TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-24-00482-CV
CPG 220 Holdings 2014, LLC, and CPG 208 Nueces Holdings 2015, LLC, Appellants
v.
Branigan Mulcahy, Appellee
FROM THE 345TH DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-21-005046, THE HONORABLE MARIA CANTÚ HEXSEL, JUDGE PRESIDING
OPINION
CPG 220 Holdings 2014, LLC and CPG 208 Nueces Holdings 2015, LLC (Third
& Shoal) appeal the trial court’s interlocutory order denying their motion to stay the underlying
lawsuit and compel arbitration of all claims and defenses in the suit.1 The suit was filed against
Appellants by appellee Branigan Mulcahy, who pleaded claims for breach of contract and a writ
of mandamus to inspect Appellants’ records, seeking damages, costs, interest, and attorneys’ fees.
In a sole appellate issue, Appellants contend that the trial court erred by denying their motion. But
because the arbitration agreement that Appellants put forward—to which they were not signatory
parties—does not clearly and unmistakably delegate to the arbitrator the arbitrability decision here
1 See Tex. Civ. Prac. & Rem. Code §§ 51.016 (citing 9 U.S.C. § 16) (interlocutory appeal of order denying motion to compel arbitration under Federal Arbitration Act), 171.098(a)(1) (interlocutory appeal of order denying motion to compel arbitration under Texas General Arbitration Act). The parties do not dispute or address which arbitration act, state or federal, applies here, nor do they identify any conflict between the acts on the issues involved in this appeal. and because they have not asserted a recognized basis for non-signatories to compel arbitration,
we affirm the trial court’s order.
BACKGROUND
Over a decade ago, Mulcahy went to work for a firm involved in real-estate
development and investing, Cielo Property Group, LLC. Their employment relationship was
governed by an Employment Agreement between Mulcahy and G&A Partners (the G&A
Agreement), which Mulcahy signed. G&A was involved because Cielo used it, one of Cielo’s
co-managing members testified, to “provide[] human resources functions for [G&A’s] clients.”
The G&A Agreement provides that Mulcahy was to be “co-employed by G&A
Partners . . . and Client to perform services for Client.”2 (All-capitalization removed.) It adds,
regarding the relationships between Mulcahy, G&A, and the Client:
G&A entered into an agreement with Client to provide administrative and employment services and is currently hiring you to work on assignment with Client as a member of its regular workforce. If in the future you become assigned to any other Client of G&A, this agreement would continue to apply. Your employment relationship with G&A will be active only while you are on assignment to a Client. Clients will be co-employers and third party beneficiaries of this Agreement.
The Agreement includes arbitration-related provisions, under which Mulcahy was to arbitrate any
disputes he might have with G&A or with any “Clients to which [he was] assigned”:
To the fullest extent permitted by law, all disputes between you and G&A or between you and all Clients to which you are assigned shall be submitted to binding arbitration pursuant to the Federal Arbitration Act and the American Arbitration Association’s National Rules for the Resolution of Employment Disputes. . . .
2 “Client” is used throughout the agreement but is not defined as a term.
2 Arbitration shall be conducted pursuant to the G&A Alternate Dispute Resolution Plan, a copy of which will be provided to you upon your request.
The main body of the G&A Agreement includes a clause stating that “[t]his Agreement relates
only to your employment with G&A.”
The referenced Alternate Dispute Resolution Plan includes a Mediation and
Arbitration Policy. Several provisions of the Policy address arbitration. According to its terms,
the Policy operates between, on the one hand, “G&A Partners and its client companies (hereinafter
referred to as ‘Company’)” and, on the other, “present and former employees (hereinafter referred
to as ‘Employee’).” It applies to “[a]ll disputes asserted by the Employee against the Company,”
requiring any such dispute first to go through “direct discussions between the parties if possible”
then if still not resolved, through mediation. If mediation does not resolve the dispute, then it
proceeds to arbitration, governed by the following terms:
The Mediation and Arbitration Policy is intended to create an exclusive procedural mechanism for the final resolution of certain types of disputes that any Employee may have against the Company. . . . (The Mediation and Arbitration Policy covers all categories of present and former employees).
....
If the dispute cannot be resolved through mediation, the Company and the Employee shall submit the dispute to binding arbitration, and not by way of court or jury trial.
This Policy is governed by the Federal Arbitration Act . . . .
The Company’s Mediation and Arbitration Policy covers any and all legal or equitable claims that the Employee may assert against the Company, including . . . disputes arising out of or relating to the interpretation or application of this Policy. . . . .
3 The arbitrator shall have the authority to determine and implement the applicable law . . . .
Mediation and binding arbitration shall be the exclusive methods by which the parties may assert claims covered by this Policy against each other and/or the Company’s clients who have elected to be bound by this Policy.
The terms of the Company’s Mediation and Arbitration Policy are severable. . . . .
Employment or continued employment after the effective date of the Company’s Mediation and Arbitration Policy constitutes consent by the Employee to be bound by this Policy, both during the employment and after termination of employment.
During his Cielo employment, Mulcahy, according to Cielo’s co-managing member, “was paid by
CRP ATX Acquisitions as Cielo’s operating company” until Cielo itself took over operations from
CRP, after which Mulcahy was paid by Cielo. The co-managing member swore that both Cielo
and CRP “were clients of G&A.”
Also during his employment, according to affidavit testimony by Mulcahy,
“opportunities arose whereby [he] could participate in co-ownership of some of the properties that
Cielo acquired and would later sell.” According to him, ownership of a given property that Cielo
was working on often would be vested in a special-purpose LLC. According to his affidavit and
to documents attached to it, CPG 220 and Third & Shoal were examples of these special-purpose
LLCs, and he was granted a 5% Class B Membership Interest in CPG 220 and a 5.5% Class B
Membership Interest in Third & Shoal.
In 2018, Cielo terminated Mulcahy’s employment. He sued Cielo and its two
principals,3 and his claims against them were referred to arbitration based on an opinion
3 One of whom is the co-managing member referred to above.
4 and judgment of this Court in the suit. See generally Cielo Prop. Grp., LLC v. Mulcahy,
No. 03-18-00587-CV, 2019 WL 3023312 (Tex. App.—Austin July 11, 2019, pet. denied) (mem.
op.). Exactly what claims Mulcahy raised while in the arbitration is a subject of dispute between
him and Appellants here.
While the Cielo Property Group appeal, involving Cielo, its principals, and
Mulcahy, was pending in this Court, Mulcahy in spring 2019 filed a lawsuit against CPG 220. He
alleged that even though “[t]he closing of the property that CPG holds appears to have occurred in
August 2018,” he “never received the required distribution” owing to his Membership Interest in
CPG 220. CPG 220 moved to have all claims and defenses in that suit referred to arbitration, but
the trial court denied the motion. In summer 2020, the trial court at CPG 220’s request stayed the
suit pending the result of the arbitration that ensued after Cielo Property Group.
In spring 2021, the arbitrator issued her Final Award. By that time, included as
parties to the arbitration were CPG 220, Third & Shoal, and other of the special-purpose LLCs
related to Cielo projects. The arbitrator’s Final Award, in addition to resolving Mulcahy’s claims,
whatever they were, resolved counterclaims raised by Cielo, CPG 220, Third & Shoal, and the
other arbitrating special-purpose LLCs. The arbitrator in her Final Award ruled that Mulcahy take
nothing on his claims and the other parties take nothing on their counterclaims.
Later in 2021, Mulcahy filed this suit, into which the earlier suit against CPG 220
was ordered consolidated. In his February 2024 live pleading in this suit, Mulcahy pleaded claims
against CPG 220 and Third & Shoal, alleging that under each LLC’s Company Agreement and the
documents granting him the Membership Interests, the respective LLC “breached their agreements
with Mulcahy by making distributions to other members while intentionally withholding any
distributions to” him. He also pleaded entitlement to a writ of mandamus ordering Appellants to
5 let him inspect their records, and he seeks damages, costs, interest, and attorneys’ fees. And he
pleaded that the completed arbitration should not bar his claims:
To the extent that Defendants may seek to rely on a res judicata/collateral estoppel or mootness/accord and satisfaction defense, Plaintiff asserts that any claim at issue was not ripe until after any prior proceeding had concluded. At a minimum, Plaintiff asserts that any claim at issue was not ripe until after any pleadings deadline had passed in any prior proceeding.
Appellants, in light of this allegation, moved the trial court to stay the suit and compel arbitration
of all claims and defenses in it. They argued that the arbitration-related provisions of the G&A
Agreement, including the incorporated Mediation and Arbitration Policy, require arbitration. They
also took the distinct position that those provisions require the arbitrator—not the courts—to make
the decision on whether the claims and defenses in the suit are arbitrable. Appellants attached
evidence to their motion, and Mulcahy responded to the motion, attaching evidence of his own.
The trial court denied Appellants’ motion, and they now appeal.
DISCUSSION
In their sole appellate issue, Appellants contend that the trial court erred by
denying their motion to compel arbitration. When, as here, an order denying a motion to compel
arbitration does not state the grounds for the denial, we must affirm the order if any of the grounds
asserted in the trial court for denying the motion are meritorious. Boring Co. v. 304 Constr., LLC,
No. 03-23-00394-CV, 2024 WL 2220716, at *4 (Tex. App.—Austin May 17, 2024, no pet.) (mem.
op.). And when, also as here, the trial court makes no written findings of fact or conclusions of
law in support of its ruling, we are to infer all facts necessary to support the denial order so long
as the facts are supported by the evidence. Id.
6 Appellants’ arguments for why the trial court erred are not only that the claims and
defenses in the suit must be arbitrated—that is, that they are “arbitrable”—but also that arbitrability
here is a decision for the arbitrator to make, not the courts. The question of whether claims
and defenses in a suit are arbitrable is a separate question from which decision-maker—the courts
or the arbitrator—is the one to decide whether the claims and defenses are arbitrable. See
TotalEnergies E&P USA, Inc. v. MP Gulf of Mex., LLC, 667 S.W.3d 694, 701 (Tex. 2023). The
who-decides-arbitrability question must be answered before the arbitrability question itself is
answered. See id.
“A party seeking to compel arbitration must establish [(1)] the existence of a valid
arbitration agreement and [(2)] that the claims at issue fall within the scope of that agreement.”
Id. at 720 (emphases added) (quoting Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018)).
“The trial court’s determination of the arbitration agreement’s validity is a legal question subject
to de novo review.” J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).
Who Decides Arbitrability Here
Whether arbitrability is decided by the courts or the arbitrator depends on whether
arbitrability has been contractually delegated to the arbitrator. See TotalEnergies E&P USA,
667 S.W.3d at 701–02; Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 631 (Tex.
2018). Such a delegation is effective only if “the agreement to delegate arbitrability to the
arbitrator . . . is ‘clear and unmistakable.’” TotalEnergies E&P USA, 667 S.W.3d at 702 (quoting
Robinson v. Home Owners Mgmt. Enters., Inc., 590 S.W.3d 518, 532 (Tex. 2019)); accord Jody
James Farms, 547 S.W.3d at 631. If the parties have successfully delegated arbitrability questions
to the arbitrator, then the courts must enforce the delegation. See TotalEnergies E&P USA,
7 667 S.W.3d at 702; Jody James Farms, 547 S.W.3d at 631. But if they have not, then the courts
decide arbitrability. Jody James Farms, 547 S.W.3d at 631; see also G.T. Leach Builders, LLC v.
Sapphire V.P., LP, 458 S.W.3d 502, 521 (Tex. 2015) (“[C]ourts presume that the parties intend
courts, not arbitrators, to decide what we have called disputes about ‘arbitrability.’ These include
questions such as ‘whether the parties are bound by a given arbitration clause.’” (quoting BG Grp.,
PLC v. Republic of Argentina, 572 U.S. 25, 34 (2014))).
Here, Appellants argue that the above-detailed arbitration-related provisions of the
G&A Agreement, including those in the incorporated Mediation and Arbitration Policy, require
all arbitrability questions to be referred to the arbitrator. Mulcahy disagrees, arguing that the courts
should answer all arbitrability questions. His arguments against referring arbitrability to the
arbitrator are that Appellants may not enforce the Agreement’s arbitration provisions because
Appellants are not signatories to that Agreement, any delegation to the arbitrator here is not “clear
and unmistakable,” and they waived enforcement of the arbitration provisions by their litigation
conduct in this suit.
The non-signatory matter is a “validity” matter for the courts to decide. See G.T.
Leach Builders, 458 S.W.3d at 524 (“[Non-signatory] contention raises questions about ‘the
existence of a valid arbitration clause between specific parties and is therefore a gateway matter
for the court to decide.’” (quoting In re Rubiola, 334 S.W.3d 220, 224 (Tex. 2011) (orig.
proceeding))). “Even when the party resisting arbitration is a signatory to an arbitration agreement,
questions related to the existence of an arbitration agreement with a non-signatory are for the court,
not the arbitrator.” Jody James Farms, 547 S.W.3d at 632; see also TotalEnergies E&P USA,
667 S.W.3d at 720–21 (judicially resolving “validity” inquiry even though parties’ agreement had
8 clearly and unmistakably delegated arbitrability issues to arbitrator and thus requiring remaining,
arbitrability “scope” issues to be referred to arbitrator).
Here, the contractual arbitration-related provisions are all silent about whether
Mulcahy must arbitrate with non-signatories who are not the kind of Clients that the G&A
Agreement and incorporated Policy refer to. Therefore, so long as Appellants are not the kind of
Clients that the contractual terms apply to, then the Agreement did not clearly and unmistakably
delegate the arbitrability decision on the claims and defenses between Mulcahy and Appellants to
the arbitrator, and thus the courts must answer that question. This case is largely controlled by
Jody James Farms, whose reasoning we quote here with appropriate alterations to substitute the
parties and facts here for those there:
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. The question is not whether [Mulcahy] agreed to arbitrate with someone, but whether a binding arbitration agreement exists between [Mulcahy] and [Appellants]. What might seem like a chicken-and-egg problem is resolved by application of the presumption favoring judicial determination. A contract that is silent on a matter cannot speak to that matter with unmistakable clarity, so an agreement silent about arbitrating claims against non-signatories does not unmistakably mandate arbitration of arbitrability in such cases.
To the extent [the G&A Agreement] expressed any intent to arbitrate arbitrability, it did so only with respect to [Mulcahy, G&A, and certain Clients]. . . . .
Given the absence of clear and unmistakable evidence that [Mulcahy] agreed to arbitrate arbitrability in disputes with non-signatories [who are not covered “Clients”], compelled arbitration cannot precede a judicial determination that an agreement to arbitrate exists.
See 547 S.W.3d at 632–33.4
4 Appellants suggest that TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico, LLC undermines this reasoning from Jody James Farms, JV v. Altman Group, Inc., but we disagree. The Court in TotalEnergies E&P USA recognized that the parties then before it were all signatories
9 As for whether under the G&A Agreement Appellants are “Clients to which
[Mulcahy was] assigned,” the record here includes evidentiary support for a fact finding that
Appellants are not Clients to which he was assigned. See Boring, 2024 WL 2220716, at *4 (when
trial court makes no written findings of fact or conclusions of law in support of denial of motion
to compel arbitration, reviewing court infers all facts necessary to support denial order so long as
the facts are supported by evidence). Mulcahy in his affidavit swore: “Pursuant to my agreements
with G&A, I was hired to perform services for G&A’s Client, which was identified as CRP ATX
Acquisitions. At no time did G&A ever assign me Third & Shoal or CPG 220 as a client, as these
entities were only holding companies for interests.”
Much the same is true under the terminology used in the Mediation and Arbitration
Policy. The provisions there apply to “G&A Partners and its client companies” or to “Company’s
clients who have elected to be bound by this Policy.” Mulcahy’s affidavit testimony provides
support for a fact finding that neither Appellant was such a client.
Appellants advance three arguments for why the arbitrator must decide
arbitrability, but we are unpersuaded. First, they rely on our opinion in Cielo Property Group.
But that opinion did not decide who should decide arbitrability; it decided arbitrability itself,
concluding that all claims there were arbitrable, which is a judicial decision on arbitrability, not
an arbitral one. See Cielo Prop. Grp., 2019 WL 3023312, at *1–3.
Appellants next argue that our sister court’s reasoning in Robinson v. Home Owners
Management Enterprises would require arbitrability here to be referred to the arbitrator. See
to the relevant agreements while the parties in Jody James Farms included some who were not signatories to the relevant agreements. See 667 S.W.3d 694, 703 & n.10 (Tex. 2023) (citing 547 S.W.3d 624, 631–32 (Tex. 2018)).
10 generally No. 02-20-00215-CV, 2021 WL 924839 (Tex. App.—Fort Worth Mar. 11, 2021, pet.
denied) (mem. op.). Yet that opinion was not deciding who-decides-arbitrability but arbitrability
itself. The court there concluded that the arbitrator should decide a procedural matter supporting
arbitrating, the res judicata effect of a prior arbitral award. See id. at *13–15. In doing so, the
court relied on authorities recognizing that applying the affirmative defense of res judicata to a
plaintiff’s claims is an exercise in deciding the merits of the case. See id. at *7, *8 (first citing
Hancock Fabrics, Inc. v. Rowdec, LLC, 126 F. Supp. 3d 784, 790 (N.D. Miss. 2015), then quoting
W. Dow Hamm III Corp. v. Millennium Income Fund, L.L.C., 237 S.W.3d 745, 755 (Tex. App.—
Houston [1st Dist.] July 12, 2007, no pet.)).5 Under TotalEnergies E&P USA’s framework for
arbitrability disputes, the underlying merits of a case represent a question distinct from arbitrability
and a question distinct from who decides arbitrability. See 667 S.W.3d at 701. Applying that
framework to Robinson leads us to conclude that Robinson was not answering whether the court
or arbitrator should decide arbitrability—the court was deciding it.
Finally, Appellants rely on the terms of the G&A Agreement and incorporated
Policy. But, as discussed above, those terms cannot have clearly and unmistakably delegated to
the arbitrator arbitrability disputes involving a non-signatory who is not a covered Client because
they are silent about arbitration with non-signatories who are not the kinds of Clients that the
contractual language refers to. See Jody James Farms, 547 S.W.3d at 632–33.
5 See also Howell v. Texas Dep’t of Crim. Just., 28 S.W.3d 125, 127 n.3 (Tex. App— Texarkana 2000, no pet.) (“Res judicata is an affirmative defense under Tex. R. Civ. P. 94 and should be treated as a plea in bar, which reaches the merits of the case. . . . The proper procedure in sustaining a plea of res judicata is to render a take-nothing judgment in favor of a defendant.” (internal citations omitted) (citing Walker v. Sharpe, 807 S.W.2d 442, 446, 447 n.2 (Tex. App.— Corpus Christi–Edinburg 1991, no writ) (citing Texas Highway Dep’t v. Jarrell, 418 S.W.2d 486, 488 (Tex. 1967)))).
11 In all then, we hold that the portion of the trial court’s order denying the motion to
compel arbitration in which the court ruled that the courts rather than the arbitrator should decide
the arbitrability of the parties’ disputes was not error. The trial court thus was charged with
deciding whether a valid agreement to arbitrate exists between Appellants and Mulcahy before any
issue may be referred to arbitration. See id. at 633. Having answered who-decides-arbitrability in
favor of judicial determination, we now turn to the arbitrability question itself.
Arbitrability of the Claims and Defenses Here
As mentioned above, the arbitration proponent bears the burden to establish both
“validity” and “scope”—a valid arbitration agreement binding the parties and that the scope of that
agreement encompasses the parties’ dispute. See TotalEnergies E&P USA, 667 S.W.3d at 720.
The arbitration agreement that Appellants put forward is still the G&A Agreement and
incorporated Policy, but now the “clear and unmistakable” standard for arbitrability delegations
no longer applies. Instead, “[w]ho is bound by an arbitration agreement is normally a function of
the parties’ intent, as expressed in the agreement’s terms.” See Jody James Farms, 547 S.W.3d
at 633. And Appellants indeed base their validity arguments on the arbitration-related terms in
the G&A Agreement and Policy to get around the non-signatory problem identified above. See id.
(noting that whether non-signatory may enforce arbitration agreement is “validity” question).
They also argue that this Court in Cielo Property Group decided the validity question raised by
this case against Mulcahy’s position.6
6 Appellants have not raised other of the theories that support compelling arbitration even when the arbitration proponent is a non-signatory, for example, incorporation by reference, assumption, agency, alter ego, equitable estoppel, or third-party beneficiary. See Jody James Farms, 547 S.W.3d at 633.
12 We conclude, for the following reasons, that neither the contractual terms nor
Cielo Property Group establishes a valid agreement to arbitrate binding Mulcahy to Appellants.
Therefore, Appellants fall under the default rule that they, as non-signatories to the G&A
Agreement, cannot compel Mulcahy to arbitrate under the Agreement. See G.T. Leach Builders,
458 S.W.3d at 524 (“As a general rule, ‘an arbitration clause cannot be invoked by a non-party to
the arbitration contract.’ ‘[The] policy favoring arbitration is strong, but it alone cannot authorize
a non-party to invoke arbitration.’” (internal citation omitted) (quoting Grigson v. Creative Artists
Agency, L.L.C., 210 F.3d 524, 532 (5th Cir. 2000) (Dennis, J., dissenting))).
At every turn in the G&A Agreement and Policy, the arbitration-related terms
concern only disputes between, on the one hand, Mulcahy and, on the other, either G&A or certain
Clients. See Jody James Farms, 547 S.W.3d at 633–34 (explaining contractual terms that similarly
required arbitration only between named parties and not also with non-signatories, despite same
terms’ broad scope regarding disputes that were covered). As we said above, the record allowed
the trial court reasonably to find that neither Appellant here is such a Client. Therefore, no matter
how broad the scope of the arbitration-related terms concerning which disputes are covered, the
contractual language does not create a valid arbitration agreement binding Mulcahy to arbitrate
with Appellants. See id. at 634 (“The parties must arbitrate ‘[a]ll disputes’ within the arbitration
agreement except pure ‘policy or procedure interpretation[s],’ but those disputes only fall within
the scope of the agreement if there is a valid arbitration agreement in the first instance.”).
As for Cielo Property Group, the validity decision there was based on the fact
that one of the appellants was named as a third-party beneficiary of the G&A Agreement. See
2019 WL 3023312, at *1, *2. Then for the other two appellants, because Mulcahy’s claims against
them were merely ancillary to his claims against the first appellant but were still factually
13 intertwined with them, it was appropriate to refer those claims to arbitration as well. See id. at *3.
By contrast here, neither Appellant is a named third-party beneficiary in the G&A Agreement,
and without a party here with a valid arbitration agreement with Mulcahy, the ancillary-claims
reasoning from Cielo Property Group is inapplicable.7 Therefore, Cielo Property Group does not
require that we decide the validity question in this appeal against Mulcahy’s position.
Despite the lack of a valid arbitration agreement to bind Mulcahy to arbitrate with
them, Appellants raise still one more ground for compelling arbitration here: their affirmative
defense of res judicata. In advancing that affirmative defense, they argue that Mulcahy submitted
to the arbitrator the same claims that he pleads against them in this suit. Mulcahy disagrees that
he did so, pointing to this language in his arbitration third amended statement of claims8:
Cielo thereafter was refusing to provide Mr. Mulcahy with the ownership interest to which he was promised, which included all active projects under Mr. Mulcahy’s asset management role . . . . In accordance with oral and written agreements between Mulcahy and Cielo, Mr. Mulcahy is entitled to receive . . . distributions from the sale of these propert[ies]. To be clear, Mr. Mulcahy is not seeking damages in this lawsuit for the ownership interests Mr. Mulcahy has under separate contracts, and specifically, CPG 220 Holdings 2014, LLC[ and] CPG 208 Nueces Holdings, LLC.
Appellants argue that if Mulcahy submitted his claims in this lawsuit to the arbitrator, then the
arbitrator must decide the res judicata effect, if any, of her final award on Mulcahy’s purportedly
identical claims in this lawsuit. Appellants rely on the Robinson opinion from our sister court that
we mentioned above.
7 Appellants rely on other language from Cielo Property Group, but that language was dealing with “scope” questions rather than the “validity” question. 8 His live-pleading-like document in the arbitration.
14 Yet in Robinson, our sister court well explained an analytical framework for
categorizing the res judicata-arbitrability question that Appellants raise here, and that framework
shows that Appellants’ res judicata-arbitrability question does not affect our “validity” conclusion
that Mulcahy is not bound by any valid agreement to arbitrate with Appellants. Our sister court
began, “The question that we confront is for a claim referred to arbitration, which of the two
decision makers—the trial court or the arbitrator—decides whether res judicata bars a claim.”
Robinson, 2021 WL 924839, at *4. It then described the framework of “substantive arbitrability”
versus “procedural arbitrability,” questions about the first of which are generally for courts and
questions about the second of which are generally for arbitrators. See id. It noted that the Supreme
Court of Texas has used the same framework and—important for Mulcahy and Appellants—
highlighted reasoning by the Supreme Court that shows that whether res judicata requires parties
to arbitrate does not affect the “validity” question about arbitrability:
Our supreme court also quoted from another United States Supreme Court opinion to explain the distinction between substantive and procedural questions:
On the one hand, courts presume that the parties intend courts, not arbitrators, to decide what we have called disputes about “arbitrability.” These include questions such as “whether the parties are bound by a given arbitration clause[]” or “whether an arbitration clause in a concededly binding contract applies to a particular type of controversy.”
On the other hand, courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration. These procedural matters include claims of “waiver, delay, or a like defense to arbitrability.” And they include the satisfaction of “prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.”
15 Id. at *5 (emphases added) (quoting G.T. Leach Builders, 458 S.W.3d at 521). Our sister court
went on to explain that res judicata is a procedural matter supporting arbitrating. See id. at *5–9.
Therefore, it is within the “procedural arbitrability” part of the substantive–procedural framework
and does not affect the validity analysis we must conduct here given the non-signatory problem.
All of which leaves us with the default rule applying to Appellants—they are
non-signatories to the arbitration agreement that they raise and thus may not enforce it to require
Mulcahy to arbitrate with them. See G.T. Leach Builders, 458 S.W.3d at 524. Because the
proponent of arbitration must prevail on both validity and scope, see TotalEnergies E&P USA,
667 S.W.3d at 720, and because Appellants have not prevailed on validity, the trial court did not
err by denying their motion to compel arbitration. We thus overrule their sole appellate issue.
CONCLUSION
__________________________________________ Chari L. Kelly, Justice
Before Chief Justice Byrne, Justices Triana and Kelly
Affirmed
Filed: February 14, 2025