Dennis Weitzel v. Brent Coon, Individually, and Brent W. Coon, P.C. D/B/A Brent Coon and Associates ( 2019 )

Opinion issued July 30, 2019
In The
Court of Appeals
For The
First District of Texas
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NO. 01-19-00015-CV
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DENNIS WEITZEL, Appellants
V.
BRENT COON, INDIVIDUALLY, AND BRENT W. COON, P.C. D/B/A
BRENT COON AND ASSOCIATES, Appellee
On Appeal from the 164th District Court
Harris County, Texas
Trial Court Case No. 2018-52828
MEMORANDUM OPINION
Dennis Weitzel filed this interlocutory appeal from the trial court’s order
denying his motion to compel arbitration. We conclude that the trial court erred by
denying the motion. We reverse and remand for proceedings in accordance with
this opinion.
Background
This case concerns business dealings between attorneys. In 2002, Brent
Coon & Associates (BCA) and Dennis Weitzel entered into a referral agreement
(“2002 agreement”) that outlined the percentage of fees Weitzel and another
attorney, Michael T. Gallagher, would receive upon a case’s favorable resolution if
they referred certain asbestos, mesothelioma, and lung cancer clients to BCA. The
letter included an attachment listing several cases to show the source of the referral
and the attorney working on the case. Sometime after the agreement, Weitzel
joined BCA as an attorney. On February 19, 2010 Weitzel ended his employment
with BCA. In April 2010, Weitzel and BCA, similarly sophisticated parties,
entered into a separation agreement (“2010 agreement”) effective February 19,
2010. The separation agreement, negotiated at arm’s length, incorporates four
exhibits. The parties agreed to an integration clause, stating that the agreement and
its exhibits represent the entire agreement between BCA and Weitzel. The 2010
agreement also contains an arbitration clause. Specifically, BCA and Weitzel
agreed that all disputes arising under the 2010 agreement would be resolved by
arbitration.
Coon and BCA’s case against Weitzel arose from a dispute about a fee
agreement between Michael T. Gallagher and the Gallagher Law Firm PLLC and
Coon and BCA. In August 2018, Michael T. Gallagher and The Gallagher Law
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Firm PLLC sued Coon and BCA alleging breach of the referral agreement between
Gallagher and BCA related to certain asbestos, mesothelioma, and lung cancer
clients. Gallagher sought declaratory relief and an accounting of the cases subject
to the agreement. Coon and BCA filed a third party claim against Dennis Weitzel,
asserting causes of action against Weitzel for BCA’s alleged overpayment of
referral fees to Weitzel, and requested declaratory relief. BCA argued that Weitzel
did not forward portions of payments to Gallagher that he received from BCA.
Weitzel filed an answer and moved to compel arbitration pursuant to the 2010
agreement executed between Weitzel and BCA. The trial court denied Weitzel’s
motion to compel arbitration in December 2018, and Weitzel appeals.
Motion to Compel Arbitration
Weitzel argues on appeal that the trial court abused its discretion by denying
his motion to compel arbitration. Weitzel contends that the 2010 agreement
contains a valid, enforceable arbitration agreement and BCA’s claims fall within
the scope of that agreement.
A. Standard of Review
Section 171.098 of the Texas Civil Practice and Remedies Code permits the
interlocutory appeal of an order denying a motion to compel arbitration. TEX. CIV.
PRAC. & REM. CODE § 171.098. We review interlocutory appeals of orders denying
motions to compel arbitration for an abuse of discretion, deferring to the trial
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court’s factual determinations if they are supported by evidence and reviewing
questions of law de novo. Cleveland Constr., Inc. v. Levco Constr., Inc., 359
S.W.3d 843, 851–52 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d).
B. Analysis
The parties, who are both attorneys, do not dispute the existence of a 2010
agreement between BCA and Weitzel that has an arbitration clause nor do they
dispute the existence of a 2002 agreement between them with no arbitration clause.
The dispute is which agreement applies and the extent to which the 2002
agreement was incorporated into the 2010 agreement.
Weitzel, the movant in the trial court, argues that the trial court erred in
denying his motion to compel arbitration because the 2010 agreement with an
arbitration clause applies. He further alleges that the 2002 agreement was
incorporated by reference into the 2010 agreement. BCA responds that the dispute
is not covered by the scope of the 2010 agreement and is governed exclusively by
the 2002 agreement.
We first must determine whether the decision as to the scope of the 2010
agreement to arbitrate was the trial court’s to make, or if instead the parties agreed
to have the arbitrator decide questions of arbitrability.
The arbitration clause in the 2010 agreement specified that:
All disputes arising under this Agreement shall be resolved by binding
arbitration proceedings brought under the auspices and rules of the
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American Arbitration Association (AAA) only to the extent that such
rules are not inconsistent with this section. Arbitration awards
resulting from such proceedings shall be binding and specifically
enforceable to the maximum extent permitted by law. Arbitrators shall
be selected in accordance with the rules established by AAA.
Generally, the question of arbitrability is a gateway issue to be decided by a court
rather than an arbitrator. RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 120
(Tex. 2018). The question of arbitrability addresses which claims must be
arbitrated. Southwinds Express Constr., LLC v. D.H. Griffin of Tex., Inc., 513
S.W.3d 66, 71 (Tex. App.—Houston [14th Dist.] 2016, no pet.); see also Saxa Inc.
v. DFD Architecture Inc., 312 S.W.3d 224, 229 (Tex. App.—Dallas 2010, pet.
denied) (questions of arbitrability include “whether the parties agreed to arbitrate
and whether a claim or dispute is encompassed in the agreement to arbitrate”).
Unless the parties clearly and unmistakably agree to submit threshold questions of
arbitrability to the arbitrator, these issues are to be resolved by courts. See Howsam
v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002); First Options of Chicago,
Inc. v. Kaplan, 514 U.S. 938, 943 (1995); In re Weekley Homes, L.P., 180 S.W.3d
127, 130 (Tex. 2005) (orig. proceeding); Burlington Res. Oil & Gas Co. v. San
Juan Basin Royalty Trust, 249 S.W.3d 34, 39–40 (Tex. App.—Houston [1st Dist.]
2007, pet. denied). The court must enforce a valid arbitration agreement that
delegates arbitrability to the arbitrator rather than the court. See RSL Funding,
LLC, 569 S.W.3d at 120. This determination depends on an interpretation of the
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parties’ contracts, which we review de novo. See In re Dillard Dep’t Stores, Inc.,
186 S.W.3d 514, 515 (Tex. 2006) (orig. proceeding).
The 2010 agreement between BCA and Weitzel governs business dealings
between them after Weitzel left BCA. It is an agreement between two similarly
sophisticated parties who negotiated at arm’s length. With reference to the disputed
referral cases it states, “The original fee agreements prevail for all cases referred by
Weitzel to BCA identified in Exhibit 4.”* The parties included an integration
clause, agreeing that the 2010 agreement and its exhibits “constitute the entire
agreement between the parties with respect to the subject matter here of.”
BCA and Weitzel agreed that “all disputes arising under” the 2010
agreement would be resolved by arbitration under the “rules of the American
Arbitration Association (AAA).” The AAA Commercial Arbitration Rules state,
“The parties shall be deemed to have made these rules a part of their arbitration
agreement whenever they have provided for . . . arbitration by the AAA of a
domestic commercial dispute without specifying particular rules.” Commercial
Arbitration Rules and Mediation Procedure R-1(a) (effective June 1, 2009),
available at www.adr.org. Under Rule 7 of the Commercial Arbitration Rules, the
“arbitrator shall have the power to rule on his or her own jurisdiction, including
*
Though Exhibit 4 is not in the record, the parties agree that the referral cases
subject to the current proceeding appear in Exhibit 4 of the 2010 agreement. See
TEX. R. APP. P. 38.1(g) (stating that in a civil case, the court will accept the facts
stated in the appellant’s brief as true unless another party contradicts them).
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any objections with respect to the existence, scope or validity of the arbitration
agreement.” Id. at R-7(a). The express incorporation of rules that empower the
arbitrator to determine arbitrability, such as the AAA Commercial Arbitration
Rules, is clear and unmistakable evidence of the parties’ intent to allow the
arbitrator to decide such issues. Schlumberger Tech. Corp. v. Baker Hughes Inc.,
355 S.W.3d 791, 802 (Tex. App.—Houston [1st Dist.] 2011, no pet.); see also
Burlington Res. Oil & Gas Co., 249 S.W.3d at 40–41 (“We are also mindful that,
in certain circumstances, the incorporation of AAA rules may constitute clear and
unmistakable evidence of an intent to allow an arbitrator to decide issues of
arbitrability.”); Trafigura Pte. Ltd. v. CNA Metals Ltd., 526 S.W.3d 612, 616–17
(Tex. App.—Houston [14th Dist.] 2017, no pet.) (listing sister courts who held the
same).
The parties incorporated the AAA Rules into the 2010 agreement and thus
agreed that the arbitrator, not the trial court, would decide gateway issues,
including whether their dispute falls under the arbitration clause of the 2010
agreement. Because BCA and Weitzel agreed that the arbitrator would decide these
questions, the trial court should have granted this aspect of Weitzel’s motion so
that the dispute, including the extent to which the 2002 agreement was
incorporated into the 2010 agreement, could be resolved in arbitration. See
Schlumberger Tech. Corp., 355 S.W.3d at 803.
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While we hold that the arbitration agreement binds BCA and Weitzel, this
dispute also involves Coon individually. Normally, only parties to an arbitration
agreement can be compelled to arbitrate. In re Kellogg, Brown & Root, Inc., 166
S.W.3d 732, 738 (Tex. 2005) (orig. proceeding). Six theories may bind
non-signatories to arbitration agreements: (1) incorporation by reference;
(2) assumption; (3) agency; (4) alter ego; (5) equitable estoppel, and (6) third-party
beneficiary. See id. Gallagher sued both Coon individually and “Brent W. Coon,
P.C. d/b/a Brent Coon and Associates.” The signatory to the 2002 and 2010
agreements was “Brent Coon & Associates.” The relationship between Coon and
Brent W. Coon, P.C. is not apparent from the record nor is it apparent if Brent
Coon & Associates as referenced in the 2002 agreement involves the same entity
referenced in the 2010 agreement and 2018 lawsuit. Because the record is unclear,
Weitzel did not meet his burden to show that the trial court abused its discretion in
denying his motion to compel arbitration against Coon.
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Conclusion
We reverse the trial court’s interlocutory order that denied Weitzel’s motion
to compel arbitration, and we remand the case to the trial court. On remand, we
direct the trial court to order BCA and Weitzel to arbitrate the substantive
arbitrability question.
Peter Kelly
Justice
Panel consists of Justices Keyes, Kelly, and Goodman.
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