Gerald Hoffman v. Baker Hughes Company ( 2023 )

Affirmed in Part, Reversed in Part, and Remanded; and Memorandum
Opinion filed June 1, 2023
In The
Fourteenth Court of Appeals
NO. 14-22-00289-CV
GERALD HOFFMAN, Appellant
V.
BAKER HUGHES COMPANY, Appellee
On Appeal from the 165th District Court
Harris County, Texas
Trial Court Cause No. 2020-46142
MEMORANDUM OPINION
Appellant Gerald Hoffman argues that the trial court erred in dismissing his
claims against appellee Baker Hughes Company. In three issues he contends the
trial court erred in compelling arbitration and dismissing the case with prejudice.
We affirm the portion of the trial court’s order compelling arbitration and reverse
and remand the portion of the trial court’s order dismissing the cause with
prejudice for further proceedings.
I. ARBITRATION AGREEMENT
In his first issue appellant argues that the trial court erred in compelling
arbitration because there is no applicable arbitration agreement under the express
terms of the contract between the parties. In his second issue appellant argues that
because his claim is not a “Covered Claim” as defined in the contract and as
admitted by appellee, the trial court erred in compelling arbitration. We address
these two related issues together.
In general, a party seeking to compel arbitration must establish (1) there is a
valid arbitration agreement, and (2) the claims raised fall within that agreement’s
scope. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737–38 (Tex. 2005).
Doubts regarding the agreement’s scope are resolved in favor of arbitration
because there is a presumption favoring arbitration. Id. This presumption arises
only after the party seeking to compel arbitration proves a valid arbitration
agreement exists. Id.“[C]ourts 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). “[T]o ensure parties are not forced to arbitrate
matters without their agreement, a substantive question of arbitrability––i.e.,
whether the parties have actually agreed to submit a particular dispute to
arbitration––‘is an issue for judicial determination unless the parties clearly and
unmistakably provide otherwise.’” Robinson v. Home Owners Mgmt. Enters., Inc.,
590 S.W.3d 518, 525 (Tex. 2019) (quoting Howsam v. Dean Witter Reynolds, 537
U.S. 79, 83–83 (2002)). The phrase “question of arbitrability” is limited to (1)
whether the parties have a valid arbitration agreement and (2) whether the
arbitration clause in a concededly binding contract applies to a particular type of
controversy. Id. “The presumption that courts will decide gateway issues and
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arbitrators will decide subsidiary issues are interpretive constructs based on
assumptions about the parties’ expectations.” Id. at 531–32. However, because
arbitration is a matter of contract, parties are generally free to alter these
presumptions by agreement. Id. at 532. We may not decide the arbitrability issue
when the contract delegates this question to an arbitrator. Id. There must be clear
and unmistakable evidence of this delegation. Id.
Appellee is appellant’s former employer. A dispute arose between the
parties regarding a breathalyzer test that was conducted on appellant at a job site
and appellee’s decision to terminate appellant because of the breathalyzer test.
Appellant sought to appeal his termination and sought such review pursuant to
appellee’s “Solutions Procedure.” It is undisputed that appellant agreed to the
Solutions Procedure during his employment. It is also undisputed that the
Solutions Procedure contains an arbitration agreement to arbitrate certain “Covered
Claims” as that term is defined in the Solutions Procedure.1
Appellant contends that his claim is not a Covered Claim and, thus, not
within the scope of the arbitration agreement. Usually such a question would be
addressed by the court. See Robinson, 590 S.W.3d at 531–32. However, in this
case the Solutions Procedure provides:
The Arbitrator, and not any court or agency, shall have exclusive
authority to resolve any dispute relating to the applicability,
interpretation, formation or enforceability of this Agreement
including, but not limited to, any claim that the entirety or any part of
the agreement is voidable or void, except as provided in Section II.K.2
1
The Solutions Procedure contains a four-step process for Covered Claims, the last step
is binding arbitration.
2
Section II.K is inapplicable.
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Our sister court has recently held that this precise agreement “delegates the
enforceability question to the arbitrator.” See In re Hughes, No. 01-22-00199-CV,
2022 WL 11413123, at *3 (Tex. App.—Houston [1st Dist.] Oct. 20, 2022, no pet.)
(mem. op.). We agree that this clause reserves the question of whether a claim is
within the scope of the Solutions Procedure or whether a party has waived their
right to proceed under the Solutions Procedure as a matter to be determined by an
arbitrator. See TotalEnergies E&P USA, Inc. v. MP Gulf of Mex., LLC, No. 21-
0028, 2023 WL 2939648, at *18 (Tex. Apr. 14, 2023) (“If the parties have
contractually agreed to delegate arbitrability disputes to the arbitrator, courts must
enforce that agreement just as they must enforce an agreement to delegate
resolution of the underlying merits to the arbitrator.”).
Here, appellant argues that his claim is not a Covered Claim and therefore
outside of the provisions of the Solutions Procedure and arbitration provision.
However, “the fact that the parties’ arbitration agreement may cover only some
disputes while carving out others does not affect the fact that the delegation
agreement clearly and unmistakably requires the arbitrator to decide whether the
present disputes must be resolved through arbitration.” Id.Thus, due to the broad nature of the delegation clause, the parties reserved to
the arbitrator the issue of whether the arbitration provision applies here. We
overrule appellant’s first and second issues.
II. DISMISSAL OF PROCEEDINGS
Appellant next argues that the trial court erred in dismissing his cause with
prejudice after compelling to arbitration. We agree.
Courts may review an order compelling arbitration if the order also
dismisses the underlying litigation so it is final rather than interlocutory. Perry
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Homes v. Cull, 258 S.W.3d 580, 586 n.13 (Tex. 2008). However, the Texas
Arbitration Act states that “[a]n order compelling arbitration must include a stay”
of the underlying litigation. Tex. Civ. Prac. & Rem. Code § 171.021(c) (emphasis
added). This is because during an arbitration, a court order may be needed to
accomplish necessary objectives in the arbitration. See generally id. § 171.041(b)
(replace arbitrator), § 171.086(b) (compel witness attendance), § 171.044(c) (direct
arbitrators to proceed promptly). After arbitration, a court order may be necessary
to confirm, modify, or vacate an award. Id. §§ 171.087–.092. Therefore,
“dismissal would usually be inappropriate because the trial court cannot dispose of
all claims and all parties until arbitration is completed.” In re Gulf Expl., LLC, 289
S.W.3d 836, 841 (Tex. 2009).
Appellee argues that under federal court precedent, dismissal is appropriate
when all claims are submitted to arbitration under federal procedure. Here,
because the proceedings were brought in state court and not removed to federal
court, the Texas Rules of Civil Procedure and the Texas Arbitration Act (TAA)
apply to any procedural issues. See Nafta Traders, Inc v. Quinn, 339 S.W.3d 84,
99–100 (Tex. 2011) (“Supreme Court concluded that the FAA’s purposes and
objectives are not defeated by conducting arbitration under state-law procedures
different from those provided by federal statute.”); see also Senter Investments,
LLC v. Veerje, 358 S.W.3d 841, 844 n.5 (Tex. App.—Dallas 2012, no pet.).
The TAA clearly mandates a stay of the litigation pending arbitration. Tex.
Civ. Prac. & Rem. Code §§ 171.021(c), 171.025(a); see also In re H&R Block Fin.
Advisors, 262 S.W.3d 896, 903 (“[T]he trial court judge was required, at a
minimum, to stay the proceedings and order those claims to arbitration.”). We
reverse the portion of the trial court’s order dismissing the cause with prejudice
and remand the case for further proceedings consistent with this opinion.
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We sustain appellant’s third issue.
III. CONCLUSION
Having overruled appellant’s first and second issues and sustained
appellant’s third issue, we affirm the trial court’s order compelling arbitration,
reverse the trial court’s order dismissing the cause with prejudice, and remand to
the trial court for further proceedings consistent with this opinion.
/s/ Ken Wise
Justice
Panel consists of Justices Wise, Jewell, and Poissant.
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