Branch Law Firm, L.L.P v. Osborn

• Decision Date: 26 August 2014
• Docket Number: No. 14–13–00820–CV.,14–13–00820–CV.
• Citation: 447 S.W.3d 390
• Parties: The BRANCH LAW FIRM, L.L.P and Turner W. Branch, Appellants v. William Shane OSBORN, Appellee.
• Court: Texas Court of Appeals

447 S.W.3d 390

The BRANCH LAW FIRM, L.L.P and Turner W. Branch, Appellants

v.William Shane OSBORN, Appellee.

No. 14–13–00820–CV.

Court of Appeals of Texas, Houston (14th Dist.).

Aug. 26, 2014.

Joseph Y. Ahmad, Ashish Mahendru, Megan Bibb, Elizabeth Pannill Fletcher, Thomas C. Wright, Houston, for Appellants.

Joseph F. Archer, Ernest W. Boyd Jr., Houston, for Appellee.

Panel consists of Chief Justice FROST, and Justices DONOVAN and BROWN.

MAJORITY OPINION

MARC W. BROWN, Justice.

In this interlocutory appeal, we decide whether the trial court abused its discretion in denying a motion in which two defendants sought to compel the plaintiff to arbitrate his claims in reliance upon an arbitration clause in a heavily redacted copy of a settlement agreement that the plaintiff did not sign. The plaintiff and the trial court have never seen the entirety of this settlement agreement, and the plaintiff objected to the defendants' failure to provide a copy of the entire agreement. We conclude that the movants did not prove they were entitled to an order compelling arbitration under these circumstances. Accordingly, we affirm the trial court's order denying the motion, without prejudice to the movants' ability to be heard on the merits of a subsequent motion to compel.

I. Factual and Procedural Background

In August 2010, appellee William Shane Osborn began working as an associate for the Branch Law Firm, L.L.P., a Texas limited liability partnership located in Houston, Texas (hereinafter, the “Texas Law Firm”). Osborn's initial salary was $50,000 per year. In October 2011, Osborn received a raise in salary to $100,000 a year. According to Osborn, his bonus structure consisted of 10% of attorney's fees in any case he worked on, plus another 15% if he originated the case, as well as at least 5% of the total fees collected from the Plaintiff Steering Committee allocation for the hours billed in the Avandia¹ multidistrict litigation.² Osborn was terminated on May 7, 2012. While employed by the Texas Law Firm, in addition to the Avandia

multidistrict litigation, Osborn worked on a mass tort case involving hip implants and an individual lawsuit.

In June 2012, Osborn filed suit against the Texas Law Firm and Turner Branch (hereinafter, collectively, the “Branch Parties”). According to Turner Branch's affidavit, he is a partner in the Texas Law Firm and a principal, officer, and major stockholder in the Branch Law Firm in New Mexico (hereinafter, the “New Mexico Law Firm”). Osborn alleged breach of contract based upon the Branch Parties' refusing to pay him the bonus of 10% of attorney's fees in cases he worked on, as well as the Branch Parties' alleged failure to pay him for working May 1 through May 7, 2012, and failure to pay him 5% of the total fees collected from the Plaintiff Steering Committee allocation for hours billed in the Avandia multidistrict litigation. Osborn also asserted a fraud claim based on the Branch Parties' alleged material misrepresentation of the 10% bonus of attorney's fees. The Branch Parties filed various counterclaims against Osborn, including for breach of fiduciary duty, fraud, unjust enrichment, conversion, and theft, alleging his fraudulent use of a firm credit card for personal charges.

In September 2012, Osborn filed a motion to compel the Branch Parties to file answers to his interrogatories, specifically with regard to the amount of attorney's fees received in cases Osborn worked on, including the Avandia

cases. The parties took opposite positions as to whether the amount of attorney's fees to be paid under a Master Settlement Agreement (hereinafter, the “MSA”) should remain confidential. In December 2010, the MSA was signed by attorneys on behalf of GlaxoSmithKline LLC and signed by Turner Branch on behalf of the New Mexico Law Firm, as well as “The Participating Claimants [a]nd The Participating Law Firms.”

Apparently, during the proceedings on the motion to compel, the Branch Parties provided and the trial court read to the parties certain confidentiality language purportedly contained in the MSA. The parties then provided briefing on the interpretation of the confidentiality language, and the trial court held a hearing on April 19, 2013. On April 24, 2013, the trial court granted the motion to compel and ordered the Branch Parties to provide Osborn with the settlement amount, as well as the amount of attorney's fees as contained in the MSA.

On June 26, 2013, Osborn amended his suit to add Turner W. Branch, P.A., a New Mexico professional association located in Albuquerque, New Mexico, as a defendant. The record does not reflect that Turner W. Branch, P.A. has yet appeared. In their brief, the Branch Parties indicate that this New Mexico entity also does business as the Branch Law Firm, so it is possible this newly added defendant is the New Mexico Law Firm.³

In his amended petition, Osborn also added claims for quantum meruit, promissory estoppel, fraudulent inducement, abuse of process, and malicious prosecution. By this time, Osborn and the Branch Parties had filed various motions for summary judgment.⁴

On June 28, 2013, the Branch Parties filed a motion to compel arbitration and stay proceedings based upon the MSA. They attached a “redacted copy of portions of the MSA relevant to this motion.” This excerpt included the definition of “Participating Law Firms”:

“Participating Law Firms” refers to The Branch Law Firm, as Lead Participating Law Firm, and all other law firms, including all attorney members of or affiliated with each firm, that represent or otherwise have any financial interest in the Participating Claimants whose cases and/or claims are the subject of this Agreement. A list of Participating Law Firms apart from The Branch Law Firm is being provided to GSK and is attached hereto as Exhibit “A.”^[ [^{5 ]}

Each Participating Law Firm, including all its current and future attorney members of or affiliated with each Firm, acknowledges that it shall be bound to the terms and conditions of this Agreement and any Addendum or exhibits hereto.

The excerpt included a section entitled “Challenges to or Disputes Involving the Agreement”:

Any challenges to or disputes arising out of or relating to an alleged violation of this Agreement, including but not limited to disputes between GSK and Participating Law Firms and/or Participating Claimants and disputes between or among Participating Law Firms and/or members of Participating Law Firms arising out of or in connection with this Agreement, shall be referred for binding determination to Judicial Arbitration Mediation Services (“JAMS”) for resolution, with all costs to be shared equally. The parties shall work together to agree on a binding neutral arbitrator to resolve any and all disputes, and if an agreed upon arbitrator cannot be selected, JAMS' complex resolution procedures shall control the selection of a neutral arbitrator.

The excerpt also included the MSA's cover and signature pages.

The Branch Law Firm, L.L.P. and Turner Branch argued that the MSA is a valid agreement to arbitrate and that Osborn's claims fall within the scope of the broad arbitration clause. While they acknowledged Osborn did not sign the MSA, they argued that he otherwise is bound to its terms under contract or agency law, or the doctrine of direct benefits estoppel.

Within his response, Osborn argued that an arbitration agreement is only valid if it satisfies general Texas contract law, which requires courts to construe agreements as a whole in order to harmonize and give effect to all provisions. Osborn objected to the Branch Parties' only including seven redacted pages of the MSA, which appears to contain at least thirty-four pages.⁶ Osborn also objected to the Branch Parties' expecting Osborn and the trial court to take their word that the excerpts contained all definitions, clauses, and appendices pertinent to the arbitration issues. Osborn noted he could not verify that the Branch Parties had provided a copy of the entire arbitration clause. Osborn asserted that he is entitled to see the entire MSA.⁷

The Branch Parties apparently then provided Osborn with another, less-redacted copy of the MSA. On July 17, 2013, Osborn filed a motion to compel compliance with the court's April 2013 order because the defendants still had not provided the amount of settlement and amount of attorney's fees contained in the MSA, and had specifically redacted the settlement amount in the copy of the MSA they had provided.⁸ On July 18, 2013, under seal, Osborn filed a supplemental response to the Branch Parties' motion to compel arbitration and attached as a sealed exhibit one additional page of the MSA provided by the defendants. On July 22, 2013, the Branch Parties filed a reply in support of their motion to compel arbitration, and a response to Osborn's motion to compel compliance with the discovery order. That same day, the trial court held a hearing on the parties' respective motions.

On September 17, 2013, the trial court signed an order that the Branch Parties had to provide Osborn with the amount of settlement and amount of attorney's fees as contained in the MSA by the end of business that day. The trial court also signed an order denying the Branch Parties' motion to compel arbitration and stay proceedings. No findings of fact and conclusions of law were filed, and the trial court's order does not contain a statement of the reasons for the denial.

The Branch Parties timely appealed the denial of their motion to compel arbitration. On appeal, in a single issue, the Branch Parties argue that because Osborn is bound by a valid agreement to arbitrate and his claims fall within the scope of that agreement, and because they have not waived their right to arbitration, the trial court erred in denying their motion to compel arbitration.

II. Analysis

A. Applicable law

There are strong policies and presumptions favoring arbitration. See Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995)....