Glassell Producing Co. v. Jared Res., Ltd.

• Decision Date: 09 January 2014
• Docket Number: No. 06–13–00020–CV.,06–13–00020–CV.
• Parties: GLASSELL PRODUCING COMPANY, INC., et al., Appellants v. JARED RESOURCES, LTD., et al., Appellees.
• Court: Texas Court of Appeals

422 S.W.3d 68

GLASSELL PRODUCING COMPANY, INC., et al., Appellants

v.JARED RESOURCES, LTD., et al., Appellees.

No. 06–13–00020–CV.

Court of Appeals of Texas, Texarkana.

Submitted Sept. 26, 2013.

Decided Jan. 9, 2014.

Chad Flores, Murray Fogler, Beck Redden, LLP, Houston, for Appellant.

Roberta S. Dohse, Robin Clay Hoblit, Hoblit Ferguson Darling, LLP, Corpus Christi, Kenneth W. Hill, Carthage, for Appellee.

Before MORRISS, C.J., CARTER and MOSELEY, JJ.

OPINION

Opinion by Justice CARTER.

I. Introduction

We withdraw our opinion of November 21, 2013, and substitute the following opinion in its place.

This appeal, at its core, involves a dispute between a brother and a sister over the proceeds generated from property interests left to them by their father. Curry Glassell sued her brother, Alfred C. Glassell, III, among others, claiming fraud, conversion, breach of fiduciary duty, and numerous other causes of action.¹ Alfred, III, and the other defendants filed a motion to compel arbitration, invoking an arbitration clause contained in a letter agreement Curry had signed. The trial court denied the motion to compel arbitration. This is an interlocutory appeal from that denial. SeeTex. Civ. Prac. & Rem.Code Ann. §§ 51.014, 51.016 (West Supp.2013), § 171.098 (West 2011).

II. Factual Background

Alfred Glassell, Jr., owned and operated oil and gas interests in Panola County, Texas, for many years. In 2007, Glassell Producing Company, Inc. (GPC), succeeded Alfred, Jr., as the operator of his oil and gas interests, and, at the same time, his son, Alfred, III, became the president and a director of GPC.

In 2008, Alfred, III, in his role as GPC's president, contacted Curry by letter informing her that GPC had received an “ ‘unsolicited offer’ ” from Chesapeake Enterprises to purchase deep rights in the Wiener Unit, a unit also located in Panola County.² Curry signed a letter agreement to facilitate the $100 million sale to Chesapeake. This agreement, which contained a binding arbitration clause, was also signed by GPC through its president. No other parties or individuals signed this letter agreement. The applicability of the binding arbitration clause contained in this letter agreement is the central issue in this appeal.

In connection with the potential sale to Chesapeake, the parties conducted a title search of the property comprising the Wiener Unit, which revealed that in 1982, Alfred, Jr., had assigned mineral rights in properties located in the Bird, Bounds, and Panola Units to his children, Alfred, III, and Glassell. ³

As a direct result of the proposed sale to Chesapeake, on October 27, 2008, the sellers, including Curry, created overriding royalties out of the properties being sold to Chesapeake.⁴ GPC hired tax advisors who proposed that a family corporation hold the overriding royalty interests to minimize tax liability. In keeping with this advice, Cabo Blanco was created to hold the seller's recently created overriding royalties. Alfred, III, Thad Dameris, and Pam Lindberg were the initial directors and continue to serve as directors of Cabo Blanco.

The Chesapeake sale was set to close in October 2008; however, the deal was delayed by Alfred, Jr.'s, death only days before the scheduled closing. Ultimately, the deal closed in October 2009 as a result of litigation between the Glassells and Chesapeake.

In 1996, Curry granted Alfred, III, a power of attorney giving him full authority to handle her real property transactions, commodity and option transactions, and energy powers. That power of attorney was in effect until 2009. Curry alleges that, during this time—1996 through 2009—Alfred, III, never informed her of any actions related to her property interests. On January 1, 2012, GPC announced, according to Curry, that it would cease marketing and operating Curry's leasehold interests. Curry also claims that Cabo Blanco refused to provide her with any stock certificates, refused to explain what share of the business she owned, and refused to provide her with formation papers, minutes of the board meetings, or an accounting.

Curry sued GPC, Cabo Blanco, and the three directors of Cabo Blanco, Alfred, III, Dameris, and Lindberg.⁵ Curry's lawsuit seeks an accounting of (1) all her property interests, (2) past-due royalties owed her, and (3) her interest in Cabo Blanco. Curry'spetition also raises claims of fraud, shareholder oppression, constructive fraud, breach of fiduciary duty, negligence, gross negligence, conversion, breach of contract, and unjust enrichment. Curry claims GPC's own accountants concede she is owed $1.4 million. She further alleges that GPC breached its duty as an operator and committed fraud in overcharging costs, misrepresenting her income, and converting her property. Curry claims that Alfred, III, owed her a fiduciary duty due to his special relationship of trust created by his superior knowledge of the oil and gas business, his familial relationship, and the power of attorney she granted to him. Curry also alleges that she relied upon misrepresentations that Cabo Blanco would be operated as a “normal company” and that Cabo Blanco owed her a fiduciary duty. Curry contends that Alfred, III, “manipulates” both GPC and Cabo Blanco as his alter ego and that, consequently, the corporate veils of both companies should be pierced.

The defendants below collectively filed a motion to compel arbitration of some, but not all, of Curry's claims.⁶ The motion to compel sought arbitration of the following claims:

• Fraudulently misrepresenting that [the Defendants] would act reasonably, fairly, and prudently and in Curry's best interest in creating, operating, and conducting the affairs of Cabo Blanco;

• Fraudulently refusing to provide evidence of ownership of Cabo Blanco;

• Fraudulently representing the costs and expenses incurred in connection with the creation of Cabo Blanco;

• Fraudulently overcharging Curry's interests in Cabo Blanco and failing to pay Curry all monies due to her; and

• Failing to provide an accounting to substantiate costs assessed against Curry's interest in Cabo Blanco.

The motion to compel continues,

Further, Curry alleges that Defendants Alfred III, Dameris, and Lindberg owe a duty to her, as directors of Cabo Blanco, and they have breached those duties by failing to disclose materials [sic] facts to her, and not acting in her best interests ....

In sum, Curry has brought a[sic] fraud, fraud in the inducement, fraud by nondisclosure, constructive fraud, shareholder oppression, constructive trust, breach of fiduciary duty, negligence, unjust enrichment, and breach of contract causes of action against Cabo Blanco, its directors, and GPC.

Appellants allege that all claims arising out of or relating to Cabo Blanco should be compelled to arbitration. The trial court denied the motion to compel.

Both GPC and Curry signed the letter agreement and are bound by it. Appellants raise two issues: (1) whether the scope of the arbitration clause includes all claims against GPC and (2) whether the claims against the Nonsignatories are subject to arbitration under the theories of equitable estoppel, alter ego, and agency.

On rehearing, the parties have reached an agreement clarifying the claims for which arbitration was sought to be compelled. GPC and Curry have agreed that the disputed claims against GPC and Alfred, III, in his capacity as an officer and director of GPC, sought to be submitted to arbitration are claims “that relate to the sale to Chesapeake, the creation of the overriding royalty interests, and the creation or operations of Cabo Blanco.” GPC and Curry also agree:

Claims specifically not compelled to arbitration that are raised against GPC and Alfred III, in his capacity as officer and director for GPC, include claims relating to the 1982 Assignment of interests to Curry Glassell, any failure to disclose that assignment, and any failure to pay revenue owing to Appellants as a result of those working interests. These include any interests in shallow rights retained by Appellants after the sale to Chesapeake.

The following opinion should be interpreted consistent with these agreements.

We conclude that Curry's claims relating to the sale to Chesapeake, the creation of the overriding royalty interests, and the creation of or operations of Cabo Blanco against GPC, a signatory to the letter agreement, and its agent Alfred, III, in his official capacity as an officer and director of GPC, should be submitted to arbitration. Additionally, we find that Curry's claims against the Nonsignatories for the “overpayment of costs” ⁷ should be submitted to arbitration. Finally, we conclude that the remaining claims against the Nonsignatories are not subject to arbitration.

III. Claims Against GPC

GPC argues in its first issue that Curry's claims relating to the sale to Chesapeake, the creation of the overriding royalty interests, and the creation of or operations of Cabo Blanco—even though sounding in tort—fall within the scope of the arbitration clause. GPC claims that the letter agreement established the overarching legal structure for Curry's participation in the Chesapeake deal and that, since Cabo Blanco formed an integral part of implementing the Chesapeake deal, the claims are within the scope of the letter agreement's arbitration clause. Curry responds that the letter agreement was only a cost-sharing arrangement and that the scope of the arbitration clause is limited to breach of contract claims concerning costs.

The burden to prove the existence of an arbitration agreement between the parties and that the claims are within the scope of that arbitration clause is on the party seeking to compel arbitration. See, e.g., In re Morgan Stanley & Co., 293 S.W.3d 182, 185 (Tex.2009) (orig. proceeding); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex.2005) (orig. proceeding); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). Once the party seeking...