In re Joseph Charles Rubiola Et Al.

• Citation: 54 Tex. Sup. Ct. J. 654,334 S.W.3d 220
• Decision Date: 16 September 2010
• Docket Number: No. 09–0309.,09–0309.
• Parties: In re Joseph Charles RUBIOLA et al., Relators.
• Court: Supreme Court of Texas

334 S.W.3d 220

54 Tex. Sup. Ct. J. 654

In re Joseph Charles RUBIOLA et al., Relators.

No. 09–0309.

Supreme Court of Texas.

Argued Sept. 16, 2010.Decided March 11, 2011.

Bernard Lee Shub, The Law Office of Ben Shub, Elizabeth Conry Davidson, San Antonio TX, for Joseph Charles Rubiola.

Bryan A. Woods, Law Office of Bryan A. Woods, San Antonio TX, for Real Party in Interest Brian Salmon.Justice MEDINA delivered the opinion of the Court.

In this original mandamus proceeding, Relators seek to compel arbitration under an arbitration agreement they did not sign. The real parties in interest, who are signatories to the arbitration agreement, object to arbitration and contend that Relators cannot compel arbitration because Relators are not parties to the arbitration agreement. The trial court apparently agreed because it denied Relators' motion to compel arbitration. The underlying arbitration agreement, however, designated certain non-signatories as parties to the agreement.

We must decide whether the parties who actually agree to arbitrate may also grant third parties the right to enforce their arbitration agreement and, if so, whether the signatories here intended to grant such rights to these Relators. We conclude that parties to an arbitration agreement may grant non-signatories the right to compel arbitration and that the Relators here were granted that right. The trial court therefore erred in denying the motion to compel arbitration, and we conditionally grant the writ.

I

The underlying case concerns the sale and financing of a home. Brian and Christina Salmon agreed to purchase the home from Greg Rubiola and his wife Catherine. The transaction was handled by J.C. Rubiola, Greg's brother, who served as the listing broker for the property. The Salmons and Rubiolas signed a standard form Texas real estate sales contract, which did not contain an arbitration clause.

Greg and J.C. Rubiola operate a number of real estate related businesses in San Antonio. The Rubiola brothers buy and sell real estate through Rubiola Management, L.L.C., which is the general partner of Rubiola Realty, Ltd. and Rubiola Properties, Ltd. Greg and J.C. are also president and vice-president, respectively, of Rubiola Mortgage Company, a corporation the brothers use to obtain financing for real estate buyers. The Rubiola brothers' business interests are operated at the same location under the name Rubiola Mortgage and Realty, which they advertise as a one-stop shop for customers' real estate needs: offering the ability to buy, sell, build, finance, and manage real estate through a single company.

After agreeing to purchase Greg Rubiola's home, the Salmons applied for mortgage financing with Rubiola Mortgage Company, using J.C. Rubiola as their mortgage broker and loan officer. As part of the loan process, the Salmons executed an arbitration agreement with the mortgage company. This agreement provided that:

Arbitrable disputes include any and all controversies or claims between the parties of whatever type or manner, including without limitation, all past, present and/or future credit facilities and/or agreements involving the parties. This arbitration provision shall survive any termination, amendment, or expiration of the agreement in which this agreement is contained, unless all of the parties expressly agree in writing.

The agreement further defined “parties” to include:

Rubiola Mortgage Company, and each and all persons and entities signing this agreement or any other agreements between or among any of the parties as part of this transaction. “The parties” shall also include individual partners, affiliates, officers, directors, employees, agents, and/or representatives of any party to such documents, and shall include any other owner and holder of this agreement.

J.C. Rubiola signed the agreement on behalf of Rubiola Mortgage Company, and the Salmons signed a form acknowledging J.C.'s dual role as a real estate agent and mortgage broker. The sale closed, and the Salmons moved into their new home.

Several months later, the Salmons sued the Rubiolas and other entities and individuals involved in repairing the home (collectively referred to as the Rubiolas).¹ The Salmons alleged that J.C. Rubiola, acting as both the listing agent and a principal involved in the home's construction and repair, made a series of misrepresentations that induced the Salmons to purchase the home. They also alleged violations of the Deceptive Trade Practices Act and negligent supervision of repairs made to the home. The Salmons sought either to rescind the sale or to collect damages. The Rubiolas answered and moved to compel arbitration, relying on the arbitration agreement signed by the Salmons and Rubiola Mortgage Company during financing.

The trial court denied the Rubiolas' motion to compel, causing the Rubiolas to seek mandamus relief in the court of appeals. The court of appeals also refused to compel arbitration, and the Rubiolas filed the present mandamus proceeding, seeking again to enforce the underlying arbitration agreement as a non-signatory.

II

The Federal Arbitration Act (FAA) generally governs arbitration provisions in contracts involving interstate commerce. See 9 U.S.C. § 2; see also In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127 (Tex.1999) (per curiam). Parties may also expressly agree to arbitrate under the FAA. In re AdvancePCS Health L.P., 172 S.W.3d 603, 605–06 & n. 3 (Tex.2005) (per curiam). The arbitration agreement here expressly provides for arbitration under the FAA, and although the Salmons oppose arbitration, generally, they do not contest the application of the FAA.

Under Section 4 of the FAA, “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition ... for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4; see In re Halliburton Co., 80 S.W.3d 566, 573 (Tex.2002). “A party denied the right to arbitrate pursuant to an agreement subject to the FAA does not have an adequate remedy by appeal and is entitled to mandamus relief to correct a clear abuse of discretion.” In re Labatt Food Serv., L.P., 279 S.W.3d 640, 642–43 (Tex.2009).

III

A party seeking to compel arbitration under the FAA must establish that (1) there is a valid arbitration clause, and (2) the claims in dispute fall within that agreement's scope. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex.2005). The Rubiolas contend that the arbitration agreement, executed during financing, is broad enough to cover all of the Salmon's claims against them. The Salmons argue, however, that the arbitration agreement extends only to disputes under the financing agreement, as opposed to the real estate sales agreement, and that its breadth cannot be used by non-signatories to compel arbitration. This disagreement raises two issues: do the Rubiolas, as non-signatories to the arbitration agreement, have authority to compel the Salmons to arbitrate, and, if so, does the arbitration clause cover the Salmons' claims. The first issue questions the validity of the arbitration clause, while the second questions the clause's scope.

A

Whether a non-signatory can compel arbitration pursuant to an arbitration clause questions the existence of a valid arbitration clause between specific parties and is therefore a gateway matter for the court to decide. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex.2005); Sherer v. Green Tree Servicing LLC, 548 F.3d 379, 381 (5th Cir.2008). Under the FAA, ordinary principles of state contract law determine whether there is a valid agreement to arbitrate. In re Kellogg Brown & Root, Inc., 166 S.W.3d at 738 (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). An obligation to arbitrate not only attaches to one who has personally signed the written arbitration agreement but may also bind a non-signatory under principles of contract law and agency. Id. at 738. Generally, however, parties must sign arbitration agreements before being bound by them. See Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 528 (5th Cir.2000) (noting that “arbitration is a matter of contract and cannot, in general, be required for a matter involving an arbitration agreement non-signatory”). Although “[a]rbitration agreements apply to nonsignatories only in rare circumstances [,]” the question of “[w]ho is actually bound by an arbitration agreement is [ultimately] a function of the intent of the parties, as expressed in the terms of the agreement.” Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 355, 358 (5th Cir.2003). Here the question is not whether a non-signatory may be compelled to arbitrate but rather whether a non-signatory may compel arbitration.

The Salmons argue that because none of the Rubiolas signed the arbitration agreement, except J.C., who signed only as the representative of Rubiola Mortgage Company, that none of them are entitled to compel the Salmons to arbitrate. The Salmons thus equate signing with being a party to the agreement. The arbitration agreement, however,...