IN RE HOUSTON PIPE LINE CO., No. 08-0800.

• Court: Supreme Court of Texas
• Writing for the Court: PER CURIAM
• Citation: 311 S.W.3d 449
• Parties: In re HOUSTON PIPE LINE COMPANY, et al., Relator.
• Decision Date: 02 July 2010
• Docket Number: No. 08-0800.

311 S.W.3d 449

In re HOUSTON PIPE LINE COMPANY, et al., Relator.

No. 08-0800.

Supreme Court of Texas.

July 3, 2009.

Order Overruling Rehearing October 23, 2009.

Rehearing Denied July 2, 2010.

311 S.W.3d 450

Charles W. Schwartz, Kelley M. Keller, Heather A. Hegefeld, Daniel E. Bolia, Skadden Arps Slate Meagher & Flom, John Lohmann III, Lohmann Glazer & Irwin, Houston, TX, for Relator.

Thomas J. Sims, Neel Alan Choudhury, Binion & Sims, PC, Houston, TX, Timothy S. Perkins, Smith Underwood & Perkins, P.C., Dallas, TX, James W. Cole, Cole Cole & Easley, William F. Seerden, Cullen Carsner Seerden & Cullen, Ronald B. Walker, Walker Keeling & Carroll, Victoria, TX, Gilberto Hinojosa, Magallanes & Hinojosa, PC, Brownsville, TX, Stanley B. Binion, Binion & Sims, Houston, TX, Craig T. Enoch, Melissa Prentice Lorber, Alex S. Valdes, Winstead PC, Austin, TX, for Real party in Interest.

PER CURIAM.

When deciding a motion to compel arbitration under the Federal Arbitration Act, a Texas trial court applies Texas procedure, which permits discovery to be taken when it is needed before the arbitration or to permit the arbitration to be conducted in an orderly manner. TEX. CIV. PRAC. & REM.CODE § 171.086(a)(4),(6); see also Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 268 (Tex.1992). At issue in this proceeding is whether the trial court abused its discretion by permitting discovery on damage calculations and other potential defendants, instead of deciding the motion to compel arbitration. For the reasons below, we conclude the trial court should not have ordered pre-arbitration discovery, but rather should have decided the motion to compel arbitration.

Houston Pipe Line Company, L.P., signed an agreement to purchase gas from O'Connor & Hewitt, Ltd., based on the Houston Ship Channel Price Index.¹ Several years later, O'Connor sued Houston Pipe Line, Energy Transfer Partners, L.P., Energy Transfer Equity, L.P., and La Grange Acquisition, L.P., for manipulating the Index downward, which caused O'Connor to receive lower payments for gas delivered pursuant to the contract. As a signatory to the contract, Houston Pipe Line sought to enforce the arbitration provision.² Energy Transfer and La Grange were not parties to the agreement, but tried to compel arbitration based on a direct benefits equitable estoppel theory. See Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 305 (Tex.2006); Sherer v. Green Tree Servicing LLC, 548 F.3d 379, 382 (5th Cir.2008). O'Connor resisted arbitration by attacking the scope of the arbitration provision and contending that it would be impossible to identify all potential defendants and to complete damages calculations within the sixty days allotted for discovery, as set out in the arbitration provision. Rather than rule on the motion to compel, the trial court ordered discovery to aid it in deciding the motion. Specifically, the trial court ordered discovery to determine if additional defendants could equitably invoke the arbitration clause, whether O'Connor's claims fell within the

311 S.W.3d 451

scope of the arbitration clause, and if the time limitations imposed by the clause were jurisdictional. In its order, the trial court suggested that it would be virtually impossible³ to conduct the necessary discovery within the sixty-day time frame allotted to the...