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Rodriguez v. Texas Leaguer Brewing Company L.L.C.

Court of Appeals of Texas, Fourteenth District

July 9, 2019


          On Appeal from the 240th District Court Fort Bend County, Texas Trial Court Cause No. 17-DCV-240581

          Panel consists of Justices Christopher, Zimmerer, and Hassan.



         Appellants, Edwin Rodriguez and Tonya Rodriguez, ("Rodriguezes") appeal the trial court's final order and judgment, which granted an application to compel arbitration and dismissed the suit. We affirm the trial court's order, except that we reverse the order to the extent that it dismisses and compels arbitration of the Rodriguezes' claim for breach of the alleged loan agreement, and remand for proceedings consistent with this opinion.


         On June 12, 2015, Texas Leaguer Brewing Company, LLC ("Texas Leaguer") was formed, with Nathan Rees as manager. Texas Leaguer's purpose is to engage in the business of owning and operating a brewery.

         On or about April 30, 2016, the Rodriguezes signed an Amended and Restated Company Agreement ("First Agreement"), under which they obtained ownership units (representing 7% ownership) in Texas Leaguer and contributed capital of $150, 000. In section 9.4 of the First Agreement, the parties agreed to arbitrate "disputes aris[ing] out of or relat[ing] to this Agreement, or the breach thereof."

         Texas Leaguer decided to seek additional funding by applying for a Small Business Administration ("SBA") loan. To assist Texas Leaguer in obtaining such a loan and to increase their ownership, the Rodriguezes signed a Second Amended and Restated Company Agreement ("Second Agreement") dated July 29, 2016. According to the Rodriguezes, the Second Agreement modified the First Agreement in two ways. First, the Second Agreement states that the Rodriguezes "agree to co-sign for an initial SBA loan in a maximum amount of $560, 000 to be taken on Company's behalf." Second, and in exchange for this promise, the Second Agreement increased the Rodriguezes' ownership to 14.5%. The Second Agreement contains the same arbitration clause (section 9.4) as the First Agreement.

         On December 22, 2016, Nathan Rees, on behalf of Texas Leaguer sent a letter to the Rodriguezes stating that Texas Leaguer was exercising its rights under section 11.3 of the Second Agreement to terminate the Rodriguezes' membership or ownership in Texas Leaguer because of the Rodriguezes' refusal to co-sign a proposed SBA Loan of up to $556, 000 (as the Rodriguezes promised to do in the Second Agreement).

         On March 29, 2017, the Rodriguezes filed suit against Texas Leaguer and Nathan Rees ("Leaguer parties"), alleging claims for securities fraud, breach of and specific performance of the First Agreement to recognize their membership in Texas Leaguer, conversion, and breach of a $20, 000 loan agreement.

         The Leaguer parties filed an application to compel arbitration. The Rodriguezes filed a response in opposition, to which the Leaguer parties filed a reply.

         On October 18, 2017, the trial court signed an order granting the Leaguer parties' application to compel arbitration on all claims and dismissing the Rodriguezes' suit without prejudice.


         I. Standard of Review

         "Generally, we review a trial court's decision to grant or deny a motion to compel arbitration under an abuse of discretion standard." Enter. Field Servs., LLC v. TOC-Rocky Mountain, Inc., 405 S.W.3d 767, 773 (Tex. App.-Houston [1st Dist.] 2013, pet. denied). Under this standard, we defer to a trial court's factual determinations if they are supported by evidence, but we review a trial court's legal determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding). "Whether an arbitration agreement is enforceable is subject to de novo review." Id.

         II. The Texas Arbitration Act

         In their application to compel arbitration, the Leaguer parties state the Second Agreement does not specify arbitration under either the Federal Arbitration Act ("FAA") or the Texas Arbitration Act ("TAA"), and the transactions do not involve interstate commerce; thus, the Texas Arbitration Act applies. The Rodriguezes did not contest this assertion either in the trial court or on appeal and, therefore, we assume this appeal is governed by the TAA. However, the issue of arbitrability is subject to a virtually identical analysis under either the FAA or the TAA.[1] When applying the TAA, Texas courts look to federal case law construing the FAA for guidance because of the similarities between the two acts. Collins v. Tex Mall, L.P., 297 S.W.3d 409, 417 (Tex. App.-Fort Worth 2009, no pet.).

         Generally, a party seeking to compel arbitration must establish that a valid arbitration agreement exists and that the claims at issue fall within the scope of that agreement. G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 524 (Tex. 2015). Unless the parties clearly and unmistakably agree to submit threshold questions of arbitrability to arbitration, these issues are to be resolved by courts. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (orig. proceeding). "The trial court conducts a summary proceeding to make the gateway determination of arbitrability." Human Biostar, Inc. v. Celltex Therapeutics Corp., 514 S.W.3d 844, 848 (Tex. App.-Houston [14th Dist.] 2017, pet. denied). "These 'gateway matters' include whether the parties agreed to arbitrate and whether a claim or dispute is encompassed in the agreement to arbitrate." Saxa Inc. v. DFD Architecture Inc., 312 S.W.3d 224, 229 n.4 (Tex. App.-Dallas 2010, pet. denied) (citing P. McGregor Enters., Inc. v. Denman Bldg. Prods., Ltd., 279 S.W.3d 717, 722 n.9 (Tex. App.- Amarillo 2007, pet. denied)). "Once the arbitration movant establishes a valid arbitration agreement that encompasses the claims at issue, a trial court has no discretion to deny the motion to compel arbitration unless the opposing party proves a defense to arbitration." Human Biostar, Inc., 514 S.W.3d at 848 (citing In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753-54 (Tex. 2001) (orig. proceeding)).

         III. Agreement ...

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