Ruff v. Ruff
| Decision Date | 11 August 2020 |
| Docket Number | No. 05-18-00326-CV,05-18-00326-CV |
| Parties | MICHAEL A. RUFF, ET AL., Appellants v. SUZANN RUFF INDIVIDUALLY AND IN HER CAPACITY AS TRUSTEE OF THE RUFF MANAGEMENT TRUST, AND MATTHEW D. RUFF, Appellees |
| Court | Texas Court of Appeals |
On Appeal from the Probate Court No. 1 Dallas County, Texas
Before Justices Myers, Whitehill, and Pedersen, III
Opinion by Justice Whitehill
A pivotal question we address is whether a party can initiate an arbitration proceeding pursuant to a specific arbitration agreement, demand that a signatory to that agreement be compelled to participate in that arbitration, and then disavow the resulting award by alleging that he (the initiating party) did not agree to arbitrate according to that arbitration agreement. Another important question is whether the integrated documents construction principle can bind a non-signatory to an arbitration agreement.
Appellant Mike Ruff argues that the trial court erred by denying his motion to vacate the arbitration award in favor of Suzann Ruff, Matthew Ruff, and Frost Bank as Trustee of the Ruff Management Trust (Frost) because: (i) he did not agree to arbitrate Suzann's tort claims against him, and (ii) he was denied discovery to determine the extent of one of the arbitrator's relationship with Frost.1
We reject both issues and affirm the trial court's judgment.
Suzann and Arthur Ruff had five children: Mike, Matthew, Tracy, Kelly, and Mark. Arthur died in 1998. In 2007, Suzann created the Ruff Management Trust (the Trust) and appointed Mike trustee.
In 2009, Suzann asked Mike to distribute certain assets to the Trust and resign as trustee. In exchange, she agreed to release any claims she had against him. To this end, they signed a Family Settlement Agreement and Release (FSA).
Thereafter, Kelly, Tracy, and Mark served as co-trustees of the Trust until they later resigned and Frost was appointed successor trustee.
To implement the transition to Frost, the parties executed a series of documents, including a February 26, 2010, Acknowledgement of Successor Trustee and a Release and Indemnity signed between Suzann and Frost (Frost Release). TheFrost Release ratified the FSA and released all the Ruff children except Mike, who was not a signatory to that document.2
The Frost Release included an arbitration clause providing for arbitration of:
[a]ny controversy or claim arising out of or relating to this Agreement, or the breach of any contractual or non-contractual duties hereunder . . . administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules . . . .
Also in connection with the Frost appointment, Mike, Kelly, Tracy, and Mark each signed separate March 1, 2010 releases. These releases each contained an arbitration clause identical to the clause in the Frost Release.
The components of these transactions can be summarized as follows:
Date Releasor Releasees Scope Reason 10/2/09 (the FSA) Suzann Mike General Mike to resign and transfer assets 2/26/10
(Frost Release) Suzann Frost and kids, except Mike Everything related to the Trust and the release, including ratifying the FSA Sub in Frost 3/1/10
Mike Frost, siblings Everything related to the Trust and the release, including ratifying the FSA Sub in Frost 3/1/10
Tracy Frost, Mike, siblings Everything related to the Trust and the release, including ratifying the FSA Sub in Frost 3/1/10
Kelly Frost, Mike, siblings Everything related to the Trust and the release, including ratifying the FSA Sub in Frost 3/1/10
Mark Frost, Mike, siblings Everything related to the Trust and the release, including ratifying the FSA Sub in Frost
Pleadings in the clerk's record show that this case began in August 2011 with Suzann filing a simple petition seeking a declaratory judgment and related request to modify certain Trust terms. Her children filed general denials, and the matter appeared to be a non-controversial trust modification suit.
But Suzann's August 31, 2012 second amended petition included her trust modification claims, added detailed allegations against Mike dating back to 1998, and asserted numerous tort claims against him regarding his conduct while acting as her fiduciary and the Trust's trustee. She sought to recover millions of dollars from him.
Less than a week later, Mike responded by filing a first amended answer that asserted various affirmative defenses to Suzann's claims, including that the FSA's release barred all her tort claims against him. He also filed a counterclaim seeking, among other things, a declaratory judgment that the FSA was valid and that the FSA's release barred all of her tort claims against him.
On October 8th, Mike filed a second amended answer, again including the FSA's release among his affirmative defenses. Shortly thereafter, he filed a third-party petition that rejoined Frost (Suzann dropped it with her second amended petition) and requested a declaratory judgment that the FSA's release was valid and barred Suzann's claims against him.
At the end of the month, Mike filed his first amended counterclaim and again sought a declaratory judgment that the FSA's release was valid and barred Suzann's claims against him.
The next day, Suzann filed her lengthy and detailed third amended petition continuing to assert numerous tort claims against Mike.
Two weeks later, asserting that he was a third-party beneficiary of the Frost Release, Mike filed with the American Arbitration Association an arbitration demand against Suzann, Frost, and his siblings. Among his requested relief, Mike sought a declaration that the FSA and Frost Release agreements were valid and that the FSA's release was enforceable. Specifically, Mike's demand asserted that:
Mike additionally moved to stay the trial court action and told the trial court that Suzann's tort claims and the declaratory judgment he requested in arbitration were intertwined. Specifically, regarding the FSA's release he told the trial court that:
Should the arbitration panel determine that the Release and Indemnity, and Acknowledgment are valid and enforceable, then Mrs. Ruff's claims would be barred. In addition, the Release and Indemnity affirms the Trust, the Release, and all prior transactions. A finding that the Release is binding and enforceable would dispose of all claims and counterclaims asserted in this action. Furthermore, every issue in this lawsuit relates back to the validity, enforceability, or interpretation of the trust, the Release and the Release and Indemnity. Therefore, the Court must stay all proceedings pending a ruling in arbitration.
Suzann opposed the stay, arguing inter alia, that Mike had no standing to rely on the arbitration clause in the Frost Release because he was not a signatory to that document.
Mike responded that he was, in fact, a signatory. Specifically, he claimed that the Frost Release was not an independent, stand-alone agreement, but rather "part and parcel of a series of documents that, taken together, comprise a transaction and thus create a contract." He also argued that his and his siblings' March 1, 2010, releases contain identical arbitration clauses and were part of the single transactionto change the Trust's management from Mark, Tracy, and Kelly to Frost. He further argued that he was a third-party beneficiary of the Frost Release.
The parties also argued about whether Suzann's tort claims against Mike could properly be heard in arbitration. Mike maintained that it was "up to the arbitrators to decide whether such claims would be included." Ultimately, the trial court granted Mike's motion to compel arbitration.
Suzann asserted her tort claims against Mike as counterclaims in the arbitration, but Mike challenged their arbitrability, that is, whether they were in the arbitration clause's scope.
The arbitrators' fifteen page first amended order on the AAA's jurisdiction concluded that Suzann's tort counterclaims were included and overruled Mike's and his siblings' objection to the AAA's jurisdiction to consider those claims.
The final arbitration hearing began on August 28 and 29, 2017, and was scheduled to resume on October 24, 25, and 26. But on September 22, 2017, Mike nonsuited his declaratory judgment claims. Suzann's counterclaims, however, remained pending.3
On October 18, Mike filed in the arbitration a "Refusal to Arbitrate," indicating he would no longer participate in the process. Thus, the October portion of the final hearing was conducted without him.
The arbitrators found that Mike committed numerous torts against Suzann and determined that she was entitled to recover $49,000,000 from him plus attorney's fees and costs. The award also provided that Frost and Matthew recover their attorney's fees and costs from Mike as well.
Suzann moved to confirm the award, and Mike moved to vacate it. Mike asserted that the award should be vacated because:
As relevant here, in opposing the award's confirmation, Mike argued to the trial court that:
Mike disputes that there is an agreement between himself and Mrs. Ruff to arbitrate her "counterclaims," and Mike refused to arbitrate them. Thus, in order to avail herself of arbitration, Mrs....
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