Valerus Compression Services, LP and Valerus Services Company, LLC v. William Austin , 417 S.W.3d 202 ( 2013 )

Opinion issued November 21, 2013.
In The
Court of Appeals
For The
First District of Texas
NO. 01-13-00266-CV
VALERUS COMPRESSION SERVICES, LP AND VALERUS SERVICES
COMPANY, LLC, Appellants
V.
WILLIAM AUSTIN, Appellee
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Cause No. 2012-66317
and
NO. 01-13-00507-CV
VALERUS COMPRESSION SERVICES, LP AND VALERUS SERVICES
COMPANY, LLC, Appellants
V.
WILLIAM AUSTIN, Appellee
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Cause No. 2012-66317
OPINION
The underlying dispute concerns the propriety of the forced redemption of
William Austin’s partnership interests in Valerus Compression Services, L.P. by
Valerus Compression Services, L.P. and Valerus Services Company, LLC
(collectively “Valerus”). In two interlocutory appeals, Valerus challenges the trial
court’s orders (1) denying Valerus’s motion to compel arbitration of Austin’s
claims and (2) granting Austin’s motion to stay the parallel arbitration proceeding
brought by Valerus. See TEX. CIV. PRAC. & REM. CODE ANN. § 171.098(a) (West
2011). 1 We conclude that the trial court erred by denying Valerus’s motion to
compel arbitration and granting Austin’s motion to stay arbitration and,
accordingly, we reverse and remand.
1
The parties agree that the Texas Arbitration Act governs. See TEX. CIV. PRAC. &
REM. CODE ANN. §§ 171.001–171.098 (West 2011).
2
Background
Valerus hired William Austin to serve as its CFO in 2009. Shortly
thereafter, in connection with a recapitalization, Austin purchased partnership
interests in Valerus Compression Services, LP. The partnership interests were
governed by a Partnership Agreement. The Partnership Agreement requires that
all disputes “arising out of or in connection with this Agreement” be resolved by
arbitration.
In April 2010, the parties executed a Separation Agreement and General
Release of Claims (“Separation Agreement”) reflecting the termination of Austin’s
employment with Valerus. The Separation Agreement provided, among other
things, that Valerus would provide Austin severance payments and continued
health coverage under specified terms. The Separation Agreement also addressed
Austin’s partnership interests. It states, in Section 4, in relevant part:
Executive’s Rights Regarding Employee Partnership Interests. The
Parties acknowledge and agree that the termination of Executive’s
employment entitled Executive to certain benefits pursuant to Section
5.8 of the Employment Agreement. Accordingly, Executive shall
have the right to retain all or any part of Executive’s Partnership
Interests (as defined in the Partnership Agreement), without any
forced redemption by the Partnership or its designees under the
Partnership Agreement; provided, however, that Executive may,
within six (6) months and one day following the Separation Date,
request that the Partnership exercise its unilateral right under the
Partnership Agreement to redeem or purchase all or any part of
Executive’s Employee Partnership Interests (as defined in the
3
Partnership Agreement) for the price set forth in Section 13.02(a) of
the Partnership Agreement; provided further, however, that the
Partnership shall not be required to comply with any such request and
shall retain discretion as to whether to exercise such right upon
Executive’s request. As used herein the term “Partnership
Agremeent” has the same meaning as contained in the Employment
Agreement.
The Separation Agreement contains another provision that fixes venue and
incorporates a fee-shifting agreement. In relevant part, it states:
Venue for any action that may be brought by any Party involving the
enforcement of this Agreement or any rights, duties or obligations
under this Agreement shall be brought exclusively in the state or
federal courts (as applicable) sitting in Houston, Texas. Executive
consents and waives any objection to personal jurisdiction and venue
in those courts for any such action. The Parties acknowledge and
agree that Sections 4.7(b) and 4.7(c) of the Employment Agreement
are hereby incorporated in this Agreement by reference such that if
Executive shall obtain any money judgment or otherwise prevail with
respect to any arbitration or litigation brought by Executive or the
Company to enforce or interpret any provision in this Agreement, the
Company, to the fullest extent permitted by applicable law, shall
reimburse Executive for all of Executive’s reasonable legal fees and
expenses incurred in such arbitration or litigation.
The Separation Agreement also contained the following merger clause:
This Agreement contains the entire agreement of the Parties with
respect to the subject matter hereof, this Agreement supersedes all
prior and contemporaneous agreements and understandings, oral or
written, between the Parties hereto concerning the subject matter
hereof. This Agreement may be amended, waived or terminated only
by a written instrument executed by all Parties hereto.
In December 2011, Austin began working as an Executive Vice President
and CFO of Exterran Energy Corporation. Valerus notified Austin that his
4
employment violated the non-competition provision in the Partnership Agreement,
permitting Valerus to forcibly redeem Austin’s partnership interests, and Valerus
redeemed the partnership interests based on the formula set forth in section 13.02
of the Partnership Agreement. In response, on November 6, 2012, Austin sued
Valerus in state district court in Houston, seeking a declaratory judgment that
(1) the Separation Agreement remains in full force and effect; (2) Austin is not in
breach of the Separation Agreement or the Partnership Agreement; (3) Austin is
entitled to retain ownership of his partnership interests; (4) Valerus must reissue
Austin’s Certificates 288-B and 225-C; and (5) Valerus must return the certificates
to Austin in accordance with the Separation Agreement. Austin also alleged
Valerus had converted his partnership interests and breached the Separation
Agreement. He sought specific performance, the return of the certificates
evidencing his ownership in Valerus Compression Services, LP.
On December 3, 2012, Valerus moved to compel arbitration and abate the
trial court proceedings, arguing that the arbitration provision in the Partnership
Agreement requires Austin to arbitrate his claims. On the same day, Valerus also
initiated an arbitration proceeding with the American Arbitration Association
(“AAA”), requesting declaratory relief under the Partnership Agreement. Valerus
requested a declaration that (1) Austin was a “Breaching Party” and that an
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Expulsion Event occurred under the Partnership Agreement, (2) Valerus had the
unilateral option under Section 13.01(c) of the Partnership Agreement to redeem
Austin’s partnership interests for the amount set forth in Section 13.02(a)(ii) of the
Partnership Agreement, (3) the total redemption price of Austin’s vested
partnership interests under Section 13.01(c) is $10,697.67, and (4) the restrictions
on competition under Section 8.03(f) of the Partnership Agreement are reasonable
and enforceable under Texas law.
Austin opposed the motion to compel arbitration, contending that the venue
and merger provisions in the Separation Agreement operate to revoke or extinguish
the arbitration provision in the Partnership Agreement with respect to the subject
matter of the suit: the forcible redemption of his partnership interests. The trial
court denied Valerus’s motion on March 8, 2013, and Valerus appealed.
On March 7, 2013, the day before the trial court signed the order denying the
motion to compel arbitration, and three months after Valerus initiated the
arbitration proceeding, Austin filed an emergency motion to stay the arbitration.
The trial court granted the emergency motion pending further briefing. On
March 28, 2013, Austin filed a motion to continue the stay, arguing that Valerus’s
claims were not arbitrable because the Separation Agreement governed and
controlled disputes regarding forced redemption of partnership interests and did
6
not contain an arbitration provision. Austin also argued that the arbitration should
be stayed to avoid inconsistent rulings and unnecessary expense. The trial court
granted the stay, and Valerus appealed from that order as well.2
Discussion
I. Did the trial court err in denying Valerus’s motion to compel arbitration?
We first consider Valerus’s contention that the trial court erred in denying its
motion to compel arbitration of Austin’s claims.
A. Standard of Review and Substantive Law
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 ANN. § 171.098 (West Supp. 2013). We review interlocutory
appeals of orders denying motions to compel arbitration for an abuse of discretion,
deferring to the trial court’s factual determinations if they are supported by the
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).
A party moving to compel arbitration must establish (1) the existence of a
valid, enforceable arbitration agreement and (2) that the claims asserted fall within
2
Because the issues in the two appeals overlap, we will dispose of both appeals in
this single opinion.
7
the scope of that agreement. In re Provine, 312 S.W.3d 824, 828–29 (Tex. App.—
Houston [1st Dist.] 2009, orig. proceeding). Whether a valid arbitration agreement
exists is a legal question. In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex.
2006). In interpreting the parties’ agreement, we apply ordinary contract
principles. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).
We examine and consider the entire writing in an effort to harmonize and give
effect to all the provisions of the contract so that none will be rendered
meaningless. Id. at 229. No single provision taken alone will be given controlling
effect. Id.
Once an arbitration agreement is established, “a court should not deny
arbitration unless it can be said with positive assurance that an arbitration clause is
not susceptible of an interpretation which would cover the dispute at issue.” In re
D. Wilson Constr. Co., 196 S.W.3d at 783 (internal citations omitted). If a valid
arbitration agreement exists, “courts should resolve any doubts as to the
agreement’s scope, waiver, and other issues unrelated to its validity in favor of
arbitration.” Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011). To be subject
to arbitration, the “allegations need only be factually intertwined with arbitrable
claims or otherwise touch upon the subject matter of the agreement containing the
arbitration provision.” In re B.P. Am. Prod. Co., 97 S.W.3d 366, 370 (Tex. App.—
8
Houston [14th Dist.] 2003, orig. proceeding).
If a party seeking arbitration carries its initial burden to prove the existence
of an agreement to arbitrate, then a strong presumption favoring arbitration arises,
and the burden shifts to the party opposing arbitration to prove an affirmative
defense to the agreement. J.M. Davidson, Inc., 128 S.W.3d at 227. “Once the trial
court concludes that the arbitration agreement encompasses the claims, and that the
party opposing arbitration has failed to prove its defenses, the trial court has no
discretion but to compel arbitration and stay its own proceedings.” In re
FirstMerit Bank, N.A., 52 S.W.3d 749, 753–54 (Tex. 2001).
B. Analysis
In its first appeal, Valerus contends that the trial court erred in denying its
motion to compel arbitration because the Partnership Agreement contains a valid,
enforceable arbitration agreement and Austin’s claims fall within the scope of that
agreement. Valerus further argues that none of Austin’s defenses are meritorious:
specifically, Valerus argues that the Separation Agreement did not revoke or
extinguish the arbitration provision in the Partnership Agreement, that Valerus did
not waive its right to arbitrate, and that Valerus is not estopped from compelling
arbitration. We address these issues in turn.
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1. Did the Separation Agreement revoke the arbitration agreement
with respect to claims regarding forcible redemption?
The arbitration provision in the Partnership Agreement provides that all
disputes “arising out of or in connection with this Agreement” shall be resolved by
arbitration.3 Austin acknowledges that he agreed to this arbitration provision in the
Partnership Agreement, but contends that the Separation Agreement revoked or
extinguished the arbitration provision with respect to any dispute regarding
forcible redemption of his partnership interests. Specifically, Austin asserts that
“[t]he Separation Agreement bars forced redemption and expressly states that
disputes involving forced redemption must be brought exclusively in court.”
Austin’s argument is based on three provisions of the Separation Agreement.
Austin first argues that Section 4 of the Separation Agreement grants him an
3
The Partnership Agreement’s arbitration provision has been amended. The
Second Amended and Restated Agreement of Limited Partnership, which was in
place at the time that Austin began his employment at Valerus and is the version
relied on by Austin, says that the parties “agree to submit to arbitration” “[a]ll
disputes arising out of or in connection with this Agreement,” and that the
arbitrator’s decision will be “final, nonappealable, and binding.” The Fifth
Amended version, which is the current version of the agreement and which
Valerus contends is the operative agreement, says “all claims, counterclaims,
demands, causes of action, disputes, controversies, and other matters in question
arising out of or in connection with this Agreement . . . shall be resolved by
mandatory and binding arbitration.” Austin contends that the partnership lacked
authority to amend the Partnership Agreement and, therefore, he is not be bound
by the provision in the Fifth Amended Partnership Agreement. But Valerus
contends, and we agree, that the outcome would be the same under either
provision.
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unqualified right to “‘retain all or any part of [his partnership interests] without any
forced redemption by [Valerus] under the Partnership Agreement.’” He argues
that the purpose of each of his claims is to enforce this right. Austin then points to
the venue provision in the Separation Agreement, which provides that “[v]enue for
any action that may be brought by any Party involving the enforcement of this
Agreement or any rights, duties or obligations under this Agreement shall be
brought exclusively in the state or federal courts (as applicable) sitting in Houston,
Texas.” This language, Austin contends, mandates that his claims be brought in a
Houston court, and nowhere else. He argues that this is confirmed by the
Separation Agreement’s merger provision, which states “[t]his Agreement contains
the entire agreement of the Parties with respect to the subject matter hereof.”
Austin argues that the “subject matter hereof” is forced redemption of partnership
interests, the subject of his claims.
Austin asserts that “magic words” are not necessary to revoke an arbitration
provision, and that, when read together, these three provisions of the Separation
Agreement—Section 4, and the venue and merger provisions—operate to revoke
or supersede the Partnership Agreement’s arbitration agreement with respect to
claims involving forced redemption. In support of his argument, Austin relies
upon TransCore Holdings, Inc. v. Rayner, 104 S.W.3d 317 (Tex. App.—Dallas
11
2003, pet. denied). In TransCore, the Dallas Court of Appeals concluded that a
Termination Agreement precluded the enforcement of an arbitration provision in
an earlier Stock Purchase Agreement. Id. at 323. But Austin’s reliance on
TransCore is unavailing because the Termination Agreement in that case contained
a broad and unconditional release of all previous agreements that is absent here. It
provided:
Except as to the promises made in this letter and except as otherwise
provided for in this letter, Viastar and TransCore, on the one hand,
and you [Rayner] on the other hand, hereby fully, forever, irrevocably
and unconditionally release, remise, settle and discharge one another
from any and all manner of claims, charges, complaints, debts,
liabilities, demands, actions, causes of action, suits, rights, covenants,
contracts, controversies, agreements, promises, omissions, damages,
obligations and expenses of any kind, including attorneys’ fees,
whether known or unknown, which they had, now have, or hereafter
may have against each other arising prior to the date of this letter
whether or not pursuant to the terms and conditions set forth in any
prior agreements between yourself, Viastar, affiliated companies and
its parent, provided however that nothing contained in this letter shall
release or discharge you from any obligations with respect to claims
[the] Viastar and/or TransCore has, now have, or hereafter may have
against you under or pursuant to Sections 7, 8, and 9 of the
Employment Agreement date May 12, 2000.
Id. at 320–21 (Emphasis added). Accordingly, the TransCore court concluded
that, because the earlier agreement was no longer in effect, TransCore could not
rely upon the arbitration agreement in it to compel arbitration. Id. at 320–23.
The Separation Agreement in this case does not contain analogous language
12
expressly extinguishing the Partnership Agreement or its arbitration provision. On
the contrary, here, both parties agree that the Partnership Agreement, including the
arbitration provision, is still in effect and applies at least to some claims, and the
only dispute is whether the arbitration provision applies to the particular claims
Austin has asserted.
While we agree with Austin that no “magic words” are required, an
agreement to supersede or revoke an earlier arbitration agreement must do so in
unequivocal terms such that the subsequent agreement cannot be harmonized with
the arbitration provision. See J.M. Davidson, Inc., 128 S.W.3d at 227;
Transwestern Pipeline Co. v. Horizon Oil & Gas Co., 809 S.W.2d 589, 591 (Tex.
App.—Dallas 1991, writ dism’d w.o.j.). Here, Austin points to a portion of the
venue provision in the Separation Agreement that fixes venue in Houston courts as
support for his claim that the Separation Agreement revoked the arbitration
agreement. But the venue clause continues:
The Parties acknowledge and agree that Sections 4.7(b) and 4.7(c) of
the Employment Agreement are hereby incorporated in this
Agreement by reference such that if Executive shall obtain any money
judgment or otherwise prevail with respect to any arbitration or
litigation brought by Executive or the Company to enforce or
interpret any provision in this Agreement, the Company, to the fullest
extent permitted by applicable law, shall reimburse Executive for all
of Executive’s reasonable legal fees and expenses incurred in such
arbitration or litigation.
13
(emphasis added). 4 Thus, the venue provision expressly contemplates that both
arbitration and litigation proceedings may be initiated to enforce the provisions of
the Separation Agreement, i.e., that the arbitration agreement in the Partnership
Agreement survived the execution of the Separation Agreement, even with respect
to claims to enforce or interpret the Separation Agreement.
The mere presence of venue and merger provisions does not invalidate an
arbitration agreement when the provisions can be harmonized with the agreement
to arbitrate. See Phytel, Inc. v. Smiley, No. 05-12-00607-CV, 2013 WL 1397085,
at *3 (Tex. App.—Dallas Apr. 5, 2013, no pet.) (mem. op.); In re Bath Junkie
Franchise, Inc., 246 S.W.3d 356, 365 (Tex. App.—Beaumont 2008, no pet.);
Coody Custom Homes LLC v. Howe, No. 10-06-00098-CV, 2007 WL 1374136, at
*2 (Tex. App.—Beaumont May 9, 2007, no pet.) (mem. op.); Kirby Highland
Lakes Surgery Ctr., L.L.P. v. Kirby, 183 S.W.3d 891, 901 (Tex. App.—Austin
2006, no pet.); New Concept Constr. Co. v. Kirbyville Consol. Indep. Sch. Dist.,
119 S.W.3d 468, 470 (Tex. App.—Beaumont 2003, pet. denied); Valero Energy
Corp. v. Teco Pipeline Corp., 2 S.W.3d 576, 587 (Tex. App.—Houston [14th
Dist.] 1999, no pet.); see also In re Winter Park Constr., Inc., 30 S.W.3d 576, 578
(Tex. App.—Texarkana 2000, orig. proceeding). Here, the venue provision can be
4
The Employment Agreement is not included in the appellate record.
14
harmonized with the arbitration provision, because it can be construed to fix venue
in Houston courts in the event that arbitration is waived or for proceedings to
enforce an arbitration award. See Coody Custom Homes LLC, 2007 WL 1374136,
at *2; New Concept Constr. Co., 119 S.W.3d at 470.
Because the venue clause expressly contemplates that both litigation and
arbitration proceedings may be brought to enforce the Separation Agreement, and
can be harmonized with the arbitration provision, we hold that the Separation
Agreement does not abrogate partnership arbitral rights with respect to forcible
redemption of partnership interests. See J.M. Davidson, Inc., 128 S.W.3d at 227;
Transwestern Pipeline Co., 809 S.W.2d at 591.
Accordingly, we sustain Valerus’s first issue.
2. Are Austin’s claims within the scope of the arbitration
agreement?
If a valid arbitration agreement exists, “courts should resolve any doubts as
to the agreement’s scope, waiver, and other issues unrelated to its validity in favor
of arbitration.” Ellis, 337 S.W.3d at 862. In determining whether the claims fall
within an arbitration agreement’s scope, a court focuses on the facts alleged, not on
the causes of action asserted. Hou–Scape, Inc. v. Lloyd, 945 S.W.2d 202, 205
(Tex. App.—Houston [1st Dist.] 1997, orig. proceeding). To be subject to
arbitration, the “allegations need only be factually intertwined with arbitrable
15
claims or otherwise touch upon the subject matter of the agreement containing the
arbitration provision.” In re B.P. Am. Prod. Co., 97 S.W.3d at 370.
Here, the parties agreed to arbitrate all disputes “arising out of or in
connection with” the Partnership Agreement. Valerus contends that Austin’s
claims fall within the scope of that agreement. Specifically, Valerus contends that
some of Austin’s claims are directly premised on the Partnership Agreement, and
that none of them may be decided without reference to the Partnership Agreement.
See Enter. Field Servs., LLC v. TOC-Rocky Mountain, Inc., 405 S.W.3d 767, 773–
74 (Tex. App.—Houston [1st Dist.] 2013, pet. denied); In re B.P. Am. Prod. Co.,
97 S.W.3d at 370. Austin responds that even if a valid arbitration agreement
exists, his claims do not fall within its scope, because his claims are based solely
upon the rights conferred upon him by the Separation Agreement, which he
contends is “the only agreement that governs this dispute.”
We conclude that Austin’s claims fall within the scope of the arbitration
provision. Adjudicating Austin’s claims will require interpretation of the
Partnership Agreement’s terms. The Partnership Agreement states the terms under
which partnership interests may be forcibly redeemed, prohibits competition by
owners of partnership interests, and otherwise governs the partnership. Indeed,
despite his contention that the Separation Agreement is the only agreement that
16
governs this dispute, Austin’s petition expressly requests a declaration that he has
not breached the Partnership Agreement, and all of his claims relate to his
partnership interests. The allegations in Austin’s petition thus are “factually
intertwined with arbitrable claims or otherwise touch on the subject matter of the
agreement containing the arbitration provision.” Enter. Field Servs., 405 S.W.3d
at 773 (quoting In re B.P. America Prod. Co., 97 S.W.3d at 370); see Ellis, 337
S.W.3d at 861–62 (courts are required to resolve all doubts regarding the scope of
arbitration agreement in favor of arbitrability once court has determined that a
valid arbitration agreement exists); Cotton Commercial USA, Inc. v. Clear Creek
Indep. Sch. Dist., 387 S.W.3d 99, 108 (Tex. App.—Houston [14th Dist.] 2012, no
pet.) (claim not subject to arbitration only if “the facts alleged in support of the
claim stand alone, are completely independent of the contract, and the claim could
be maintained without reference to the contract”); see also Richmont Holdings, Inc.
v. Superior Recharge Sys., L.L.C., 392 S.W.3d 633, 635 (Tex. 2013) (noting that
dispute touching upon two agreements, one of which contained arbitration clause,
was subject to arbitration). Accordingly, we conclude that Austin’s claims fall
within the scope of the arbitration clause in the Partnership Agreement.
17
We sustain Valerus’s second issue.5
3. Austin’s defenses
Once a valid arbitration agreement has been established, a presumption
attaches favoring arbitration and the burden shifts to the party resisting arbitration
to establish a defense to enforcing arbitration. See In re AdvancePCS Health L.P.,
172 S.W.3d 603, 607 (Tex. 2005) (orig. proceeding); In re Hartigan, 107 S.W.3d
684, 687–88 (Tex. App.—San Antonio 2003, orig. proceeding [mand. denied]).
Austin raises the defenses of waiver and estoppel. He contends that Valerus
waived the right to arbitrate by entering in to the Separation Agreement and that
Valerus should be estopped from enforcing the arbitration agreement for the same
reason. But Austin’s waiver and estoppel arguments are premised on his argument
that the express language of the Separation Agreement revoked the arbitration
agreement with respect to Austin’s claims regarding forced redemption. Because
we have rejected the premise of Austin’s contention, Austin’s waiver and estoppel
defenses fail.
We sustain Valerus’s third issue.
5
Although we have determined that a valid arbitration agreement exists and that
Austin’s claims are subject to arbitration, we express no opinion regarding the
merits of Austin’s claims.
18
4. Abatement of Lawsuit
“Once the trial court concludes that the arbitration agreement encompasses
the claims, and that the party opposing arbitration has failed to prove its defenses,
the trial court has no discretion but to compel arbitration and stay its own
proceedings.” In re FirstMerit Bank, N.A., 52 S.W.3d at 753–54. Because we hold
that there is a valid arbitration agreement which encompasses Austin’s claims, and
because Valerus has not waived its right to compel arbitration and is not estopped
from exercising its right to compel arbitration, the trial court proceedings should
have been abated and arbitration compelled. Id.
We sustain Valerus’s fourth issue.
II. Did the trial court err in granting Austin’s motion to stay arbitration?
We now turn to Valerus’s second appeal, in which it contends that the trial
court erred in granting Austin’s motion to stay the arbitration.
A. Standard of Review
Section 171.098 of the Texas Civil Practice and Remedies Code permits the
interlocutory appeal of an order staying arbitration. TEX. CIV. PRAC. & REM. CODE
ANN. § 171.098 (West Supp. 2013). A party moving to stay arbitration must show
that there is not an agreement to arbitrate. See id. § 171.023 (West 2011). We
apply a no-evidence standard of review to orders granting motions to stay
19
arbitration. ODL Servs., Inc. v. ConocoPhillips Co., 264 S.W.3d 399, 417 n.7
(Tex. App.—Houston [1st Dist.] 2008, no pet.).
B. Analysis
In its first issue, Valerus contends the Partnership Agreement contains a
valid, enforceable arbitration agreement and its claims for declaratory relief under
the Partnership Agreement fall within the scope of that agreement. In its second
issue, Valerus contends that the Separation Agreement did not revoke or extinguish
the arbitration provision in the Partnership Agreement.
In response, Austin argues that the Separation Agreement revoked the
arbitration agreement with respect to disputes regarding the forcible redemption of
Austin’s partnership interests, that the dispute regarding forcible redemption of his
shares is outside the scope of the arbitration provision, and that he did not waive
his right to object to arbitration because he participated subject to his objection that
arbitration was not the appropriate forum.
In the arbitration, Valerus seeks declarations that (1) Austin was a
“Breaching Party” and that an Expulsion Event occurred under the Partnership
Agreement, (2) Valerus had the unilateral option under Section 13.01(c) of the
Partnership Agreement to redeem Austin’s partnership interests for the prices set
forth in Section 13.02(a)(ii) of the Partnership Agreement, (3) the total redemption
20
price of Austin’s vested partnership interest under Section 13.01(c) is $10,697.67,
and (4) the restrictions on competition under Section 8.03(f) of the Partnership
Agreement are reasonable and enforceable under Texas law. Austin concedes that
“there is no distinction” between his claims and Valerus’s claims, because both are
“flip-sides of the forced redemption issue” and are “mirror-images of one another.”
Having already decided that the Separation Agreement did not abrogate
partnership arbitral rights with respect to forcible redemption of Austin’s
partnership interests, and that Austin’s claims fall within the scope of the
arbitration provision, we agree that Valerus’s claims also fall within the arbitration
agreement’s scope, and we sustain Valerus’s first and second issues. Accordingly,
we hold that the trial court erred in staying the arbitration. See TEX. CIV. PRAC. &
REM. CODE ANN. § 171.023 (party moving to stay arbitration must show that there
is not an agreement to arbitrate). Because our resolution of Valerus’s first two
issues requires reversal, we do not reach Valerus’s remaining issues.
21
Conclusion
We reverse the trial court’s order denying Valerus’s motion to compel
arbitration and the order staying the arbitration proceeding and remand for further
proceedings compelling arbitration.
Rebeca Huddle
Justice
Panel consists of Chief Justice Radack and Justices Bland and Huddle.
22