The Federal Arbitration Act ("FAA") preempts state law that
would otherwise render arbitration agreements unenforceable in a contract
involving interstate commerce. 9 U.S.C. § 2 (West 2008); Southland Corp. v.
Keating, 465 U.S. 1, 10-11, 104 S Ct. 852, 858, 79 L. Ed. 2d 1 (1984); In re
Olshan Found. Repair Co., LLC, 328 S.W.3d 883, 888 (Tex. 2010).
The parties in
this case do not dispute that the two Delaware LLC agreements involve
interstate commerce.[9] Under the FAA, courts should apply ordinary state-law
principles governing the formation of contracts when determining issues of
substantive arbitrability. First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 944, 115 S. Ct. 1920, 1924, 131 L. Ed. 2d 985 (1995). As noted, the two
Delaware LLC agreements provide that they should be "construed and
enforced in accordance with and governed by the laws of the State of
Delaware." The arbitration clauses contained in those agreements specify
that any actual arbitration is to be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("the
AAA Rules"), but the arbitration agreements themselves are expressly
governed by Delaware law.
The Delaware Supreme Court has confirmed that "arbitration is a
matter of contract and a party cannot be required to submit to arbitration any
dispute which he has not agreed so to submit." James & Jackson, LLC v.
Willie Gary, LLC, 906 A.2d 76, 78 (Del. 2006). A Delaware LLC is bound by the
arbitration provisions of its own governance and operation agreement, even
where the LLC did not itself execute the agreement. Elf Atochem N. Am., Inc. v.
Jaffari, 727 A.2d 286, 287 (Del. 1999). Delaware arbitration law mirrors
federal policy in presuming the validity of arbitration agreements and
resolving doubts about the scope of arbitrable issues in favor of arbitration.
See Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25, 103
S. Ct. 927, 941, 74 L. Ed. 2d 765 (1983) (explaining federal law and policy);
Willie Gary 906 A.2d at 78 (explaining Delaware law).
The question of whether parties have agreed to arbitrate their disputes
is to be decided by the court, unless there is clear and unmistakable evidence
that the parties delegated that question to the arbitrator instead. First
Options, 514 U.S. at 944-45, 115 S. Ct. at 1924. Federal law refers gateway
matters such as (1) whether the parties are bound by a given arbitration clause
and (2) whether a certain dispute is within the arbitration agreement to the
court in order to "avoid the risk of forcing parties to arbitrate a matter
they may well not have agreed to arbitrate." Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79, 83-84, 123 S. Ct. 588, 591-92, 154 L. Ed. 2d 491
(2002).
The Delaware Supreme Court has adopted the majority federal view that a
reference to the AAA Rules in an arbitration agreement serves as the type of
clear and unmistakable evidence that the parties agreed to submit the question
of the arbitrability of a particular dispute to the arbitrator. Willie Gary,
906 A.2d at 80. However, the court limited this interpretation to arbitration
clauses that broadly refer all disputes to arbitration under the referenced
rules. Id. Where an arbitration agreement specifically reserves carve-outs for
judicial remedies, something more than reference to the AAA Rules is needed to
establish that the parties intended to arbitrate the arbitrability of their
dispute. Id. at 81.
Whether the court or the arbitrator decides the question of substantive
arbitrability, Delaware law strongly favors arbitration. See Elf, 727 A.2d at
295. An arbitration clause, though, only covers claims that touch on the legal
rights contained in the underlying contract or agreement within which the
clause is found. See Parfi Holding AB v. Mirror Image Internet, Inc., 817 A.2d
149, 159-60 (Del. 2002) (holding that a fiduciary duty claim was not covered by
an arbitration provision in a stock underwriting agreement). Where an
arbitration clause is broad in scope, courts will defer to it where a claim
touches on any issues of contract rights or contract performance. Id. at 155.
STANDARD OF REVIEW
We review a trial court's grant of a motion to stay arbitration under
an abuse-of-discretion standard. See McReynolds v. Elston, 222 S.W.3d 731, 739
(Tex. App.-Houston [14th Dist.] 2007, no pet.) (so holding on appeal of order
denying motion to compel arbitration under TAA); see also Garcia v. Huerta, 340
S.W.3d 864, 868-69 (Tex. App.-San Antonio 2011, pet. filed) (so holding on
appeal of order denying motion to compel arbitration under FAA); Sidley Austin
Brown & Wood, LLP v. J.A. Green, 327 S.W.3d 859, 863 (Tex. App.-Dallas
2010, no pet.) (same); SEB, Inc. v. Campbell, No. 03-10-00375-CV, 2011 WL
749292, at *2 (Tex. App.-Austin Mar, 2, 2011, no pet.) (mem. op.) (same). Under
this standard, we defer to the trial court's factual determinations if they are
supported by evidence, but we review the trial court's legal determinations de
novo. In re Labatt Food Service, L.P., 279 S.W.3d 640, 643 (Tex. 2009).
Determining whether a claim falls within the scope of an arbitration agreement
involves the trial court's legal interpretation of the agreement, and we review
such interpretations de novo. McReynolds, 222 S.W.3d at 740.
SOURCE: HOUSTON COURT OF APPEALS - 14-11-00439-CV – 4/17/2012
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