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Dargahi v. Handa

Court of Appeals of Texas, Third District, Austin

November 8, 2017

Pejman Dargahi; Kamran Dargahi; and Yekk Construction Services, LLC d/b/a Lakeway Custom Homes and Renovation, Appellants
v.
Dhiraj Handa and Ritu Handa, Appellees

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT NO. D-1-GN-16-001279, HONORABLE AMY CLARK MEACHUM, JUDGE PRESIDING

          Before Justices Puryear, Field, and Bourland

          MEMORANDUM OPINION

          David Puryear, Justice

         In this interlocutory appeal we must determine whether the trial court properly denied a motion to compel arbitration. See Tex. Civ. Prac. & Rem. Code § 171.098 (providing for interlocutory appeal of orders denying motions to compel arbitration). In their motion, appellants Pejman Dargahi, Kamran Dargahi, and Yekk Construction Services, LLC d/b/a Lakeway Custom Homes and Renovation (Yekk) cited an arbitration clause that appears in a construction contract between Yekk and appellees Dhiraj Handa and Ritu Handa (the Handas) and contended that the clause covers all of the claims asserted by the Handas in their lawsuit against appellants. In their response to appellants' motion to compel, the Handas asserted that appellants Pejman and Kamran[1]may not enforce the arbitration agreement because they are not parties to it and that all appellants waived their right to enforce the clause by engaging in litigation. We will reverse the trial court's order denying appellants' motion to compel arbitration and render judgment granting the motion and staying the proceedings.

         BACKGROUND

         The record shows that the Handas entered into a contract with appellant Lakeway Custom Homes and Renovation (Yekk's d/b/a) for the construction of a house on appellees' real property. The contract price was $1.46 million. After a dispute arose over payments and the parties attempted mediation, the Handas filed a lawsuit against Yekk, Pejman, and Kamran. Their lawsuit alleged that Pejman, who signed the contract on behalf of Yekk, represented to them that he and his brother, Kamran, were "partners" in the construction company.

         The Handas' petition further alleged that after they had paid appellants about 95% of the contract price, appellants demanded further payments exceeding the contract price and ceased further work on the house when the Handas refused to pay the additional amount. The lawsuit alleged that appellants failed to pay subcontractors despite falsely representing that they had been paid, fraudulently diverted trust-fund payments made by the Handas to appellants' own use, and negligently performed the construction work. Their lawsuit sought damages for claims of breach of contract, breach of fiduciary duty, fraud, unjust enrichment, money had and received, theft, negligence, and violations of the DTPA.

         Several months after answering the Handas' lawsuit and after some discovery had been conducted, which will be outlined in more detail below, appellants filed a motion to compel arbitration and stay the proceedings, citing the following clause in the parties' contract:

If a dispute arises between Lakeway Custom Homes and Renovation and [the Handas], which cannot be resolved in good faith through informal discussions, the parties agree to submit the dispute to mediation before resorting to any litigation other than a suit to seek injunctive relief. If mediation is required, the parties shall jointly agree upon a mediator acceptable to both parties. If a dispute cannot be resolved through mediation, both parties agree to submit the dispute to binding arbitration supervised by the American Arbitration Association (AAA) . . . .

         In response to the motion to compel, the Handas argued that (a) all three appellants-Yekk, Pejman, and Kamran-waived arbitration by "substantially invoking the judicial process" and (b) Pejman and Kamran were not parties to the arbitration agreement and, therefore, had no right to compel arbitration. After a hearing, the trial court denied the motion to compel, which decision we review on appeal.

         DISCUSSION

         In a single issue, appellants contend that the trial court erred in denying their motion to compel arbitration and abate further trial-court proceedings because (a) the Handas' claims fall within the broad scope of the parties' arbitration agreement, which covers not only Yekk but also its agents and representatives, Pejman and Kamran; and (b) appellants did not waive their right to enforce the agreement. We review a trial court's denial of a motion to compel arbitration for abuse of discretion, deferring to the trial court's factual determinations if supported by the evidence, and reviewing the court's legal determinations de novo. SEB, Inc. v. Campbell, No. 03-10-00375-CV, 2011 WL 749292, at *2 (Tex. App.-Austin Mar. 2, 2011, no pet.) (mem. op.) (citing Trammell v. Galaxy Ranch Sch., L.P., 246 S.W.3d 815, 820 (Tex. App.-Dallas 2008, no pet.)). Whether the parties agreed to be bound to an arbitration agreement is a contract-formation question that we review de novo. Oak Crest Manor Nursing Home, LLC v. Barba, No. 03-16-00514-CV, 2016 WL 7046844, at *2 (Tex. App.-Austin Dec. 1, 2016, no pet.) (mem. op.).

         A party seeking to compel arbitration must establish the existence of a valid, enforceable arbitration agreement and that the asserted claims fall within the agreement's scope. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999), abrogated in part on other grounds by In re Halliburton, 80 S.W.3d 566 (Tex. 2002). Once the existence of an arbitration agreement has been established, a presumption attaches favoring arbitration. SEB, 2011 WL 749292, at *2. The burden then shifts to the opposing party to present evidence that the agreement was procured in an unconscionable manner or induced or procured by fraud or duress; that the other party has waived its right to compel arbitration; or that the dispute falls outside the scope of the agreement. In re Oakwood Mobile Homes, 987 S.W.2d at 573. In determining whether the original claims fall within the scope of the arbitration agreement, we focus on the factual allegations of the complaint, rather than the legal causes of action asserted. In re FirstMerit Bank, 52 S.W.3d 749, 754 (Tex. 2001). We consider whether the facts alleged are intertwined with the contract containing the arbitration clause. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271 (Tex. 1992). To be within the scope of an arbitration provision, the allegations need only be factually intertwined with arbitrable claims or otherwise touch upon the subject matter of the agreement containing the arbitration provision. In re BP Am. Prod. Co., 97 S.W.3d 366, 370 (Tex. App.-Houston [14th Dist.] 2003, orig. proceeding). Furthermore, Texas law favors the joint resolution of multiple claims to prevent multiple determinations of the same matter. Jack B. Anglin, 842 S.W.2d at 271.

          The Handas did not argue to the trial court that the dispute between the parties does not fall within the broad scope of the arbitration provision or that the provision is not enforceable generally. Rather, they argued that the individual defendants-Pejman and Kamran-may not compel arbitration because they are not parties to the agreement to arbitrate (i.e., only Yekk is) and that, in any event, all of the defendants waived their rights to enforce the provision by "substantially invoking the judicial ...


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