Roe v. Ladymon
| Decision Date | 30 July 2010 |
| Docket Number | No. 05-08-00417-CV.,05-08-00417-CV. |
| Parties | Kimberlea A. ROE, Appellant,v.Blane LADYMON and Metro Townhomes & Homes, L.L.P., Appellees. |
| Court | Texas Court of Appeals |
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John J. Marek, Addison, TX, for Appellant.
Greg C. Noschese, David Jefrie Mizgala, Munsch Hardt Kopf & Harr, P.C., Dallas, TX, for Appellees.
Before Chief Justice WRIGHT and Justices MORRIS and MOSELEY.
Kimberlea A. Roe obtained an arbitration award against Blane Ladymon and Metro Townhomes & Homes, L.L.P. (Metro LLP), a Texas registered limited liability partnership. The trial court confirmed the award against Metro LLP, but vacated the award against Ladymon. Roe and Metro LLP appeal.
This case requires us to determine who-the arbitrator or the court-has the primary responsibility to decide whether a party to the dispute is bound by an arbitration provision in a contract between other parties. The answer to that question determines how we review the decision on whether the party is bound by the arbitration provision. We also consider whether the trial court erred by confirming the award against Metro LLP.
We conclude that Ladymon individually is not a party to the contract containing the arbitration clause, and he did not “clearly and unmistakably” agree to allow the arbitrator to decide issues of arbitrability. Therefore, the primary responsibility to decide the issue belongs to the court, not the arbitrator. We also conclude that the trial court-reviewing the issue de novo-did not err by finding that Ladymon was not individually bound by the arbitration provision. Lastly, we conclude the trial court-applying the deferential standard applicable to arbitration awards-did not err by confirming Roe's award against Metro LLP. Thus, we affirm the trial court's judgment.
In 2003, Roe contracted for Metro LLP to renovate her home. The contract defined Roe as the “Owner” and Metro LLP as the “Contractor.” Ladymon signed the contract in his capacity as a partner of Metro LLP. Metro LLP's partners included Ladymon, Metro Townhomes and Homes, Inc. (Metro Inc.), and others.
The contract is a form prepared by the Home Builders Association of Greater Dallas. Paragraph 18 of the contract contained a detailed mediation/arbitration provision. That provision broadly defined a “Dispute” as “any controversy or claim or matters in question between the parties,” and provided that the Owner and Contractor agreed to submit any Dispute to mediation, and to submit any unresolved Dispute to the American Arbitration Association (AAA) for binding arbitration pursuant to Federal Arbitration Act (FAA).1 See 9 U.S.C. §§ 1- 16 (2006).
On July 5, 2004, Ladymon, as president of Metro Inc., filed two documents with the Texas Secretary of State. One withdrew Metro LLP's registration as a registered limited liability partnership and the other was a certificate of limited partnership for Metro Townhomes Limited Partnership (Metro LP). The certificate stated that Metro LLP was converting to a limited partnership, Metro LP. The certificate identified Metro Inc. as Metro LP's sole general partner and identified Ladymon as a limited partner. Ladymon testified his accountant advised him to change the form of the business for tax purposes. He testified there was no transfer or formal assignment of Roe's contract to Metro LP, and the partners continued to do the work on the project. Roe did not have actual knowledge of these filings.
Unsatisfied with the remodeling work, Roe demanded arbitration against both Metro LLP and Ladymon in June 2006. Attached to her arbitration demand was a demand letter addressed to Metro LLP and Ladymon. It alleged several construction defects and failures with the remodeling project and claimed damages under a number of legal theories.2 Although we do not have a complete record of the arbitration proceedings or a transcript of the arbitration hearing, the record reflects that after an August 2006 preliminary hearing, which Ladymon attended, the arbitrator entered a scheduling order setting deadlines for disclosing witnesses, experts, and exhibits. The arbitrator also set the arbitration hearing for February 2007; the hearing was later rescheduled for May 7, 2007.
Roe served her witness, expert, and exhibit list on April 23, 2007. The next day, Ladymon faxed a letter (on Metro Inc. letterhead) to the arbitrator requesting a sixty-day continuance based on Roe's allegedly late disclosures, the need to retain experts to respond to Roe's experts, and the need to hire an attorney for the arbitration hearing. On May 3, 2007, the AAA notified the parties that the arbitrator denied the continuance. Roe filed an additional disclosure of witnesses and attached several pages of new exhibits on May 4, 2007.
Metro LLP and Ladymon retained an attorney to represent them. At the beginning of the May 7, 2007 hearing, they filed five written objections to the arbitration proceeding, again requested a continuance, and requested that Ladymon be dismissed from the proceeding. Objections four and five 3 pertained to whether Ladymon was required to arbitrate Roe's claims against him:
The arbitrator denied the continuance, reserved ruling on Ladymon's objections until after the parties submitted post-hearing briefs, and proceeded with the hearing.
Ladymon's post-hearing brief argued that he signed the contract solely as a partner in a registered limited liability partnership (Metro LLP) and thus had no personal liability. See Tex.Rev.Civ. Stat. Ann.. art. 6132b-3.07(a)(1) (Vernon Supp.2009). When Metro LLP withdrew its registration, it converted to a limited partnership (Metro LP) as allowed by law, and Ladymon became a limited partner in Metro LP. Ladymon argued that the contracts and obligations of the old partnership were assigned to the new partnership by operation of law, and thus no formal assignment of Roe's contract to Metro LP was required. See Tex.Rev.Civ. Stat. Ann.. art. 6132b-9.05(h)(1)-(3) (Vernon Supp.2009). And, Ladymon argued, as a limited partner he had no personal liability for the partnership's obligations. See Tex.Rev.Civ. Stat. Ann.. art. 6132a-1, § 3.03(a), (b)(1) (Vernon Supp.2009).
Roe's post-hearing brief argued that, even though Ladymon did not sign the arbitration agreement in his individual capacity, he was bound to arbitrate the claims against him because he was an officer, agent, or representative of the entity that signed the agreement and was not a stranger to the contract. She also argued that because the contract provided it was binding upon the parties and “their respective ... representatives [and] successors ...,” Ladymon was bound to arbitrate as a representative and successor to Metro LLP. Her successor liability argument was based on Ladymon's deposition testimony that, to his knowledge, when Metro LLP was “dissolved” there was no formal assignment of the contract with Roe, but he continued to do the work.
On June 5, 2007, the arbitrator signed an award. He overruled Ladymon's objections and ruled Metro LLP and Ladymon were jointly and severally liable for Roe's damages. Roe filed this suit to confirm the arbitration award. Metro LLP and Ladymon filed an answer and application to vacate the award.
After hearing evidence and argument, the trial court rendered final judgment. As to Ladymon, the judgment stated:
Defendant Ladymon timely and properly objected to the arbitrator regarding the arbitrator's lack of jurisdiction over him in a personal capacity. Furthermore, whether or not Defendant Ladymon was personally liable for the debts of defendant [Metro LLP] is a separate issue from whether or not Defendant Ladymon was bound by the arbitration clause.
The trial court then held that the arbitrator exceeded his authority in rendering an award against Ladymon individually, stating: “The arbitrator was without jurisdiction and the determination of the arbitrator's jurisdiction is a matter of arbitrability under First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920 (1995) and is exclusively reserved to this Court.”
As to Metro LLP, the court's judgment stated that the court was bound by the “exceedingly deferential standard of review that must be given to arbitral awards.” It concluded that Metro LLP did not prove that it received a fundamentally unfair hearing based on the arbitrator's refusal to postpone the hearing or based on evident partiality of the arbitrator. Thus, the trial court confirmed the award against Metro LLP, but vacated the award against Ladymon individually.
Both Roe and Metro LLP appealed. Roe's brief identifies a single issue on appeal: whether the trial court erred in vacating the award against Ladymon individually. In its cross-appeal, Metro LLP asserts the trial court erred by confirming (and not vacating) the award against it.4
Roe asserts the arbitrator did not exceed his authority by determining that her claims against Ladymon were subject to arbitration, and that the arbitrator's decision on that issue was correct. She asks this Court to reverse the trial court's judgment vacating the award against Ladymon and render judgment confirming the arbitration award against Ladymon.
A. Applicable Law1. Introduction
We begin with the foundational principle that “arbitration is a matter of contract and a party cannot be required to submit to arbitration...
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