In re Kellogg Brown & Root, Inc.
| Decision Date | 20 May 2005 |
| Docket Number | No. 03-1129.,03-1129. |
| Citation | 166 S.W.3d 732 |
| Parties | In re KELLOGG BROWN & ROOT, INC., Relator. |
| Court | Texas Supreme Court |
Jack G. Carnegie, John L. Hagan, Jones Day, Kevin B. Finkel, Johnson Finkel DeLuca & Kennedy, P.C., Houston, for relator.
Jeffrey Raizner, Doyle Raizner LLP, Jack F. Burleigh, Houston, Ira E. Hoffman, Grayson Kubli & Hoffman, P.C., McLean, Jeff H. Galloway, John Fellas, Hughes Hubbard & Reed LLP, New York, NY, for real party in interest.
Jeffery T. Nobles, Beirne Maynard & Parsons, L.L.P., Robert Bryan Tobor, Houston, Clint Alexander Corrie, Joseph Lawrence Mira, Bierne, Maynard & Parsons, LLP, Dallas, John D. White, Jones Walker Waechter Poitevent Carrere & Denegre, The Woodlands, for Gulf Coast Holdings Inc.
In this original proceeding, the question is whether Kellogg Brown & Root, Inc. ("KBR"), as a non-signatory to a contract containing an arbitration clause, must arbitrate its claims against Unidynamics, Inc. ("Unidynamics") and MacGREGOR (FIN) Oy ("MacGregor")—the signatories to the contract. The trial court denied MacGregor's motion, which sought to compel KBR to pursue its claims in an ongoing arbitration between MacGregor and Unidynamics. The court of appeals held that the trial court abused its discretion and conditionally granted mandamus relief, ordering the trial court to vacate its order denying MacGregor's motion and "issue an order compelling KBR to arbitrate all claims." 126 S.W.3d 176, 184. KBR sought mandamus relief in this Court.
Approximately two months after KBR filed its petition here, the arbitration between MacGregor and Unidynamics concluded. As a result, the relief MacGregor requested in the lower courts—that KBR be compelled "to pursue its claims in the arbitration between MacGregor (FIN) and Unidynamics"—is no longer available. The case is not moot, however, because the parties continue to dispute whether KBR should be compelled to "arbitrate all claims" pursuant to the court of appeals' order. Id. at 184. Because we conclude that KBR cannot be so compelled, we conditionally grant mandamus relief and order the court of appeals to vacate its order.
In October 1999, MacGREGOR (USA), Inc. contracted with Ingalls Shipbuilding, Inc. ("Ingalls") to build elevator trunks for two cruise ships. MacGREGOR (USA) assigned the contract to its sister company MacGREGOR (FIN) Oy1 ("MacGregor"). In August 2000, MacGregor subcontracted part of the job to Unidynamics, which agreed to fabricate a set of the elevator trunks for one of the ships.2 In June 2001, Unidynamics and KBR entered into a second-tier subcontract, under which KBR agreed to furnish labor, equipment, and facilities to fabricate the elevator trunks. In the fabrication subcontract between MacGregor and Unidynamics, the parties agreed that: "Any disputes arising from the interpretation or application of this contract including any document pertaining thereto, shall be settled by arbitration in accordance with General Conditions (ECE 188), (Appendix 10)."3 The second-tier subcontract between Unidynamics and KBR did not contain an arbitration provision.
After the ship buyer declared bankruptcy in November 2001, Ingalls directed MacGregor to cease work and notify its subcontractors to do the same. MacGregor directed Unidynamics to comply with "the same instructions that Ingalls gave MacGregor." Unidynamics conveyed those instructions to KBR. On or around November 5, 2001, KBR ceased work, stored the elevator trunks and other equipment, and sent Unidynamics invoices for unpaid fabrication services and storage costs. Because KBR had not been paid in full, it asserted liens on the elevator trunk fabrications, parts, and other materials (the "collateral").
A dispute then arose between MacGregor and Unidynamics regarding who owned the collateral and who owed KBR for the fabrication services and storage costs. The dispute stemmed from MacGregor and Unidynamics' Agreement Concerning Passing of Title (the "Title Agreement"), executed on December 5, 2001, and fully incorporated into their fabrication subcontract. Among other things, the Title Agreement provided that full title to the collateral would pass irrevocably to MacGregor immediately after MacGregor made two payments to Unidynamics, which were to occur no later than December 19, 2001. The Title Agreement further required Unidynamics to release the collateral to MacGregor upon MacGregor's request. It is undisputed that MacGregor timely paid Unidynamics; however, Unidynamics asserted that the payments were ineffective to pass title to MacGregor. When MacGregor demanded that Unidynamics release the elevator trunks, Unidynamics refused. The collateral remained in KBR's possession.
In May 2002, pursuant to the arbitration provision in the fabrication subcontract, MacGregor asked the International Chamber of Commerce ("ICC") to arbitrate its dispute with Unidynamics. Among other things, MacGregor sought: (1) damages for breach of contract by Unidynamics for failure to release the collateral, (2) a determination as to which defendant owned the collateral, and (3) a determination regarding MacGregor's proportionate responsibility for the storage costs KBR billed Unidynamics. Unidynamics filed an answer and asserted counterclaims. MacGregor and Unidynamics then commenced arbitration in Paris, France.
While the arbitration was proceeding, both MacGregor and Unidynamics demanded that KBR release the collateral. KBR refused the demands and, on September 17, 2002, filed suit against both companies in Harris County. KBR claimed that Unidynamics breached its contract and, in the alternative, that it was entitled to recover quantum meruit damages against Unidynamics and MacGregor. KBR also sued for declaratory relief to determine which defendant owned the collateral. Subject to the court's ruling on ownership, KBR sought a judicial declaration that it possessed valid constitutional and statutory liens against the collateral in its possession.4 MacGregor answered and sought a temporary restraining order, temporary injunction, and permanent injunction directing KBR to release the collateral. Unidynamics opposed MacGregor's application, arguing that the court action should be abated because the collateral's ownership was "the very issue ... being arbitrated before the ICC." MacGregor, Unidynamics, and KBR then negotiated an agreement, which the trial court entered as an Agreed Order. Pursuant to that order, MacGregor agreed to post a $1,000,000 bond and, upon presentation of the bond, KBR agreed to release the collateral to MacGregor.5 MacGregor posted the bond on October 28, 2002.
Meanwhile, on October 18, 2002, MacGregor filed a motion to abate the state court proceedings pending its arbitration with Unidynamics or, in the alternative, to compel KBR to pursue its claims in the ongoing arbitration between MacGregor and Unidynamics. The trial court denied MacGregor's motion. On December 19, 2002, MacGregor filed an interlocutory appeal and a petition for writ of mandamus in the court of appeals, contending that the trial court abused its discretion. The court of appeals dismissed the interlocutory appeal as moot and conditionally granted mandamus relief, ordering the trial court "to vacate its order denying MacGregor's plea in abatement and motion to compel arbitration, to issue an order compelling KBR to arbitrate all claims, and to stay all proceedings pending arbitration."6 126 S.W.3d at 184-85.
On December 9, 2003, KBR petitioned this Court for a writ of mandamus. On February 4, 2004, while the petition was pending before us, the arbitration between MacGregor and Unidynamics concluded, and the ICC issued a final arbitration award. KBR does not contest that award.
As a preliminary matter, we must decide whether the ICC's final arbitration award moots this mandamus proceeding. A case becomes moot if a controversy ceases to exist between the parties at any stage of the legal proceedings, including the appeal. Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 642 (Tex.2005); Bd. of Adjustment of San Antonio v. Wende, 92 S.W.3d 424, 427 (Tex.2002); Williams v. Lara, 52 S.W.3d 171, 184 (Tex.2001). This case stems from the lower courts' action on MacGregor's motion to "compel[] KBR to pursue its claims in the arbitration between [MacGregor] and Unidynamics." Because that arbitration is over, KBR can no longer be compelled to "join the arbitration." See 126 S.W.3d at 183 (). The question, then, is whether this proceeding is moot.
A case is not rendered moot simply because some of the issues become moot during the appellate process. See Allstate, 159 S.W.3d at 642-43 (); Camarena v. Tex. Employment Comm'n, 754 S.W.2d 149, 151 (Tex.1988) (same). In this case, the court of appeals ordered the trial court "to issue an order compelling KBR to arbitrate all claims." 126 S.W.3d at 184. Although it is no longer possible for KBR to join the Paris arbitration, the court of appeals' ultimate directive has no temporal component. It requires KBR to "arbitrate all claims."
The live controversy in this proceeding is whether KBR must arbitrate those claims that remain now that the arbitration between MacGregor and Unidynamics has concluded. KBR's petition consisted of: (1) a breach-of-contract claim against Unidynamics; (2) in the alternative, a quantum meruit claim against Unidynamics and MacGregor; and (3) a declaratory judgment action to determine the collateral's owner and to establish that KBR possessed valid liens. The arbitrator determined that, pursuant to the Title Agreement between MacGregor...
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