Aspen Technology, Inc. v. Shasha (Tex.App. - Houston March 2008)

An employer and its employee entered into two arbitration agreements - one in which they did not specify the arbitration rules, arbitration site, or number of arbitrators and a subsequent agreement in which they specified a three-arbitrator panel in Boston, Massachusetts, in accordance with the commercial arbitration rules of the American Arbitration Association. The trial court compelled arbitration in Houston, Texas, before a single arbitrator under the first agreement but refused to compel arbitration under the second agreement, impliedly ruling that the second agreement is illusory and substantively unconscionable. The Houston Court of Appeals concludes that mandamus relief is warranted and directs the trial court to vacate its orders compelling arbitration under the first agreement and to issue an order compelling arbitration under the second agreement. Given this ruling, the employer's interlocutory appeal is rendered moot. Aspen Technology, Inc. vs. Abe Shasha , In re Aspen Technology, Inc. (Tex.App.- Houston [1st Dist.] Mar. 27, 2008) (Opinion by Justice Kem Thompson Frost) (interlocutory appeal dismissed, arbitration mandamus granted) Appellate court: First Court of Appeals in Houston --> See more March 2008 Opinions Cause Nos: No. 14-07-00303-CV , No. 14-07-00469-CV Appeal from 165th District Court of Harris County, Texas (Houston) Trial Court Judge: District Court Judge Hon. Elizabeth Ray O P I N I O N An employer and its employee entered into two arbitration agreements C one in which they did not specify the arbitration rules, arbitration site, or number of arbitrators and a subsequent agreement in which they specified a three-arbitrator panel in Boston, Massachusetts, in accordance with the commercial arbitration rules of the American Arbitration Association. The trial court compelled arbitration in Houston, Texas, before a single arbitrator under the first agreement but refused to compel arbitration under the second agreement, impliedly ruling that the second agreement is illusory and substantively unconscionable. We conclude mandamus relief is warranted. For the reasons explained below, we direct the trial court to vacate its orders compelling arbitration under the first agreement and to issue an order compelling arbitration under the second agreement. Given this ruling, the employer's interlocutory appeal is rendered moot. I. Factual and Procedural Background Appellee/real party in interest Abe Shasha began his employment in December 2001, with the predecessor of appellant/relator Aspen Technology, Inc. At that time, Shasha signed an agreement regarding his employment, in which he and Aspen’s predecessor agreed to arbitrate any and all disputes or controversies that might arise between Shasha and Aspen’s predecessor, including without limitation employment disputes (hereinafter “2001 Agreement”). On October 28, 2005, Shasha signed an agreement regarding his incentive compensation for Aspen fiscal year 2006 (hereinafter “2006 Agreement”). In the 2006 Agreement, Shasha agreed that any legal action against Aspen would be settled exclusively by arbitration before a three-member panel in Boston, Massachusetts in accordance with the commercial arbitration rules of the American Arbitration Association (hereinafter “AAA”). Early in 2006, Shasha notified Aspen that he had a dispute regarding his commissions. In May 2006, Shasha resigned from his position with Aspen and soon thereafter filed suit against Aspen in the trial court below asserting contract and tort claims. Aspen filed a motion to compel arbitration, relying on both the 2001 Agreement and the 2006 Agreement. In response, Shasha admitted that he executed both the 2001 Agreement and the 2006 Agreement. Shasha argued that the arbitration provision in the 2006 Agreement replaced the arbitration provision in the 2001 Agreement. Shasha did not dispute that his claims fall within the scope of the arbitration clause in the 2006 Agreement; rather, Shasha asserted that this arbitration clause is unenforceable because (1) the clause is illusory given that Aspen allegedly retains a unilateral, unrestricted right to terminate this arbitration agreement; and (2) the clause imposes such exorbitant costs on Shasha that it is substantively unconscionable. The trial court granted Aspen’s motion to compel, ordered all claims to arbitration, and stayed the case pending the conclusion of the arbitration. However, the trial court’s first order did not specify the site for the arbitration or the agreement under which the trial court ordered the parties to arbitrate the claims. Confusion arose as to whether the trial court had ordered arbitration under the 2006 Agreement. Aspen asserted that the trial court had ordered the parties to arbitrate the claims in Boston, Massachusetts, under the 2006 Agreement. Shasha filed a motion for reconsideration and clarification. In this motion, Shasha stated that the trial court’s order was ambiguous as to whether the trial court had compelled the parties to arbitrate the claims under the 2001 Agreement or under the 2006 Agreement. Shasha asserted that he had no issue with the court to the extent it intended to compel arbitration under the 2001 Agreement. However, to the extent the trial court had ordered arbitration under the 2006 Agreement, Shasha moved the court to reconsider its rejection of the two grounds upon which Shasha had asserted that this arbitration agreement is unenforceable. Shasha requested the trial court to order the parties to arbitration under the 2001 Agreement in Houston, Texas, with a single arbitrator. Aspen filed a response in opposition in which it argued that no clarification was necessary because the trial court already had ordered the parties to arbitrate in Boston, Massachusetts, under the 2006 Agreement. Aspen again presented argument in support of its position that there is no merit in Shasha’s two objections to the enforceability of the arbitration clause in the 2006 Agreement. Aspen asserted that the Federal Arbitration Act (“Federal Act”) and the Texas Arbitration Act (“Texas Act”) both mandate that Shasha’s claims be arbitrated in Boston, Massachusetts before a panel of three arbitrators pursuant to the commercial arbitration rules of the AAA (“Commercial Rules”) and that the proceedings in the trial court be stayed pending completion of arbitration. Aspen submitted to the trial court a proposed order denying Shasha’s motion. In this proposed order, the trial court would compel arbitration in Boston, Massachusetts, before a panel of three arbitrators pursuant to the Commercial Rules and stay the proceedings in the trial court until the conclusion of the arbitration. Instead of signing this proposed order, the trial court signed an order in which it granted Shasha’s motion and compelled arbitration in Houston, Texas, with a single arbitrator under the 2001 Agreement. Aspen has appealed this order under section 171.098(a)(1) of the Texas Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code Ann. ' 171.098(a)(1) (Vernon 2005). Aspen also filed a petition for writ of mandamus. This court has consolidated these two proceedings. II. Standard of Review The Federal Act applies to an arbitration agreement in any contract involving interstate commerce, to the full extent of the Commerce Clause of the United States Constitution. See 9 U. S. C. ' 2 (1999); Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 277-81, 115 S. Ct. 834, 839-41, 130 L. Ed. 2d 753 (1995); In re L&L Kempwood Assocs., 9 S.W.3d 125, 127 (Tex. 2006). Shasha does not dispute that the Federal Act applies. The 2001 Agreement and the 2006 Agreement both involve interstate commerce, and therefore, the Federal Act applies. Mandamus relief is available when the trial court clearly abuses its discretion by erroneously denying a party its contracted for arbitration rights under the Federal Act. See In re D. Wilson Const. Co., 196 S.W.3d 774, 780-81 (Tex. 2006) (orig. proceeding); In re Igloo Prods. Corp., 238 S.W.3d 574, 577 (Tex. App.- Houston [14th Dist.] 2007, orig. proceeding [mand. denied]). Therefore, Aspen’s right to mandamus relief hinges on whether the trial court erred by refusing to compel arbitration under the 2006 Agreement.[1] On mandamus review of factual issues, a trial court will be held to have abused its discretion only if the party requesting mandamus relief establishes that the trial court reasonably could have reached only one decision, and not the decision the trial court made. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). Mandamus review of issues of law is less deferential. A trial court abuses its discretion if it clearly fails to analyze the law correctly or apply the law to the facts. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005). In construing the 2006 Agreement, our primary concern is to ascertain and give effect to the intentions of the parties as expressed in the contract. Kelley Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). To ascertain the parties’ true intentions, we examine the entire agreement in an effort to harmonize and give effect to all provisions of the contract so that none will be rendered meaningless. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999). Whether a contract is ambiguous is a question of law for the court. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation. Id. However, when a written contract is worded such that it can be given a certain or definite legal meaning or interpretation, it is unambiguous, and the court construes it as a matter of law. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). III. Issues and Analysis A. Does this court lack mandamus jurisdiction because the trial court did not deny a motion to compel arbitration? Shasha first argues that this court lacks jurisdiction to consider Aspen’s mandamus petition because the trial court allegedly did not deny Aspen’s application to compel arbitration. According to Shasha, Aspen moved to compel arbitration under either the 2001 Agreement or the 2006 Agreement, and the trial court granted this request by compelling arbitration under the 2001 Agreement. Though Aspen based its motion to compel on both agreements, in response to Shasha’s motion for reconsideration and clarification, Aspen relied on the 2006 Agreement and requested the trial court to order arbitration of Shasha’s claims in Boston, before a panel of three arbitrators pursuant to the Commercial Rules. The trial court refused to do so, and instead, it ordered the parties to arbitrate the claims in Houston, with a single arbitrator under the 2001 Agreement. Mandamus relief is available if a trial court abuses its discretion by erroneously denying a party its contracted for arbitration rights under the Federal Act. See In re D. Wilson Const. Co., 196 S.W.3d 774, 780-81. Impliedly finding that the arbitration clause in the 2006 Agreement is illusory and substantively unconscionable, the trial court denied Aspen its contracted for arbitration rights under the 2006 Agreement, which is governed by the Federal Act. Therefore, this court has mandamus jurisdiction to consider whether the trial court clearly abused its discretion in so ruling. See In re D. Wilson Const. Co., 196 S.W.3d 774, 780-81. B. Did the trial court err by concluding that the arbitration clause in the 2006 Agreement is illusory? Shasha asserted in the trial court that the arbitration clause in the 2006 Agreement is illusory because Aspen allegedly retains a unilateral, unrestricted right to terminate this arbitration agreement. If one party to an arbitration agreement retains such a right, then the arbitration agreement is illusory and unenforceable. See In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677 (Tex. 2006). Shasha asserts that Aspen retains a unilateral, unrestricted right to terminate the arbitration provision in the 2006 Agreement based on the following language in that agreement: The incentive compensation plan administrator (Vice President of Worldwide Sales Operations) is responsible for the interpretation of the plan. If the meaning or interpretation of the plan wording requires clarification after consideration of all the facts, the Senior Vice President, Worldwide Sales and Business Development (SVP Sales) or his/her designee(s), if any[,] will issue a written ruling, which will be final. In addition, the SVP Sales will be responsible for the periodic review of the plan and may make revisions from time to time. (emphasis added). The title of the 2006 Agreement is “Aspen Technology, Inc. FY 2006 Incentive Compensation Plan Global Account Manager (GAM).” In the 2006 Agreement, there is no definition of the term “plan.” Shasha asserts that, under the above language, the SVP Sales may make revisions to the 2006 Agreement from time to time. Presuming that the above language refers to the 2006 Agreement as “the plan,” and presuming that the SVP Sales may review the 2006 Agreement and make revisions from time to time, this is not equivalent to stating that the SVP Sales has a unilateral, unrestricted right to terminate the arbitration provision in the 2006 Agreement. Under the 2006 Agreement, “[a]ny additional terms or conditions, or verbal or written agreements between [Shasha] and [Aspen] will not apply unless explicitly agreed to and approved in a signed writing by both the SVP Sales and [Shasha].” We conclude that, under the unambiguous language of the 2006 Agreement, Aspen does not retain a unilateral, unrestricted right to modify or terminate the arbitration provision in that agreement; therefore, that arbitration provision, as a matter of law, is not illusory. See In re Dillard Dept. Stores, Inc., 186 S.W.3d 514, 516 (Tex. 2006) (holding that arbitration agreement did not give employer unilateral, unrestricted right to modify the arbitration agreement). The cases on which Shasha relies are not on point. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228B30 (Tex. 2003) (concluding that it was unclear whether employer retained unilateral right to terminate arbitration agreement without notice in case in which agreement stated that the employer “reserves the right to unilaterally abolish or modify any personnel policy without prior notice”); In re C & H News Co., 133 S.W.3d 642, 646 (Tex. App.- Corpus Christi 2003, orig. proceeding) (concluding agreement was illusory because it contained provision giving employer the ability to modify or delete provisions as the employer deems appropriate, with or without prior notification to employees); Tenet Healthcare Ltd. v. Cooper, 960 S.W.2d 386, 386-88 (Tex. App.- Houston [14th Dist.] 1998, pet. dism’d w.o.j.) (holding arbitration agreement contained in employee handbook was not supported by consideration, in case in which handbook stated that (1) it was not intended to constitute a legal contract with any employee because that could only occur with a written agreement executed by a facility executive director and (2) the employer reserved the right to amend or rescind any provision of the handbook as it deemed appropriate in its sole and absolute discretion). Therefore, the trial court clearly abused its discretion to the extent it concluded that the arbitration clause in the 2006 Agreement is illusory. C. Did the trial court err by concluding that the arbitration clause in the 2006 Agreement is substantively unconscionable? Shasha asserted in the trial court that the arbitration clause in the 2006 Agreement imposes such exorbitant costs on him that it is substantively unconscionable. Under certain circumstances, arbitration costs could be so high that they preclude a litigant from effectively vindicating his rights through arbitration. See Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 90-92, 121 S. Ct. 513, 522-23, 148 L.Ed.2d 373 (2000). A party seeking to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive bears the burden of providing specific evidence showing a likelihood that he would incur excessive arbitration costs. See Green Tree Fin. Corp., 531 U.S. at 90-92, 121 S. Ct. at 522-23; In re U.S. Home Corp., 236 S.W.3d 761, 764 (Tex. 2007); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex. 2001); TMI, Inc. v. Brooks, 225 S.W.3d 783, 796 (Tex. App.- Houston [14th Dist.] 2007, pet. denied). The 2006 Agreement is silent as to arbitration costs. In the trial court Shasha offered an affidavit from one of his lawyers. In this affidavit, Shasha’s counsel testifies, in pertinent part, to the following: ● Based on his personal knowledge of the Commercial Rules and the AAA employment arbitration rules (“Employment Rules”), claims arbitrated under the Commercial Rules are significantly more costly to the employee/claimant than claims arbitrated under the Employment Rules. This is because under the Employment Rules, the employee/claimant is only responsible for a filing fee of $50-150; whereas under the Commercial Rules, the employee/claimant is responsible for the filing fee, the case service fee, and one-half of all the arbitrator fees unless the arbitration agreement states otherwise. ● The AAA’s filing fee for this case would be $4,250, and the AAA case service fee would be $1,750. The AAA administration fee would be $325. Although arbitrator fees vary for each arbitrator, a “median estimate” is $305.50 per hour for each arbitrator based on ten arbitrator resumes for the Boston area from the AAA website. A conservative estimate of total arbitrator fees based on four days of work per arbitrator is $24,000 (32 hours x $250/hour per arbitrator). ● Shasha’s air fare and hotel costs for an arbitration in Boston would be at least $2,700. Presuming that arbitrations under the Commercial Rules are significantly more costly than arbitrations under the Employment Rules, this testimony alone does not provide specific evidence as to Shasha’s likely costs to arbitrate under the 2006 Agreement. Though Shasha’s counsel provides projected fees for filing with the AAA, AAA case service, and AAA administration, this projection is based on the premise that the AAA would administer the arbitration.[2] However, the arbitration provision in the 2006 Agreement does not require that the AAA conduct or administer the arbitration; rather the provision states that arbitration shall be Ain accordance with the [Commercial Rules].” Under this language, the AAA may administer the arbitration, but the parties are not required to have the arbitration administered by the AAA. See TMI, Inc., 225 S.W.3d at 797. Although the party seeking to compel arbitration in TMI, Inc. presented evidence that arbitration under the same arbitration provision was available by a non-AAA arbitrator at a cost significantly lower that the costs of a AAA arbitration, such proof is not necessary for Shasha to be required to make a factual showing that the AAA would administer the arbitration. See Green Tree Fin. Corp., 531 U.S. at 90 n.6, 121 S. Ct. at 522 n.6 (concluding that party asserting substantive unconscionability could not carry her burden of proof based on AAA fees unless she, made a factual showing, among other things, that the AAA would administer the arbitration). As to arbitrator fees, again, Shasha’s projected fees appear to be based on fees charged by AAA arbitrators. In addition, Shasha’s counsel testifies that, under the Commercial Rules, absent agreement by the parties, Shasha must pay half of the arbitrator fees. However, under the Commercial Rules attached to counsel’s affidavit, the arbitration panel in its final award shall apportion the arbitration fees, expenses, and compensation among the parties in such amounts as the panel determines is appropriate. We conclude that the evidence is legally insufficient to support the trial court’s implied finding that Shasha satisfied his burden of providing specific evidence showing a likelihood that he would be denied access to arbitration based on excessive arbitration costs. See Green Tree Fin. Corp., 531 U.S. at 90-92, 121 S. Ct. at 522-23; In re U.S. Home Corp., 236 S.W.3d at 764; In re FirstMerit Bank, N.A., 52 S.W.3d at 756-57; TMI, Inc., 225 S.W.3d at 796. On the record before it, the only finding the trial court could have made was that Shasha did not satisfy this burden. By impliedly ruling to the contrary, the trial court clearly abused its discretion. In addition, even presuming that the AAA would administer the arbitration and that the arbitration costs and fees would be allocated equally by the arbitration panel, Shasha’s counsel projected aggregate costs and fees of $30,325, which would make Shasha’s portion $15,162.50. Presuming that the extra expense of traveling to Boston for the arbitration is $2,700 (the figure stated in the affidavit of Shasha’s counsel) the total financial burden on Shasha would be $17,862.50. However, Shasha is asserting a claim of between $300,000 and $500,000, and Shasha’s base salary, without commissions, when he entered into the 2006 Agreement was $120,000. Though Shasha provided his own affidavit, in which he states that the costs of pursuing his claim through arbitration in Boston under the 2006 Agreement would be extraordinary, oppressive, unaffordable, and would deprive him of the opportunity to litigate his claim, these conclusory statements are legally insufficient. See, e.g., Green Tree Fin. Corp., 531 U.S. at 90 n.6, 121 S. Ct. at 522 n.6 (concluding that party’s unsupported statement that she did not have the resources to pay the high costs of arbitration was insufficient). Shasha does state that he is currently paying for the university studies of his three children and that since he stopped working at Aspen he has been unable to find “equivalent fixed income work.” However, we determine substantive unconscionability based on the circumstances existing when the parties entered into the contract in October 2005, and Shasha provided no evidence as to his finances or ability to pay $17,862.50 at this time.[3] See In re FirstMerit Bank, N.A., 52 S.W.3d at 757. Under the applicable standard of review, we conclude that the trial court clearly abused its discretion by impliedly ruling that the arbitration clause in the 2006 Agreement is substantively unconscionable.[4] IV. Conclusion The Federal Act governs the arbitration clause in the 2006 Agreement. Therefore, this court has mandamus jurisdiction to consider whether the trial court erred in denying Aspen its contracted for arbitration rights under the 2006 Agreement. The trial court clearly abused its discretion (1) by impliedly finding that the arbitration clause in the 2006 Agreement is illusory; (2) by impliedly finding that the clause is substantively unconscionable; and (3) by refusing to order the parties to arbitrate the claims under the 2006 Agreement. Accordingly, we conditionally grant a writ of mandamus directing the trial court to vacate its orders compelling arbitration under the 2001 Agreement and to issue an order (1) compelling arbitration under the 2006 Agreement before a three-arbitrator panel in Boston, Massachusetts, in accordance with the Commercial Rules and (2) staying the proceedings in the trial court pending completion of arbitration. We are confident the respected trial judge will comply with this opinion. Only in the unlikely event she fails to do so will the writ issue. Because we have granted this mandamus relief, we dismiss Aspen’s interlocutory appeal as moot. /s/ Kem Thompson Frost Justice Judgment rendered and Opinion filed March 27, 2008. Panel consists of Chief Justice Hedges and Justices Anderson and Frost. [1] In 1992, addressing whether a party is entitled to mandamus relief for wrongful denial of its arbitration rights under an agreement subject to the Federal Act, the Texas Supreme Court concluded that the Texas Act does not provide such a party the ability to assert an interlocutory appeal. See Jack B. Anglin, Inc. v. Tipps, 842 S.W.2d 266, 272-73 (Tex. 1992). In 2006, the Texas Supreme Court decided that such a party can file an interlocutory appeal of the trial court's denial of a motion to compel arbitration under an agreement governed by the Federal Act. See In re D. Wilson Const. Co., 196 S.W.3d 774, 778-80 (Tex. 2006). It might appear that Aspen is not entitled to mandamus relief in this case because the Federal Act governs the Agreement and, under In re D. Wilson Const. Co., Aspen has an adequate remedy at law by interlocutory appeal. See id. However, the Texas Supreme Court reaffirmed in In re D. Wilson Const. Co. that mandamus relief remains available when a party is erroneously denied its contracted‑for arbitration rights under the Federal Act. See In re D. Wilson Const. Co., 196 S.W.3d at 780-81. Therefore, we conclude that mandamus relief is still potentially available to Aspen. [2] Shasha's counsel attaches a copy of the Commercial Rules and the fee schedule for arbitrations conducted by the AAA, but the AAA fee schedule is not part of the Commercial Rules. [3] In any event, Shasha did not provide specific evidence in his affidavit that would prove his present ability to pay this amount. [4] Shasha relies on In re Luna, 175 S.W.3d 315, 319 (Tex. App.- Houston [1st Dist.] 2004, orig. proceeding [mand. pending]). We are not bound by In re Luna, and, in any event, in that case, there was evidence establishing that arbitration would force the former employee to pay fees that amounted to one-half of his annual compensation. See In re Luna, 175 S.W.3d 315, 321 (Tex. App.- Houston [1st Dist.] 2004, orig. proceeding [mand. pending]). Therefore, In re Luna is not on point.

In Re MHI Partnership, Ltd. (Tex.App.- Houston Apr. 23, 2008)

Homeowners required to arbitrate claims against builder. In this original proceeding, relator MHI Partnership, Ltd. seeks a writ of mandamus directing the presiding judge of the 11th District Court of Harris County, Texas, to vacate an order denying MHI's motion to compel arbitration. The Fourteenth Court of Appeals, in an opinion written by one of its newest members, Hon. Bill Boyce, conditionally grants the writ. In Re MHI Partnership, Ltd., No. 14-07-00851-CV (Tex.App.- Houston [14th Dist.] April 23, 2008) (homeowners compelled to arbitrate contamination claims against builder) Appellate Court: Fourteenth Court of Appeals in Houston, TX ---> See more April 2008 Opinions Appellate Panel's Opinion by Justice William Boyce Panel composition: Chief Justice Adele Hedges, Justice John Anderson, and Justice Bill Boyce Full style: In Re: MHI Partnership, LTD.Appeal from 11th District Court of Harris County Trial Court Judge: Hon. Mark Davidson Disposition: Writ of Mandamus Compelling Arbitration Conditionally Granted Links: Houston arbitration case law Houston Texas construction case law homeowner cases From the opinion: Homeowners have not established that the arbitration agreements are so burdensome as to render them substantively unconscionable. Unconscionability of the Arbitration Agreements as a Whole The homeowners argue the cumulative effect of the provisions in the arbitration agreements renders the agreements unconscionable. Texas courts must consider the arbitration agreement as a whole. In re Luna 175 S.W.3d at 328; see also Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 822 (Tex. App.- San Antonio 1996, no pet.) (per curiam) (trial court abused its discretion by determining unconscionability without sufficient facts before the court to determining if agreement was unconscionable as a whole). Because we already have rejected the homeowners' arguments, we cannot say the arbitration agreements are unconscionable as a whole. Conclusion We hold the trial court abused its discretion in denying MHI's motion to compel arbitration. We therefore conditionally grant the petition for a writ of mandamus, and direct the trial court vacate its order denying MHI's motion to compel arbitration. The writ will issue only if the trial court fails to act in accordance with this opinion.

Divorce Decree Did Not Vary from MSA and Arbitration Award

Houston Court of Appeals rejects wife's challenges to final decree of divorce; affirms trial court on finding that the decree reflected and gave effect to the underlying agreement and arbitration award. Engineer v. Engineer No. 14-06-01099-CV (Tex.App.- Houston [14th Dist.] Mar. 20, 2008)(substituted opinion by Justice Charles Seymore) (decree not at variance from mediated settlement agreement and arbitration award) (multiple appeals, judgment based on MSA, arbitration award) Katy Engineer v. Mike Engineer Appeal from 387th District Court of Fort Bend County Trial court judge: Hon. Robert J. Kern S U B S T I T U T E M E M O R A N D U M O P I N I O N Appellant's motion for rehearing is overruled. This court's opinion issued January 15, 2008 is withdrawn and the following memorandum opinion is substituted therefor. In this divorce action, Katy Engineer appeals the amended divorce decree on the grounds that the decree does not accurately reflect the mediated settlement agreement and the arbitration award. Our disposition is based on clearly settled law. Accordingly, we issue this memorandum opinion and affirm. See Tex. R. App. P. 47.4. I. Background Katy and Mike Engineer were divorced on September 16, 2002. Katy appealed the final divorce decree on the grounds that the decree did not incorporate all of the provisions of the mediated settlement agreement and arbitration award. In an opinion issued January 31, 2006, this court found the alimony provision in the decree differed from language in the agreement and the December 4, 2001 arbitration award that was incorporated into the decree did not address the alimony provision. Engineer v. Engineer, 187 S.W.3d 625, 626 (Tex. App.- Houston [14th Dist.] 2006, no pet.). This court sustained Katy's challenge to the alimony provision in the decree and further determined that it did not need to address her other challenges. Id. at 627. The case was remanded to the trial court for further proceedings. Id. On remand, the trial court signed a document entitled, "Final Decree of Divorce After Remand." In that document, the trial court amended the parties' divorce decree to conform to the December 4, 2001 arbitration award as it pertained to contractual taxable alimony. In this appeal, Katy contends the trial court erred in failing to further amend the divorce decree to address other portions of the arbitration award, specifically provisions relating to gold coins, savings bonds, and the place where alimony payments should be sent. II. Scope of Remand Initially, Katy argues the trial court failed to follow this court's mandate because the trial court corrected only the alimony provision in the decree. Mike responds that the trial court did not err in failing to address the provisions, which are the subject of Katy's complaints, because this court remanded the case only to permit the trial court to amend the decree with regard to the contractual alimony. In our first opinion, we reversed and remanded "for proceedings in accordance with the court's opinion." When an appellate court reverses and remands a case for further proceedings, and the mandate is not limited by special instructions, the effect is to remand the case to the lower court on all issues of fact, and the case is reopened in its entirety. Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986); Brewer & Pritchard, P.C. v. Johnson, 167 S.W.3d 460, 465 (Tex. App.- Houston [14th Dist.] 2005, pet. denied). Neither our opinion nor mandate, provide special instructions to the trial court upon remand; therefore, the case was reopened in its entirety. See Manon v. Solis, 142 S.W.3d 380, 386 (Tex. App. - Houston [14th Dist.] 2004, pet. denied). The issue before us, therefore, is whether the decree of divorce after remand accurately incorporates the arbitration award. III. Arbitration Award Katy argues that the final arbitration award is the proposed "Final Decree of Divorce" submitted to the trial court by the arbitrator on July 23, 2002. Mike argues that the final arbitration award is a document entitled, "Final Arbitration Award" signed by the arbitrator on December 4, 2001. In its conclusions of law, the trial court found that the arbitrator's "proposed final decree of divorce submitted on July 23, 2002 was not considered an arbitration award, implicating the procedures of Chapter 171 of the Texas Civil Practice and Remedies Code."[1] In remanding the case to the trial court, this court referred to the December 4, 2001 arbitration award as the operative document. Therefore, in order to address Katy's issues, we will determine whether the final divorce decree incorporates the provisions of the December 4, 2001 arbitration award. IV. Provisions of the Decree The trial court must make a just and right division of marital property in a divorce proceeding. Tex. Fam. Code Ann. Section 7.001 (Vernon 1998). To promote the amicable settlement of disputes in a suit for divorce, spouses may enter into a written agreement concerning the division of the property and the liabilities of the spouses and maintenance of either spouse. Tex. Fam. Code Ann. Section 7.006 (a)-(c) (Vernon 1998). If the court finds that the terms of such an agreement are just and right, those terms are binding on the court. Tex. Fam. Code Ann. Section 7.006(b). If the trial court approves the agreement, the court may set forth the agreement in full or incorporate it by reference in the final decree. Id. Conversely, if the court finds that the terms of the agreement are not just and right, it may either request the spouses to submit a revised agreement or set the case for a contested hearing. Tex. Fam. Code Ann. Section 7.006(c). Therefore, a court may either enter a property division agreement in its entirety or decline to enter it all, but has no discretion to change the agreement before entering it. See Engineer, 187 S.W.3d at 626; Reppert v. Beasley, 943 S.W.2d 172, 174 (Tex. App.- San Antonio 1997, no pet.). In this case, the agreement provided that disputes concerning interpretation or performance of the agreement would be submitted to binding arbitration. In unchallenged conclusions of law, the trial court found that the decree incorporates the agreement as modified and clarified in arbitration and as thereafter corrected and/or modified by the court upon proper pleadings and proof. Katy complains that the trial court erred in failing to accurately incorporate the agreement into the divorce decree. Specifically, Katy argues the provisions addressing allocation of the gold coins and savings bonds were inaccurately incorporated. Further, Katy complains that provisions in the decree regarding the place for alimony payments do not reflect the arbitration award. A. Gold Coins Attached to the arbitration award are three exhibits listing the community property awarded to each spouse and the property awarded to Katy as custodian for the parties' son. The gold coins are listed in the property awarded to Mike and are described as the "[g]old coins purchased and stored in the family safety deposit box." The final divorce decree awards the following property to the husband: "All household furniture, furnishings, fixtures, goods, art objects, collectibles, appliances, and equipment in the possession of the husband or subject to his sole control, including but not limited to any gold coins purchased and stored in the family safety deposit box . . . said coins to be delivered to Mike Engineer by (6/5/03) to M. Carden's office." Katy first argues that the trial court erred in the divorce decree by not including a provision that she was to relinquish the gold coins "should they be in existence." Katy bases her argument on the arbitrator's proposed final decree submitted to the court on July 23, 2002. As stated earlier, that document was not recognized by the trial court as an arbitration award. The arbitration award used by the trial court in preparing the final divorce decree did not establish a procedure or qualify the distribution of the gold coins. Second, Katy complains of the trial court's inclusion of specific terms requiring her to deliver the gold coins to Mike, contending that this language improperly imposes an affirmative obligation that the arbitrator did not impose. The Family Code does not require parties to agree to all of the provisions to be contained in the divorce decree. The law only requires the parties to reach an agreement as to all material terms and prohibits the trial court from supplying additional terms. Haynes v. Haynes, 180 S.W.3d 927, 930 (Tex. App.- Dallas 2006, no pet.). Terms necessary to effectuate and implement the parties' agreement do not affect the agreed substantive division of property and may be left to future articulation by the parties or consideration by the trial court. Id. In this case, the terms requiring Katy to deliver the gold coins on a date certain to a specific location are properly denominated as essential to effectuate and implement the agreement that Mike will receive the gold coins. Therefore, with regard to the gold coins, the arbitration award was accurately incorporated in the decree. B. Savings Bonds Katy alleges that the decree varies from the arbitration award in the distribution of savings bonds. In the December 4, 2001 document, the arbitrator awarded "U. S. Series EE Savings Bonds Approximate value $18,608.00" to Katy. The arbitrator further awarded "EE Series Savings Bonds Approximate value $25,000.00" to Katy as custodian for the parties' child. In the corrected final divorce decree, the "US Series EE Savings Bonds" were awarded to the parties' child "with Katy Engineer trustee." The decree then listed the bonds by number. The decree did not award any savings bonds to Katy individually. On October 23, 2002, the trial court signed a final decree of divorce, which awarded "US Series EE Savings Bonds B approximate value of $18,608.00" and "EE Series Savings Bonds No. M39388208EE to M39388216EE & M39531538EE" to Katy. The October 23, 2002, decree failed to award any savings bonds to Katy as custodian for the child. Katy thereafter filed a motion to modify the decree, which included a request that the trial court correct the decree as to the bonds awarded to her, and the bonds awarded to her as custodian for the child. On January 22, 2003, the trial court signed an order modifying the divorce decree. The order recites that a hearing was held on December 18, 2002, but no record of the hearing appears in our appellate record. A letter from the trial court signed on December 27, 2002, reflects that as a result of the hearing, the parties agreed to certain changes in the decree. One of the referenced changes is, "[S]eries EE bonds should be awarded to [the child], with Wife as Trustee." The trial court's January 22, 2003 order reflects that agreement. On appeal, Katy contends that the decree incorrectly awarded all the bonds to the parties' child with her as trustee. Katy does not assert that the trial court's recitation of an agreement is incorrect, but argues that even if she agreed to the change, the trial court was without authority to change the arbitrator's award. Section 7.006(a) of the Family Code specifically provides that the parties' agreement "may be revised or repudiated before rendition of the divorce or annulment unless the agreement is binding under another rule of law." While the trial court has no authority to supply terms, provisions, or conditions not previously agreed to by the parties, conversely, the parties are bound by their agreements. See McLendon, 847 S.W.2d at 610. Katy cannot agree to a change in the agreement, then complain on appeal about that change. See Keith v. Keith, 221 S.W.3d 156, 163 (Tex. App.- Houston [1st Dist.] 2006, no pet.) (appellant may not complain on appeal of an action or ruling to which she agreed). Therefore, with regard to the savings bonds, the divorce decree accurately reflects the parties' agreement. C. Alimony Payments Katy argues that the final decree varies from the arbitration award in that the decree permits Mike to pay alimony at her residence instead of depositing the amount in her checking account. Katy further argues that the decree does not provide security for the alimony as required by the arbitration award. Again, Katy relies on the July 23, 2002 document, which is not an arbitration award. The December 4, 2001 arbitration award is silent with regard to alimony. However, the parties' mediated settlement agreement provides that Achild support [and] alimony to be obligation of H[usband]'s estate. The "Final Divorce Decree After Remand" provides that Mike is to pay contractual alimony of $4000 per month to Katy at her residence. The decree further provides that alimony is to be secured by Mike's 401(k) plan. Although the mediated settlement agreement required Mike to pay Katy alimony, the parties did not agree to the manner and place of payment. The trial court was authorized to include terms in the decree to implement the parties' agreement, specifying the manner and place of payment of alimony. See McLendon v. McLendon, 847 S.W.2d 601, 606 (Tex. App.- Dallas 1992, writ denied). Further, contrary to Katy's assertion, the decree provided that alimony payments would be secured by Mike's 401(k) plan. Therefore, the trial court did not err by including delivery instructions pertaining to alimony in the decree. In conclusion, the final divorce decree does not vary from the terms of the mediated settlement agreement or the arbitration award. Accordingly, the judgment of the trial court is affirmed. /s/ Charles W. Seymore Justice Judgment rendered and Substitute Memorandum Opinion filed March 20, 2008. Panel consists of Chief Justice Hedges and Justices Anderson and Seymore. [1] Chapter 171 of the Texas Civil Practice and Remedies Code generally prescribes the necessary requirements for a valid arbitration agreement.

Mediation Costs: Supreme Court Candidate Baltasar Cruz has money-saving ideas

Attorney Baltasar Cruz is one of two Democratic contenders for Texas Supreme Court Seat 7, which is currently occupied by Republican Dale Wainwright who is up for re-election this year. Cruz appears to be practicing the low-budget gospel he preaches, campaigning on the web via a blogger account, rather than an expensive professional campaign web site with all bells, whistles, and flash. The Dallas Morning News recently wrote him off as a candidate because he did not take in enough money from campaign financiers (donors) to impress its editorial board. Excerpts of ADR relevant proposals from Candidate Cruz's blog are pasted below: Mediation should not be automatically ordered in cases in which the pleadings indicate that the amount in controversy is equal to or less than $5,000.00. (Mediation should not be compulsory in such cases because the mediation fees and attorneys' fees imposed by such orders constitute a burden which is disproportionate to the relief sought for litigants in such cases and parties should not be faced with the choice they are currently given in many courts of incurring the cost of preparing an objection to a mediation order and attending a hearing on their objection -- which might be overruled anyway -- or just going ahead and paying a mediator and their attorneys for conducting a mediation. Although mediation orders in such cases do coerce litigants to enter into settlements merely out of a desire to avoid escalating litigation costs, I do not believe it is the role of the Courts to impose litigation costs on parties that are so disproportionate to the relief sought as to coerce settlements. I think it is more important for a judge to reduce the costs of access to the courts than to impose expenses upon litigants which coerce them into settlements.) When mediation orders are entered in other cases (i.e., cases in which the amount in controversy exceeds $5,000.00) the orders should not designate a mediator nor a mediation deadline, unless the parties have agreed to same. Rather, all parties should be given an opportunity to agree upon a mediator and a mediation deadline in a rule 11 agreement to be filed with the Court or inform the Court if no agreement can be reached. Only then should trial courts be able to appoint a mediator and order a mediation deadline. (Since most experienced attorneys have mediators they prefer to use and file motions for substitution of the mediator when one is appointed by a trial court, this should also save judicial resources since a rule 11 agreement does not have to be reviewed or signed by a judge and the mediation deadline can then be extended by a subsequent rule 11 agreement between the parties without requiring another court order.) Comment: County-based dispute resolutions centers (DRCs) may provide a viable low-cost alternative in some cases and venues. Find terms: mediation in low value cases, mediation costs, fees, ADR on a shoestring budget

Statutory right to arbitrate in municipal annexation dispute subverted, Justice Willett says

Writing in dissent in City of Rockwall, Texas v. Hughes, No. 05-0126 (Tex. Jan 25, 2008) Justice Don Willett charges that the interpretation of the arbitration provision at issue in the case by the majority, in an opinion written by Justice Phil Johnson, undermines the Legislature's intent to give land owners a remedy against annexation-eager cities. Willett concludes: Hughes is statutorily entitled to arbitration, and because the Court “fails to take action” to enforce that remedy, I respectfully dissent. DISSENTING OPINION Justice Willett, joined by Justice Hecht, Justice O’Neill, and Justice Brister, dissenting. The Court espouses sound principles of statutory construction but unsoundly applies them. Basically, it takes literalism too literally. Read naturally, section 43.052(i) means this: landowners who request inclusion of their land in a city’s annexation plan may arbitrate the city’s failure to include it. The City’s position—arbitration is only available if the City ignores the petition, not if it rejects it—makes little sense. Studied in context, the arbitration-triggering phrase “fails to take action” in section 43.052(i) has a more substantively coherent meaning than “fails to take any action”; it necessarily means “fails to take favorable action.” Landowners are seeking a specific outcome: inclusion in the city’s annexation plan. The statute grants arbitration if the property remains excluded, and exclusion persists just as surely through adverse action as through inaction. The meaning of “fails to take action” is best revealed by how this phrase is used in another Chapter 43 arbitration provision. Applying today’s wooden construction to that provision dictates an illogical result that lays bare the Court’s misinterpretation. As discussed more fully below, the Court’s literalist interpretation would deny residents of areas annexed by the City of Houston their statutory right to arbitrate the City’s failure to provide municipal services to the annexed area if the City rejects the residents’ petition to enforce the service plan. As the Court reads “fails to take action,” Houstonians deprived of basic city services will have no private remedy. Read as a whole, the statutory scheme—in both section 43.052(i) and in section 43.056(l)—is straightforward and cannot bear the narrow meaning the Court ascribes to it. The Court’s unduly restrictive reading is foreclosed by statutory context, and because context matters, I respectfully dissent. I. When Searching for Statutory Meaning, Words Matter–And So Does Context The Court aptly describes, then misapplies, the pertinent ground rules for construing statutory language. Words and phrases must be read “in context and construed according to the rules of grammar and common usage.”[1] The import of language, plain or not, must be drawn from the surrounding context, particularly when construing everyday words and phrases that are inordinately context-sensitive.[2] Given the power of context to transform the meaning of language, courts should resist rulings anchored in hyper-technical readings of isolated words or phrases,[3] or forced readings that are exaggerated or, at the other extreme, constrained.[4] This “context matters” maxim—a cardinal rule not only of statutory construction but “of language itself”[5]—is rooted in common sense,[6] Texas statutory law,[7] and caselaw from both this Court[8] and the United States Supreme Court.[9] Accordingly, when interpreting the (h)(1) exemption for quick annexation of rural land and the arbitration remedy in subsection (i), we must consult the text and structure of surrounding and related provisions. Doing so yields a clear and forthright interpretation that confirms the statute’s natural meaning while giving effect to every part of the statute. Subsection (i) begins: “A municipality may not circumvent the [three-year plan] requirement[ ] by proposing to separately annex two or more areas described by Subsection (h)(1) if no reason exists under generally accepted municipal planning principles and practices for separately annexing the areas.” This proscriptive language sets the context; lawmakers intended arbitration to curb the overzealous use of expedited, piecemeal annexations under subsection (h)(1) in order to evade the three-year planning requirement. Ignoring this context, the Court adopts the City’s view that “fails to take action” means “fails to take any action,” in other words, when a city succumbs to bureaucratic inertia and does nothing. But if a city rejects a petition outright, the landowner has no further recourse.[10] This interpretation subverts the Legislature’s effort to curb abusive annexation tactics. The City complains that Hughes’s interpretation requires arbitration of all requests, no matter how groundless, but the City’s rigid interpretation enables it to deny all requests, no matter how meritorious. The Court’s holding will effectively prescribe, not proscribe, the very circumvention that subsection (i), by its terms, was intended to cure.[11] In context, the phrase “fails to take action” captures not only a city’s inaction but also a city’s overt denial of favorable action. The word “favorable” is implicit, honors the phrase’s (and the overall statute’s) common-sense meaning, and gives full effect to the statute’s objective: giving landowners a specific and workable remedy against abuse of the (h)(1) exemption. In my view, the language cannot fairly be read any other way, and the Court’s reading almost certainly undermines the Legislature’s intent. II. The Court’s Strained Reading Invites Absurd Results The Court acknowledges that any interpretation, literal or not, that produces absurd results should be discarded.[12] In my view, the Court’s interpretation works multiple absurdities. A. The Undeniable Meaning of “Fails to Take Action” Elsewhere in Chapter 43 Undercuts the Court’s Literalist Construction of Subsection (i) Most disconcerting is that the Court’s noncontextual analysis cannot be squared with other parts of Chapter 43, principally section 43.056, which centers on the City of Houston’s contractual duty to provide must-have services to areas slated for annexation (e.g., fire and police protection, EMS, road maintenance, solid waste collection, water and wastewater facilities).[13] The Legislature in subsection (l) authorizes Houston residents and landowners to request arbitration to force compliance with the City’s service plan, and, strikingly, it uses the very same “fails to take action” phrase that appears in section 43.052(i). Subsection (l) provides: A person residing or owning land in an annexed area . . . may enforce a service plan by petitioning the municipality for a change in policy or procedures to ensure compliance with the service plan. If the municipality fails to take action with regard to the petition, the petitioner may request arbitration of the dispute . . . .[14] Under long-settled authority, “fails to take action” must mean the same thing here as it does in section 43.052(i).[15] The multiple parallels at work here—the same phrase enacted the same day in the same bill describing the same proceeding—could not present a more “classic case for application of the normal rule of statutory construction that identical words used in different parts of the same act are intended to have the same meaning.”[16] I venture this prediction: if today’s case centered not on subsection (i) but on subsection (l) and a Houston resident’s request to arbitrate the City’s alleged breach of a service plan, the Court would read “fails to take action” exactly as I read it in subsection (i). Studied consistently and contextually, the meaning is self-evident: someone in an annexed area can request arbitration to enforce the service plan if the city grants no relief on the petition. Applying today’s construction of “fails to take action,” however, if the City of Houston denied a service-plan enforcement petition, arbitration would be unavailable. This reading runs head-long into subsection (l)’s two-step process for enforcing City of Houston service plans: (1) a petition urging the City to comply, then (2) arbitration if the petition produces no compliance. The notion that arbitration is possible only if the City refuses to move a bureaucratic muscle is conceptually untenable. The paramount goal of service-plan enforcement is illusory if the City of Houston can foreclose a service-plan challenge simply by rejecting the petition outright. Such a result would render subsection (l) wholly impotent and allow the concerns that prompted its enactment to thrive unchecked.[17] The landowner is seeking to compel obedience to the service plan—a formal “contractual obligation”[18]—and vital city services will remain unprovided whether the City rejects the petition or ignores it; granting arbitration only if the City’s response is dilatory, but not if it is direct, works an absurd result. The very next sentence in subsection (l) removes any doubt that the Legislature intended “fails to take action” to mean “fails to take favorable action.” It authorizes persons living outside of Houston to apply for a writ of mandamus to prod service-plan compliance from their respective cities.[19] It cannot possibly be the law that every Texan outside the Houston city limits can freely and immediately seek mandamus relief to enforce their cities’ service plans while Houstonians deprived of basic services and whose enforcement petitions are rejected must hope exclusively for a State-led quo warranto action. Again, this result defeats the fundamental purpose (and contractual promise) of the service-plan statute, but it is necessitated by the Court’s construction of section 43.052(i). Chapter 43 is most coherent and consistent when “fails to take action” means the same thing in both provisions. The Court, however, cites “context” to reserve the right to interpret subsection (l) differently because “sections 43.052(i) and 43.056(l) not only differ in the types of disputes they address, but also in how arbitrations of those disputes are to be conducted.”[20] That is true, but also irrelevant; the decisive “fails to take action” language is word-for-word identical and operates the same way—the triggering phrases are grammatical and structural twins—and there is no principled basis for distinguishing the indistinguishable.[21] B. The City Says Arbitration Is Possible “Only Under the Narrowest of Circumstances”–Namely, When a City Volunteers The City’s view, at its core, is that a landowner entitled to request arbitration is never entitled to receive arbitration. Rather, subsection (i) is “an essentially consensual remedy of limited applicability,” something vested in the City’s absolute discretion.[22] I disagree that cities are only subjected to arbitration if they choose to be. Section 43.052(i), like the identically worded section 43.056(l), grants an actual remedy, not a “consensual” one and not merely a request for one. The Court’s “consensual remedy” holding endorses a path by which cities may circumvent the legislatively preferred three-year plan: “Just Say No”—deny everything and arbitrate nothing. Under this view, if a city (for reasons I cannot imagine) wanted to cede some of its planning authority, it would ignore the petition. But if a city wanted to retain unfettered control, it would deny the petition. Given how cities prize and safeguard their municipal annexation authority,[23] no rational city would ever renounce power by ignoring a petition when it could redouble power by denying it. If the Legislature intended only to authorize cities to volunteer for arbitration, then no statute was necessary as home-rule cities already possess “all the powers of the state not inconsistent with the Constitution, the general laws, or the city’s charter.”[24] A city that wants to arbitrate something does not need a statute granting it permission. Because “the legislature is never presumed to do a useless act,”[25] we must presume that it intended something more than voluntary arbitration. More revealing, though, is the City’s argument that all this sound and fury about arbitration and inclusion in the city’s annexation plan signifies nothing because the fast-track nature of (h)(1) annexations will quickly moot the entire dispute. As the City noted at oral argument: “If the landowner asks to be included in a three-year plan, the city sits on it, that remedy or rather any consideration of whether it should be in a three-year plan is lost [once the area is annexed].” The underlying facts illustrate the City’s position that all landowner action under subsection (i) is ultimately futile: $ the Estate proposed to the City a high-density housing plan in the City’s extraterritorial jurisdiction (ETJ) $ five days later the City directed its staff to begin expeditious (h)(1) annexation (goal: to bring the property within the City limits so it could impose low-density development restrictions) $ the Estate then petitioned for inclusion in the City’s three-year plan (goal: to delay the (h)(1) annexation so it could vest the property’s high-density development plan) Under the City’s position, heads the city wins and tails the landowner loses. The calendar is inexorable. Arbitration is forever a mirage because even if a landowner is theoretically entitled to arbitration, the City’s annexation—the very annexation being challenged—zooms along the (h)(1) fast track, thus short-circuiting the dispute. C. The City’s “Pocket Veto” Analogy Is Facially off the Mark The City says arbitration is possible in exactly one situation: “when a city refuses to consider or evaluate the request—exercising the proverbial ‘pocket veto.’” The pocket-veto analogy is inapposite because a pocket veto, classically understood, quickly yields a definitive outcome: rejection.[26] Accepting arguendo the City’s pocket-veto characterization, the Legislature, unlike the United States Constitution, has failed to define the contours, and the Court avoids addressing these concerns,[27] most notably (1) how much time must elapse before the landowner may request arbitration? and (2) what form of “action” suffices to derail arbitration?[28] Subsection (i) is open-ended and sets no decision-making deadline by which a city must respond to a landowner’s petition. If a city sits idle, a landowner has no way of knowing whether the city has merely failed to open its mail or, alternatively, has in fact reviewed the petition but quietly decided not to grant it. What length of city inaction is sufficient before a landowner may seek arbitration? Meanwhile, as the landowner awaits a formal response, the city continues speedily annexing the targeted property under subsection (h)(1). Moreover, the Court, while purporting to construe “fails to take action” literally, actually spurns its own literalist method. The Court says arbitration is unavailable because the City’s categorical refusal amounts to “action.” The word “action,” however, encompasses a wide range of activities: reviewing a petition, conducting research, convening a hearing, deliberating, etc.[29] Why are these actions not “action”? The Court implicitly limits the word “action” to mean dispositive action—when a city formally denies a petition—but the Court cites nothing to explain why nondispositive action fails to qualify. By restricting “action” to a yes-or-no decision,[30] the Court has in fact abandoned literalism by reading the statute to mean “fails to take final action,” a locution that, notably, lawmakers have used elsewhere in the Local Government Code regarding land use regulation, but not here.[31] The Court thus allows context to inform the meaning of “action,” but it does so selectively, picking and choosing when it will permit context to guide its statutory analysis. III. The Legislature Enacted a Specific Alternative to Quo Warranto in Cases of Alleged Abuse of Subsection (h)(1) The Court says landowners are no worse off given the possibility of State-initiated quo warranto intervention. The Court reasons that annexation law is largely procedural and that our 1991 decision in Alexander Oil Co. v. City of Sequin declared quo warranto the exclusive mechanism to challenge improperly conducted annexations.[32] The Court’s analysis is unconvincing. The Legislature is presumed to understand extant law when it enacts legislation,[33] and if it intended that quo warranto remain a landowner’s sole remedy against post-1999 annexation abuses, it would not have enacted a statute that explicitly grants a private arbitration right.[34] This Court recently held that the “truest manifestation” of what lawmakers intended is what lawmakers enacted—the text they actually voted on—and the intent to supersede Alexander Oil is found in a statute that does exactly that.[35] We decided Alexander Oil in 1991 largely on the basis that the Legislature had not yet given private individuals a way to challenge annexations. Eight years later, the Legislature did so, granting landowners a defined arbitration right.[36] The Legislature, we must presume, understood the role of quo warranto in challenging annexation proceedings when it provided for arbitration in subsection (i), but the Legislature’s comprehensive overhaul makes no mention of quo warranto, much less retains the exclusivity of such relief. The City insists the Legislature’s failure to unequivocally declare that it was superseding Alexander Oil indicates it never intended to do so. We have never required such declarations, and Alexander Oil overtly disclaims the necessity for any such declaration: quo warranto, we said in that case, is the way to attack annexation irregularities unless the Legislature has “acted to expressly provide a private action.”[37] The Legislature did precisely that post-Alexander Oil.[38] This 1999 legislative exception to the general quo warranto rule provides a simple yet substantive remedy that is complete unto itself: the landowner petitions for inclusion in the three-year plan, and if the land is not added, the landowner may seek arbitration. Subsection (i) never states or suggests that quo warranto remains part of the legal landscape or that quo warranto must precede arbitration as an intermediate step. Finally, the City’s reliance on three courts of appeals’ decisions construing section 43.052 as strictly procedural, and thus subject only to quo warranto challenge, is misplaced.[39] While those courts held that quo warranto is the sole means to attack a city’s alleged violation of 43.052, none of those decisions considered the (h)(1) exemption or interpreted subsection (i), focusing instead on other portions of section 43.052. The remedy for abuse of the sparsely-populated-area exemption is arbitration, which subsection (i) clearly authorizes. IV. Conclusion The statute in this case speaks for itself. The Court mutes the statute, however, by fixating on four words divorced from the surrounding statutory framework. I agree judges must adhere to the language that lawmakers voted on, but statutes operate as a whole and must be read as a whole, not as a hodgepodge of isolated fragments. The Court’s noncontextual reading is incompatible with related provisions (including one identical provision) in the same statute. Literalism can sometimes border on trivialism and should not be confused with textualism, which considers both statutory text and statutory context to ascribe meaning. Today’s decision is literalism gone bad. Hughes is statutorily entitled to arbitration, and because the Court “fails to take action” to enforce that remedy, I respectfully dissent. ____________________________________ Don R. Willett Justice Opinion delivered: January 25, 2008 [1] Tex. Gov’t Code § 311.011(a). [2] Id. Some familiar words, depending on how they are used, convey polar opposite meanings. For example, the word “sanction” may indicate approval (“I sanction eating that bowl of ice cream.”) or disapproval (“My wife will sanction me for eating that bowl of ice cream.”). See Webster’s New World Dictionary & Thesaurus 566 (Michael Agnes, ed., 2d ed. 2002). Its meaning—permission or prohibition—turns entirely on context. [3] Tex. Dep’t of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004) (“We must read the statute as a whole and not just isolated portions.”). [4] Cities of Austin, Dallas, Ft. Worth, & Hereford v. Sw. Bell Tel. Co., 92 S.W.3d 434, 442 (Tex. 2002). [5] Deal v. United States, 508 U.S. 129, 132 (1993). [6] As noted above, some words are auto-antonyms that can mean diametrically opposite things depending on the context. The word “fast,” for example, can mean “swift” or “firmly fastened.” See Webster’s, supra note 2, at 233. The word “cleave” can mean “to adhere” or “to divide.” See id. at 112. In my view, the Court’s decision today “cleaves” to a myopic approach that “cleaves” literal meaning from plain meaning. [7] See Tex. Gov’t Code § 311.011(a). [8] For example, in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006), our sole objective was to define the meaning of “sue and be sued”-type language. Rather than concluding that these simple and apparently unambiguous words have one, definitive meaning, we recognized that “the import of these phrases cannot be ascertained apart from the context in which they occur.” Id. at 329; see also, e.g., City of Sunset Valley, 146 S.W.3d at 642. [9] In Deal, the Court identified numerous possible meanings of “conviction” in a bank robbery statute but reasoned that “of course susceptibility of all of these meanings does not render the word ‘conviction,’ whenever it is used, ambiguous; all but one of the meanings is ordinarily eliminated by context.” 508 U.S. at 131-32. The author of Deal, Justice Scalia, was determined to drive home this point, as he wrote a dissent two weeks later in Smith v. United States, 508 U.S. 223, 241-47 (1993), which centered on the meaning of “using a firearm” and where Justice Scalia again stressed the importance of giving words their fair meaning: To use an instrumentality ordinarily means to use it for its intended purpose. When someone asks, “Do you use a cane?,” he is not inquiring whether you have your grandfather's silver-handled walking stick on display in the hall; he wants to know whether you walk with a cane. Similarly, to speak of “using a firearm” is to speak of using it for its distinctive purpose, i.e., as a weapon. Id. at 242. The Court is equally attuned to context in civil cases. In Textron Lycoming Reciprocating Engine Division v. UAW of America, 523 U.S. 653 (1998) (construing “suits for violation of contracts”), the Union urged a narrow focus on the meaning of the preposition “for,” but the Court refused to turn statutory interpretation into a brain teaser and instead insisted on a natural reading that examined each word in context, not under a microscope. Id. at 656-58 (“It is not the meaning of the word ‘for’ we are seeking here, but the meaning of ‘[s]uits for violation of contracts.’” (alteration in original)). [10] While this opinion uses the term “landowner” for simplicity, section 43.052(i) makes clear that a petitioner may be either “a person residing or owning land in the area.” Id. [11] The record suggests that few cities enact three-year municipal annexation plans. In fact, amicus curiae The Texas Municipal League (“TML”), an association of more than 1,070 incorporated cities that advocates municipal interests, notes that many of its member “cities will have a one page plan stating that they do not intend to annex any area for which an annexation plan is required.” See Scott N. Houston, Tex. Mun. League, Municipal Annexation in Texas: “Is It Really That Complicated?” 13 (2003, updated Nov. 2004), available at http://www.tml.org/legal_pdf/ANNEXATION111704.pdf. The City of Rockwall’s annexation “plan” is a near carbon copy: “[t]he City does not intend to annex any territory that in order to be annexed, is required to be in an annexation plan.” City of Rockwall, Tex., Ordinance 99-49 (Dec. 20, 1999). Hughes argues that such “plans” clash with a key objective underlying the Legislature’s 1999 rewrite, that annexation decisions should be driven not by circumvention of the three-year planning process but by order, thoughtfulness, and predictability. Judging by the myriad amicus briefs filed by Texas cities, expedited annexations under (h)(1) are so common that (h)(1) is actually the rule. TML’s brief admits as much, saying the (h)(1) exception “is routinely used by most home rule cities. Only a handful of cities annex under an annexation plan” at all. [12] See __ S.W.3d. __. [13] The statute defines the service plan as a contract between the city and the annexed area. Tex. Loc. Gov’t Code § 43.056(k) (“On approval by the governing body, the service plan is a contractual obligation . . . .”). This contract establishes the method that the city will follow in extending services to the newly annexed area. Tex. Loc. Gov’t Code § 43.056(b). [14] Tex. Loc. Gov’t Code § 43.056(l) (emphasis added). Compare this statute with section 43.052(i): “If the municipality fails to take action on the petition, the petitioner may request arbitration of the dispute.” It seems beyond serious dispute that “fails to take action with regard to the petition” in subsection (l) means exactly the same thing as “fails to take action on the petition” in subsection (i). [15] See Comm'r of Internal Revenue v. Lundy, 516 U.S. 235, 249-50 (1996), superseded by statute, Taxpayer Relief Act of 1997, Pub. L. No. 105-34, sec. 1282(a), 111 Stat. 1037 (codified as amended at 26 U.S.C. § 6512); see also Dallas County Cmty. Coll. Dist. v. Bolton, 185 S.W.3d 868, 873 (Tex. 2005) (“We must interpret a statute according to its terms, giving meaning to the language consistent with other provisions in the statute.”); Paddock v. Siemoneit, 218 S.W.2d 428, 435 (Tex. 1949) (observing that the same words must be given the same meaning unless context dictates otherwise). [16] Lundy, 516 U.S. at 250 (internal quotation marks omitted) (quoting Sullivan v. Stroop, 496 U.S. 478, 484 (1990)); see also Paddock, 218 S.W.2d at 435. [17] See Houston, supra note 11, at 5-8 (describing the furor surrounding the City of Houston’s annexation of suburban Kingwood in 1996, a controversy that fueled the Legislature’s 1999 overhaul of Texas annexation law). [18] See supra note 13. [19] Tex. Loc. Gov’t Code § 43.056(l) (“A person residing or owning land in an annexed area . . . may enforce a service plan by applying for a writ of mandamus . . . .”). [20] __ S.W.3d __. [21] Besides eviscerating the arbitration provision in section 43.056(l) regarding service-plan enforcement, the Court’s holding also nullifies parts of section 43.056(i) above and beyond the arbitration provision itself. For example, subsection (i) features a cost-shifting penalty provision whereby arbitrators can sanction landowners if the petition was “groundless or requested in bad faith or for the purposes of harassment.” It is inconceivable, however, that any right-minded city would ever submit to city-funded arbitration of any petition, much less a baseless one, if it knew that it could dodge arbitration just by denying the petition outright. [22] At oral argument, the City insisted that a valid arbitration request alone cannot trigger arbitration or justify a court order compelling arbitration: COURT: So does 43.052 give a private landowner any right at any time under any circumstances to sue for an order compelling arbitration? RESPONSE: No, it doesn’t. . . . COURT: So even when the city fails to act one way or the other, they sit on it for whatever reason, there is still no private right of action to compel arbitration? RESPONSE: Well, that’s correct. We take that position. . . . [23] Cities regard the broad, unilateral power to annex as a matter of municipal life and death: “According to many national authorities, this annexation power is the primary difference between the flourishing cities of Texas and the declining urban areas in other parts of the nation.” See Houston, supra note 11, at 10. [24] Proctor v. Andrews, 972 S.W.2d 729, 733 (Tex. 1998) (observing that the Legislature may restrict the power of home-rule cities that derive their plenary power directly from the Constitution); see also Tex. Const. Art. XI, § 5. [25] Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 551 (Tex. 1981); see also Travis County v. Pelzel & Assocs., Inc., 77 S.W.3d 246, 249-50 (Tex. 2002), superseded by statute, Tex. Loc. Gov’t Code § 262.007; Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 485 (Tex. 1998). [26] A true pocket veto occurs when the President fails to sign a bill passed by Congress within ten days, if Congress is not in session at the end of those ten days. U.S. Const. art. I, § 7, cl. 2; see also The Pocket Veto Case, 279 U.S. 655 (1929). Timing is the critical element. The President can only kill legislation with a pocket veto if Congress adjourns before the ten days expire; if Congress remains in session, and ten days elapse, then the bill automatically becomes law without the President’s signature. U.S. Const. art. I, § 7, cl. 2. [27] __ S.W.3d __. [28] The City argues that two other Texas statutes use the phrase “fails to take action” to mean “fails to take any action” and not overt rejection. See Tex. Loc. Gov’t Code § 232.096 (authorizing commissioner’s courts to approve or disapprove plat decisions of a land planning commission and providing that if the court “fails to take action” within thirty days, the commission’s decision becomes final); Tex. Occ. Code § 262.1025 (authorizing the State Board of Dental Examiners to review rules proposed by an advisory committee and providing that if the board fails to take action on the recommendation within ninety days, it must adopt the recommendation). These two statutes are facially different. In both, one governmental body is reviewing the prior decision or proposal of another governmental body; if the reviewing body “fails to take action” for a specified number of days, the prior decision is ratified by operation of law. The annexation statute, by contrast, lacks this critical “deeming” feature. The City’s theory leaves the landowner in perpetual limbo since inaction is never treated as either approval or rejection of the landowner’s petition, no matter how much time elapses. Meanwhile, the challenged annexation proceeds unabated. The reason the identical phrase “fails to take action” is interpreted differently in these other statutes is because the surrounding language is different in these other statutes. Again, context controls. [29] According to Black's Law Dictionary, "action" means "[t]he process of doing something; conduct or behavior." Black's Law Dictionary 31 (8th ed. 2004). [30] See, e.g., __ S.W.3d __ (“[T]he city failed to take action on it one way or the other . . . .”). [31] The Legislature, for example, says if a county planning commission “fails to take final action” on a completed plat application within sixty days, the applicant may seek mandamus relief “to compel the planning commission to approve or disapprove the plat.” Tex. Loc. Gov’t Code § 232.096(g) (emphasis added). [32] 825 S.W.2d 434, 436-37 (Tex. 1991). [33] In re Pirelli Tire, L.L.C., __ S.W.3d __ (Tex. 2007). [34] Again, “the legislature is never presumed to do a useless act.” Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 551 (Tex. 1981). [35] Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 651–-52 (Tex. 2006). [36] Act of May 31, 1999, 76th Leg., R.S., ch. 1167, § 4, sec. 43.052(i), 1999 Tex. Gen. Laws 4074, 4076-77. [37] Alexander Oil, 825 S.W.2d at 437. [38] The Court posits the specter of multiple “individual arbitration proceedings” as another basis for its pro-quo-warranto holding. __ S.W.3d. __. To be sure, the City and various amici predict calamitous and “drastic implications” if we interpret the statute to provide a private arbitration right. I concede that landowner-invoked arbitration may well saddle cities with real and nonincidental costs. I also understand the City’s fear that developers will (1) target areas within the ETJ for dense, out-of-character projects that clash with the city’s overall vision for the area and (2) use arbitration under subsection (i) as a delaying tactic or as negotiating leverage. These arguments, however, are rooted in policy and prudential concerns, which are quintessential legislative judgments, not judicial ones. Burdensome or not, the costs and hassles attending arbitration were, I would conclude, presumed acceptable by the Legislature, and in any event, avoidable if cities scrupulously complied with the statute’s three-year annexation plan requirement in lieu of successive fast-track annexations under (h)(1). [39] The City cites Werthmann v. City of Fort Worth, 121 S.W.3d 803, 807 (Tex. App.—Fort Worth 2003, no pet.); City of Balch Springs v. Lucas, 101 S.W.3d 116, 122 (Tex. App.—Dallas 2002, no pet.); City of San Antonio v. Hardee, 70 S.W.3d 207, 212 (Tex. App.—San Antonio 2001, no pet.). THE CITY OF ROCKWALL, TEXAS v. VESTER T. HUGHES, AS SOLE INDEPENDENT EXECUTOR OF THE ESTATE OF W. W. CARUTH, DECEASED; from Rockwall County; 5th district (05-04-01562-CV, 153 S.W.3d 709, 01-20-2005) The Court reverses the court of appeals' judgment and renders judgment. Justice Johnson delivered the opinion of the Court, in which Chief Justice Jefferson, Justice Wainwright, Justice Medina, and Justice Green joined. Justice Willett filed a dissenting opinion, in which Justice Hecht, Justice O'Neill, and Justice Brister joined.