Meyer v. WMCO-GP, LLC

211 S.W.3d 302, 50 Tex. Sup. Ct. J. 264, 2006 Tex. LEXIS 1299, 2006 WL 3751585
CourtTexas Supreme Court
DecidedDecember 22, 2006
DocketNo. 04-0252
StatusPublished
Cited by126 cases

This text of 211 S.W.3d 302 (Meyer v. WMCO-GP, LLC) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 50 Tex. Sup. Ct. J. 264, 2006 Tex. LEXIS 1299, 2006 WL 3751585 (Tex. 2006).

Opinions

Justice HECHT

delivered the opinion of the Court,

in which Chief Justice JEFFERSON, Justice WAINWRIGHT, Justice BRISTER, Justice MEDINA, Justice GREEN, Justice JOHNSON, and Justice WILLETT joined.

A person who has agreed to arbitrate disputes with one party may in some cases be required to arbitrate related disputes with others.1 This is such a case. A motor vehicle manufacturer exercised its right of first refusal to acquire its dealer’s business and transferred the right to its assignee, preempting the dealer’s agreement to sell the business to another. The jilted buyer sued the manufacturer and its assignee for interfering with the proposed contract of sale. Although the defendants had no contract with the jilted buyer, they demanded arbitration based on the buyer’s agreement to arbitrate disputes with the dealer. The trial court refused to compel arbitration, and a divided court of appeals affirmed.2 We reverse.

Ford Motor Co.’s agreement with its dealer, Bullock Motor Co., gave Ford an assignable right of first refusal to acquire Bullock’s business should Bullock want to sell to another. The dealership agreement provided that Ford could “discuss the terms of [any proposed sale] with any potential Assignee, as long as such information is treated confidentially.” Bullock contracted to sell the dealership to WMCO-GP, LLC. Their purchase and sale agreement (“PSA”) acknowledged Ford’s right of first refusal and, if Ford exercised that right, allowed Bullock to terminate the agreement. Ford exercised its right and assigned it to Alton J. Meyer and Meyer Acquisition Corp. (collectively “Meyer”), and Bullock accordingly sold its business to Meyer.

WMCO sued Bullock, Meyer, and Ford. WMCO sought a declaration that Ford’s right of first refusal was void because, in violation of the dealership agreement, as-signee Meyer had disclosed WMCO’s confidential information to third parties. WMCO also claimed damages against Meyer for tortious interference with the PSA and against Meyer and Ford for conspiring to violate the Texas Motor Vehicle Commission Code.3 WMCO asserted that although Bullock had breached the PSA, it was joined only as a necessary party because it would have performed the PSA but for Ford’s exercise of its right of first refusal.

Meyer and Ford moved to compel arbitration based on WMCO’s agreement to the following provision in the PSA, to which they, of course, were not parties themselves:

[305]*305Any controversy between the parties to this Agreement involving the construction or application of any of the terms, covenants, or conditions of this Agreement, shall ... be submitted to binding arbitration, and such arbitration shall comply with and be governed by the provisions of the Texas General Arbitration Act....

Meyer and Ford argued that because WMCO had made this agreement with Bullock, WMCO was equitably estopped from refusing to arbitrate with them. Bullock did not join in the motions. Although the dealership agreement between Bullock and Ford also provided for arbitration and was raised in the trial court, Meyer and Ford conceded, for purposes of this appeal, that the dealership agreement would not apply to WMCO.4 Nor do they rely on the Federal Arbitration Act;5 they assert only the Texas General Arbitration Act.6

The trial court denied the motion, and a divided court of appeals affirmed.7 We granted Meyer’s and Ford’s petitions for review.8

As a rule, arbitration of a claim cannot be compelled unless it falls within the scope of a valid arbitration agreement.9 But sometimes a person who is not a party to the agreement can compel arbitration with one who is,10 and vice versa.11 We have held that a person who seeks by his claim “to derive a direct benefit from the contract containing the arbitration provision” may be equitably estopped from refusing arbitration.12 The court of appeals came to this same conclusion based largely on Grigson v. Creative Artists Agency, L.L. C., in which the United States Court of Appeals for the Fifth Circuit quoted the Eleventh Circuit’s decision in MS Dealer Service Corp. v. Franklin, stating:

Existing case law demonstrates that equitable estoppel allows a nonsignatory to compel arbitration in two different cir[306]*306cumstances. First, equitable estoppel applies when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the nonsignatory. When each of a signatory’s claims against a nonsignatory makes reference to or presumes the existence of the written agreement, the signatory’s claims arise out of and relate directly to the written agreement, and arbitration is appropriate. Second, application of equitable es-toppel is warranted when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract. Otherwise the arbitration proceedings between the two signatories would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted.13

Grigson, like the present case, was a suit by a signatory to an arbitration agreement against a nonsignatory.14 In essence, the Fifth Circuit explained, the claimant cannot

“have it both ways”: it cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the other hand, deny arbitration’s applicability because the defendant is a non-signatory.15

Having derived from Grigson a substantially correct statement of Texas law, the court of appeals misapplied it to this case. First, the court concluded that WMCO could not be required to arbitrate claims other than those described in the arbitration provision of the PSA — “controversies] between the parties to this Agreement involving the construction or application of any of the terms, covenants, or conditions of this Agreement”.16 WMCO’s claims were against non-parties Meyer and Ford and did not, the court determined, involve the construction or application of the PSA.17 Had the PSA broadly required arbitration of “all disputes” in just so many words instead of describing particular claims and parties, the court reasoned, equitable estoppel would apply.18

We agree that an arbitration provision may limit the application of equitable estoppel. For example, if Bullock and WMCO, the parties to the PSA, had agreed to arbitrate only very specific disputes that might arise between the two of them- — whether specific vehicles were included in inventory, for example — and nothing else, one could hardly argue that WMCO would be equitably estopped from drawing the same line for disputes with non-parties. Equitable estoppel cannot give non-parties a greater right to arbitration than the parties themselves have. But the text of the arbitration provision here is not so restrictive.

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Cite This Page — Counsel Stack

Bluebook (online)
211 S.W.3d 302, 50 Tex. Sup. Ct. J. 264, 2006 Tex. LEXIS 1299, 2006 WL 3751585, Counsel Stack Legal Research, https://law.counselstack.com/opinion/meyer-v-wmco-gp-llc-tex-2006.