his second period of employment. Id. at *2.

Unlike the agreement analyzed in Lozano , the arbitration agreement here does not specifically state that it survives the termination of the employment relationship. But like the Lozano agreement, the arbitration agreement in today’s case clearly is intended to have a broad reach because it lacks any temporal limitations and applies to any dispute between CKR Property and Longoria "whether related to the employment relationship or otherwise." Giving the agreement its plain meaning, it encompasses CKR Property’s claims in the underlying proceeding even though they arose from Longoria’s second employment period. See id.

We conclude that CKR Property’s claims in the underlying proceeding fall within the scope of the parties' arbitration agreement.

III. Waiver

In response to Longoria’s motion to compel arbitration, CKR Property asserted an express-waiver and an implied-waiver argument. CKR Property asserts that, because Longoria did not address on appeal CKR Property’s express waiver argument, the court must affirm the trial court’s denial of Longoria’s motion to compel.

An express waiver in the arbitration context "arises when a party affirmatively indicates that it wishes to resolve the case in the judicial forum rather than in arbitration." Branch Law Firm L.L.P. , 532 S.W.3d at 22. Implied waiver examines "whether a party has substantially invoked the judicial process" resulting in prejudice to the opposing party. Id.

The section addressing waiver in Longoria’s opening appellate brief discusses the elements necessary to show an implied waiver, with argument focusing on whether Longoria "substantially invoked" the judicial process. In her opening brief, Longoria broadly asserted that she "did not waive her right to compel arbitration." We conclude that Longoria also sufficiently challenged the trial court’s implied finding of express waiver. And, in her reply brief, Longoria provided briefing on the express-waiver issue.

With respect to CKR Property’s express waiver contention, the record does not contain any evidence showing that Longoria "affirmatively indicate[d]" she wished to resolve the case in a judicial forum rather than in arbitration. See id. The non-compete agreement does not satisfy this showing because it does not state that (1) it is fully integrated; (2) it supersedes all prior agreements; (3) all future claims between CKR Property and Longoria must be resolved in court; or (4) the arbitration agreement is invalid.

With respect to CKR Property’s implied waiver argument, Longoria filed her motion to compel arbitration before (1) the trial court entered a docket control order; (2) the parties took any depositions, and (3) the parties exchanged anything other than written discovery requests. These actions do not constitute a substantial invocation of the judicial process. See id. ; see also RSL Funding, LLC v. Pippins , 499 S.W.3d 423, 430 (Tex. 2016) (per curiam) ("[p]arties seeking to arbitrate have taken several different types of action without substantially invoking the judicial process" including "filing suit, conducting discovery, noticing depositions, taking depositions, agreeing to trial settings, and moving for procedural disposition").

Longoria did not waive her right to compel arbitration pursuant to the parties' arbitration agreement.

CONCLUSION

We conclude that the parties executed a valid arbitration agreement and that CKR Property’s claims in the underlying proceeding fall within the scope of that agreement. Longoria did not waive her arbitration rights. The trial court therefore erred in denying Longoria’s motion to compel arbitration. The trial court’s January 30, 2018 order is reversed and the cause is remanded to the trial court for proceedings consistent with this opinion.

( Frost, C.J., concurring).

CONCURRING OPINION

Kem Thompson Frost, Chief Justice

I concur in the court’s judgment. I write separately to address an issue necessary to final disposition of this appeal.

See Tex. R. App. P. 47.1 (stating that "[t]he court of appeals must hand down a written opinion that is as brief as practicable but that addresses every issue raised and necessary to final disposition of the appeal").

Appellant Denise Longoria argues that the trial court erred in deciding arbitrability issues because the parties to the arbitration agreement clearly and unmistakably agreed that the arbitrators — not the courts — should decide them. Pointing to this agreement, Longoria asserts that the trial court lacked authority to decide arbitrability issues — those going to the validity, scope, and enforceability of the arbitration agreement. If successful, the argument would change the outcome of this appeal. Yet, the majority does not address it.

G.T. Leach Builders, LLC v. Sapphire V.P., LP , 458 S.W.3d 502, 519 (Tex. 2015).

Under the Federal Arbitration Act, courts presume that parties to an arbitration agreement intend that courts rather than arbitrators decide arbitrability issues. But parties may defeat this presumption by agreement. Clear and unmistakable evidence that parties agreed to arbitrate one or more of the arbitrability issues rebuts the courts-decide-arbitrability-issues presumption and requires courts to allow the arbitrators to decide any arbitrability issue the parties delegated to the arbitrators.

See Jody James Farms, JV v. Altman Group, Inc. , 547 S.W.3d 624, 631–33 (Tex. 2018).

See id .

See id .

Courts have found clear and unmistakable evidence of an agreement to arbitrate arbitrability issues in different contexts. Some have held that unambiguous language in the arbitration agreement constitutes clear and unmistakable evidence of an agreement to arbitrate an arbitrability issue. Under this line of cases, the agreement of Longoria and appellee CKR Property Management, LLC to arbitrate "all disputes about the validity of this arbitration clause" might amount to clear and unmistakable evidence of their agreement that arbitrators (not courts) should decide all issues as to the arbitration agreement’s validity.

See, e.g., Rent-A-Center West, Inc. v. Jackson , 561 U.S. 63, 65–76, 130 S.Ct. 2772, 2775–81, 177 L.Ed.2d 403 (2010) (enforcing provision in stand-alone arbitration contract, in which the employee and the employer unambiguously agreed to arbitrate "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" because employee did not challenge the validity of this delegation provision in response to employer’s reliance on this language in the trial court).

See id .

The arbitration rules to which the parties agreed also impact the analysis. Though the Supreme Court of the United States has yet to address the issue, various federal courts of appeals, including the United States Court of Appeals for the Fifth Circuit, have held that an agreement by parties to arbitrate under rules providing that "[t]he arbitrator shall have the power to rule on ... any objections with respect to the existence, scope or validity of the arbitration agreement" constitutes clear and unmistakable evidence of the parties' agreement that arbitrators, not the courts, should decide all arbitrability issues.

See Petrofac, Inc. v. DynMcDermott Petr. Ops. Co. , 687 F.3d 671, 675 (5th Cir. 2012). Accord Oracle Am., Inc. v. Myriad Group, A.G., 724 F.3d 1069, 1074 (9th Cir. 2013) ; Fallo v. High–Tech Inst. , 559 F.3d 874, 878 (8th Cir. 2009) ; Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1372–73 (Fed. Cir. 2006) ; Terminix Int'l Co., L.P. v. Palmer Ranch Ltd. P'ship, 432 F.3d 1327, 1332–33 (11th Cir. 2005) ; Contec Corp. v. Remote Solution Co. , 398 F.3d 205, 208 (2d Cir. 2005).

Likewise, though the Supreme Court of Texas has not yet addressed the issue, various intermediate courts of appeals have concluded that if parties agree to a broad arbitration clause covering a wide variety of claims (such as " ‘[a]ny claim, dispute or other matter in question arising out of or related to’ the contract" ) and if the parties also agree to arbitrate under rules giving the arbitrator the "power to rule on ... any objections with respect to the existence, scope[,] or validity of the arbitration agreement" then this agreement constitutes clear and unmistakable evidence of the parties' intent to have the arbitrators rather than the courts determine arbitrability issues such as the validity, enforceability, and scope of the arbitration agreement (the " Saxa Rule").

See Saxa Inc. v. DFD Architecture Inc. , 312 S.W.3d 224, 229 (Tex. App.—Dallas 2010, pet. denied).

See Trafigura Pte. Ltd v. CNA Metals Ltd ., 526 S.W.3d 612, 616–18 (Tex. App.—Houston [14th Dist.] 2017, no pet.) ; Schlumberger Tech. Corp. v. Baker Hughes Inc ., 355 S.W.3d 791, 802-03 (Tex. App.—Houston [1st Dist.] 2011, no pet.) ; Saxa Inc. v. DFD Architecture Inc. , 312 S.W.3d at 229–31.

In the Longoria-CKR Property arbitration agreement, the parties broadly agree to arbitrate "any claim or dispute between them or against the other or any agent or employee of the other, whether related to the employment relationship or otherwise." They also agree to arbitrate under the American Arbitration Association’s "National Rules for the Resolution of Employment Disputes." If these rules provide that the arbitrator has the "power to rule on ... any objections with respect to the existence, scope[,] or validity of the arbitration agreement" or something similar, then the parties' agreement to arbitrate under these rules and their broad arbitration agreement would be clear and unmistakable evidence of the parties' intent to have the arbitrators rather than the courts settle arbitrability issues such as the validity, enforceability, and scope of the arbitration agreement.

See Oracle Am., Inc., 724 F.3d at 1074 ; Petrofac, Inc. , 687 F.3d at 675 ; Fallo , 559 F.3d at 878 ; Qualcomm Inc., 466 F.3d at 1372–73 ; Terminix Int'l Co., L.P., 432 F.3d at 1332–33 ; Contec Corp. , 398 F.3d at 208 ; Trafigura Pte. Ltd , 526 S.W.3d at 616–18 ; Schlumberger Tech. Corp. , 355 S.W.3d at 802-03 ; Saxa Inc. , 312 S.W.3d at 229–31.

On appeal in this court, Longoria asserts that the arbitration agreement requires that the arbitrators, rather than the court, settle any "disputes regarding arbitrability," a phrase that encompasses disputes as to the scope and enforceability of an arbitration agreement, as well as disputes regarding the agreement’s validity. Thus, Longoria argues on appeal that the scope, validity, and enforceability-of-the arbitration-agreement issues should go to the arbitrators, not the court. According to Longoria, the parties clearly and unmistakably agreed to arbitrate these arbitrability disputes. In her appellate brief, Longoria cites to both the plain terms of the parties' agreement and the Saxa Rule cases. Longoria argues that the trial court erred by deciding arbitrability issues because the trial court lacked any authority to do so. The majority does not consider this argument.

See G.T. Leach Builders, LLC , 458 S.W.3d at 519.

See id .

If Longoria’s argument has merit, then neither the trial court nor this court may determine the arbitrability issues, and the only issue would be whether CKR Property challenged the validity of the parties' agreement to have the arbitrators decide the arbitrability issues and possibly whether Longoria waived arbitration by substantially invoking the judicial process and thus causing prejudice to CKR Property. Conversely, if Longoria’s argument lacks merit, then the trial court and this court may determine arbitrability issues such as whether the claims fall within the scope of the arbitration agreement and CKR Property’s argument that "the Arbitration Agreement is no longer valid and does not apply to the pending claims."

See Rent-A-Center West, Inc. , 561 U.S. at 65–76, 130 S.Ct. at 2775–81 ; Haddock v. Quinn , 287 S.W.3d 158, 171-75 (Tex. App.—Fort Worth 2009, pet. denied).

Though Longoria’s argument holds promise, as with nearly all appellate arguments, to be entitled to a merits analysis, the party relying on the arbitrator-should-determine-arbitrability-issues argument must have raised the point in the court below. Because this complaint does not fall within the narrow scope of the fundamental-error doctrine recognized by the Supreme Court of Texas, to get a merits review, the appellant must have preserved error in the trial court. Longoria did not raise the complaint in the trial court:

See In re B.L.D., 113 S.W.3d 340, 350–52 (Tex. 2003).

See In re L.M.I., 119 S.W.3d 707, 711 (Tex. 2003) ; VAPRO Supply, LLC v. Zink , 2018 WL 6517151, at *2 (Tex.App.-San Antonio Dec. 12, 2018) (holding party appealing denial of its motion to compel arbitration waived Saxa Rule by not raising it in the trial court).

• She did not argue that the parties had agreed to arbitrate any arbitrability issue.

• She did not assert or cite the Saxa Rule.

• She did not invoke the part of the Arbitration Agreement in which the parties agreed to arbitrate "all disputes about the validity of this arbitration clause."

• She did not address whether the American Arbitration Association’s "National Rules for the Resolution of Employment Disputes" provide that the arbitrator has the "power to rule on ... any objections with respect to the existence, scope[,] or validity of the arbitration agreement" or something similar.

• She did not provide the trial court with a copy of these arbitration rules or ask the trial court to take judicial notice of them.

See VAPRO Supply, LLC , 2018 WL 6517151, at *2. Courts have held that for a party to successfully invoke the Saxa Rule, the party must offer the arbitration rules in evidence in support of the party’s motion to compel arbitration or have the trial court take judicial notice of them. See id . ; Barantas Inc. v. Enter. Fin. Group Inc. , No. 05-17-00896-CV, 2018 WL 3738089, at *6 n.2 (Tex. App.—Dallas Aug. 7, 2018, no pet.) (mem. op.).

Longoria failed to preserve error. So, her complaint affords no basis for merits review and no basis for this court to reverse the trial court’s order. In light of this waiver, the trial court and this court should decide the arbitrability issues. Even though the judgment would be the same as the one the court reaches today, the court should consider and dispose of the unaddressed argument, finding that waiver forecloses merits review.

See In re L.M.I., 119 S.W.3d at 711 ; VAPRO Supply, LLC , 2018 WL 6517151, at *2.

See In re L.M.I., 119 S.W.3d at 711 ; In re B.L.D., 113 S.W.3d at 350–52 ; VAPRO Supply, LLC , 2018 WL 6517151, at *2.

See VAPRO Supply, LLC , 2018 WL 6517151, at *2. Despite the waiver due to failure to preserve error, in one part of the majority opinion, the court relies on the parties' agreement to arbitrate all disputes about the arbitration agreement’s validity. See ante at 274–75. In other parts of the majority opinion, the court determines arbitrability issues, such as the scope of the arbitration agreement.

( Boyce, J., majority).


Summaries of

Longoria v. CKR Prop. Mgmt., LLC

Court of Appeals of Texas, Houston (14th Dist.).
Dec 21, 2018
577 S.W.3d 263 (Tex. App. 2018)
Case details for

Longoria v. CKR Prop. Mgmt., LLC

Case Details

Full title:Denise LONGORIA, Appellant v. CKR PROPERTY MANAGEMENT, LLC, Appellee

Court:Court of Appeals of Texas, Houston (14th Dist.).

Date published: Dec 21, 2018

Citations

577 S.W.3d 263 (Tex. App. 2018)

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