Barantas Incorporated, Patrick J. O'Brien, Brian P. Fox, and EGS Administration v. Enterprise Financial Group Incorporated ( 2018 )

AFFIRM in Part, REVERSE in Part, and REMAND; Opinion Filed August 7, 2018.
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-17-00896-CV
BARANTAS INCORPORATED, PATRICK J. O'BRIEN, BRIAN P. FOX,
AND EGS ADMINISTRATION, L.L.C., Appellants
V.
ENTERPRISE FINANCIAL GROUP INCORPORATED, Appellee
On Appeal from the 191st Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-17-01503
MEMORANDUM OPINION
Before Justices Lang-Miers, Fillmore, and Stoddart
Opinion by Justice Fillmore
On February 22, 2008, Barantas Incorporated and Enterprise Financial Group Incorporated
(EFG) entered into an Administrative Services Agreement (the 2008 Agreement) that contained
an agreement to arbitrate. After EFG sued Barantas; Patrick J. O’Brien, the president of Barantas;
Brian P. Fox, an employee and “principal” of Barantas; and EGS Administration, L.L.C., which is
owned by O’Brien and Fox, appellants moved to stay proceedings in the trial court and compel
arbitration based on the arbitration provision in the 2008 Agreement. The trial court granted
appellants’ motion with respect to EFG’s claim Barantas breached the 2008 Agreement and request
for declarations of its rights and duties under the 2008 Agreement, but denied appellants’ motion
with respect to all other claims.
In this accelerated, interlocutory appeal, appellants assert the trial court erred by partially
denying the motion to compel arbitration and denying the motion to stay proceedings because all
claims asserted by EFG against appellants arise from or are based on the 2008 Agreement. We
affirm the trial court’s order compelling arbitration of EFG’s claim against Barantas for breach of
the 2008 Agreement and request for declaratory relief relating to the 2008 Agreement. We reverse
the trial court’s order denying appellants’ motion to compel arbitration of EFG’s remaining claims,
order that all disputes between the parties proceed to arbitration, and remand this case to the trial
court so that it may stay the proceedings pending before it.
Background
EFG administers vehicle service contract (VSC) programs without participating directly in
the sale of the vehicles. The 2008 Agreement authorized Barantas to “procur[e] agreements” with
vehicle dealerships and call centers in twenty-four states and the District of Columbia to sell VSCs
administered by EFG. If EFG entered into a sales agreement with the dealership or call center
identified by Barantas, Barantas would receive a commission for any VSC administered by EFG
that was sold by the dealership or call center.
The 2008 Agreement required EFG to provide to Barantas “forms, promotional materials,
dealer cost rate schedules and other materials needed, in the sole judgment of [EFG], to properly
service accounts” of dealerships and call centers procured by Barantas. Barantas was required to
“provide continued maintenance and servicing” of the accounts it procured and to “keep such
records and business accounts as [EFG] may reasonably request.” The 2008 Agreement was
subject to termination if Barantas solicited, or attempted to solicit, any of EFG’s existing accounts.
Barantas and EFG agreed that:
[A]ny dispute which might arise between them concerning their rights or duties
pursuant to this Agreement shall be submitted to arbitration in the County of
Tarrant, in the State of Texas, pursuant to the rules of Commercial Arbitration of
the American Arbitration Association.
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On October 1, 2009, EFG and Barantas entered into a “Seller Agreement for
Administrative Services” (the 2009 Agreement), pursuant to which Barantas was authorized to
directly sell VSCs administered by EFG. EFG and EGS entered into a “Seller Agreement for
Administrative Services” on January 5, 2015 (the 2015 Agreement), pursuant to which EGS was
authorized to directly sell VSCs administered by EFG.
On February 7, 2017, EFG sued appellants, alleging (1) Barantas breached the 2008
Agreement, (2) O’Brien, Fox, and EGS misappropriated, and conspired to misappropriate, EFG’s
trade secrets, and (3) O’Brien, Fox, and EGS tortiously interfered with, and conspired to tortiously
interfere with, EFG’s contracts with various call centers. EFG also sought a declaration that the
2008 Agreement was terminated; it had no further obligation to pay commissions or other sums to
Barantas; Barantas, O’Brien, and Fox were not authorized to hold themselves out as being
affiliated with EFG or having authority to procure agreements on behalf of EFG; and Barantas,
O’Brien, and Fox were not authorized to retain, use, or disclose any information or materials
provided by EFG for the performance of services under the 2008 Agreement or in the possession
of Moxy Solutions, Inc., a corporation with which EFG had an administrative services agreement.
Appellants filed a motion to stay proceedings and compel arbitration based on the
arbitration provision in the 2008 Agreement. Appellants asserted EFG’s claims were subject to
arbitration under either the Federal Arbitration Act, 9 U.S.C.A. §§ 1–16 (West 2009) (the FAA),
or the Texas General Arbitration Act, TEX. CIV. PRAC. & REM. CODE ANN. §§ 171.001–.098 (West
2011) (the TAA). Appellants specifically argued (1) EFG’s claims against Barantas pertained to
EFG’s and Barantas’s rights and duties under the 2008 Agreement, and (2) the non-signatories
could compel arbitration because EFG alleged they were officers, directors, employees, or
affiliates of Barantas and EFG’s claims related to, flowed from, were interwoven with, and
ultimately resulted from the contractual relationship between EFG and Barantas established by the
2008 Agreement.
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EFG filed an amended petition, in which it alleged that, pursuant to the 2008 Agreement,
it gave Barantas “its proprietary and confidential forms, promotional materials, rate schedules,
statistical and actuarial analyses, and other necessary information and materials in order to
properly service call centers procured” by Barantas. EFG further alleged that pursuant to the 2008,
2009, and 2015 Agreements, it periodically “furnished [appellants] with confidential and
proprietary information and data regarding EFG’s VSC contract customers and their accounts.”
EFG asserted it provided this information to appellants “for the sole purpose of enabling
[appellants] to render services for the benefit of EFG by, inter alia, (i) servicing the call centers
who sell EFG VSCs and program offerings, and (ii) marketing and selling EFG VSCs and program
offerings” to “EFG’s Expiring Customers,” which it defined as customers with canceled, expired,
or near expiring VSCs or with contracts sold by call centers no longer in business or no longer
“producing.”
EFG also alleged that, on February 20, 2008, it entered into an agreement with Moxy,
which provides “data management solutions and services” for the VSC industry (the Moxy
Agreement). EFG asserted O’Brien recommended that EFG enter into the Moxy Agreement, but
failed to disclose he owned a “substantial 20–25% equity interest in Moxy.” According to EFG,
it provided its current rate charts, underwriting guidelines, class guides, “list of eligible states for
its program for each [s]eller,” and “forms for policy fulfilment” to Moxy.
EFG asserted Barantas, O’Brien, and Fox owned a controlling interest in an entity that was
administering a VSC program marketed under the name “Omega Autocare.” EFG alleged that,
without EFG’s consent, appellants used EFG’s confidential information to solicit call centers to
sell Omega Autocare products and to market Omega Autocare products directly to EFG’s Expiring
Customers.
EFG’s first three causes of action were for breach of contract. EFG alleged Barantas
breached the 2008 Agreement by:
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● Failing to limit the disclosure and use of EFG’s proprietary and confidential
forms, promotional materials, dealer cost rate schedule, and other necessary
materials to disclosure and uses permitted by the 2008 Agreement;
● Failing to disclose “up front” to EFG that O’Brien had a substantial conflict
of interest by owning a financial interest in Moxy as well as in companies
that competed with EFG in the VSC industry;
● Failing to properly service and maintain the call center accounts procured
by Barantas, resulting, at least in part, in delays or failures by call centers to
refund commission chargebacks and other deficits; and
● Soliciting or attempting to solicit EFG’s existing accounts, by virtue of the
actions of O’Brien and Fox.
EFG alleged Barantas breached the 2009 Agreement and EGS breached the 2015 Agreement by:
● Failing to keep confidential and limit the disclosure and use of EFG’s
confidential customer information to permitted disclosures and uses;
● Failing to provide “notification of and refund cancels” as and when
required;
● Failing to fund customer payments, thus forcing cancellation for non-
payment, even though the customer made a payment;
● Failing to use their best efforts in marketing EFG’s VSC program and
failing to faithfully perform in every way their duties in compliance with
EFG’s instructions by, among other things, using EFG’s confidential
customer information regarding Expiring Customers to market and sell a
VSC program provided by Omega Autocare;
● Failing to return all of EFG’s property upon termination of the parties’
contractual relationship, including EFG’s confidential information; and
● Failing to disclose “up front” to EFG that O’Brien had a substantial conflict
of interest by owning a financial interest in Moxy as well as in companies
that competed with EFG in the VSC industry.
EFG alleged EGS also breached the 2015 Agreement by failing to expeditiously notify EFG of
customer requests for non-renewals and by failing to abide by the Vehicle Protection Association,
Inc. Standards of Conduct.
In counts four through twelve of its petition, EFG asserted the following tort claims:
4. Barantas and EGS breached the duty of good faith and fair dealing imposed
by the 2009 and 2015 Agreements by disclosing EFG’s confidential
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information and using that information to market and sell Omega
Autocare’s VSCs to EFG’s Expiring Customers; using EFG’s confidential
information, including statistical and actuarial analyses and rates, without
EFG’s consent, to compete unfairly with EFG; and failing to disclose
conflicts of interests of the owners, officers, and directors of Barantas and
EGS;
5. Appellants misappropriated EFG’s trade secrets, including EFG’s
confidential information; statistical and actuarial analyses, including rates;
and the proprietary and confidential forms and information submitted by
EFG to Moxy as well as EFG customer and other information electronically
stored in the Moxy database and used that information to compete against
EFG by marketing and selling Omega Autocare’s VSC program to EFG’s
Expiring Customers.
6. Appellants conspired to misappropriate EFG’s trade secrets;
7. Appellants tortiously interfered with the repayment agreements entered into
by EFG and call centers due to higher than expected levels of cancellations
through (a) O’Brien and Fox causing, soliciting, or inducing call centers to
(i) reduce their volume of business with EFG, re-direct their business to
EGS, and refrain from making repayments to EFG, and (ii) refrain from
negotiating or entering into amendments of repayment agreements with
EFG and from dealing with EFG regarding the terms of their agreements
with EFG; and (b) O’Brien, Fox, and EGS using EFG’s confidential
information to solicit EFG’s Expiring Customers to purchase Omega
Autocare’s VSCs;
8. Appellants tortiously interfered with EFG’s VSCs by using EFG’s
confidential information to cause, solicit, or induce EFG’s Expiring
Customers to cancel or elect not to renew their VSCs with EFG and to
purchase Omega Autocare VSCs; making false and misleading statements
to, and causing confusion among such customers; and disparaging EFG, its
business, and its VSC products in the solicitations;
9. Appellants tortiously interfered with prospective contractual relationships
by using EFG’s confidential information to contact EFG’s Expiring
Customers and solicit them to purchase Omega Autocare’s VSCs; making
false and misleading statements to, and causing confusion among such
customers; and disparaging EFG, its business, and its VSC products in the
solicitations;
10. O’Brien, Fox, and EGS conspired to commit tortious interference with the
repayment agreements between EFG and certain call centers;
11. Appellants conspired to tortiously interfere with EFG’s existing VSC
contracts with Expiring Customers and prospective contractual
relationships with EFG customers whose VSCs had already expired or
canceled; and
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12. Appellants published disparaging words about EFG’s business to the
competitive marketplace, including to call centers and EFG’s Expiring
Customers.
In its thirteenth cause of action, EFG requested declarations that the 2008, 2009, and 2015
Agreements were terminated; it had no obligation to pay commissions to Barantas and EGS;
appellants were not authorized to hold themselves out as being affiliated with EFG or to procure
seller agreements or VSCs on behalf of EFG; and appellants had no rights in and were not
authorized to retain, use, or disclose any information or materials provided by EFG for the
performance of services under the 2008, 2009, and 2015 Agreements or in the possession or control
of Moxy.
EFG responded to appellant’s motion to compel arbitration, arguing the case was
“essentially a business tort case,” involving claims and causes of action for misappropriation of
EFG’s trade secrets and the use of that information to tortiously interfere with EFG’s VSCs and to
gain an unfair competitive advantage over EFG. EFG asserted that “pursuant to one or more
agreements,” it disclosed its confidential customer information to appellants “for the sole purpose
of enabling [them] to use it in furtherance of EFG’s business.” Appellants, however, used the
information to “market their own vehicle service program and program offerings to EFG’s contract
customers for the enrichment of [appellants] and detriment of EFG.” EFG argued there were
multiple agreements between it and appellants, the facts alleged in the amended petition were
independent of the 2008 Agreement, and the claims were not subject to arbitration. Attached to
EFG’s response were the petitions in two cases filed by Barantas in Missouri state court that EFG
asserted showed Barantas was attempting to circumvent the arbitration provision, the 2008
Agreement, an “EFG Companies Enrollment Form” for EGS, and the 2015 Agreement.
At the hearing on appellant’s motion to compel, appellants provided a notebook to the trial
court. The exhibits in the notebook, however, were not offered into evidence and are not in the
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appellant record. EFG conceded during the hearing that its claims against Barantas for breach of
the 2008 Agreement and for declaratory relief pursuant to the 2008 Agreement were subject to
arbitration. The trial court granted appellants’ motion to compel as to those claims, but denied it
as to all other claims brought by EFG.
Analysis
Appellants contend the trial court erred by partially denying the motion to compel
arbitration and denying the motion to stay proceedings because all of EFG’s claims fall within the
scope of the arbitration provision in the 2008 Agreement.
Applicable Law
The 2008 Agreement does not state whether the FAA or the TAA applies, and appellants
sought to compel arbitration under both statutes. The FAA generally governs arbitration
provisions in contracts involving interstate commerce. Henry v. Cash Biz, LP, No. 16-0854, 2018
WL 1022838, at *2 (Tex. Feb. 23, 2018), pet. for cert. filed, No. 17-1716 (May 24, 2018). The
FAA applies to any transaction affecting “commerce” and is coextensive with the reach of the
Commerce Clause of the United States Constitution.1 Allied-Bruce Terminix Companies, Inc., v.
Dobson, 513 U.S. 265, 273–77 (1995) (citing 9 U.S.C. § 2). “As defined in the FAA, however,
‘interstate commerce’ is not limited to the interstate shipment of goods, but includes all contracts
‘relating to’ interstate commerce.” In re FirstMerit Bank, N.A., 52 S.W.3d 749, 754 (Tex. 2001)
(orig. proceeding).
The 2008 Agreement was executed by Barantas, a Missouri corporation, and EFG, a Texas
Corporation with its principal place of business in Irving, Texas. Pursuant to the 2008 Agreement,
Barantas was authorized to procure agreements with dealerships and call centers in twenty-four
states and the District of Columbia. EFG anticipated entering into sales agreements with any
1
U.S. CONST. art. I, § 8, cl. 3.
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dealership or call center identified by Barantas. Barantas received a commission for any VSC
administered by EFG that was sold by a dealership or call center “procured” by Barantas. In light
of these facts, we conclude the 2008 Agreement involves interstate commerce and is subject to the
FAA. See In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127 (Tex. 1999) (orig. proceeding)
(per curiam) (transaction involved interstate commerce where parties resided in different states
and work was to be done by Texas business in Texas for Georgia owners); In CRS Indus., Inc.,
No. 01-16-00780-CV, 2017 WL 1881166, at *1 (Tex. App.—Houston [1st Dist.] May 9, 2017, no
pet.) (mem. op.).
The 2008 Agreement, however, also states it was “made pursuant to, and shall be governed
by, the laws of the State of Texas.” The supreme court has interpreted similar language as invoking
both the FAA and the TAA. In re D. Wilson Constr. Co., 196 S.W.3d 774, 778–79 (Tex. 2006)
(orig. proceeding). When both acts apply, the FAA preempts the TAA only if the TAA is
inconsistent with the FAA or affects the enforceability of the contract. Id. at 779–80. The parties
have not asserted anything in the TAA or other state law subverts enforcement of the 2008
Agreement. Accordingly, where appropriate, we cite cases decided under both acts, as they share
the same core substantive principles. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 n.10
(Tex. 2008) (noting similarities between FAA and predecessor statute to TAA and, where
appropriate, relying interchangeably on cases that discuss both acts); see also G.T. Leach Builders,
LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 519 n.14 (Tex. 2015).
Standard of Review
We review an order denying a motion to compel arbitration for abuse of discretion. Henry,
2018 WL 1022838, at *3. We defer to the trial court’s factual determinations, if they are supported
by evidence, but review the trial court’s legal determinations de novo. Id. We review de novo
whether there is a valid arbitration agreement and whether the claims in dispute fall within the
scope of the agreement. Id.
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Claims Against Barantas
Arbitration is a matter of contract, and a party cannot be required to submit to arbitration
any dispute it has not agreed to so submit. AT & T Techs., Inc. v. Commc’ns Workers of Am., 475
U.S. 643, 648 (1986); Shillinglaw v. Baylor Univ., No. 05-17-00498-CV, 2018 WL 3062451, at
*2 (Tex. App.—Dallas June 21, 2018, no pet. h.) (mem. op.). A party seeking to compel arbitration
has the burden to show the existence of a valid arbitration agreement and a dispute within the scope
of the agreement. Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 633 (Tex. 2018).
If the party seeking to compel arbitration meets this burden, the burden shifts and, to avoid
arbitration, the party opposing it must prove an affirmative defense to the provision’s enforcement.
Henry, 2018 WL 1022838, at *2. EFG does not dispute the 2008 Agreement contains a valid
agreement to arbitrate. Accordingly, the issue is whether the claims asserted by EFG against
Barantas fall within the scope of the agreement.2
Both Texas and federal policy favor arbitration. Id. at *3. Therefore, courts “resolve any
doubts about an arbitration agreement’s scope in favor of arbitration.” Id. (quoting In re FirstMerit
Bank, N.A., 52 S.W.3d at 753). “The presumption in favor of arbitration ‘is so compelling that 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.”’” Id. (quoting
Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995) (orig. proceeding) (per curiam);
Neal v. Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990)). However, the strong policy
2
Appellants assert that, by incorporating the Commercial Arbitration Rules (CARs) of the American Arbitration Association into the
arbitration provision of the 2008 Agreement, EFG and Barantas agreed the arbitrator, rather than the trial court, would determine arbitrability. Rule
R-7(a) of the CARs provides the “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the
existence, scope or validity of the arbitration agreement[.]” AMERICAN ARBITRATION ASSOCIATION, Commercial Arbitration Rules and Mediation
Practice, https://www.adr.org/sites/default/files/Commercial%20Rules.pdf (last visited July 28, 2018). This Court has concluded a broad
arbitration agreement that incorporates rules empowering an arbitrator to decide issues of arbitrability indicates a clear intent by the parties for the
arbitrator to consider any objections to the existence, scope, or validity of the arbitration agreement. See Saxa Inc. v. DFD Architecture Inc., 312
S.W.3d 224, 229–30 (Tex. App.—Dallas 2010, pet. denied); but see Jody James Farms, JV., 547 S.W.3d at 631–32 (concluding incorporation of
AAA rules into arbitration agreement does not show clear intent for arbitrator to determine arbitrability as to non-signatory). However, because
the CARs were not offered into evidence, the trial court was required to determine the scope of the arbitration agreement. See PER Grp. L.P. v.
Dava Oncology, L.P., 294 S.W.3d 378, 386 (Tex. App.—Dallas 2009, no pet.) (concluding that because the record did not contain the CARs and
did not indicate the rules were offered into evidence in trial court, the trial court was required to determine scope of arbitration agreement).
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favoring arbitration “cannot serve to stretch a contractual clause beyond the scope intended by the
parties or allow modification of the plain and unambiguous provisions of an agreement.” Belmont
Constructors, Inc. v. Lyondell Petrochemical Co., 896 S.W.2d 352, 356 (Tex. 1995); see also
Staley v. Crossley, No. 05-17-00319-CV, 2018 WL 2252554, at *3 (Tex. App.—Dallas May 17,
2018, no pet.) (mem. op.).
The scope of an arbitration clause is determined based on the “complaint’s factual
allegations rather than the legal causes of action asserted.” In re FirstMerit Bank, N.A., 52 S.W.3d
at 754; see also Henry, 2018 WL 1022838, at *3. “When the contract contains a broadly written
arbitration clause, so long as the allegations touch matters, have a significant relationship with, or
are inextricably enmeshed or factually intertwined with the contract, the claim will be arbitrable.
Athas Health, LLC v. Trevithick, No. 05-16-00219-CV, 2017 WL 655926, at *4 (Tex. App.—
Dallas Feb. 17, 2017, no pet.) (mem. op.); see also Prudential Sec. Inc., 909 S.W.2d at 900; Jack
B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271 (Tex. 1992) (concluding that, although
misrepresentation claims were grounded in legal theory distinct from contract claim, they were
factually intertwined with breach of contract claim and thus subject to arbitration provision of
contract). However, “[i]f the facts alleged in support the claim stand alone, are completely
independent of the contract [containing the arbitration provision], and the claim can be maintained
without reference to the contract, the claim is not subject to arbitration.” VSR Fin. Servs., Inc. v.
McLendon, 409 S.W.3d 817, 832 (Tex. App.—Dallas 2013, no pet.) (quoting Pennzoil Co. v.
Arnold Oil Co., Inc., 30 S.W.3d 494, 498 (Tex. App.—San Antonio 2000, orig. proceeding)).
“[T]he scope of an arbitration clause that includes all ‘disputes,’ and not just claims, is
very broad and encompasses more than claims ‘based solely on rights originating exclusively from
the contract.’” Henry, 2018 WL 1022838, at *3 (quoting Pinto Tech. Ventures, L.P. v. Sheldon,
526 S.W.3d 428, 439 (Tex. 2017)). Further, the term “concerning,” when used in an arbitration
provision, is “a broad term synonymous with ‘relating to.’” Tantrum St., LLC v. Carson, No. 05-
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16-01096-CV, 2017 WL 3275901, at *4 (Tex. App.—Dallas July 25, 2017, no pet.) (mem. op.);
Schwarz v. Pully, No. 05-14-00615-CV, 2015 WL 4607423, at *3 (Tex. App.—Dallas Aug. 3,
2015, no pet.) (mem. op.) (“The phrase ‘relates to’ is a very broad term. A claim ‘relates to’ a
contract if it has a significant relationship with or touches matters covered by the contract.”
(internal citations omitted)). “[A]rbitration provisions that employ terms like ‘any dispute’ and
‘relating to’ are broad arbitration clauses capable of expansive reach and create a presumption of
arbitrability.” In re Signor, No. 05-16-00703-CV, 2017 WL 1046770, at *6 (Tex. App.—Dallas
Mar. 20, 2017, orig. proceeding) (mem. op.). When parties include such a broad clause in an
agreement to arbitrate and do not expressly exclude claims from arbitration, “only the most
forceful evidence of a purpose to exclude the claim[s] from arbitration can prevail.” Id. (quoting
BDO Seidman, LLP v. J.A. Green Dev. Corp., 327 S.W.3d 852, 857 (Tex. App.—Dallas 2010, no
pet.)); see also AT & T Techs., Inc., 475 U.S. at 650. The scope of such a broad clause “is not
limited to claims that literally arise under the contract’s terms.” In re CRS Indus., Inc., No. 01-16-
00780-CV, 2017 WL 1881166, at *2 (Tex. App.—Houston [1st Dist.] May 9, 2017, orig.
proceeding) (citing Hou-Scape, Inc. v. Lloyd, 945 S.W.2d 202, 205–06 (Tex. App.—Houston [1st
Dist.] 1997, orig. proceeding) (per curiam) (claims for deceptive trade practices, fraudulent
inducement, negligence, defamation, and tortious interference with business relations all held to
be within scope of broad arbitration clause)).
EFG and Barantas agreed that “any dispute which might arise between them concerning
their rights or duties” pursuant to the 2008 Agreement would be submitted to arbitration, a broad
provision that encompasses any claims relating to the 2008 Agreement and creates a presumption
of arbitrability. In re Signor, 2017 WL 1046770, at *6. In its first amended petition, EFG alleged
it provided its confidential information (1) to appellants pursuant to the 2008 Agreement and the
2009 and 2015 Agreements, which were sales agreements contemplated by the 2008 Agreement,
and (2) to Moxy pursuant to the Moxy Agreement, which was entered into at the same time as the
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2008 Agreement. EFG asserts O’Brien owned an equity interest in Moxy, but failed to disclose
that interest to EFG. EFG alleged Barantas used the confidential information it obtained pursuant
to the 2008, 2009, and 2015 Agreements and from Moxy to solicit (1) dealerships and call centers
to cease doing business with EFG and to sell VSCs administered by Omega Autocare, and (2)
EFG’s Expiring Customers to purchase VSCs administered by Omega Autocare rather than
renewing their VSCs administered by EFG. Based on this conduct, EFG asserted Barantas
committed a number of torts and breached the 2008 and 2009 Agreements.
EFG’s claims that Barantas breached the 2008 Agreement and for declaratory relief based
on that breach are premised on the same conduct that EFG alleges supports its claims Barantas
breached the 2009 Agreement and committed a number of torts. Accordingly, all of EFG’s claims
against Barantas are factually intertwined, inextricably enmeshed, significantly related, or
otherwise touch upon the 2008 Agreement, see Athas Health, LLC, 2017 WL 655926, at *4; see
also Prudential Sec. Inc., 909 S.W.2d at 900; Tipps, 842 S.W.2d at 271, and fall within the scope
of the broad arbitration provision in the 2008 Agreement. Given that EFG has not proven a defense
to the enforcement of the agreement, the trial court had no discretion but to compel arbitration of
all of EFG’s claims against Barantas.
Claims Against Non-Signatories
Generally, “an arbitration clause cannot be invoked by a non-party to the arbitration
contract.” G.T. Leach Builders, LLC, 458 S.W.3d at 524; see also Jody James Farms, JV, 547
S.W.3d at 632 (“The involvement of a non-signatory is an important distinction because a party
cannot be forced to arbitrate absent a binding agreement to do so.”). However, if required by
principles of contract law and agency, “a person who has agreed to arbitrate disputes with one
party may be required to arbitrate related disputes with non-parties.” Jody James Farms, JV, 547
S.W.3d at 629. A non-signatory may enforce an arbitration provision’s terms only if there is a
valid agreement to arbitrate. Id. at 633. Whether a claim involving a non-signatory must be
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arbitrated is a “gateway matter” for the trial court which is subject to de novo review on appeal.
Id. at 629.
Texas courts have recognized six theories that allow non-signatories to enforce arbitration
agreements: (1) incorporation by reference; (2) assumption; (3) agency; (4) alter ego; (5) equitable
estoppel; and (6) third-party beneficiary. See id. at 633. Appellants argue the trial court erred by
not compelling EFG’s claims against O’Brien, Fox, and EGS to arbitration because (1) O’Brien,
Fox, and EGS are agents or affiliates of Barantas, a signatory to the 2008 Agreement, (2) the claims
against O’Brien and Fox were based on actions they took in a representative capacity for Barantas
or EGS, and (3) the claims against O’Brien, Fox, and EGS are based on the same conduct as the
claims against Barantas.
Parties to an arbitration agreement “may not evade arbitration through artful pleading, such
as by naming individual agents of the party to the arbitration clause and suing them in their
individual capacities.” In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 188 (Tex. 2007) (orig.
proceeding). Corporations and other business entities “can act only through human agents,” and
as a result, “many business-related torts can be brought against either a corporation or its
employees.” Id. However, “a contracting party generally cannot avoid unfavorable clauses by
suing the other parties’ agents.” Jody James Farms, JV, 547 S.W.3d at 635 (quoting In re Kaplan
Higher Educ. Corp., 235 S.W.3d 206, 209 (Tex. 2007) (per curiam) (orig. proceeding)).
Accordingly, an agent of a signatory to the contract may sometimes invoke an arbitration clause
against another signatory. Id.; see also In re Kaplan Higher Educ. Corp., 235 S.W.3d at 209
(concluding agent of signatory may sometimes invoke arbitration clause even if a non-signatory
and claimant is not suing on contract). The non-signatory seeking to enforce the arbitration
provision must show it was subject to the principal signatory’s control and authorized to act as its
agent. Jody James Farms, JV, 547 S.W.3d at 635.
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Under the principles of direct-benefit estoppel, a non-signatory to a contract may compel
arbitration when the signatory to the contract containing an arbitration clause seeks “‘to derive a
direct benefit’ from a contract with an arbitration provision. Id. at 637 (quoting G.T. Leach
Builders, LLC, 458 S.W.3d at 527). The application of this theory prevents a signatory from
attempting to “both have his contract and defeat it too,” by seeking to hold the non-signatory liable
pursuant to the terms of a contract that contains an arbitration provision while simultaneously
denying the dispute is subject to arbitration because the defendant is a non-signatory to the
agreement. Id.; see also Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 306 (Tex. 2006).
“When a claim depends on the contract’s existence and cannot stand independently—that
is, the alleged liability ‘arises solely from the contract or must be determined by reference to it’—
equity prevents a person from avoiding the arbitration clause that was part of that agreement.”
Jody James Farms, JV, 547 S.W.3d at 637 (quoting In re Weekley Homes, L.P., 180 S.W.3d 127,
132 (Tex. 2005) (orig. proceeding)); see also G.T. Leach Builders, LLC, 458 S.W.3d at 527–28.
On the other hand, “when the substance of the claim arises from general obligations imposed by
state law, including statutes, torts and other common law duties, or federal law,’ direct-benefits
estoppel is not implicated even if the claim refers to or relates to the contract or would not have
arisen ‘but for’ the contract’s existence.” Jody James Farms, JV, 547 S.W.3d at 637 (quoting G.T.
Leach Builders, LLC, 458 S.W.3d at 528).
EFG’s claims in its original petition were based on the 2008 Agreement, which contained
an arbitration clause. See id. (“In the archetypal direct-benefits case, the party opposing arbitration
seeks to enforce the terms of an agreement with an arbitration clause.”). EFG alleged that O’Brien
and Fox were subject to the trial court’s jurisdiction because, acting in their capacities as officers,
directors, or employees of Barantas, they contracted with EFG. EFG further asserted the lawsuit
involved the “wrongful conduct” of O’Brien “in causing the violation by Defendant Barantas of
its agreement with EFG and the breaches of contract and duties resulting therefrom.” EFG asserted
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that, “acting by and through” O’Brien, Barantas solicited call centers under the 2008 Agreement
and “acting by and through” O’Brien and Fox, Barantas solicited and procured repayment
agreements from call centers. In its first amended petition, EFG alleged O’Brien and Fox
improperly obtained EFG’s confidential information from Moxy and, along with Barantas and
EGS, used that information, as well as confidential information obtained from EFG pursuant to
the 2008, 2009, and 2015 Agreements, to interfere with EFG’s relationships with dealerships and
call centers and to solicit EFG’s Expiring Customers to purchase Omega Autocare’s VSCs.
EFG alleged Barantas and EGS were “affiliated entities” that were “believed to be
controlled and ultimately owned by” O’Brien and Fox. EFG asserted EGS breached the 2015
Agreement in a number of ways, including using confidential information EFG provided pursuant
to the 2008 Agreement and failing to disclose O’Brien and Fox, the owners, officer, or directors
of EGS, had a “substantial conflict of interest” due to O’Brien owning an equity interest in Moxy.
EFG also alleged EGS, along with the other defendants, improperly used EFG’s confidential
information, some of which was obtained pursuant to the 2008 Agreement, to solicit (1)
dealerships and call centers to cease doing business with EFG and start selling Omega Autocare’s
VSCs and (2) EFG’s Expiring Customers to purchase Omega Autocare’s VSCs, rather than VSCs
administered by EFG.
“[W]hen an agreement between two parties clearly provides for the substance of a dispute
to be arbitrated, one cannot avoid it by simply pleading that a nonsignatory agent or affiliate was
pulling the strings.” In re Kaplan Higher Educ. Corp., 235 S.W.3d at 210. We have already
determined all of EFG’s claims against Barantas fall within the scope of the broad arbitration
provision in the 2008 Agreement. EFG asserts those same claims, based on the same facts, against
O’Brien, Fox, and EGS, as agents or affiliates of EFG. By bringing a lawsuit that is necessarily
premised on Barantas’s and EFG’s rights and duties under the 2008 Agreement, confidential
information provided to appellants pursuant to that agreement, and appellants’ alleged improper
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use of that information, EFG is estopped from avoiding the arbitration provision in that agreement.
See Rachal v. Reitz, 403 S.W.3d 840, 846–47 (Tex. 2013); In re Trammell, 246 S.W.3d 815, 821
(Tex. App.—Dallas 2008, no pet.) (“When each of a signatory’s claims against a nonsignatory
references or presumes the existence of a written agreement, the signatory’s claims arise out of
and relate directly to the written agreement, and arbitration is appropriate.”).
We conclude EFG’s claims against O’Brien, Fox, and EGS are so intertwined with and
dependent upon the 2008 Agreement that it would be impractical to resolve EFG’s claims against
Barantas without simultaneously resolving the claims against the non-signatories. See Waterstone
on Lake Conroe, Inc. v. Williams, No. 09-17-00071-CV, 2017 WL 3298234, at *6 (Tex. App.—
Beaumont Aug. 3, 2017, no pet.) (mem. op.); see generally Grigson v. Creative Artists Agency
L.L.C., 210 F.3d 524, 527–28 (5th Cir. 2000). “[A]lowing willing non-signatories to compel
arbitration with a party to the arbitration agreement simply precludes a signatory from avoiding
arbitration with a party when the issues the non-signatory is seeking to resolve in arbitration are
intertwined with the agreement the estopped party has signed.” Shillinglaw, 2018 WL 3062451,
at *3 (citing In re Vesta Ins. Grp., Inc., 192 S.W.3d 759, 762–63 (Tex. 2006) (per curiam) (orig.
proceeding)). Under those circumstances, “all parties to the requested arbitration have agreed to
forego their right to a judicial forum.” Id.
Based on the record, we conclude that O’Brien, Fox, and EGS, even though non-signatories
to the 2008 Agreement, may compel arbitration based on the arbitration provision and that EFG’s
claims against the non-signatories fall within the scope of the provision. Because EFG has not
proven a defense to the enforcement of the agreement, the trial court abused its discretion by
denying O’Brien, Fox, and EGS’s motion to compel arbitration.
Motion to Stay
Appellants requested the trial court stay its proceedings pending the arbitration of EFG’s
claims. Where the disputed matter falls within the scope of the matter the parties agreed to arbitrate
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and the party opposing arbitration has failed to prove a defense, a “‘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 all of EFG’s claims are subject to arbitration, the trial court erred by denying
appellants’ motion to stay proceedings.
Conclusion
We resolve appellants’ sole issue in their favor, affirm the trial court’s order compelling
arbitration of EFG’s claim against Barantas for breach of the 2008 Agreement and request for
declaratory relief relating to the 2008 Agreement, reverse the trial court’s order denying
appellants’ motion to compel arbitration of EFG’s remaining claims, order that all disputes
between the parties proceed to arbitration, and remand this case to the trial court so that it may stay
the proceedings pending before it.
/Robert M. Fillmore/
ROBERT M. FILLMORE
JUSTICE
170896F.P05
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
BARANTAS INCORPORATED, On Appeal from the 191st Judicial District
PATRICK J. O'BRIEN, BRIAN P. FOX, Court, Dallas County, Texas,
AND EGS ADMINISTRATION, LLC, Trial Court Cause No. DC-17-01503.
Appellants Opinion delivered by Justice Fillmore,
Justices Lang-Miers and Stoddart
No. 05-17-00896-CV V. participating.
ENTERPRISE FINANCIAL GROUP
INCORPORATED, Appellee
In accordance with this Court’s opinion of this date, the trial court’s July 27, 2017 Order
Granting in Part and Denying in Part Defendants’ Motion to Stay Proceedings and Compel
Arbitration is AFFIRMED in part and REVERSED in part.
We AFFIRM that portion of the trial court’s order granting the motion to compel as to
Enterprise Financial Group Incorporated’s claims against Barantas Incorporated “for breach of
the written agreement referred to as the ‘2008 Private Label Agreement’” and for declaratory
relief regarding the 2008 Private Label Agreement.
We REVERSE that portion of the trial court's July 27, 2017 order (1) denying Barantas
Incorporated, Patrick J. O’Brien, Brian P. Fox, and EGS Administration, LLC’s motion to
compel arbitration of all other claims asserted by Enterprise Financial Group Incorporated and
(2) denying Barantas Incorporated, Patrick J. O’Brien, Brian P. Fox, and EGS Administration,
LLC’s motion to stay the trial court proceedings.
It is ORDERED that all disputes between the parties proceed to arbitration. We
REMAND this case to the trial court and instruct it to stay the proceedings pending before it.
It is ORDERED that appellants Barantas Incorporated, Patrick J.O’Brien, Brian P. Fox,
and EGS Administration, L.LC recover their costs of this appeal from appellee Enterprise
Financial Group Incorporated.
Judgment entered this 7th day of August, 2018.
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