IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 15-20375

RAINIER DSC 1, L.L.C.; RAINIER DSC 2, L.L.C.; RAINIER DSC 3, L.L.C.; 

RAINIER DSC 4, L.L.C.; RAINIER DSC 5, L.L.C.; RAINIER DSC 6, L.L.C.; 

RAINIER DSC 7, L.L.C.; RAINIER DSC 8, L.L.C.; RAINIER DSC 9, L.L.C.; 

RAINIER DSC 11, L.L.C.; RAINIER DSC 13, L.L.C.; RAINIER DSC 14, 

L.L.C.; RAINIER DSC 15, L.L.C.; RAINIER DSC 16, L.L.C.; RAINIER DSC 

18, L.L.C., 

 Plaintiffs – Appellants,

v.

RAINIER CAPITAL MANAGEMENT, L.P.; RAINIER DSC ACQUISITION, 

L.L.C.; RAINIER PROPERTIES, L.P.; RAINIER PROPERTIES G.P., L.L.C.; 

FOUNDATION SURGERY AFFILIATE; FOUNDATION SURGERY 

AFFILIATE OF SOUTHWEST HOUSTON, L.L.P.; FOUNDATION 

SURGERY AFFILIATE OF SOUTHWEST HOUSTON, L.L.C.; WAYNE 

ALANI, M.D.; EDDIE MATSE, M.D.; CHARLOTTE ALEXANDER, M.D.; 

THOMAS PARR, M.D.; CARL HICKS, M.D.; VINCENT PHAN, M.D.; 

GREGORY HOOVER, M.D.; TIMOTHY SITTER, M.D.; LIN JONES, M.D.; 

EDWIN TAEGEL, M.D.; STAN JONES, M.D.; RAY VALDEZ, M.D.; 

EUGENE LOU, M.D.; JAMES ALBRIGHT, M.D.; MARVIN LERNER, M.D.; 

EUGENE ALFORD, M.D.; JAMES MARTIN, M.D.; PAUL BRINDLEY, M.D.; 

J. CARY MOOREHEAD, M.D.; GARY CARD, M.D.; BRADFORD PATT, 

M.D.; NEWTON DUNCAN, M.D.; STANFORD SHOSS, M.D.; JOSEPH 

EDMONDS, M.D.; JOHN YOO, M.D.; JOHN JONES, M.D.; MARVIN 

CHANG, M.D.; JAMES LAI, M.D.; ROBERT SICKLER, M.D., 

 Defendants – Appellees.

United States Court of Appeals

Fifth Circuit

FILED

July 7, 2016

Lyle W. Cayce

Clerk

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Appeal from the United States District Court

for the Southern District of Texas

Before KING, JOLLY, and ELROD, Circuit Judges.

PER CURIAM:

In one of several appeals arising from an ill-fated real estate investment, 

Plaintiffs appeal the district court’s judgments in favor of the non-arbitrating 

defendants.1 Because Plaintiffs have not shown that the district court erred

in declining to stay the litigation pending the arbitration of some parties, and

the district court properly granted summary judgment, we AFFIRM.

I.

The real estate transactions underlying this appeal have already been 

described in greater depth in Rainier DSC 1, L.L.C. v. Rainier Capital 

Management, L.P., 546 F. App’x 491, 492–93 (5th Cir. 2013) (“Rainier I”). In 

brief, Foundation Surgery Affiliate of Southwest Houston, LLC (“Southwest”), 

the owner of a surgical and imaging facility in Houston, entered into a 

purchase and sale agreement in 2008 with Rainier Capital Acquisitions, LP, 

which in turn assigned its interest to Rainier DSC Acquisitions, LLC (“Rainier 

DSC”). Rainier DSC marketed tenant-in-common interests in the property 

through a Private Placement Memorandum (the “PPM”), which described 

Southwest as the seller and sole tenant and explained that Rainier Properties, 

LP would manage the property and the twenty-nine physician members of 

Southwest would provide medical services there.

Rainier DSC purchased the property and sold fractional tenant-incommon interests to Plaintiffs (the “Investors”), who each signed an agreement

 

1 In Appeal No. 15-20383, which is also before this panel, Plaintiffs separately appeal 

the judgment confirming the arbitration award in favor of the arbitrating defendants.

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with Rainier DSC that included an arbitration agreement. Two years later, in 

late 2010, Southwest stopped making full rent payments, and thereafter 

stopped paying rent altogether and vacated the property.

In May 2012, the Investors sued Southwest, several Rainier entities, and 

the twenty-nine individual physicians, among others. The original petition, 

filed in state court, alleged various state law claims including fraud and breach 

of contract, in addition to violations of federal securities law. After the case 

was removed, the Rainier defendants moved to compel arbitration. At the 

pretrial status conference, before the Investors had responded to the motion to 

compel arbitration, the trial court dismissed the claims against Foundation 

Surgery Affiliate of Southwest Houston, LLP, which no longer existed, and 

against Foundation Surgery Affiliate, LLC, which the Investors had sued 

because they thought it might be related to Southwest.

The Investors subsequently filed their response to the motion to compel 

arbitration, in which they “agree[d] to arbitrate this matter with the Rainier 

Defendants, upon the express condition that all Rainier Defendants stipulate 

to participate and be treated as one.” The Investors’ response also stated that 

9 U.S.C. § 2 requires the district court to stay its proceedings when an issue 

therein is referable to arbitration.

In August 2012, following the filing of an amended complaint and 

numerous motions, the district court held a second status conference. The 

district court then ordered the Investors and the principal Rainier parties to 

arbitration.2 The district court also dismissed with prejudice the Investors’ 

claims against Foundation Surgery Affiliate, LLC and Rainier Properties GP, 

LLC, denied the Investors’ motion to reconsider its earlier dismissals, and 

 

2 The arbitrator issued his award in favor of Rainier in March 2015. The district court 

severed the arbitrated claims and affirmed the award. That judgment is the subject of Appeal 

No. 15-20383.

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converted the physicians’ motions to dismiss into motions for summary 

judgment.

The Investors appealed, arguing that the district court’s orders after the 

motion to compel arbitration should be vacated because the district court erred 

by not staying the proceedings. In November 2013, we dismissed the appeal 

for lack of jurisdiction because the district court had not entered an order 

refusing a stay. Rainier I, 546 F. App’x 491.

Meanwhile, in August 2013, the district court issued an opinion granting 

summary judgment in favor of the physicians and five “Foundation Surgery 

Affiliate” entities (collectively, “FSA”).

The Investors appeal the adverse judgments. The Investors argue that: 

(1) all orders issued by the district court after the motion to compel arbitration 

should be vacated because the district court was required to stay the case; (2) 

the district court erred in granting summary judgment in favor of FSA and the 

physicians; and (3) the case should be reassigned on remand.

II.

As an initial matter, Rainier challenges our jurisdiction, arguing that 

“[t]here has been no denial of a stay or appealable order in this case, and as 

this Court has already determined, this Court therefore lacks jurisdiction to 

consider the Investors’ appeal.” This argument is meritless. In Rainier I, we 

held that we lacked interlocutory jurisdiction because no order denying a stay 

had been entered, 546 F. App’x at 492, but the Investors now appeal from 

multiple final judgments, and our jurisdiction is therefore not in doubt. See id.

at 495 n.8 (“We note that nothing precludes the Plaintiffs from appealing the 

district court’s dismissal of FSA, Rainier Capital Manager, LLC, and Rainier 

GP after a final judgment is entered.”).

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III.

A.

The Investors first argue that once presented with the motion to compel 

arbitration, the district court was required to restrict its judicial scrutiny to 

the issue of arbitrability, and that the district court was required to stay the 

case once it determined that an issue was referable to arbitration.

We review a district court’s denial of a motion to stay litigation pending 

arbitration de novo, using the same standard as the district court.3 Waste 

Mgmt., Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 

341 (5th Cir. 2004). Section 3 of the FAA provides:

If any suit or proceeding be brought in any of the courts of the 

United States upon any issue referable to arbitration under an 

agreement in writing for such arbitration, the court in which such 

suit is pending, upon being satisfied that the issue involved in such 

suit or proceeding is referable to arbitration under such an 

agreement, shall on application of one of the parties stay the trial 

of the action until such arbitration has been had in accordance 

with the terms of the agreement, providing the applicant for the 

stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3. “In general, Section 3 only applies to parties to an agreement 

containing an arbitration clause.” Hill v. G E Power Sys., Inc., 282 F.3d 343, 

346 (5th Cir. 2002). We have applied it to non-signatories only where: (1) the 

arbitrated and litigated disputes involve the same operative facts; (2) the 

claims asserted in the arbitration and litigation are “inherently inseparable”; 

and (3) the litigation has a “critical impact” on the arbitration. Waste Mgmt., 

372 F.3d at 343; see also Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 

 

3 The parties dispute whether the Investors ever applied for a stay. We assume 

without deciding that the Investors’ statement that the FAA required a stay, combined with 

their request for “a stay of all proceedings until the Arbitration is complete,” sufficiently 

constitutes an “application” for a stay under 9 U.S.C. § 3 despite the absence of a separate 

motion.

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460 U.S. 1, 20 n.23 (1983) (“In some cases, . . . it may be advisable to stay 

litigation among the non-arbitrating parties pending the outcome of the 

arbitration. That decision is one left to the district court . . . as a matter of its 

discretion to control its docket.”).

It is undisputed that the only signatories to arbitration agreements with 

the Investors were some of the Rainier parties, and they proceeded to 

arbitration. A stay of the other parties’ litigation was therefore subject to the 

district court’s discretion and was only warranted if: (1) the arbitrated and 

litigated disputes involved the same operative facts; (2) the claims asserted in 

the arbitration and litigation were “inherently inseparable”; and (3) the 

litigation had a “critical impact” on the arbitration. Waste Mgmt., 372 F.3d at 

343. The district court concluded that a stay “was not required because the 

claims are wholly distinct,” explaining that although the claims against 

Southwest and the other defendants arose out of the same transaction, “they 

relate to different parts of it. Those against the promoters are securities claims 

premised on fraud, while those against the tenant were for breach of the lease. 

These are not inherently inseparable.”

The Investors in their initial brief conclusorily and incorrectly argued 

that “the district court must stay its own proceedings when any issues therein 

are referable to Arbitration.” The brief utterly failed to address the distinction 

between signatories and non-signatories, to discuss the three Waste 

Management factors, or to argue that the district court had abused its 

discretion. In their reply brief, the Investors argue that § 3 applies to nonsignatories and that the Waste Management factors are satisfied, but this 

comes too late and is not properly before the court. See, e.g., Jones v. Cain, 600 

F.3d 527, 541 (5th Cir. 2010) (“Arguments raised for the first time in a reply 

brief are generally waived.”). Accordingly, the Investors have not 

demonstrated that the district court erred in declining to stay the litigation.

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B.

The Investors also argue that the district court erred in granting 

summary judgment in favor of FSA and the physicians because genuine issues 

of material fact exist as to the Investors’ partnership by estoppel claims. We 

review a district court’s summary judgment de novo, applying the same 

standard as did the district court. United States v. Lawrence, 276 F.3d 193, 

195 (5th Cir. 2001). Summary judgment is proper when, viewing the facts in 

the light most favorable to the non-movant, no issue of material fact exists and 

the moving party is entitled to judgment as a matter of law. Id.

The Investors’ claims against FSA and the physicians are premised on 

statements in the PPM that described FSA and the physicians as “partners” of 

Southwest. The Investors seek to hold FSA and the physicians individually 

and jointly liable for the lease payments owed by Southwest, arguing that 

these statements created a partnership by estoppel.

“Partnership by estoppel consists of two elements: (1) a representation 

that the one sought to be bound is a partner; and (2) the one to whom the 

representation is made must rely on the representation.” CCR, Inc. v. 

Chamberlain, No. 13-97-312-CV, 2000 WL 35721225, at *10 (Tex. App.—

Corpus Christi, June 1, 2000, pet. denied) (not designated for publication). 

“The representation may be made . . . by others, provided the alleged partner 

knowingly allows others to make the representation and fails to correct them.” 

Id. (emphasis added); see also Storms v. Tuck, 579 S.W.2d 447, 452 (Tex. 1979) 

(“The principle of estoppel by silence arises where a person is under a duty to 

another to speak, but refrains from doing so and thereby leads the other to act 

in reliance on a mistaken understanding of the facts. The duty to speak does 

not arise until the silent party is himself aware of the facts.”) (citation omitted).

The district court correctly granted summary judgment. The Investors’ 

partnership by estoppel argument relies entirely on statements made by 

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parties other than the physicians and FSA, most significantly in the PPM. 

Even assuming, arguendo, that the statements could be reasonably construed 

as a representation of partnership, which is highly doubtful, there is no 

evidence that the physicians and FSA were aware of or consented to these 

statements. The Investors argue that they have raised a fact issue because it 

is “inconceivable” that the physicians and FSA had no knowledge of the 

representations that were being made about them in light of the fact that they 

received a share of the sales proceeds in 2008. This is pure conjecture and not 

evidence to raise a genuine issue of material fact. Accordingly, we affirm the 

summary judgment in favor of FSA and the physicians.4

IV.

Because the Investors have not established that the district court erred

in not staying the litigation of the non-arbitrating parties during the 

arbitration or in granting summary judgment in favor of FSA and the 

physicians, we AFFIRM.

 

4 In light of our affirmance, we do not reach the Investors’ argument that the case 

should be reassigned on remand.

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