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San Saba Pecan, LP v. Give and Go Prepared Foods Corp.

Court of Appeals of Texas, Fifth District, Dallas

December 6, 2019


          On Appeal from the 101st Judicial District Court Dallas County, Texas Trial Court Cause No. DC-17-13535

          Before Justices Whitehill, Schenck, and Osborne



         San Saba Pecan, LP ("San Saba") appeals the trial court's denial of its motion to compel arbitration. For the reasons discussed below, we affirm the trial court's order. Because all issues are settled in law, we issue this memorandum opinion. Tex.R.App.P. 47.4.


         San Saba is a family-owned business that grows, processes, and sells pecans with its principal operations in San Saba, Texas. Appellee Give and Go Prepared Foods Corp. ("Give & Go") is a Canadian manufacturer of bakery goods supplied to retailers. For several years, Give & Go sourced pecan halves and small pieces from San Saba without major incident. In October 2016, Give & Go issued purchase orders to San Saba for a total of 672 cases of pecan pieces to be shipped between October 2016 and February 2017. In December 2016, San Saba issued invoices, which had several conditions printed on the back, including Condition 11, which contained a provision to arbitrate certain disputes, claims or controversies as detailed below.

         San Saba shipped the ordered pecan pieces between October 2016 and February 2017, and during this time, Give & Go incorporated the pecan pieces into a variety of finished consumer products. During January 2017, Give & Go discovered weevil larvae in two lots of pecan pieces from San Saba. As a result, Give & Go put a hold on the remaining cases of pecan pieces from San Saba and disposed of all finished product in stock involving the implicated lot numbers. However, upon discovery of the issue, some of the other cases of the finished product involving the implicated lot of San Saba pecan pieces had already been distributed to Give & Go's customers. After receiving customer complaints involving pecan weevil larvae in finished product made from at least one San Saba lot number, Give & Go recalled much of its products.

         In October 2017, Give & Go filed suit against San Saba and another supplier of pecan pieces for breach of contract, money had and received, negligence, and violations of the Texas Deceptive Trade Practices Act. In response, San Saba filed a motion to transfer venue from Dallas County to San Saba County, which the trial court later denied in May 2018.

         In December 2018, San Saba filed a motion to compel arbitration pursuant to Condition 11, in which it argued that "[b]y excepting quality disputes from the Dallas, Texas location, the provision specifically allows quality dispute arbitration to occur at other locations . . . where more is known about the pecan industry." On January 10, 2019, Give & Go filed its first amended petition against San Saba, which eliminated its claim for violations of the DTPA and added claims for gross negligence, breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness, common-law fraud, fraud by nondisclosure, negligent misrepresentation, and strict liability. On January 2, 2019, the trial court conducted a hearing on the motion to compel. On January 28, 2019, the trial court signed an order denying the motion to compel without any separate findings of fact or conclusions of law. San Saba timely requested findings of fact and conclusions of law, but the trial court did not file any.


         A trial court's determinations of whether a claim falls within the scope of an arbitration agreement and whether a party waived its right to arbitrate are questions of law, which we review de novo. See Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018).

         The Federal Arbitration Act ("FAA") generally governs arbitration provisions in contracts involving interstate commerce as is the case here. See In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011). A party seeking to compel arbitration under the FAA must establish that (1) there is a valid arbitration clause, and (2) the claims in dispute fall within that agreement's scope. Id.

         In its third issue, San Saba argues the claims fall within the arbitration provision's scope.[1]In deciding questions of scope, we focus on the factual allegations and not on the legal causes of action asserted. See Henry, 551 S.W.3d at 115. In determining whether parties have agreed to arbitrate a certain matter under the FAA, we apply the contract law of the particular state that governs the agreement. See Tittle v. Enron Corp., 463 F.3d 410, 419 (5th Cir. 2006) (citations omitted). In Texas, contract terms are given their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense. See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).

         Give & Go's original and amended petitions allege San Saba supplied Give & Go with pecan pieces containing weevil larvae, such that the supplied pecan pieces were not merchantable and were unfit for human consumption in violation of the agreements between the parties. Give & Go alleges that because San Saba failed to provide pecan pieces fit for human consumption, San Saba now holds money that belongs to Give & Go in equity and good conscience. Further, Give & Go alleges San Saba failed to exercise reasonable care in the handling, processing, inspection, and packing of the pecan pieces. Give & Go alleges San Saba made misrepresentations about the quality and characteristics of the pecan pieces by representing they were selling pecan pieces that were merchantable and fit for use in finished products intended for human consumption. Give & Go also alleges San Saba failed to disclose that they were selling pecan ...

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