Broad Arbitration Clause sweeps up related disputes even if not strictly based on contract

An arbitration clause that covers any dispute arising out of or relating to the parties' contract is expansive in scope and encompasses any controversy between the parties that touches on, has a significant relationship to, is inextricably enmeshed with, or is factually intertwined with the contract regardless of any label applied to the controversy. See Houston Progressive, 474 S.W.3d at 447-48; FD Frontier, 438 S.W.3d at 695; Hou-Scape, Inc. v. Lloyd, 945 S.W.2d 202, 205-06 (Tex. App.-Houston [1st Dist.] 1997, orig. proceeding) (per curiam). 

Its reach therefore is not limited to claims that literally arise under the contract's terms. E.g., Hou-Scape, 945 S.W.2d at 206 (claims for deceptive trade practices, fraudulent inducement, negligence, defamation, and tortious interference with business relations all held to be within scope of broad arbitration clause).

SOURCE: HOUSTON COURT OF APPEALS - Nos. 01-16-00780-CV (mandamus case) 01-16-00783-CV (interlocutory appeal) - 5/9/2017 styled IN RE CRS INDUSTRIES, INC

IN RE CRS INDUSTRIES, INC.
CRS INDUSTRIES, INC., Appellant,
v. MACDONALD SYSTEMS, INC., Appellee.

Nos. 01-16-00780-CV, 01-16-00783-CV.

Court of Appeals of Texas, First District, Houston.

Opinion issued May 9, 2017.

Original Proceeding on Petition for Writ of Mandamus.

On Appeal from the 152nd District Court Harris County, Texas, Trial Court Case No. 2016-41521.

Panel consists of Chief Justice Radack and Justices Brown and Lloyd.

MEMORANDUM OPINION

HARVEY BROWN, Justice.

CRS Industries, Inc. filed this interlocutory appeal and a petition for writ of mandamus, both of which assert that the trial court abused its discretion by denying CRS's motion to compel arbitration. We agree and reverse the order denying the motion, remand to the trial court so that it can enter an order compelling arbitration and staying this suit, and dismiss CRS's petition for writ of mandamus as moot.

Background

CRS manufactures air purification systems. It contractually agreed to allow MacDonald Systems, Inc. to market and sell its commercial products within a designated territory. The two subsequently became embroiled in a dispute about the sale of a residential product, and MacDonald filed this suit.

MacDonald alleged that it designed a new air filtration system that incorporated one of CRS's products and had identified a customer for this new product, DuPure Water Filters. MacDonald further alleged that the parties agreed to compensate it for the new design by allowing it to purchase the new product from CRS and sell it to DuPure at a profit of $300 per unit. Instead, CRS fired MacDonald as its product representative, and CRS and DuPure refused to pay MacDonald for the new design. MacDonald alleged that CRS is selling or has sold the new design to a company that bought DuPure. It alleged three causes of action—promissory estoppel, quantum meruit, and breach of contract—by which it sought recovery of the $300-per-unit profit it allegedly was promised.

CRS moved to compel arbitration of MacDonald's claims and to stay the suit pending that arbitration based on a clause in their contract requiring arbitration of all claims, disputes, and other matters arising out of or relating to the contract. MacDonald responded that the arbitration clause was inapplicable because the parties' dispute concerned a residential product rather than the commercial ones that were the subject of their contract. It did not, however, otherwise dispute the validity of the contract or its arbitration clause.

The trial court denied CRS's motion to compel arbitration without making any fact findings or stating its reasons. By way of interlocutory appeal and a petition for writ of mandamus, CRS urges that the trial court abused its discretion.

Jurisdiction

CRS is a Florida company whose principal office is in that state, and MacDonald is a Texas company whose principal office is in this state. As they are located in different states, their contract's arbitration clause involves interstate commerce and is subject to the Federal Arbitration Act. 9 U.S.C. § 2; Rapid Settlements v. Green, 294 S.W.3d 701, 705 (Tex. App.-Houston [1st Dist.] 2009, no pet.). The Act's applicability, in turn, gives this court jurisdiction to hear CRS's appeal from the trial court's order denying its motion to compel arbitration. See TEX. CIV. PRAC. & REM. CODE § 51.016; see also 9 U.S.C. § 16(a)(1)(B).

Motion to Compel Arbitration

CRS posits that MacDonald's claims in this suit relate to their contract and therefore are subject to the contract's arbitration clause. On this basis, CRS contends that the trial court erred by denying its motion to compel arbitration.

On interlocutory appeal, we review a trial court's denial of a motion to compel arbitration for an abuse of discretion. Houston Progressive Radiology Assocs. v. Lee, 474 S.W.3d 435, 442 (Tex. App.-Houston [1st Dist.] 2015, no pet.). We defer to the trial court's factual determinations, if any, so long as they are supported by the evidence, but we review questions of law de novo. Id.

A party who moves to compel arbitration must show the existence of a valid, enforceable arbitration agreement and that the agreement's scope encompasses the lawsuit's claims. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011); Houston Progressive, 474 S.W.3d at 442. Whether a valid agreement exists is a legal question, which turns on the application of ordinary contract principles. Valerus Compression Servs. v. Austin, 417 S.W.3d 202, 208 (Tex. App.-Houston [1st Dist.] 2013, no pet.). In determining whether claims are within the agreement's scope, courts focus on the factual allegations of the petition rather than the causes of action alleged. In re Rubiola, 334 S.W.3d at 225; FD Frontier Drilling (Cyprus) v. Didmon, 438 S.W.3d 688, 695 (Tex. App.-Houston [1st Dist.] 2014, pet. denied). Allegations that touch on the subject of the contract containing the arbitration clause or that are factually intertwined with claims subject to that clause generally are within the clause's scope. In re Dillard Dep't Stores, 186 S.W.3d 514, 516 (Tex. 2006) (per curiam); Valerus, 417 S.W.3d at 208. Courts must resolve any doubts about the agreement's scope in favor of arbitration. In re Rubiola, 334 S.W.3d at 225; Valerus, 417 S.W.3d at 208. If the movant shows that a valid arbitration agreement encompasses the lawsuit's claims, and the opposing party has not proven a defense to enforcement of the agreement, the trial court has no discretion but to compel arbitration and stay the suit. Richmont Holdings v. Superior Recharge Sys., 392 S.W.3d 633, 635 (Tex. 2013) (per curiam).

MacDonald did not dispute the validity of the contract or its arbitration clause in the trial court. Nor has it filed an appellate brief or a response to CRS's petition for mandamus relief. Accordingly, the arbitration clause's validity is undisputed.

The dispositive issue, therefore, is whether MacDonald's claims are within the scope of the contract's arbitration clause. We hold that they are.

The contract specified the products that MacDonald was entitled to market and sell, commercial ones. It disallowed MacDonald from marketing or soliciting orders for any other products unless mutually agreed upon in writing. It provided that CRS retained sole and exclusive ownership of all product designs and modifications and that technical information or plans used or prepared by MacDonald remained the sole property of CRS. It included a merger clause, which provided that the contract was the entire agreement and superseded and replaced any other understandings or agreements. It also provided that its terms could only be amended or modified by an agreement in writing signed by representatives of the parties.

In addition, the contract had an arbitration clause. Setting aside an inapplicable exception, this clause specified that all claims, disputes, and matters arising out of or relating to the contract or its breach must be arbitrated. An arbitration clause that covers any dispute arising out of or relating to the parties' contract is expansive in scope and encompasses any controversy between the parties that touches on, has a significant relationship to, is inextricably enmeshed with, or is factually intertwined with the contract regardless of any label applied to the controversy. See Houston Progressive, 474 S.W.3d at 447-48; FD Frontier, 438 S.W.3d at 695; Hou-Scape, Inc. v. Lloyd, 945 S.W.2d 202, 205-06 (Tex. App.-Houston [1st Dist.] 1997, orig. proceeding) (per curiam). Its reach therefore is not limited to claims that literally arise under the contract's terms. E.g., Hou-Scape, 945 S.W.2d at 206 (claims for deceptive trade practices, fraudulent inducement, negligence, defamation, and tortious interference with business relations all held to be within scope of broad arbitration clause).

Focusing on MacDonald's factual allegations, its claims are within the expansive scope of the arbitration clause. MacDonald acknowledged that it sold CRS's products under contract. It alleged that it made an additional agreement with CRS to sell a new design that incorporated an existing CRS product. It sued to recover the profit it contended it should have received from the sales of this new design.

When CRS moved to compel arbitration of these claims, MacDonald contended that its claims were outside of the arbitration clause's scope because the contract only concerned commercial products and the parties' dispute concerned a residential product. In part, MacDonald relied on a letter predating the parties' contract in which CRS authorized MacDonald to sell residential products. This purported distinction between commercial and residential products, however, merely confirms that MacDonald's claims are factually intertwined with and relate to the parties' contract. That contract postdated the letter in question by several months, contained a merger clause, and expressly forbade MacDonald from selling or soliciting orders for products other than those specified in the contract, which was limited to commercial products. Whatever rights MacDonald may have with respect to the newly designed residential product are therefore inextricably enmeshed with the contract and subject to its mandatory arbitration clause.

In sum, we hold that the evidence shows the existence of a valid, enforceable arbitration agreement between CRS and MacDonald and that the agreement encompasses MacDonald's claims in this suit. Given that MacDonald has not proven a defense to the enforcement of the agreement, the trial court had no discretion but to compel arbitration of MacDonald's claims and stay this suit. Richmont Holdings, 392 S.W.3d at 635. Accordingly, we reverse the trial court's ordering denying CRS's motion to compel arbitration and remand for entry of an order compelling arbitration and staying the suit pending arbitration of MacDonald's claims.

Petition for Writ of Mandamus

Because MacDonald's claims are subject to arbitration by means of CRS's interlocutory appeal, we need not address CRS's related petition for writ of mandamus. See Royston, Rayzor, Vickery & Williams, LLP v. Lopez, 467 S.W.3d 494, 499 (Tex. 2015). Thus, we dismiss CRS's petition as moot. See Houston Progressive, 474 S.W.3d at 439, 451.

Conclusion

We conclude that the trial court abused its discretion by denying CRS's motion to compel arbitration. We therefore reverse the trial court's order denying the motion, remand this cause to the trial court so that it can enter an order compelling arbitration and staying this suit pending arbitration, and dismiss CRS's related petition for writ of mandamus as moot. 

Houston appeals court vacates arbitration award worth more than $6 million

First Court of Appeals, in an opinion authored by Justice Terry Jennings, holds that arbitor exceeded his authority by entering an award on a matter not submitted to him, and not part of the parties' arbitration agreement. Reverses trial court's confirmation of award. Burlington Resources Oil & Gas Company LP v. San Juan Basin Royalty Trust, No. (Tex.App.- Houston [1st Dist.] Aug. 16, 2007)(Opinion by Justice Jennings)(arbitration award set aside)(Before Justices Nuchia, Jennings and Higley) Appeal from 281st District Court of Harris County (Judge David J. Bernal) OPINION Appellant, Burlington Resources Oil & Gas Company LP ("Burlington"), challenges the trial court's judgment rendered in favor of appellee, San Juan Basin Royalty Trust (the "Trust"), confirming a portion of an arbitration award in favor of the Trust and ordering that the Trust recover from Burlington damages in the amount of $6,019,370, plus interest, for a total disputed award of $6,243,990. In its first issue, Burlington contends that the parties did not agree, by clear and unmistakable language, to submit questions regarding the scope of arbitrable issues to the arbitrator. In its second issue, Burlington contends that "construing the scope of the arbitration agreement de novo," the parties' dispute is not within the scope of the arbitration agreement. We reverse and render in part and remand in part. Factual and Procedural Background Burlington (1) owns and operates several oil and gas properties in New Mexico. The Trust holds a net overriding royalty interest in those properties and, pursuant to the terms of a "Conveyance," is entitled to receive a 75% interest in the net proceeds from those properties. (2) Burlington is required by the Conveyance to issue quarterly accounting statements to the Trust, and the Trust has 180 days to except to those statements. In October 2004, in order to resolve a number of specific existing "audit disputes," the parties entered into an "Agreement Dealing with the Resolution of Existing Audit Disputes" (the "Arbitration Agreement"). However, the parties ultimately disagreed regarding the abitrability of one of the Trust's claims ruled upon by the arbitrator. After the arbitrator ruled in favor of the Trust on this claim, Burlington filed its application to vacate, modify, or correct the arbitration award. The parties' dispute relevant to this appeal originates from Burlington's entry into a settlement agreement in 1990 with the Gas Company of New Mexico ("GCNM") to resolve litigation involving properties covered by the Conveyance (the "GCNM settlement agreement"). Pursuant to the terms of the GCNM settlement agreement, Burlington received $54.5 million in settlement payments. At that time, Burlington allocated $6.7 million of those proceeds to take-or-pay claims, $21 million to past-pricing claims, and $26.8 million to future-pricing claims. In accordance with the terms of the Conveyance, in calculating the amount of the GCNM settlement proceeds owed to the Trust for its net overriding royalty interest, Burlington did not include the $6.7 million allocated to the take-or-pay claims. As the Trust notes, however, the Trust also was not burdened with a charge for any royalty payments due to other royalty owners on that portion of the GCNM settlement. At that time, the Trust did not challenge Burlington's allocation of the GCNM settlement proceeds or Burlington's exclusion of the $6.7 million portion of the settlement in calculating the amounts owed to the Trust. In 2001, Burlington entered into a settlement agreement with the Minerals Management Service of the United States Department of Interior ("MMS") and the Jicarilla Apache Indian Nation ("Jicarilla"), other royalty interest holders in properties covered by the Conveyance (the "MMS/Jicarilla settlement"). Burlington, MMS, and Jicarilla entered into the MMS/Jicarilla settlement in order to resolve MMS's and Jicarilla's complaints regarding the amount of royalty payments due and owing to them from the proceeds of the GCNM settlement. The Trust asserts that as part of its MMS/Jicarilla settlement, Burlington agreed to pay MMS and Jicarilla royalties on the $6.7 million portion of the GCNM settlement that had been originally allocated to "non-royalty-bearing take-or-pay claims." Burlington disputes the Trust's claim and asserts, to the contrary, that MMS and Jicarilla expressly acknowledged that they were not entitled to royalty payments on the $6.7 million portion of the GCNM settlement. Although the parties disagree as to the whether MMS and Jicarilla received royalty payments on the $6.7 million portion of the GCNM settlement, the Trust asserts that, following the MMS/Jicarilla settlement, Burlington erroneously charged the Trust with its 75% share of the MMS/Jicarilla settlement payment by deducting this charge from the amount of proceeds due to the Trust for its net overriding royalty interest on the properties. The Trust complained that the charge assessed against it by Burlington had been calculated based on the full amount of the MMS/Jicarilla settlement, including the $6.7 million originally allocated to take-or-pay claims. The parties entered into the Arbitration Agreement to settle this "audit dispute" and a number of other existing audit disputes, many of which are not relevant to this appeal. The Arbitration Agreement, our focus in resolving the parties' dispute, states, in relevant part, 3. Exhibit "C" attached hereto identifies audit exceptions that the parties have identified for submission to binding arbitration pursuant to the procedures set forth hereafter. . . . [T]he exceptions identified in Exhibit "C" constitute the only items that will be subjected to arbitration. 4. Arbitration Agreement The existing audit disputes described on attached Exhibit "C," . . . shall be finally settled by arbitration pursuant to the provisions hereof. This agreement to arbitrate applies only to the audit disputes identified on Exhibit "C" . . . all of which shall be collectively referred to as the "Audit Disputes." (a) The Audit Disputes shall be heard and determined by one Arbitrator. . . . . (b) The proceeding shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, unless otherwise specified herein. . . . In the event of a conflict between such Commercial Arbitration Rules and this Agreement, this Agreement shall control. (Emphasis added). Exhibit C, attached to the Arbitration Agreement, lists a number of audit disputes, and, as Burlington emphasizes, includes a column entitled "Arbitrate Amount," which details specific amounts at issue for each of the identified audit disputes. On the first page of Exhibit C, the sum total "arbitrate amount" for all of the audit disputes listed in Exhibit C, including many of which that are not relevant to the underlying award or this appeal, is identified as $1,528,223. In fact, among the numerous audit disputes identified on Exhibit C, only two specific disputes are relevant to this appeal, and the total "arbitrate amount" for these two disputes is identified as $374,978. The parties identified the first dispute as "Gross Proceeds under stated due to excess royalties charged from MMS/Jicarilla settlement," and the total arbitrate amount for that dispute is identified as $342,477. The parties labeled their second dispute as "Interest Overcharged on MMS/Jicarilla Settlement," and the total arbitrate amount for that dispute is identified as $32,501. There is no mention of the GCNM settlement or any audit issues specifically relating to the GCNM settlement anywhere in the Arbitration Agreement or Exhibit C. At the conclusion of the arbitration, the arbitrator entered an arbitration award in favor of the Trust, including an award of over $6 million on the two relevant audit disputes for the Trust's "75% share of additional gross proceeds resulting from the reallocation of $6.7 million [of the 1990 GCNM settlement] to past pricing." In its award, the arbitrator conceded that Burlington had objected to consideration of the Trust's claim for its share of the $6.7 million in reallocated proceeds. However, the arbitrator determined that it had jurisdiction to decide its "own jurisdiction" pursuant to the terms of the Arbitration Agreement, which provided that the arbitration would be conducted "in accordance with the Commercial Arbitration Rules of the American Arbitration Association unless otherwise specificed." The arbitrator then cited in his opinion Rule 7(a) of the Commercial Rules, which provides, "The Arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the Arbitration Agreement." Commercial Rules of the American Arbitration Association, Rule 7(a). After determining that it had the power to decide arbitrability, the arbitrator concluded that "the Trust's claim to its proportionate share of the $6.7 million proceeds [from the 1990 GCNM settlement] is within the scope of the Arbitration Agreement." The arbitrator contended that Exhibit C identified "an exception related to the MMS/Jicarilla settlement" and that the Trust's claim arose from Burlington's charging the Trust for additional royalty payments Burlington made to Jicarilla and MMS to settle their claims even though Burlington had not shared the $6.7 million portion on which the additional royalty payments had been calculated. Based on this, the arbitrator stated, From the testimony and documents attached to the Arbitration Agreement, it is clear that the dispute between the parties over the MMS/Jicarilla [settlement] flows directly from Burlington's charge of royalty on the $6.7 million initially attributed to take-or-pay. The arbitrator further concluded that there was a "nexus between the royalty charge and the excluded $6.7 million" and that "an adjustment to gross proceeds to include the Trust's proportionate share of the $6.7 million on which it has been charged royalty is an arbitrable claim." After determining the scope of its jurisdiction, the arbitrator stated that "[b]y making this reallocation, Burlington characterized the entire $54.5 million GCNM settlement proceeds (including the $6.7 million Burlington originally allocated to take-or-pay) as past pricing in which the Trust is entitled to share." Thus, the arbitrator ruled that the Trust was entitled to a 75% share of additional gross proceeds from the reallocation of the $6.7 million to past-pricing claims. Following arbitration, Burlington filed an application to vacate or modify the arbitration award. See 9 U.S.C. §§ 10, 11; see also Tex. Civ. Prac. & Rem. Code Ann. §§ 171.088(a)(3)(A), 171.091(a)(2) (Vernon 2005). In its application, Burlington asserted that, in awarding the Trust $6,243,990 on its claim for a portion of the allegedly reallocated proceeds from the 1990 GCNM settlement (referred to in the arbitration award as "MMS/Jicarilla--Case A"), the arbitrator rendered an award on a matter not submitted to him and thereby exceeded his powers. Burlington asserted that this portion of the arbitration award should be modified, corrected, or vacated. Burlington also asserted a claim for breach of the Arbitration Agreement on the ground that the Trust's attempt to assert a claim for a portion of the GCNM settlement, i.e., its newly crafted MMS/Jicarilla--Case A, violated the agreement and caused it to incur substantial unnecessary expenses in defending the arbitration and pursuing relief in the trial court. The Trust filed a counterclaim for confirmation of the arbitration award. The trial court rendered judgment in favor of the Trust, denying Burlington's application and granting the Trust's application to confirm the arbitration award. The trial court denied all other requested relief, including Burlington's claim for breach of the Arbitration Agreement. Arbitrability In its first issue, Burlington argues that the parties did not agree, by clear and unmistakable language, to submit questions regarding the scope of arbitrable issues to the arbitrator because the Arbitration Agreement itself "carefully limited the scope of arbitration to identified audit disputes" and "withheld from the arbitrator [the] power to decide any additional questions, including the question of arbitrability." The Trust counters that the parties' incorporation of the American Arbitration Association ("AAA") rules clearly and unmistakably granted the arbitrator the power to determine Burlington's objection to the scope of the arbitration. In First Options of Chicago, Inc. v. Kaplan, the United States Supreme Court stated that "[w]hen deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally [] should apply ordinary state-law principles that govern the formation of contracts," with the qualification that, "when courts decide whether a party has agreed that arbitrators should decide arbitrability," courts "should not assume that the parties agreed to arbitrate arbitrability unless there is 'clea[r] and unmistakabl[e]' evidence that they did so." 514 U.S. 938, 944, 115 S. Ct. 1920, 1924 (1995) (citations omitted). The Supreme Court noted that "the law treats silence or ambiguity about the question 'who (primarily) should decide arbitrability' differently from the way it treats silence or ambiguity about the question 'whether a particular merits-related dispute is arbitrable because it is within the scope of a valid arbitration agreement'" so as to not "force unwilling parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would decide." Id., 514 U.S. at 944-45, 115 S. Ct. at 1924-25; see also Gen. Motors Corp. v. Pamela Equities Corp., 146 F.3d 242, 249 (5th Cir. 1998) ("[W]hen a party to a dispute contends that he and the other disputant agreed to submit . . . the question of whether that arbitrator had authority to arbitrate their dispute, that party must bear the burden of demonstrating clearly and unmistakably that the parties agreed to have the arbitrator decide that threshold question of arbitrability."); In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) ("[A]bsent unmistakable evidence that the parties intended the contrary, it is the courts rather than the arbitrators that must decide 'gateway matters' such as whether a valid arbitration agreement exists. Whether an arbitration agreement is binding on a nonparty is one of those gateway matters."); In re Ford Motor Co., 220 S.W.3d 21, 23 (Tex. App.--San Antonio 2006, no pet.) (same). Paragraphs 3 and 4 of the Arbitration Agreement expressly state that the audit exceptions identified in Exhibit C "constitute the only items that will be subjected to arbitration" and that the Arbitration Agreement "applies only to the audit disputes identified on Exhibit C." Here, there is no clear and unmistakable statement in the Arbitration Agreement that matters of arbitrability will be submitted to an arbitrator. In fact, Burlington and the Trust purposefully drafted an Arbitration Agreement of very narrow scope. Although, as the Trust emphasizes, the Arbitration Agreement generally provides that the proceeding "shall be conducted in accordance with the Commercial Arbitration Rules of the [AAA], unless otherwise specified herein," the Arbitration Agreement further provides that the terms of the Arbitration Agreement control in the event of any conflict with the rules. We conclude that there is no conflict because the parties, in their Arbitration Agreement, unambiguously detailed the specific subjects and amounts subject to arbitration, and arbitrability was not one of those matters. Even if we were to conclude, based, in part, on the authority cited below, that some ambiguity was created by the parties' reference to the AAA rules, the parties simply did not clearly and unmistakably submit the issue of arbitrability to arbitration. We recognize that Rule 7(a) of the Commercial Arbitration Rules of the AAA grants an arbitrator "the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the Arbitration Agreement." Commercial Rules of the American Arbitration Association, Rule 7(a). We further recognize that, "[a]lthough the United States Court of Appeals for the Fifth Circuit has not addressed the effect of a reference to AAA Rules contained in an arbitration clause," (3) other courts have generally concluded that an arbitration agreement's incorporation of rules empowering an arbitrator to decide arbitrability clearly and unmistakably evidences the parties' intent to allow the arbitrator to decide issues of arbitrability. See, e.g., Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1372-73 (Fed. Cir. 2006) (concluding that agreement's incorporation of AAA rules clearly and unmistakably showed parties' intent to delegate issue of determining arbitrability to arbitrator); Terminix Int'l Co., LP v. Palmer Ranch Ltd. P'ship, 432 F.3d 1327, 1332-33 (11th Cir. 2005) (holding that by incorporating AAA Rules into arbitration agreement, parties clearly and unmistakably agreed that arbitrator should decide whether arbitration clause was valid); Contec Corp. v. Remote Solution, Co., 398 F.3d 205, 208 (2d Cir. 2005) ("[W]hen . . . parties explicitly incorporate rules that empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties' intent to delegate such issues to an arbitrator."); Citifinancial, Inc. v. Newton, 359 F. Supp. 2d 545, 549-52 (S.D. Miss. 2005) (holding that by agreeing to be bound by procedural rules of AAA, including rule giving arbitrator power to rule on his or her own jurisdiction, defendant agreed to arbitrate questions of jurisdiction before arbitrator); Sleeper Farms v. Agway, Inc., 211 F. Supp. 2d 197, 200 (D. Me. 2002) (holding arbitration clause stating that arbitration shall proceed according to rules of AAA provides clear and unmistakable delegation of scope-determining authority to arbitrator). We are also mindful that, in certain circumstances, the incorporation of AAA rules may constitute clear and unmistakable evidence of an intent to allow an arbitrator to decide issues of arbitrability. However, we conclude, based on the express terms of the Arbitration Agreement before us, that the agreement's mere reference to the AAA's rules does not provide clear and unmistakable evidence of the parties' delegation of issues of arbitrabilty to an arbitrator. In determining whether an agreement provides clear and unmistakable language of such delegation, we consider the specific language of the Arbitration Agreement. See Kaplan, 514 U.S. at 944, 115 S. Ct. at 1924 ("When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally [] should apply ordinary state-law principles that govern the formation of contracts."). We also apply general principles of Texas contract law governing the formation of contracts. See In re Dillard Dep't Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006) (stating that ordinary principles of "[c]ontract law determine[] the validity of arbitration agreements," a "trial court's determination of an arbitration agreement's validity is a legal question," and "[t]he objective intent as expressed in the agreement controls the construction of an unambiguous contract"). Here, the Arbitration Agreement restricted the arbitrator's reach only to specifically identified "audit disputes," and for specific amounts. There is not a clear and unmistakable indication that the parties authorized an arbitrator to decide the arbitrability of claims or amounts not specifically identified in the Arbitration Agreement. Moreover, the agreement provided that to the extent there was any conflict between the parties' agreement and the AAA rules, any such conflict would be resolved in favor of the agreement. Although not directly on point, we note that the San Antonio Court of Appeals has recently concluded that an arbitration agreement providing for any dispute to be settled "in accordance with the rules and procedures of the AAA" did not contain unmistakable evidence that the parties intended for an arbitrator to decide whether nonparties were bound by the arbitration agreement. In re Ford Motor Co., 220 S.W.3d at 23-24. In so holding, the court highlighted "the established Texas law [of] placing the initial burden of proving the existence of a valid arbitration agreement and claims within the scope of that agreement on the party seeking to compel arbitration." Id. We also find the opinion of the United States Court of Appeals for the Second Circuit in Katz v. Feinberg helpful to our analysis. See 290 F.3d 95 (2d Cir. 2002). In Katz, the court found that the parties did not agree to arbitrate questions of arbitrability. Id. at 96-97. The Katz court recognized that a "broadly worded arbitration clause committing resolution of all disputes to arbitration" would satisfy the clear and unmistakable standard. Id. at 97. However, the court could not conclude that "where a single agreement contains both a broadly worded arbitration clause and a specific clause assigning a certain decision to an independent accountant, that the parties intention to arbitrate questions of arbitrability under the broad clause remains clear." Id. Similarly, in James & Jackson, LLC v. Willie Gary, LLC, the Delaware Supreme Court court recognized the "majority view" that an arbitration agreement's reference to AAA rules might provide clear and unmistakable evidence of the parties' intent to have an arbitrator determine arbitrability. 906 A.2d 76, 78, 80 (Del. 2006). However, the court stated that the majority view did not "mandate that arbitrators decide arbitrability in all cases where an arbitration clause incorporates the AAA rules." Id. at 80. Rather, the court stated, the majority view "applies in those cases where the arbitration clause generally provides for arbitration of all disputes and also incorporates a set of arbitration rules that empower arbitrators to decide arbitrability." Id. The court noted that although the arbitration agreement before it required arbitration of "any controversy arising out of or related to [the agreement]," it also expressly authorized the non-breaching parties to obtain some limited types of relief in the courts. Id. at 81. Thus, the court concluded, "despite the broad language" at the outset of the arbitration agreement and the reference in the agreement to the AAA rules, that "[s]ince this arbitration clause does not generally refer all controversies to arbitration, the federal majority rule does not apply, and something other than the incorporation of the AAA rules would be needed to establish that the parties intended to submit arbitrability questions to an arbitrator." Id. We recognize that the arbitration agreements in both Katz and James & Jackson, LLC are quite different than the Arbitration Agreement before us. For example, the Arbitration Agreement here does not contain any provisions assigning decision-making authority on the specifically identified existing audit disputes to anyone other than the arbitrator. However, both Katz and James & Jackson, LLC illustrate the application of the principle that a court must carefully consider the language of the specific arbitration agreement before it in determining whether the parties have clearly and unmistakably ceded authority to decide matters of abitrabilty to an arbitrator. See id.; Katz, 290 F.3d at 97. A court should not blindly apply the majority view regarding the effect of mere reference to AAA rules and ignore the "clear and unmistakable standard" set forth by the Supreme Court in Kaplan. See Kaplan, 514 U.S. at 944, 115 S. Ct. at 1924. Accordingly, we hold that Burlington and the Trust did not agree in the Arbitration Agreement, by clear and unmistakable language, to submit questions regarding the scope of arbitrable issues to the arbitrator. See id., 514 U.S. at 942-44, 115 S. Ct. at 1923-25. We sustain Burlington's first issue. Scope of Arbitration Agreement In its second issue, Burlington argues that "construing the scope of the arbitration agreement de novo," the Trust's claim for its "75% share of additional gross proceeds resulting from the reallocation of $6.7 million to past pricing" is not within the scope of the Arbitration Agreement. (4) Burlington asserts that the audit disputes identified in Exhibit C to the Arbitration Agreement confirm that (1) the parties agreed to arbitrate only the Trust's complaint that its "gross proceeds were understated due to excess royalties" charged against it based on the full value of the GCNM settlement and (2) the Trust's claim for a 75% share of the $6.7 million portion of the allegedly reallocated GCNM settlement proceeds was never contemplated by the parties to be an arbitrable claim. Rather, Burlington complains that the Trust asserted this new claim only after the commencement of arbitration. Burlington notes that the expressly stated subject matter of the first audit dispute was that Burlington, "in adjusting gross proceeds to reflect the MMS/Jicarilla settlement[,] . . . improperly deducted royalties paid supposedly on account of the $6.7 million in take-or-pay claims not covered by the Conveyance." In fact, the dispute to be arbitrated arose from the Trust's allegation that the MMS/Jicarilla settlement was based upon the full amount of the GCNM settlement, including the $6.7 million take-or-pay portion, that 12.3% of the MMS/Jicarilla settlement, or approximately $500,000, was allocable to production in which the Trust had no interest, and that the Trust should not have been charged for 75% of those payments. Moreover, the Trust's complaint about the second audit dispute simply concerned its claim for interest on the amount at issue in the first audit dispute. In spite of these specifically identified and narrowly limited audit disputes, the arbitrator ruled on a claim by the Trust that its "gross proceeds were understated, not due to the deduction or charge of royalties paid to MMS and the Jicarilla tribe, but, instead, due to the exclusion of $6.7 million of receipts under gas purchase contracts in the GCNM settlement that [Burlington] has attributed to take-or-pay obligations." Yet, as Burlington highlights, there is absolutely no mention of the GCNM settlement in Exhibit C, nor is there any suggestion that the Trust would be seeking to recover in arbitration approximately $6 million based on its theory that Burlington had reallocated funds from its 1990 settlement. Burlington argues that "the sheer numbers involved" in the Trust's newly asserted claim preclude it "from being shoehorned into the 'excess royalties' concept" identified in Exhibit C. The Trust, on the other hand, asserts that the audit disputes describe its complaint that Burlington had charged it with excess royalties relating to Burlington's reallocation of the $6.7 million in take-or-pay claims without sharing those proceeds with the Trust. The Trust notes that, despite the specific arbitrate amounts, Exhibit C states that "[a]ll amounts stated are subject to change." The Trust asserts that this language justifies the arbitration award of over $6 million, even though the relevant "arbitrate amount" for the two audit disputes was $374,978. The Trust, as additional support for its claim for a 75% share of the full value of the GCNM settlement, cites a November 1, 2002 letter from it to Burlington stating, The Trust was not paid any royalties on the take-or-pay settlement [of 6.7 million]. The Trust did not pursue a claim for royalties on that amount, and does not now want to be assessed any portion of the current settlement which is attributable to royalties which should have been paid to the MMS or Jicarillas on the take-or-pay portion because the Trust did not share in the economic benefits attributable to the take-or-pay settlement in 1990. If the "major portion" settlement took into account the take-or-pay claim, the amount allocated to the Trust should be reduced . . . If instead the 1990 settlement was "reallocated" such that more or all of the amount received by Burlington's successor [sic] was treated as "past pricing" or "contract buyout," then the Trust is entitled to 75% net overriding royalty interest on the 6.7 [million] no longer allocable to take-or-pay. Based on this letter, the Trust asserts that it "made clear" throughout its dispute "its complaint that Burlington improperly had charged the Trust with royalty on settlement proceeds without sharing those proceeds with the Trust" and "the alternative remedies that it was seeking . . . [to] either eliminate the charge to the Trust of the royalties on the proceeds or give the Trust its share of the proceeds." The Supreme Court stated in Kaplan that if "the parties did not agree to submit the arbitrability question itself to arbitration, then the court should decide that question just as it would decide any other question that the parties did not submit to arbitration, namely, independently." Kaplan, 514 U.S. at 943, 115 S. Ct. at 1923-24. The Federal Arbitration Act provides that a court may vacate an arbitration award "where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made" and may modify or correct an arbitration award "[w]here the arbitrators have awarded upon a matter not submitted to them." 9 U.S.C. §§ 10, 11; see also Tex. Civ. Prac. & Rem. Code Ann. §§ 171.088(a)(3)(A) (providing that court shall vacate award if arbitrators exceed their powers), 171.091(a)(2) (providing that court shall modify or correct award if "the arbitrators have made an award with respect to a matter not submitted to them and the award may be corrected without affecting the merits of the decision made with respect to the issues that were submitted"). In reviewing the arbitrator's decision independently, we recognize the strong presumption under the Federal Arbitration Act of favoring arbitration. See In re D. Wilson Constr. Co., 196 S.W.3d 774, 782-83 (Tex. 2006). Furthermore, we note that any doubt as to whether a party's claim falls within the scope of an arbitration agreement must be resolved in favor of arbitration. Id. Also, a court should not deny arbitration unless it can be said with positive assurance that an arbitration clause is not susceptible to an interpretation that would cover the dispute at issue. Id.; see also In re Dillard Dept. Stores, Inc., 186 S.W.3d at 516. Of course, "the policy that favors resolving doubts in favor of arbitration cannot serve to stretch a contractual clause beyond the scope intended by the parties or authorize an arbiter to disregard or modify the plain and unambiguous provisions of the agreement." Smith v. Transp. Workers Union of Am., AFL-CIO Air Transp. Local 556, 374 F.3d 372, 375 (5th Cir. 2004) (citations omitted); see also Belmont Constructors, Inc. v. Lyondell Petrochemical Co., 896 S.W.2d 352, 356 (Tex. App.--Houston [1st Dist.] 1995, no writ) (stating that "federal policy of resolving doubts in favor of arbitration" cannot stretch contractual clause beyond scope intended or allow modification of plain and unambiguous provisions). With these principles in mind, and reviewing the arbitrator's decision independently, we conclude that the relevant audit disputes describing the Trust's complaint about its understated gross proceeds due to Burlington's charge of excess royalties from the MMS/Jicarilla settlement is not susceptible to an interpretation for an alternative claim by the Trust for a 75% interest in the allegedly reallocated proceeds of $6.7 million portion of the 1990 GCNM settlement. We can say, with positive assurance, that by making a claim for reallocated proceeds from the 1990 GCNM settlement, the Trust was making a separate and new claim rather than a claim covered by the "audit disputes" contemplated by the parties in the Arbitration Agreement. The inescapable fact is that the Arbitration Agreement provided specific "arbitrate amounts" for each of the identified audit disputes, and the amount ultimately awarded by the arbitrator on the Trust's newly asserted claim greatly exceeded, beyond any amount that could have reasonably been contemplated by the parties, the amounts identified in the Arbitration Agreement. As the Trust points out, the Arbitration Agreement did provide that the arbitrate amounts were "subject to change"; however, the inclusion of this language cannot justify the assertion of a wholly separate claim. Again, the 1990 GCNM settlement is not mentioned in the Arbitration Agreement. Allowing the Trust to assert a claim for over $6 million shortly after executing an agreement identifying the arbitration amounts for the relevant audit disputes to be approximately $375,000 stretches the Arbitration Agreement beyond its breaking point. Had the parties intended to arbitrate the Trust's claim for reallocated proceeds from the 1990 GCNM settlement, the parties could have included a reference to this settlement in the Arbitration Agreement and stated the appropriate arbitrate amount. The Trust contends, in post-submission briefing, that "the parties were not required to include in Exhibit C all sub-issues entailed within that general description of the dispute and the alternative remedies to which the Trust might be entitled, depending on facts that were solely within the control of Burlington and which became known to the Trust only following discovery undertaken in the course of arbitration proceedings." First, one cannot reasonably conclude that a claim for over $6 million for allegedly reallocated proceeds from the 1990 GCNM settlement qualifies as a "sub-issue" of a specific "audit dispute" over understated gross proceeds in the amount of $374,978. Second, the Trust's admission that it did not learn of the underlying facts supporting its newly asserted claim until after the commencement of arbitration establishes that such a claim was not one of the "existing" audit disputes between the parties to be resolved by the Arbitration Agreement. Finally, we cannot, as suggested by the Trust, rely on its November 2002 letter as "clearly" putting Burlington "on notice of the Trust's position" that it was always seeking alternative remedies. Rather, the unambiguous provisions of the Arbitration Agreement, setting forth detailed descriptions of the relevant audit disputes and the associated arbitrate amounts, control our inquiry. See In re Dillard Dept. Stores, Inc.,186 S.W.3d at 515 (stating that "[t]he objective intent as expressed in the agreement controls the construction of an unambiguous contract"). In sum, the Arbitration Agreement cannot reasonably be interpreted as authorizing the Trust's claim for its 75% share of the full value of the 1990 GCNM settlement proceeds. Accordingly, we hold that the Trust's claim was "clearly beyond the agreed scope of the arbitration," the arbitrator exceeded his powers in ruling on the Trust's claim, and the arbitrator entered an award on a matter not properly submitted to him. We further hold that the trial court erred in confirming the arbitration award. We sustain Burlington's second issue. Conclusion We reverse the portion of the trial court's judgment confirming the portion of the arbitration award awarding the Trust $6,243,990 (labeled in the arbitration award as "MMS/Jicarilla-Case A"), vacate that portion of the arbitration award, and modify the award to reflect that this award has been vacated. We render a take-nothing judgment in Burlington's favor on the Trust's claim giving rise to the arbitration award of $6,243,990. We also reverse the portion of the trial court's judgment denying Burlington's claim for breach of the Arbitration Agreement, and we remand for further proceedings consistent with this opinion. Terry Jennings Justice Panel consists of Justices Nuchia, Jennings, and Higley. 1. To avoid confusion, we make no distinction between Burlington and its predecessor, Southland Royalty Company ("Southland"). 2. The Trust explains that "[t]he overriding royalty interest is a 'net' interest, in the sense that Burlington, in calculating the payments to which the Trust is entitled, includes certain revenues (including proceeds from the sale of production from the properties) and certain expenses incurred in the operation of the properties (including royalties on production paid to royalty owners holding royalty interests in the properties)." 3. Citifinancial, Inc. v. Newton, 359 F. Supp. 2d 545, 551 (S.D. Miss. 2005). 4. Having held that the Arbitration Agreement does not clearly and unmistakably evidence the parties' intent to delegate the issue of determining arbitrability to the arbitrator, we need not consider Burlington's alternative contention in its second issue that even if the arbitrator is afforded "considerable leeway" in construing the scope of the arbitration agreement, the parties' dispute is "clearly beyond the agreed scope of the arbitration." See Kaplan, 514 U.S. at 943, 115 S. Ct. at 1923-24.

In re D. Wilson Constr. Co., 196 S.W.3d 774 (Tex. 2006)

In re D. Wilson Construction Co., No. 05-0326, Jun. 30, 2006)(Willett)(arbitration mandamus, construction contracts, interlocutory appeal, ILA) In re D. Wilson Construction Company, et al., Relators ══════════════════════ On Petition for Writ of Mandamus ══════════════════════ consolidated with American Standard and the Trane Company, et al. v. Brownsville Independent School District, No. 05-0327 (Tex. Jun. 30, 2006)(Willett) (On Petition for Review from the Court of Appeals for the Thirteenth District of Texas) Justice Willett delivered the opinion of the Court, in which Chief Justice Jefferson, Justice Hecht, Justice O’Neill, Justice Wainwright, Justice Medina, Justice Green, and Justice Johnson joined. Justice Brister filed a concurring opinion. In this consolidated proceeding, we decide whether the court of appeals had jurisdiction over an interlocutory appeal under the Texas Arbitration Act and whether the parties’ arbitration agreements are ambiguous. We hold that the court of appeals had jurisdiction over the interlocutory appeal and that the agreements are not ambiguous. I. Background In 1993, the Brownsville Independent School District contracted with two general contractors, D. Wilson Construction Company and Stotler Construction Company, to build two schools in Brownsville. Both contracts incorporate General Conditions and Supplementary Conditions. The General Conditions expressly incorporate AIA Document A201, a standard construction industry document published by the American Institute of Architects that details the parties’ respective rights, responsibilities and relationships on the project.[1] Paragraph 4.5 of A201 is titled “Arbitration,” and subparagraph 4.5.1, titled “Controversies and Claims Subject to Arbitration,” sets forth the broad, catch-all scope of the arbitration agreement: “Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association . . . .” The Supplementary Conditions state that they “modify, change, delete from or add to” the General Conditions. Among other things, the Supplementary Conditions “[a]dd new Clause 4.5.1.1” to the arbitration provision: “Except as otherwise provided in this Contract, any dispute concerning a question of fact arising under this contract, which is not disposed of by agreement shall be decided by [BISD] . . . . The decision of [BISD] shall be final and conclusive unless” it is timely appealed to the Superintendent and then to the BISD Board of Trustees, “whose decision shall be final and conclusive.” This litigation began when one of the subcontractors, American Standard and the Trane Company (Trane), sought injunctive relief against BISD to preserve evidence in a personal injury action that students and teachers brought against Trane in another court. BISD counterclaimed for alleged defects in the construction of the two schools and filed third-party actions against several parties, including general contractors Wilson and Stotler, as well as subcontractors and second-tier subcontractors. Trane and the third-party defendants filed or joined motions to compel arbitration under the Federal Arbitration Act, 9 U.S.C. §§ 1–16, and the Texas Arbitration Act, Tex. Civ. Prac. & Rem. Code §§ 171.001–.098.[2] After a hearing, the trial court issued a brief letter ruling denying arbitration, saying “the Court finds the contract in question ambiguous.” Trane and the third-party defendants filed both a petition for writ of mandamus under the FAA and an interlocutory appeal under the TAA, and the court of appeals consolidated the two proceedings. __ S.W.3d __, __, Nos. 13-04-184-CV, 13-04-333-CV, 2005 WL 310777, at *1 (citing In re Valero Energy Corp., 968 S.W.2d 916, 916–17 (Tex. 1998)). The court of appeals dismissed the interlocutory appeal for want of jurisdiction, finding the TAA inapplicable since the dispute concerned a “‘transaction involving commerce.’“ Id. at __, 2005 WL 310777, at *2 (quoting In re MONY Sec. Corp., 83 S.W.3d 279, 282–83 (Tex. App.—Corpus Christi 2002, consolidated appeal and orig. proceeding). The court also denied the petition for writ of mandamus, holding that clause 4.5.1.1 in the Supplementary Conditions creates ambiguity. Id. at __, 2005 WL 310777, at *3. In this appeal, Trane and the third-party defendants complain that (1) the court of appeals erred in dismissing their interlocutory appeal under the TAA for want of jurisdiction, and (2) the trial court erred in deeming the arbitration agreements ambiguous and abused its discretion in denying their motions to compel arbitration. II. Jurisdiction of the Court of Appeals Trane and the third-party defendants first argue that the court of appeals erred in dismissing their TAA-based interlocutory appeal for want of jurisdiction. We agree.[3] The contracts in question reference neither the FAA nor TAA, merely noting that “[t]he Contracts shall be governed by the law of the place where the Project is located.” We have interpreted identical language to invoke federal and state law. In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127–28 (Tex. 1999) (per curiam) (consolidated appeal and orig. proceeding). Trane and the third-party defendants sought relief under both statutes in the court of appeals, bringing a petition for writ of mandamus under the FAA, see Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272–73 (Tex. 1992), and an interlocutory appeal under the TAA, Tex. Civ. Prac. & Rem. Code § 171.098(a)(1). While refusing jurisdiction under the TAA, the court of appeals recognized that it at least had jurisdiction under the FAA to consider the mandamus petition. __ S.W.3d at __, 2005 WL 310777, at *2. We held in Jack B. Anglin Co. that mandamus is appropriate to review a trial court’s denial of a motion to compel arbitration under the FAA. 842 S.W.2d at 272–73. The court of appeals determined that it lacked jurisdiction over the interlocutory appeal under the TAA because the construction contracts involved interstate commerce, thus implicating the FAA. __ S.W.3d at __, 2005 WL 310777, at *2; see Perry v. Thomas, 482 U.S. 483, 489 (1987) (the FAA applies when the dispute concerns a “contract evidencing interstate commerce”); 9 U.S.C. § 1 (“‘commerce’ . . . means commerce among the several States”); In re L & L Kempwood Assocs., L.P., 9 S.W.3d at 127 (noting that the FAA “extends to any contract affecting commerce, as far as the Commerce Clause of the United States Constitution will reach”). The court of appeals is not alone in dismissing interlocutory appeals under the TAA when the FAA applies. See Kroupa v. Casey, Nos. 01-05-00224-CV, 01-05-00376-CV, 2005 WL 3315279, at *4 (Tex. App.—Houston [1st Dist.] 2005, consolidated appeal and orig. proceeding) (not designated for publication); Am. Med. Tech., Inc. v. Miller, 149 S.W.3d 265, 269–70 (Tex. App.—Houston [14th Dist.] 2004, consolidated appeal and orig. proceeding); Verlander Family Ltd. P’ship v. Verlander, No. 08-02-00135-CV, 2003 WL 304098, at *3 (Tex. App.—El Paso 2003, no pet.); Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 498 (Tex. App.—San Antonio 2000, consolidated appeal and orig. proceeding). Other courts have granted mandamus relief and dismissed the consolidated interlocutory appeal as moot. See, e.g., Kirby Highland Lakes Surgery Ctr., L.L.P. v. Kirby, 183 S.W.3d 891, 895 & n.5 (Tex. App.—Austin 2006, consolidated appeal and orig. proceeding); In re MacGregor (FIN) Oy, 126 S.W.3d 176, 181, 184 (Tex. App.—Houston [1st Dist.] 2003, consolidated appeal and orig. proceeding). We take this opportunity to clarify precisely when the FAA preempts the TAA. Many courts of appeals wrongly view the FAA and TAA as mutually exclusive, but the United States Supreme Court and this Court have held a different view for some time: the FAA only preempts contrary state law, not consonant state law. The United States Supreme Court has said: The FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration. But even when Congress has not completely displaced state regulation in an area, state law may nonetheless be pre-empted to the extent that it actually conflicts with federal law—that is, to the extent that it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” The question before us, therefore, is whether application of [state law] to stay arbitration under this contract in interstate commerce . . . would undermine the goals and policies of the FAA. Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 477–78 (1989) (citations omitted) (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)). Similarly, this Court has noted that the FAA “preempts state statutes to the extent they are inconsistent with that Act.” Jack B. Anglin Co., 842 S.W.2d at 271. Recently, in the case of In re Nexion Health at Humble, Inc., this Court articulated a four-factor test to determine whether the TAA would thwart the goals and policies of the FAA in a particular case. 173 S.W.3d 67, 69 (Tex. 2005) (per curiam) (construing 9 U.S.C. § 2). The FAA only preempts the TAA if: “(1) the agreement is in writing, (2) it involves interstate commerce, (3) it can withstand scrutiny under traditional contract defenses [under state law], and (4) state law affects the enforceability of the agreement.” Id. (emphasis added). In today’s case, the court of appeals ignored the fourth factor. The mere fact that a contract affects interstate commerce, thus triggering the FAA, does not preclude enforcement under the TAA as well. For the FAA to preempt the TAA, state law must refuse to enforce an arbitration agreement that the FAA would enforce, either because (1) the TAA has expressly exempted the agreement from coverage, see Tex. Civ. Prac. & Rem. Code § 171.002(a) (detailing various claims the TAA “does not apply to”), or (2) the TAA has imposed an enforceability requirement not found in the FAA, see In re Nexion Health at Humble, Inc., 173 S.W.3d at 69 (“The TAA interferes with the enforceability of the arbitration agreement by adding an additional requirement—the signature of a party’s counsel—to arbitration agreements in personal injury cases.”). The parties have asserted nothing in the TAA or other state law that would subvert enforcement of the agreements at issue. Therefore, the FAA does not preempt the TAA in this case, and the court of appeals had jurisdiction under both laws.[4] III. Ambiguity of the Arbitration Agreements Trane and the third-party defendants next argue that the trial court wrongly deemed the arbitration agreements ambiguous and abused its discretion in denying their motions to compel arbitration. We decide the merits under our mandamus jurisdiction.[5] Mandamus is proper to correct a clear abuse of discretion when there is no adequate remedy by appeal, Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding), as when a party is erroneously denied its contracted-for arbitration rights under the FAA, Jack B. Anglin Co., 842 S.W.2d at 272–73. Also, a trial court “has no ‘discretion’ in determining what the law is or applying the law to the facts.” Walker, 827 S.W.2d at 840. In evaluating a motion to compel arbitration, a court must determine first whether a valid arbitration agreement exists, and then whether the agreement encompasses the claims raised. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999) (per curiam). When deciding whether the parties agreed to arbitrate under the FAA, courts should apply ordinary state law principles regarding the formation of contracts. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227–28 (Tex. 2003). In a letter ruling, the trial court found “the contract in question ambiguous”; however, the record does not indicate whether the trial court was uncertain as to the agreements’ existence or merely their scope. We address these two issues in turn. A. Ambiguity Concerning the Existence of Valid Agreements Whether a valid arbitration agreement exists is a legal question subject to de novo review. J.M. Davidson, Inc., 128 S.W.3d at 227. Whether contractual ambiguity exists is likewise a question of law. See Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). Inartful drafting does not alone render a contractual provision ambiguous. See Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154, 157 (Tex. 1951). A contract is ambiguous only if it is subject to “two or more reasonable interpretations after applying the pertinent rules of construction.” Columbia Gas Transmission Corp., 940 S.W.2d at 589. Ambiguity does not exist merely because the parties assert forceful and diametrically opposing interpretations. Id. BISD contends that the contracts with Wilson and Stotler (1) contain no arbitration language at all, or (2) contain ambiguous language. The trial court’s three-sentence letter ruling is silent on the first point, while the court of appeals, “[a]ssuming without determining that the contracts contain arbitration language,” concluded that “the supplementary conditions create ambiguity.” __ S.W.3d at __, 2005 WL 310777, at *3. We disagree with BISD that its contracts with Wilson and Stotler contained no arbitration language. The contracts validly and expressly incorporate by reference the expansive arbitration language of subparagraph 4.5.1 of A201. Innumerable contracts are consummated every day in Texas that incorporate other documents by reference. A contractual term is not rendered invalid merely because it exists in a document incorporated by reference, Owen v. Hendricks, 433 S.W.2d 164, 166 (Tex. 1968), and we agree with the courts of appeals that arbitration-related language is no exception to this rule. See, e.g., Teal Constr. Co./Hillside Villas Ltd. v. Darren Casey Interests, Inc., 46 S.W.3d 417, 420 (Tex. App.—Austin 2001, pet. denied) (holding that an unsigned arbitration agreement contained in a document incorporated by reference into the signed contract constitutes an enforceable arbitration agreement); D. Wilson Constr. Co. v. McAllen Indep. Sch. Dist., 848 S.W.2d 226, 230 (Tex. App.—Corpus Christi 1992, writ dism’d w.o.j.) (rejecting the argument that an arbitration agreement incorporated by reference is invalid or unenforceable). Accordingly, we reject BISD’s argument that these provisions were not validly incorporated into the contracts with Wilson and Stotler. We likewise reject BISD’s argument, and the trial court’s holding, that the arbitration agreements are ambiguous. Subparagraph 4.5.1 of A201 states: ”Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association . . . .” The Supplementary Conditions “[a]dd new Clause 4.5.1.1” to the arbitration provision: ”Except as otherwise provided in this Contract, any dispute concerning a question of fact arising under this contract, which is not disposed of by agreement shall be decided by [BISD] . . . . The decision of [BISD] shall be final and conclusive unless” it is timely appealed to the Superintendent and then to the BISD Board of Trustees, “whose decision shall be final and conclusive.” The caption of clause 4.5.1.1 in the Supplementary Conditions evinces the parties’ intent to “[a]dd new Clause 4.5.1.1 to subparagraph 4.5.1.” Clause 4.5.1.1 is added to subparagraph 4.5.1, and the clause’s numerical designation places it beneath subparagraph 4.5.1. In addition, clause 4.5.1.1 begins with the caveat, “[e]xcept as otherwise provided in this Contract.” Subparagraph 4.5.1 does provide otherwise in certain cases. If the parties intended for clause 4.5.1.1 to supplant subparagraph 4.5.1, they could have easily drafted language to accomplish exactly that.[6] Further, clause 4.5.1.1 does not mention the additional arbitration procedures set forth in subparagraphs 4.5.2–4.5.7. If clause 4.5.1.1 negates subparagraph 4.5.1, as BISD contends, then subparagraphs 4.5.2–4.5.7 are meaningless. The placement, caption, and caveat of clause 4.5.1.1, as well as the language of subparagraphs 4.5.2–4.5.7, indicate that the clause is subordinate to subparagraph 4.5.1 if subparagraph 4.5.1 applies in a given situation. BISD argues that such a construction would render clause 4.5.1.1 meaningless. We disagree. By its terms, clause 4.5.1.1 applies to “any dispute concerning a question of fact arising under this contract,” while subparagraph 4.5.1 applies to “[a]ny controversy or Claim arising out of or relating to the Contract, or the breach thereof . . . .” (emphasis added). While the scope of clause 4.5.1.1 is narrower than the scope of subparagraph 4.5.1, certain situations would fall solely under the factual dispute clause. For example, the construction contracts could have called for solid brass doorknobs throughout the schools. BISD could have argued that the doorknobs Wilson and Stotler used were brass-plated instead of solid brass. Whether the doorknobs are solid brass or brass-plated would be a factual dispute subject to clause 4.5.1.1. We hold that the arbitration agreements and clause 4.5.1.1 can be reconciled; the arbitration agreements are not susceptible to more than one reasonable interpretation and are therefore not ambiguous. Columbia Gas Transmission Corp., 940 S.W.2d at 589. B. Ambiguity Concerning the Scope of the Agreements We next consider whether there is ambiguity concerning the agreements’ scope. The strong presumption favoring arbitration generally requires that we resolve doubts as to the scope of the agreements in favor of coverage. In re Kellogg, Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005); In re FirstMerit Bank, 52 S.W.3d 749, 753 (Tex. 2001); Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (per curiam) (orig. proceeding). Once an agreement is established, “a court should not deny arbitration ‘unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue.’” Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995) (per curiam) (orig. proceeding) (emphasis in original) (quoting Neal v. Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990)). Here, BISD claims there are construction defects throughout the two schools. This dispute is a “controversy or Claim arising out of or related to the Contract” to build the schools and thus falls squarely within the scope of the arbitration agreements. We find no ambiguity in either the validity or the scope of these arbitration agreements. Trane and the third-party defendants have proven the existence of valid arbitration agreements that cover the present dispute. In re Oakwood Mobile Homes, Inc., 987 S.W.2d at 573. The trial court abused its discretion by denying the motions to compel arbitration after finding “the contract in question ambiguous.” C. Waiver Finally, BISD argues that Trane and Stotler waived any right to arbitrate. In a personal injury suit filed by students and teachers in a separate court, Trane, Stotler, and Mac’s Insulation, Inc. filed cross-actions against BISD, seeking indemnity in that case. Trane also filed the present suit against BISD to obtain injunctive relief to preserve evidence in that personal injury case. There is a strong presumption against waiver under the FAA. In re Vesta Ins. Group, Inc., __ S.W.3d __, __, 2006 WL 662335, at *2 (Tex. 2006) (per curiam). “Merely taking part in litigation is not enough unless a party ‘has substantially invoked the judicial process to its opponent’s detriment.’” Id. (quoting In re Serv. Corp. Int’l, 85 S.W.3d 171, 174 (Tex. 2002)). In In re Vesta Ins. Group, Inc., we held that the relators, who litigated in the trial court for two years, did not substantially invoke the judicial process to their opponent’s detriment because the relators engaged in minimal discovery, and the real party in interest failed to demonstrate sufficient prejudice to overcome the strong presumption against waiver. Id. at __, 2006 WL 662335, at *3. Likewise, BISD has failed to demonstrate how the cross-actions for indemnity in the separate personal injury suit or Trane’s pursuit of injunctive relief related to that case have worked to BISD’s detriment. We hold that the actions of Trane, Stotler, and Mac’s Insulation, Inc. do not constitute waiver of their right to arbitrate. IV. Conclusion The trial court abused its discretion by finding the contracts ambiguous and denying the motions to compel arbitration. There is no ambiguity in either the existence or scope of these arbitration agreements. We conditionally grant the writ of mandamus and direct the trial court to (1) vacate its order denying the motions to compel arbitration, (2) grant Stotler’s motion to compel arbitration, (3) conduct further proceedings to determine whether Wilson is entitled to arbitration,[7] and (4) conduct further proceedings to determine whether the various nonsignatories are entitled to arbitration. The writ will issue only if the trial court fails to comply. Insofar as we have granted full relief under our mandamus jurisdiction, we dismiss the related interlocutory appeal as moot. _______________________________________ Don R. Willett Justice Opinion delivered: June 30, 2006 [1] Document Synopses by Series, at http://www.aia.org/docs_series. The American Institute of Architects represents the professional interests of America’s architects. The AIA: Advocacy Community, Knowledge, at http://www.aia.org/about_default. Among other things, the AIA publishes industry standard documents for design and construction projects. About AIA Contract Documents, at http://www.aia.org/docs_about&defPr’1. Document A201 “is frequently adopted by reference into a variety of other agreements . . . to establish a common basis for the primary and secondary relationships on the typical construction project.” Instruction Sheet for AIA Document A201, General Conditions of the Contract for Construction—1987 Edition at 1, available at http://www.engin.umich.edu/class/cee431/AIA/A201Inst.PDF. In the instant case, the General Conditions incorporate the 1987 (14th) Edition of AIA Document A201, which is approved and endorsed by the Associated General Contractors of America. AIA Document A201, General Conditions of the Contract for Construction (1987). [2] Four third-party defendants filed independent motions to compel arbitration: Wilson, Stotler, Mijares Mora Architects, Inc., and Zamora Engineering, Inc. Mac’s Insulation, Inc. joined Stotler’s motion. Trane, Victoria Air Conditioning, Ltd., and Superheat Air Balancing Co., Inc. joined the Wilson and Stotler motions. Al Cardenas Masonry Inc. joined Trane’s motion. Sechrist-Hall Co., Wrightway Construction, Inc., and Rio Mechanical, Inc. joined the Wilson and Trane motions. The independent motions of Mijares Mora Architects, Inc. and Zamora Engineering, Inc. do not invoke the FAA or TAA. Wilson’s motion is not in the record, and we are thus unable to determine whether it invokes the FAA, TAA, both, or neither. All other motions invoke the FAA or both the FAA and the TAA. The motions of all subcontractors and second-tier subcontractors also argue that the doctrine of equitable estoppel allows nonsignatories to the Wilson and Stotler contracts to obtain the benefits of the arbitration agreements therein. [3] This Court undeniably has jurisdiction to review the correctness of the court of appeals’ decision that it lacked jurisdiction over the TAA-based interlocutory appeal. See McAllen Med. Ctr., Inc. v. Cortez, 66 S.W.3d 227, 231 (Tex. 2001) (“When a court of appeals determines that it lacks jurisdiction over an interlocutory appeal, this Court has jurisdiction to review that decision.”). [4] While we continue to see no benefit in requiring parties to pursue parallel proceedings that are “unnecessarily expensive and cumbersome,” we remain mindful that “we may not enlarge appellate jurisdiction absent legislative mandate.” Jack B. Anglin Co., 842 S.W.2d at 272. We again invite 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.” Id. [5] Our analysis today proceeds under the FAA because, as a procedural matter, Trane and the third-party defendants only assert in their “Statement of Jurisdiction” that this Court has jurisdiction under Cortez to decide whether the lower court had jurisdiction. 66 S.W.3d at 231 (“When a court of appeals determines that it lacks jurisdiction over an interlocutory appeal, this Court has jurisdiction to review that decision.”). They do not assert “conflict or dissent” jurisdiction under the general interlocutory appeal statute. Tex. Gov’t Code § 22.225(c). [6] A subparagraph later in the Supplementary Conditions states that it “[d]elete[s] the first sentence [of subparagraph 5.2.1 of the General Conditions] and substitute[s] the following . . . .” Clearly, the parties thus were free able to delete and replace language in the General Conditions with language in the Supplementary Conditions, ands they had done so elsewhere. [7] Wilson’s motion to compel arbitration is not in the record.