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PRESTONWOOD TRADITION, LP; Tradition Management, LLC; Prestonwood TSL, LP; Prestonwood TSL GP, LLC; Tradition Senior Living, L.P.; Tradition SL, LLC; and Jonathan S. Perlman, Appellants / Relators v. Mary Jo JENNINGS, Individually and as the Independent Executrix and Representative of the Beneficiaries of the Estate of Leah Alice Corken; Lisa Cullen, Individually; Matt Corken, Individually; Dianne Tannery, Individually and as the Independent Executrix and Representative of the Beneficiaries of the Estate of Juanita Purdy; Thomas Ducker, Individually; Sherril Kerr, Individually and as the Independent Executrix and Representative of the Beneficiaries of the Estate of Glenna Day; Gregory B. Day, Individually; Marsha Spring Repp and Stephen Spring, Individually and as the Co-Executors and Representatives of the Beneficiaries of the Estate of Solomon H. Spring; Michael Solomon, Matthew Abramowitz, and Paul Abramowitz, Individually and as the Co-Executors and Representatives of the Beneficiaries of the Estate of Joyce Abramowitz; and Marc Abramowitz, Individually, Appellees / Real Parties in Interest
Appellants-relators 1 bring this appeal and petition for writ of mandamus challenging the trial court's orders granting a stay of arbitration and denying appellants’ plea in abatement, which sought an order for the parties to attend arbitration. On appeal, appellants raise four issues, contending that the trial court abused its discretion in (i) deciding the arbitrability issues, (ii) staying arbitration, (iii) declining to order the parties to arbitration, and (iv) striking a supporting affidavit attached to appellants’ plea in abatement. In their petition for writ of mandamus, appellants assert the trial court abused its discretion in issuing its orders because the claims can be arbitrated under Texas common law.
We agree with appellants and reverse the trial court's orders. We remand the causes with instructions to order the parties to arbitration and stay the underlying cases pending the outcome of the arbitration. We dismiss appellants’ petition for writ of mandamus as moot.
A. Parties and History Before Litigation
In 2016, Leah Corken, Juanita Purdy, Glenna Day, Solomon Spring, and Joyce Abramowitz died while they were residents of The Tradition-Prestonwood, a senior living community owned and operated by appellants. The decedents had signed written leases with appellants, which provide:
7. Your Rights and Responsibilities
E. Waiver of Jury Trial. Pursuant to the Arbitration Agreement set forth in Section 8 below, EACH PARTY HERETO WAIVES ITS RIGHT TO A TRIAL BY JURY AND AGREES TO SUBMIT TO BINDING ARBITRATION in any action, proceeding or counterclaim brought by any party against any other party.
8. Arbitration Agreement
A. Agreement To Arbitrate. Should a dispute arise between us, we desire to avoid costly and time-consuming litigation. Landlord and You agree that any claims, controversies, or disputes arising between us and in any way related to or arising out of the relationship created by this Agreement shall be resolved exclusively by binding arbitration. ․ Accordingly, neither Landlord nor You will be permitted to pursue court action regarding these claims, controversies, or disputes.
B. Conduct Of The Arbitration. The arbitration shall be conducted by a panel of either one or three neutral arbitrators (the “Panel”), said number being chosen by You. The member(s) of the Panel shall be chosen by the American Arbitration Association (“AAA”) or by mutual agreement between the parties․ The Panel shall follow the current Commercial Arbitration Rules of the AAA.
E. Waiver Of Jury Trial. Any claim, controversy, or dispute between the parties for which arbitration is not allowed by law shall be brought in an appropriate court before a judge. Both You and Landlord waive your rights to a trial by jury.
F. Applicability To Related Parties. You and Your Authorized Representative agree that this Agreement, in particular this Section 8, shall be binding upon them personally. This Agreement shall be binding upon and inure to the benefit of all persons whose claim is derived through or on behalf of You, including that of the [sic] Your family, heirs, guardian, executor, administrator and assigns. This Agreement shall be binding upon and inure to the benefit of Landlord, Tradition Management, LLC, and its subsidiaries and their respective directors, officers, employees, representatives, or agents.
THIS AGREEMENT CONTAINS BOTH AN ARBITRATION PROVISION AND A WAIVER OF JURY TRIAL, WHICH MAY BE ENFORCED BY THE PARTIES.
G. Governing Law. Except as noted above, this Agreement shall be governed by and construed under the laws of the State of Texas.
(emphasis in original).
Appellees-real parties in interest are individuals and representatives of the estates of the decedents who sought to resolve claims against appellants related to the decedents’ deaths. The parties attended mediation, and appellants invoked the above arbitration agreements. On June 17, 2019, appellants filed arbitration actions with the AAA. On June 25, 2019, appellees responded to the arbitration action before the AAA and filed five separate suits in Dallas County Court.
B. Procedural History of Litigation
Appellees sued appellants—both individually as wrongful death beneficiaries and as executors of the respective estates—for (i) declaratory judgment; (ii) negligent undertaking; (iii) premises liability; (iv) general negligence; and (v) negligent hiring, training, and supervision. The claims for declaratory judgment sought a declaration that appellees’ claims were not subject to arbitration. Appellees further moved to stay the arbitrations in each case. Appellants answered in the trial court and filed pleas in abatement in each case, requesting that the trial court abate the case so that arbitration could proceed.
The record does not indicate that an arbitrator or arbitration panel was ever selected. However, on June 28, 2019, the AAA responded to the arbitration communications as follows:
Upon review of the parties’ contentions, the AAA has made an administrative determination that it will not proceed with the administration of the submissions unless the parties mutually agree, or until the issue of arbitrability is decided by the Dallas County, Texas Court (“Court”).
The parties submitted arguments and attached evidence in support of their respective motions and responses regarding arbitration. Appellees objected to and moved to strike an affidavit from appellants. On September 30, 2019, the trial court heard the arbitration motions. Regarding the AAA's administrative determination, the trial court stated, “I don't think that's an end all be all on the outcome.” After the hearing, the parties submitted further arguments and authorities related to the arbitration dispute; appellants responded to appellees’ objections to their affidavit. On February 28, 2020, the trial court granted appellees’ requests for stay of arbitration and denied appellants’ requests for abatement.2
IT IS THEREFORE ORDERED that Plaintiffs’ Motions to Stay Arbitration in each of the above-captioned matters are GRANTED, and the arbitration proceeding with the American Arbitration Association that is currently pending between Plaintiffs and Defendants is STAYED.
IT IS FURTHER ORDERED that Defendant's Pleas in Abatement in each of the above-captioned matters are DENIED[.]
These interlocutory appeals followed. See Tex. Civ. Prac. & Rem. Code Ann. § 171.098. Appellants further petitioned for writs of mandamus. We have consolidated each original proceeding into the corresponding interlocutory appeal.
II. Issues Raised
On appeal, appellants raise four issues to our Court:
1. The trial court abused its discretion when it decided the arbitrability issues, because federal and Texas law require that determination of arbitrability issues be referred to the arbitrator, and the Leases specifically provide for AAA arbitration.
2. To the extent the trial court based its decision to stay the arbitrations on the Texas Arbitration Act, such decision was an abuse of discretion because the FAA, not the TAA, applies.
3. The trial court abused its discretion when it declined to order the parties to AAA arbitration, because the uncontroverted evidence established Appellants were entitled to arbitration under the FAA.
4. The trial court abused its discretion when it struck the affidavit supporting of Appellants’ pleas in abatement, as Appellees failed to timely object and their objections are without legal basis.
On petition for writ of mandamus and apart from asserting they have no adequate remedy at law, appellants raise one issue to our Court:
1. If this Court holds the statutory arbitration schemes argued in such appeals do not apply, the trial court nevertheless abused its discretion in issuing such Order because the claims can be arbitrated under Texas common law.
Because our resolution of appellants’ first issue obviates the need to discuss the remaining issues, we limit our discussion accordingly. See Tex. R. App. 47.1 (“The 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.”).
III. Standard of Review
“Arbitration agreements can be enforced under either statutory provisions or the common law.” Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494, 499 (Tex. 2015) (citing L. H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 351 (Tex. 1977)).3 We review a trial court's order on a motion to stay arbitration for an abuse of discretion. Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018) (citing In re Labatt Food Serv., L.P., 279 S.W.3d 640, 642–43 (Tex. 2009) (orig. proceeding)). We review the trial court's legal determinations de novo. In re Labatt Food Serv., 279 S.W.3d at 643.
Issue One: Whether the Trial Court Abused Its Discretion When It Decided the Arbitrability Issues
i. Decedents’ Agreement to Arbitrate
“[W]hen a party seeks to compel arbitration based on a contract, the first question is whether there is a contract between the parties at all.” HomeAdvisor, Inc. v. Waddell, No. 05-19-00669-CV, 2020 WL 2988565, at *3 (Tex. App.—Dallas June 4, 2020, no pet.) (mem. op.) (citing Arnold v. Homeaway, Inc., 890 F.3d 546, 550 (5th Cir. 2018)).
Under Texas law, a binding contract requires: (1) an offer; (2) acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds (mutual assent); (4) each party's consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding.
HomeAdvisor, 2020 WL 2988565, at *3 (citation omitted).
Here, it is undisputed that decedents agreed to the leases by signature. Each lease shows the decedent agreed to arbitrate and expressly bound “all persons whose claim is derived through or on behalf of [decedent], including that of the [decedent's] family, heirs, guardian, executor, administrator and assigns.” In Texas, the death of a natural person does not ordinarily extinguish his or her contracts. Solomon v. Greenblatt, 812 S.W.2d 7, 17 (Tex. App.—Dallas 1991, no writ) (citation omitted).
Appellees have brought claims that derive from the decedents’ allegedly wrongful deaths. See Civ. Prac. & Rem. § 71.004. In In re Labatt Food Service, the Texas Supreme Court explained:
While it is true that damages for a wrongful death action are for the exclusive benefit of the beneficiaries and are meant to compensate them for their own personal loss, the cause of action is still entirely derivative of the decedent's rights. Tex. Civ. Prac. & Rem. Code §§ 71.003(a), .004(a); Russell, 841 S.W.2d at 347. Thus, regardless of the fact that [decedent]’s beneficiaries are seeking compensation for their own personal loss, they still stand in [decedent]’s legal shoes and are bound by [his or her] agreement.
279 S.W.3d at 646. Thus, regarding appellees’ wrongful death claims, they are bound by the decedents’ agreements. See In re Golden Peanut Co., L.L.C., 298 S.W.3d 629, 631 (Tex. 2009) (orig. proceeding) (per curiam) (wrongful death beneficiaries are bound by decedent's pre-death arbitration agreement “because, under Texas law, the wrongful death cause of action is entirely derivative of the decedent's rights”); Arredondo v. Dugger, 347 S.W.3d 757, 764 (Tex. App.—Dallas 2011), aff'd on other grounds, 408 S.W.3d 825 (Tex. 2013) (“A statutory wrongful death claim is wholly derivative of the decedent's claim and is subject to any defense that would have been available against the decedent had they survived.”).
In addition, appellees asserted survival claims that derive from the decedent's rights. See Civ. Prac. & Rem. § 71.021. “The purpose of the survival statute is to continue a decedent's cause of action beyond death to redress the decedent's estate for decedent's injuries.” Stevenson v. Ford Motor Co., 608 S.W.3d 109, 131 (Tex. App.—Dallas 2020, no pet. h.). “The survival action, as it is sometimes called, is wholly derivative of the decedent's rights.” Russell v. Ingersoll-Rand Co., 841 S.W.2d 343, 345 (Tex. 1992) (explaining that if decedent's action for injuries would have been barred by limitations had it been asserted immediately prior to his death, survival action and wrongful death actions based on same alleged wrong are likewise barred); see also Brown v. Shwarts, 968 S.W.2d 331, 334 (Tex. 1998) (explaining parents’ survival action “as wholly derivative of [child]’s, the injury is that which he suffered, and the damages are those he sustained while he was alive”). “A defendant can raise the same defenses in the survivorship action that it could assert against the injured person.” Waters ex rel. Walton v. Del-Ky, Inc., 844 S.W.2d 250, 254 (Tex. App.—Dallas 1992, no writ). Arbitration and award is an affirmative defense, which appellants (i) have raised against appellees and (ii) could have asserted against the decedents. See Tex. R. Civ. P. 94; see, e.g., Nabors Drilling USA, LP v. Pena, 385 S.W.3d 103, 109 (Tex. App.—San Antonio 2012, pet. denied) (explaining decedent's family's wrongful death and survival actions against employer were subject to arbitration agreement between decedent and employer); In re Jindal Saw Ltd., 264 S.W.3d 755, 766–67 (Tex. App.—Houston [1st Dist.] 2008, orig. proceeding), (explaining that decedent's arbitration agreement with his employer stating to bind his “heirs, beneficiaries and assigns” bound decedent's widow to the arbitration agreement) mand. granted, 289 S.W.3d 827 (Tex. 2009) (per curiam).
As appellees’ survival actions arise from the decedents’ rights—brought on behalf of the decedents—those claims are subject to the decedents’ arbitration agreements. See Waters ex rel. Walton, 844 S.W.2d at 254. Furthermore, as Section 8.F. indicates, the leases expressly anticipated such a result. Thus, regarding appellees’ survival actions, they are bound by the decedents’ agreements. Accordingly, we must conclude that appellees are bound by the decedents’ arbitration agreements in the leases.
A trial court generally determines the arbitrability of an arbitration agreement, unless the parties clearly and unmistakably provide otherwise. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985, (1995).4 “Where the parties’ contract clearly and unmistakably delegates the arbitrability question to the arbitrator, the court possesses no power to decide the arbitrability issue.” HomeAdvisor, 2020 WL 2988565, at *5 (citing Robinson v. Home Owners Mgmt. Enters., Inc., 590 S.W.3d 518, 532 (Tex. 2019)).
Appellants assert that the language in the leases incorporated (i) “any claims, controversies, or disputes” and (ii) the AAA's Commercial Arbitration Rules by reference, such that arbitrability is an issue for the arbitrator to decide. In response, appellees, without authority, assert that the threshold question of arbitrability necessitates a determination of whether the FAA or the TAA applies. Appellees incorrectly rely on RSL Funding, LLC v. Newsome to assert that the trial court—and not the arbitrator—must determine that threshold issue before any jurisdiction or authority can even arguably be delegated to an arbitrator. 569 S.W.3d 116, 121–24 (Tex. 2018).
To the contrary, in RSL Funding, the Texas Supreme Court explained:
Arbitrators are competent to decide any legal or factual dispute the parties agree to arbitrate.
[A]s parties have a right to contract as they see fit, they may agree to arbitral delegation clauses that send gateway issues such as arbitrability to the arbitrator.
[W]e have held that parties may contract to arbitrate issues even when the law vests some related exclusive power in a court.
Here, the courts below have not questioned the validity of parties’ arbitration clause. We thus have no choice but to send this dispute to arbitration for the arbitrator to at least decide arbitrability.
569 S.W.3d at 121–23 (internal citations omitted, emphasis added).5 In HomeAdvisor, we addressed arbitrability of a contract that incorporated the AAA's Commercial Arbitration Rules:
[A]rbitration procedures specified that any arbitration would be administered by the AAA and governed by the AAA's Commercial Arbitration Rules. The AAA rules expressly delegate the issue of arbitrability to the arbitrator. This Court and many others have held that a bilateral agreement to arbitrate under the AAA rules constitutes clear and unmistakable evidence of the parties’ intent to delegate the issue of arbitrability to the arbitrator. Arnold, 890 F.3d at 553; Saxa Inc. v. DFD Architecture Inc., 312 S.W.3d 224, 229-30 (Tex. App.—Dallas 2010, pet. denied).
2020 WL 2988565, at *5.
As in HomeAdvisor, the record here shows the decedents’ leases, which were bilateral agreements, included an arbitration provision that clearly informed, with emphasized text, the decedents that (i) they were waiving their right to jury trial and (ii) their rights would be determined by a panel of either one or three neutral arbitrators. However, no arbitrator was selected. The scope of the arbitration provisions expressly included that “any claims, controversies, or disputes arising between us and in any way related to or arising out of the relationship created by this Agreement shall be resolved exclusively by binding arbitration.” As in HomeAdvisor, the arbitration provisions in the leases specify that any arbitration would be administered by the AAA and governed by the AAA's Commercial Arbitration Rules.6
Thus, we must conclude appellants have established the existence of an arbitration agreement between them and appellees. Appellants have established that all defenses to arbitration, including validity of the arbitration provision, were delegated to the arbitrator. The record shows no arbitrator decided arbitrability. Accordingly, the trial court erred in granting appellees’ motions to stay arbitration and in denying appellants’ pleas in abatement. See HomeAdvisor, 2020 WL 2988565, at *5. We resolve appellants’ first issue in their favor. Because of our resolution of this issue, we pretermit further discussion on and do not reach the remaining issues on appeal and the sole issue on petition for writ of mandamus.7
V. Dissent Acknowledgment
The Dissent asserts that our adjudication of the issues in this case conflicts with our prior opinion in Roe v. Ladymon, 318 S.W.3d 502, 513 (Tex. App.—Dallas 2010, no pet.).8 Relying on Roe, the Dissent opines that, because appellees did not individually sign the decedents’ leases, appellees (i) were non-signatories to the contract (ii) without clear and unmistakable evidence that they authorized an arbitrator to decide the gateway question of arbitrability. We limit our discussion to distinguishing Roe from the case at bar and offer no discussion on the remaining issues in this case.
In Roe, we considered who had the primary power to decide whether appellants could compel the appellees to arbitrate claims: a court or an arbitrator. See Roe, 318 S.W.3d at 511. Roe contracted with Metro LLP to renovate her home, and Ladymon signed the contract “in his capacity as a partner of Metro LLP.” Id. at 507.9 This contract included an arbitration provision. Id. “Unsatisfied with the remodeling work, Roe demanded arbitration against both Metro LLP and Ladymon.” Id. at 508. The parties attended arbitration, and the arbitrator ultimately signed an award in favor of Roe against Metro LLP and Ladymon—jointly and severally liable for Roe's damages. Id. at 509. The trial court confirmed the arbitration award but stated the following as to the award against Ladymon, individually:
Defendant Ladymon timely and properly objected to the arbitrator regarding the arbitrator's lack of jurisdiction over him in a personal capacity. Furthermore, whether or not Defendant Ladymon was personally liable for the debts of defendant [Metro LLP] is a separate issue from whether or not Defendant Ladymon was bound by the arbitration clause.
Id. at 509. The trial court further held
that the arbitrator exceeded his authority in rendering an award against Ladymon individually, stating: “The arbitrator was without jurisdiction and the determination of the arbitrator's jurisdiction is a matter of arbitrability under First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S. Ct. 1920 [131 L.Ed.2d 985] (1995) and is exclusively reserved to this Court.”
Id. In first addressing the applicability of an arbitration agreement, we explained:
Disputes about the scope of an arbitration agreement are resolved in favor of arbitration. However, this presumption favoring arbitration arises only after the party seeking to compel arbitration proves that a valid arbitration agreement exists.
Like other contracts, nonparties are normally not bound by arbitration agreements between others. But just as other contracts can become binding on nonparties, principles of contract law and agency may bind a non-signatory to an arbitration agreement. Thus non-signatories to a contract containing an arbitration clause may be required to arbitrate if rules of law or equity would bind them to the contract generally. See In re Labatt Food Serv., L.P., 279 S.W.3d 640, 644 (Tex. 2009); see also In re Weekley Homes, L.P., 180 S.W.3d 127, 131 (Tex. 2005) (“Indeed, if Texas law would bind a nonparty to a contract generally, the FAA would appear to preempt an exception for arbitration clauses alone.”)
Id. at 511 (internal citations and quotations omitted).10 In Roe, we further discussed whether a non-signatory to an arbitration agreement could be required to arbitrate.
[A] court should decide whether an arbitration contract binds a person who did not sign the contract.
While non-signatories to an arbitration agreement can be bound to arbitrate under principles of contract and agency law, such issues—dealing as they do with non-signatories—are gateway “issues of arbitrability” that the courts are primarily responsible for deciding—not the arbitrator. And only if the non-signatory has “clearly and unmistakably agreed” to submit that issue to arbitration will the courts be bound to a deferential review of the arbitrator's decision that the non-signatory is bound by the arbitration agreement.
Id. at 515 (internal citations omitted). We concluded Roe had not shown that Ladymon “ ‘clearly agreed to have the arbitrator [ ] decide (i.e., to arbitrate) the question of arbitrability.’ ” Id. at 517 (quoting First Options, 514 U.S. at 946, 115 S.Ct. 1920,). We rejected the argument that Ladymon's execution of the contract on behalf of Metro LLP was evidence that “he clearly and unmistakably agreed the arbitrator could decide whether he is bound to arbitrate claims against him individually.” Id. at 516 (emphasis added).
The Dissent opines that appellees in this case are in the same position as Ladymon in Roe because “both are non-contracting parties because they did not sign the leases.” See id. at 517. The result of the Dissent's rule suggests that nonparties to a contract containing an arbitration provision can never be bound by arbitration agreements they did not individually sign—an argument the Texas Supreme Court has repeatedly rejected. See In re Labatt Food Serv., 279 S.W.3d at 644; see also In re Weekley Homes, L.P., 180 S.W.3d 127, 131 (Tex. 2005). Here, appellees’ positions in the instant case are distinguishable from that of Ladymon in Roe.
Unlike Roe—in which neither Metro LLP nor Ladymon agreed to subject Ladymon to the contract—the decedents here agreed to arbitrate and explicitly bind “all persons whose claim is derived through or on behalf of [decedent], including that of the [decedent's] family, heirs, guardian, executor, administrator and assigns” to the leases. Unlike Ladymon—who sought to avoid liability under a contract he was not a party to—appellees’ claims of wrongful death and survival action derive from the respective decedents, who each agreed to arbitration. Thus, appellees are not acting as non-signatories to the decedents’ agreements with appellants. Instead, appellees have asserted claims that can only be raised (i) by stepping into the decedents’ legal shoes or (ii) by the decedents—as appellees have done on behalf of the decedents’ estates. See In re Labatt Food Serv., 279 S.W.3d at 646; Stevenson, 608 S.W.3d at 131. Therefore, Ladymon's position in Roe as a non-signatory to an agreement is not comparable to appellees’ positions in this case. As we conclude above, appellees are subject to the decedents’ agreements, including the arbitration provision and its incorporation of the AAA's Commercial Arbitration Rules, which delegate arbitrability questions to the arbitrator.
We reverse the trial court's orders granting a stay of arbitration and denying appellants’ plea in abatement. We remand the causes with instructions to order the parties to arbitration and to stay the underlying causes pending the outcome of the arbitrations. We dismiss appellants’ petition for writ of mandamus as moot.
I disagree with the majority's determination that the trial court abused its discretion by deciding gateway issues of arbitrability. The majority's holding conflicts with this Court's binding precedent. I, therefore, adamantly dissent.
DETERMINATION OF ARBITRABILITY
In their first issue, appellants (the Prestonwood Entities) assert that the trial court impermissibly determined questions of arbitrability by staying the AAA proceedings and denying their pleas in abatement rather than submitting those questions to the AAA. The majority agrees, but I do not.
Arbitration is “simply a matter of contract between the parties; it is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.” Robinson v. Home Owners Mgmt. Enters., Inc., 590 S.W.3d 518, 525–26 (Tex. 2019) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Arbitration is governed by two fundamental principles: arbitration agreements are contracts that must be enforced according to their terms, and a party cannot be compelled to arbitrate any dispute absent an agreement to do so. Id.
Although arbitration is favored under both state and federal law, “arbitrators wield only the authority they are [contractually] given.” Lamps Plus, Inc. v. Varela, ––– U.S. ––––, 139 S. Ct. 1407, 1416, 203 L.Ed.2d 636 (2019). To ensure parties are not forced to arbitrate matters outside their agreement, a substantive question of arbitrability—i.e., whether the parties have actually agreed to submit a particular dispute to arbitration—“is an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.” Howsam v. Dean Witter Reynolds, 537 U.S. 79, 83–84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (quoting AT & T Techs. Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)).
The phrase “question of arbitrability” refers to the “narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter.” Howsam, 537 U.S. at 83, 123 S.Ct. 588. Referring gateway matters to the court “avoids the risk of forcing parties to arbitrate a matter they may well not have agreed to arbitrate.” Id. These “gateway matters” include whether the parties agreed to arbitrate and whether a claim or dispute is encompassed in the agreement to arbitrate. G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 520–21 (Tex. 2015) (questions of substantive arbitrability, which concern the existence, enforceability and scope of an agreement to arbitrate, are usually decided by the trial court.); McGehee v. Bowman, 339 S.W.3d 820, 824 (Tex. App.—Dallas 2011, no pet.); Saxa Inc. v. DFD Architecture, Inc., 312 S.W.3d 224, 229 (Tex. App.—Dallas 2010, pet. denied) (whether the parties agreed to arbitrate is generally an issue decided by the courts rather than an arbitrator).
The parties may, however, agree to submit arbitrability issues to arbitration. Saxa, 312 S.W.3d at 229 (citing Howsam, 537 U.S. at 83, 123 S.Ct. 588). But courts do not assume the parties “agreed to arbitrate arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.” Roe v. Ladymon, 318 S.W.3d 502, 513 (Tex. App.—Dallas 2010, no pet.) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)); accord McGehee, 339 S.W.3d at 825–26 (if the parties clearly and unmistakably provide that the arbitrator is to decide the questions of substantive arbitrability, then the trial court must permit the arbitrator to decide those issues). A “court must examine the arbitration agreement to decide if, when construed under the relevant state law, the agreement evidences a clear and unmistakable intention that the arbitrators will have the authority to determine the scope of arbitration.” Saxa, 312 S.W.3d at 229 (citing ODL Servs. Inc. v. ConocoPhillips Co., 264 S.W.3d 399, 413 (Tex. App.—Houston [1st Dist.] 2008, no pet.)). For example, the parties’ agreement to a broad arbitration clause that expressly incorporates rules empowering the arbitrator to decide substantive arbitrability may provide clear and unmistakable evidence of the parties’ intent to delegate the issues of substantive arbitrability to the arbitrator. See Saxa, 312 S.W.3d at 230; see also Swearingen v. Swearingen, No. 05-15-01199-CV, 2016 WL 3902747, at *3–4 (Tex. App.—Dallas July 14, 2016, no pet.) (mem. op.); Schlumberger Tech. Corp. v. Baker Hughes Inc., 355 S.W.3d 791, 802–03 (Tex. App.—Houston [1st Dist.] 2011, no pet.).
Here, paragraph 8.B. of the Operative Leases includes the following sentence: “The Panel shall follow the current Commercial Arbitration Rules of the AAA.” Rule 7(a) of the Commercial Arbitration Rules of the AAA permits an arbitrator “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.” The Prestonwood Entities argue, and the majority holds, that by invoking the AAA and its Commercial Arbitration Rules in the arbitration agreements, the parties clearly and unmistakably agreed to submit arbitrability issues to the arbitrator. The majority's conclusion conflicts with this Court's opinion in Roe, in which we considered and rejected the same argument. Roe, 318 S.W.3d at 517.
In Roe, Metro LLP and Roe were the parties to a construction contract with an arbitration provision. 318 S.W.3d at 507. Ladymon signed the contract as Metro's partner but did not sign in his individual capacity. Id. The arbitration agreement incorporated the AAA's Construction Industry Arbitration Rules, which included Rule R–8, a provision similar to Rule 7 of the Commercial Arbitration Rules. Id. at 507, 517. Roe was dissatisfied with Metro's construction services and demanded arbitration against both Metro and Ladymon. Id. at 508. Ladymon objected to arbitration, asserting the arbitration provision did not apply to him because he did not sign an agreement to arbitrate in his individual capacity. Id. Roe argued that Rule R–8 required that the question of whether Ladymon was subject to the arbitration provision be submitted to the arbitrator. Id. at 517.
This Court disagreed, noting that “the entities who agreed to arbitrate under the AAA rules are Metro LLP and Roe, not Ladymon” and, as such, “the terms of the contracting parties’ agreement to arbitrate is not evidence that a non-contracting party—here Ladymon—agreed to arbitrate or to do so under AAA rules, much less clear and unmistakable evidence of such an agreement.” Roe, 318 S.W.3d at 517 (citing First Options, 514 U.S. at 946–47, 115 S.Ct. 1920). We concluded that we could not “say that Ladymon clearly and unmistakably agreed to submit gateway issues to an arbitrator simply because Roe and Metro LLP agreed to arbitrate in accordance with rules selected by the AAA.” Id.
The majority's reliance on HomeAdvisor, Inc. v. Waddell is misplaced because the parties seeking to avoid arbitration there were first parties to the arbitration agreement, not third-party complainants asserting derivative claims like the Estate Representatives here. No. 05-19-00669-CV, 2020 WL 2988565, *2 (Tex. App.—Dallas June 4, 2020, no pet.) (mem. op.). Rather, those parties engaged Home Advisors’ services through an on-line, click-through agreement and, in the process, agreed to terms and conditions that included an arbitration provision. Id. That provision stated that arbitration would be administered by the AAA and governed by the AAA's Commercial Arbitration Rules. Id. Because they were the actual parties to the agreement, this Court concluded the reference to the AAA's Commercial Arbitration Rules provided “clear and unmistakable evidence of the parties’ intent to delegate the issue of arbitrability to the arbitrator.” Id. at *5. Here, however, the Estate Representatives did not sign the leases. The reference to the AAA's Commercial Arbitration Rules, therefore, provides no evidence that the Estate Representatives intended to delegate arbitrability issues to the arbitrator. See Roe, 318 S.W.3d at 517.
Under this record, I would apply Roe and affirm the trial court's order. Just as in Roe, the parties seeking to avoid arbitration here—the Estate Representatives—are non-contracting parties because they did not sign the leases. See Roe, 318 S.W.3d at 517. As such, the language in the leases stating that the arbitration panel “shall follow the current Commercial Arbitration Rules of the AAA” is not evidence that the Estate Representatives agreed to arbitrate or to do so under AAA rules, much less clear and unmistakable evidence that the Estate Representatives, as non-contracting parties, authorized an arbitrator to decide those gateway matters. See, e.g., Elgohary v. Herrera, 405 S.W.3d 785, 791–92 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (applying Roe and concluding that agreement to arbitrate under AAA rules was not clear and unmistakable evidence that a non-contracting party agreed to arbitrate under AAA rules).
Whether the arbitration agreement binds the Estate Representatives as non-signatories is for the courts to decide, unless there is “clear and unmistakable evidence” that the Estate Representatives agreed the arbitrator would make that decision. See Roe, 318 S.W.3d at 514 (first citing First Options, 514 U.S. at 944, 115 S.Ct. 1920 and then citing Howsam, 537 U.S. at 84, 123 S.Ct. 588). On this record, I would conclude the Prestonwood Entities have not shown that the Estate Representatives “clearly agreed to have the arbitrator [ ] decide (i.e., to arbitrate) the question of arbitrability.” See First Options, 514 U.S. at 946, 115 S.Ct. 1920. Because the non-contracting parties (here the Estate Representatives) “did not clearly agree to submit the question of arbitrability to arbitration, the [trial court] was correct in finding that the arbitrability of the dispute was subject to independent review by the courts.” See id. at 947, 115 S.Ct. 1920. Accordingly, I would hold that the trial court correctly concluded the arbitrability of the dispute was subject to its de novo determination. See Roe, 318 S.W.3d at 518; see also Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 633 (Tex. 2018) (“Given the absence of clear and unmistakable evidence that Jody James agreed to arbitrate arbitrability in disputes with non-signatories, compelled arbitration cannot precede a judicial determination that an agreement to arbitrate exists. The trial court was therefore charged with determining whether a valid agreement to arbitrate exists between Jody James and the Agency before any issue may be referred to arbitration.”).
REMAINING APPELLATE ISSUES
Having concluded the trial court did not abuse its discretion by determining gateway issues of arbitrability, I would then have analyzed and addressed the Prestonwood Entities’ remaining appellate issues in which they assert the trial court abused its discretion by (1) determining the TAA applied to the arbitration agreements (Issue Two); (2) disregarding the “uncontroverted evidence” establishing that the Estate Representatives’ claims are arbitrable under the FAA (Issue Three); (3) striking the affidavit of Richard Campos offered in support of their pleas in abatement (Issue 4); and (4) denying arbitration under the common law (original proceedings).
First, I would overrule the Prestonwood Entities’ fourth issue regarding the Campos affidavit due to waiver because they did not seek a continuance of the hearing or file a response to the objections before the court ruled and they failed to address renewed objections argued at the hearing. See Cunningham v. Anglin, No. 05-12-00039-CV, 2014 WL 3778907, at *3 (Tex. App.—Dallas July 31, 2014, pet. denied) (mem. op.) (although a trial court should not sustain late-filed objections without giving the other party an opportunity to amend, “the other party should ask the trial court for a continuance for time to respond to the objections” and failing to do so waives error on appeal”); Webster v. Allstate Ins. Co., 833 S.W.2d 747, 750 (Tex. App.—Houston [1st Dist.] 1991, no writ.) (same). By failing to respond or offer any argument in defense of the objections, the Prestonwood Entities did not preserve error for review. Webster, 833 S.W.2d at 750.
Without the Campos testimony, the remaining record will not support the Prestonwood Entities’ contention that the FAA applies here because there is no evidence that the leases show a transaction involving interstate commerce. See 9 U.S.C. § 2. Without such evidence, the Prestonwood Entities’ assertion that the FAA controls the arbitration agreement fails as a matter of law. See Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) (the transaction evidenced by the contract must in fact involve interstate commerce); Eastland v. Camp Mystic, Inc., No. 04-08-00675-CV, 2009 WL 260523, at *3 (Tex. App.—San Antonio Feb. 4, 2009, pet. denied) (mem. op.) (lease between two Texas entities for real property on which one party operated a summer camp did not evidence a transaction involving interstate commerce). Further, I would conclude the record shows that interstate commerce is not implicated here. All parties involved in the suit are Texas residents, the leases were signed in Texas, the leases were to be performed in Texas only, the leased premises are located in Texas, the leases are governed by Texas law, and the underlying dispute does not relate in any way to interstate commerce. The agreements, therefore, cannot be governed by the FAA. Accordingly, I would conclude the trial court did not abuse its discretion by denying the Prestonwood Entities’ motion to compel arbitration under the FAA, and I would overrule the Prestonwood Entities’ third issue.
Next, I would overrule the Prestonwood Entities’ second issue and conclude the TAA governs the arbitration agreements but renders those agreements unenforceable as to the personal injury claims asserted here. The Estate Representatives provided multiple bases in support of their argument that the arbitration agreements were invalid and unenforceable, including that the agreements were illusory, unconscionable, and did not comply with signature requirements set out in the Act related to personal injury claims. Because the trial court did not enter findings of fact or conclusions of law to explain its ruling, we must uphold the trial court's decision on any appropriate legal theory urged below. See Bonded Builders Home Warranty Ass'n of Tex. v. Rockoff, 509 S.W.3d 523, 531–32 (Tex. App.—El Paso 2016, no pet.); see also Lakeway Homes, Inc. v. White, No. 05-15-01455-CV, 2016 WL 3453559, at *3 (Tex. App.—Dallas June 23, 2016, no pet.) (mem. op.).
A written agreement to arbitrate is valid and enforceable under the TAA if the agreement is to arbitrate a controversy that: (1) exists at the time of the agreement; or (2) arises between the parties after the date of the agreement. Tex. Civ. Prac. & Rem. Code § 171.001. The TAA controls the dispute where, as here, the contract does not relate to interstate commerce and was executed between Texas residents in Texas, to be performed in Texas. Therefore, I would hold that the TAA controls this dispute, and the trial court did not abuse its discretion to the extent it made that determination. See, e.g., Chambers v. O'Quinn, 305 S.W.3d 141, 150 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (TAA controlled dispute despite references to both FAA and TAA in the contract where contract did not relate to interstate commerce); see also In re Godt, 28 S.W.3d 732, 738–39 (Tex. App.—Corpus Christi–Edinburg 2000, orig. proceeding) (same).
When a party's claim is for personal injury, however, an arbitration agreement is unenforceable as to the personal injury claim unless: “(1) each party to the claim, on the advice of counsel, agrees in writing to arbitrate; and (2) the agreement is signed by each party and each party's attorney.” Tex. Civ. Prac. & Rem. Code § 171.002(a)(3), (c). It is undisputed that the leases at issue here are not signed by the Estate Representatives in their individual capacities, or by the decedents’ attorneys, the Estate Representatives’ attorneys, or the Prestonwood Entities’ attorneys. As a result, the arbitration agreements are unenforceable. Accordingly, I would conclude the trial court could reasonably determine the arbitration agreements were unenforceable as to the personal injury claims asserted here. See, e.g., In re Godt, 28 S.W.3d at 738–39 (concluding TAA controlled dispute and holding that the arbitration agreement is unenforceable under the TAA because it did not meet the requirements of section 171.002(c)).
Finally, I would deny the petitions for writ of mandamus. Discussion of whether the order is permissible under the common law would be obviated by a determination that the trial court did not err in staying the AAA proceedings and denying the pleas in abatement under the TAA. See Miller v. Brewer, 118 S.W.3d 896, 899 (Tex. App.—Amarillo 2003, no pet.) (per curiam) (discussion of whether order was permissible under the FAA or common law unnecessary because court concluded order was permissible under the TAA).
Under this record, I would conclude the trial court did not abuse its discretion by granting the motions to stay arbitration and denying the pleas in abatement.
Because the majority reaches the opposite conclusion and in doing so disregards this Court's binding precedent, I adamantly dissent.
1. Prior to submission, we consolidated relators’ original proceeding, cause number 05-20-00619-CV, into the 05-20-00380-CV cause.
2. At the time of the September 30, 2019 hearing, the Salomon/Abramowitz and Repp/Spring cases had not been transferred into the trial court. However, both of those cases were transferred to the trial court, along with all of the other three cases, before the trial court's February 28, 2020 order.
3. “[A] dual system of arbitration has existed in Texas, and the statutory method has been viewed as cumulative of the common law.” L. H. Lacy Co., 559 S.W.2d at 351.
4. See also RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 120 (Tex. 2018) (“The U.S. Supreme Court has explained that there are three types of disagreements in the arbitration context: (1) the merits of the dispute; (2) whether the merits are arbitrable; and (3) who decides the second question․ The default rule for the third question is that arbitrability is a threshold matter for the court to decide.” (first citing First Options, 514 U.S. at 942, 115 S.Ct. 1920, and then citing Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 61 (Tex. 2008))).
5. We note the arbitration provision in RSL Funding did not involve the AAA or incorporate its Commercial Arbitration Rules. See generally RSL Funding, 569 S.W.3d at 119.
6. The record includes the AAA's Commercial Arbitration Rule R-7, which provides, in part: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 or to the arbitrability of any claim or counterclaim.See, e.g., Saxa Inc. v. DFD Architecture Inc., 312 S.W.3d 224, 228 (Tex. App.—Dallas 2010, pet. denied) (discussing AAA rules); PER Group, L.P. v. Dava Oncology, L.P., 294 S.W.3d 378, 386 (Tex. App.—Dallas 2009, no pet.) (discussing Commercial Arbitration Rule R-7).
7. Not only is further discussion unnecessary, imparting further opinion risks providing an advisory opinion when it is not our question to decide.
8. We note neither appellants nor appellees rely upon Roe.
9. Metro LLP later converted to a limited partnership, with Ladymon serving as a limited partner. Roe, 318 S.W.3d at 507–08.
10. Unlike the contract claims in Roe, In re Labatt Food Services and In re Weekley Homes involved wrongful death and personal injury. In re Labatt Food Serv., 279 S.W.3d at 649 (holding “the arbitration provision in an agreement between a decedent and his employer requires the employee's wrongful death beneficiaries to arbitrate their wrongful death claims against the employer even though they did not sign the agreement”); In re Weekley Homes, L.P., 180 S.W.3d 127, 135 (Tex. 2005) (recognizing that a “nonparty may be compelled to arbitrate if it deliberately seeks and obtains substantial benefits from the contract itself” in discussion of a personal injury claim where claimant demanded compliance with the contract).
Opinion by Justice Pedersen, III
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Docket No: No. 05-20-00380-CV, No. 05-20-00387-CV, No. 05-20-00388-CV, No. 05-20-00389-CV, No. 05-20-00390-CV
Decided: October 22, 2021
Court: Court of Appeals of Texas, Dallas.
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