Alliance Auto Auction of Dallas, Inc. v. Lone Star Cleburne Autoplex, Inc.

• Court: Court of Appeals of Texas
• Decided: January 26, 2022
• Docket: 10-19-00226-CV
• Status: Published

Opinion

IN THE TENTH COURT OF APPEALS

No. 10-19-00226-CV

ALLIANCE AUTO AUCTION OF DALLAS, INC., Appellant v.

LONE STAR CLEBURNE AUTOPLEX, INC., Appellee

From the 18th District Court Johnson County, Texas Trial Court No. DC-C201900316

MEMORANDUM OPINION

Lone Star Cleburne Autoplex, Inc., a company that operated an auto dealership in

Cleburne, Texas, sued two of its former employees, Robert Russell and Robert Hansen,

alleging various breaches of fiduciary duty that resulted in millions of dollars in losses

for Lone Star. Lone Star also sued Alliance Auto Auction of Dallas, Inc. alleging it

knowingly participated in Russell and Hansen’s activities. Alliance moved to compel

arbitration. Because the trial court did not abuse its discretion in denying Alliance’s

motion to compel arbitration, the trial court’s order is affirmed. BACKGROUND

Lone Star registered its employees, Russell and Hansen, with AuctionACCESS, a

third-party service provider that allows its members to remotely access information

about vehicles and auctions across America prior to an auction. The purpose of the

registration was to permit Russell and Hansen to act on behalf of Lone Star as its agents

at auto auctions like ones held by Alliance so that they could “buy and sell automobiles.”

AuctionACCESS is not a party to the underlying lawsuit.

The registrations incorporated by reference AuctionACCESS’s terms and

conditions. Alliance argued to the trial court that the arbitration clause included in

AuctionACCESS’s terms and conditions entitled Alliance to compel Lone Star to arbitrate

its claims against Alliance. The trial court disagreed.

ISSUES AND REVIEW

In three issues, Alliance argues that the arbitration clause included in

AuctionACCESS’s terms and conditions is enforceable against Lone Star by Alliance

under the Federal Arbitration Act; the clause assigns the issue of arbitrability to an

arbitrator, not the trial court; and to the extent the trial court could decide arbitrability,

the trial court incorrectly concluded that Lone Star’s claims were not arbitrable.

A party seeking to compel arbitration under the FAA, as Alliance is here, must

establish that (1) there is a valid arbitration clause, and (2) the claims in dispute fall within

that agreement's scope. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011); In re Kellogg Brown

& Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005). If the party seeking to compel arbitration

meets this burden, the burden then shifts, and to avoid arbitration, the party opposing it

Alliance Auto Auction of Dallas, Inc. v. Lone Star Cleburne Autoplex, Inc. Page 2 must prove an affirmative defense to the provision's enforcement, such as waiver. Henry

v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018).

We review a trial court's order denying a motion to compel arbitration for an abuse

of discretion. Id.; In re Labatt Food Serv., L.P., 279 S.W.3d 640, 642-43 (Tex. 2009). We defer

to the trial court's factual determinations if they are supported by evidence but review its

legal determinations de novo. Id. Whether the claims in dispute fall within the scope of

a valid arbitration agreement is a question of law, which is also reviewed de novo. Id.;

Perry Homes v. Cull, 258 S.W.3d 580, 598 & n.102 (Tex. 2008).

TRIAL COURT OR ARBITRATOR

Initially, we address Alliance’s second issue regarding whether the trial court or

an arbitrator should determine the underlying dispute’s arbitrability. The case law on

this issue is clear. The question of whether a case should be sent to arbitration is a

gateway issue that courts must decide at the outset of litigation. See Howsam v. Dean

Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S. Ct. 588, 154 L. Ed. 2d 491 (2002) (citations

omitted) ("[A] gateway dispute about whether the parties are bound by a given

arbitration clause raises a 'question of arbitrability' for a court to decide."); see also Perry

Homes v. Cull, 258 S.W.3d 580, 589 (Tex. 2008) (citations omitted) (explaining that courts

decide "gateway matters regarding 'whether the parties have submitted a particular

dispute to arbitration'"). Such circumstances are limited to (1) whether the parties have a

valid arbitration agreement at all and (2) whether an arbitration clause in a concededly

binding contract applies to a particular type of controversy. Robinson v. Home Owners

Mgmt. Enters., 590 S.W.3d 518, 525 (Tex. 2019). Referral of a gateway dispute to the court

Alliance Auto Auction of Dallas, Inc. v. Lone Star Cleburne Autoplex, Inc. Page 3 avoids the risk of forcing parties to arbitrate a matter they may well not have agreed to

arbitrate. Id. Thus, because this is a gateway issue for the courts to decide, Alliance’s

second issue is overruled.

SCOPE OF THE AGREEMENT

Next, assuming without deciding there is a valid arbitration agreement between

the parties, we determine whether Lone Star’s claims fall within the scope of the

agreement. When we determine whether a particular claim is within the scope of an

arbitration agreement, we examine the terms of the arbitration agreement and the factual

allegations pertinent to the claims rather than legal causes of action asserted. See In re

Rubiola, 334 S.W.3d 220, 225 (Tex. 2011); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 754

(Tex. 2001); Dennis v. Coll. Station Hosp., L.P., 169 S.W.3d 282, 285 (Tex. App.—Waco 2005,

pet. denied). Generally, if the facts alleged “touch matters,” have a “significant

relationship” to, are “inextricably enmeshed” with, or are “factually intertwined” with

the contract that is subject to the arbitration agreement, the claim will be arbitrable.

Dennis, 169 S.W.3d 282 at 285.

In this case, the arbitration clause which is contained within AuctionACESS’s

terms and conditions is limited to any controversy or claim “related directly or indirectly

to this Agreement[.]” The “Agreement” is defined to include “these terms and conditions,

our registration application and any other agreements between you and us, any

membership policies or operating procedures that we may post on our website from time

to time, and our Privacy Policy.”

All of Lone Star’s claims against Alliance flow from its allegations that Russell and

Alliance Auto Auction of Dallas, Inc. v. Lone Star Cleburne Autoplex, Inc. Page 4 Hansen embezzled large amounts of money from Lone Star and then attempted a cover-

up through activities with Alliance. Examples of the allegations include: Russell and

Hansen stopped using other auctions and dealers to sell used cars and strictly used

Alliance; Alliance “wined and dined” Russell and Hansen; Russell would hide vehicles

at Alliance and sold vehicles at a loss; fees Alliance charged were greatly increasing; and

vehicles were sold multiple times.

After reviewing the briefs, the petition, the motion for arbitration, and the

response thereto, there were no facts alleged that related directly or indirectly to

AuctionACCESS’s Agreement as that term is defined. Therefore the facts of Lonestar’s

petition cannot reasonably be said to “touch matters,” have a “significant relationship”

to, are “inextricably enmeshed,” or are “factually intertwined with,” AuctionACCESS’s

Agreement. Accordingly, the allegations asserted by Lone Star are outside the scope of

the arbitration clause, and Alliance’s third issue is overruled.

CONCLUSION

Because Alliance could not meet one step of the two-step burden to compel

arbitration, the trial court did not abuse its discretion in denying Alliance’s motion to

compel, and we need not specifically discuss Alliance’s first issue. Accordingly, the trial

court’s July 2, 2019 Order Denying Motion to Compel Arbitration and Stay Case Filed by

Defendant Alliance Auto Auction of Dallas, Inc. is affirmed.

TOM GRAY Chief Justice

Alliance Auto Auction of Dallas, Inc. v. Lone Star Cleburne Autoplex, Inc. Page 5 Before Chief Justice Gray, Justice Johnson, and Justice Smith Affirmed Opinion delivered and filed January 26, 2022 [CV06]

Alliance Auto Auction of Dallas, Inc. v. Lone Star Cleburne Autoplex, Inc. Page 6