Court of Appeals of Texas, Fifth District, Dallas
Appeal from the 366th Judicial District Court Collin County,
Texas Trial Court Cause No. 366-05277-2017
Justice Whitehill, Molberg, and Reichek
case concerns the scope of a "relating to"
arbitration clause in a partnership agreement where the
underlying dispute is laser-focused on the parties'
partnership duties. Steve Gray and Happy Accidents, Inc.
(together, Accidents unless context shows otherwise) appeal
the trial court's interlocutory order partially denying
their motion to compel arbitration under the Federal
Arbitration Act. In a single issue, Accidents argues
that the trial court erroneously concluded that some of Bryan
Ward's claims fall outside the scope of the parties'
linchpin here is the correlation between the partnership
buy-out dispute and Ward's claims that he was wrongfully
terminated because of the dispute and defamed concerning the
conditions upon which his partnership employment terminated.
conclude the trial court erred because Ward's claims have
a significant relationship to and are inextricably enmeshed
and factually intertwined with the limited partnership
agreement (the LP Agreement) containing the broad arbitration
clause. We thus reverse the trial court's order and
render judgment that all of Ward's claims are compelled
2012, Gray, Ward, and Ken Burge started Primal Health LP (the
Partnership), which sells herbal and vitamin supplements
online. Burge later departed, and the Partnership purchased
his interest leaving Gray and Ward as the only remaining
limited partners and Happy Accidents as the general partner.
the Partnership's majority owner and Happy Accidents'
Neither Gray nor Ward have an employment agreement with
Primal. But the parties signed the LP Agreement which
provides in Section 13.2 that:
All disputes and claims relating to this Agreement, the
rights and obligations of the parties hereto, or any claims
or causes of action relating to the performance of either
party that have not been settled through mediation will be
settled by arbitration by the American Arbitration
Association in either Boca Raton, Florida or Arizona in
accordance with the Federal Arbitration Act and the
Commercial Arbitration Rules of the American Arbitration
Association. The costs of the arbitration proceedings will be
borne by the losing party if such party is found to have been
in material breach of its obligations hereunder. . . .
point, Ward approached Gray and Accidents about his desire to
leave the Partnership and asked Gray to buy out his interest.
A dispute arose concerning the valuation of Ward's
Ward filed this suit asserting breach of contract, breach of
fiduciary duty, wrongful discharge, and defamation claims.
Ward's ten-page, fifty-eight paragraph, and four count
petition describes in detail that Ward and Gray initiated
discussions for Gray to buy out Ward's partnership
interest and how Gray (i) allegedly manipulated the
partnership interest appraisal process to drive down the
price of Ward's interest, (ii) forced Ward to
involuntarily resign, (iii) used the forced resignation
"as a tactic to preclude the Partnership's
obligation to repurchase Ward's interest under the
Partnership Agreement . . .," (iv) refused to complete
the buy-out, and (v) refused to make partnership
distributions to Ward.
count in Ward's petition begins by stating that,
"Plaintiff [Ward] incorporates the preceding paragraphs
as if fully reproduced herein." Ward's first two
counts are his fiduciary breach and partnership claims. Thus,
his succeeding wrongful termination and defamation counts
incorporate as if fully reproduced therein all of the
preceding (i) factual allegations regarding partnership
agreement disputes, valuation manipulations, and forced
resignations and (ii) the resulting fiduciary breach
moved to compel arbitration according to the LP
Agreement's arbitration clause. The court initially
ordered that all of Ward's claims would be arbitrated.
But following Ward's motion for reconsideration, the
trial court ordered that Ward's breach of fiduciary duty
and breach of contract claims were subject to arbitration
while the wrongful discharge and defamation claims were not.
This appeal followed.
Analysis A. Standard of Review
review a trial court's ruling on a motion to compel
arbitration under an abuse of discretion standard. See
Henry v. Cash Biz, L.P., 551 S.W.3d 111, 115 (Tex.
2018). Under that standard, we defer to the trial court's
factual determinations when they are supported by evidence,
but review de novo the trial court's legal
determinations. VSR Fin. Servs., Inc. v. McLendon,
409 S.W.3d 817, 827 (Tex. App.-Dallas 2013, no pet.). Whether
disputed claims fall within the scope of a valid arbitration
agreement is a question of law that we review de novo.
Henry, 551 S.W.3d at 115.
a party seeking to compel arbitration under the FAA must
establish that (i) there is a valid agreement to arbitrate
and (ii) the claims raised fall within the agreement's
scope. See id.
there is a strong presumption favoring arbitration, the
presumption arises only after the party seeking to compel
establishes the existence of a valid arbitration agreement.
JM Davidson, Inc. v. Webster, 128 S.W.3d 223, 227
(Tex. 2003). Any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration. See In
re Serv. Corp. Int"l., 85 S.W.3d 171, 174 (Tex.
2002) (citing Moses H. Cone Mem'l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25 (1983)).
"[e]ven the exceptionally strong policy favoring
arbitration cannot justify requiring litigants to forego a
judicial remedy when they have not agreed to do so."
Carr v. Main Carr Dev., LLC, 337 S.W.3d 489, 496
(Tex. App.-Dallas 2011, pet. denied).
the parties agree that there is a valid agreement to
arbitrate, and the issue is whether Ward's claims all
fall within its scope. Because the arbitration
agreement's validity is undisputed, we begin with a