COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH
NO. 02-12-00372-CV
TEXAS ECHO LAND AND CATTLE, APPELLANT LLP
V.
GENERAL STEEL DOMESTIC APPELLEE SALES, LLC D/B/A GENERAL STEEL CORPORATION
----------
FROM COUNTY COURT AT LAW NO. 1 OF PARKER COUNTY
MEMORANDUM OPINION1
Appellant Texas Echo Land and Cattle, LLP appeals the trial court‘s order
granting Appellee General Steel Domestic Sales, LLC d/b/a General Steel
Corporation‘s motion to compel arbitration.2 We will affirm.
1 See Tex. R. App. P. 47.4. 2 Because, as we explain later, the Federal Arbitration Act (FAA) governs the arbitration agreement at issue in this case, and because the trial court dismissed Texas Echo‘s suit upon compelling arbitration, we have jurisdiction Texas Echo is a limited partnership formed under the laws of the State of
Texas. General Steel is a Colorado entity whose principal place of business is in
Colorado. General Steel ―markets and sells pre-engineered steel buildings,
building accessories, and related services to customers throughout the United
States.‖
In June 2007, Randy Childers, on behalf of Texas Echo, executed a written
agreement with General Steel to purchase a steel building for $69,953. As part
of the purchase, Texas Echo paid General Steel a $14,000 deposit. One of the
agreement‘s ―Conditions‖ provided that ―[a]ny deposit received herein by the
Seller shall be non-refundable, held by the Seller as security for the completion of
this contract, and applied to the final balance.‖ Another condition contained an
arbitration agreement and required that ―[a]ny controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be resolved by arbitration
over this appeal under civil practice and remedies code section 51.016 and 9 U.S.C. § 16(a)(3). See 9 U.S.C.A. § 16(a)(3) (West 2009) (providing that an appeal may be taken from ―a final decision with respect to an arbitration that is subject to this title‖); Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (West Supp. 2012) (providing that in a matter subject to the FAA, an appeal may be taken from a judgment or interlocutory order only if it would be permitted under the same circumstance in federal court under § 16); see also Green Tree Fin. Corp.- Ala. v. Randolph, 531 U.S. 79, 85–89, 121 S. Ct. 513, 519–21 (2000) (interpreting 9 U.S.C. § 16(a)(3) and holding ―that where, as here, the District Court has ordered the parties to proceed to arbitration, and dismissed all the claims before it, that decision is ‗final‘ within the meaning of § 16(a)(3), and therefore appealable‖); cf. CMH Homes v. Perez, 340 S.W.3d 444, 450 (Tex. 2011) (―Because the trial court did not enter a dismissal or otherwise dispose of all parties and claims, the order remains interlocutory and cannot be appealed under section 16(a)(3)).‖).
2 before the Judicial Arbiter Group, Inc. in Denver, Colorado. . . . The Federal
Arbitration Act shall govern the interpretation, enforcement, and proceedings
pursuant to this arbitration agreement.‖ Childers initialed each condition.
Unable to resolve a dispute about sales tax under the agreement, Texas
Echo sued General Steel in July 2011 for breach of contract, misrepresentation,
and violation of the Texas Deceptive Trade Practices Act.3 According to one of
the trial court‘s unchallenged fact findings, Texas Echo terminated the agreement
and demanded that General Steel return the $14,000 deposit. General Steel
answered and filed a motion to compel arbitration; Texas Echo responded that
the arbitration agreement was induced or procured by fraud and is
unconscionable. After a hearing where Texas Echo submitted only the argument
of its counsel, the trial court granted General Steel‘s motion to compel arbitration
and dismissed Texas Echo‘s claims with prejudice.
In its only issue, Texas Echo argues that the trial court erred by granting
General Steel‘s motion to compel arbitration because Texas Echo successfully
established its fraud and unconscionability defenses to enforcement of the
arbitration agreement. Texas Echo also contends that the arbitration agreement
is governed by the Texas General Arbitration Act (TGAA), not the FAA.
3 Texas Echo alleged that General Steel had ―continually attempted to charge the Plaintiff sales tax on the sale of the steel building although the Plaintiff provided the Defendant with a Texas Sales and Use[] Tax Exemption Certificate.‖
3 A party seeking to compel arbitration under the FAA must establish that
there is a valid arbitration clause and that the claims in dispute fall within that
agreement‘s scope. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig.
proceeding). The party seeking to avoid arbitration then bears the burden of
proving its defenses against enforcing the otherwise valid arbitration provision.
In re AdvancePCS Health L.P., 172 S.W.3d 603, 607 (Tex. 2005) (orig.
proceeding). Although we have been unable to locate a case in which a Texas
appellate court exercised jurisdiction under civil practice and remedies code
section 51.016 to review a ―final decision with respect to an arbitration that is
subject to this title,‖ as provided in 9 U.S.C. § 16(a)(3), we will apply the abuse of
discretion standard of review. See Sidley Austin Brown & Wood, LLP v. J.A.
Green Dev. Corp., 327 S.W.3d 859, 863 (Tex. App.—Dallas 2010, no pet.)
(applying abuse of discretion standard of review to appeal under section 51.016
involving denial of motion to compel arbitration pursuant to 9 U.S.C. § 16).
The arbitration agreement specifically provides that the FAA ―shall govern
the . . . proceedings pursuant to this arbitration agreement,‖ and the underlying
agreement for the purchase of a steel building—between a Texas entity and a
Colorado entity—involves interstate commerce. We therefore reject Texas
Echo‘s argument that the arbitration agreement is not governed by the FAA. See
9 U.S.C.A. § 2 (providing that the FAA applies to a dispute that concerns a
―contract evidencing a transaction involving commerce‖); Rubiola, 334 S.W.3d at
4 223 (―The [FAA] generally governs arbitration provisions in contracts involving
interstate commerce.‖). We overrule this part of Texas Echo‘s issue.
Texas Echo argues that the arbitration agreement was procured by fraud
because, according to its argument at the hearing on the motion to compel
arbitration, ―The representative of the defendant told my client that he could
cancel the contract any time. Not to worry about the arbitration clause.‖ General
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COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH
NO. 02-12-00372-CV
TEXAS ECHO LAND AND CATTLE, APPELLANT LLP
V.
GENERAL STEEL DOMESTIC APPELLEE SALES, LLC D/B/A GENERAL STEEL CORPORATION
----------
FROM COUNTY COURT AT LAW NO. 1 OF PARKER COUNTY
MEMORANDUM OPINION1
Appellant Texas Echo Land and Cattle, LLP appeals the trial court‘s order
granting Appellee General Steel Domestic Sales, LLC d/b/a General Steel
Corporation‘s motion to compel arbitration.2 We will affirm.
1 See Tex. R. App. P. 47.4. 2 Because, as we explain later, the Federal Arbitration Act (FAA) governs the arbitration agreement at issue in this case, and because the trial court dismissed Texas Echo‘s suit upon compelling arbitration, we have jurisdiction Texas Echo is a limited partnership formed under the laws of the State of
Texas. General Steel is a Colorado entity whose principal place of business is in
Colorado. General Steel ―markets and sells pre-engineered steel buildings,
building accessories, and related services to customers throughout the United
States.‖
In June 2007, Randy Childers, on behalf of Texas Echo, executed a written
agreement with General Steel to purchase a steel building for $69,953. As part
of the purchase, Texas Echo paid General Steel a $14,000 deposit. One of the
agreement‘s ―Conditions‖ provided that ―[a]ny deposit received herein by the
Seller shall be non-refundable, held by the Seller as security for the completion of
this contract, and applied to the final balance.‖ Another condition contained an
arbitration agreement and required that ―[a]ny controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be resolved by arbitration
over this appeal under civil practice and remedies code section 51.016 and 9 U.S.C. § 16(a)(3). See 9 U.S.C.A. § 16(a)(3) (West 2009) (providing that an appeal may be taken from ―a final decision with respect to an arbitration that is subject to this title‖); Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (West Supp. 2012) (providing that in a matter subject to the FAA, an appeal may be taken from a judgment or interlocutory order only if it would be permitted under the same circumstance in federal court under § 16); see also Green Tree Fin. Corp.- Ala. v. Randolph, 531 U.S. 79, 85–89, 121 S. Ct. 513, 519–21 (2000) (interpreting 9 U.S.C. § 16(a)(3) and holding ―that where, as here, the District Court has ordered the parties to proceed to arbitration, and dismissed all the claims before it, that decision is ‗final‘ within the meaning of § 16(a)(3), and therefore appealable‖); cf. CMH Homes v. Perez, 340 S.W.3d 444, 450 (Tex. 2011) (―Because the trial court did not enter a dismissal or otherwise dispose of all parties and claims, the order remains interlocutory and cannot be appealed under section 16(a)(3)).‖).
2 before the Judicial Arbiter Group, Inc. in Denver, Colorado. . . . The Federal
Arbitration Act shall govern the interpretation, enforcement, and proceedings
pursuant to this arbitration agreement.‖ Childers initialed each condition.
Unable to resolve a dispute about sales tax under the agreement, Texas
Echo sued General Steel in July 2011 for breach of contract, misrepresentation,
and violation of the Texas Deceptive Trade Practices Act.3 According to one of
the trial court‘s unchallenged fact findings, Texas Echo terminated the agreement
and demanded that General Steel return the $14,000 deposit. General Steel
answered and filed a motion to compel arbitration; Texas Echo responded that
the arbitration agreement was induced or procured by fraud and is
unconscionable. After a hearing where Texas Echo submitted only the argument
of its counsel, the trial court granted General Steel‘s motion to compel arbitration
and dismissed Texas Echo‘s claims with prejudice.
In its only issue, Texas Echo argues that the trial court erred by granting
General Steel‘s motion to compel arbitration because Texas Echo successfully
established its fraud and unconscionability defenses to enforcement of the
arbitration agreement. Texas Echo also contends that the arbitration agreement
is governed by the Texas General Arbitration Act (TGAA), not the FAA.
3 Texas Echo alleged that General Steel had ―continually attempted to charge the Plaintiff sales tax on the sale of the steel building although the Plaintiff provided the Defendant with a Texas Sales and Use[] Tax Exemption Certificate.‖
3 A party seeking to compel arbitration under the FAA must establish that
there is a valid arbitration clause and that the claims in dispute fall within that
agreement‘s scope. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig.
proceeding). The party seeking to avoid arbitration then bears the burden of
proving its defenses against enforcing the otherwise valid arbitration provision.
In re AdvancePCS Health L.P., 172 S.W.3d 603, 607 (Tex. 2005) (orig.
proceeding). Although we have been unable to locate a case in which a Texas
appellate court exercised jurisdiction under civil practice and remedies code
section 51.016 to review a ―final decision with respect to an arbitration that is
subject to this title,‖ as provided in 9 U.S.C. § 16(a)(3), we will apply the abuse of
discretion standard of review. See Sidley Austin Brown & Wood, LLP v. J.A.
Green Dev. Corp., 327 S.W.3d 859, 863 (Tex. App.—Dallas 2010, no pet.)
(applying abuse of discretion standard of review to appeal under section 51.016
involving denial of motion to compel arbitration pursuant to 9 U.S.C. § 16).
The arbitration agreement specifically provides that the FAA ―shall govern
the . . . proceedings pursuant to this arbitration agreement,‖ and the underlying
agreement for the purchase of a steel building—between a Texas entity and a
Colorado entity—involves interstate commerce. We therefore reject Texas
Echo‘s argument that the arbitration agreement is not governed by the FAA. See
9 U.S.C.A. § 2 (providing that the FAA applies to a dispute that concerns a
―contract evidencing a transaction involving commerce‖); Rubiola, 334 S.W.3d at
4 223 (―The [FAA] generally governs arbitration provisions in contracts involving
interstate commerce.‖). We overrule this part of Texas Echo‘s issue.
Texas Echo argues that the arbitration agreement was procured by fraud
because, according to its argument at the hearing on the motion to compel
arbitration, ―The representative of the defendant told my client that he could
cancel the contract any time. Not to worry about the arbitration clause.‖ General
Steel included several of Texas Echo‘s interrogatory responses in its brief for the
hearing on the motion to compel arbitration, and the responses clarify the basis
of Texas Echo‘s fraud defense: ―The representative told me I could cancel the
contract at anytime if I was unhappy and get my deposit back.‖
―While an arbitration agreement procured by fraud is unenforceable, the
party opposing arbitration must show that the fraud relates to the arbitration
provision specifically, not to the broader contract in which it appears.‖ Forest Oil
Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008); In re Merrill Lynch Trust Co.
FSB, 235 S.W.3d 185, 190 (Tex. 2007) (orig. proceeding) (noting that a defense
relating to the parties‘ entire contract, rather than the arbitration clause alone, is a
question for the arbitrator).
Here, Texas Echo‘s fraud argument does not implicate any aspect of the
arbitration agreement. Instead, it complains about an alleged oral statement
made by a General Steel representative regarding Texas Echo‘s ability to cancel
the entire agreement. The extent to which the entire agreement may be
canceled and the details regarding when, where, and how a dispute will be
5 resolved (the arbitration agreement) are two different things. Texas Echo failed
to prove its fraud defense. We overrule this part of its issue.
Texas Echo argues that the arbitration agreement is unenforceable
because arbitration might subject it to substantial costs.4 The party seeking to
invalidate an arbitration agreement on the ground that arbitration would be
prohibitively expensive bears the burden of showing the likelihood of incurring
such costs. In re Olshan Found. Repair Co., LLC, 328 S.W.3d 883, 895 (Tex.
2010). ―Evidence of the ‗risk‘ of possible costs of arbitration is insufficient
evidence of the prohibitive cost of the arbitration forum.‖ Id. Rather, parties
―must at least provide evidence of the likely cost of their particular arbitration,
through invoices, expert testimony, reliable cost estimates, or other comparable
evidence.‖ Id.
Here, Texas Echo offered no evidence to support its contention that the
arbitration agreement is unconscionable due to excessive costs. It merely
offered argument surmising about possible costs. We also note that the
arbitration agreement provides that ―[t]he party initiating arbitration shall advance
all costs thereof,‖ and Texas Echo is not the party who initiated arbitration. We
hold that Texas Echo failed to prove its defense that the arbitration agreement is
unconscionable, and we overrule the remainder of its only issue.
4 Texas Echo argues that ―forcing [it] to travel to Colorado in order to arbitrate the claim would involve travel costs in excess of $1000.00 which would make the agreement unconscionable.‖
6 We hold that the trial court did not abuse its discretion by granting General
Steel‘s motion to compel arbitration. We affirm the trial court‘s order compelling
arbitration.
BILL MEIER JUSTICE
PANEL: LIVINGSTON, C.J.; MEIER and GABRIEL, JJ.
DELIVERED: June 20, 2013