Brand FX, LLC v. Rhine

• Decision Date: 26 February 2015
• Docket Number: NO. 02–14–00249–CV,02–14–00249–CV
• Citation: 458 S.W.3d 195
• Parties: Brand FX, LLC d/b/a Brand FX Body Company, Appellant v. Curtis Rhine, Appellee
• Court: Texas Court of Appeals

458 S.W.3d 195

Brand FX, LLC d/b/a Brand FX Body Company, Appellant

v.Curtis Rhine, Appellee

NO. 02–14–00249–CV

Court of Appeals of Texas, Fort Worth.

DELIVERED: February 26, 2015

Matthew D. Stayton, Russell D. Cawyer,Kelly Hart & Hallman LLP, Fort Worth, for Appellant.

Rod Tanner and Matt Pierce, Tanner and Associates, PC, Fort Worth, for Appellee.

PANEL: LIVINGSTON, C.J.; MEIER and GABRIEL, JJ.

OPINION

LEE GABRIEL, JUSTICE

In this interlocutory appeal, appellant Brand FX, LLC appeals from the trial court's order denying its motion to compel arbitration and later motion to reconsider. We reverse the trial court's order and remand for entry of an order compelling arbitration.

I. BACKGROUND

A. Employment with Brand FX

Appellant Brand FX, LLC is “a Delaware limited liability company” that is publicly traded. Brand FX designs, produces, markets, and sells utility truck bodies and touts revenues of $75,000,000. On October 4, 2013, Brand FX hired appellee Curtis Rhine as its chief financial officer. On November 6, 2013, Rhine signed an employment contract with Brand FX, which set out Brand FX's performance expectations, provided for severance pay if Rhine was fired “for any reason other than [c]ause,” and mandated that any employment disputes would be subject to arbitration. The arbitration clause provided:

Any dispute related to your employment, performance, or compensation shall be resolved exclusively through arbitration, held in New York, New York by and in accordance with the rules of the American Arbitration Association. Decisions of the arbitrator shall be in accordance with applicable state law and not based upon the principle of ex-aequo et bono.^{[ 1 ]} The arbitrator shall state the reasons for any award and shall not have the power to amend or modify this agreement. The unsuccessful party shall pay all costs of arbitration, including costs of the other party.

On November 27, 2013, Rhine entered into a separate subscription agreement with Brand FX under which Rhine was able to buy publicly-traded Brand FX stock and acquire a 1% interest in Brand FX.

On February 13, 2014, Brand FX's chief executive officer and Rhine's immediate supervisor, Art De St. Aubin, informed Rhine by letter of “concerns with respect to [Rhine's] employment,” delineated several instances of “willful misconduct,” and offered Rhine “an opportunity to cure” (the notice letter). De St. Aubin warned Rhine that if he failed to improve within thirty days, he would be fired for cause as provided in the employment contract. On March 17, 2014, Brand FX fired Rhine for cause.

B. Underlying Suit, Default, and Motion to Compel Arbitration

Rhine filed suit against Brand FX, alleging that Brand FX (1) committed “statutory libel per se” by asserting in the notice letter that Rhine committed willful misconduct and (2) breached the employment contract by failing to provide a cure period in good faith, falsely asserting his termination was for cause, and failing to give him severance pay. After Brand FX failed to timely answer, Rhine moved for default judgment as to Brand FX's liability. See Tex. R. Civ. P. 239. The trial court granted the motion for default judgment and set a hearing for July 17, 2014 to hear evidence regarding Rhine's unliquidated damages. See Tex. R. Civ. P. 243. On July 15, 2014, Brand FX filed a motion to compel arbitration and also sought to have the default judgment set aside and a new trial ordered. In its motion to compel, Brand FX raised the arbitration provision in the employment contract, asserted that Rhine's claims fell within the scope of the agreement, and sought arbitration “to the American Arbitration Association consistent with the terms of [the arbitration] agreement.” The trial court set a nonevidentiary hearing on Brand FX's motions for July 28, 2014.

Rhine filed a response to Brand FX's motion to compel on July 25, 2014, three days before the hearing. Rhine asserted that the arbitration clause was unenforceable because Brand FX waived its right to arbitrate and because the agreement was substantively unconscionable. Although Rhine served the response on Brand FX by certified mail, Brand FX did not receive the response until after the hearing and the trial court's ruling.

At the July 28 hearing, Rhine asserted for the first time that the arbitration clause was governed by the Texas Arbitration Act (the TAA) and not the Federal Arbitration Act (the FAA). The distinction was important because under the TAA, a personal-injury claim may not be subject to an arbitration agreement unless the party's attorney signs the arbitration agreement. See Tex. Civ. Prac. & Rem. Code Ann. § 171.002 (West 2011). Rhine also argued that the agreement was unconscionable and that Brand FX had waived arbitration. Brand FX asserted that the agreement was governed by the FAA because of its activities involving interstate commerce and that it had not waived its right to arbitrate. At the hearing, the trial court denied the motion to compel but set aside the default judgment.

C. Motion to Reconsider

On August 5, 2014, Brand FX filed a motion to reconsider the denial to allow the trial court to “address [Rhine's] arguments” raised at the hearing and included in Rhine's response, which Brand FX received after the hearing and the trial court's ruling. Brand FX attached De St. Aubin's affidavit, which expounded upon Brand FX's activities involving interstate commerce and averred that Rhine's duties included supervising Brand FX's financial activities in Brand FX's manufacturing locations in Iowa, Indiana, Minnesota, and Texas. Brand FX more fully responded to Rhine's waiver argument and addressed whether the agreement was substantively unconscionable. In its prayer for relief, Brand FX requested that the trial court grant the motion to reconsider, abate Rhine's case, and “order [Rhine] to submit his claims to the American Arbitration Association consistent with the terms of their agreement.” The trial court set a nonevidentiary hearing on Brand FX's motion to reconsider for August 11, 2014. Rhine responded to the motion to reconsider on August 7, 2014, and asserted that any evidence filed in support of the motion to reconsider that was not part of the trial court's initial determination could not be taken into account on reconsideration. Rhine then asserted that because there was no evidence supporting an interstate-commerce connection, the TAA applied; thus, his defamation claim was not subject to the arbitration agreement. Finally, Rhine contended that the agreement was unconscionable, violated the rules of the American Arbitration Association (the AAA), and was waived. In addition, Rhine filed a motion to strike Brand FX's new evidence—namely, De St. Aubin's affidavit—submitted with its motion to reconsider.

At the hearing, Brand FX expounded on its arguments that the FAA applied, and Rhine asserted that no new evidence on the issue could be considered. Brand FX argued that its motion to reconsider was necessary because it was “unaware that [Rhine] was going to argue that the [TAA] applied.” Brand FX again raised its argument that the arbitration agreement was enforceable and that Rhine's claims fell within its scope. On August 15, 2014, the trial court denied Brand FX's motion to reconsider but did not rule on Rhine's motion to strike. On August 18, 2014, Brand FX filed a notice of appeal from the order denying its motion to compel and from the order denying its motion to reconsider. In a sole issue, Brand FX asserts that the trial court abused its discretion by failing to compel arbitration.

II. DISCUSSION

A. Scope of Our Review

Rhine asserts that we may not consider the evidence Brand FX submitted with its motion to reconsider to support its argument that the FAA applied. Indeed, Rhine has filed a motion to strike “any untimely evidence” from the clerk's record. Rhine bases his argument on the fact that an interlocutory appeal from a motion to reconsider the denial of a motion to compel is not statutorily authorized. Thus, Rhine posits that any filings relating to the motion to reconsider are not properly part of this appeal, which is only authorized as to the denial of the motion to compel.

We conclude that striking properly filed trial court documents from the clerk's record would be inappropriate. Any document that was filed in the trial court is subject to designation in the clerk's record. See generally Tex. R. App. P. 34.5. But our scope of review is not determined by a document's inclusion in the clerk's record. See In re C.A.K., 155 S.W.3d 554, 559 (Tex.App.–San Antonio 2004, pet. denied) (refusing to strike items from clerk's record and noting “inclusion of a document in the clerk's record does not necessarily mean it is relevant to the merits of the appeal”); Roventini v. Ocular Sciences, Inc., 111 S.W.3d 719, 726 (Tex.App.–Houston [1st Dist.] 2003, no pet.) (recognizing filing of supplemental clerk's record does not compel consideration of its contents).

If we may appropriately consider a document in the clerk's record as part of our authorized review of a trial court's order or judgment, we will. And the converse is true as well. See generally Hon. Deborah Hankinson & Rick Thompson, Standards and Scope of Review, 29 The Advocate (Tex.) 6, 6 (2004) (“The scope of review, as the name suggests, delineates the portion of the appellate record that an appellate court may consider in deciding whether the trial court erred and whether that error warrants reversal.”). Therefore, we deny Rhine's motion to strike portions of the clerk's record.

But we are still left with the question of whether the evidence Rhine submitted to the trial court in support of its motion to reconsider should be considered in our review of the trial court's denial of arbitration.² Interlocutory orders may be appealed only if permitted by statute and only to the extent jurisdiction is conferred by statute. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992) (orig....