Comp-E-Ware Tech. Assocs., Inc. v. Mushkin, Inc.

• Decision Date: 25 March 2021
• Docket Number: No. 02-20-00185-CV,02-20-00185-CV
• Citation: 629 S.W.3d 549
• Parties: COMP-E-WARE TECHNOLOGY ASSOCIATES, INC. d/b/a Comware, Appellant v. MUSHKIN, INC., d/b/a Enhanced Network Systems, Appellee
• Court: Texas Court of Appeals

629 S.W.3d 549

COMP-E-WARE TECHNOLOGY ASSOCIATES, INC. d/b/a Comware, Appellant

v.MUSHKIN, INC., d/b/a Enhanced Network Systems, Appellee

No. 02-20-00185-CV

Court of Appeals of Texas, Fort Worth.

Delivered: March 25, 2021

Rehearing Denied April 15, 2021

ATTORNEYS FOR APPELLANT: CARLOS SOLTERO, MATTHEW MURRELL, SOLTERO SAPIRE MORRELL PLLC, AUSTIN, TEXAS.

ATTORNEYS FOR APPELLEE: MATTHEW M. MITZNER, DOUGLAS R. SALISBURY, MITZNER LLP, DALLAS, TEXAS.

Before Kerr, Bassel, and Wallach, JJ.

OPINION

Opinion by Justice Wallach

Appellant Comp-E-Ware Technology Associates, Inc. (doing business as Comware) appeals from the 17th District Court of Tarrant County's denial of its "Motion to Compel Arbitration [of] and Motion to Dismiss or Stay" the claims of Appellee Mushkin, Inc. (doing business as Enhanced Network Systems) (ENS) against Comware. We hold that the 17th District Court of Tarrant County abused its discretion by not staying ENS's claims because they are subject to an arbitration proceeding between the parties previously ordered by the 44th District Court of Dallas County. We reverse the 17th District Court's order denying the motion, and we remand the case to that court to stay ENS's claims pending resolution of the previously ordered arbitration in the 44th District Court.

I. Background

This litigation has traveled through several courts in Dallas and Tarrant counties. To set the proper perspective, we will detail ENS's factual allegations in the 17th District Court case, the last filed case, so that we may then look back in time to make appropriate comparisons.

In its original petition in the 17th District Court, ENS succinctly, and importantly, summarized its claim against Comware: "Plaintiff ENS files this original petition against defendant Comware for the return of $250,774.79 that ENS paid Comware for undelivered or returned equipment." ENS then detailed the factual dealings giving rise to its allegations, as follows:

A. ENS's Factual Allegation s

ENS is an independent, secondary-market reseller of information technology. Among other things, it buys Cisco IT products and then sells them. From mid-2017 to April 25, 2018, ENS had been purchasing products, at a premium, from "Cisco Gold Partner" General Datatech (GDT). Buying Cisco products through Cisco-authorized sellers like GDT automatically imbued the products with Cisco's licenses and warranties—but only if the reseller was an authorized service provider.¹ In April 2018, GDT told ENS that Cisco would not allow GDT to sell products to ENS because, in Cisco's view, ENS was not an authorized service provider.

ENS alleged that to keep the business, GDT proposed a rerouting scheme: GDT assured ENS that GDT would continue selling it Cisco products through another authorized service provider and maintain the licenses and warranties. GDT asked ENS's CEO to come to Dallas to meet Comware's CEO at GDT's headquarters on May 21, 2018. Comware, which GDT said Cisco recognized as an authorized service provider, would become the intermediary GDT wanted (in order to keep ENS purchasing from GDT). Because Comware was an authorized Cisco service provider, Cisco's licenses and warranties would pass through to ENS's customers.

ENS then began purchasing Cisco products in the new way that GDT allegedly requested. Under the new transactional structure, Comware handled invoicing for an apparent 1% commission. But despite the new transactional structure, GDT still shipped the purchased products to ENS directly—not through Comware. In the next five months, ENS purchased Cisco products from GDT through Comware some 209 times, totaling $3,401,835.50 in purchases.

In October 2018, GDT allegedly told ENS that Cisco had again learned about GDT's sales to ENS and that Cisco directed GDT to stop selling to ENS. Thereafter, according to ENS, GDT nevertheless went forward with shipping approximately $700,000 worth of Cisco hardware to ENS in seven different shipments. In light of the fact that the Cisco licenses and warranties would apparently not be honored by Cisco as previously represented, ENS claims it returned $905,285 worth of shipped products to GDT. This return left $250,774.79 outstanding, which ENS claims Comware owed to ENS as a refund.

B. Prior Litigation

Now, returning in time to the first court to entertain this dispute, we travel east to the 160th District Court in Dallas County. ENS filed a verified petition to take depositions before suit (commonly referred to as a Rule 202 petition) in cause number DC-19-04815 on April 3, 2019. See Tex. R. Civ. P. 202.1. The adverse parties identified in the suit were Comware and GDT. The factual allegations made to support the Rule 202 petition were virtually identical to the allegations eventually filed in the 17th District Court, even down to the claim that Comware had not returned "approximately $250,000 that [ENS] had provided for a portion of this purchase."

We next briefly visit the 101st District Court in Dallas, where GDT filed its original petition for application to compel arbitration. GDT asked the court to refer to arbitration ENS's claims anticipated in its Rule 202 petition in the 160th District Court. GDT also asked the 101st District Court to transfer the case to the 160th District Court where the Rule 202 suit was pending. Comware filed a plea in intervention in the 101st District Court, seeking to compel ENS to arbitrate the anticipated Rule 202 claims as well. ENS answered by denying that it had refused to arbitrate any claims subject to arbitration, stating that it had refused only to withdraw its Rule 202 petition. It contended that arbitration should be denied because it could not be ordered to arbitrate unless it had refused. ENS further stated it did not oppose transfer of the case to the 160th District Court, host of the Rule 202 suit. This concludes our side visit to the 101st District Court.

Back in the 160th District Court, Comware joined in GDT's motion to compel arbitration. Thus, as of July 18, 2019, ENS's Rule 202 petition and GDT's and Comware's petitions to compel arbitration were all pending in the 160th District Court.

On the road again, for reasons not explained, ENS decided to check out Tarrant County. It filed its original petition in August 2019 in the 342nd District Court. The sole defendant was Comware. The allegations derived from the allegations in the Rule 202 petition filed in the 160th District Court in Dallas and mirrored the allegations soon to be raised in the 17th District Court case on appeal before us. The case in the 342nd District Court was nonsuited without service on Comware.

Back to the east, ENS filed suit against GDT in the 44th District Court on September 9, 2019 at 9:19 a.m. The factual allegations in ENS's petition were virtually the same as in its Rule 202 petition, with ENS seeking recovery of damages from GDT for fraud and promissory estoppel, as was similarly the case in the Rule 202 petition where ENS requested discovery to investigate these potential claims.² GDT joined Comware as a third party defendant, ENS moved to strike, and the court refused to strike the joinder. GDT and Comware also reasserted their requests to compel arbitration of ENS's claims in the 44th District Court case. On April 24, 2020, the 44th District Court signed an order referring the parties to arbitration. Among the matters considered by the court as recited in its order were GDT's and Comware's motions to compel arbitration and ENS's responses. The decretal language of the order recites:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that all claims, counterclaims and Third-Party claims asserted in this matter are referred to arbitration before the American Arbitration Association in Dallas, Texas.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that all claims, counterclaims and Third-Party claims asserted in this matter are hereby stayed pending arbitration.

One last trip back to the west reveals that ENS filed yet another suit against Comware, this time in the 17th District Court on September 9, 2019, at 9:22 a.m.—just three minutes after the 44th District Court case was filed. ENS did not name GDT as a defendant but sued "Comware for the return of $250,774.79 that ENS paid Comware for undelivered or returned equipment." Comware moved to compel arbitration, and on May 27, 2020, the 17th District Court signed an order denying the motion. Comware appeals from that denial.

The saga has now moved to this court for review. In two issues, Comware challenges the trial court's denial of its motion to compel arbitration or stay the proceedings. Within its second issue, Comware challenges the trial court's denial of its motion to dismiss or stay ENS's claims. Because our ruling on this subissue is dispositive, we need not address the first issue or the remainder of the second issue. See Tex. R. App. 47.1.

II. Standard of Review

Within its second issue, Comware contends that the 17th District Court should have dismissed or stayed ENS's claims under the doctrine of comity and for the orderly administration of justice because those claims are involved in arbitration ordered by the 44th District Court involving the same parties and transactions. The principle of comity has been recognized in Texas common law as the rule of dominant jurisdiction:

"The general common law rule in Texas is that the court in which suit is first filed acquires dominant jurisdiction to the exclusion of other coordinate courts." As a result, when two suits are inherently interrelated, "a plea in abatement in the second action must be granted." This first[ ]filed rule flows from "principles of comity, convenience, and the necessity for an orderly procedure in the trial of contested issues." The default rule thus tilts the playing field in favor of according dominant jurisdiction to the court in which suit is first filed.

In re J.B. Hunt Transp., Inc. , 492 S.W.3d 287, 294 (Tex. 2016) (orig. proceeding) (footnotes omitted) (quoting Wyatt v. Shaw Plumbing...