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Emery v. Hilltop Securities, Inc.

Court of Appeals of Texas, Fifth District, Dallas

August 26, 2019

ROCKY V. EMERY, Appellant

          On Appeal from the 193rd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-18-03103

          Before Justices Schenck, Osborne, and Reichek



         Appellant Rocky V. Emery appeals the trial court's orders (1) denying his motion to compel arbitration, and (2) granting appellee Hilltop Securities, Inc.'s application for temporary injunction. For the reasons that follow, we reverse the trial court's injunction order. We remand the case to the trial court with an instruction to order the parties to arbitrate Hilltop's claims in this lawsuit in the proceeding pending before the Financial Industry National Regulatory Authority ("FINRA"), and for other proceedings consistent with this opinion.


         On June 17, 2016, Hilltop and Emery entered into an employment agreement under which Emery was employed as an Investment Executive with Hilltop. On the same date, Emery signed a promissory note in the principal amount of $350, 000 to Hilltop. The promissory note included the following provision:

This Note shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America. This Note is performable in Dallas County, Texas. Any action or proceeding under or in connection with this Note against Employee or any other party ever liable for payment of any sums of money payable on this Note may be brought in any state or federal court in Dallas County, Texas. Employee and each such other party hereby irrevocably (i) submits to the nonexclusive jurisdiction of such courts, and (ii) waives any objection he may now or hereafter have as to the venue of any such action or proceeding brought in such court or that such court is an inconvenient forum.

         Neither the promissory note nor the employment agreement included an arbitration provision or made any reference to arbitration of disputes.

         In March 2018, Hilltop filed this suit against Emery for the unpaid principal balance due on the note. Hilltop also pleaded a claim for monthly advances it paid Emery against commissions that Emery had not yet earned.

         Emery responded by filing a motion to compel arbitration. He explained that on March 30, 2018, after this suit was filed, he filed a FINRA arbitration against Hilltop for claims relating to his employment by Hilltop, and that arbitration proceeding was now pending. In his motion to compel, Emery alleged:

• Hilltop is a member of FINRA and he is a registered broker and investment adviser "last registered with and employed by" Hilltop;
• He and Hilltop were obligated by FINRA's rules to arbitrate Hilltop's claim on the promissory note;
• FINRA Rule 13200 "provides in part, '. . . a dispute must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person and is between or among: Members; Members and Associated Persons; or Associated Persons";
• Hilltop induced him to accept employment by promising it could "support" Emery's business using a "fee for advice" model;
• "As part of its attempt to induce [Emery], [Hilltop] presented Emery with the very promissory note in the amount of $350, 000 (the "Note"), which is the subject of this lawsuit"; and
• He accepted Hilltop's offer of employment and signed the promissory note based on Hilltop's representations, but he was forced to leave Hilltop's employ when Hilltop "made no progress" implementing and supporting Emery's model.

         Emery attached his employment agreement with Hilltop to his motion. The agreement does not contain an arbitration clause. It provides only that "[t]he validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of Texas." Emery did not include a copy of Rule 13200 or any evidence supporting his argument that the rule bound Hilltop to arbitrate its claim on the promissory note.

         Hilltop opposed Emery's motion, responding that "[w]hatever issues Defendant raises as to his employment with Plaintiff clearly are outside the terms of the Promissory Note." Hilltop concluded, "[i]t is [Hilltop's] assertion that the claims in the FINRA arbitration are trumped by the prior pending case in this Court in Dallas, Texas."

         After a hearing, the trial court denied Emery's motion by written order dated May 21, 2018. There is no reporter's record of this hearing or any indication that any witness testified or that any documents were offered or admitted into evidence.[1] Consequently, there is nothing in the record to show that Emery proffered to the trial court the FINRA rule under which he contended Hilltop was required to arbitrate. The trial court had before it only the note-the sole basis for Hilltop's claim-that did not contain an arbitration provision.

         On July 18, 2018, Hilltop filed an application for temporary injunction pursuant to section 65.011(2) of the civil practice and remedies code. Hilltop alleged that on March 30, 2018, Emery "filed a Statement of Claim in an attempt to initiate an arbitration proceeding with FINRA," and was proceeding with arbitration "in spite of the trial court's order on May 21, 2018" denying Emery's motion to compel arbitration. Hilltop also recited that Emery had filed an interlocutory appeal of the trial court's order. Hilltop argued:

4. This Court should grant a temporary injunction to preserve this Court's jurisdiction and to avoid unnecessary expenses. It is clear that this Court has jurisdiction and that all claims of Defendant are mandatory counterclaims; however, should this Court refuse to grant this injunction, Plaintiff shall be forced to participate in FINRA initially to pay in excess of $2, 500 to properly do the research to select arbitrators and then to move forward with the arbitration.
5. Further, if both proceedings are permitted to proceed at the same time, Plaintiff is in danger of inconsistent outcomes being reached by different tribunals regarding ...

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