Ikon Office Solutions v Eifert

Decision Date16 September 1999
Citation2 S.W.3d 688
Parties<!--2 S.W.3d 688 (Tex.App.-Houston 1999) IKON OFFICE SOLUTIONS, INC., GAYLEN MCCLUSKY AND CHARLIE HOLLIS, Appellants v. STEVEN G. EIFERT, Appellee and IN RE IKON OFFICE SOLUTIONS, INC., GAYLEN MCCLUSKY AND CHARLIE HOLLIS, Relators NO. 14-98-01337-CV NO. 14-98-01424-CV In The
CourtTexas Court of Appeals

On Appeal from 215th District Court, Harris County, Texas, Trial Court Cause No. 97-61183

Affirmed

[Copyrighted Material Omitted] Panel consists of Justices Yates, Fowler and Frost.

Original Proceeding Writ of Mandamus

O P I N I O N

Leslie Brock Yates, Justice

This is a consolidated interlocutory appeal and petition for writ of mandamus arising from an order denying a motion to compel arbitration brought by appellants/relators, IKON Office Solutions, Inc.("IKON"), Gaylen McClusky, and Charlie Hollis. See TEX. CIV. PRAC. & REM. CODE ANN. 171.098a(1) (Vernon Supp. 1999); see also Jack. B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992). At issue, is whether contract and tort claims asserted by appellee/real party in interest, Steven G. Eifert, are covered by the arbitration provision in the parties' sale agreement. Because we conclude the arbitration provision is limited and does not cover Eifert's claims, we affirm the trial court's judgment and deny the petition for writ of mandamus.

FACTUAL AND PROCEDURAL BACKGROUND

Eifert is the former owner of nearly 97% of the outstanding shares of Global Services, Inc. ("Global"), a distributor of office products. In May 1996, Eifert sold Global to Alco Standard Corporation, now IKON, a major distributor of office supplies. The sale is documented by a Plan and Agreement of Reorganization ("the Acquisition Agreement") between IKON and Global's two shareholders, Eifert and Dana Davis. During negotiations, Eifert made three demands: (1) that Eifert be given a "meaningful" position in IKON after acquisition; (2) that Global continue as a distinct, independent operating entity for more than two years and (3) that Eifert remain as CEO of Global with full control over executive employment. These demands, along with a promise to give Global the rights to market IKON's exclusive product line of Oc copiers and systems printers, were made terms of an Employment and Non-Competition Agreement ("the Employment Agreement") between IKON and Eifert. The Employment Agreement specifically contemplates the "concurrent" execution of the Acquisition Agreement and was attached to the Acquisition Agreement as Exhibit E.1 That exhibit, as well as other exhibits and schedules were incorporated by reference and made a part of the Acquisition Agreement. According to its terms, the Acquisition Agreement constituted the entire agreement of the parties.

After the sale, Global incurred losses. Eifert alleges that these losses were caused as a result of a "spin-off" of one of IKON's operating entities, which IKON had previously assured would not cause a problem. He also alleges there was a conspiracy between IKON's Central Division President, Gaylen McClusky, and the President of IKON Houston, Charlie Hollis, to get rid of Global as a distinct entity and to interfere with Eifert's contractual relationship with IKON. Eifert alleges that IKON, led by McClusky and Hollis, disparaged Global in the market place, denied Global access to the Oc product line, and delayed Eifert's appointment as CEO of IKON's Texas operations. At a November 1996 meeting among IKON and Global executives to discuss Global's situation, McClusky announced plans to cease Global's operations as an independent entity. Accordingly, IKON never made Eifert CEO of IKON's Texas operations and never gave Global the opportunity to market the Oc product line. Eifert ultimately resigned.

On December 19, 1997, Eifert filed suit against IKON, McClusky and Hollis for breach of contract, fraud, tortious interference and conspiracy. Specifically, Eifert alleged that IKON breached the Employment Agreement and fraudulently induced him to sell his company for "far less than its actual value." Eifert also alleged that McCluskey and Hollis tortiously interfered with the Employment Agreement and conspired to commit fraud. Eifert subsequently filed a first amended petition, adding a claim for declaratory relief that the covenant not to compete contained in the Employment Agreement was unenforceable. In response to Eifert's claims, the defendants filed a general denial. In the spring of 1998, the trial court set the case for trial on January 18, 1999. During that spring and fall, the parties engaged in limited discovery. On September 3, 1998, ten months after Eifert had filed suit and four months before trial, the defendants filed a motion to compel arbitration asserting that all of Eifert's claims were based on the termination of his employment and thus, were covered by the arbitration provision contained in the Employment Agreement. The defendants attached a copy of that agreement to their motion. Paragraph 7 of the Employment Agreement, entitled Arbitration of Disputes, provides:

In the event Employee's employment is terminated, and Employee contends that such termination was wrongful or otherwise in violation of his rights or privileges, express or implied, whether founded in fact or in law, or any other rights or privileges, or was in violation of any express or implied condition, term, or covenant, whether founded in law or in fact, including but not limited to the covenant of good faith and fair dealing, or otherwise in violation of law, Employee and [IKON] agree to submit the above-described disputed matter to binding arbitration in Houston, Texas in accordance with the rules of the American Arbitration Association. Employee and [IKON] further expressly agree that in any such arbitration, the maximum remedy which may be awarded by the arbitrator(s) shall be limited to any unfulfilled Base Salary remaining in the employment period, and Employee agrees that he shall not be entitled to any other remedy at law or in equity, including but not limited to general damages, punitive damages and/or injunctive relief.

On September 16, 1998, Eifert filed a second amended petition. In this pleading, Eifert continued to maintain that the defendants fraudulently induced him to sell his company for less than its true value. Eifert, however, added factual allegations concerning representations made about "the value of IKON stock being paid to [him] for his Global stock." He also alleged that the "critical promises and representations made to [him] to induce the sale were incorporated into the Acquisition Agreement." Thus, Eifert deleted references to the Employment Agreement and instead, referred to the Acquisition Agreement.2 In addition, Eifert added two more counts of fraud, including statutory fraud in a stock transaction, and specifically alleged breach of the Acquisition Agreement.

On the same day that he filed his second amended petition, Eifert filed a response to the motion to compel arbitration asserting that his claims were not for wrongful termination under the Employment Agreement, but were based solely on the alleged fraudulent sale of his company under the Acquisition Agreement. According to Eifert, there was no agreement to arbitrate claims arising from the Acquisition Agreement. Eifert also asserted that McClusky and Hollis could not individually enforce the arbitration provision in question because they were not parties to either agreement. He further asserted that IKON had waived arbitration by participating in discovery. Eifert attached the Acquisition Agreement, his second amended petition, his own affidavit and the affidavit of his attorney. Eifert later filed a supplemental response that included affidavits from two experts and the attorney who handled the merger for Eifert. The defendants filed a response reasserting that Eifert's claims were subject to arbitration under the Employment Agreement.

On October 26, 1998, the trial court held a hearing and orally denied the defendants' motion to compel arbitration. On November 11, 1998, the trial court signed the written order. Five days later, the defendants filed their notice of accelerated appeal. See TEX. R. APP. P. 26.1(b), 28; see also TEX. CIV. PRAC. & REM. CODE ANN. 171.098a(1). On December 22, 1998, as an alternative to their appeal, the defendants filed their petition for writ of mandamus. On February 11, 1999, we consolidated the two proceedings and stayed a final trial on the merits pending a final decision on both the appeal and mandamus. See In re Valero Energy Corp., 968 S.W.2d 916, 916-17 (Tex. 1998). On April 19, 1999, pursuant to the request of appellants/relators, we abated both proceedings and postponed oral argument to allow the newly appointed judge of the 215th District Court the opportunity to reconsider the court's prior order denying the motion to compel arbitration. See TEX. R. APP. P. 7.2(b). On May 13, 1999, the new trial judge denied the defendants' motion for reconsideration.

INTERLOCUTORY APPEAL (TEXAS ACT)

Standard of Review

In determining whether to compel arbitration, two issues must be decided: (1) whether a valid, enforceable arbitration exists, and if so, (2) whether the claims asserted fall within the scope of the agreement. See Leander Cut Stone Co., Inc. v. Brazos Masonry, Inc., 987 S.W.2d 638, 640 (Tex. App.--Waco 1999, no pet.); see also Dallas Cardiology Associates, P.A. v. Mallick, 978 S.W.2d 209, 212 (Tex. App.--Texarkana 1998, pet. denied). A court has no discretion and must compel arbitration if the answer to both questions is affirmative. See Dallas Cardiology, 978 S.W.2d at 212. The trial court may summarily decide whether to compel arbitration on the basis of affidavits, pleadings, discovery and stipulations. See Jack B. Anglin, 842 S.W.2d at 269. The trial court must conduct an evidentiary hearing, however, when there are disputed material facts. See id.

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