the Sinclair Group, LTD., H. L. Sinclair and Whitney Fox v. Henri Haggblom

548 S.W.3d 40

• Court: Court of Appeals of Texas
• Decided: April 12, 2018
• Docket: 09-17-00248-CV
• Status: Published

Opinion

In The

Court of Appeals

Ninth District of Texas at Beaumont

___________________

NO. 09-17-00248-CV ___________________

THE SINCLAIR GROUP, LTD., H.L. SINCLAIR AND WHITNEY FOX, Appellants

V.

HENRI HAGGBLOM, Appellee

__________________________________________________________________

On Appeal from the 284th District Court Montgomery County, Texas Trial Cause No. 17-04-04582-CV __________________________________________________________________

OPINION

In this interlocutory appeal, The Sinclair Group, Limited, H.L. Sinclair and

Whitney Fox (collectively, Sinclair) appeal from an order denying their joint motion

to compel arbitration of their claims, which relate to their dispute with Henri

Haggblom, an individual who was employed as the manager of The Sinclair Group,

Limited (The Sinclair Group) and the Sinclair Group Texas, LLC (the LLC). See 1 Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(1) (West 2011) (authorizing

interlocutory appeals from rulings on applications to compel arbitration subject to

the Texas Arbitration Act). The claims Sinclair asked the trial court to refer to

arbitration concerned primarily whether the appraiser who was employed by the

parties to evaluate the fair market value of Haggblom’s membership interest in The

Sinclair Group followed the method of appraisal set out in the written agreements

that he had with The Sinclair Group and the LLC. The record reflects that the written

agreements relevant to Haggblom’s employment included arbitration provisions,

which required the parties to arbitrate “[a]ny and all disputes, controversies, or

claims arising out of or relating to this Agreement, including without limitation,

claims based on contract, tort, or statute[.]”

We hold the trial court erred by denying Sinclair’s motion to compel

arbitration regarding the parties’ dispute. Accordingly, we reverse the trial court’s

order and remand the cause to the trial court, with instructions ordering the parties

to resolve through arbitration their dispute over whether the appraiser followed the

method of appraisal that is required in the parties’ written agreements, which

specifically addressed the method to be used in valuing a limited partner’s

membership interest in The Sinclair Group.

2 Background

Haggblom signed a “Company Agreement” when he began employment to be

one of two managers of the LLC, which is the general partner of The Sinclair Group.

The Company Agreement includes a provision restricting the rights of a member

owning an interest in The Sinclair Group from disposing of that interest through a

method other than the one that is provided under the Company Agreement. Under

the Company Agreement, The Sinclair Group had a five-year period from the date

Haggblom signed the agreement to purchase the interest of any member with an

ownership interest in The Sinclair Group who no longer worked there. The Company

Agreement included a provision containing a formula to be used to calculate the

value of a limited partner’s interest in The Sinclair Group. The Company Agreement

required that the parties select an “accredited Business Valuator” (appraiser), and

required the appraiser to then calculate the fair market value of the limited partner’s

interest in The Sinclair Group by using a specific formula that included criteria

allowing the appraiser to consider certain matters but preventing the appraiser from

considering others. The Company Agreement includes an arbitration provision,

which provides that the parties shall arbitrate “[a]ny and all disputes, controversies,

or claims arising out of or relating to this Agreement, including without limitation,

3 Approximately eight months after signing the Company Agreement,

Haggblom signed an “Employment Agreement” with The Sinclair Group. Under the

Employment Agreement, Haggblom acquired a “5% Partnership Interest” in The

Sinclair Group. The Employment Agreement reflects that Haggblom was being

employed to manage the business of the LLC. The Employment Agreement also has

an arbitration provision that is identical to the one in the Company Agreement.

In 2015, Sinclair terminated Haggblom’s contracts. At that time, The Sinclair

Group exercised its right to purchase Haggblom’s partnership interest in The Sinclair

Group. The record that was before the trial court when it ruled on Sinclair’s motion

to compel arbitration shows that after Haggblom was terminated, the parties retained

a consulting firm to appraise “the fair market value” of Haggblom’s five percent

limited partnership interest in The Sinclair Group, as of December 31, 2015. In April

2016, the appraiser provided the parties with a draft of his appraisal on Haggblom’s

partnership interest in The Sinclair Group, which placed a fair market value on

Haggblom’s interest at an amount exceeding $1,000,000.

In June 2016, Sinclair sent the appraiser’s consulting firm a letter complaining

the appraiser had failed to follow “the agreements of Sinclair Group and Mr.

Haggblom relative to [valuing Haggblom’s interest].” Sinclair demanded that the

consulting firm “withdraw from this engagement without issuing any further draft

4 reports or opinions or any final reports or opinions.” The record does not show that

the appraiser ever finalized his April 2016 draft report or issued a final report.

In April 2017, Haggblom sued Sinclair in Montgomery County, Texas,

seeking to recover a judgment against Sinclair based on the value of his interest as

determined by the appraiser in his April 2016 draft report. In the suit, Haggblom

asked the trial court to confirm the appraiser’s determination and render a judgment

against Sinclair based on the opinion regarding the value expressed by the appraiser.

Haggblom’s petition alleges the appraiser’s opinion regarding value was final

because the Company Agreement states that the appraiser’s determination “shall be

binding upon the parties.” Haggblom also asked the trial court to declare that

Sinclair’s complaints about the appraiser’s method was not arbitrable and that the

appraiser’s “award” was final.

In May 2017, when Sinclair responded to Haggblom’s suit, it filed a motion

to compel arbitration. Additionally, Sinclair asked the trial court to stay all judicial

proceedings, pending the arbitration of its claim alleging the appraiser had not

followed the method of appraisal required by the parties’ written agreements.

Sinclair’s motion to compel arbitration alleges that the appraiser the parties selected

to appraise the value of Haggblom’s partnership interest “failed to follow the

instructions contained in the controlling agreements.” According to Sinclair, its

5 dispute regarding whether the appraiser followed the correct method when he

appraised Haggblom’s partnership interest is an arbitrable claim, given the broad

scope of the arbitration agreements in the Company Agreement and the Employment

Agreement.

In early June 2017, Haggblom filed his response to Sinclair’s motion to

compel arbitration. In his response, Haggblom argued that his written agreements

with Sinclair provide “for a separate, binding mechanism by which to determine the

value of [his] interest in the Sinclair Group[,]” and he suggested the “parties intended

and agreed to except the valuation process from arbitration.”

After conducting a non-evidentiary hearing on Sinclair’s motion, the trial

court took the case under advisement. Approximately one week later, the court

denied Sinclair’s motion. The trial court did not explain in the hearing or in its order

the basis for its ruling. Subsequently, Sinclair pursued an interlocutory appeal and

seeks an order to compel the parties to arbitrate their dispute.

Standard of Review

Under Texas law, a written agreement to arbitrate is valid and enforceable if

an arbitration agreement exists and the claims a party seeks to have arbitrated are

claims that fall within the scope of parties’ arbitration agreement. Tex. Civ. Prac. &

Rem. Code Ann. §§ 171.001, 171.021 (West 2011). “To determine whether a party’s

6 claims fall within an arbitration agreement’s scope, we focus on the complaint’s

factual allegations rather than the legal causes of action asserted.” In re FirstMerit

Bank, N.A., 52 S.W.3d 749, 754 (Tex. 2001) (orig. proceeding). Because the public

policy of the State strongly favors arbitration, a court should not deny a request to

order the parties to arbitrate when a valid agreement to arbitrate exists unless the

arbitration clause is not susceptible to being interpreted in a manner that would

require the parties to arbitrate their dispute. See Williams Indus., Inc. v. Earth Dev.

Sys. Corp., 110 S.W.3d 131, 137 (Tex. App.—Houston [1st Dist.] 2003, no pet.)

(applying the Texas Arbitration Act).

A party seeking to compel arbitration must show that “(1) there is a valid

arbitration agreement and (2) the claims raised fall within that agreement’s scope.”

Granite Re Inc. v. Jay Mills Contr. Inc, No. 02-14-00357-CV, 2015 Tex. App.

LEXIS 4182, *7 (Tex. App.—Fort Worth 2015, no. pet.) (mem. op.) (citing In re

Kellogg, Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding));

see also Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576, 581 (Tex. App.—

Houston [14th Dist.] 1999, no pet.); Tex. Civ. Prac. & Rem. Code Ann. § 171.001(a).

Once the party moving for arbitration establishes that a valid arbitration agreement

exists, the burden of showing that the dispute is one that is not arbitrable falls on the

party opposed to referring the matter to arbitration. Prudential Sec. Inc. v. Marshall,

7 909 S.W.2d 896, 900 (Tex. 1995) (orig. proceeding) (applying the Federal

Arbitration Act); McReynolds v. Elston, 222 S.W.3d 731, 740 (Tex. App.—Houston

[14th Dist.] 2007, orig. proceeding) (applying the Texas Arbitration Act). To

determine whether the dispute at issue falls within the scope of arbitration, courts

are required to focus on the facts that are alleged in the pleadings, not the legal causes

of action that have been pleaded. McReynolds, 222 S.W.3d at 740. A strong

presumption exists favoring arbitration, so courts are required to resolve doubts

regarding arbitrability in favor of referring the dispute to arbitration. Ellis v.

Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011) (per curiam).

When reviewing a trial court’s decision on a motion to compel arbitration, the

ruling is reviewed under a de novo standard. Lexington Ins. Co. v. Exxon Mobil

Corp., No. 09-16-00357-CV, 2017 Tex. App. LEXIS 3819, *11 (Tex. App.—

Beaumont 2017, no pet.) (mem. op.) (citing Tex. Petrochemicals LP v. ISP Water

Mgmt. Servs. LLC, 301 S.W.3d 879, 884 (Tex. App.—Beaumont 2009, no pet.));

McReynolds, 222 S.W.3d at 740.

Is Sinclair’s Claim Arbitrable?

In the trial court, Haggblom and Sinclair agreed the arbitration agreements

they signed were valid. Given the agreement that a valid arbitration agreement

existed, the trial court was required to resolve “any doubts as to the agreement’s

8 scope, waiver, and other issues unrelated to [the arbitration agreement’s validity] in

favor of arbitration.” Ellis, 337 S.W.3d at 862. And, where the disputed matter falls

within the scope of the matters the parties agreed to arbitrate, a “‘court has no

discretion but to compel arbitration and stay its own proceedings.’” Forest Oil Corp.

v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008) (quoting In re FirstMerit Bank, 52

S.W.3d at 753-54) (explaining the process that is required to resolve an appeal

involving a contract governed by the Texas Arbitration Act)).

With respect to the arbitration clauses in the written agreements before the

trial court in this case, both agreements required the parties to arbitrate “[a]ny and

all disputes, controversies, or claims arising out of or relating” to the Agreements.

Broad arbitration provisions, like the arbitration provisions before us in this appeal,

required the trial court to favor ordering the dispute, which concerns whether the

appraiser followed the appraisal method in the agreements, into arbitration. See

Dewey v. Wegner, 138 S.W.3d 591, 602-603 & n.20 (Tex. App.—Houston [14th

Dist.] 2004, orig. proceeding) (citing AutoNation USA Corp. v. Leroy, 105 S.W.3d

190, 196 (Tex. App.—Houston [14th Dist.] 2003, no pet.)); see also In re Jim Walter

Homes, Inc., 207 S.W.3d 888, 895 (Tex. App.—Houston [14th Dist.] 2006, orig.

proceeding).

9 In Haggblom’s case, the heart of the parties’ dispute concerns whether the

appraiser complied with the appraisal method established in the parties’ written

agreements. The written agreements specify the criteria the parties expected the

appraiser to use in appraising the value of a partner’s interest, and both Haggblom

and Sinclair, as a matter of contract law, had the right to expect the appraiser to

comply with the method the parties outlined in their agreements. Given the broad

language in the arbitration agreements, the dispute falls clearly within the scope of

the disputes the parties chose to arbitrate.

In his brief, Haggblom suggests the appraiser’s opinion was final and that it

could not be attacked for the reason Sinclair suggests. To support this argument,

Haggblom relies on a provision in the appraisal provision that states the appraiser’s

“determination of the [fair market value] . . . shall be binding upon the parties.”

While the term “binding” indicates the parties intended the process to be one that

could not be broken, that same expectation exists whenever a party enters into a legal

agreement. While the parties to contracts generally always intend their agreements

to be binding, such agreements may prove not to be binding on the parties for

numerous reasons, including when one of the parties breaches a term that is material

to the agreement.

10 In this case, the “binding” nature of the appraisal process presumed that the

appraiser would follow the appraisal method imposed on the appraisal process by

the parties’ written agreements. And, this is the matter in dispute, since Sinclair

alleges that the appraiser failed to comply with the method established by the parties

in their written agreements. Importantly, the language the parties chose to use in

their arbitration agreements also contains no language that expressly excludes this

type of dispute from the express requirement that all disputes be arbitrated.

“Generally, if the facts alleged in a claim ‘touch matters’ that are covered by,

have a ‘significant relationship’ to, are ‘inextricably enmeshed’ with, or are

‘factually intertwined’ with the contract that contains the arbitration agreement, the

claims are arbitrable.” Tex. Petrochemicals LP, 301 S.W.3d at 885 (citing In re Bath

Junkie, 246 S.W.3d 356, 366 (Tex. App.—Beaumont 2008, orig. proceeding)).

While some tension exists between the “shall be binding” language that is in the

appraisal provision and the “any and all disputes” language found in the arbitration

agreements, Texas law requires that we resolve all doubts about whether a dispute

is arbitrable in favor of requiring the parties to arbitrate their dispute. See Ellis, 337

S.W.3d at 862.

Given the scope of the arbitration agreement, whether the appraiser followed

the method called for by the parties’ written agreements is a dispute that must be

11 decided in arbitration. Depending on the arbitrator’s resolution of that dispute,

Sinclair might ask the arbitrator to require an appraisal that employs the method of

appraisal found in the parties’ written agreements. Should Haggblom prevail, he

might ask the arbitrator to accept the draft report. Regardless of the arbitrator’s

resolution of that dispute, the parties’ claims are arbitrable in light of the broad and

inclusive language that Sinclair and Haggblom used in the arbitration provisions

they chose to include in both their Employment and Company Agreements.

Conclusion

We conclude the trial court erred when it denied Sinclair’s motion to compel

arbitration. See Hoskins v. Hoskins, 497 S.W.3d 490, 494 (Tex. 2016) (noting that

Texas law favors arbitration); G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458

S.W.3d 502, 521 (Tex. 2015) (noting that both Texas and federal law recognize a

strong presumption favoring the arbitration of disputes). Considering the broad

scope of the language in the parties’ arbitration agreements, we conclude that the

dispute over whether the appraiser failed to follow the appraisal method established

by the parties in their written agreements is an arbitrable issue.

We reverse the trial court’s order denying Sinclair’s motion to compel

arbitration, and we remand the cause to the trial court with instructions to render an

order compelling Sinclair and Haggblom to arbitration to resolve their dispute about

12 whether the appraiser failed to follow the appraisal method that the parties created

under their written agreements.

REVERSED AND REMANDED.

_________________________ HOLLIS HORTON Justice

Submitted on December 20, 2017 Opinion Delivered April 12, 2018

Before Kreger, Horton and Johnson, JJ.