Aramark Uniform & Career Apparel, LLC v. Agentek, Inc. ( 2015 )

ACCEPTED
03-15-00157-CV
4726823
THIRD COURT OF APPEALS
AUSTIN, TEXAS
4/1/2015 12:31:18 PM
JEFFREY D. KYLE
CLERK
No. 03-15-00157-CV
ARAMARK UNIFORM & CAREER § IN THE THIRD
FILED IN
APPAREL, LLC, § 3rd COURT OF APPEALS
Appellant, § AUSTIN, TEXAS
§ COURT OF 4/1/2015 12:31:18 PM
APPEALS
v. § JEFFREY D. KYLE
Clerk
§
AGENTEK, INC. §
Appellee. § AUSTIN, TEXAS
APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
A. INTRODUCTION
1. Appellant is ARAMARK UNIFORM & CAREER APPAREL, LLC;
Appellee is AGENTEK, INC.
2. This interlocutory appeal is from a denial of a motion to compel
arbitration and stay proceedings in Cause No. D-1-GN-14-005219, pending in the
98th Judicial District Court of Travis County, Texas. (See Notice of Appeal.) In May
2012, the Appellant here filed a claim with the American Arbitration Association
pursuant to the terms of an arbitration agreement that it believed bound the parties.
In December 2014, the Appellee filed its Original Petition in the instant action in
Travis County. In January 2015, Appellant filed its application to compel arbitration
and stay the proceedings in Travis County and also filed an Answer to the Original
Petition. On February 19, 2015, the 98th Judicial District Court heard argument on
Appellant’s application to compel arbitration and stay the proceedings, and shortly
PAGE 1 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
thereafter, on February 24, signed an order denying that motion, and Appellant timely
filed its notice of appeal in the district court on March 10, 2015. (See Id.)
3. Between the time that the district court signed its order and Appellant
filed its notice of appeal, Appellee served two sets of discovery requests on Appellant,
and has offered no indication that it intends to await the disposition of this appeal
before advancing full-ahead in the district court.
4. Because Appellee is moving forward with litigation in the district court,
Appellant moves this court to stay the district court proceedings pending appeal.
Texas Rule of Appellate Procedure 29.5(b) makes it clear that that district court may
not make any orders that “interfere[] with or impair[] the jurisdiction of the appellate
court or effectiveness of any relief sought or that may be granted on appeal.” Whether
the district court makes any order, however, allowing discovery to move forward in
the district court deprives Appellant of the most significant benefit of its agreement to
arbitrate – specifically the right to have disputes resolved in a more efficient and
economical fashion than traditional litigation. In order to protect this right, both the
Federal Arbitration Act (which applies to this case) and the Texas Arbitration Act
authorize litigants to seek immediate appellate review of an order denying a motion to
compel arbitration. If Appellant is forced to incur the expense of litigation before its
appeal is heard, the appeal will effectively be moot (even as this Court has obviously
attempted to expedite this and similar interlocutory appeals), and the Federal
Arbitration Act and Texas Arbitration Act’s right to appeal would be – effectively –
PAGE 2 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
meaningless. As discussed below, because this appeal (i) raises serious legal issues, (ii)
Appellant will be irreparably harmed without a stay of this proceeding pending an
appeal, (iii) Appellee will not be substantially harmed by the granting of a stay, and (iv)
both the public interest in conserving judicial resources and the strong state and
federal policies in favor of arbitration weigh in favor of a stay, the balance of equities
dictate that the district court proceedings should be stayed pending this appeal.
B. ARGUMENT & AUTHORITIES
5. Both the Federal Arbitration Act and the Texas Arbitration Act
authorize immediate appellate review of an order denying a motion to compel
arbitration or refusing a stay of litigation pending arbitration. 9 U.S.C. § 16(a)(1); Tex.
Civ. Prac. & Rem. Code §§ 171.098(a)(1), 51.016. Appellant has obviously exercised
its right to an immediate interlocutory appeal of the district court’s order denying its
application to compel arbitration and stay the district court proceedings.
6. There is no statute or Texas case suggesting that proceedings in the
district court are automatically stayed pending the outcome of an appeal of an order
denying a motion to compel arbitration. To the contrary, the Texas Rules of Civil
Procedure make it clear that “[w]hile an appeal from an interlocutory order is pending,
the trial court retains jurisdiction of the case . . .” and may make any other order that
is not “inconsistent with any appellate court temporary order” and that does not
“interfere[] with or impair[] the jurisdiction of the appellate court or effectiveness of
any relief sought or that may be granted on appeal.” Tex. R. App. P. 29.5. By the same
PAGE 3 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
token, the “appellate court may make any temporary orders necessary to preserve the
parties’ rights until disposition of the appeal . . . .” Tex. R. App. P. 29.3.
7. Appellant urges that the only way to preserve the parties’ rights until
disposition of the appeal is by maintaining the status quo with an order staying any
further proceedings in the district court.
8. While there is no Texas authority directly on point, and this Court is not
bound by federal authority regarding the procedural aspects of this case, Roe v.
Ladymon, 318 S.W.3d 502, 510 (Tex. App. – Dallas 2010), the Texas Arbitration Act
and the Federal Arbitration Act are quite similar, and Texas courts look to federal
cases interpreting the FAA as persuasive in matters governing Texas’s own statutory
scheme, Kilroy v. Kilroy, 137 S.W.3d 780, 787 n.2 (Tex. App. – Houston [1st Dist.]
2004). And the policy behind why federal courts frequently (automatically in a
majority of federal Circuits) stay trial court proceedings pending appeals of denials of
motions to compel arbitration is identical to the policy interest here; if Appellant’s
claims are arbitrable, then the only place it should be required to continue with the
dispute resolution process is in the arbitration.
9. The majority of the United States Courts of Appeal to consider the issue
have held that a stay of all district court proceedings is automatic upon the filing of a
non-frivolous appeal from a denial of a motion to compel arbitration. See Ehleiter v.
Grapetree Shores, Inc., 482 F.3d 207, 215 n.6 (3d Cir. 2007); McCauley v. Halliburton Energy
Servs., Inc., 413 F.3d 1158, 1162-63 (10th Cir. 2005); Blinco v. Green Tree Servicing, L.L.C.,
PAGE 4 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
366 F.3d 1249, 1251 (11th Cir. 2004); Bradford-Scott Data Corp. v. Physician Comp.
Network, Inc., 128 F.3d 504, 507 (7th Cir. 1997). Others have held that staying the case
is discretionary. See Motorola Credit Corp. v. Uzan, 388 F.3d 39, 53-54 (2d Cir. 2004);
Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir. 1990).
10. Even in jurisdictions where a stay is discretionary, like the Ninth Circuit,
courts overwhelmingly find that a stay should be issued pending the appeal of a denial
of a motion to compel arbitration. See, e.g., Hunt v. Check Recovery Sys., Inc., Nos. C-05-
4993-SBA, C-06-203-SBA, 2008 WL 2468473 (N.D. Cal. June 17, 2008 (granting a
stay and noting that “California district courts frequently issue stays in an action when
there is a matter pending interlocutory appeal.”); Steiner v. Apple Computer, Inc., No. C-
07-04486-SBA, 2008 WL 1925197 (N.D. Cal. Apr. 29, 2008 (granting a stay and
noting that “almost every California district court to consider whether to stay a
matter, pending appeal of an order denying a motion to compel arbitration, has issued
a stay”).
11. The only way to “preserve the parties’ rights until disposition of the
appeal” is by staying the trial court proceedings in this case. If the Court finds that the
arbitration that has been pending since May 2012 is the proper forum for this dispute,
the district court’s and the parties’ resources will have been needlessly expended on
continuing preparations for trial. To force Appellant to litigate this matter while its
appeal is pending is to deprive it of the most significant benefit of the parties’
agreement to arbitrate – specifically, the right to have disputes resolved in a more
PAGE 5 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
efficient and economical fashion than traditional litigation. See Trefny v. Bear Stearns Sec.
Corp., 243 B.R. 300, 309 (S.D. Tex. 1999) (“[Movant] will suffer irreparable injury
absent a stay because it will be forced to participate in discovery under court order
and its right to arbitrate the dispute will be jeopardized by such discovery.”); C.B.S.
Employees Fed. Credit Union v. Donaldson, Lufkin & Jenrette Secs. Corp., 716 F. Supp. 307,
310 (W.D. Tenn. 1989) (“If the defendants are forced to incur the expense of
litigation before their appeal is heard, the appeal will be moot, and their right to
appeal would be meaningless.”).
12. This question is not theoretical; Appellee has served discovery requests
on Appellant, evidencing its intent to have the district court case move forward even
as this appeal is pending.
13. And if the Court grants the stay, it will have no effect on Appellee.
Appellee has had the opportunity at any point after May 2012 to file its suit in the
Texas court, if it believed that the arbitration was improper and should not have been
moving forward. Appellee cannot, therefore, be heard to complain of delay, even if
this appeal had the potential to be lengthy. The reality is that this Court appears to be
treating this appeal expeditiously. And Appellant has not acted to delay any
proceeding at any point, but rather promptly filed a motion to compel arbitration, and
promptly filing a notice of appeal when that motion was denied.
PAGE 6 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
C. CONCLUSION
14. Courts across the country routinely stay district court proceedings
pending an appeal of an order denying a motion to compel arbitration. And given
Appellee’s actions in moving the litigation forward in the district court, this Court
should act to “preserve the parties’ rights until disposition of the appeal” by staying
proceedings in the district court until this Court has an opportunity to determine
whether the case should be submitted to arbitration. Even though the district court
has not yet affirmatively exercised its jurisdiction in a way that renders this appeal
meaningless, the Appellee has used the district court’s continued jurisdiction over this
matter to undermine the Appellant’s right to an immediate appeal of the denial of its
motion to compel arbitration; Appellant has been and will continue to be irreparably
harmed without a stay of these proceedings. Consequently, Appellant respectfully
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PAGE 7 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
requests that the Court stay any further proceedings in Cause No. D-1-GN-14-005219
in the 98th Judicial District Court of Travis County pending resolution of this appeal.
Respectfully submitted,
COLEMAN FROST LLP
By: /s/ Daniel L. Alexander
Daniel L. Alexander
State Bar No. 24058225
429 Santa Monica Boulevard, Suite 700
Santa Monica, California 90401
Tel. (310) 576-7312
Fax (310) 899-1016
daniel@colemanfrost.com
ATTORNEYS FOR APPELLANT
ARAMARK UNIFORM & CAREER
APPAREL, LLC
CERTIFICATE OF CONFERENCE
I hereby certify that, in accordance with Texas Rule of Appellate Procedure
10.1(a)(5), I conferred with counsel for Appellee about the merits of this Motion.
Appellee does not agree to the relief requested in this Motion.
/s/ Daniel L. Alexander
Daniel L. Alexander
PAGE 8 APPELLANT’S MOTION TO STAY
DISTRICT COURT PROCEEDINGS PENDING APPEAL
CERTIFICATE OF SERVICE
I certify that on April 1, 2015, I served a copy of APPELLANT’S MOTION
TO STAY DISTRICT COURT PROCEEDINGS PENDING APPEAL on the
counsel listed below by electronic service, and the electronic transmission was
reported as complete. My e-mail address is daniel@colemanfrost.com.
W. Reid Wittliff Attorneys for Appellee
reid@wittliffcutter.com AGENTEK, INC.
WITTLIFF CUTTER, PLLC
1803 West Avenue
Austin, Texas 78701
/s/ Daniel L. Alexander
DANIEL L. ALEXANDER
ATTORNEY FOR APPELLANT
ARAMARK UNIFORM & CAREER
APPAREL, LLC