Sunday, September 2, 2007
Texas Supreme Court grants mandamus to force financial services customer to arbitrate all claims. In re Merrill Lynch Trust Co., No. 03-1059 (Tex. Aug 31, 2007)(per curiam)(arbitration mandamus, financial services) In re Merrill Lynch Trust Company FSB, Henry Medina, and Medina & Medina Group, Relators ═════════════════════= On Petition for Writ of Mandamus ══════════════════════ After Chris Pereyra recovered $2 million in a personal injury settlement, she retained Merrill Lynch, Pierce, Fenner & Smith Inc. and its employee Henry Medina as her financial advisors. Her agreement with Merrill Lynch contained a broad arbitration clause: I agree that all controversies which may arise between us, including but not limited to those involving any transaction or the construction, performance, or breach of this or any other agreement between us, whether entered into prior, on or subsequent to the date hereof, shall be determined by arbitration. Among other investments, Medina advised Pereyra to set up a trust account and name Merrill Lynch Trust Company of Texas as trustee. The sole asset of the trust is a variable life policy bought from Merrill Lynch Life Insurance Company. Both of these Merrill Lynch affiliates – ML Trust and ML Life – had their own contracts with Pereyra, neither of which contained an arbitration clause. In September 2002, Pereyra initiated an arbitration proceeding against Merrill Lynch, Merrill Lynch & Co., Henry Medina, and Medina & Medina Group, alleging breach of fiduciary duty, fraud, and other claims related to the financial services she received. Pereyra also filed this lawsuit against Medina, Medina & Medina, and ML Trust asserting several torts as well as violations of the Texas Trust Code and Texas Insurance Code. Medina and Merrill Lynch filed a motion to compel arbitration and stay litigation. The trial court denied the motion, and the court of appeals denied mandamus relief. __ S.W.3d __ (Tex. App.—San Antonio 2003). For the reasons stated in an almost identical case, In re Merrill Lynch Trust Co., __ S.W.3d__ (Tex. [Aug. 24] 2007), we hold the trial court abused its discretion in refusing to compel arbitration with the Medina parties, and in refusing to stay the litigation against ML Trust. Accordingly, without hearing oral argument, see Tex. R. App. P. 52.8(c), we conditionally grant the writ of mandamus and order the trial court to vacate its order and enter a new order in accordance with this opinion. We are confident the trial court will comply, and our writ will issue only if it does not. OPINION DELIVERED: August 31, 2007  Merrill Lynch & Co. is the parent company of Defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. Medina & Medina is a trade name used by Defendant Henry Medina. ------- Texas Supreme Court Cause No. 03-1059 IN RE MERRILL LYNCH TRUST COMPANY FSB, HENRY MEDINA, AND MEDINA & MEDINA GROUP; from Duval County; 4th district (04‑03‑00424‑CV, 123 SW3d 549, 10‑29‑03)stay order issued November 20, 2003, liftedmotion for leave to file supplement brief on the merits, denied Pursuant to Texas Rule of Appellate Procedure 52.8(c), without hearing oral argument, the Court conditionally grants the petition for writ of mandamus.Per Curiam Opinion (Justice Green not sitting)
Friday, August 31, 2007
Houston's Fourteenth Court of Appeals dismisses appeal because the parties ignored the court's mediation order and did report back on whether the case had settled. Luis Rey Flores v. Patricia Flores, No. 14-06-01059-CV (Tex.App.- Houston [14th Dist.] Aug. 30, 2007)(Per Curiam)(order to compel mediation)(Before Chief Justice Hedges, Justices Brock Yates and Frost) Appeal from County Court at Law of Waller County On Appeal from the County Court at Law Waller County, Texas Trial Court Cause No. 98-03-14479 M E M O R A N D U M O P I N I O N This is an appeal from a judgment signed August 3, 2006. On February 15, 2007, this court ordered the parties to mediation. On July 19, 2007, notification was transmitted to all parties of the Court's intent to dismiss the appeal for failing to comply with this court's order of May 31, 2007, which ordered the parties to conduct mediation and advise the court in writing whether the case settled within thirty days of the order. See Tex. R. App. P. 42.3(c). No response was filed. Accordingly, the appeal is ordered dismissed. PER CURIAM Judgment rendered and Memorandum Opinion filed August 30, 2007. Panel consists of Chief Justice Hedges, Justices Yates and Frost. Do Not Publish.
Thursday, August 30, 2007
In parallel proceeding Houston-based First Court of Appeals also denied mandamus relief. William E. Trump v. Vaughn Arthur Motsko, No. 01-07-00486-CV (Tex.App.- Houston [1st Dist.] Aug. 30, 2007)(Per Curiam)(Before Justices Nuchia, Hanks and Bland)(appeal dismissed, DWOJ) Appeal from Probate Court No 3 of Harris County Trial Court Cause No. 371,418-401 MEMORANDUM OPINION This is an attempted interlocutory appeal from the probate court's order denying appellant William E. Trump's motion to abate proceedings and quash his deposition. Trump alleges that conducting the deposition violates the Federal Arbitration Act. See 9 U.S.C. §§ 1-16 (2000). Trump also filed a petition for a writ of mandamus in this Court, which was denied. In re Trump, No. 01-07-00485-CV (Tex. App.--Houston [1st Dist.] June 18, 2007, orig. proceeding) (mem. op.). There is no statute authorizing an interlocutory appeal from an order granting or denying a request to compel arbitration under the Federal Arbitration Act. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992). The probate court's order is also not a final, appealable order. See Tex. Prob. Code Ann. § 5(g) (Vernon Supp. 2006). We dismiss the appeal for want of jurisdiction. The Clerk of this Court is directed to issue the mandate immediately. See Tex. R. App. P. 18.6. PER CURIAM Panel consists of Justices Nuchia, Hanks, and Bland.
Sunday, August 26, 2007
In re Merrill Lynch Trust Company FSB, Merrill Lynch Life Insurance Company, and Henry Medina, Relators, No. 04-0865 (Tex. August 24, 2007)(Brister) ══════════════════════ On Petition for Writ of Mandamus ══════════════════════ Argued March 23, 2005 Justice Brister delivered the opinion of the Court, in which Chief Justice Jefferson, Justice Green, and Justice Willett joined, and in which Justice Hecht and Justice Medina joined as to Parts I, III-A, and IV, Justice O’Neill joined as to Parts I, III, and IV, and Justice Wainwright and Justice Johnson joined as to Parts I, II, and IV. Justice Hecht filed an opinion concurring in part and dissenting in part, in which Justice Medina joined, and in Part I of which Justice O’Neill joined. Justice Johnson filed an opinion concurring in part and dissenting in part, in which Justice Wainwright joined. In considering referral to arbitration, the question is not which forum is quicker, cheaper, or more convenient, but which one the parties picked. Here, the plaintiffs agreed to arbitrate with Merrill Lynch, but not the employee or affiliates they have sued. Because their claims against the employee are in substance claims against Merrill Lynch, we hold those claims must be arbitrated. Because there is no contract theory that ties the affiliates to the same agreement, we hold those claims do not. And to the extent these separate proceedings overlap, we hold the litigation must be stayed until the arbitration is completed. I. Background Juan Alaniz was severely injured in a refinery explosion. He and his wife filed suit and recovered a settlement of more than $2 million. To preserve this recovery, they engaged Merrill Lynch, Pierce, Fenner & Smith Inc. through its employee Henry Medina to provide financial and investment services. In September 1993, the Alanizes opened a series of cash and investment accounts with Merrill Lynch. For each account, the Alanizes agreed to arbitrate any disputes that might arise with Merrill Lynch: I agree that all controversies which may arise between us, including but not limited to those involving any transaction or the construction, performance, or breach of this or any other agreement between us, whether entered into prior, on or subsequent to the date hereof, shall be determined by arbitration. As a part of their financial plan, the Alanizes set up an irrevocable life insurance trust with Merrill Lynch Trust Company as trustee, which then purchased a variable life policy from Merrill Lynch Life Insurance Company. Both of these Merrill Lynch affiliates had their own contracts with the Alanizes, neither of which contained an arbitration clause. The Alanizes transferred more than $200,000 from their Merrill Lynch accounts to ML Trust to pay premiums to ML Life. ML Life paid a commission on the sale to Merrill Lynch, which then paid Medina, a licensed agent for ML Life and other insurers. In April 2003, the Alanizes sued ML Trust, ML Life, and Medina — but not Merrill Lynch — alleging a dozen multifarious claims, all related to the insurance trust, and all asserted against the defendants collectively without differentiating the actions of each. The defendants moved to stay the litigation and compel arbitration, which the trial court denied. The Thirteenth Court of Appeals denied mandamus relief. The parties agree that the Federal Arbitration Act applies. Accordingly, mandamus relief is appropriate if the trial court abused its discretion in failing to stay the litigation and compel arbitration. II. Arbitration with Corporate Employees: Henry Medina The claims against Merrill Lynch’s employee, Henry Medina, must go to arbitration for two reasons. First, “parties to an arbitration agreement may not evade arbitration through artful pleading, such as by naming individual agents of the party to the arbitration clause and suing them in their individual capacity.” Corporations can act only through human agents, and many business-related torts can be brought against either a corporation or its employees. If a plaintiff’s choice between suing the corporation or suing the employees determines whether an arbitration agreement is binding, then such agreements have been rendered illusory on one side. As we recently noted, this would not place arbitration agreements on equal footing with other contracts: When contracting parties agree to arbitrate all disputes “under or with respect to” a contract (as they did here), they generally intend to include disputes about their agents’ actions because “[a]s a general rule, the actions of a corporate agent on behalf of the corporation are deemed the corporation’s acts.” If arbitration clauses only apply to contractual signatories, then this intent can only be accomplished by having every officer and agent (and every affiliate and its officers and agents) either sign the contract or be listed as a third-party beneficiary. This would not place such clauses on an equal footing with all other parts of a corporate contract. Second, the substance of the plaintiffs’ suit here is against Merrill Lynch, even though it has not been named as a party. While the plaintiffs allege they are suing Medina only for his actions while wearing “the hat of the insurance agent,” brokers do not change employers every time they sell someone else’s product. The commission on this insurance transaction was paid directly to Merrill Lynch, not Medina; if the latter was acting as an agent for ML Life or ML Trust, then so was the former. As there is no question Medina was acting in the course and scope of his employment, if he is liable for the torts alleged against him, then Merrill Lynch is too. While the plaintiffs have not sued Merrill Lynch yet, they have not “disavowed” such claims (as Justice Hecht asserts). They have never so stipulated under oath or in their pleadings, and their appellate brief says only that the defendants have not shown that Merrill Lynch has any potential liability, thus carefully leaving the door open for the plaintiffs to pursue precisely that option. Nor do the plaintiffs’ trial court pleadings “focus solely” on the insurance sale (again per Justice Hecht); to the contrary, they focus entirely on the alleged misrepresentations, omissions, and fiduciary breaches leading up to it. While only ML Trust might be liable for the transaction itself, Medina and his employer would both be liable for the preliminary tort and statutory claims the plaintiffs have actually alleged. Finally, the plaintiffs also assert their arbitration agreements were illusory as Merrill Lynch could modify or rescind those agreements at any time. As this defense relates to the parties’ entire contract rather than the arbitration clause alone, it is a question for the arbitrators. Additionally, the plaintiffs’ testimony that they failed to read the arbitration provisions until this dispute arose is not a valid ground for setting aside their signed agreements. We do not hold today that employees can always invoke an employer’s arbitration agreement. When actions outside the course of employment cannot be attributed to an employer, the latter would have no need to invoke its arbitration protections. But under both Texas and federal law, arbitrability turns on the substance of a claim, not artful pleading. Because the plaintiffs’ claims against Medina are in substance claims against Merrill Lynch, they must abide by their agreement to arbitrate those claims. III. Arbitration with Affiliates: ML Life and ML Trust A. The Agreements Merrill Lynch’s cash management agreements referred to some affiliates and third parties, but not ML Trust or ML Life. Those affiliates signed their own contracts with the plaintiffs, which had no arbitration clauses. As allowing these affiliates to compel arbitration would effectively rewrite their contracts, we hold they cannot. “A corporate relationship is generally not enough to bind a nonsignatory to an arbitration agreement.” Unlike a corporation and its employees, corporate affiliates are generally created to separate the businesses, liabilities, and contracts of each. Thus, a contract with one corporation — including a contract to arbitrate disputes — is generally not a contract with any other corporate affiliates. Of course, if two corporations are actually operated as one, many courts recognize an alter-ego exception that will bind one to the arbitration agreements of the other. But there are no such allegations here, and the exception itself illustrates that arbitration agreements generally do not apply to all corporate affiliates. Thus, we hold ML Trust and ML Life are not covered by the plaintiffs’ arbitration agreements with Merrill Lynch. B. Concerted-Misconduct Equitable Estoppel ML Life and ML Trust also assert that they can invoke Merrill Lynch’s arbitration agreements through an estoppel theory based on substantially interdependent and concerted misconduct. Estoppel is one of five or six instances in which the federal circuit courts require arbitration with nonsignatories. We too have applied estoppel when nonsignatories seek a direct benefit from a contract with an arbitration clause. But we have never compelled arbitration based solely on substantially interdependent and concerted misconduct, and for several reasons we decline to do so here. First, the United States Supreme Court has never construed the Federal Arbitration Act to go this far. It has repeatedly emphasized that arbitration “is a matter of consent, not coercion,” that the Act “does not require parties to arbitrate when they have not agreed to do so,” and its purpose is to make arbitration agreements “as enforceable as other contracts, but not more so.” Thus, arbitration is not required merely because two claims arise from the same transaction, as the Court made clear in Moses H. Cone Memorial Hospital v. Mercury Construction Corp. In that case, a hospital sued a contractor (with whom it had an arbitration agreement) and an architect (with whom it did not) alleging the two had improperly agreed to waive the deadline for claiming extra construction costs without the hospital’s consent. Despite these allegations of substantially interdependent and joint misconduct, the court held that the nonsignatory architect could not be forced into arbitration: The Hospital points out that it has two substantive disputes here — one with Mercury, concerning Mercury’s claim for delay and impact costs, and the other with the Architect, concerning the Hospital’s claim for indemnity for any liability it may have to Mercury. The latter dispute cannot be sent to arbitration without the Architect’s consent, since there is no arbitration agreement between the Hospital and the Architect. Recognizing the “misfortune” inherent in resolving these related issues in two different places, the Court nevertheless held that considerations of efficiency and convenience cannot override either a signatory’s arbitration agreement or a nonsignatory’s right to a jury trial: It is true, therefore, that if Mercury obtains an arbitration order for its dispute, the Hospital will be forced to resolve these related disputes in different forums. That misfortune, however, is not the result of any choice between the federal and state courts; it occurs because the relevant federal law requires piecemeal resolution when necessary to give effect to an arbitration agreement. Under the Arbitration Act, an arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute but not to the arbitration agreement. If the dispute between Mercury and the Hospital is arbitrable under the Act, then the Hospital’s two disputes will be resolved separately – one in arbitration, and the other (if at all) in state-court litigation. While the Fifth Circuit has recognized concerted-misconduct estoppel, the theory is far from well-settled in the federal courts. Despite hundreds of federal appeals involving arbitration, it appears in only 10 reported opinions. In the two leading cases, Grigson v. Creative Artists Agency L.L.C. and MS Dealer Service Corp. v. Franklin, the Fifth and Eleventh Circuits held that both direct-benefits and concerted-misconduct estoppel were present, so it is unclear what the latter theory added to the result. Of the remainder, the theory was found inapplicable in 4, and it was not reached in 2 more. In only 2 cases did the result hinge on the exception — and in those the Fifth Circuit compelled arbitration in one and refused to do so in the other. In the latter case, Hill v. G E Power Systems, Inc., the Fifth Circuit found that “Grigson’s second prong is met” (direct-benefits being the first estoppel prong and concerted-misconduct the second), and at the same time that “the district court did not abuse its discretion” in refusing to compel arbitration because “the district court is better equipped to make the call than this court, and we do not lightly override that discretion.” But the right to a jury trial is not discretionary. Nor is the right to have an arbitration contract enforced. If the parties have not agreed to arbitration, no trial court has discretion to make them go; if they have agreed to arbitration, no trial court has discretion to let one wriggle out. This Court has already rejected the argument that equitable estoppel allows trial judges to send cases to arbitration or litigation depending on which they think would be fair. It is true that other federal circuit courts have estopped signatory plaintiffs from avoiding arbitration with nonsignatories using an “intertwined-claims” test. For example, the Second Circuit has compelled arbitration when a nonsignatory defendant has a “close relationship” with one of the signatories and the claims are “intimately founded in and intertwined with the underlying contract obligations.” But the “close relationship” requirement has generally limited this exception to instances of strategic pleading by a signatory who, in lieu of suing the other party for breach, instead sues that party’s nonsignatory principals or agents for pulling the strings. As discussed above with reference to employees, allowing litigation to proceed that is in substance against a signatory though in form against a nonsignatory would allow indirectly what cannot be done directly. By contrast, the concerted-misconduct test has no “close relationship” component, and would sweep independent entities and even complete strangers into arbitration agreements. Similarly, while Texas law has long recognized that nonparties may be bound to a contract under traditional contract rules like agency or alter ego, there has never been such a rule for concerted misconduct. Conspiracy is a tort, not a rule of contract law. And while conspirators consent to accomplish an unlawful act, that does not mean they impliedly consent to each other’s arbitration agreements. As other contracts do not become binding on nonparties due to concerted misconduct, allowing arbitration contracts to become binding on that basis would make them easier to enforce than other contracts, contrary to the Arbitration Act’s purpose. Until the United States Supreme Court clarifies whether concerted-misconduct estoppel correctly reflects federal law, or even whether federal or state law governs the issue, today’s decision must remain somewhat tentative. But we find nothing in Texas contract law, and no settled principles of federal arbitration law, that would require the plaintiffs to arbitrate with Merrill Lynch’s affiliates. IV. Stay of Litigation Pending Arbitration In addition to moving to compel arbitration, ML Trust and ML Life moved to stay the plaintiffs’ litigation against them. Assuming the same issues must be decided both in arbitration (against Medina) and in court (against the affiliates), we hold the latter must be stayed until the former is completed. Trial judges cannot deny a party its day in court, but they have always had wide discretion to say when that day will be. Both the Federal and Texas Arbitration Acts require courts to stay litigation of issues that are subject to arbitration. Without such a stay, arbitration would no longer be the “rapid, inexpensive alternative to traditional litigation” it was intended to be, so long as one could find a trial judge willing to let the litigation proceed for awhile. The Federal Arbitration Act was passed precisely to overcome such judicial hostility. Thus, when an issue is pending in both arbitration and litigation, the Federal Arbitration Act generally requires the arbitration to go forward first; arbitration “should be given priority to the extent it is likely to resolve issues material to this lawsuit.” This has been the practice in all the federal courts. As Judge Posner has noted: [There] are cases in which a party to an arbitration agreement, trying to get around it, sues not only the other party to the agreement but some related party with which it has no arbitration agreement, in the hope that the claim against the other party will be adjudicated first and have preclusive effect in the arbitration. Such a maneuver should not be allowed to succeed . . . [and] would require the court to stay the proceedings before it and let the arbitration go forward unimpeded. We encountered the problem in different circumstances in In re Kellogg Brown & Root, Inc., in which a nonsignatory’s litigation of a lien claim was abated while arbitrators decided who owned the equipment to which the lien claim attached. Once arbitration was completed, we held the litigation could proceed. The case illustrates one of many circumstances in which litigation must be abated to ensure that an issue two parties have agreed to arbitrate is not decided instead in collateral litigation. In this case, if the alleged misrepresentations and omissions by Medina must be arbitrated, that proceeding must be given priority so that it is not rendered moot by deciding the same issues in court. After the arbitration is completed, the plaintiffs’ claims against ML Trust and ML Life can then be litigated (to the extent they survive) without infringing the arbitration agreement. In the interim, a stay of litigation ensures that the Alanizes do not “both have [their] contract and defeat it too.” * * * Accordingly, we hold the trial court abused its discretion in failing to compel arbitration of the plaintiffs’ claims against Henry Medina, and in failing to stay their litigation against ML Trust and ML Life until that arbitration was concluded. We conditionally grant the writ of mandamus and order the trial court to vacate its order and enter a new order in accordance with this opinion. We are confident the trial court will comply, and our writ will issue only if it does not. __________________________________ Scott Brister Justice OPINION DELIVERED: August 24, 2007  See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947 (1995).  159 S.W.3d 162, 165.  See 9 U.S.C. §§ 1-16.  In re D. Wilson Constr. Co., 196 S.W.3d 774, 780 (Tex. 2006); In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005).  Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1318 (11th Cir. 2002) (internal quotations omitted); accord, Pritzker v. Merrill Lynch, Inc., 7 F.3d 1110, 1121 (3d Cir. 1993) (“Because a principal is bound under the terms of a valid arbitration clause, its agents, employees, and representatives are also covered under the terms of such agreements.”); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762-63 (Tex. 2006).  See, e.g., Miller v. Keyser, 90 S.W.3d 712, 717 (Tex. 2002) (noting “Texas’ longstanding rule that a corporate agent is personally liable for his own fraudulent or tortious acts”); Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 486 (Tex. 1998) (holding both insurer and its employees may be liable for Insurance Code violations); Weitzel v. Barnes, 691 S.W.2d 598, 601 (Tex. 1985) (holding both corporation and its individual agents may be liable under DTPA); Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 375 (Tex. 1984) (holding both corporation and its agents may be liable for defamation).  See In re Dillard Dep’t Stores, Inc., 198 S.W.3d 778, 782 (Tex. 2006); In re Halliburton Co., 80 S.W.3d 566, 569 (Tex. 2002).  In re Vesta, 192 S.W.3d at 762 (quoting Holloway v. Skinner, 898 S.W.2d 793, 795 (Tex. 1995) (citation omitted)).  See Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573, 577 (Tex. 2002) (“The general rule is that an employer is liable for its employee’s tort only when the tortious act falls within the scope of the employee’s general authority in furtherance of the employer’s business and for the accomplishment of the object for which the employee was hired.”); GTE Sw., Inc. v. Bruce, 998 S.W.2d 605, 617–18 (Tex. 1999) (“Generally, a master is vicariously liable for the torts of its servants committed in the course and scope of their employment. This is true even though the employee’s tort is intentional when the act, although not specifically authorized by the employer, is closely connected with the servant’s authorized duties.”) (citations omitted).  See, e.g., Hennigan v. I.P. Petroleum Co., 858 S.W.2d 371, 372 (Tex. 1993) (per curiam) (holding plaintiff did not abandon gender discrimination claim by testifying at her deposition that she did not believe she had been fired because of her gender). Accordingly, such a statement is neither a judicial admission (“a formal waiver of proof usually found in pleadings or the stipulations of the parties”), nor even a quasi-admission (“[a] party’s testimonial declaration” that is evidentiary but “not conclusive”). Id.  See, e.g., Liberty Mut. Ins. Co., 966 S.W.2d at 486 (holding both insurer and its employees may be liable for Insurance Code violations); Weitzel, 691 S.W.2d at 601 (holding both corporation and its individual agents may be liable under DTPA); see also Tex. Rev. Civ. Stat. art. 581-33, §§ A(2), F(1) (holding one who offers securities and those who directly or indirectly control them liable for securities fraud).  See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449 (2006) (“We reaffirm today that . . . a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.”); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001).  See In re AdvancePCS Health L.P., 172 S.W.3d 603, 608 (Tex. 2005); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996) (“Gonzalez’ failure to read the agreement does not excuse him from arbitration. We presume a party, like Gonzalez, who has the opportunity to read an arbitration agreement and signs it, knows its contents.”).  See, e.g., McCarthy v. Azure, 22 F.3d 351, 362-63 (1st Cir. 1994) (refusing to allow nonsignatory owner acting in his own interest from invoking arbitration clause signed by his wholly owned corporation).  See Am. Bankers Ins. Group, Inc. v. Long, 453 F.3d 623, 626-28 (4th Cir. 2006); Ford v. NYLCare Health Plans of Gulf Coast, Inc., 141 F.3d 243, 250 (5th Cir. 1998); Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757–58 (11th Cir. 1993); Bonny v. Soc’y of Lloyd’s, 3 F.3d 156, 162 (7th Cir. 1993); Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185, 1188 n.4 (9th Cir. 1986); In re Weekley Homes, L.P., 180 S.W.3d 127, 131–32 (Tex. 2005).  We disagree with the plaintiffs’ alternative argument that if New York law applies, this result would be any different. Compare Hirschfeld Prods. v. Mirvish, 630 N.Y.S.2d 726, 728 (N.Y. App. Div. 1995) (“The attempt to distinguish officers and directors from the corporation they represent for the purposes of evading an arbitration provision is contrary to the established policy of this State . . . . If it were otherwise, it would be too easy to circumvent the agreement by naming individuals as defendants instead of the entity Agents themselves.”) (quotations and citations omitted), with In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex. 2006) (“When contracting parties agree to arbitrate all disputes . . . they generally intend to include disputes about their agents’ actions because ‘as a general rule, the actions of a corporate agent on behalf of the corporation are deemed the corporation’s acts.’ If arbitration clauses only apply to contractual signatories, then this intent can only be accomplished by having every officer and agent (and every affiliate and its officers and agents) either sign the contract or be listed as a third-party beneficiary. This would not place such clauses on an equal footing with all other parts of a corporate contract.”) (citation omitted).  Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 688 (7th Cir. 2005).  See, e.g., S. Union Co. v. City of Edinburg, 129 S.W.3d 74, 86 (Tex. 2003) (holding franchise tax agreement inapplicable to corporate affiliate under single-business-enterprise theory); Bell Oil & Gas Co. v. Allied Chem. Corp., 431 S.W.2d 336, 341 (Tex. 1968) (holding corporation not liable for affiliate’s debts).  See, e.g., Am. Bankers, 453 F.3d at 627 n.3; Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 447 F.3d 411, 416 (5th Cir. 2006); Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006).  See Bridas, 447 F.3d at 415; Comer, 436 F.3d at 1101; Zurich Am., 417 F.3d at 687; Denney v. BDO Seidman, L.L.P., 412 F.3d 58, 71 (2d Cir. 2005); Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005); InterGen N.V. v. Grina, 344 F.3d 134, 145-46 (1st Cir. 2003); Javitch v. First Union Sec., Inc., 315 F.3d 619, 629 (6th Cir. 2003); Employers Ins. of Wausau v. Bright Metal Specialties, Inc., 251 F.3d 1316, 1322 (11th Cir. 2001); Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 416-17 (4th Cir. 2000); see also In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005).  See In re Weekley Homes, L.P., 180 S.W.3d 127, 131–32 (Tex. 2005); Kellogg, 166 S.W.3d at 741.  We noted allegations of concerted misconduct in Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 306–07 (Tex. 2006), but compelled arbitration because the plaintiff’s claims depended on the underlying agreement, and thus were governed by principles of direct-benefits estoppel.  Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989).  EEOC v. Waffle House, Inc., 534 U.S. 279, 293 (2002) (quoting Volt, 489 U.S. at 478).  Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967).  460 U.S. 1 (1983).  Id. at 19-20.  Id. at 20 (emphasis in original).  “The federal courts of appeal are currently publishing more than one hundred cases per year substantially dealing with arbitration.” Frank Z. LaForge, Note, Inequitable Estoppel: Arbitrating with Nonsignatory Defendants Under Grigson v. Creative Artists, 84 Tex. L. Rev. 225, 225 (2005).  210 F.3d 524, 528-31 (5th Cir. 2000).  177 F.3d 942, 947 (11th Cir. 1999).  Though the Grigson court stated that equitable estoppel “is much more readily applicable when the case presents both independent bases,” 210 F.3d at 527, if the two bases are independent and each alone is sufficient, it is hard to see why either is made “more applicable” by having both. See also In re Humana Inc. Managed Care Litig., 285 F.3d 971, 976 (11th Cir. 2002) (“The plaintiff’s actual dependance on the underlying contract in making out the claim against the nonsignatory defendant is therefore always the sine qua non of an appropriate situation for applying equitable estoppel.”).  See Brantley v. Republic Mortgage Ins. Co., 424 F.3d 392, 396 (4th Cir. 2005); Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347, 360-61 (5th Cir. 2003); Westmoreland v. Sadoux, 299 F.3d 462, 467 (5th Cir. 2002); Humana, 285 F.3d at 976.  See Am. Bankers Ins. Group, Inc. v. Long, 453 F.3d 623, 627 n.3 (4th Cir. 2006); Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702, 706 (5th Cir. 2002) (noting that exception was applied by district court but that appeal addressed other issues).  See Brown v. Pac. Life Ins. Co., 462 F.3d 384, 399 (5th Cir. 2006) (compelling arbitration); Hill v. G E Power Sys., Inc., 282 F.3d 343, 349 (5th Cir. 2002) (refusing to compel arbitration).  Hill, 282 F.3d at 349.  Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225 (1987) (citation omitted) (noting that Federal Arbitration Act was specifically enacted to overcome “judicial hostility to arbitration agreements”).  See Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 308 (Tex. 2006) (“WMCO also argues that the trial court had discretion not to apply equitable estoppel, even if it could be applied in the same circumstances. We disagree. A trial court has no ‘discretion’ in determining what the law is or applying the law to the facts.”) (internal quotations omitted).  Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 779 (2d Cir. 1995) (internal citations omitted); accord, Denney v. BDO Seidman, L.L.P., 412 F.3d 58, 70 (2d Cir. 2005); JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 177 (2d Cir. 2004); Astra Oil Co., v. Rover Navigation, Ltd., 344 F.3d 276, 279 (2d Cir. 2003); Choctaw Generation Ltd. P’ship v. Am. Home Assurance Co., 271 F.3d 403, 406 (2d Cir. 2001); Smith/Enron Cogeneration Ltd. v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 97–98 (2d Cir. 1999).  See CD Partners, LLC v. Grizzle, 424 F.3d 795, 799 (8th Cir. 2005) (allowing nonsignatory owners of signatory franchisor to invoke its arbitration clause); JLM Indus., 387 F.3d at 177 (allowing nonsignatory owners of subsidiary to invoke its arbitration clauses); Astra, 344 F.3d at 279 (allowing nonsignatory affiliate that acted as agent for signatory corporation to invoke its arbitration clause); Smith/Enron, 198 F.3d at 97–98 (allowing nonsignatory affiliates and assignors of signatory corporations to invoke their arbitration clauses); Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 758 (11th Cir. 1993) (allowing nonsignatory parent to invoke subsidiary’s arbitration clause); J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 321 (4th Cir. 1988) (same); see also E.I. DuPont de Nemours and Co. v. Rhone Poulenc Fiber and Resin Intermediates, S.A.S., 269 F.3d 187, 201 (3d Cir. 2001) (“In essence, a non-signatory voluntarily pierces its own veil to arbitrate claims against a signatory that are derivative of its corporate-subsidiary’s claims against the same signatory.”); cf. Choctaw Generation, 271 F.3d at 406 (allowing nonsignatory surety to invoke debtor’s arbitration clause); but see Denney, 412 F.3d at 70 (allowing unaffiliated nonsignatories to invoke arbitration by estoppel); McCarthy v. Azure, 22 F.3d 351, 362–63 (1st Cir. 1994) (refusing to allow nonsignatory owner of signatory corporation to invoke its arbitration clause).  Cf. In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006) (“We agree with Cashion that he would not be required to arbitrate a tortious interference claim against a complete stranger to his contract and its arbitration clause.”).  See In re Weekley Homes, L.P., 180 S.W.3d 127, 131 (Tex. 2005).  See Tilton v. Marshall, 925 S.W.2d 672, 680–81 (Tex. 1996).  See Triplex Commc’ns, Inc. v. Riley, 900 S.W.2d 716, 719 (Tex. 1995).  See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12 (1967); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 740 (Tex. 2005).  See Weekley, 180 S.W.3d at 130; Kellogg, 166 S.W.3d at 738–39.  9 U.S.C. § 3; Tex. Civ. Prac. & Rem. Code §§ 171.025, 172.174.  Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 272–73 (Tex. 1992).  Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225–26 (1987).  AgGrow Oils, L.L.C. v. Nat’l Union Fire Ins. Co., 242 F.3d 777, 783 (8th Cir. 2001).  See, e.g., Volkswagen Of Am., Inc. v. Sud’s Of Peoria, Inc., 474 F.3d 966, 972 (7th Cir. 2007); Waste Mgmt., Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 345 (5th Cir. 2004); Hill v. G E Power Sys., Inc., 282 F.3d 343, 348 (5th Cir. 2002); Harvey v. Joyce, 199 F.3d 790, 796 (5th Cir. 2000); Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir. 1999); WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 76 (2d Cir. 1997); IDS Life Ins. Co. v. SunAmerica, Inc., 103 F.3d 524, 530 (7th Cir. 1996); Sam Reisfeld & Son Import Co. v. S.A. Eteco, 530 F.2d 679, 681 (5th Cir. 1976).  IDS Life Ins. Co., 103 F.3d at 530.  166 S.W.3d 732 (Tex. 2005).  Id. at 742.  In re Weekley Homes, L.P., 180 S.W.3d 127, 135 (Tex. 2005).
In re Kaplan Higher Educ. Corp., No. 06-0072 (Tex. Aug. 24, 2007)(per curiam)(arbitration mandamus)(students compelled to arbitrate fraudulent inducement claim against vocational school; may not avoid arbitration clause by suing school's agents) In re Kaplan Higher Education Corporation and Leticia Ventura, Relators ═══════════════════════════════════════════════ On Petition for Writ of Mandamus ═══════════════════════════════════════════════ A vocational college and 45 of its students agreed to arbitrate any dispute “arising from or relating to” their enrollment agreement. Claiming they were fraudulently induced to sign up, the students nevertheless seek to avoid arbitration by pursuing their claims only against two nonsignatories. The parties agree the Federal Arbitration Act applies. See 9 U.S.C. § 1 et. seq. The trial court refused to compel arbitration, and the Thirteenth Court of Appeals denied mandamus relief. We conditionally grant it. See In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (“Mandamus relief is proper to enforce arbitration agreements governed by the FAA.”). The students enrolled in an electrician’s program at the San Antonio College of Medical and Dental Assistants – McAllen Branch (“the College”), a wholly-owned subsidiary of Kaplan Higher Education Corporation. They allege they were fraudulently induced to enroll by assurances that upon graduation they would be eligible for licenses as journeymen or master electricians. Each student signed an enrollment agreement detailing tuition, rules, and graduation requirements, and requiring them to arbitrate “[a]ny controversy or claim arising out of, or relating to, this Agreement.” Initially, the plaintiffs filed suit against Kaplan, the College, Frank Jennings (the College’s president) and Leticia Ventura (the College’s admissions director). When the defendants moved for arbitration, the plaintiffs dropped their claims against the College and Jennings (both signatories to the agreements) as well as all claims of joint venture or enterprise, leaving only claims against Kaplan and Ventura (both nonsignatories). Although alleged in various forms, the substance of the students’ claim was fraudulent inducement, as they seek refunds of tuition and other costs they would not have incurred had they not been induced to sign up. See Weekley, 180 S.W.3d at 131–32 (stating that arbitrability “turns on the substance of the claim, not artful pleading”); Haase v. Glazner, 62 S.W.3d 795, 797– 800 (Tex. 2001) (distinguishing fraudulent inducement from other fraud claims as it “presupposes that a party has been induced to enter a contract”). We have held that such claims fall within an agreement to arbitrate all disputes “involving” an underlying contract. See In re J.D. Edwards World Solutions Co., 87 S.W.3d 546, 550–51 (Tex. 2002). Clearly, the students’ complaints arise out of and relate to their enrollment agreements. We disagree with Kaplan that the students are suing on those agreements. “Claims must be brought on the contract (and arbitrated) if liability arises solely from the contract . . . . [C]laims can be brought in tort (and in court) if liability arises from general obligations imposed by law.” Weekley, 180 S.W.3d at 132. Claims of fraudulent inducement arise from general obligations imposed by law, not the underlying contract. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 304 (Tex. 2006) (“The duty not to fraudulently procure a contract arises from the general obligations of law rather than the contract itself, and may be asserted in tort even if the only damages are economic.”); Formosa Plastics Corp. USA v. Presidio Eng’rs and Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998) (“[I]t is well established that the legal duty not to fraudulently procure a contract is separate and independent from the duties established by the contract itself.”). Nevertheless, the agents of a signatory may sometimes invoke an arbitration clause even if they themselves are nonsignatories and a claimant is not suing on the contract. Thus, if two companies sign a contract to arbitrate disputes, one cannot avoid it by recasting a contract dispute as a tortious interference claim against an owner, officer, agent, or affiliate of the other. In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762–63 (Tex. 2006) (per curiam). “Every contract claim against a corporation could be recast as a tortious interference claim against its agents,” and it is impractical to require every corporate agent to sign or be listed in every contract. Id. at 762. As a contracting party generally cannot avoid unfavorable clauses by suing the other party’s agents, this rule is necessary “‘to place arbitration agreements on equal footing with other contracts’.” Id. (quoting E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 293 (2002)). For the same reasons, the same rule must apply when a party to an arbitration contract seeks to avoid it by pleading a contract dispute as fraudulent inducement by an officer, agent, or affiliate of the other. Here too, almost every contract claim against a corporation could be recast as a fraudulent inducement claim against the agents or employees who took part in the negotiations preceding it. If such arbitration clauses are enforceable only if every officer, employee, agent, or affiliate signs or is listed in the contract, they would be more easily avoided than other contract clauses. Further, the students’ agreements with the College require arbitration here because the College will be liable for the judgment if their suit is successful. The Texas Education Code requires vocational schools to provide full refunds if enrollment was procured by representations “by the owner or representatives of the school.” Tex. Educ. Code § 132.061(a)(2); see also Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573, 577 (Tex. 2002) (stating that employers are generally liable for employees’ torts committed in course, scope, and furtherance of employer’s business). The enrollment agreements specifically provided for tuition refunds in the event enrollment was induced by misrepresentation. If the College’s liability for such refunds (about $10,000 for each student) can be decided in court by suing its agents, then the arbitration contract has been effectively abrogated. The students argue that Ventura and the other admissions officers to whom they spoke were not employees of the College but of Kaplan. But the undisputed facts (and the students’ own pleadings) show that regardless of who paid them, they were acting as agents of the College when they advertised, recruited, and procured contracts on its behalf, and that the College itself will have to answer for any misrepresentations they made in doing so. The students also assert that Kaplan cannot seek arbitration because of “unclean hands” in its dealings with them. But this defense pertains to the enrollment agreement in general rather than the arbitration clause in particular, and thus must be arbitrated. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449 (2006) (“We reaffirm today that . . . a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.”); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001). We emphasize again today that arbitration clauses do not automatically cover all corporate agents or affiliates. See In re Merrill Lynch Trust Co., __ S.W.3d __ , __ (Tex. 2007); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006) (per curiam). Like other contracts, arbitration agreements “are enforced according to their terms and according to the intentions of the parties.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947 (1995) (internal citation omitted). Thus, for example, owners may not be able to invoke a subsidiary’s arbitration clause when they act on their own behalf rather than for their subsidiary. See, e.g., Westmoreland v. Sadoux, 299 F.3d 462, 466 (5th Cir. 2002). But when an agreement between two parties clearly provides for the substance of a dispute to be arbitrated, one cannot avoid it by simply pleading that a nonsignatory agent or affiliate was pulling the strings. Accordingly, without hearing oral argument, see Tex. R. App. P. 52.8(c), we conditionally grant the writ of mandamus and direct the trial court to order that the students’ claims proceed to arbitration. Our writ will not issue unless the trial court fails to do so. OPINION DELIVERED: August 24, 2007  Each enrollment agreement contained the following arbitration provision: ACKNOWLEDGEMENT OF OBLIGATION: . . . Any controversy or claim arising out of, or relating to, this Agreement, or breach thereof, no matter how pleaded or styled, shall be settled by arbitration in accordance with the Commercial Rules of Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction.  The students’ pleadings alleged negligence, negligence per se based on alleged violations of the Texas Education and Texas Administrative Codes, violations of the Texas Deceptive Trade Practices Act, and negligent misrepresentation.
In Re H&R Block, No. 04-0061 (Tex. Aug. 24, 2007)(per curiam)(investments, arbitration mandamus granted, company's name change irrelevant to validity and enforceability of arbitration agreement) In re H&R Block Financial Advisors, Inc. and Robert Bullock, Relators ══════════════════════ On Petition for Writ of Mandamus ══════════════════════ PER CURIAM After losing a substantial investment in the Enron debacle, two investors sued their investment advisor and his firm. Although they had signed contracts with the firm containing broad arbitration clauses, they sought to avoid them on grounds that (1) the firm had changed its name, and (2) the employee did not sign the contracts in his personal capacity. Because all the other terms of the parties’ contracts could not be avoided on these grounds, neither could the arbitration clauses. Accordingly, we conditionally grant mandamus relief. See In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (“Mandamus relief is proper to enforce arbitration agreements governed by the FAA.”). In 1992 and again in 1996, Robert and Gilda Bonds entered into investment account agreements with Olde Discount Corporation. Both contracts contained arbitration clauses covering “any and all controversies or claims arising out of the relationship established by this agreement or any corresponding agreement to arbitration.” Robert Bullock, an Olde employee, signed both on Olde’s behalf. When Olde changed its name in 2000 to H&R Block Financial Advisors, Inc., Bullock continued to advise the Bonds, and recommended investments in Enron Corporation. In 2001, H&R Block sent the Bonds an Addendum to their account agreements that changed some terms but did not mention arbitration. In October 2002, the Bonds sued H&R Block and Bullock alleging negligence, gross negligence, fraud, breach of fiduciary duty, and violations of the Texas Securities Act and the Texas Deceptive Trade Practices Act. The Bonds sought recovery of their entire $119,031.92 investment in Enron. H&R Block and Bullock moved to stay proceedings pursuant to the Federal Arbitration Act. The trial court denied the motion, and the court of appeals denied mandamus relief. __ S.W.3d __ (Tex. App.–Corpus Christi 2003). The Bonds concede signing an arbitration agreement with Olde, but argue that H&R Block and Bullock are nonsignatories who cannot invoke it. But H&R Block established that it was the same company as Olde, now operating under a different name. H&R Block tendered affidavits and a Certificate of Amendment showing that Olde amended its Articles of Incorporation in July 2000 to change its name to H&R Block. Under ordinary legal principles, a contracting party that has merely changed its name is still a contracting party. See, e.g., Coulson v. Lake LBJ Mun. Util. Dist., 781 S.W.2d 594, 595 (Tex. 1989); Texas Co. v. Lee, 157 S.W.2d 628, 630 (Tex. 1941). Accordingly, the company’s change of name does not prevent it from invoking its own arbitration agreements. See Contec Corp. v. Remote Solution Co., 398 F.3d 205, 207 (2d Cir. 2005); Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir. 1993). Nor can the Bonds skirt arbitration with Bullock when the substance of the suit is against both him and his employer. Bullock had no duty to provide investment advice to the Bonds but for their contract with Olde/H&R Block, and the damages the Bonds seek is the investment they made through that contract. As Bullock’s liability arises from and must be determined by reference to the parties’ contract rather than general obligations imposed by law, the suit is subject to the contract’s arbitration provisions. In re Weekley Homes, L.P., 180 S.W.3d 127, 131–32 (Tex. 2005); see also In re Vesta Ins. Group, Inc. 192 S.W.3d 759, 762 (Tex. 2006) (“When contracting parties agree to arbitrate all disputes ‘under or with respect to’ a contract (as they did here), they generally intend to include disputes about their agents’ actions . . . .”). The Bonds claim the 2001 Addendum (which contained no arbitration clause) overrides the earlier account agreements (which did). But the Addendum’s first two sentences expressly incorporate all nonconflicting terms of the earlier agreements: The following are changes and/or additions to your Investor Account Agreement that you may have signed previously. . . . [W]here conflict exists, this addendum shall control and be binding on you. As the Addendum was silent regarding arbitration, it did not conflict with the existing arbitration provisions and thus left them intact. Finally, the Bonds assert the trial court properly refused to compel arbitration because the evidence regarding Olde’s name change was not produced promptly in response to discovery requests. But even if exclusion were a proper discovery sanction (a question we do not reach), the trial court did not exclude it here; to the contrary, the court gave the Bonds extra time to respond to the evidence before ruling on the motion. By the time the trial court made that ruling three months later, the Bonds had filed nothing contradicting Olde’s change of name evidence. Once this undisputed evidence was tendered, the court was not at liberty to ignore it. Accordingly, without hearing oral argument, see Tex. R. App. P. 52.8(c), we conditionally grant the writ of mandamus and direct the trial court to order that the Bonds’ claims proceed to arbitration. Our writ will not issue unless the trial court fails to do so. OPINION DELIVERED: August 24, 2007  The defendants also moved to compel arbitration under the Texas Arbitration Act and filed an interlocutory appeal related thereto. We do not address that claim as the court of appeals determined that the FAA applies and neither party contests that determination.