OCCIDENTAL PETROLEUM CORPORATION AND OXY LOW CARBON VENTURES LLC v. BLACK MOUNTAIN CARBONLOCK LLC (2026)

MAJORITY OPINION 1

Two affiliated companies appeal the trial court's interlocutory order denying their motion to compel arbitration of a tortious interference case asserted against them by a signatory to a contract containing an arbitration provision. Concluding that the trial court erred in denying the motion, we reverse and remand.

I. FACTUAL AND PROCEDURAL BACKGROUND

Nonparty Carbon Engineering Ltd., a corporation organized under the laws of British Columbia, is a pioneer of Direct Air Capture (“DAC”) technology—a technology which extracts carbon dioxide directly from the Earth's atmosphere and sequesters it, thereby reducing greenhouse gases. DAC technology allegedly can be used to synthesize carbon dioxide into clean and affordable transportation fuels. Although Carbon Engineering develops the technology to capture and sequester carbon, it does not usually build its own carbon capture facilities. Instead, Carbon Engineering licenses its technology to “plant developers” like appellee/plaintiff Black Mountain CarbonLock, LLC (“Black Mountain”), who are responsible for developing and constructing plants that utilize the DAC process. Black Mountain was created to focus on project development in the natural resources sector, including carbon capture and storage.

Appellant/defendant Oxy Low Carbon Ventures, LLC (“Oxy Low Carbon”) is a subsidiary of appellant/defendant Occidental Petroleum Corporation (“Oxy”). Oxy Low Carbon purchased less than fifty percent of Carbon Engineering's stock and placed Rick Callahan and Michael Avery on the Board of Directors of Carbon Engineering. Black Mountain and Carbon Engineering entered into a November 4, 2021 Australia DAC Development Cooperation Agreement (the “Contract”) in which the parties agreed to arbitrate disputes in Vancouver, British Columbia in accordance with British Columbia's Arbitration Act (“Arbitration Agreement”).² Another provision provides that the Contract shall be governed by and construed in accordance with British Columbia law.³

In the Contract Black Mountain and Carbon Engineering agreed to “use commercially reasonable efforts to collaborate to progress [Black Mountain's] Business Plan in [Australia] and to work toward further agreements contemplated in [the Contract], on the terms and conditions herein.” Black Mountain initiated arbitration against Carbon Engineering under the Contract's arbitration provision in February 2022, asserting claims for breach of the contracts between Carbon Engineering and Black Mountain, including the Contract. As provided in the Contract the arbitration took place in Vancouver, British Columbia. The arbitrator issued an award in favor of Black Mountain on February 21, 2024 in the amount of approximately $4.5 million. Carbon Engineering paid Black Mountain the amount of the award in April 2024.

According to Black Mountain, during the arbitration, numerous internal memoranda and emails surfaced demonstrating that Oxy and Oxy Low Carbon (collectively the “Oxy Parties”) had developed a plan to force their way into Carbon Engineering and force Black Mountain out. Black Mountain alleges that the Oxy Parties forced Carbon Engineering to breach its contracts with Black Mountain in 2022. Therefore, Black Mountain decided to pursue claims against the Oxy Parties. In the fall of 2023, a subsidiary of Oxy Low Carbon acquired 100% of Carbon Engineering's stock. In November 2023 while the arbitration was still pending, Black Mountain filed suit in the trial court below against the Oxy Parties,⁴ asserting claims for tortious interference with contract, tortious interference with prospective relations and business advantages, fraud, quantum meruit, and unjust enrichment, and alleging conspiracy. Black Mountain seeks actual and punitive damages, its reasonable and necessary attorney's fees, and the imposition of a constructive trust. According to Black Mountain, the tort theories it asserts, if successful, will allow Black Mountain to recover the full amount of its damages, without the limits on the recovery of contract damages that applied in the arbitration with Carbon Engineering.

The Oxy Parties filed an original answer on December 18, 2023. On January 22, 2024, the Oxy Parties filed a Motion to Compel Arbitration along with a brief in support thereof (“Motion to Compel Arbitration”). The Oxy Parties asserted that (1) under the binding and enforceable arbitration agreement in the Contract, the trial court should compel Black Mountain to arbitrate all of its claims against the Oxy Parties; (2) the Arbitration Agreement is governed by the Federal Arbitration Act (“FAA”); (3) the Arbitration Agreement clearly and unmistakably delegates to the arbitrator the determination of which claims are arbitrable; (4) though the Oxy Parties are not parties or signatories to the Contract, they may compel Black Mountain to arbitrate based on direct-benefits estoppel and intertwined-claims estoppel; and (5) under section 3 of the FAA the trial court should stay the proceedings in the trial court pending arbitration. The Oxy Parties submitted the Contract and a letter they sent to Black Mountain demanding that Black Mountain nonsuit this case and, if it wishes to pursue these claims, that it do so by arbitration. The Oxy Parties asserted that Texas law applies to the determination of whether they, as non-signatories, may enforce the Arbitration Agreement against signatory Black Mountain. In the alternative, the Oxy Parties asserted that even if British Columbia law applies, Black Mountain still should be compelled to arbitrate its claims against them based on British Columbia law.

Black Mountain filed a motion asking the trial court to take judicial notice of the law of British Columbia which, according to Black Mountain, applies to the determination of whether non-signatories like the Oxy Parties may enforce the Arbitration Agreement. The Oxy Parties filed a motion asking the trial court to take judicial notice of British Columbia's Arbitration Act, British Columbia's International Commercial Arbitration Act, and other authorities under British Columbia law. The Oxy Parties also submitted a declaration of Daniel R. Bennett, a British Columbia lawyer, in which he testifies as to various points of British Columbia law in support of the proposition that Black Mountain should be compelled to arbitrate even if British Columbia law applies.

Black Mountain filed a response setting forth various grounds on which it asserted the trial court should deny the Motion to Compel Arbitration. Black Mountain submitted a declaration by Ashley Zumwalt Forbes, Black Mountain's co-founder and Chief Executive Officer, and a declaration of Gerald W. Ghikas, K.C., a British Columbia lawyer, in which he testifies as to various points of British Columbia law.

On October 3, 2024, the trial court held a hearing on the motions for judicial notice and the Motion to Compel Arbitration. On the same day, the trial court signed an order denying the Motion to Compel Arbitration without specifying the grounds for this ruling. The trial court also signed orders granting the respective motions by Black Mountain and the Oxy Parties for the trial court to take judicial notice of various authorities under British Columbia law. The Oxy Parties timely perfected this interlocutory appeal from the trial court's order denying its Motion to Compel Arbitration.

II. ISSUES AND ANALYSIS

Under a single issue the Oxy Parties assert various arguments in support of the proposition that the trial court erred in denying the Motion to Compel Arbitration and their motion to stay the trial court proceedings under section 3 of the FAA.

A. Did the trial court err in denying the Motion to Compel Arbitration?

We review the denial of a motion to compel arbitration for an abuse of discretion, reviewing matters of law de novo, but deferring to any fact findings by the trial court. See Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018); In the Estate of Guerrero, 465 S.W.3d 693, 700–01, 705 (Tex. App.—Houston [14th Dist.] 2015, pet. denied) (en banc). When, as in today's case, the trial court files no findings of fact or conclusions of law, it is implied that the trial court made all necessary findings of fact to support its ruling. See In the Estate of Guerrero, 465 S.W.3d at 701. We review de novo the trial court's determinations as to whether a valid arbitration agreement exists and whether a non-signatory may enforce the agreement. See Lennar Homes of Texas Land & Construction, Ltd. v. Whiteley, 672 S.W.3d 367, 376 (Tex. 2023); Henry, 551 S.W.3d at 115.

1. Failure to Challenge Alleged Basis for Trial Court's Ruling

At the threshold we address an argument by Black Mountain that, if meritorious, would make our analysis much shorter. When, as in this case, the trial court does not specify the grounds upon which it relied in denying the Motion to Compel Arbitration, we must affirm the trial court's ruling if any of the independent grounds for denying this motion is meritorious. See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). In this circumstance, the Oxy Parties must challenge in their opening brief each of the independent grounds on which the trial court could have denied the motion, properly or improperly; otherwise this court will affirm the trial court's order without addressing the merits of any of the grounds. See RSL Funding, LLC v. Pippins, 424 S.W.3d 674, 687 n.24 (Tex. App.—Houston [14th Dist.] 2014), aff'd, 499 S.W.3d 423, 434 (Tex. 2016).

Black Mountain contends that one of the independent grounds for denying the Motion to Compel Arbitration was that the Oxy Parties are barred under the doctrine of unclean hands from arguing that Black Mountain is bound by direct-benefits estoppel. Black Mountain asserts that this court should summarily affirm the trial court's order because the Oxy Parties did not challenge this ground in their opening brief. In its response to the Motion to Compel Arbitration, Black Mountain only mentioned the term “unclean hands” once and that was in a quote from a Fourth Court of Appeals case. See Tex. Enters. v. Arnold Oil Co., 59 S.W.3d 244, 249 (Tex. App.—San Antonio 2001, no pet.) (“As an equitable theory, equitable estoppel is subject to traditional equitable defenses․ For example, the doctrine of “unclean hands” requires that one who comes seeking equity must come with clean hands.”). Black Mountain never argued that either of the Oxy Parties had unclean hands. We conclude that this passing reference to the doctrine of unclean hands is insufficient to make this doctrine an independent ground for denying the Motion Compel Arbitration.

Black Mountain also cites its invocation of the doctrine of unclean hands in a Motion for Pre-Hearing Discovery. However, Black Mountain withdrew this motion and the trial court never ruled on it. Even presuming that the doctrine of unclean hands was a ground for the Motion for Pre-Hearing Discovery, that status does not make this doctrine a ground for denying the Motion to Compel Arbitration. See FinServ Cas. Corp. v. Transamerica Life Ins. Co., 523 S.W.3d 129, 150 n.13 (Tex. App.—Houston [14th Dist.] 2016, pet. denied).

Because Black Mountain did not raise the doctrine of unclean hands as a basis for denying the Motion to Compel Arbitration, the Oxy Parties were not required to challenge this ground in their opening brief.

2. Applicability of the FAA

The Oxy Parties sought an order under section 4 of the FAA compelling Black Mountain to arbitrate its claims against them as well as an order under section 3 of the FAA staying the court proceeding pending arbitration. Therefore, we must determine whether the FAA applies.

The Contract is silent as to whether the FAA applies to the Arbitration Agreement. The Oxy Parties assert that the FAA applies, and Black Mountain does not disagree. The FAA applies to an arbitration agreement in any contract involving interstate commerce to the full extent of the Commerce Clause of the United States Constitution. See 9 U.S.C. § 2; Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 277–81, 115 S.Ct. 834, 839–41, 130 L.Ed.2d 753 (1995); In re Nexion Health at Humble, Inc., 173 S.W.3d 67, 69 (Tex. 2005). To be applicable, the FAA does not require a substantial effect on interstate commerce; it requires only that commerce be involved or affected. See In re L & L Kempwood Assocs., 9 S.W.3d 125, 127 (Tex. 1999). Interstate commerce may be shown in a variety of ways, including: (1) location of a party's headquarters in another state; (2) transportation of materials across state lines; (3) manufacture of parts in a different state; (4) billings prepared out of state; and (5) interstate mail and phone calls in support of a contract. See R&L Carriers Shared Servs., L.L.C. v. Gonzalez, No. 14-24-00992-CV, 2026 WL 1172841, at *4 (Tex. App.—Houston [14th Dist.] Apr. 30, 2026, no pet.) (mem. op.). Under its plain text the Contract involves a party, Carbon Engineering, that is organized under the laws of British Columbia and that has its principal office in British Columbia, and a party, Black Mountain that is a Delaware entity with its principal office in Texas. Under the Contract, Carbon Engineering and Black Mountain agree to use commercially reasonable efforts to collaborate to progress Black Mountain's business plan in Australia. We conclude that the Contract involves or affects interstate commerce and that the FAA applies to the Arbitration Agreement. See R&L Carriers Shared Servs., L.L.C., 2026 WL 1172841, at *4; ODL Services, Inc. v. ConocoPhillips Co., 264 S.W.3d 399, 409 (Tex. App.—Houston [1st Dist.] 2008, no pet.).

3. Whether Texas law and British Columbia law are different

Texas courts apply Texas conflict-of-laws principles. See Greenberg Traurig of N.Y., P.C. v. Moody, 161 S.W.3d 56, 69–70 (Tex. App.—Houston [14th Dist.] 2004, no pet.). A Texas court must make a conflict-of-laws decision only when the case is connected with more than one jurisdiction and the laws of the jurisdictions in question differ on one or more points in issue. See id. Texas courts presume that the law of another jurisdiction, such as British Columbia, is the same as Texas law unless a party establishes to the contrary. See Excess Underwriters at Lloyd's, London v. Frank's Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 53 (Tex. 2008). We examine the record to see if it has been established that Texas law and British Columbia law are different on one or more points in issue.

Under Texas law (1) “[d]etermining whether a claim involving a non-signatory must be arbitrated is a gateway matter for the trial court, not the arbitrator”; (2) a presumption favors adjudication of arbitrability issues by the courts absent clear and unmistakable evidence of the parties' intent to delegate to the arbitrator the determination of disputes over one or more of the arbitrability issues, such as the validity, scope, or enforceability of the arbitration agreement; and (3) whether a non-signatory to the agreement may compel a signatory to arbitrate its claims against the non-signatory is an issue as to the existence of an arbitration agreement that must be decided by the courts and not by the arbitrator. See Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624, 629, 631–33 (Tex. 2018).

Each side's expert on British Columbia law agrees that when a party to a court action in British Columbia applies for a stay of the court action under section 8 of the International Commercial Arbitration Act (“ICAA”),⁵ “where it is arguable that the dispute falls within the terms of the arbitration agreement, or where it is arguable that a party to the legal proceedings is bound by the arbitration agreement, the law requires that the court grant a stay of proceedings and allow the arbitral tribunal to rule on its own jurisdiction.”⁶ Thus, under British Columbia law the default rule is that the arbitrator determines arbitrability issues such as whether a non-signatory may enforce an arbitration agreement against a signatory and whether the claims are within the scope of the agreement, but the court may make this determination where there is no arguable basis for ruling in favor of the party seeking to arbitrate as to an arbitrability issue.

Under Texas law direct-benefits estoppel applies to parties who seek “to derive a direct benefit” from a contract with an arbitration agreement. See Jody James Farms, JV, 547 S.W.3d at 637. This estoppel theory precludes a signatory plaintiff from seeking to hold a non-signatory defendant liable based on the terms of an agreement that contains an arbitration provision while simultaneously asserting the provision lacks force because the defendant is a non-signatory. Id. When a claim depends on the contract's existence and cannot stand independently—that is, the alleged liability “arises solely from the contract or must be determined by reference to it”—equity prevents a person from avoiding the arbitration clause that was part of that agreement. Id. But “when the substance of the claim arises from general obligations imposed by state law, including statutes, torts and other common law duties, or federal law,” direct-benefits estoppel is not implicated even if the claim refers to or relates to the contract or would not have arisen “but for” the contract's existence. Id. The Supreme Court of Texas has held that tortious interference claims between a signatory to an arbitration agreement and affiliates of the other signatory to the agreement arise more from the contract than general law and thus are subject to direct-benefits estoppel. See In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 761–62 (Tex. 2006).

The declarations regarding British Columbia law and the British Columbia cases submitted to the trial court show that British Columbia law recognizes estoppel as a non-signatory theory and that British Columbia courts have neither adopted nor rejected estoppel law that is the same or similar to Texas direct-benefits estoppel law. British Columbia cases do not appear to have developed the estoppel non-signatory theory that much. Although section 8(1) of the ICAA applies only when a party to an arbitration agreement commences a court proceeding against another party to the agreement regarding a matter agreed to be arbitrated, British Columbia courts have construed the term “party” broadly to include non-signatories in certain circumstances. See Can., B.C. International Commercial Arbitration Act, R.S.B.C. 1996, ch. 233, § 8(1); Wittman v. Blackbaud, Inc., 2021 BCSC ⁷ 2025, para. 25 (Can. B.C. Sup. Ct.).⁸ Estoppel is traditionally based on the conduct of the parties at issue. See Wittman, 2021 BCSC 2025, para. 71. In most British Columbia cases regarding the estoppel non-signatory theory, the estoppel is applied against a non-signatory and in favor of a signatory. Here, we have the opposite situation. Nonetheless, in one of the British Columbia cases submitted by the Oxy Parties, estoppel was applied against a signatory plaintiff and in favor of non-signatory defendants based on statements made by the plaintiff in its Notice of Civil Claim and in another court filing, with no mention of detrimental reliance. See Northwestpharmacy.com Inc. v. Yates, 2017 BCSC 1572, para. 54, subparas. 109–10 (Can. B.C. Sup. Ct.).⁹ British Columbia law regarding estoppel as a non-signatory theory is different from Texas law.

4. Whether Texas or British Columbia Law applies to the determination of whether the Oxy Parties may enforce the Arbitration Agreement?

The issue of which jurisdiction's law governs is a question of law for the court to decide. See Greenberg Traurig of N.Y., P.C., 161 S.W.3d at 69–70. There are no fact issues in the record regarding the conflict-of-laws issue at hand. By denying the Motion to Compel Arbitration, the trial court impliedly decided that British Columbia law applies to the determination of whether the Oxy Parties, non-signatories to the Contract, may enforce the Arbitration Agreement. We review this decision de novo. See id.

On appeal the Oxy Parties argue that the trial court erred to the extent it applied British Columbia law and that Texas law applies to the determination of whether the Oxy Parties, non-signatories to the Contract, may enforce the Arbitration Agreement. Black Mountain argues that the choice-of-law provision in the Contract requires the application of British Columbia law to this issue. The parties have not cited and research has not revealed any binding precedent that determines this issue.

Though some courts have held that federal common law governs the determination of who is bound by an arbitration agreement and whether nonparties may enforce the agreement,¹⁰ the United States Supreme Court disapproved of these cases in Arthur Andersen LLP v. Carlisle. See 556 U.S. 624, 630–31, 129 S.Ct. 1896, 1901–02, 173 L.Ed.2d 832 (2009). The Carlisle court held that “State law” rather than federal law applies to the determination of whether non-signatories may enforce an arbitration agreement. See id.; see also Jody James Farms, JV, 547 S.W.3d at 631–32 & n.12 (citing Carlisle for the proposition that whether parties have agreed to arbitrate is a gateway matter controlled by state law governing the validity, revocability, and enforceability of contracts generally and concluding that whether a non-signatory may enforce an arbitration agreement against a signatory is a question regarding the existence of an arbitration agreement with the non-signatory). The Carlisle court concluded that state law governing issues concerning the validity and enforceability of contracts generally governs issues concerning the validity and enforceability of arbitration agreements subject to the FAA. See id. The high court did not address any issue concerning the conflict-of-laws determination as to which state's law governs such issues. See id.

In the trial court Black Mountain asserted that British Columbia law governs the substantive arbitrability issues, including determination of whether the Oxy Parties may enforce the Arbitration Agreement. Black Mountain relied on the provision in the Contract choosing British Columbia law to govern the Contract and its construction, as well as the Arbitration Agreement's requirement of arbitration under British Columbia law.¹¹

The Oxy Parties make several arguments in support of the application of Texas law to the determination of whether they may enforce the Arbitration Agreement. The Oxy Parties argue that the forum state's law always applies to the determination of whether non-signatories may enforce an arbitration agreement, without any need to conduct a conflict-of-laws analysis. They cite various cases in support of this proposition. Because none of these cases involved a party who sought to have another jurisdiction's law applied to this issue or who proved that another jurisdiction's law on this issue differed from Texas law, these cases are not on point, and any statement by these courts that Texas or the forum's law applied does not inform the conflict-of-laws analysis in today's case. See Northport Health Services of Arkansas, LLC v. Posey, 930 F.3d 1027, 1030 (8th Cir. 2019); Morrison v. Amway Corp., 517 F.3d 248, 254 (5th Cir. 2008); Huntley v. Rosebud Econ. Dev. Corp., No. 22-CV-1172-L-MDD, 2023 WL 5186247, at *3 (S.D. Cal. Aug. 11, 2023); ROI Properties Inc. v. Burford Capital Ltd., No. CV-18-03300-PHX-DJH, 2019 WL 1359254, at *5 (D. Ariz. Jan. 14, 2019); Hood v. Uber Techs., Inc., No. 1:16-CV-998, 2017 WL 11017585, at *2 (M.D. N.C. May 17, 2017); Citicorp Admin. Services, Inc. v. Mail Sort, Inc., No. 4:04-CV-223-A, 2004 WL 962832, at *1 (N.D. Tex. May 4, 2004); Boucher v. Warrior Crane Serv., LLC, 698 S.W.3d 344, 350–51 (Tex. App.—Eastland 2024, pet. denied); Deaton v. Law Offices of Steven M. Johnson, P.C., 697 S.W.3d 676, 693 (Tex. App.—Eastland 2024, no pet.).

Even if the Oxy Parties had cited a case holding that the forum state's law always applies to the determination of whether non-signatories may enforce an arbitration agreement, without any need to conduct a conflict-of-laws analysis, such a case would conflict with the Supreme Court of Texas's pronouncements that Texas courts apply the “most significant relationship” test from the Restatement (Second) of Conflict of Laws to decide conflict-of-laws issues. See Hughes Wood Prods., Inc. v. Wagner, 18 S.W.3d 202, 205 (Tex. 2000). Under the Restatement, conflict-of-laws issues regarding contracts are determined by the law chosen by the parties in accordance with the rule of Restatement section 187 and otherwise by the law selected in accordance with the rule of Restatement section 188. See Restatement (Second) of Conflict of Laws §§ 186–188 (1971). The Restatement does not provide that the forum state's law always applies to the determination of whether non-signatories may enforce an arbitration agreement, regardless of the law chosen by the parties or the law that has the most significant relationship to the transaction and the parties under Restatement sections 6 and 188.¹² See id.

The Oxy Parties next argue that a choice-of-law clause may not supply the law to be applied to the determination of whether the contract containing the clause was formed. The Oxy Parties cite two cases from the United States Court of Appeals for the Fifth Circuit. See Realogy Holdings Corp. v. Jongebloed, 957 F.3d 523, 531 & n.11 (5th Cir. 2020); Edminster, Hinshaw, Russ & Associates, Inc. v. Downe Twp., 953 F.3d 348, 351 (5th Cir. 2020). These cases are based on the premise that a court may not apply any provision of a contract, including a choice-of-law provision, until after the court has determined that the contract was formed. See Realogy Holdings Corp., 957 F.3d at 531 & n.11; Edminster, Hinshaw, Russ & Associates, Inc., 953 F.3d at 351. This line of cases is not on point in today's case. It is undisputed and the record proves as a matter of law that the Contract between Carbon Engineering and Black Mountain was formed, and the question is whether the choice-of-law provision of the Contract binds the Oxy Parties in their attempt to compel arbitration under the Contract's Arbitration Agreement. Black Mountain concedes that it entered into the Arbitration Agreement with Carbon Engineering but argues that this agreement does not cover its claims against the Oxy Parties. The Oxy Parties assert that they may enforce the Arbitration Agreement against Black Mountain based on estoppel principles. The Arbitration Agreement provides for arbitration in British Columbia, under British Columbia law. To the extent the Oxy Parties seek to compel arbitration under the Arbitration Agreement in the Contract, they may not seek this benefit of the Contract and avoid the choice-of-law provisions in the Contract. See Motorola Credit Corp. v. Uzan, 388 F.3d 39, 51 (2d Cir. 2004) (stating that “if defendants wish to invoke the arbitration clauses in the agreements at issue, they must also accept the [ ] choice-of-law clauses that govern those agreements”); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005) (stating that “under ‘direct benefits estoppel,’ a non-signatory plaintiff seeking the benefits of a contract is estopped from simultaneously attempting to avoid the contract's burdens”).

The Oxy Parties also cite various opinions from United States District Courts for the proposition that though choice-of-law and arbitration provisions that choose foreign law are relevant to the substantive law to be used in the arbitration, these provisions do not determine the law applicable to arbitrability issues. See Gorelik v. Dillon, No. 10-20877-CIV, 2010 WL 11553317, at *4 (S.D. Fla. Dec. 15, 2010); Sea Bowld Marine Group, LDC v. Oceanfast Pty, Ltd., 432 F. Supp. 2d 1305, 1312 (S.D. Fla. 2006); Boston Telecomm. Group, Inc. v. Deloitte Touche Tohmatsu, 278 F. Supp. 2d 1041, 1045–46 (N.D. Cal. 2003), aff'd, 249 Fed. Appx. 534 (9th Cir. 2007); Chloe Z Fishing Co., Inc. v. Odyssey Re (London) Ltd., 109 F.Supp.2d 1236, 1253–54 (S.D. Cal. 2000); Westbrook Intern., LLC V. Westbrook Techs., Inc., 17 F. Supp. 2d 681, 683–84 (E.D. Mich. 1998). In each of these opinions the court relies on the proposition that federal law, rather than state law, governs arbitrability issues. The Carlisle court disapproved of this proposition, so the reasoning of these opinions no longer offers sound guidance on this point. See Carlisle, 556 U.S. at 630–31, 129 S.Ct. at 1901–02; Jody James Farms, JV, 547 S.W.3d at 631–32 & n.12.

We agree with the courts that have concluded that a choice-of-law provision in the contract containing the arbitration agreement at issue may decide the issue of which state's law will be used to determine whether non-signatories may enforce an arbitration agreement. See Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 255, 257–59 (5th Cir. 2014) (applying section 187 of the Restatement (Second) of Conflict of Laws and enforcing a contract's choice of Arizona law to apply to the issue of whether non-signatory defendants in a court in Mississippi could enforce an arbitration agreement against signatory plaintiffs based on estoppel); Motorola Credit Corp., 388 F.3d at 50–51 (applying Swiss law based on choice-of-law provision to determine whether non-signatory defendants could enforce arbitration agreement against signatory plaintiffs); RCA Trade Center v. Schulte Building Sys., No. 24-00074 HG-WRP, 2025 WL 1707711, at *5 (D. Hawai'i Jun. 17, 2025) (applying Texas law based on choice-of-law provision in contract to determine whether non-signatory plaintiffs could be forced to arbitrate their claims); Ramasamy v. Essar Global Ltd., 825 F. Supp. 2d 466, 468–69 (S.D.N.Y. 2011) (applying Texas law based on choice-of-law clause to determine whether non-signatory could compel signatory to arbitrate); FR 8 Singapore Pte. Ltd. v. Albacore Maritime, Inc., 794 F. Supp. 2d 449, 454–59 (S.D. N.Y. 2011) (applying English law based on choice-of-law clause to determine whether signatory could compel non-signatories to arbitrate under alter ego theory); BDO Seidman v. Miller, 949 S.W.2d 858, 860–61 (Tex. App.—Austin 1997, writ dism'd w.o.j.) (determining that the arbitration agreement was invalid and unenforceable under New York law based on choice-of-law provision).

We conclude that under Texas conflict-of-laws principles, courts should use the Restatement (Second) of Conflict of Laws to determine which state's law applies to the determination of whether a non-signatory may enforce an arbitration agreement. See Restatement (Second) of Conflict of Laws §§ 6, 187; Crawford Prof'l Drugs, Inc., 748 F.3d at 257–59; Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319, 324–31 (Tex. 2014). The Oxy Parties have not argued that (1) British Columbia has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the choice of British Columbia law, or (2) the application of British Columbia law would be contrary to a fundamental policy of a state (1) which has a materially greater interest than British Columbia in the determination of the particular issue and (2) which, under section 188 of the Restatement (Second) of Conflict of Laws, would be the state of the applicable law in the absence of an effective choice of law by the parties. Therefore, under Texas conflict-of-laws principles, we conclude that British Columbia law applies to the determination of whether the Oxy Parties, non-signatories to the Contract, may compel Black Mountain to arbitrate its claims against them. See Restatement (Second) of Conflict of Laws § 187; Drennen, 452 S.W.3d at 324–31.

5. Whether the Oxy Parties waived the Motion to Compel Arbitration under section 4 of the FAA by filing it after their original answer?

The Oxy Parties filed their original answer on December 18, 2023. On January 22, 2024 they filed their Motion to Compel Arbitration under section 4 of the FAA and their motion for a stay of the trial court proceedings under section 3 of the FAA. Black Mountain has not argued that the Oxy Parties waived their rights to seek arbitration by their litigation conduct. See Morgan v. Sundance, Inc., 596 U.S. 411, 416–19 (2022). But Black Mountain has argued that the Oxy Parties waived their Motion to Compel Arbitration based on the strict waiver rule allegedly found in section 8(1) of the ICAA. Under that statute an application for a stay of legal proceedings in favor of arbitration must be filed “before submitting the party's first statement on the substance of the dispute.” We presume for the sake of argument that the Oxy Parties' original answer would be their “first statement on the substance of the dispute” and that an untimely filing of an application for a stay of legal proceedings in favor of arbitration under section 8 of the ICAA results in a waiver of a party's right to such a stay. Nonetheless, this waiver rule does not apply in today's case because the Oxy Parties filed a motion to compel arbitration under section 4 of the FAA and a motion for a stay pending arbitration under section 3 of the FAA. See OptumRx, Inc. v. Advant-Edge Pharmacy, 713 S.W.3d 460, 474–75 (Tex. App.—Houston [14th Dist.] 2025, no pet.). They did not file an application for a stay of legal proceedings in favor of arbitration under section 8 of the ICAA. Therefore, the Oxy Parties did not waive the Motion to Compel Arbitration and motion to stay by filing them five weeks after their answer.¹³

6. Whether under British Columbia law the Oxy Parties were entitled to compel Black Mountain to arbitrate its claims against them

a. British Columbia Law

The Oxy Parties' expert on British Columbia law, Daniel R. Bennett, testified as follows in his declaration:

• Pursuant to section 16(1) of the ICAA, an arbitral tribunal is granted express authority to rule on its own jurisdiction, otherwise known as the “competence-competence principle,” which gives precedence to the arbitration process in the first instance.

• Section 16(1) of the ICAA also provides that the arbitral tribunal “may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement.”

• Section 16(2) of the ICAA further provides that any objections to the arbitral tribunal's jurisdiction must be raised with the arbitral tribunal before the submission of the responsive pleadings.14

• Under section 16(6) of the ICAA, where the arbitral tribunal denies 15 a challenge to its jurisdiction under section 16(2), the party may appeal that decision to the Supreme Court of British Columbia. Further, section 16(8) of the ICAA provides that while such an appeal is pending, the arbitral tribunal may continue the arbitral proceedings and even make an arbitral award.

• Section 8 of the ICAA outlines the process for a court to stay a proceeding and refer the matter to arbitration, where a court proceeding is commenced pertaining to a matter which the parties agreed would be resolved at arbitration. Both acts require the court to stay the legal proceedings in such circumstances, unless the court determines that the arbitration agreement is “void, inoperative or incapable of being performed” or that it is not even arguable, on the face of the pleadings, that the dispute is subject to the arbitration agreement.

• Under the process adopted by the Supreme Court of British Columbia, the court does not need to come to any final determination on whether a party or dispute is subject to an arbitration agreement before a stay of proceedings will be ordered in favour of arbitration.

• The Supreme Court of British Columbia has stayed legal proceedings which include non-signatories to an arbitration agreement. One such case was Northwestpharmacy.com Inc. v. Yates, 2017 BCSC 1572, where the plaintiff pleaded its claim so as to avoid naming the company that was party to the arbitration agreement, in an apparent attempt to evade application of the arbitration clause, which called for arbitration in connection with all disputes arising out of or relating to the contract.

• A British Columbia court generally only retains discretion to decide a jurisdictional issue if it can be determined based on a pure question of law, or one of mixed fact and law requiring only a superficial review of the record before the courts. In general, courts allow arbitrators the first opportunity to determine their own jurisdiction.

• In this regard, where it is arguable that the dispute falls within the terms of the arbitration agreement, or where it is arguable that a party to the legal proceedings is bound by the arbitration agreement, British Columbia law requires that the court grant a stay of proceedings and allow the arbitral tribunal to rule on its own jurisdiction. This low “arguable case” threshold is said to reflect the strong public policy in giving effect to arbitration agreements.

• When the arbitration agreement uses language such as “with respect to,” Canadian courts have found that the agreement encompasses claims beyond the specific provisions within the subject agreement, including claims where the contract's existence is relevant to the claim or the defense.

Black Mountain's expert on British Columbia law, Gerald Ghikas, testified as follows in his declaration:

• As a result of Ghikas's experience as arbitrator in various arbitrations in Canada and the United States in which non-signatory issues arose, he researched and authored a published article entitled “Consent to Arbitration, Party Autonomy, and Non-Signatories: A Review of Procedural, Analytical, and Substantive Approaches under Canadian Laws” (“Article”).

• In Ghikas's opinion few specific non-signatory theories have been definitively approved or applied by Canadian courts. Ghikas thinks this is largely because on stay applications final determinations are not required due to the competence-competence theory under which arbitrators rather than courts generally make the first substantive determination of objections to the arbitrator's jurisdiction.

• According to Ghikas, this dearth of authority means that the non-signatory theories available under Canadian law must be identified by a principled analysis, taking into account the foundational requirement for consent to arbitration.

• Ghikas thinks that the Canadian legal theory of estoppel by representation could possibly apply in non-signatory cases, but he finds it difficult to envisage fact situations where it could be successfully applied;

• In Ghikas's opinion, the two “equitable estoppel” theories available under state laws in the United States—“estoppel by taking direct benefit” and “close relationship estoppel”—are not comparable to any recognized theory of Canadian law, and their adoption likely would be inconsistent with the requirement for consent under Canadian arbitration laws.

• There is no recognized Canadian legal theory that could render an arbitration agreement enforceable by or against a non-signatory simply because claims, facts or parties implicated in the proposed claim against the non-signatory are “intertwined” with claims, facts or parties implicated in arbitrable claims.

• The group of companies theory has not been recognized as part of Canadian law and is generally inconsistent with the requirement for consent to arbitration.

• In Ghikas's opinion, the conclusions he reached in the Article reflect the present state of the law of British Columbia. He thinks his conclusions and opinions were reinforced by the judgment of the British Columbia Supreme Court in Wittman v. Blackbaud, Inc., 2021 BCSC 2025 (Can. B.C. Sup. Ct.), which was decided after the Article was written.

• The Wittman case involved signatory defendants seeking to enforce an arbitration agreement against a non-signatory plaintiff, which is the reverse of the fact situation Ghikas was asked to consider. Nonetheless, Ghikas states that the Wittman court helpfully enumerated the “four narrow categories” that are recognized by British Columbia law and that may be relied on to justify a stay under section 8 of the ICAA.

• These four categories are (1) where a contractual agreement between a party and a non-signatory incorporates an arbitration agreement by reference; (2) where an agency agreement exists between a party to an arbitration agreement and the non-signatory; (3) where it is appropriate to pierce the corporate veil; and (4) where a non-signatory is bound by estoppel.

• The Wittman court declined to expand those theories. Ghikas thinks that the Wittman court's enumeration of the accepted non-signatory theories and the reasons for refusing to expand on them are consistent with the conclusions and opinions Ghikas expressed in the Article.

• The question of whether a non-signatory can enforce an international arbitration agreement against a signatory may arise under British Columbia law and practice in several ways:

a. Under section 8 of the ICAA, a party to a court action may apply for a stay of the court action;

b. Under section 16(5) of the ICAA, an arbitral tribunal may rule on an objection to jurisdiction either as a preliminary question or in award on the merits;

c. Under section 16(6) of the ICAA, where an arbitral tribunal has ruled on a jurisdictional objection as a preliminary question, within 30 days a party may apply to the British Columbia Supreme Court to decide the matter;

d. Under section 34(1)(a) of the ICAA, where the arbitration was seated in British Columbia, the Supreme Court of British Columbia may be asked to set aside the award on the grounds, inter alia, that “the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.”

• In Ghikas's opinion, under section 8 of the ICAA, to obtain a stay of legal proceedings it is not sufficient for a non-signatory to merely allege that it is party to an arbitration agreement. The non-signatory must (a) identify a non-signatory theory that is arguably recognized under the applicable law and (b) produce evidence showing that the theory arguably applies. In Ghikas's opinion, if the applicant does not provide evidence sufficient to show that an arguably recognized theory arguably applies, the court must refuse the stay.

Section 8(1) of the ICAA provides that “[i]f a party to an arbitration agreement commences legal proceedings in a court against another party to the agreement in respect of a matter agreed to be submitted to arbitration, a party to the legal proceedings may, before submitting the party's first statement on the substance of the dispute, apply to that court to stay the proceedings.” Can., B.C. International Commercial Arbitration Act, R.S.B.C. 1996, ch. 233, § 8(1).

According to Ghikas, “estoppel has only been recognized as a basis for a signatory to enforce an arbitration agreement against a non-signatory.” We do not rely on this statement because in one of the British Columbia cases submitted by Bennett, the British Columbia Supreme Court applied estoppel against a signatory plaintiff and in favor of non-signatory defendants based on statements made by the plaintiff in its Notice of Civil Claim and in another court filing, with no mention of detrimental reliance. See Northwestpharmacy.com Inc. v. Yates, 2017 BCSC 1572, para. 54, subparas. 108–10 (Can. B.C. Sup. Ct.). The Yates case shows that under British Columbia law a non-signatory may use estoppel against a signatory and that the statements triggering the estoppel may be made in the non-signatory plaintiff's live pleading or other court filings. See id. Thus, under British Columbia law, in certain circumstances a signatory plaintiff may be estopped from denying that a non-signatory defendant is a party to the arbitration agreement. See id.

Both experts on British Columbia law agree that under British Columbia law “where it is arguable that the dispute falls within the terms of the arbitration agreement, or where it is arguable that a party to the legal proceedings is bound by the arbitration agreement, [British Columbia law] requires that the court grant a stay of proceedings and allow the arbitral tribunal to rule on its own jurisdiction.” Bennett also testified that “where a court proceeding is commenced pertaining to a matter which the parties agreed would be resolved at arbitration ․ [section 8 of the ICAA] require[s] the court to stay the legal proceedings ․ unless the court determines that the arbitration agreement is ‘void, inoperative or incapable of being performed,’ or that it is not even arguable, on the face of the pleadings, that the dispute is subject to the arbitration agreement.”

b. Application of British Columbia Law

We now review the facts of this case and apply British Columbia law to see if the trial court should have granted the Motion to Compel Arbitration. It is undisputed, and the evidence conclusively proves, that the Contract, and its valid Arbitration Agreement, was formed effective as of November 4, 2021, and that Carbon Engineering and Black Mountain are the only entities referred to in the Contract as being parties thereto.¹⁶ The Arbitration Agreement requires the arbitration of “any dispute, claim, question[,] or difference ․ aris[ing] with respect to [the Contract] or its performance, enforcement, default, termination, or validity” that “the Parties” are unable to resolve by informal dispute resolution under section 18(a) of the Contract. The Contract defines Parties to mean Carbon Engineering and Black Mountain.¹⁷ Section 19(g) of the Contract provides that there are no third-party beneficiaries to the Contract.

Black Mountain summarizes the nature of its claims in the trial court below in the following statement at the beginning of its live pleading:

This is a case of tortious interference. [Black Mountain] had contracts with Carbon Engineering. These were multi-million-dollar contracts to develop extensive “carbon capture” facilities in Australia. This was an attractive business arrangement that would both improve the environment and earn substantial profits via carbon capture.

The [Oxy Parties] are an array of multi-billion-dollar companies. When the [Oxy Parties] learned of this lucrative business prospect in Australia, they decided to use their vast economic power to take it. They developed a plan to force their way in; and force Black Mountain out. [The Oxy Parties] began exerting power over Carbon Engineering, forcing it to breach contracts with Black Mountain. The [Oxy Parties] were successful and forced Carbon Engineering to breach its contract with Black Mountain. The [Oxy Parties] then stole Black Mountain[']s business opportunity with Carbon Engineering.18

In its pleading Black Mountain also alleges that the Oxy Parties “had agents inside [Carbon Engineering].” These alleged agents were Rick Callahan and Michael Avery, whom Black Mountain describes as “Oxy men” who held offices in Oxy Low Carbon. According to Black Mountain, Callahan and Avery acted as the agents and representatives of the Oxy Parties and did their bidding while acting as directors of Carbon Engineering. Black Mountain alleges that the Oxy Parties purchased stock in Carbon Engineering and placed Callahan and Avery on the Board of Directors of Carbon Engineering, which Black Mountain asserts created a conflict of interest for them. According to Black Mountain, the loyalties of Callahan and Avery to Carbon Engineering were compromised by their loyalties to their long-time principals, the Oxy Parties. In their role at Carbon Engineering, they had access to confidential information and could convey that information to the Oxy Parties. Black Mountain alleges that Callahan and Avery conveyed Carbon Engineering's confidential information to the Oxy Parties, alerting the Oxy Parties to the details of the Black Mountain Australian Project and providing important information to the Oxy Parties. Black Mountain claims that this action was a naked breach of the Non-Disclosure Agreement between Carbon Engineering and Black Mountain, under which Carbon Engineering agreed that the confidential information gained from Black Mountain would only be used “for the purpose of cooperating” with Black Mountain in developing the Project. Black Mountain alleges that although the Oxy Parties knew about the existing contractual commitments and knew that the Black Mountain Australian Project was already a Carbon Engineering commitment, they acted intentionally to interfere in this contract and interfere in the advantageous business relationship enjoyed by Black Mountain.

Black Mountain alleges that through Callahan and others, the Oxy Parties knew of the contracts between Carbon Engineering and Black Mountain, including the Contract, and that the Oxy Parties intentionally interfered with these contracts, inducing their breach. Black Mountain claims that this tortious interference caused the following alleged damages: (1) Black Mountain did not receive its interest in Black Mountain Pty Ltd.—the entity for the Black Mountain Australian Project; (2) Black Mountain will not gain rights to license Carbon Engineering's DAC technology in Australia—resulting in millions of dollars in lost profits to Black Mountain, as well as the diminution of Black Mountain's value and loss of its business reputation and opportunity; and (3) BHP Ventures, one of the world's largest mining companies, will no longer purchase 40% of Black Mountain's project at the valuation of $33 million.

Black Mountain contends that on December 20, 2021, Callahan sent an email that, in hindsight, was the beginning of the end of the Black Mountain Australian Project. Black Mountain also alleges that on or about April 19, 2021, Callahan personally signed a “Framework” that revealed the details of the Oxy Parties' plans on a worldwide basis. Black Mountain does not specify when it claims the Oxy Parties first purchased stock in Carbon Engineering and installed Callahan and Avery as directors. Nonetheless based on the language in Black Mountain's live pleading, including an action allegedly taken by Callahan in April 2021, the allegations in this pleading reflect that the Oxy Parties purchased shares in Carbon Engineering before November 4, 2021, the effective date of the Contract. Under Black Mountain's live pleading, at the effective date of the Contract the Oxy Parties owned a minority interest in Carbon Engineering and thus were affiliates of Carbon Engineering, and the Oxy Parties had installed Callahan and Avery on that British Columbia corporation's Board of Directors.

In its live pleading Black Mountain also alleges that in August 2023, Oxy announced that, through a subsidiary the Oxy Parties would acquire all of the outstanding equity of Carbon Engineering for a total cash consideration of approximately $1.1 billion. In a verified portion of the Motion to Compel Arbitration, the Oxy Parties stated that OLCV CE Holdings, ULC acquired all of the stock of Carbon Engineering, and that Oxy Low Carbon is the sole shareholder of OLCV CE Holdings, ULC. The record reflects that by the time Black Mountain filed suit in the trial court, Carbon Engineering was a wholly owned subsidiary of Oxy Low Carbon, which is a subsidiary of Oxy.

The record does not contain a copy of the arbitration award in the arbitration between Black Mountain and Carbon Engineering. Black Mountain's CEO states in her declaration that “[a]pparently, the arbitrator['s] hands were tied, and he could not order Carbon Engineering to pay the full damages and losses which Black Mountain has experienced, and will continue to experience from losing the entire Australia project,” possibly referring to section 9 of the Contract which provides that no party has any liability under the Contract for any consequential damages. Having not recovered all of its alleged damages in the arbitration against Carbon Engineering, Black Mountain now sues two of Carbon Engineering's affiliates asserting that these affiliates tortiously interference with the Contract and induced Carbon Engineering to breach the Contract.

The Oxy Parties argue that under Texas law they are entitled to compel Black Mountain to arbitrate under the doctrine of direct-benefits estoppel.¹⁹ Black Mountain is suing two affiliates of Carbon Engineering for tortious interference with the Contract and for inducing Carbon Engineering to breach the Contract. On this record, it is arguable that the Oxy Parties' alleged liability on Black Mountain's claims must be determined by reference to the Contract and that Black Mountain seeks a direct benefit from the Contract. If Texas law applied there would be a substantial basis for ruling that the Oxy Parties are entitled to compel Black Mountain to arbitrate under the doctrine of direct-benefits estoppel. See In re Vesta Ins. Group, Inc., 192 S.W.3d at 761–63; Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576, 591–93 (Tex. App.—Houston [14th Dist.] 1999, no pet.). As to British Columbia law, no party has cited a case stating that British Columbia law has adopted Texas's approach to direct-benefits estoppel or something similar, and no party has cited a case saying that British Columbia rejects this approach or something similar. In the Wittman case the court essentially presumed for the sake of argument that British Columbia would adopt direct-benefits estoppel as articulated in two American cases in federal court. See Wittman, 2021 BCSC 2025, paras. 82–101. The Wittman court concluded that even if the American law were applied it would not change the result in that case. See id. at paras. 100–101. The expert declarations and the British Columbia cases submitted in today's case indicate that the non-signatory theory of estoppel has not been well developed or articulated under British Columbia law. It does not appear that any party in a British Columbia court has argued that the court should adopt the Texas law of direct-benefits estoppel or something similar as part of the estoppel non-signatory theory under British Columbia law. See id.

We conclude that, either based on existing British Columbia law or on the adoption by British Columbia of Texas direct-benefits estoppel law, it is arguable (1) that the Oxy Parties should be considered parties to the Arbitration Agreement under the doctrine of estoppel based on Black Mountain's statements in its live pleading and the statements in the declaration of its CEO; (2) that Black Mountain's claims in this lawsuit are disputes between parties arising with respect to the Contract or its performance, enforcement, default, termination, or validity and therefore they fall within the terms of the Arbitration Agreement; and (3) that a party to the legal proceedings is bound by the Arbitration Agreement. See In re Vesta Ins. Group, Inc., 192 S.W.3d at 61–63; Valero Energy Corp., 2 S.W.3d at 591–93; Yates, 2017 BCSC 1572, para. 54, subparas. 98–101, 108–110 (applying estoppel against a signatory plaintiff and in favor of non-signatory defendants based on statements made by the plaintiff in its court filings); Hosting Metro Inc. v. Poornam Info Vision Pvt, Ltd., 2016 BCSC 2371, paras. 39–41 (Can. B.C. Sup. Ct.);²⁰ Aradia Fitness Canada Inc. v. Dawn M. Hinze Consulting Ltd., 2008 BCSC 839, paras. 33–40 (Can. B.C. Sup. Ct.).²¹ Thus, under British Columbia law the record meets the necessary threshold regarding the existence of an arbitration agreement and the non-signatories' ability to enforce the agreement against a signatory. See Yates, 2017 BCSC 1572, para. 54, subparas. 98–101, 108–110; Hosting Metro Inc., 2016 BCSC 2371, paras. 39–41; Aradia Fitness Canada Inc., 2008 BCSC 839, paras. 33–40.

Therefore, the trial court should have granted the Motion to Compel Arbitration so that an arbitral tribunal in British Columbia may determine whether and to what extent it has jurisdiction over Black Mountain's claims against the Oxy Parties and may adjudicate the merits of the claims over which the arbitral tribunal decides it has jurisdiction. See Yates, 2017 BCSC 1572, para. 54, subparas. 98, 110, 115–116; Hosting Metro Inc., 2016 BCSC 2371, paras. 39–41; Aradia Fitness Canada Inc., 2008 BCSC 839, paras. 33–40.²² Concluding that the trial court erred in denying the Motion to Compel Arbitration, we sustain the Oxy Parties' sole issue.

B. Did the trial court err in denying the Oxy Parties' motion to stay under section 3 of the FAA?

The Oxy Parties also assert that the trial court erred in denying their motion to stay under section 3 of the FAA. As to an arbitration agreement to which the FAA applies, Texas courts are required to grant stays pending arbitration if section 3 of the FAA so requires. See OptumRx, Inc., 713 S.W.3d at 475. The United States Supreme Court has concluded that when a trial court determines that a lawsuit involves a dispute subject to arbitration under the FAA and a party has requested a stay of the court proceeding pending arbitration, section 3 of the FAA requires that the trial court stay the proceeding until arbitration has been had in accordance with the terms of the agreement, as long as the applicant for the stay is not in default in proceeding with the arbitration. See Smith v. Spizzirri, 601 U.S. 472, 477–78 (2024). The trial court should have granted the Oxy Parties' Motion to Compel Arbitration. Therefore, under section 3 of the FAA, the trial court was required to stay the proceeding in the trial court until arbitration has been had in accordance with the terms of the Arbitration Agreement, as long as the Oxy Parties are not in default in proceeding with the arbitration. See id. The trial court erred in denying the Oxy Parties' motion for a stay under section 3 of the FAA. See id.

III. CONCLUSION

Black Mountain did not raise the doctrine of unclean hands as a basis for denying the Motion to Compel Arbitration; therefore the Oxy Parties were not required to challenge this ground in their opening brief. Because the Contract involves or affects interstate commerce, the FAA applies to the Arbitration Agreement. Under Texas conflict-of-laws principles, British Columbia law applies to the determination of whether the Oxy Parties, non-signatories to the Contract, may compel Black Mountain to arbitrate its claims against them. It is arguable that (1) the Oxy Parties should be considered parties to the Arbitration Agreement under the doctrine of estoppel based on Black Mountain's statements in its live pleading and the statements in the declaration of its CEO; (2) Black Mountain's claims fall within the terms of the Arbitration Agreement; and (3) Black Mountain is bound by the Arbitration Agreement to arbitrate its claims against the Oxy Parties. Therefore, we conclude that the trial court abused its discretion by denying the Motion to Compel Arbitration and by denying the Oxy Parties' motion for a stay under section 3 of the FAA.

We reverse the trial court's order and remand with instructions to the trial court to sign an order (1) granting the Motion to Compel Arbitration and the motion for a stay under section 3 of the FAA, (2) compelling Black Mountain and the Oxy Parties to proceed to arbitration under the Arbitration Agreement so that an arbitral tribunal in British Columbia may determine whether and to what extent it has jurisdiction over Black Mountain's claims against the Oxy Parties and may adjudicate the merits of the claims over which the arbitral tribunal decides it has jurisdiction, and (3) staying the proceeding in the trial court until arbitration has been had in accordance with the terms of the Arbitration Agreement, as long as the Oxy Parties are not in default in proceeding with the arbitration.

FOOTNOTES

2.   The Arbitration Agreement, section 18(b) of the Contract, reads as follows:(b) Arbitration. If the Parties are unable to resolve a Dispute in accordance with Section 18 (a), the Dispute shall be referred to and finally settled by a single arbitrator. All Disputes referred to arbitration shall be governed by the substantive laws of the Province of British Columbia for the appointment of an arbitrator. The Parties agree that the chosen arbitrator shall have the requisite experience and appropriate technical expertise to decide the matter. The arbitration shall be in accordance with the Arbitration Act, RSBC 1996, c.55, as amended. The number of arbitrators shall be one. The place of the arbitration will be Vancouver, British Columbia and the language of the arbitration shall be English.

3.   Black Mountain and Carbon Engineering also executed separate Non-Disclosure Agreements in November 2020 and November 2021, and a November 2021 Engineering Services Agreement.

4.   In its live pleading Black Mountain asserts claims against a third defendant that Black Mountain calls “Oxy,” which it claims is “the common name for an entity or entities that directed Rick Callahan and/or Michael Avery to take steps and actions to benefit [the Oxy Parties] and their related companies.” Black Mountain asserts in the pleading that “Oxy” is named as a defendant pursuant to Texas Rule of Civil Procedure 28, which allows suits against an entity under its “assumed or common name,” but provides that the defendant's true name may be substituted on a motion by any party or on the court's own motion. See Tex. R. Civ. P. 28. The record does not reflect that the trial court or any party have so moved or that the true name for the “Oxy” defendant has been substituted. The Oxy Parties contend that “Oxy” is a trade name and that no entity named “Oxy” exists. The Oxy Parties have filed a verified denial that any entity named “Oxy” exists and have reserved and asserted—subject to and without waiver of their demand for arbitration and a stay pending arbitration—all appropriate lack of capacity and misnomer defenses related to this allegation.

5.   The Arbitration Agreement provides that the arbitration shall be in accordance with the British Columbia Arbitration Act as amended (“Arbitration Act”). Nonetheless, both British Columbia law experts agree that the ICAA, not the Arbitration Act, applies to any arbitration in British Columbia under the Arbitration Agreement because the ICAA, not the Arbitration Act, applies to any arbitration seated in British Columbia where the parties to the arbitration agreement had, at the time of the conclusion of that agreement, their places of business in different states. Both experts agree that under section 1(7) of the ICAA, the reference to the Arbitration Act in the Arbitration Agreement is deemed to be a reference to the ICAA. Both the Oxy Parties and Black Mountain agree that the ICAA would govern any arbitration in British Columbia under the Arbitration Agreement. A copy of the ICAA and the Arbitration Act are attached to Bennett's declaration.

6.   This quote is from Ghikas's declaration.

7.   The Supreme Court of British Columbia is the superior trial court for the Province of British Columbia.

8.   https://www.bccourts.ca/jdb-txt/sc/21/20/2021BCSC2025.htm.

9.   https://www.bccourts.ca/jdb-txt/sc/17/15/2017BCSC1572.htm.

10.   See McCarthy v. Azure, 22 F.3d 351, 355–56 (1st Cir 1994).

11.   Black Mountain has not asserted that even absent any choice-of-law provision in the Contract, British Columbia law applies because British Columbia has the most significant relationship to the issue of whether the Oxy Parties may enforce the Arbitration Agreement.

12.   The Oxy Parties also argue that during the hearing on the Motion to Compel Arbitration Black Mountain's counsel conceded that as to cases pending in Texas courts, Texas law always applies to the determination of whether non-signatories may enforce an arbitration agreement. We have reviewed counsel's statements, and we conclude that he made no such concession.

13.   Black Mountain relies on Lancaster v. WestCorp Solutions, Ltd. in support of its argument that the trial court properly could have denied the Motion to Compel Arbitration based on section 8 of the ICAA because the Oxy Parties filed the motion after they submitted their first statement on the substance of the dispute. See 673 S.W.3d 57, 64–65 (Tex. App.—Corpus Christi 2023, no pet.). But that case did not address the timeliness of a motion to compel arbitration filed in Texas. See id. Instead, that case involved a proceeding in Texas to recognize a judgment rendered by a British Columbia trial court that had denied an application to stay the court proceedings and compel arbitration under the Arbitration Act. See id. That court was bound to follow the substantive and procedural law of British Columbia; whereas the trial court in today's case had to follow the FAA and Texas procedural law.

14.   Black Mountain's expert on British Columbia law agreed with the first three points

15.   Black Mountain's expert says that this statute has been amended and that under the current version a party may appeal to the Supreme Court of British Columbia from any ruling by an arbitral tribunal on a challenge to its jurisdiction. We presume that the statute so provides.

16.   No party has asserted, nor does the evidence show, that the Arbitration Agreement is null and void, inoperative, or incapable of being performed.

17.   Black Mountain's CEO stated in her declaration that the Oxy Parties were not parties to the Contract. Whether the Oxy Parties are considered parties to the Contract under British Columbia law or whether Black Mountain is estopped from denying that they are parties are legal conclusions.

18.   All of this text is in bold in Black Mountain's pleading.

19.   Black Mountain argues that there was no arguable basis for the trial court to determine that the Oxy Parties may enforce the Arbitration Agreement based on estoppel because the Oxy Parties submitted no evidence on this point. But the evidence includes the Contract, and we presume that the trial court took judicial notice of the allegations in the Black Mountain's live petition. Maree v. Zuniga, 577 S.W.3d 595, 604 (Tex. App.—Houston [14th Dist.] 2019, no pet.) (stating that courts “presume that a trial court took judicial notice of the items in the clerk's record in the same case, even if no party requested judicial notice and even if the record does not reflect that the trial court took judicial notice”). The allegations of the live petition and the contract containing the arbitration agreement may be sufficient to establish direct-benefits estoppel. In re Weekley Homes, L.P., 180 S.W.3d 127, 131–32 (Tex. 2005).

20.   https://www.bccourts.ca/jdb-txt/sc/16/23/2016BCSC2371.htm.

21.   https://www.bccourts.ca/Jdb-txt/SC/08/08/2008BCSC0839.htm.

22.   The Wittman case distinguished these cases from its facts on the ground that the non-signatories in these three cases had active and direct involvement or knowledge of the subject matter and signatories of the contract. See Wittman, 2021 BCSC 2025, paras. 65–67. In today's case Black Mountain alleges that the Oxy Parties knew of the Contract and intentionally interfered with it. Therefore, the facts of Wittman are materially different from the facts in today's case.

Randy Wilson Justice