Hou-Scape, Inc. v. Lloyd

• Decision Date: 03 April 1997
• Docket Number: INC,HOU-SCAP,No. 01-97-00169-CV,01-97-00169-CV
• Citation: 945 S.W.2d 202
• Parties: , Relator, v. The Honorable Russell LLOYD, Judge of the 334th District Court, Harris County, Texas, Respondent. (1st Dist.)
• Court: Texas Court of Appeals

Page 202

945 S.W.2d 202

HOU-SCAPE, INC., Relator, v. The Honorable Russell LLOYD, Judge of the 334th District Court, Harris County, Texas, Respondent.

No. 01-97-00169-CV.

Court of Appeals of Texas Houston (1st Dist.).

April 3, 1997.

L. Keith Rhymes, Corprew Kaye Cockran, Houston, for relator.

Eddie Krenek, Houston, for real parties in interest.

Before COHEN, O'CONNOR and HEDGES, JJ.

OPINION

PER CURIAM.

Hou-Scape, Inc. (Hou-Scape), relator, seeks mandamus relief from the trial judge's order denying arbitration of tort claims. Hou-Scape also seeks to compel the trial judge to confirm an arbitration award already rendered. We conditionally grant the writ of mandamus, sending the tort claims to arbitration, but we do not compel the judge to confirm the arbitration award.

BACKGROUND

Johnson Golf Course Construction Company, Inc. (Johnson), a real party in interest, contracted to work on a city's golf course. Johnson, in turn, sub-contracted with Hou-Scape to perform landscaping and planting at the golf course. The sub-contract required Johnson to purchase a payment and performance bond, which Johnson obtained through Colonia Insurance Company (Colonia), the other real party in interest.

Hou-Scape sued Johnson for the sub-contract's breach. Hou-Scape sued Colonia a few months later for not paying pursuant to the performance bond. Johnson counterclaimed against Hou-Scape for fraud and misrepresentation; Deceptive Trade Practices Act ¹ (DTPA) violations; breach of express and implied warranties; negligence and gross negligence; breach of contract; violations of TEX. GOV'T CODE ANN. § 2253.079 (Vernon Pamph.1997); and recission.

About four months after suing Johnson, Hou-Scape moved to compel arbitration under the Federal Arbitration Act (FAA) ² and to stay the court proceedings. The sub-contract between Hou-Scape and Johnson contains the following arbitration clause:

6.1. Any controversy or claim between the Contractor [Johnson] and the Subcontractor [Hou-Scape] arising out of or related to this Subcontract, or the breach thereof, shall be settled by arbitration, which shall be conducted in the same manner and under the same procedure as provided in the Prime Contract with respect to claims between the Owner and Contractor ... If the Prime Contract does not provide for arbitration, it shall be conducted in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise.

The prime contract between Johnson and the city also contained an arbitration clause applicable to Johnson and Hou-Scape. The prime contract provided for arbitration as follows:

16.1. All Claims, disputes and other matters in question between OWNER and CONTRACTOR arising out of, or relating to the Contract Documents or the breach thereof ... will be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining subject to the limitations of this Article 16.

16.3. ... The demand for arbitration will be made within ... a reasonable time after the claim, dispute or other matter in question has arisen, and in no event shall any such demand be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations.

After a hearing, the trial judge granted Hou-Scape's motion to compel arbitration and stay proceedings. We have no record of that hearing, but Hou-Scape claims, and Johnson does not dispute, that no evidence was presented then. Only argument of counsel was heard.

After the hearing, Johnson added two causes of action to its counterclaim, one for libel and defamation and one for tortious interference with business relations. Johnson moved to sever non-arbitrable claims. The judge ordered that all tort claims be tried rather than arbitrated.

The arbitration proceeded on the parties' contract claims against each other, resulting in a $115,000 judgment for Hou-Scape. Hou-Scape then moved the trial judge to confirm the arbitration award, pursuant to Section 171.013 of the Texas Arbitration Act ³ (TAA). Hou-Scape requested that the trial judge either (1) enter a judgment stating that all claims had been decided by the arbitrator, or alternatively, (2) enter two judgments, one confirming the award for all but tort claims, and a second one ordering the remaining tort claims to arbitration. Johnson moved to vacate the award. No ruling was made on either motion.

RELATOR'S REQUEST THAT MANDAMUS ISSUE TO COMPEL THE TRIAL

JUDGE TO ENTER JUDGMENT ON THE ARBITRATION AWARD

The TAA requires a court to confirm an arbitration award unless a party urges proper grounds to vacate, modify or correct the award within, in most situations, 90 days after the delivery of a copy of the award to the applicant. TEX.CIV.PRAC. & REM.CODE ANN. § 171.013 (Vernon Supp.1996). If the application to vacate the award is denied, the trial court must confirm the award. TEX.CIV.PRAC. & REM.CODE ANN. § 171.014(d) (Vernon Supp.1996). Johnson timely moved to vacate the arbitration award, and the trial judge has not yet ruled on Johnson's motion. We hold that this issue is not ripe for our consideration.

RELATOR'S REQUEST THAT MANDAMUS ISSUE TO COMPEL THE TRIAL

COURT TO SEND TORT CLAIMS TO ARBITRATION

1. Application of the FAA

The threshold issue is whether the FAA applies to the arbitration clause. ⁴ The FAA applies to an arbitration agreement in a contract evidencing a transaction involving "commerce." 9 U.S.C. § 2 (1987); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269-70 (Tex.1992). "Commerce" is broadly construed and encompasses contracts relating to interstate commerce. Belmont Constructors, Inc. v. Lyondell Petrochemical Co., 896 S.W.2d 352, 355 (Tex.App.--Houston [1st Dist.] 1995, no writ).

Hou-Scape's verified motion to compel arbitration alleged that the goods it provided were in interstate commerce and that Colonia was a New York insurance corporation. Neither Johnson nor Colonia has contested these assertions here or below. Moreover, the prime contract refers to the FAA, stating, "The award ... will not be subject to modification or appeal except to the extent permitted by Sections 10 and 11 of the Federal Arbitration Act ..." Consequently, we hold the FAA applies to the arbitration clause. See Lost Creek Mun. Util. Dist. v. Travis Indus. Painters, Inc., 827 S.W.2d 103, 105 (Tex.App.--Austin 1992, writ denied) (finding "commerce" where surety bond was issued and goods were made outside state); cf. Belmont Constructors, Inc., 896 S.W.2d at 356 (treating insurance by foreign companies as evidence of interstate commerce).

2. Standard of Review and Availability of Mandamus Relief

Mandamus will lie under the FAA. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 88 (Tex.1996); Metropolitan Life Ins. Co. v. Lindsay, 920 S.W.2d 720, 722 (Tex.App.--Houston [1st Dist.] 1996, orig. proceeding). We follow the standard of review in Anglin, 842 S.W.2d at 271, 272-73.

3. Scope of Arbitration Clause

When the FAA applies, federal law determines whether a dispute is arbitrable. Prudential Sec., Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995); Prudential-Bache Sec., Inc. v. Garza, 848 S.W.2d 803, 806 (Tex.App.--Corpus Christi 1993, orig. proceeding). We use federal common law to interpret the arbitration clause at issue. Prudential Sec., Inc., 909 S.W.2d at 899.

A party cannot be required to arbitrate unless it has agreed to do so. Matthews v. Rollins Hudig Hall Co., 72 F.3d 50, 53 (7th Cir.1995). Nevertheless, there is a strong federal policy favoring arbitration. Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983); Metropolitan Life Ins. Co., 920 S.W.2d at 722. An order to arbitrate should not be denied unless it can be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960); Metropolitan Life Ins. Co., 920 S.W.2d at 722. Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. at 941; Metropolitan Life Ins. Co., 920 S.W.2d at 722. In determining whether the claim falls within an arbitration agreement's scope, a court focuses on the facts alleged, not on the causes of action asserted. Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846 (2nd Cir.1987); Prudential Sec., Inc., 909 S.W.2d at 900.

Courts consider whether the facts alleged "touch matters" covered by the underlying agreement. Genesco, 815 F.2d at 846; American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 93 (4th Cir.1996) ("significant relationship" to the contract); Griffin v. Semperit of Am., Inc., 414 F.Supp. 1384, 1389 (S.D.Tex.1976) ("inextricably enmeshed"); Anglin, 842 S.W.2d at 271 ("factually intertwined"). The fact that a tort claim would not have arisen "but for" the parties' contract does not necessarily determine whether that claim is arbitrable. Tracer Research Corp. v. Nat'l Environ. Serv. Co., 42 F.3d 1292, 1295 (9th Cir.1994). The words used in these particular contracts, "arising out of or relating to," have been held to be very broad language favoring arbitration. See Tracer Research Corp., 42 F.3d at 1295; Genesco, 815 F.2d at 848; Pierson v. Dean, Witter, Reynolds, Inc., 742 F.2d 334, 338 (7th Cir.1984).

a. Johnson's DTPA Claims

Johnson alleges that Hou-Scape's products and services were deficient and did not meet warranties and representations Hou-Scape had made. We find that these claims arise out of and relate to the sub-contract and, therefore, are arbitrable. See Anglin, 842 S.W.2d at 271 (finding DTPA claim was arbitrable); cf., D. Wilson...