Dallas Cardiology Associates, P.A. v. Mallick

• Decision Date: 09 September 1998
• Docket Number: No. 06-98-00021-CV,06-98-00021-CV
• Parties: 136 Lab.Cas. P 58,481 DALLAS CARDIOLOGY ASSOCIATES, P.A., d/b/a HeartPlace, Appellant, v. Saleem MALLICK, M.D. and Evelio D. Garcia, M.D., Appellees.
• Court: Texas Court of Appeals

Page 209

978 S.W.2d 209

136 Lab.Cas. P 58,481

DALLAS CARDIOLOGY ASSOCIATES, P.A., d/b/a HeartPlace, Appellant, v. Saleem MALLICK, M.D. and Evelio D. Garcia, M.D., Appellees.

No. 06-98-00021-CV.

Court of Appeals of Texas Texarkana.

Argued July 28, 1998.

Decided Aug. 12, 1998.

Rehearing Overruled Sept. 9, 1998.

G. Harvey Dunn, III, Vinson & Elkins, Dallas, Jennifer Haltom Doan, Patton, Haltom, Roberts, Texarkana, for appellant.

William G. Short, Jr., Short, How, Lozano, Frels, Tredoux, Dallas, James R. Rodgers, Moore, Payne, Clem, Rodgers, Paris, for appellee.

Before CORNELIUS, C.J., and GRANT and ROSS, JJ.

OPINION

ROSS, Justice.

Dr. Saleem Mallick and Dr. Evelio Garcia brought a declaratory judgment action against Dallas Cardiology Associates, P.A. d/b/a HeartPlace ("HeartPlace") seeking construction of their respective employment contracts. HeartPlace filed a motion to compel arbitration of the employment contracts according to the terms of the agreements, which require that such disputes be resolved by arbitration. The trial court denied the motion, and HeartPlace now brings this appeal asserting that the trial court abused its discretion.

BACKGROUND

Both Mallick and Garcia were employed by HeartPlace pursuant to employment agreements entered into in 1996. Both agreements contain an identical arbitration clause which states:

30. Arbitration. Any dispute arising over the terms and conditions of this Agreement or in any manner relating to this Agreement which the parties are unable to resolve informally between themselves or by mediation shall be submitted, upon the motion of either party, to arbitration under the appropriate rules of the American Arbitration Association ("AAA").

....

.... The parties separately and specially agree that if either shall contend that this Agreement is invalid or that grounds exist for its rescission or cancellation, that any dispute concerning such contention shall be submitted to arbitration in the manner provided in this section....

During 1997, Mallick's compensation was reduced from $17,500.00 bi-monthly to $1,000.00 bi-monthly. Garcia also contends that he was not paid the full amount owed to him under his employment agreement. On October 6, 1997, the doctors filed a declaratory judgment action seeking a declaration that HeartPlace committed an anticipatory breach by unilaterally reducing the compensation paid to Mallick. They also sought an accounting by HeartPlace so that the proper amounts due under the employment agreements could be determined. The doctors terminated their employment with HeartPlace on October 9, 1997.

On November 24, 1997, HeartPlace filed a plea in abatement, motion to compel arbitration, motion to stay, and an original answer subject thereto seeking to compel arbitration and stay the other proceedings pursuant to the arbitration clauses of the employment contracts.

The doctors subsequently amended their petition by adding tort claims for interference with a contract, slander and defamation, and asked for injunctive relief to prevent HeartPlace's alleged interference with their patients. The amended petition also asked for a declaration that the noncompetition provisions of the employment agreements were unenforceable.

The trial court held a hearing on December 9, 1997, on the motion to compel arbitration. The doctors contended that arbitration was not required because:

(1) HeartPlace repudiated/anticipatorily breached the contract by unilaterally reducing the physicians' compensation levels;

(2) HeartPlace failed to meet a condition precedent to arbitration by not submitting the claim to mediation;

(3) tort claims are asserted which fall outside the arbitration agreement; and

(4) the separation clause which contained a noncompetition agreement is unenforceable and unreasonable and an arbitrator is without power to enforce the noncompetition agreement; also, the liquidated damages clause of the noncompetition agreement is unreasonable.

HeartPlace responded to all of these contentions by essentially arguing that the physicians entered into the contract knowingly and all of these disputes, including the tort claims, fall within the scope of the arbitration clause.

The trial court denied the motion to compel arbitration in a February 5, 1998, order. No findings of fact or conclusions of law were requested or filed.

ANALYSIS

In this accelerated appeal of an interlocutory order denying a motion to compel arbitration, we review the trial court's decision under a "no evidence" standard. A "no evidence" point requires the appellate court to consider only the evidence and inferences tending to support the finding under attack and to disregard all evidence and inferences to the contrary. Wetzel v. Sullivan, King & Sabom, P.C., 745 S.W.2d 78, 79 (Tex.App.-Houston [1st Dist.] 1988, no writ) (citing Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965)). Because no findings of fact or conclusions of law were filed, we must uphold the trial court's decision if there is sufficient evidence to support it on any legal theory asserted. Wetzel, 745 S.W.2d at 81.

The party seeking arbitration has the initial burden to establish his right to the remedy under the contract; that is, to establish that a valid arbitration agreement exists. City of Alamo v. Garcia, 878 S.W.2d 664, 665 (Tex.App.-Corpus Christi 1994, no writ); see Nationwide of Fort Worth, Inc. v. Wigington, 945 S.W.2d 883, 884 (Tex.App.-Waco 1997, no writ). Both parties concede that an arbitration agreement existed. In applying the law to the Federal Arbitration Act, Texas courts have concluded that once the existence of an arbitration agreement has been established, then a presumption attaches favoring arbitration. At this point, the burden of proof shifts to the party seeking to avoid the arbitration agreement to show that some grounds exist in law or equity for the revocation of the contract. Such grounds could include fraud, waiver, unconscionability, or that the dispute was not within the scope of the agreement. Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 900 (Tex.1995); Merrill Lynch, Pierce, Fenner, and Smith, Inc. v. Longoria, 783 S.W.2d 229, 231 (Tex.App.-Corpus Christi 1989, orig. proceeding). This is a proper placement of the burden under Texas law, given the strong Texas presumption in favor of arbitration. See Brazoria County v. Knutson, 142 Tex. 172, 176 S.W.2d 740, 743 (1943); Wetzel, 745 S.W.2d at 81.

In determining whether to compel arbitration, the court must decide two issues: (1) whether a valid, enforceable arbitration agreement exists, and (2) if so, whether the claims asserted fall within the scope of the agreement. BDO Seidman v. Miller, 949 S.W.2d 858, 860 (Tex.App.-Austin 1997, writ dism'd w.o.j.); Nationwide, 945 S.W.2d at 884. The court has no discretion and must compel arbitration if the answer to both questions is affirmative. Merrill Lynch, Pierce, Fenner & Smith v. Eddings, 838 S.W.2d 874, 878 (Tex.App.-Waco 1992, writ denied). Doubts regarding the scope of arbitration agreements are resolved in favor of arbitration. Id. at 880.

1. Does a valid, enforceable arbitration agreement exist?

The contracts in dispute in this case were attached to the pleadings filed with the trial court. None of the parties dispute the existence of the arbitration clauses within the contracts.

A. Requirement of Mediation

The doctors contend that HeartPlace is not entitled to arbitration because it has not presented any evidence that it complied with a condition precedent to invoking arbitration, that being the requirement to mediate the dispute before pursuing arbitration. The portion of the contracts on which the doctors rely states:

30. Arbitration. Any dispute arising over the terms and conditions of this Agreement or in any manner relating to this Agreement which the parties are unable to resolve informally between themselves or by mediation shall be submitted, upon the motion of either party, to arbitration under the appropriate rules of the American Arbitration Association ("AAA").

Breach of a condition precedent affects the enforceability of the provision to which the condition is attached. Landscape Design and Constr., Inc. v. Harold Thomas Excavating, Inc., 604 S.W.2d 374, 376 (Tex.Civ.App.-Dallas 1980, writ ref'd n.r.e.).

HeartPlace contends that the doctors "ran to the courthouse" and thereby demonstrated their intent to forego any informal attempts to resolve the dispute. Also, HeartPlace contends that if the provision relied upon by the The record does not demonstrate that either party attempted to resolve the dispute informally. Furthermore, the language of the agreement does not appear to rise to the level of a condition precedent. The arbitration provision is not defeated by a failure to mediate.

doctors was truly a condition precedent to arbitration, the doctors could frustrate any arbitration of the dispute by simply refusing to participate in any informal attempts at resolution. Lastly, HeartPlace argues that the parties have remained at the courthouse and this evidences an inability of the parties to informally resolve the issues.

B. Did HeartPlace repudiate the contract?

The doctors contend that HeartPlace anticipatorily breached, and therefore repudiated, the contract by significantly reducing the compensation levels to the doctors. According to the doctors, this repudiation is cause to render the entire contract, including the arbitration requirement, unenforceable. For this proposition, the doctors rely heavily on Miller v. Puritan Fashions Corp., 516 S.W.2d 234 (Tex.Civ.App.-Waco 1974, writ ref'd n.r.e.). In Miller, the appellee terminated appellant before the conclusion of the employment contract by sending a letter so advising Miller. The employment contract contained an arbitration provision governed by the Federal Arbitration Act. Although governed by the Act, the court stated:

If the Texas law applied in the case at bar, because of...