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Trafigura Pte. Ltd. v. CNA Metals Limited

Court of Appeals of Texas, Fourteenth District

June 27, 2017

TRAFIGURA PTE. LTD., Appellant
v.
CNA METALS LIMITED, Appellee

         On Appeal from the 434th Judicial District Court Fort Bend County, Texas Trial Court Cause No. 13-DCV-210802-B

          Panel consists of Justices Boyce, Busby, and Wise.

          OPINION

          William J. Boyce Justice

         The principal issue on appeal is whether the trial court or an arbitrator determines arbitrability of the plaintiff's claims. The challenged order was signed by the trial court, which determined that the claims at issue are not arbitrable. Because an arbitration agreement existed between the parties, and because that agreement assigns arbitrability determinations to the arbitrator, we conclude the trial court erred by making the determination. Accordingly, we reverse and remand to the trial court for proceedings consistent with this opinion.

         Background

         Appellant Trafigura Pte. Ltd. contracted in January 2013 to buy 70, 000 metric tons of iron ore from appellee CNA Metals Limited (the "First Contract"). This contract included a broad-form arbitration agreement submitting all disputes to arbitration in England under the United Kingdom's arbitration rules.

         According to CNA, a smaller scrap-metal trading company called Jace Metals and Minerals, L.L.C. acted as CNA's agent in connection with the First Contract. CNA allegedly advanced funds to Jace with the expectation that Jace would use them to purchase the iron ore promised to Trafigura in the First Contract.

         Because of Jace's alleged failure to secure sufficient iron ore, CNA delivered only 40, 989.13 of the 70, 000 contracted-for metric tons of iron ore. CNA admitted in its live petition below that it breached the First Contract by delivering only a portion of the contracted-for ore, but contended that Trafigura accepted the lesser amount in late March 2013 and paid CNA $4, 302, 211.60 for the ore in April 2013. CNA alleged that, unknown to it, Jace still possessed a substantial amount of iron ore purchased with CNA funds.

         Jace allegedly approached Trafigura in June 2013 without CNA's knowledge and proposed to sell Trafigura 80, 000 additional tons of iron ore. Jace and Trafigura allegedly entered into a new contract (the "Second Contract"), and Jace allegedly sold Trafigura the iron ore in exchange for approximately $4 million. Jace is alleged to have kept this amount for itself. CNA alleged that at least a portion of the iron ore Jace sold to Trafigura under the Second Contract was purchased using funds CNA had advanced to Jace to purchase ore under the First Contract.

         CNA sued Jace and its principals in November 2013, and added Trafigura as a defendant in November 2015.[1] CNA alleged that Trafigura engaged in conversion of CNA's iron ore and engaged in a conspiracy with Jace "to fraudulent[ly] purchase, from Jace, iron ore it knew belonged to CNA."

         Trafigura moved to stay proceedings and compel arbitration pursuant to the arbitration clause in the First Contract. After hearing arguments from the parties, the trial court denied Trafigura's motion to compel arbitration on June 16, 2016. The trial court made the following findings in its order:

1. On January 22nd, 2013 Plaintiff CNA entered into a purchase contract (hereinafter referred to as the "contract") with Defendant Trafigura PTE that contained a broad form arbitration agreement.
2. That while the relationship between the parties may have begun in this contract, or bear some evidentiary relationship to this contract, that the subject matter of the causes of action do not fall within the scope of the arbitration agreement, and can be maintained without reliance/reference to the contract.

         Trafigura timely filed this interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (Vernon 2015) (in a matter subject to the Federal Arbitration Act, an appeal may be taken from an interlocutory order of a district court under the same circumstances that an appeal from a federal district court's order or decision would be permitted by 9 U.S.C. § 16); 9 U.S.C.A. § 16(a)(1)(C) (West 2009) (under FAA, appeal may be taken from order denying application to compel arbitration); In re Helix Energy Sols. Grp., Inc., 303 S.W.3d 386, 396 (Tex. App.-Houston [14th Dist.] ...


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