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Quality Metrics Partners, LLC v. Blasingame

Court of Appeals of Texas, Fifth District, Dallas

August 26, 2019


          On Appeal from the 101st Judicial District Court Dallas County, Texas Trial Court Cause No. DC-17-03702

          Before Justices Brown, Schenck, and Pedersen, III



         Appellants challenge the trial court's denial of their consolidated motions to compel arbitration of certain claims brought by appellees. In two issues, appellants contend that (i) the claims at issue fall within the scope of the agreement containing an arbitration provision, and (ii) three legal theories allow these appellants to compel arbitration of those claims. We reverse the trial court's order denying the motion to compel, render judgment ordering all disputes between the parties to proceed to arbitration, and remand for further proceedings consistent with this opinion.


         This appeal involves a series of contractual relationships among the parties.

         The Parties

         Appellant Quality Metrics Partners, LLC (QMP) provides marketing services, including sales and client acquisition to vendors of services and products of interest to health care providers. It owns and operates a laboratory, appellant Clearview Diagnostics, LLC (Clearview), which processes blood and urine samples. Individual appellants Brodie Flanders, Michael Morales, Michael Knall, and Anthony Kim are principals of both QMP and Clearview. In this opinion, we will refer to QMP, Clearview, Flanders, Morales, Knall, and Kim as the QMP Appellants.

         Individual appellant Christopher Peyton is the Chief Executive Officer of CKG Consulting, LLC[1] and CGK Medical Ventures, LLC. In this opinion, we will refer to CGK, CGK Medical Ventures, LLC, and Peyton as the CGK Appellants.

         Appellees Greg Blasingame and Capricia Larson are principals of DX Power Moves Consulting, LLC (DX Power) and its predecessor in interest, Gabby Consulting, LLC (Gabby). We refer to these four parties collectively as appellees.

         The Agreements

         On November 18, 2015, QMP and CGK entered into their Representative Marketing Agreement. In that agreement, CGK agreed to provide information to physicians and other health care professionals and health care organizations regarding specific services and products of Clearview. QMP subsequently assigned its interest in the Representative Marketing Agreement to Clearview itself. The new agreement was titled the Marketing Services Agreement, and it continued all obligations relevant to this appeal.

          Appellees contend that, during that same month, they entered into an oral contract with the QMP Appellants. Appellees agreed to market QMP and Clearview's services to appellees' health-care-provider clients. In return, appellees would receive 40% of QMP's and Clearview's gross collections after processing samples provided by appellees' clients.

         And the same month, appellees contend, the QMP Appellants persuaded Gabby to enter a written agreement with CGK. That agreement, titled the Distribution Agreement, likewise provided that appellees would market Clearview's services to appellees' health-care clients. Under the written agreement, appellees would receive 40% of CGK's gross collections from Clearview's processing of appellees' clients' samples. The Distribution Agreement contains an arbitration provision, which states that disputes under or relating to the agreement will be submitted to arbitration.

         Proceedings Below

         After a year of business dealings among the parties, appellees sued all appellants. They alleged breach of the Distribution Agreement by CGK. And they pleaded claims against all appellants for conversion and civil threat, violations of the Texas Theft Liability Act, unjust enrichment/restitution, civil conspiracy, constructive trust, fraud, negligent misrepresentation, tortious interference with contract, and breach of fiduciary duty. Finally, they pleaded a claim of aiding and abetting against individual appellants Morales, Knall, Flanders, and Kim.

         Appellants answered and then filed motions to compel arbitration pursuant to the Distribution Agreement's arbitration provision.

         Days later, appellees filed their First Amended Petition, which added allegations of the existence and breach of a separate oral agreement with the QMP Appellants. The amended petition also claimed that the QMP Appellants had fraudulently induced appellees to enter into that oral agreement.

         The motions to compel were heard together by the Associate Judge; she ordered arbitration of all claims against all appellants. Appellees appealed, and the trial court heard the motions de novo. The court granted the motions except as to direct claims against the QMP Appellants.

         This appeal followed.

         Non-Signatories Compelling Arbitration

         We begin with appellants' second issue, which argues that the QMP Appellants-who are not signatories to the Distribution Agreement-can nevertheless compel arbitration with appellees via any of three legal theories: third-party-beneficiary status, intertwined estoppel, and same-transaction agreements. Whether a claim involving a non-signatory must be arbitrated is a "gateway matter" for the trial court that is subject to de novo review on appeal. Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 629 (Tex. 2018).

         "Arbitration is a creature of contract between consenting parties." Id. Nevertheless, principles of contract law and agency may require a party that agreed to arbitrate disputes with one party to arbitrate with another. Id. The parties before us agree that the Federal Arbitration Act (FAA) and federal law generally govern their case. But the United States Supreme Court has directed that we look to state law to determine whether contracts are binding and enforceable under the FAA when that state law would govern issues of "validity, revocability, and enforceability of contracts generally." Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009). The Carlisle Court identified a list of state law principles that allow a contract to be enforced by or against nonparties to the contract: assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver, and estoppel. Id. at 631 (citing 21 Richard A. Lord, Williston on Contracts § 57:19, p. 183 (4th ed. 2001)). Thus, "[i]f a written arbitration provision is made enforceable against (or for the benefit of) a third party under state contract law, the [FAA's] terms are fulfilled." Id.

          The QMP Appellants' first argument is that they are intended third-party beneficiaries of the Distribution Agreement. "A third party may enforce a contract it did not sign when the parties to the contract entered the agreement with the clear and express intention of directly benefitting the third party." Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011). We determine whether the contracting parties intended to benefit a third party directly by looking to the contract's language, construed as a whole. First Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017). We are assisted in this effort by a relatively unusual example of contract drafting. The Distribution Agreement contains a clause specifically acknowledging that it intends such beneficiaries:


The Distributor is aware that CGK acts as an independent contractor for multiple Service Providers. The services that the Distributor will be providing for CGK are also intended to benefit such Service Providers. As a result, the Distributor acknowledges that the Service Providers shall be considered to be a third party beneficiary of this Agreement. Consequently, the protections and benefits to CGK under this Agreement shall also be afforded to the Service Providers.

         This clause identifies a category of parties-service providers-that are entitled to the protections and benefits of the Distribution Agreement. Certainly one of those protections or benefits is the right to compel arbitration in a dispute relating to the agreement. In re NEXT Fin. Group, Inc., 271 S.W.3d 263, 267 (Tex. 2008) (intended third-party beneficiary may compel arbitration in accordance with terms of agreement).

         The term "service providers," however, is not defined within the Distribution Agreement, and the parties disagree as to who is included within its ambit. Appellees argue that no QMP Appellant is specifically identified as a service provider, and they contend that-as between the QMP Appellants and CGK-if one is a service provider it would be CGK, who provides marketing services for those appellants. These arguments are unavailing. First, a third-party beneficiary need not be identified by name; identification of a class or category of parties is sufficient. Freeman v. Harleton Oil & Gas, Inc., 528 S.W.3d 708, 746 (Tex. App.-Texarkana 2017, pet. denied). And second, we cannot interpret the contract in a manner that would make a signatory (CGK) its own third-party beneficiary.[2]

         Appellants contend that Clearview is a service provider under the Distribution Agreement. They contend further that QMP (as Clearview's predecessor in interest) and Morales, Knall, Flanders, and Kim (as agents of QMP and Clearview) are also service providers. Our primary concern in addressing appellants' arguments is to ascertain the true intention of the parties as it is expressed in the agreement. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). To that end, we "examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of a contract so that none will be rendered meaningless." Id.

         We begin with the third-party provision itself. This section affirms that appellees were aware at the time the agreement was made "that CGK acts as an independent contractor for multiple Service Providers." The agreements between CGK on the one hand, and QMP and Clearview on the other, state specifically that their relationship is one of independent contractor. And while it is true that CGK has provided marketing services for QMP and Clearview, it is equally true that Clearview provides laboratory services to CGK's clients. Indeed, those laboratory services are the source of the revenue within all of the contractual relationships implicated in this appeal. The third-party provision declares that "[t]he services that [appellees] will be providing for CGK are also intended to benefit such Service Providers." Certainly appellees' marketing services are intended to benefit Clearview directly and QMP, its owner, indirectly. It is difficult to posit what other parties would be benefitted by appellees' efforts; appellees point out in another context that the Distribution Agreement was not exclusive, ...

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