Dennis Weitzel v. Brent Coon, Individually, and Brent W. Coon, P.C. D/B/A Brent Coon and Associates

• Court: Court of Appeals of Texas
• Decided: July 30, 2019
• Docket: 01-19-00015-CV
• Status: Published

Opinion

Opinion issued July 30, 2019

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-19-00015-CV ——————————— DENNIS WEITZEL, Appellants V. BRENT COON, INDIVIDUALLY, AND BRENT W. COON, P.C. D/B/A BRENT COON AND ASSOCIATES, Appellee

On Appeal from the 164th District Court Harris County, Texas Trial Court Case No. 2018-52828

MEMORANDUM OPINION

Dennis Weitzel filed this interlocutory appeal from the trial court’s order

denying his motion to compel arbitration. We conclude that the trial court erred by

denying the motion. We reverse and remand for proceedings in accordance with

this opinion. Background

This case concerns business dealings between attorneys. In 2002, Brent

Coon & Associates (BCA) and Dennis Weitzel entered into a referral agreement

(“2002 agreement”) that outlined the percentage of fees Weitzel and another

attorney, Michael T. Gallagher, would receive upon a case’s favorable resolution if

they referred certain asbestos, mesothelioma, and lung cancer clients to BCA. The

letter included an attachment listing several cases to show the source of the referral

and the attorney working on the case. Sometime after the agreement, Weitzel

joined BCA as an attorney. On February 19, 2010 Weitzel ended his employment

with BCA. In April 2010, Weitzel and BCA, similarly sophisticated parties,

entered into a separation agreement (“2010 agreement”) effective February 19,

2010. The separation agreement, negotiated at arm’s length, incorporates four

exhibits. The parties agreed to an integration clause, stating that the agreement and

its exhibits represent the entire agreement between BCA and Weitzel. The 2010

agreement also contains an arbitration clause. Specifically, BCA and Weitzel

agreed that all disputes arising under the 2010 agreement would be resolved by

arbitration.

Coon and BCA’s case against Weitzel arose from a dispute about a fee

agreement between Michael T. Gallagher and the Gallagher Law Firm PLLC and

Coon and BCA. In August 2018, Michael T. Gallagher and The Gallagher Law

2 Firm PLLC sued Coon and BCA alleging breach of the referral agreement between

Gallagher and BCA related to certain asbestos, mesothelioma, and lung cancer

clients. Gallagher sought declaratory relief and an accounting of the cases subject

to the agreement. Coon and BCA filed a third party claim against Dennis Weitzel,

asserting causes of action against Weitzel for BCA’s alleged overpayment of

referral fees to Weitzel, and requested declaratory relief. BCA argued that Weitzel

did not forward portions of payments to Gallagher that he received from BCA.

Weitzel filed an answer and moved to compel arbitration pursuant to the 2010

agreement executed between Weitzel and BCA. The trial court denied Weitzel’s

motion to compel arbitration in December 2018, and Weitzel appeals.

Motion to Compel Arbitration

Weitzel argues on appeal that the trial court abused its discretion by denying

his motion to compel arbitration. Weitzel contends that the 2010 agreement

contains a valid, enforceable arbitration agreement and BCA’s claims fall within

the scope of that agreement.

A. Standard of Review

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 § 171.098. We review interlocutory appeals of orders denying

motions to compel arbitration for an abuse of discretion, deferring to the trial

3 court’s factual determinations if they are supported by 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).

B. Analysis

The parties, who are both attorneys, do not dispute the existence of a 2010

agreement between BCA and Weitzel that has an arbitration clause nor do they

dispute the existence of a 2002 agreement between them with no arbitration clause.

The dispute is which agreement applies and the extent to which the 2002

agreement was incorporated into the 2010 agreement.

Weitzel, the movant in the trial court, argues that the trial court erred in

denying his motion to compel arbitration because the 2010 agreement with an

arbitration clause applies. He further alleges that the 2002 agreement was

incorporated by reference into the 2010 agreement. BCA responds that the dispute

is not covered by the scope of the 2010 agreement and is governed exclusively by

the 2002 agreement.

We first must determine whether the decision as to the scope of the 2010

agreement to arbitrate was the trial court’s to make, or if instead the parties agreed

to have the arbitrator decide questions of arbitrability.

The arbitration clause in the 2010 agreement specified that:

All disputes arising under this Agreement shall be resolved by binding arbitration proceedings brought under the auspices and rules of the

4 American Arbitration Association (AAA) only to the extent that such rules are not inconsistent with this section. Arbitration awards resulting from such proceedings shall be binding and specifically enforceable to the maximum extent permitted by law. Arbitrators shall be selected in accordance with the rules established by AAA.

Generally, the question of arbitrability is a gateway issue to be decided by a court

rather than an arbitrator. RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 120

(Tex. 2018). The question of arbitrability addresses which claims must be

arbitrated. Southwinds Express Constr., LLC v. D.H. Griffin of Tex., Inc., 513

S.W.3d 66, 71 (Tex. App.—Houston [14th Dist.] 2016, no pet.); see also Saxa Inc.

v. DFD Architecture Inc., 312 S.W.3d 224, 229 (Tex. App.—Dallas 2010, pet.

denied) (questions of arbitrability include “whether the parties agreed to arbitrate

and whether a claim or dispute is encompassed in the agreement to arbitrate”).

Unless the parties clearly and unmistakably agree to submit threshold questions of

arbitrability to the arbitrator, these issues are to be resolved by courts. See Howsam

v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002); First Options of Chicago,

Inc. v. Kaplan, 514 U.S. 938, 943 (1995); In re Weekley Homes, L.P., 180 S.W.3d

127, 130 (Tex. 2005) (orig. proceeding); Burlington Res. Oil & Gas Co. v. San

Juan Basin Royalty Trust, 249 S.W.3d 34, 39–40 (Tex. App.—Houston [1st Dist.]

2007, pet. denied). The court must enforce a valid arbitration agreement that

delegates arbitrability to the arbitrator rather than the court. See RSL Funding,

LLC, 569 S.W.3d at 120. This determination depends on an interpretation of the

5 parties’ contracts, which we review de novo. See In re Dillard Dep’t Stores, Inc.,

186 S.W.3d 514, 515 (Tex. 2006) (orig. proceeding).

The 2010 agreement between BCA and Weitzel governs business dealings

between them after Weitzel left BCA. It is an agreement between two similarly

sophisticated parties who negotiated at arm’s length. With reference to the disputed

referral cases it states, “The original fee agreements prevail for all cases referred by

Weitzel to BCA identified in Exhibit 4.”* The parties included an integration

clause, agreeing that the 2010 agreement and its exhibits “constitute the entire

agreement between the parties with respect to the subject matter here of.”

BCA and Weitzel agreed that “all disputes arising under” the 2010

agreement would be resolved by arbitration under the “rules of the American

Arbitration Association (AAA).” The AAA Commercial Arbitration Rules state,

“The parties shall be deemed to have made these rules a part of their arbitration

agreement whenever they have provided for . . . arbitration by the AAA of a

domestic commercial dispute without specifying particular rules.” Commercial

Arbitration Rules and Mediation Procedure R-1(a) (effective June 1, 2009),

available at www.adr.org. Under Rule 7 of the Commercial Arbitration Rules, the

“arbitrator shall have the power to rule on his or her own jurisdiction, including

* Though Exhibit 4 is not in the record, the parties agree that the referral cases subject to the current proceeding appear in Exhibit 4 of the 2010 agreement. See TEX. R. APP. P. 38.1(g) (stating that in a civil case, the court will accept the facts stated in the appellant’s brief as true unless another party contradicts them). 6 any objections with respect to the existence, scope or validity of the arbitration

agreement.” Id. at R-7(a). The express incorporation of rules that empower the

arbitrator to determine arbitrability, such as the AAA Commercial Arbitration

Rules, is clear and unmistakable evidence of the parties’ intent to allow the

arbitrator to decide such issues. Schlumberger Tech. Corp. v. Baker Hughes Inc.,

355 S.W.3d 791, 802 (Tex. App.—Houston [1st Dist.] 2011, no pet.); see also

Burlington Res. Oil & Gas Co., 249 S.W.3d at 40–41 (“We are also mindful that,

in certain circumstances, the incorporation of AAA rules may constitute clear and

unmistakable evidence of an intent to allow an arbitrator to decide issues of

arbitrability.”); Trafigura Pte. Ltd. v. CNA Metals Ltd., 526 S.W.3d 612, 616–17

(Tex. App.—Houston [14th Dist.] 2017, no pet.) (listing sister courts who held the

same).

The parties incorporated the AAA Rules into the 2010 agreement and thus

agreed that the arbitrator, not the trial court, would decide gateway issues,

including whether their dispute falls under the arbitration clause of the 2010

agreement. Because BCA and Weitzel agreed that the arbitrator would decide these

questions, the trial court should have granted this aspect of Weitzel’s motion so

that the dispute, including the extent to which the 2002 agreement was

incorporated into the 2010 agreement, could be resolved in arbitration. See

Schlumberger Tech. Corp., 355 S.W.3d at 803.

7 While we hold that the arbitration agreement binds BCA and Weitzel, this

dispute also involves Coon individually. Normally, only parties to an arbitration

agreement can be compelled to arbitrate. In re Kellogg, Brown & Root, Inc., 166

S.W.3d 732, 738 (Tex. 2005) (orig. proceeding). Six theories may bind

non-signatories to arbitration agreements: (1) incorporation by reference;

(2) assumption; (3) agency; (4) alter ego; (5) equitable estoppel, and (6) third-party

beneficiary. See id. Gallagher sued both Coon individually and “Brent W. Coon,

P.C. d/b/a Brent Coon and Associates.” The signatory to the 2002 and 2010

agreements was “Brent Coon & Associates.” The relationship between Coon and

Brent W. Coon, P.C. is not apparent from the record nor is it apparent if Brent

Coon & Associates as referenced in the 2002 agreement involves the same entity

referenced in the 2010 agreement and 2018 lawsuit. Because the record is unclear,

Weitzel did not meet his burden to show that the trial court abused its discretion in

denying his motion to compel arbitration against Coon.

8 Conclusion

We reverse the trial court’s interlocutory order that denied Weitzel’s motion

to compel arbitration, and we remand the case to the trial court. On remand, we

direct the trial court to order BCA and Weitzel to arbitrate the substantive

arbitrability question.

Peter Kelly Justice

Panel consists of Justices Keyes, Kelly, and Goodman.