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.[2] 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.[3] 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).[4] 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.[5] 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.[6]
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.[7] 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.
