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In re CRS Industries Inc.

Court of Appeals of Texas, First District

May 9, 2017

IN RE CRS INDUSTRIES, INC.
v.
MACDONALD SYSTEMS, INC., Appellee CRS INDUSTRIES, INC., Appellant

         Original Proceeding on Petition for Writ of Mandamus

         On Appeal from the 152nd District Court Harris County, Texas Trial Court Case No. 2016-41521

          Panel consists of Chief Justice Radack and Justices Brown and Lloyd.

          MEMORANDUM OPINION

          Harvey Brown Justice.

         CRS Industries, Inc. filed this interlocutory appeal and a petition for writ of mandamus, both of which assert that the trial court abused its discretion by denying CRS's motion to compel arbitration. We agree and reverse the order denying the motion, remand to the trial court so that it can enter an order compelling arbitration and staying this suit, and dismiss CRS's petition for writ of mandamus as moot.

         Background

         CRS manufactures air purification systems. It contractually agreed to allow MacDonald Systems, Inc. to market and sell its commercial products within a designated territory. The two subsequently became embroiled in a dispute about the sale of a residential product, and MacDonald filed this suit.

         MacDonald alleged that it designed a new air filtration system that incorporated one of CRS's products and had identified a customer for this new product, DuPure Water Filters. MacDonald further alleged that the parties agreed to compensate it for the new design by allowing it to purchase the new product from CRS and sell it to DuPure at a profit of $300 per unit. Instead, CRS fired MacDonald as its product representative, and CRS and DuPure refused to pay MacDonald for the new design. MacDonald alleged that CRS is selling or has sold the new design to a company that bought DuPure. It alleged three causes of action-promissory estoppel, quantum meruit, and breach of contract-by which it sought recovery of the $300-per-unit profit it allegedly was promised.

         CRS moved to compel arbitration of MacDonald's claims and to stay the suit pending that arbitration based on a clause in their contract requiring arbitration of all claims, disputes, and other matters arising out of or relating to the contract. MacDonald responded that the arbitration clause was inapplicable because the parties' dispute concerned a residential product rather than the commercial ones that were the subject of their contract. It did not, however, otherwise dispute the validity of the contract or its arbitration clause.

         The trial court denied CRS's motion to compel arbitration without making any fact findings or stating its reasons. By way of interlocutory appeal and a petition for writ of mandamus, CRS urges that the trial court abused its discretion.

         Jurisdiction

         CRS is a Florida company whose principal office is in that state, and MacDonald is a Texas company whose principal office is in this state. As they are located in different states, their contract's arbitration clause involves interstate commerce and is subject to the Federal Arbitration Act. 9 U.S.C. § 2; Rapid Settlements v. Green, 294 S.W.3d 701, 705 (Tex. App.-Houston [1st Dist.] 2009, no pet.). The Act's applicability, in turn, gives this court jurisdiction to hear CRS's appeal from the trial court's order denying its motion to compel arbitration. See Tex. Civ. Prac. & Rem. Code § 51.016; see also 9 U.S.C. § 16(a)(1)(B).

         Motion to Compel Arbitration

         CRS posits that MacDonald's claims in this suit relate to their contract and therefore are subject to the contract's arbitration clause. On this basis, CRS contends that the trial ...


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