Word should have gotten around by now that orders denying arbitration under the FAA are immediately appealable these days, but errors are still being made, as seen a doomed mandamus petition in San Antonio. Mandamus is proper to correct a clear abuse of discretion when there is no adequate remedy by appeal. CMH Homes v. Perez, 340 S.W.3d 444, 452-53 (Tex. 2011). Because the availability of interlocutory review based on statutory enactment precludes mandamus relief, the Fourth Court predictably denied the requested relief without delving into the merits of the complaint about the trial court’s failure to order arbitration.
In re Green Tree Servicing, LLC (Tex.App.- San Antonio, 2012)
PER CURIAM MEMORANDUM OPINION
On May 4, 2012, Relator Green Tree Servicing, LLC as Successor Servicer for BAHS — A Division of Bank of America, FSB, filed a petition for writ of mandamus complaining that the trial court erred in denying a motion to compel arbitration. Mandamus, however, will issue only to correct a clear abuse of discretion for which the relator has no adequate remedy at law. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex.1992) (orig. proceeding). Texas Civil Practice and Remedies Code section 51.016 permits interlocutory appeals "to the court of appeals from the judgment or interlocutory order of a district court . . . under the same circumstances that an appeal from a federal district court's order or decision would be permitted by 9 U.S.C. Section 16." TEX. CIV. PRAC. & REM CODE ANN. § 51.016; CMH Homes v. Perez, 340 S.W.3d 444, 448-49 (Tex. 2011) (explaining that section 51.016 provides for interlocutory appeals in Federal Arbitration Act cases so long as "it would be permitted under the same circumstances in federal court under section 16."). We, therefore, conclude Relator failed to establish he lacks an adequate remedy by appeal. Accordingly, the petition for writ of mandamus is denied. See TEX. R. APP. P. 52.8(a).
In re Green Tree Servicing, LLC as Successor Servicer for BAHS — A Division of Bank of America, FSB, 04-12-00277-CV (Tex.App.- San Antonio, May 15, 2012) (arbitration-related mandamus petition denied because interlocutory appeal now available)
EXCERPT FROM TEXAS SUPREME COURT’S OPINION IN
CMH Homes v. Perez, 340 S.W.3d 444(Tex. 2011).
Texas Civil Practice and Remedies Code Section 51.016
Prior to the Legislature's 2009 amendment to the Texas Arbitration Act (TAA), parties seeking to appeal an order refusing to compel arbitration would commonly file two separate appellate proceedings. Under the TAA, a party could bring an interlocutory appeal of an order denying arbitration. See TEX. CIV. PRAC. & REM. CODE § 171.098. Under the Federal Arbitration Act (FAA), a party could only challenge an order denying arbitration by mandamus. Jack B. Anglin, 842 S.W.2d at 271-72. As a result, parallel proceedings were the norm in Texas arbitration disputes where parties were unsure which arbitration act applied. Although "unnecessarily expensive and cumbersome," such parallel proceedings were required. Id. at 272. Twice, this Court requested that the Legislature "consider amending the Texas Act to permit interlocutory appeals of orders issued pursuant to the Federal Act." Id.; In re D. Wilson Constr. Co., 196 S.W.3d 774, 780 n. 4 (Tex.2006) (quoting Jack B. Anglin, 842 S.W.2d at 272). In response, the Legislature added section 51.016 to the Civil Practice and Remedies Code in 2009. Act of May 27, 2009, 81st Leg., R. S., ch. 820, §§ 1, 3, 2009 Tex. Gen. Laws 2061 (codified at TEX. CIV. PRAC. & REM.CODE § 51.016). This is our first opportunity to construe the scope of the Legislature's remedial action.
Section 51.016 provides that a party may appeal a judgment or interlocutory order "under the same circumstances that an appeal from a federal district court's order or decision would be permitted by 9 U.S.C. Section 16." TEX. CIV. PRAC. & REM. CODE § 51.016. Section 16 of the FAA provides:
(a) An appeal may be taken from—
(1) an order—
(A) refusing a stay of any action under section 3 of this title,
(B) denying a petition under section 4 of this title to order arbitration to proceed,
(C) denying an application under section 206 of this title to compel arbitration,
(D) confirming or denying confirmation of an award or partial award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to this title; or
(3) a final decision with respect to an arbitration that is subject to this title.
(b) Except as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order—
(1) granting a stay of any action under section 3 of this title;
(2) directing arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4) refusing to enjoin an arbitration that is subject to this title.
9 U.S.C. § 16. Civil Practice and Remedies Code section 51.016 expressly incorporates federal law. Thus, an interlocutory appeal in this case is permitted only if it would be permitted under the same circumstances in federal court under section 16. See Little v. Tex. Dep't of Crim. Justice, 148 S.W.3d 374, 381-82 (Tex.2004) (examining federal law when interpreting state statute that incorporated federal statute).
In considering the scope of section 16's jurisdictional grant, we first determine the nature of the order being appealed. The order at issue is entitled "Order on Plaintiff's Motion to Compel Arbitration" and appoints Gilberto Hinojosa as arbitrator. Although Perez's motion to compel arbitration did not request that the trial court appoint an arbitrator, Perez submitted letters to the court administrator declaring an impasse and requesting the trial judge appoint an arbitrator.
At first glance, this order may appear to fit within section 16(b)(2) as an order "directing arbitration to proceed." 9 U.S.C. § 16(b)(2). The "Order on Plaintiff's Motion to Compel Arbitration" was issued in response to Perez's motion requesting that the trial court compel arbitration. But the substance of the order is the appointment of Gilberto Hinojosa as arbitrator. See Del Valle Indep. Sch. Dist. v. Lopez, 845 S.W.2d 808, 809 (Tex.1992) ("[I]t is the character and function of an order that determine its classification."). While it may be argued that by appointing an arbitrator the order implicitly compels the parties to arbitration, the order does not explicitly grant Perez's motion to compel and does not explicitly compel the parties to arbitrate their dispute. There is no question that both parties agreed to arbitrate their dispute; the open question remaining was who would serve as the arbitrator. The purpose of the order was to answer that question.
Section 5 of the FAA explicitly permits a trial court to appoint an arbitrator under certain circumstances. 9 U.S.C. § 5. Where the parties have previously agreed to a method for selecting an arbitrator, the parties must follow that method. Id. However, if the agreed upon method breaks down and there is a lapse in appointing an arbitrator, the parties may petition the trial court to appoint an arbitrator. Id.
An order appointing an arbitrator under section 5 is neither listed in section 16(a) (where appeals may be taken) nor in section 16(b) (where appeals may not be taken). 9 U.S.C. § 16(a), (b). Even though section 16 is silent on the matter, CMH Homes argues that an appeal of an order appointing an arbitrator is "permitted by Section 16" because some federal circuit cases may have entertained interlocutory appeals regarding appointment of arbitrators pursuant to section 5. However, none of the cited cases mentions whether the appeal is interlocutory and all but one of the cited cases fails to specifically discuss its jurisdictional basis or cite section 16. Nat'l Am. Ins. Co. v. Transamerica Occidental Life Ins. Co., 328 F.3d 462 (8th Cir.2003) (affirming the district court's selection of an arbitrator pursuant to section 5); ACEquip Ltd. v. Am. Eng'g Corp., 315 F.3d 151 (2d Cir.2003) (same); see also The Stop & Shop Supermarket Co. LLC v. United Food & Commercial Workers Union Local 342, 246 Fed.Appx. 7 (2d Cir.2007) (same). The one exception, Universal Reinsurance, specifically establishes its jurisdiction "pursuant to 9 U.S.C. § 16(a)(3), which authorizes review of `a final decision with respect to an arbitration....'" Universal Reinsurance Corp. v. Allstate Ins. Co., 16 F.3d 125, 126 (7th Cir.1994). Neither CMH Homes nor Perez has suggested that this appeal was anything other than interlocutory. Because the trial court did not enter a dismissal or otherwise dispose of all parties and claims, the order remains interlocutory and cannot be appealed under section 16(a)(3). See In re Gulf Exploration, LLC, 289 S.W.3d 836, 839 (Tex.2009) ("[T]here can be an appeal if the underlying case is dismissed." (citing Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 86-87, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000))). Although we presume a court always evaluates its jurisdiction before deciding a matter, these cases do not indicate whether their jurisdictional basis was section 16, and if so, whether the basis was section 16(a)(3) for final orders. The only federal circuit case that speaks directly to the jurisdictional issue is O.P.C. Farms Inc. v. Conopco Inc., which held that under section 16, the trial court's order appointing an arbitrator was not a final decision and was thus unappealable. 154 F.3d 1047, 1048-49 (9th Cir. 1998). The court explained: "[T]he only basis for an appeal ... that could even be plausibly argued is § 16(a)(3). It is, however, clear that the appointment of the third arbitrator is not the final decision in this case.... Consequently § 16 effectively deprives us of jurisdiction." Id.
The appellate jurisdiction of Texas courts in this case is based on federal law. The court of appeals had jurisdiction to consider the trial court's order if "appeal... would be permitted by 9 U.S.C. Section 16" in federal court. TEX. CIV. PRAC. & REM.CODE § 51.016. Because there is no apparent federal approach to judicial review under section 16 of orders appointing arbitrators, we will not extrapolate jurisdiction from a dearth of federal authority to allow an interlocutory appeal where the law is unclear and section 16 suggests otherwise.
Before the enactment of section 51.016, we specifically invited the Legislature "`[i]n the interests of promoting the policy considerations of rigorous and expedited enforcement of arbitration agreements,... to consider amending the Texas Act to permit interlocutory appeals of orders issued pursuant to the Federal Act.'" See In re D. Wilson, 196 S.W.3d at 780 n. 4 (quoting Jack B. Anglin, 842 S.W.2d at 272). While we agree the Legislature added section 51.016 to prevent unnecessary parallel proceedings, this inconsistency generally arose when parties were unsure whether the TAA or the FAA applied to their agreement. See Jack B. Anglin, 842 S.W.2d at 272 ("[L]itigants who allege entitlement to arbitration under the Federal Act, and in the alternative, under the Texas Act, are burdened with the need to pursue parallel proceedings—an interlocutory appeal of the trial court's denial under the Texas Act, and a writ of mandamus from the denial under the Federal Act."). The Legislature in enacting section 51.016 has remedied this particular situation and enacted a policy change that promotes efficiency and common sense. See Sidley Austin Brown & Wood, LLP v. J.A. Green Dev. Corp., 327 S.W.3d 859, 862 (Tex.App.-Dallas 2010, no pet.); Ranchers & Farmers Mut. Ins. Co. v. Stahlecker, No. 09-10-00286-CV, 2010 WL 4354020, at *1 (Tex. App.-Beaumont Nov. 4, 2010, no pet.) (mem.op.); In re Rio Grande Xarin II, Ltd., Nos. 13-10-00115-CV, 13-10-00116-CV, 2010 WL 2697145, at *3-4 (Tex.App.-Corpus Christi-Edinburg July 6, 2010, pet. dism'd) (mem.op.); 950 Corbindale, L.P. v. Kotts Capital Holdings Ltd. P'ship, 316 S.W.3d 191, 195 n. 1 (Tex.App.-Houston [14th Dist.] 2010, no pet.).
Here, however, the issue is not which Act applies, but whether this particular type of order is appealable. Just as all interlocutory arbitration orders are not subject to appeal under the TAA, the Legislature in enacting section 51.016 did not intend to make all interlocutory orders under the FAA appealable, only those permitted by section 16 of the FAA. Our interpretation does not promote parallel proceedings of arbitration orders under the TAA and FAA and does not frustrate 452*452 the Legislature's intent in enacting section 51.016.
The court of appeals below correctly determined it was without jurisdiction to hear an interlocutory appeal pursuant to section 51.016. The only remaining appellate option for the parties at this juncture is mandamus relief.