In re John M. O'Quinn, P.C.

• Decision Date: 25 June 2003
• Docket Number: No. 12-02-00352-CV.,12-02-00352-CV.
• Citation: 155 S.W.3d 195
• Parties: In re JOHN M. O'QUINN, P.C.
• Court: Texas Court of Appeals

155 S.W.3d 195

In re JOHN M. O'QUINN, P.C.

No. 12-02-00352-CV.

Court of Appeals of Texas, Tyler.

June 25, 2003.

Rehearing Overruled July 22, 2003.

J. Clay Gossett, Henderson, for respondent.

Mike Hatchell, Tyler, J.R. Phenix, Henderson, Sam W. Cruse Jr., Billy Shepherd, John D. Vogel, Houston, for relator.

Clay Wilder, Terry L. Scarborough, Cynthia Olson Bourland, Austin, William Fred Hagans, Carl D. Kulhanek Jr., J. Woodfin Jones, Joseph D. Jamail Jr., Ronald D. Krist, Houston, for Real Parties in Interest.

Panel consisted of WORTHEN, C.J. and GRIFFITH, J.

OPINION

JAMES T. WORTHEN, Chief Justice.

Relator John O'Quinn, P.C. ("O'Quinn") brings this petition for writ of mandamus complaining of the trial court's reconsideration of its order compelling arbitration. We conditionally grant the writ.

BACKGROUND

O'Quinn represented real parties in interest Martha Wood, Patricia Haynes, and Ellie L. Corley (collectively the "RPI") in breast-implant litigation. Each of the RPI signed a contingent fee agreement (collectively the "fee agreements"). O'Quinn settled the claims of the RPI and deducted 1.5 percent of the gross settlement proceeds for expenses that, according to O'Quinn, were common to all clients in the litigation. Consequently, the RPI sued O'Quinn contending, inter alia, that the deduction for "common expenses" is not permitted by the fee agreements and therefore O'Quinn's deduction constitutes a breach of the agreements. Further, the RPI allege that O'Quinn represented approximately three thousand women in the litigation, settled the claims of approximately two thousand of those women, and deducted 1.5 percent from the gross settlement proceeds of each settling client. Thus, the RPI filed their lawsuit as a class action on behalf of all clients of O'Quinn who had 1.5 percent of their settlement proceeds deducted for "common expenses."

The fee agreements contain an arbitration provision providing that "[a]ny and all disputes, controversies, claims or demands arising out of or relating to [the] Agreement or any provision [thereof] ... or in any way relating to the relationship between Attorneys and Client ... shall be resolved by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association." On November 3, 2000, the trial court granted various arbitration motions filed by O'Quinn and ordered that "all claims and causes of action ... shall be submitted to American Arbitration Association for binding arbitration under the Federal Arbitration Act." The order also stayed the proceedings in the trial court "pending completion of and final decisions in the binding arbitration" and expressly provides that the trial court "has not made a decision or finding regarding class status or class certification." The RPI sought mandamus review of the November 3 order from this court and from the Texas Supreme Court. Both courts denied relief. However, arbitration did not occur.

On November 4, 2002, the trial court, on motion of the RPI, reconsidered its prior order (the "first order") and signed a second order. The second order referred "[a]ll claims and causes of action [pleaded by the RPI in their] Third Amended Petition, specifically including, without limitation the class action claims" to arbitration under the Federal Arbitration Act (the "FAA"). Further, the order stated that

[t]he Arbitrator is specifically authorized to have the full limit of authority to determine the issues related to class action and to address and resolve all issues related to due process rights of putative class members and to determine all class action issues, including, without limitation, the issue of class certification, the issue of the definition of the class, and the issue of whether proceeding on class or individual claims is proper (emphasis added).

On November 7, 2002, O'Quinn filed a motion for rehearing, which the trial court denied. On December 4, 2002, O'Quinn filed a petition for writ of mandamus requesting this court to enter an order requiring the trial court to (1) vacate its order of November 4, 2002 (the "second order"); (2) deny in its entirety the motion for reconsideration filed by the RPI; and (3) refer this case to binding, separate arbitrations.

AVAILABILITY OF MANDAMUS

Mandamus issues only to correct a clear abuse of discretion or the violation of a duty imposed by law when there is no adequate remedy by appeal. In re Daisy Mfg. Co., 17 S.W.3d 654, 658 (Tex.2000) (orig. proceeding). A trial court clearly abuses its discretion if "it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law." Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992) (citing Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985)). A trial court has no discretion in determining what the law is or applying the law to the facts. Walker, 827 S.W.2d at 840. Consequently, a clear failure by the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Id. Where an arbitration agreement is governed by the Federal Arbitration Act (the "FAA"), mandamus is the appropriate means to assert that a trial court has failed to enforce the agreement according to its terms. See, e.g., In re Louisiana Pacific Corp., 972 S.W.2d 63, 65 (Tex.1998) (citing Freis v. Canales, 877 S.W.2d 283, 284 (Tex.1994) and Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992)).

APPLICABLE LAW

It is undisputed that the Federal Arbitration Act (the "FAA") applies in this case. See 9 U.S.C.A. §§ 1-16 (West 1999). The FAA creates a body of federal substantive law that is applicable in both state and federal courts. Southland Corp. v. Keating, 465 U.S. 1, 12, 104 S.Ct. 852, 859, 79 L.Ed.2d 1 (1984) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). When interpreting an arbitration agreement, courts should generally apply state-law principles. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995). Furthermore, federal procedure does not apply in Texas courts; Texas procedure controls, even when the FAA governs the interpretation of the agreement. Tipps, 842 S.W.2d at 272.

SUBJECT MATTER JURISDICTION

During oral argument, O'Quinn contended for the first time that the trial court lacked subject matter jurisdiction to reconsider its first order. Alleging a lack of subject matter jurisdiction raises fundamental error; consequently, the issue may be raised at any time. See Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 445 (Tex.1993). Therefore, we first address the merits of O'Quinn's jurisdictional complaint.

O'Quinn maintains that an order referring a case to arbitration is generally considered "final" for judicial purposes, and the trial court's plenary judicial power over the merits of the case ceases. Thus, according to O'Quinn, the trial court lost plenary power thirty days after it signed the first order. As a result, his argument continues, the trial court was without jurisdiction to sign its second order, and therefore the order is void. In support of his argument, O'Quinn cites cases holding that a trial court has power to set aside an order of nonsuit for only thirty days after the order is signed. See America's Favorite Chicken Co. v. Galvan, 897 S.W.2d 874, 878 (Tex.App.-San Antonio 1995, orig. proceeding); Mo. Pac. R. Co. v. Whitaker, 815 S.W.2d 348, 349 n. 2 (Tex.App.-Tyler 1991, orig. proceeding).

The RPI, on the other hand, contend that the trial court's first order was not a final judgment because "the order plainly states that the court was reserving the class action questions for another day...." Therefore, they argue, the first order is interlocutory because it does not dispose of all issues in the instant case, and the trial court had jurisdiction to reconsider the order. Furthermore, they distinguish an order granting a nonsuit and an order compelling arbitration because a nonsuit terminates the litigation while an order compelling arbitration does not.

Arbitration has been defined as:

a contractual proceeding by which the parties to a controversy or dispute, in order to obtain a speedy and inexpensive final disposition of matters involved voluntarily select arbitrators or judges of their own choice, and by consent submit the controversy to such tribunal for determination in substitution for the tribunals provided by the ordinary processes of the law.

Tipps, 842 S.W.2d at 268. Thus, an order compelling arbitration contemplates continuing resolution through the arbitration. Brooks v. Pep Boys Automotive Supercenters, 104 S.W.3d 656, 660 (Tex.App.-Houston [1st Dist.] 2003, no pet.). By compelling arbitration, the trial court simply takes the first step in the ultimate disposition of the dispute between the parties. Materials Evolution Dev., USA, Inc. v. Jablonowski, 949 S.W.2d 31, 33 (Tex.App.-San Antonio 1997, no writ). However, an order compelling arbitration is not a final order because it does not dispose of all parties or issues presented. E.g., Brooks, 104 S.W.3d at 660; Jablonowski, 949 S.W.2d at 33; Elm Creek Villas Homeowner Ass'n, Inc. v. Beldon Roofing & Remodeling Co., 940 S.W.2d 150, 153 (Tex.App.-San Antonio 1996, no writ); Gathe v. Cigna Healthplan of Texas, Inc., 879 S.W.2d 360, 363 (Tex.App.-Houston [14th Dist.] 1994, writ denied).

As a general rule, a trial court retains plenary power over its interlocutory orders until a final judgment is entered. Fruehauf v. Carrillo, 848 S.W.2d 83, 84 (Tex.1993). Additionally, a trial court has the inherent authority to change or modify any interlocutory order until its plenary power expires. Mendez v. San Benito/Cameron County Drainage Dist. No. 3, 45 S.W.3d 746, 754 (Tex.App.-Corpus Christi 2001, pet. denied). Referral of a matter to arbitration does not deprive the...