## COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH NO. 02 - 1 1 - 00 492 - CV

ANTHONY ALDRIDGE APPELLANT V. THRIFT FINANCIAL MAR KETING, LLC APPELLEE

---------- FROM THE 67TH DISTRICT COURT OF TARRANT COUNTY

---------- 

### OPINION

---------- I. Introduction A ppellant Anthony Aldridge appeal s from the trial court ’ s denial of hi s mot ion to compel arbitration in a suit brought against h im and others by Appellee Thrift Financial Marketing, LLC (Thrift) , a Delaware Limited Liability Company

. Aldridge , a former “M ember ” of Thrift, contends that , pursuant to an arbitration agreement contained in the formation agreement creating Thrift, he may compel arbitration of the claims asserted a gainst him by Thrift because those claims2

arise from acts he all egedl y undertook while still a M ember of Thrift. Because the Agreement excludes former M embers from the class of persons entitled to compel arbitration, we affirm the trial court’s order. II. Background Ald ridge and Sue Harvison formed Thrift in 2008 when th ey entered into the Limited Liability Company Agreement of Thrift Financial Marketing, LLC (Company Agreement). From Thrift ’ s inception through September 30, 2011, Harvison and Aldridge , who executed the Company Agreement as the “initial Members of the Co mpany,” were also Thrift’s only two Managers as well as its only two M embers

. The Company Agreement , which contains the operative provisions for management, membership rights, and other matters pertaining to the governance and operation of Thrift, also co ntains an arbitration agreement that states in relevant part as follows :

(b) In the event of the existence of a dispute or disagreement arising out of, or relating to, the formation, interpretation, performance or breach of any Transaction Documents or any amendment or other modification thereto, any Member or Members (each a “ Disputing Member ” ) may submit its basis for such dispute or disagreement in writing to the other Member or Members and such other Member or Members (the “ Responding Members ” ) shall re spond in writing to such written notice within 14 days after receiving the written notice.

. . . (c) If any dispute shall not have been resolved through the use of the procedures specified in paragraph (b) within 30 days after the initial written submissi on of the issue by a Disputing Member to the Responding Member s , then the dispute shall, unless the Disputing Member and Responding Member s otherwise agree, be submitted to3

and settled by arbitration in accordance with the Commercial Arbitration Rules of t he American Arbitration Association , now in effect, except to the extent modified herein.

. . . [Emphasis added.] The Company Agreement expressly defines “Member” as follows:

“ Member

” means any Person executing this Agreement as of t he date of this Agree ment as a M ember or hereafte r admitted to the Company as a m ember as provided in this Agreement, but such term “ exclude s any Person who has ceased to be a Member .” [Emphasis added.] As alleged in the parties’ pleadings and set forth in affidavits , Harvi son and Aldridge formed Thrift to handle leads provided to it by Cendera Funding, Inc. (Cendera), a lending company for residential mortgage loans

. Thrift’s business plan contemp lated the use of a call center owned and operated by Thr ift, to refine and so licit such leads for Cendera from raw data provided to Thrift by Cendera. According to Thrift, its call center operations allowed it to identify the most promising prospective customers seeking mortgage loans on single

- family residences , who would then be referred to Cendera loan officers. Effective September 30, 2008, shortly after Thrift had been form ed , Thrift and Cendera entered into a marketing service agreement that provided for Thrift to handle the leads and payment by Cendera for Thrift’s services and for Cendera to recruit and train loan officers to be employed by Cendera but located at Thrift’s offices. When Thrift received the leads, Thrift personnel would call the potential borrower and invite that person to speak to one of Cendera’ s loan offi cers. If the lead matured into a loan, Cendera paid Thrift.4

Aldridge , a licensed mortgage banker, became employed as a loan officer for Cendera and recruited other loan officers to be employed by Cendera and to work from Thrift’s offices. According to A ld ridge, Thrift was awa re of and consented to Aldridge’ s em ployment with Cendera , and Cendera was awa re of and consented to Aldridge’s relationship with Thrift. Thrift contends that , by late spring of 2011, profits derived from Cendera’s branch office at Thrift’s off ices had increased dramatically; Thri ft contends that Brian Collins 1 proposed a joint venture with Thri ft that promised greater profits and that Thrift and Cendera equally shared profits pursuant to that joint venture from early S ummer 2011 thr ough September 30, 2011. Aldridge contends that changes to the agreement were necessary to bring i t into compliance with new laws and regulations and that Thrift and Cendera “ could not reach a resolution ” about necessary changes “ after much effort and dis cussion

. ” Aldridge resigned as a member and manager of Thrift effective September 30, 2011, and relinquished all membership interest in Thrift

. A ldridge’s letter of resignation, addressed to Harvison, also referenced a “dissolution” of the marketing serv ices agreement between Thrift and Cendera, to which Harvison responded on the same date with a vigorous objection that Aldridge had no authority to dissolve the agreement between Thrift and Cendera.

1 Brian Collins is identified in documents contained in the clerk’s record as the Presi dent and CEO of Cendera.5

On October 6, 2011, Thrift filed this lawsuit again st Al dridge, Cendera, and Collins, 2 assert ing against Aldridge various claims for debt , liability under the Texas Theft Liability Act , and breach es of fiduciary duty and seeking damages, forfeiture of profits, and establishment of a constructive trust. Aldridg e filed a motion to compel arbitration , and Thrift filed a response. T he trial court denied Aldridge ’s motion to compel arbitration after a hearing, and this interlocutory appeal followed

. 3
III. Discussion Aldridge raises three issues. He argues genera lly in his first issue that the trial court erred when it refused to compel arbitration. He contends in his second issue that Thrift may be compelled to arbitrate pursuant to the arbitration provision in the Company Agreement even though Thrift itself is a nonsignatory to that agreement, and he asserts in his third issue that , although he is no longer a M ember of Thrift, he may nevertheless compel arbitration pursuant to the Company Agreement because Thrift’s claims arise from conduct that allegedly

occurr ed while he was still a M ember. We addres s Aldridge’s third issue first.

2 Thrift alleges that Collins knowingly participated in Aldridge ’s and Cendera’s breaches of fiducia ry duty against Thrift.

3 Ce ndera and Collins filed a motion adopting Aldridge ’s motion to compel arbitration but have not appealed the trial court’s denial of their motion.6

A. Applicable Law The parties agree that the F ederal A rbitration A ct (FAA) applies to this proceeding. See 9 U.S.C.A. §§ 1

– 16 (West 2009). Section 51.016 of the Texas Civil Pra ctice and Remedies Code permits the interlocutory appeal of an order denying a motion to compel arbitration under the FAA. T ex . C iv. P rac . & R em

. C ode A nn . § 51.016 (West Supp. 2012 ). The FAA provides, in relevant part: A written provision in .

. . a cont ract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract .

. . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of an y contract. 9 U.S.C. § 2 . “The FAA reflects the fundamental principle that arbitration is a matter of contract.” Rent

– A

– Center

, W. , Inc. v. Jackson , 130 S. Ct. 2772, 2776 (2010). Section 2 of the FAA has been described as reflecting both a “liberal fed eral policy favoring arbitration” and the “fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. Concepc ion , 131 S. Ct. 1740, 1745 (2011) ( citing Rent

– A

– Center

, 130 S. Ct. at 2776 ; Moses H. Cone Mem’l Hosp. v. Mercury Const r. Corp. , 460 U.S. 1, 24, 103 S. Ct. 927, 941 (1983) )

. “The FAA thereby places arbitration agreements on an equal footing with other contracts, and requires courts to enforce them according to their terms.” Rent

– A

– Center

, 130 S. Ct. at 2776 ( citing Bucke ye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 443, 126 S. Ct. 1204, 1207 (2006) , and Volt Info. Sci s

. , Inc. v. Bd.7

of Trs. of Leland Stanford Junior Univ. , 489 U.S. 468, 478, 109 S. Ct. 1248, 1255 (1989) )

. The Company Agreement contains a choice

- of

- la w provision that states that it is to be “governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law principles. ” Although Thrift cites a few Delaware case s in its brief, it also asserts that “Delaware and Texas law regarding arbitration do not conflict” and that “Delaware and Texas law on contract construction principles are essentially identical and do not conflict.” Aldridge relies on Federal and Texas case law, and he does not point to an y conflict between Texas and Delaware law. “ As there appears to be no conflic t of laws, ‘ there can be no harm in applying Texas law. ’” In re AdvancePCS Health
L.P. , 172 S.W.3d 603, 606 (Tex. 2005) (orig. proceeding) (per curiam) (quoting Compaq Computer Corp. v. Lapray , 135 S.W.3d 657, 672 (Tex. 2004) ) ; see also In re J.D. Edwards World Solutions Co. , 87 S.W.3d 546, 550 (Tex. 2002) (orig. proceeding) (per curiam). We thus apply Texas law. A trial court ’ s determination regarding the validity of an agreem ent to arbitrate is a question of law which we review de novo. 4 J.M. Davidson, Inc. v.

4 “Under the FAA, absent unmistakable evidence that the parties intended the contrary, it is the courts rather than arbitrators that must decide ‘gateway matters’ such as whether a valid arbitration agreement exists.” In re Weekley Homes, L.P. , 180 S.W.3d 127, 130 (Tex. 2005) (orig. proceeding) (citing Green Tree Fin. Corp. v. Bazzle , 539 U.S. 444, 452, 123 S. Ct. 2402, 2407 (2003) , and PacifiCare Health Sys., Inc. v. Book , 538 U.S. 401, 407 n.2, 123 S. Ct. 1531, 1536 n.2 (2003))

.8

Webster , 128 S.W.3d 223, 227 (Tex. 2003); see GM Oil Props

. , Inc. v. Wade, No. 01

- 08

- 00757

- CV, 2012 WL 246041, at *5 (Tex. App.―Houston [1st Dist.] Jan. 26, 2012, no pet. ) (mem. op.) ( recognizing whether an enforceable arbitration agreement exists is a question of law for court to review de novo); Schlumberger Tech . Corp. v. Baker Hughes Inc., 355 S.W.3d 791, 800 (Tex

. App.―Houston [1st Dist.] 2011, no pet.) (“When an appeal from a denial of a motion to compel arbitration turns on a legal determination . . . we apply a de novo standard.”) (citing Forest Oil Corp. v. McAllen , 268 S.W.3d 51, 55 n. 9 (Tex. 2008) )

. Under t he FAA, a party seeking to compel arbitration must satisfy a two

pronged burden of proof in that it must first demonstrate the existence of a valid agreement to arbitrate the dispute and then prove that the claims asserted are within the scope of the agree ment. In re Dillard Dep ’ t Stores, Inc. , 186 S.W.3d 514, 515 (Tex. 2006) (orig. proceeding) (per curiam) ; AdvancePCS Health L.P. , 172 S.W.3d at 605. If the party seeking arbitration carries its initial burden, the burden shifts to the opposite party to pr esent evidence of an affirmative defense. AdvancePCS Health L.P. , 172 S.W.3d at 607. An agreement to arbitrate is a contract, the relation of the parties is contractual, and the rights and liabilities of the parties are controlled by the law of
contracts

. See AT&T Mobility LLC, 131 S. Ct. at 1748

– 49, 17 52

– 53 (arbitration is a creature of contract; a person can be compelled to arbitrate a dispute only if, to the extent that, and in the manner which, he has agreed to do so ). Since9

arbitration is generally a matter of contract, the FAA r equires courts to honor parties’ expectations. 9 U.S.C.A. § 1 et seq.; AT&T Mobility LLC, 131 S. Ct. at 17 52

– 53 ; In re Bunzl USA, Inc., 155 S.W.3d 202, 209 (Tex. App.―El Paso 2004, orig. proceeding) ( “[A] p arty cannot be co mpelle d to arbitrate a dispute unless he has agreed to do so .”). When deciding whether parties agreed to arbitrate, courts should apply ordinary state law principles regarding the formation of contracts. First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S. Ct. 1920, 1924 (1995); J.M. Davidson , 128 S.W.3d at 227

– 28 ; see Weekley Homes , L.P. , 180 S.W.3d at 130 (“Generally under the FAA, state law governs whether a litigant agreed to arbitrate.”). In conducting our review, we “may not expand u pon the terms of the contract or tolerate a liberal interpretation of it by reading into it a voluntary, consensual agreement to arbitrate when one otherwise does not exist.” In re Bates , 177 S.W.3d 419, 422 (Tex. App.

— Houston [1st Dist.] 2005, orig.
proc eeding)

. “Although an arbitration agreement does not have to assume any particular form, the language of the agreement must clearly indicate the intent to arbitrate.” Id. Additionally, in resolving disputes regarding interpretation of an arbitration agr eement, we apply standard principles of contract interpretation and construction. Peacock v. Wave Tec Pools, Inc. , 107 S.W.3d 631, 63 6 (Tex. App.―Waco 2003, no pet.). The plain meaning of the contractual language should be looked to in order to ascertain the intent of the parties

. Id.10

B. Application
A ldridge contends that he has a right under the Company Agreement to compel arbitration of Thrift’s claims against him, contrary to Thrift’s argument in the trial court that, because he is no longer a membe r of Thrift, he can no longer compel arbitration. Aldridge acknowledges that he voluntarily re linquished his position and resigned as a M ember of Thrift b efore Thrift filed this lawsuit and before he filed his motion to compel arbitration. B ut he argues that his resignation does not prevent him from compelling arbitration of Thrift’s claims

now because there is no dispute that Thrift’ s claims are based on acts that allegedly occurred while Aldridge was a M ember and M anager of Thrift. Aldridge characteriz es Thrift’s argument as “nothing more than the Company Agreement is written in the present tense” and argues that nothing in the Company Agreement “prohibits or divests” a former M ember from seeking arbitration of disputes arising from or relating to acts taken by that individual while he was a Member. T he agreement to arbitra te provides that “ any Member or Members (each

a ‘ Disputing Membe r

’ ) may submit its basis for such dispute or disagreement in writing to the other Member or Members ” and that if the di spute or disagreement is not resolved “ within 30 days after the initial written submission of the issue by a Disputing Member to the Responding Member s , then the dispute shall, unless the Disputing Member and Responding Member s otherwise agree, be submitte d to and settled by arbitration .” [Emphasis added.] Although that provision is, as11

Aldridge points out, written in the present tense, we agree with Thrift that the repeated use of the term s “Member,” “Disputing Member,” and “Responding Member” demonstrat es that the agreement to arbitrate is an agreement solely regarding resolution of disputes between “Members” of Thrift. Moreover, we disagree with Aldridge’s contention that nothing in the Company Agreement prevents or divests a former M ember from seeki ng arbitration. To the contrary, and r eg ardless of whether the alleged conduct occurred or the dispute arose while a person was a M ember, the definition of the term “Member” set forth in the Company Agreement expressly “excludes any Person who has ceased to be a Member .” [Emphasis added

. ] That definition is contained in a list of defined terms in a preceding section of the contract that provides that “[w]hen used in this [Company] Agreement, the following terms shall have the respective meanings assigned t o them

. . . .” When contracting parties have set forth their own definitions of terms they employ, courts are not at liberty to disregard such definitions and substitute other meanings. AMS Const r . Co. v. K.H.K. Scaffolding Houston, Inc. , 357 S.W.3d 30, 41 (Tex. App.―Houston [1st Dist.] 2011, pet. dism’d ); Healthcare Cable Sys., Inc. v. Good Shepherd Hosp., Inc ., 180 S.W.3d 787, 791 (Tex. App.

— Tyler 2005, no pet.); Alexander v. Cooper , 843 S.W.2d 644, 646

– 47 (Tex. App.―Corpus Christi 1992, no writ); Hart v. Traders & Gen. Ins. Co. , 487 S.W.2d 415, 417

– 18 (Tex. Civ. App.―Fort Worth 1972, writ ref’d n.r.e.). R eading the arbitration provision together with the Company Agreement’s definition of “M ember,” the12

Company Agreement is specific that a person who ha s ceased to be a M ember is not a “Membe r. ” T hus, only a n existing M ember of Thrift may invoke the informal resolution and resulting arbitration prov isions against another current M ember. See Dillard Dep ’

t Stores , 186 S.W.3d at 515 (stating that the “ obje ctive intent as expressed in the agreement controls the construction of an un ambiguous contract”); Bates , 177 S.W.3d at 422 (stating that “the language of the [arbitration] agreement must clearly indicate the intent to arbitrate” ). Aldridge does not direc tly address the exclusion of former M embers from the definition of “M e mber” in the Company Agreement

. His response is that he
may nevertheless compel arbitration because “an arbitration agreement contained within a contract survives the termination or rep udiation of th e contract as a whole” and that his alleged acts occurred while he was still a M ember of Thrift. Aldridge supports his argument by citing several cases. See Ambulance Billings Sys., Inc. v. Gemini Ambulance Servs., Inc. , 103 S.W.3d 507, 512

– 14 (Tex. App.

— San Antonio 2003, no pet.); In re Koch Indus., Inc. , 49 S.W.3d 439, 445 (Tex. App.

— San Antonio 2001, orig. proceeding); Henry v. Gonzalez , 18 S.W.3d 684, 690 (Tex. App.

— San Antonio 2000, pet. dism’d by agr.); Dallas Cardiology Assocs., P.A. v. Mallick , 978 S.W.2d 209, 213 (Tex. App.

— Texarkana 1998, pet. denied); Pepe Int’l Dev. Co. v. Pub Brewing Co. , 915 S.W.2d 925, 932 (Tex. App.

— Houston [1st Dist.] 1996, no writ); Miller v. Puritan Fashions Corp. , 516 S.W.2d 234, 238 (Tex. Civ. App.

— Wac o 1 974, writ ref’d n.r.e.).13

Those cases are distinguishable for at least two reasons. First, the issue in those cases involved whether an abandonment, repudiation, or termination of the contract containing an arbitration provision rendered the arbitration p rovision unenforceable

. See Ambulance Billings Sys., Inc. , 103 S.W.3d at 510, 512

– 14 (involving whether settlement agreement of contract dispute rendered arbitration agreement no longer in effect); Koch Indus., Inc. , 49 S.W.3d at 444

– 45 (opposing parties contended arbitration provision was unenforceable because easement had been abandoned) ; Henry , 18 S.W.3d at 690 (involving issue of whether termination of attorney

- client contract also terminated arbitration clause); Dallas Cardiology , 978 S.W.2d at 213 (f inding any potential breach of contract did not render arbitration clause unenforceable) ; Pepe Int’l , 915 S.W.2d at 932 (holding cancellation of underlying contracts did not invalidate arbitration clauses). 5 Secondly, none of those cases involved provisio ns like that in the Company Agreement th at expressly excludes a former Member from the definition of “M ember[s]” who are entitled to invoke the arbitration provision. Even though an arbitration provision survives termination of the contract containing it, see Henry , 18 S.W.3d at 690, this case is unique because the

5 Moreover, the termination, repudiation, abandonment, and breach issues involved in those cases dealt with the merits of the respective parties’ claims and defenses (as opposed to termination of the arbitration clause itself), and those were held to be issues for an arbitrator rather than the court. See Ambulance Billings Sys., Inc. , 103 S.W.3d at 512

– 14; Koch Indus., Inc. , 49 S.W.3d at 4 45; Henry , 18 S.W.3d at 690; Dallas Cardiology , 978 S.W.2d at 213; Pepe Int’l , 915 S.W.2d at 932; Miller , 516 S.W.2d at 238.14

express language of the arbitration provision limits its application to disputes or disagreements between “ M embers ” and because the Compan y Agreement expressly defines “M ember” to exclude any pe rson “who has ceased to be a Member.” Considering the enforceability of the arbitration provision alone, see Koch Indus., Inc. , 49 S.W.3d at 445, Aldridge has not met his burden of presenting a valid agreement to arbitrate between himself and Thrift becau se the express language of the Company Agreement excludes former M embers from those entitled to compel arbitration and because Al dridge voluntarily resigned as a M ember of Thrift. See AdvancePCS Health L.P. , 172 S.W.3d at 607 (discussing shifting burdens under FAA); see also AT&T Mobility LLC , 131 S. Ct. at 17 52

– 53 (stating that the FAA requires courts to honor the parties’ expectations); D illard Dep ’ t Stores , 186 S.W.3d at 515 (stating that the parties ’ intent as shown by the unambiguous agreement control s); Bates , 177 S.W.3d at 422 (stating that reviewing courts may not read an agreement to arbitrate into a contract “when one otherwise does not exist” and that the contract must clearly indicate the intent to arbitrate). We hold that the trial court did n ot err by denying Aldridge’s motion to compel arbitration because Aldridge does not have the contractual right under the Company Agreement to compel arbitration of Th rift’s claims against him. W e therefore overrule Aldridge’s third issue.15

C. Aldridge’s Remaining Issues Aldridge contends in his second issue that Thrift may be compelled to arbitrate its claims even though it did not separately sign the Company Agreement. Within his second issue, Aldridge argues that Thrift’s claims in this lawsuit are s ubject to arbitration because Thrift is bound by the Company Agreement; because Thrift artfully pleaded claims actually belonging t o Harvison, the only remaining M ember of Thrift, in an attempt to avoid arbitration; because direct benefits estoppel require s a rbitration of Thrift’s claims; and because Thrift’s claims fall within the scope of the arb itration provision. Those remaining arguments, however, each assume that Aldridge has the contractual right under the Company Agreement to compel arbitration. B ecause

w e have held above that Aldridge does not have a right to compel arbitration given the express contractual language and his volu ntary resignation as a M ember, that issue is dispositive of the appeal, and it is unnecessary for us to reach Aldridge’ s first or second issue

. See Tex. R. App. P. 47.1 (“The court of appeals must hand down a written opinion that . . . addresses every issue raised and necessary to final disposition of the appeal.”)

.16 IV. Conclusion Having overruled Aldridge’s t hird issue , and finding it unnecessary to reach his general first issue or his second issue, we affirm the trial court’s order denying Aldridge’s motion to compel arbitration.

ANNE GARDNER JUSTICE
PANEL: LIVINGSTON, C.J.; GARDNER and GABRIEL, JJ.
DELIVERE D: August 2, 2012