NUMBER 13-10-00504-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
CIRCLE ZEBRA FABRICATORS, LTD., BY AND THROUGH ITS GENERAL PARTNER CIRCLE ZEBRA FABRICATORS MANAGEMENT, L.L.C., Appellant,
v.
AMERICAS WELDING CORP., RAUL CASTILLO, SR., JORGE MANUEL GARCIA, AND KEPPEL AMFELS, INC., Appellees.
On Appeal from the County Court at Law No. 1 of Nueces County, Texas.
NUMBER 13-10-00591-CV
IN RE CIRCLE ZEBRA FABRICATORS, LTD., BY AND THROUGH ITS GENERAL PARTNER CIRCLE ZEBRA FABRICATORS MANAGEMENT, L.L.C.
On Petition for Writ of Mandamus Before Justices Garza, Benavides and Vela Memorandum Opinion by Justice Garza Circle Zebra Fabricators, Ltd., by and through its general partner Circle Zebra
Fabricators Management, L.L.C. (“Circle Zebra”), seeks to set aside an order
compelling arbitration by appeal in appellate cause number 13-10-00504-CV and by
petition for writ of mandamus in appellate cause number 13-10-00591-CV. We dismiss
the appeal and deny the petition for writ of mandamus.
I. BACKGROUND
Circle Zebra executed a Master Service Agreement (the “agreement”) with
Keppel Amfels, Inc. (“Keppel Amfels”) through which Circle Zebra agreed to provide
certified welders to Keppel Amfels for work at Keppel Amfels‟s shipyard in Brownsville,
Texas. In order to meet its obligations under the agreement, Circle Zebra purchased
equipment, obtained marine insurance, and employed approximately 100 welders.
According to Circle Zebra‟s first amended original petition, it invested more than
$1,000,000 to perform the agreement. At this time, Raul Castillo Sr. served as Circle
Zebra‟s “chief foreman manager” and ran Circle Zebra‟s business operations in South
Texas. Circle Zebra also employed LR Global, L.L.C.,1 which served as a business
consultant regarding these relationships.
Circle Zebra‟s employees began working for Keppel Amfels. At Keppel Amfels‟s
request, Circle Zebra met with Jorge Manuel Garcia and representatives of Americas
Welding Corporation (“Americas Welding”). According to Circle Zebra‟s first amended
petition, the “purpose of the meeting . . . was to enhance the labor force available to . . . 1 LR Global, L.L.C. is not a party to this appeal or original proceeding.
2 Keppel Amfels by utilizing Mexican Nationals.” Circle Zebra refused to hire Americas
Welding‟s personnel. According to Circle Zebra, Castillo, Garcia, and Americas
Welding then entered into a conspiracy to convert Circle Zebra‟s equipment and
personnel to their use, and this conspiracy was joined by Keppel Amfels, who “allowed
this . . . conduct to occur motivated solely by retaliation for [Circle Zebra‟s] refusal to
hire said Mexican Nationals.” Circle Zebra filed suit against Americas Welding, Castillo,
Garcia, Keppel Amfels, and LR Global, L.L.C. for causes of action including, inter alia,
tortious interference, fraud, breach of contract, conversion, and breach of fiduciary duty.
The agreement between Circle Zebra and Keppel Amfels contained an arbitration
clause:
ALL CLAIMS, DISPUTES[,] OR CONTROVERSIES ARISING OUT OF, OR IN RELATION TO THE INTERPRETATION, APPLICATION[,] OR ENFORCEMENT OF THIS AGREEMENT, SHALL BE DECIDED BY ARBITRATION UTILIZING A SINGLE ARBITRATOR IN ACCORDANCE WITH THE CONSTRUCTION INDUSTRY RULES OF THE AMERICAN ARBITRATION ASSOCIATION. THE ARBITRATOR SHALL BE EXPERIENCED IN THE OFFSHORE INDUSTRY AND SHALL NOT BE A PRACTICING ATTORNEY. THE ARBITRATION SHALL BE HELD IN HOUSTON, TEXAS. THE DECISION OF THE ARBITRATOR SHALL BE FINAL[,] BINDING[,] AND ENFORCEABLE IN ANY COURT OF COMPETENT JURISDICTION AND THE PARTIES AGREE THAT THERE SHALL BE NO APPEAL FROM THE ARBITRATOR‟S DECISION.
Based on this provision, Keppel Amfels filed a motion to compel arbitration and an
amended motion to compel arbitration. The non-signatories to the agreement,
Americas Welding, Castillo, and Garcia, also filed a joint motion to compel arbitration
based on this language in the agreement.
Following an evidentiary hearing, the trial court granted Keppel Amfels‟s motion
by written order rendered on June 11, 2009, and granted the non-signatories‟ motion to
compel arbitration by order rendered on August 7, 2010. Each of these orders stayed
3 the trial court proceedings pending results of the arbitration. This appeal and original
proceeding ensued. The matter has been fully briefed on appeal, and the Court
requested and received a response to the petition for writ of mandamus.
Circle Zebra attacks the trial court‟s orders on multiple grounds. Its arguments
include, but are not limited to, contentions that: its claims should not be arbitrated
because they are not based on the agreement with Keppel Amfels; the agreement was
unconscionable insofar as it, for example, purports to eliminate the right to appeal the
results of the arbitration; and its claims against the non-signatories to the agreement
should not be arbitrated because there is no agreement to arbitrate with them and the
agreement itself provides that it shall not “be construed to confer any benefit on any
third party . . . nor shall it provide any rights to such third party to enforce its provisions.”
II. APPEAL
Appellee, Keppel Amfels, has filed a motion to dismiss the appeal in cause
number 13-10-00504-CV on grounds that the orders compelling arbitration are
interlocutory orders which are not subject to appeal. A party may not appeal an
interlocutory order unless authorized by statute. Bally Total Fitness Corp. v. Jackson,
53 S.W.3d 352, 355, 359 (Tex. 2001). We construe statutes granting interlocutory
appeals strictly because they are a narrow exception to the general rule that
interlocutory orders are not immediately appealable. Tex. A&M Univ. Sys. v. Koseoglu,
233 S.W.3d 835, 841 (Tex. 2007).
An order compelling arbitration and staying proceedings in district court is not
subject to interlocutory appeal under either the federal or state arbitration schemes.
See Chambers v. O’Quinn, 242 S.W.3d 30, 31-32 (Tex. 2007) (per curiam) (explaining
4 that neither the Federal Arbitration Act nor the Texas Arbitration Act allow interlocutory
appeals from orders compelling arbitration); Abdel Hakim Labidi v. Sydow, 287 S.W.3d
922, 926 (Tex. App.–Houston [14th Dist.] 2009, no pet.) (combined appeal & orig.
proceeding); see also 9 U.S.C. § 16(a) (specifying which orders under the Federal
Arbitration Act are subject to appeal); TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)
(Vernon 2008) (omitting orders compelling arbitration from delineated categories of
appealable interlocutory orders); TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (Vernon
Supp. 2010) (providing that a party may appeal from a “judgment or interlocutory order .
. . under the same circumstances that an appeal from a federal district court‟s order or
decision would be permitted by” the Federal Arbitration Act); TEX. CIV. PRAC. & REM.
CODE ANN. § 171.098(a)(1), (2) (Vernon 2008) (specifying which orders under the
Texas Arbitration Act are subject to appeal). Instead, orders compelling arbitration and
staying litigation are subject to appeal after the rendition of final judgment. See Perry
Homes v. Cull, 258 S.W.3d 580, 587 (Tex. 2008); Chambers, 242 S.W.3d at 32.
Accordingly, we grant the motion to dismiss filed by Keppel Amfels and we dismiss the
appeal in cause number 13-10-00504-CV for want of jurisdiction.
III. MANDAMUS
Mandamus is an “extraordinary” remedy. In re Sw. Bell Tel. Co., L.P., 235
S.W.3d 619, 623 (Tex. 2007) (orig. proceeding); see In re Team Rocket, L.P., 256
S.W.3d 257, 259 (Tex. 2008) (orig. proceeding). To obtain mandamus relief, the relator
must show that the trial court clearly abused its discretion and that the relator has no
adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36
(Tex. 2004) (orig. proceeding); see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 462
5 (Tex. 2008) (orig. proceeding). A trial court abuses its discretion if it reaches a decision
so arbitrary and unreasonable as to constitute a clear and prejudicial error of law, or if it
clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P.,
164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam); Walker v. Packer, 827
S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). To satisfy the clear abuse of discretion
standard, the relator must show that the trial court could “reasonably have reached only
one decision.” Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996)
(quoting Walker, 827 S.W.2d at 840).
Historically, mandamus was treated as an extraordinary writ that would issue
“only in situations involving manifest and urgent necessity and not for grievances that
may be addressed by other remedies.” Walker, 827 S.W.2d at 840. Now, in some as
yet not completely defined set of cases, whether a clear abuse of discretion can be
adequately remedied by appeal depends on a careful analysis of the costs and benefits
of interlocutory review. See In re McAllen Med. Ctr., Inc., 275 S.W.3d at 462.
Sometimes, “[a]n appellate remedy is „adequate‟ when any benefits to mandamus
review are outweighed by the detriments.” In re Prudential Ins. Co. of Am., 148 S.W.3d
at 136. According to the Texas Supreme Court:
Mandamus review of significant rulings in exceptional cases may be essential to preserve important substantive and procedural rights from impairment or loss, allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments, and spare private parties and the public the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.
Id. at 136.
6 Under previous law, mandamus was available to review orders either compelling
or denying arbitration under the Federal Arbitration Act. See Freis v. Canales, 877
S.W.2d 283, 284 (Tex. 1994). However, in 2006, in order to ensure consistency
between federal and state procedures, the Texas Supreme Court held that mandamus
was generally not available to review orders compelling arbitration so that federal and
state procedure would be consistent. See In re Palacios, 221 S.W.3d 564, 565 (Tex.
2006) (orig. proceeding). In Palacios, the Texas Supreme Court noted that mandamus
relief might be available, but only if the party seeking relief from an order staying a case
for arbitration meets the “particularly heavy” burden to show “clearly and indisputably
that the district court did not have the discretion to stay the proceedings pending
arbitration.” Id. (quoting Apache Bohai Corp. v. Texaco China, B.V., 330 F.3d 307, 310-
11 (5th Cir. 2003)). The Texas Supreme Court recently reaffirmed this proposition and
clarified that “this „exception‟ applies not to the question whether an order compelling
arbitration was correct, but to the question whether the case should have been
dismissed rather than stayed.” In re Gulf Exploration, LLC, 289 S.W.3d 836, 841 (Tex.
2009) (orig. proceeding); see Small v. Specialty Contrs., Inc., 310 S.W.3d 639, 642
(Tex. App.–Dallas 2010, no pet.) (“Courts may review an order compelling arbitration if
the order also dismisses the entire case and is therefore a final, rather than
interlocutory, order.”).
Moreover, even if a case falls within the foregoing parameters for mandamus
review, mandamus is nonetheless “generally unavailable” because petitioners can
“rarely” show that they lack an adequate remedy by appeal. See In re Gulf Exploration,
LLC, 289 S.W.3d at 842. Generally, the adequacy of an appellate remedy “depends on
7 a careful balance of the case-specific benefits and detriments of delaying or interrupting
a particular proceeding”; however, because both the federal and state arbitration acts
specifically exclude immediate review of orders compelling arbitration, “any balancing
must tilt strongly against mandamus review.” Id. Nevertheless, the supreme court held
that mandamus review may be appropriate “in those rare cases when legislative
mandates conflict.” According to the supreme court, “such conflicts are few, so the
balance will generally tilt toward reviewing orders compelling arbitration only on final
appeal.” Id. In such cases, “mandamus may be essential to preserve important
substantive and procedural rights from impairment or loss [and] allow the appellate
courts to give needed and helpful direction to the law that would otherwise prove elusive
in appeals from final judgments.” Id. at 843 (quoting In re Prudential Ins. Co., 148
S.W.3d at 136). The court further noted that delay and expense, standing alone,
generally do not render appeal after a final judgment to be an inadequate remedy, and
this is particularly true in arbitration cases “because arbitration clauses are usually
contractual and cover contractual claims,” and a “party that prevails on a contractual
claim can recover its fees and expenses, even if they were incurred in collateral
proceedings like arbitration.” Id. (citations omitted).
In the instant case, Circle Zebra‟s petition for writ of mandamus does not address
the adequacy of its remedy by appeal. Following oral argument in this cause, Circle
Zebra filed an opposed motion to supplement or amend its petition to address this
issue. According to Circle Zebra‟s motion and attached “First Supplement to its Petition
for Writ of Mandamus,” mandamus is appropriate and an appeal following arbitration is
inadequate because Circle Zebra has been “put out of business,” and its cause of action
8 does “not arise from or rely on the contract containing the arbitration clause.” Circle
Zebra further contends that the Master Service Agreement expressly states that it does
not confer benefits on third parties and it does not provide rights to third parties to
enforce its provisions, and accordingly, the non-signatory defendants should not be able
to enforce the arbitration clause in that agreement. Finally, Circle Zebra contends that:
[W]here there is no signed agreement with the non-signatory defendants, and Circle Zebra has been put out of business, Circle Zebra does not have an adequate remedy at law and the order compelling arbitration is reviewable by this court.
Further, the effect of ordering a company that has been put out of business to arbitration, where there is no arbitration agreement and[] the agreement relied on says it cannot be enforced by third parties, is essentially a final order that equitably should be the subject of an appeal.
Each of these issues was extant and could have been addressed in Circle Zebra‟s
petition for writ of mandamus before the real parties in interest filed their responses to
the petition for writ of mandamus and before this matter was submitted to the Court at
oral argument. Therefore, we deny Circle Zebra‟s motion to supplement or amend its
petition for writ of mandamus to discourage the practice of waiting until after oral
argument to raise and address an issue which must be established as a necessary part
of the petition for writ of mandamus. See Walker, 827 S.W.2d at 840-42 (stating that
the relator bears the burden to show that remedies other than mandamus are
inadequate); In re Christus Health, 276 S.W.3d 708, 710 (Tex. App.–Houston [1st Dist.]
2008, orig. proceeding) (same); In re William Roberts, 18 S.W.3d 736, 738 (Tex. App.–
San Antonio 2000, orig. proceeding) (same). Yet, even if we had granted leave for
Circle Zebra to supplement or amend its petition, we would not have found that Circle
9 Zebra met its burden to prove that its appellate remedy was inadequate as a matter of
law.
Because both the federal and state arbitration acts specifically exclude
immediate review of orders compelling arbitration, our analysis regarding the adequacy
of Circle Zebra‟s remedy by appeal “tilts strongly against mandamus review.” See In re
Gulf Exploration, LLC, 289 S.W.3d at 842. The matter does not involve conflicting
legislative mandates. See id. at 843. Delay and expense, standing alone, generally do
not render appeal after a final judgment to be an inadequate remedy, and this is
particularly true in the instant case because it is, at least in part, based on a contractual
dispute, and a “party that prevails on a contractual claim can recover its fees and
expenses, even if they were incurred in collateral proceedings like arbitration.” See id.
In sum, Circle Zebra has not carried its burden to show that it lacks an adequate
remedy by appeal. Compare id. and Abdel Hakim Labidi, 287 S.W.3d at 926
(concluding that there was an adequate remedy by appeal for an order compelling
arbitration where clients sued their lawyers for breach of contract and breach of
fiduciary duty) with In re Sthran, 327 S.W.3d 839, 846 (Tex. App.–Dallas 2010, orig.
proceeding) (concluding that relator lacked an adequate remedy by appeal where
“legislative mandates might be construed to conflict” and it was “not clear that any fees
and expenses incurred as a result of arbitration [would] be recoverable” in a tort action),
and In re Villanueva, 311 S.W.3d 475, 483-84 (Tex. App.–El Paso 2009, orig.
proceeding) (concluding that relator lacked an adequate remedy by appeal where
relator would not be able to recover fees and expenses in tort action and, more
10 compellingly, because the case involved “conflicting rulings” which were “significant
rulings in exceptional cases”). Accordingly, we deny the petition for writ of mandamus.
IV. CONCLUSION
The Court, having examined and fully considered the matters in these causes, is
of the opinion that it lacks jurisdiction over the appeal in appellate cause number 13-10-
00504-CV and that the petition for writ of mandamus in appellate cause number 13-10-
00591-CV should be denied. In so holding, we note that the writ of mandamus is a
discretionary writ, and its denial, without comment on the merits, does not deprive an
appellate court from considering the matter in a subsequent appeal. Chambers, 242
S.W.3d at 32; see In re AIU Ins. Co., 148 S.W.3d 109, 119 (Tex. 2004) (stating that the
“failure to grant a petition for writ of mandamus is not an adjudication of, nor even a
comment on, the merits of a case in any respect, including whether mandamus relief
was available”). Similarly, although the language in the arbitration agreement provides
that “[t]he decision of the arbitrator shall be final[,] binding[,] and enforceable in any
court of competent jurisdiction and the parties agree that there shall be no appeal from
the arbitrator‟s decision,” this language indicates that a party may not appeal the merits
of the arbitration; not that the parties agreed to waive the right to appeal the trial court‟s
decision to compel arbitration, or that the parties waived the right to appeal the district
court‟s judgment confirming or vacating the arbitration decision. See In re Gulf
Exploration, LLC, 289 S.W.3d at 842 (“If a trial court compels arbitration when the
parties have not agreed to it, that error can unquestionably be reviewed by final
appeal.”). As acknowledged by Keppel Amfels in its response to the petition for writ of
mandamus, the “no appeal” language does not affect Circle Zebra‟s ability to vacate or
11 modify an arbitration award on grounds listed in the Texas Arbitration Act or the Federal
Arbitration Act. See 9 U.S.C. §§ 10, 11; TEX. CIV. PRAC. & REM. CODE ANN. §§ 171.088,
171.091 (Vernon 2005); Silicon Power Corp. v. GE Zenith Controls, Inc., 661 F. Supp.
2d 524, 538 (E.D. Pa. 2009); see also Rollins, Inc. v. Black, 167 Fed. Appx. 798, 2006
WL 355852, at *1 n.1 (11th Cir. 2006) (per curiam, not designated for publication) (“A
„binding, final, and non-appealable‟ arbitral award . . . simply means the parties have
agreed to relinquish their right to appeal the merits of their dispute; it does not mean the
parties relinquish their right to appeal an award resulting from an arbitrator‟s abuse of
authority, bias, or manifest disregard of the law.”); Barsness v. Scott, 126 S.W.3d 232,
238 (Tex. App.–San Antonio 2003, pet. denied) (holding that a “no appeal” provision in
an arbitration agreement did not preclude review of a judgment on fraud, misconduct or
gross mistake, or those grounds for vacatur or modification listed in the Texas
Arbitration Act). Accordingly, we dismiss the appeal and deny the petition for writ of
mandamus.
DORI CONTRERAS GARZA JUSTICE
Delivered and filed the 17th day of March, 2011.