Haddock v. Quinn

• Decision Date: 26 February 2009
• Docket Number: No. 2-07-048-CV.,No. 2-06-472-CV.,2-06-472-CV.,2-07-048-CV.
• Citation: 287 S.W.3d 158
• Parties: Gerald W. HADDOCK, Appellant, v. William F. QUINN, Paul E. Rowsey, III, John Goff, Terry N. Worrell, Crescent Real Estate Equities Company, Crescent Real Estate Limited Partnership and Crescent Real Estate Equities, Ltd., Appellees. and In re Gerald W. Haddock, Relator.
• Court: Texas Court of Appeals

287 S.W.3d 158

Gerald W. HADDOCK, Appellant, v. William F. QUINN, Paul E. Rowsey, III, John Goff, Terry N. Worrell, Crescent Real Estate Equities Company, Crescent Real Estate Limited Partnership and Crescent Real Estate Equities, Ltd., Appellees. and In re Gerald W. Haddock, Relator.

No. 2-06-472-CV.

No. 2-07-048-CV.

Court of Appeals of Texas, Fort Worth.

February 26, 2009.

Rehearing and Rehearing En Banc Overruled July 9, 2009.

Wolf Law PC and Jeffrey J. Wolf, Fort Worth, and Beatie and Osborn LLP and

Russel H. Beatie, New York, NY, for appellant/relator.

Jackson & Walker LLP and Charles L. Babcock, David T. Moran, Patrick R. Cowlishaw, William R. Jenkins, Jr., Amanda L. Bush, Fort Worth, for appellees/real parties in interest.

PANEL: GARDNER and WALKER, JJ.; and DIXON W. HOLMAN, J. (Senior Justice, Retired, Sitting by Assignment).

OPINION

ANNE GARDNER, Justice.

I. Introduction

In this consolidated interlocutory appeal and mandamus proceeding, Relator and Appellant Gerald W. Haddock seeks relief from the trial court's order staying arbitration proceedings that he initiated against Appellees and Real Parties in Interest William F. Quinn, Paul E. Rowsey, III, John Goff, Terry N. Worrell, Crescent Real Estate Equities Company ("CEI"), Crescent Real Estate Equities Limited Partnership ("CREELP"), and Crescent Real Estate Equities, Limited ("CREE").

Haddock raises three issues. In his first issue, Haddock argues that the trial court improperly assumed jurisdiction because the parties contracted to have all issues — including questions of arbitrability — decided by arbitration. Second, Haddock contends that even if the trial court had jurisdiction to decide some issues of arbitrability, the main issue in this case — whether he repudiated or waived arbitration — should be decided by an arbitrator. Third, Haddock argues that the trial court erred and abused its discretion by concluding that he repudiated or waived arbitration by engaging in prior litigation that was inconsistent with arbitration.

Real Parties in Interest contend that the issue of repudiation or waiver was properly for the court to decide and that the trial court correctly determined that Haddock repudiated, or in the alternative waived, arbitration of his claims by substantially invoking the judicial process to their detriment. They argue that the trial court correctly concluded that the remaining claims asserted by Haddock, individually and derivatively on behalf of CEI stockholders and against nonsignatories, are not within the scope of the arbitration agreement.

II. Factual and Procedural Background

A. The Parties

1. The Crescent Entities

CEI is a publicly held real estate investment trust (commonly referred to as a "REIT") organized under the laws of the state of Texas. CEI is structured as an Umbrella Partnership Real Estate Investment Trust whereby CEI owns a majority of the limited partnership interests in CREELP, a Delaware limited partnership. This organizational structure (referred to as an "UPREIT") allows owners of investment real estate to sell their properties to CREELP in exchange for CREELP units, which the seller may later convert into CEI common stock. The real estate owners incur no income tax liability until they sell the stock. CREE, a Delaware corporation, is a wholly owned subsidiary of CEI and serves as CREELP's general partner.

2. The Individuals

In 1994, Haddock and two cofounders created the Crescent Entities and related companies. Prior to 1994, Haddock had served in various capacities in companies formed by one of the cofounders, including serving as lead transactional attorney and chief negotiator. Of the individual Real Parties in Interest, John Goff currently serves as CEI's CEO and Vice Chairman. William Quinn, Paul Rowsey III, and Terry Worrell serve as members of CEI's Board of Trust Managers.

B. The CREELP Partnership Agreement and Arbitration Clause

In February 1994, Haddock, as CEI's President, signed a limited partnership agreement on behalf of CEI, CREE, and several limited partners to form the CREELP limited partnership. CREE was CREELP's general partner. Haddock became a limited partner in CREELP as well as President of CEI, and he became CEO of CEI in 1996. As an officer and senior management employee, Haddock received options to purchase units in CREELP in 1995 and 1996, which were exchangeable for CEI common stock. The options for both the CREELP units and CEI stock were created by incentive plans adopted by those entities' respective governance committees.

The original CREELP limited partnership agreement did not contain an arbitration agreement. However, in May 1994, the limited partnership agreement was amended to add an arbitration agreement that provides, in pertinent part:¹

Section 16.1 Arbitration

Notwithstanding anything to the contrary contained in this Agreement, all claims, disputes and controversies between the parties hereto (including, without limitation, any claims, disputes, and controversies between the Partnership and any one or more of the Partners and any claims, disputes and controversies among any two or more Partners) arising out of or in connection with this Agreement or the Partnership created hereby, relating to the validity, construction, performance, breach, enforcement or termination thereof, or otherwise, shall be resolved by binding arbitration in the State of Texas, in accordance with this Article 16 and, to the extent not inconsistent herewith, the Expedited Procedures and Commercial Arbitration Rules of the American Arbitration Association.

The arbitration agreement contains additional paragraphs of detailed procedures to be followed in any arbitration proceedings under the agreement, including an expedited schedule for selection of an arbitration panel, for commencement and completion of the arbitration proceeding within sixty days after selection, and for rendition by the panel of its award within thirty days thereafter.

C. The Severance Agreement

In June 1999, Haddock resigned from his executive positions and entered into a confidential severance agreement with CEI and CREELP, which provided for him to receive certain cash compensation and which, together with simultaneously executed amended unit option and stock option agreements, accelerated the vesting of certain of his CREELP unit options and CEI stock options that he had previously received as part of his compensation. The agreement called for Haddock to relinquish all of his remaining unvested unit options and stock options. Paragraph 13 of the severance agreement (the "unfavorable-comments clause") restricted both Haddock and the Crescent Entities from making unfavorable comments about the other or about Haddock's job performance. The severance agreement did not contain an arbitration clause.

D. The Prior Lawsuit

In March 2005, Haddock filed a suit for a declaratory judgment and for temporary and permanent injunctions against the Crescent Entities in the 17th District Court of Tarrant County, Texas. Haddock pleaded his prior status as CEO and President of CEI, CREE, and other related entities referred to in his petition as "the Employer Group," that he and the Employer Group had agreed to terminate his employment relationship in June 1999, and that the parties had entered into a confidential severance agreement that he would file under seal with the court. Haddock stated that as consideration for his resignation from all directorships and offices held in the Employer Group, the severance agreement provided that, in addition to stock and units in CEI and CREELP that he already owned, he was promised certain cash compensation as well as the accelerated vesting of certain stock and partnership unit options and that he thereby became immediately vested in a large number of stock and unit options in both CEI and CREELP.

In his petition, Haddock further explained that he had become "concerned" that the Crescent Entities were being managed and operated adversely to interests of shareholders and unitholders by offering executives excessive compensation packages and risky loans that seriously jeopardized the financial health and stability of the entities. Haddock alleged that he desired to discuss these concerns with fellow shareholders and unitholders and to further investigate but feared that doing so might be construed by the Crescent entities as a breach of the unfavorable comments clause in the severance agreement. Haddock alleged that he had received threats that the Crescent Entities would forfeit his options as a result of his conduct in discussing those matters and exposing their "questionable practices."

Haddock sought to clarify or reform the severance agreement by a declaratory judgment that the unfavorable comments clause of the severance agreement was void or limited to statements rising to the level of actionable defamation. He also sought and obtained a temporary restraining order against the Crescent Entities from "[t]hreatening or taking any action to declare forfeited or interfere with" his rights in any shares of CREE or CREELP, already owned by him or shares or units subject to an unexercised option held by him. The restraining order granted by the trial court also provided that all parties were to abide by the unfavorable-comments clause. The parties later agreed to an order extending the temporary restraining order until the date of trial, originally scheduled for August 29, 2005.

The Crescent Entities filed a counterclaim asserting that Haddock had breached the terms of both the severance agreement and a subsequent 2001 settlement agreement, general release, and covenant not to sue for claims and causes of action in any way connected with his prior employment or termination.

In June 2005, Haddock filed a motion to clarify or modify the temporary restraining order, alleging that he proposed to exercise his rights as a unitholder in CREELP and the right to have...