In re D. Wilson Const. Co.

• Decision Date: 30 June 2006
• Docket Number: No. 05-0327.,No. 05-0326.,05-0326.,05-0327.
• Citation: 196 S.W.3d 774
• Parties: In re D. WILSON CONSTRUCTION COMPANY, et al., Relators American Standard and the Trane Company, et al., Petitioners, v. Brownsville Independent School District, Respondent.
• Court: Texas Supreme Court

Page 774

196 S.W.3d 774

In re D. WILSON CONSTRUCTION COMPANY, et al., Relators

American Standard and the Trane Company, et al., Petitioners, v. Brownsville Independent School District, Respondent.

No. 05-0326.

No. 05-0327.

Supreme Court of Texas.

Argued February 14, 2006.

Decided June 30, 2006.

COPYRIGHT MATERIAL OMITTED

John R. Griffith, Lucia Thompson, Paul W. Gertz, Mark T. Beaman, David E. Little, Fred L. Shuchart, David P. Benjamin Cindy A. Lopez Garcia, Albert M. Gutierrez, Jr., Margery Huston, Rick Fancher, Rob Martin, Robert A. Skipworth, Ewing Edben Sikes, III, for relator.

Ernesto Gamez, Jr., Ramon Garcia, Baltazar Salazar, Catherine W. Smith, for real party in interest.

William K. Luyties, Paul Goldenberg, Moises R. Hernandez, James H. Powell, Jr., for person interested in case.

Justice WILLETT delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice HECHT, Justice O'NEILL, Justice WAINWRIGHT, Justice MEDINA, Justice GREEN, and Justice JOHNSON joined.

In this consolidated proceeding, we decide whether the court of appeals had jurisdiction over an interlocutory appeal under the Texas Arbitration Act and whether the parties' arbitration agreements are ambiguous. We hold that the court of appeals had jurisdiction over the interlocutory appeal and that the agreements are not ambiguous.

I. Background

In 1993, the Brownsville Independent School District contracted with two general contractors, D. Wilson Construction Company and Stotler Construction Company, to build two schools in Brownsville. Both contracts incorporate General Conditions and Supplementary Conditions.

The General Conditions expressly incorporate AIA Document A201, a standard construction industry document published by the American Institute of Architects that details the parties' respective rights, responsibilities and relationships on the project.¹ Paragraph 4.5 of A201 is titled "Arbitration," and subparagraph 4.5.1, titled "Controversies and Claims Subject to Arbitration," sets forth the broad, catch-all scope of the arbitration agreement: "Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association . . . ."

The Supplementary Conditions state that they "modify, change, delete from or add to" the General Conditions. Among other things, the Supplementary Conditions "[a]dd new Clause 4.5.1.1" to the arbitration provision: "Except as otherwise provided in this Contract, any dispute concerning a question of fact arising under this contract, which is not disposed of by agreement shall be decided by [BISD] .... The decision of [BISD] shall be final and conclusive unless" it is timely appealed to the Superintendent and then to the BISD Board of Trustees, "whose decision shall be final and conclusive."

This litigation began when one of the subcontractors, American Standard and the Trane Company (Trane), sought injunctive relief against BISD to preserve evidence in a personal injury action that students and teachers brought against Trane in another court. BISD counterclaimed for alleged defects in the construction of the two schools and filed third-party actions against several parties, including general contractors Wilson and Stotler, as well as subcontractors and second-tier subcontractors. Trane and the third-party defendants filed or joined motions to compel arbitration under the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and the Texas Arbitration Act, TEX. CIV. PRAC. & REM. CODE§§ 171.001-.098.² After a hearing, the trial court issued a brief letter ruling denying arbitration, saying "the Court finds the contract in question ambiguous." Trane and the third-party defendants filed both a petition for writ of mandamus under the FAA and an interlocutory appeal under the TAA, and the court of appeals consolidated the two proceedings. Nos. 13-04-184-CV, 13-04-333-CV, 2005 WL 310777, at *1 (citing In re Valero Energy Corp., 968 S.W.2d 916, 916-17 (Tex.1998)). The court of appeals dismissed the interlocutory appeal for want of jurisdiction, finding the TAA inapplicable since the dispute concerned a "`transaction involving commerce.'" Id. at 2005 WL 310777, at *2 (quoting In re MONY Sec. Corp., 83 S.W.3d 279, 282-83 (Tex.App.—Corpus Christi 2002, consolidated appeal and orig. proceeding)). The court also denied the petition for writ of mandamus, holding that clause 4.5.1.1 in the Supplementary Conditions creates ambiguity. Id. at 2005 WL 310777, at *3. In this appeal, Trane and the third-party defendants complain that (1) the court of appeals erred in dismissing their interlocutory appeal under the TAA for want of jurisdiction, and (2) the trial court erred in deeming the arbitration agreements ambiguous and abused its discretion in denying their motions to compel arbitration.

II. Jurisdiction of the Court of Appeals

Trane and the third-party defendants first argue that the court of appeals erred in dismissing their TAA-based interlocutory appeal for want of jurisdiction. We agree.³

The contracts in question reference neither the FAA nor TAA, merely noting that "[t]he Contracts shall be governed by the law of the place where the Project is located." We have interpreted identical language to invoke federal and state law. In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127-28 (Tex.1999) (per curiam) (consolidated appeal and orig. proceeding). Trane and the third-party defendants sought relief under both statutes in the court of appeals, bringing a petition for writ of mandamus under the FAA, see Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272-73 (Tex.1992), and an interlocutory appeal under the TAA, TEX. CIV. PRAC. & REM. CODE § 171.098(a)(1).

While refusing jurisdiction under the TAA, the court of appeals recognized that it at least had jurisdiction under the FAA to consider the mandamus petition. 2005 WL 310777, at *2. We held in Jack B. Anglin Co. that mandamus is appropriate to review a trial court's denial of a motion to compel arbitration under the FAA. 842 S.W.2d at 272-73.

The court of appeals determined that it lacked jurisdiction over the interlocutory appeal under the TAA because the construction contracts involved interstate commerce, thus implicating the FAA. 2005 WL 310777, at *2; see Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) (the FAA applies when the dispute concerns a "contract evidencing interstate commerce"); 9 U.S.C. § 1 ("`commerce' . . . means commerce among the several States"); In re L & L Kempwood Assocs., L.P., 9 S.W.3d at 127 (noting that the FAA "extends to any contract affecting commerce, as far as the Commerce Clause of the United States Constitution will reach").

The court of appeals is not alone in dismissing interlocutory appeals under the TAA when the FAA applies. See Kroupa v. Casey, Nos. 01-05-00224-CV, 01-05-00376-CV, 2005 WL 3315279, at *4 (Tex.App.—Houston [1st Dist.] 2005, consolidated appeal and orig. proceeding) (not designated for publication); Am. Med. Tech., Inc. v. Miller, 149 S.W.3d 265, 269-70 (Tex.App.—Houston [14th Dist.] 2004, consolidated appeal and orig. proceeding); Verlander Family Ltd. P'ship v. Verlander, No. 08-02-00135-CV, 2003 WL 304098, at *3 (Tex.App.—El Paso 2003, no pet.); Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 498 (Tex.App.—San Antonio 2000, consolidated appeal and orig. proceeding). Other courts have granted mandamus relief and dismissed the consolidated interlocutory appeal as moot. See, e.g., Kirby Highland Lakes Surgery Ctr., L.L.P. v. Kirby, 183 S.W.3d 891, 895 & n. 5 (Tex.App.—Austin 2006, consolidated appeal and orig. proceeding); In re MacGregor (FIN) Oy, 126 S.W.3d 176, 181, 184 (Tex.App.—Houston [1st Dist.] 2003, consolidated appeal and orig. proceeding).

We take this opportunity to clarify precisely when the FAA preempts the TAA. Many courts of appeals wrongly view the FAA and TAA as mutually exclusive, but the United States Supreme Court and this Court have held a different view for some time: the FAA only preempts contrary state law, not consonant state law. The United States Supreme Court has said:

The FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration. But even when Congress has not completely displaced state regulation in an area, state law may nonetheless be pre-empted to the extent that it actually conflicts with federal law—that is, to the extent that it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." The question before us, therefore, is whether application of [state law] to stay arbitration under this contract in interstate commerce . . . would undermine the goals and policies of the FAA.

Volt Info. Sciences, Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 477-78, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (citations omitted) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)). Similarly, this Court has noted that the FAA "preempts state statutes to the extent they are inconsistent with that Act." Jack B. Anglin Co., 842 S.W.2d at 271.

Recently, in the case of In re Nexion Health at Humble, Inc., this Court articulated a four-factor test to determine whether the TAA would thwart the goals and policies of the FAA in a particular case. 173 S.W.3d 67, 69 (Tex.2005) (per curiam) (construing 9 U.S.C. § 2). The FAA only preempts the TAA if: "(1) the agreement is in writing, (2) it involves interstate commerce, (3) it can withstand scrutiny under traditional contract defenses [under state law], and (4) state law affects the enforceability of the agreement." Id. (emphasis added). In today's case, the court of appeals ignored the fourth factor. The mere fact that a contract affects interstate commerce, thus triggering the FAA, does not...