## IN THE SUPREME COURT OF TEXAS

══════════ No. 17-0062

══════════ 

### J ODY 

### J AMES 

### F ARMS 

### , JV, P ETITIONER

V
. 

### T HE 

### A LTMAN 

### G ROUP 

### , I NC


### . AND 

### L AURIE 

### D IAZ 

### , R ESPONDENTS

══════════════════════ ════════════════════ O N P ETITION FOR R EVIEW FROM THE C OURT OF A PPEALS FOR THE S EVENTH D ISTRICT OF T EXAS

══════════════════════ ════════════════════ Argued March 20, 2018

J USTICE G UZMAN delivered the opinion of the Court.
J USTICE J OHNSON did not participat e in the decision.

Arbitration is a creature of cont ract between consenting parties. 1 Nevertheless, as may be required by principles of contract law and agency, 2 a person who has agreed to arbitrate disputes with one party may be required to arb itrate related disputes with non-parties. 3 This, however, is not one of those cases. Determining whether a claim involving a non-si gnatory must be arbitrated is a gateway matter for the trial court, not the arbitrator, wh ich means the determination is reviewed de novo

1 Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ. , 489 U.S. 468, 479 (1989).
2 See, e.g. , In re Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 738 (Tex. 2005).
3 Meyer v. WMCO-GP, LLC , 211 S.W.3d 302, 304 (Tex. 2006).2 rather than with the deference that must be acc orded to arbitrators. Applying the appropriate standard of review, we hold the lower courts erroneous ly required a signatory to arbitrate its non-contractual claims against non-s ignatories. We therefore vacate the arbitrator’s take-nothing award and remand the case to the tr ial court for further proceedings. I. Background Jody James Farms, JV purchased a Crop Re venue Coverage Insurance Policy from Rain & Hail, LLC, through the Altman Group, an independent insurance agency. The insurance policy, which was reinsured by the Federal Crop Insurance Corporat ion (FCIC) under the authority of the Federal Crop Insurance Act, 4 contains an arbitration clause in section 20(a): If you and we fail to agree on any determ ination made by us except those specified in section 20(d), the disagreement ma y be resolved through mediation in accordance with section 20(g) . If resolution cannot be reached through mediation, or you and we do not agree to mediation, th e disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association (AAA), except as provided in sections 20(c) and (f), and unless rules are established by FCIC for this purpose. Any mediator or arbitrator with a familial, financial or other business relationship to you or us, or our agent or lo ss adjuster, is disqualified from hearing the dispute. 5 The policy defines “us” and “we” as referring to the insurer (Rain & Hail) and “you” as referring to the named insured (Jody James). Neither th e Altman Group nor any of its employees is expressly named in the policy, and neither the Al tman Group nor any of its employees signed the agreement.

4 See 7 U.S.C. § 1508(h).
5 Section 20(c) establishes the binding nature of arbitra tion, subject to judicial review. Section 20(d) governs certain disagreements involving the FCIC. And section 20(f) explains how to resolve conflicts between the contract and other laws.3 This dispute follows Rain & Hail’s denial of coverage for a grain sorghum crop loss Jody James suffered. Though Jody James claims it prom ptly called an Altman Group agent, Laurie Diaz, to report the loss, Rain & Hail denied the claim on severa l bases, including that Jody James “failed to provide a timely notice of damage which has resulted in [Rain & Hail’s] inability to make necessary and required loss determinati ons for indemnity under your . . . policy.” Jody James disagreed with Rain & Hail’s coverage determinati on, so the parties arbitrated the dispute as required by the insurance policy. Jody James lost. The arbitrator agreed with Rain & Hail that Jody James did not “timely pres ent[] notice of its claim in accordance with the provisions of the crop insurance policy” and, furthe r, “did not state a presentable loss” because crops from performing and non-performi ng farm units were commingled. Based on the adverse arbitration ruling, J ody James sued the Altman Group and Diaz (collectively, the Agency) for breach of fi duciary duty and deceptive-trade practices. 6 Jody James asserts the Agency’s failure to timely submit the cr op-loss claim resulted in denial of coverage and a $68,000 pecuniary loss. Jody James seeks damage s equal to the amount of the loss, plus attorney’s fees and interest. The Agency moved to compel arbitration under the insurance polic y, which Jody James opposed and the trial court granted. Following an unsuccessful motion for reconsideration, the case proceeded to arbitration wher e Jody James continued to assert its right to proceed in court against the Agency, a non-signatory to the arbitration agreement. Th e arbitrator resolved that issue and the merits of the dispute in the Agency’s favor, issuing a take-nothi ng arbitration award.

6 See T EX
. B US

. & C OMM

. C ODE §§ 17.41-.506.4 The Agency asked the trial court to confirm and enforce the arbitrator’s award, while Jody James moved to vacate it, again asserting that no valid arbitration agreement exists between the parties. The trial court’s final judgment conf irmed the award, denied Jody James’s motion, and denied the Agency’s request for attorney’s fees. Applying a deferential sta ndard of review to the arbitrator’s determinations, th e court of appeals affirmed. 7 We granted Jody James’s petition for review, wh ich challenges the arbitrator’s authority to determine whether a non-signatory can compel a signatory to arbitrate. II. Discussion Jody James and the Agency disagree about (1) whether the Agency is liable for Jody James’s loss; (2) whether they agreed to arbitrate th e merits of that issue; and (3) whether the trial court or the arbitrator should deci de whether they agreed to arbitrate the merits. The third matter— who answers the question of arbitr ability—is the primary focus of th is appeal. Jody James asserts that the trial court must determine, as a threshol d matter, whether an arbitration agreement exists between it and the Agency. The Agency argues it makes no difference who actually holds the power to determine arbitrabilit y, because both the trial court a nd the arbitrator concluded Jody James must arbitrate. We disagree with the Agency. Who may properl y adjudicate arbitrability is critical to ascertaining the appropriate standard of review. A trial court’s arbitrability determinations are reviewed de novo, 8 while an arbitrator’s determinations are entitled to deference. 9 Under the

7 506 S.W.3d 595, 600 (2016).
8 In re Labatt Food Serv., L.P. , 279 S.W.3d 640, 643 (Tex. 2009); J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 227 (Tex. 2003).
9 See First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 943 (1995).5 Federal Arbitration Act, an ar bitration award must be confirmed except in extremely limited circumstances, such as corruption, fraud, undue mean s, evident partiality, and lack of authority. 10 The answer to the third question is thus signif icant and ultimately dispositive of this appeal, because it controls the standard of review we apply in evaluating the arbitrator’s authority. A. Standard of Review Whether parties have agreed to arbitrate is a gateway matter ordinarily committed to the trial court 11 and controlled by state law governing “the validity, revocability, and enforceability of contracts generally.” 12 Parties can, however, agre e to arbitrate arbitrability . Arbitration is a matter of contract, and that which the parties agr ee must be arbitrated shall be arbitrated. 13 A presumption favors adjudication of arbitrability by the courts absent clear and unmistakable evidence of the parties’ intent to submit that matter to arbitration. 14 The unmistakable clarity standard follows “the principle that a party can be forced to arbitr ate only those issues it specifically has agreed to submit to arbitration” and protects unwilling parties from compelled arbitration of matters they reasonably expected a judge, not an arbitrator, would decide. 15 The court of appeals held that an arbitr ation agreement incorporating the American Arbitration Association (AAA) rule s evinces clear and unmistakable in tent to arbitrat e arbitrability because the AAA rules declare that an “arbitrator shall have the pow er to rule on his or her own

10 9 U.S.C. § 10.
11 In re Rubiola , 334 S.W.3d 220, 224 (Tex. 2011).
12 Arthur Andersen LLP v. Carlisle , 556 U.S. 624, 631 (2009) (quoting Perry v. Thomas , 482 U.S. 483, 493 n.9 (1987)).
13 First Options , 514 U.S. at 943.
14 Id. at 944; see 9 U.S.C. § 4 (the court shall order the parties to arbitration “upon being satisfied that the making of the agreement for arbitration . . . is not in issue”).
15 First Options , 514 U.S. at 945.6 jurisdiction, including any objections with re spect to the existence . . . of the arbitration agreement or to the arbitrab ility of any claim or counterclaim.” 16 Jody James and Rain & Hail’s arbitration agreement expressly incorporates the AAA rules, so the court of appeals applied a “narrow and deferential review” to the arbitrator’s determina tion that Jody James’s claims against the Agency were arbitrable. 17 While such deference may be the consequence of incorporating the AAA rules in disputes between signatories to an arbitration agreement, 18 which we need not decide, the analysis is necessarily different when a dispute arises betw een a party to the arbi tration agreement and a non-signatory. As to that matter, Texas courts differ about whether an arbitration agreement’s mere incorporation of the AAA rules shows clear intent to arbi trate arbitrability. 19 We hold it does not. Even when the party resisting arbitration is a signatory to an arbitration agreement, questions

16 506 S.W.3d 595, 599 (2016) (citing Chesapeake Appalachia, LLC v. Scout Petrol., LLC , 809 F.3d 746, 763 (3d Cir. 2016); Oracle Am., Inc. v. Myriad Grp., A.G. , 724 F.3d 1069, 1074 (9th Cir. 2013); Petrofac, Inc. v. DynMcDermott Petrol. Ops. Co. , 687 F.3d 671, 675 (5th Cir. 2012); Fallo v. High-Tech Inst. , 559 F.3d 874, 878 (8th Cir. 2009); Qualcomm Inc. v. Nokia Corp. , 466 F.3d 1366, 1372-73 (Fed. Cir. 2006); Terminix Int’l Co. v. Palmer Ranch Ltd. P’ship , 432 F.3d 1327, 1332-33 (11th Cir. 2005); Contec Corp. v. Remote Sol. Co. , 398 F.3d 205, 208 (2d Cir. 2005)); see also A M
. A RBITRATION A SS ’ N C OMMERCIAL A RBITRATION R ULES R-7(a), (b) (2017). Amendments to the AAA rules since this dispute arose are not germane to its disposition. Accordingly, we cite the current rules for convenience.
17 506 S.W.3d at 599-600.
18 See Oracle , 724 F.3d at 1071 (addressing an arbitration cl ause in a license agreement signed by both parties in the dispute); Petrofac , 687 F.3d at 675 (“[T]he parties expressly incorporated into their arbitration agreement the AAA rules.”); Fallo , 559 F.3d at 876 (reviewing an arbitration agreement between plaintiff students and defendant school); Qualcomm , 466 F.3d at 1368, 1372-73 (reviewing an agreement between appellant and appellees); Terminix , 432 F.3d at 1332-33 (same); c.f. Contec , 398 F.3d at 207 (reviewing an arbitr ation clause in Agreement signed by predecessor corporations of the plaintiff and defendant).
19 Compare Jody James Farms , 506 S.W.3d at 599-600 (finding clear and unmistakable evidence), and Rent-A-Ctr. Tex., L.P. v. Bell , No. 09-16-00085-CV, 2016 WL 4499093, at *4 (Tex. App.—Beaumont Aug. 25, 2016, no pet.) (mem. op.) (finding clear and unmistakable eviden ce “to delegate gateway issues of arbitrability to the arbitrator, including the arbitrability of David’ s claim even though he is a non-signatory”), with Leshin v. Oliva , No. 04-14-00657-CV, 2015 WL 4554333, at *6 (Tex. App.—San Antonio July 29, 2015, no pet.) (mem. op.) (finding no clear and unmistakable evidence to arbitrate arbitrability in dispute involving a non-signatory), and Elgohary v. Herrera , 405 S.W.3d 785, 791-92 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (same), and Roe v. Ladymon , 318 S.W.3d 502, 517 (Tex. App.—Dallas 2010, no pet.) (same).7 related to the existence of an arbitration agreem ent with a non-signatory are for the court, not the arbitrator. The involvement of a non-signatory is an impor tant distinction becau se a party cannot be forced to arbitrate absent a binding agreement to do so. 20 The question is not whether Jody James agreed to arbitrate with someone , but whether a binding arbitration agreement exists between Jody James and the Agency. What might seem like a chicken-and-egg problem is resolved by application of the presumption fa voring a judicial determination. 21 A contract that is silent on a matter cannot speak to that matter with unmista kable clarity, so an agreement silent about arbitrating claims against non- signatories does not unmistakably mandate arbitration of arbitrability in such cases. 22 To the extent Jody James and Rain & Hail’s agreement expressed any intent to arbitrate arbitrability, it did so only with respect to one another. Jody James’s agreement with Rain & Hail requires disagreements to “be resolved through arbitration in accordance with the rules of the [AAA]” only “[i]f [Jody James] and [Rain & Hail] fail to agree on any determination made by [Rain & Hail].” The insurance policy directly in corporates the AAA rules only for these disputes, not for disputes between Jody James and unspecified third parties. The contract also does not “expressly provide[] that certain non-signatories are considered pa rties” or otherwise expressly

20 United Steelworkers v. Warrior & Gulf Nav. Co. , 363 U.S. 574, 582 (1960) (“[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”).
21 If an arbitrator must determine whether a valid arbitr ation agreement exists as to the parties before it, a conundrum arises: “[A]n arbitrator would be put in the position of deciding whether he was authorized to decide the parties’ dispute, concluding either that he was not authorized, a logical circularity, or that he was, and raising himself by his own bootstraps.” In re Morgan Stanley & Co., Inc. , 293 S.W.3d 182, 193 (Tex. 2009) (Hecht, J., dissenting). The presumption favoring a judicial determination, outlined in First Options , resolves this conundrum. By requiring clear and unmistakable evidence before an arbitrator may decide the question of arb itrability, the arbitrator is empowered by something more than “his own bootstraps.”
22 See First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 944 (1995).8 extend the contract’s bene fits to third parties. 23 And no agreement between Jody James and the Agency incorporates the AAA rules as to disputes between them. 24
Given the absence of clear and unmistakable evidence that Jody James agreed to arbitrate arbitrability in disputes with non-signatories, compelled ar bitration cannot precede a judicial determination that an agreement to arbitrate exis ts. The trial court was therefore charged with determining whether a valid agreement to arbitrate exists between Jody James and the Agency before any issue may be referred to arbitration. We review the resolution of that question de novo, because arbitrators lack authority to resolve a dispute absent a valid arbitration agreement. 25 B. Analysis Who is bound by an arbitration agreement is nor mally a function of the parties’ intent, as expressed in the agreement’s terms. 26 Courts have also articu lated six scenarios in which arbitration with non-signatories ma y be required: (1) incorporation by reference, (2) assumption, (3) agency, (4) alter ego, (5) equitable estoppel, and (6) third-party beneficiary. 27 The Agency argues the insurance policy’s language mandates arbi tration here and, alternatively, that agency,

23 In re Rubiola , 334 S.W.3d 220, 225 (Tex. 2011).
24 See Petrobras Am., Inc. v. Vicinay Cadenas, S.A. , 921 F. Supp. 2d 685, 693 (S.D. Tex. 2013).
25 9 U.S.C. § 10 (explaining that courts may vacate ar bitration awards “where the arbitrators exceeded their powers”); Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp. , 559 U.S. 662, 682 (2010) (“[A]n arbitrator derives his or her powers from the parties’ agreement.”).
26 Rubiola , 334 S.W.3d at 224 (quoting Bridas S.A.P.I.C. v. Gov’t of Turkmenistan , 345 F.3d 347, 355, 358 (5th Cir. 2003)).
27 In re Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 739 (Tex. 2005).9 third-party-beneficiary, and estoppe l theories preclude Jody James from avoi ding arbitration even though the Agency is a non-signatory. 1. The Insurance Policy When relying on a contract to compel arbitra tion, the moving party must first establish the existence of a valid and enforceable arbitration agreement. 28 Second, the claims at issue must fall within the arbitration agreement’s scope. 29 Whether a non-signatory may enforce an arbitration agreement’s terms is a question within the first element. 30 Section 20(a) of the crop insurance policy requi res a “disagreement to be resolved through arbitration.” “[D]isagreement” occurs when “[Jody James] and [R ain & Hail] fail to agree on any determination made by [Rain & Hail].” The arbi tration agreement’s text does not reference any other disagreement, such as disagreements betw een Jody James and anothe r person or entity. This litigation centers on the Agency’s alle ged failure to inform Rain & Hail of Jody James’s insurance claim in a timely manner, whic h is not a disagreement between Rain & Hail and Jody James. This suit does not arise from a disagreement between Rain & Hail and Jody James; indeed, the claims against the Agency act ually embrace and depend on Rain & Hail’s determination that the claim was la te. Section 20(a) thus does not require Jody James to arbitrate this dispute with the Agency. The Agency, however, cites the first sentence in subsection 20 (a)(1) as supporting a much broader application of the policy’ s arbitration agreement. Subs ection 20(a)(1) is a subpart of

28 See G.T. Leach Builders, LLC v. Sapphire V.P., LP , 458 S.W.3d 502, 525 (Tex. 2015); In re FirstMerit Bank, N.A. , 52 S.W.3d 749, 753 (Tex. 2001).
29 FirstMerit Bank , 52 S.W.3d at 753.
30 G.T. Leach Builders , 458 S.W.3d at 525.10 section 20(a), in which the genera l arbitration agreement resides. Subsection 20(a)(1) reads as follows: All disputes involving dete rminations made by us, ex cept those specified in subsection 20(d), are subject to mediation or arbitration. Howe ver, if the dispute in any way involves a polic y or procedure interpreta tion, regarding whether a specific policy provision or procedure is applicable to the situation, how it is applicable, or the meaning of any policy pr ovision or procedure, either you or we must obtain an interpretation from FCIC in accordance with 7 CFR part 400, subpart X or such other procedur es as established by FCIC. Reading the words of subsection 20( a)(1)’s first sentence “in the context in which they are used,” 31
we first observe that it is struct urally constrained to the scope of arbitration in Section 20(a), to which it is appended. Second, the fi rst sentence must be considered in light of subsection (a)(1)’s remainder, which is devoted to restricting the scop e of arbitration in a spec ific manner. Construed in context, subsection (a)(1) is thus a limiter, not an expander. This reading accords with the interpretive canon that “[m] aterial within an inde nted subpart relates on ly to that subpart.” 32 The context of the entire contract confirms the same; when referring to arbitration elsewhere, the insurance policy consistently tr eats arbitration as pertaining to Rain & Hail and Jody James without expressing any br oader application. Subsection 20(a)(1) is not itself an arbitrati on agreement; instead, it only describes how far the agreement reaches. The parties must arbitrate “[a]ll disputes” within th e arbitration agreement except pure “policy or pro cedure interpretation[s],” 33 but those disputes only fall within the scope of the agreement if there is a valid arb itration agreement in the first instance.

31 URI, Inc. v. Kleberg Cty. , ___ S.W.3d ___, 2018 WL 1440148, at *7 (Tex. 2018).
32 A NTONIN S CALIA & B RYAN A. G ARNER , R EADING L AW : T HE I NTERPRETATION OF L EGAL T EXTS 156 (2012).
33 The parties do not argue the FCIC must interpret an y policy or procedure, and we agree FCIC review is not implicated by the issues in this case. 7 C.F.R. part 400, subpart X, which the insurance contract cites as the authority for FCIC interpretations, clarifies the applicability of the FCIC’s interpretative powers and duties. The11 A valid arbitration agreement exists fo r disagreements between Jody James and Rain & Hail, but the insurance policy cannot be reasonably read to encompass disagreements between the signatories and other parties. Accordingly, we turn to alternative theories for compelling arbitration. 2. Agency “[A] contracting party genera lly cannot avoid unfavorable clauses by suing the other party’s agents.” 34 Thus, an agent of a signatory may sometimes invoke an arbitration clause against another signatory. 35 To establish an agency relations hip, a non-signatory must show it was subject to the principal si gnatory’s control and author ized to act as its agent. 36 The record does not support the conclusion that Rain & Hail had control over the Agency’s actions in relaying a claim from Jody James to Ra in & Hail. The Agency points to the insurance contract’s references to the “insurance agent,” but mere references do not create an agency relationship; the touchstone is control. 37 Because Rain & Hail did not exercise control over the Agency, arbitration cannot be compelled on that basis.

parties may obtain “a final agency determination of the inte rpretation of any provision of the [Federal Crop Insurance] Act or the regulations promulgated ther eunder.” 7 C.F.R. § 400.765(a). Fu rthermore, the “FCIC will not interpret any specific factual situation or case, such as actions of a ny participant under the terms of a policy or any reinsurance agreement.” Id. § 400.768(a). This case calls for an interpretation of the insurance contract as it applies to the “specific . . . case” between Jody James and the Agency; accordingl y, the FCIC-interpretation clause is inapplicable.
34 In re Kaplan Higher Educ. Corp. , 235 S.W.3d 206, 209 (Tex. 2007).
35 See id.
36 See Cmty. Health Sys. Prof’l Servs. Corp. v. Hansen , 525 S.W.3d 671, 697 (Tex. 2017) (“To establish an agency relationship, one must show a manifestation of consent by the purported agent to act on the principal’s behalf and subject to the principal’s control, together with a mani festation of consent by the pu rported principal authorizing his agent to act.”); Exxon Mobil Corp. v. Rincones , 520 S.W.3d 572, 589 (Tex. 2017) (“Authority to act on the principal’s behalf and control are the tw o essential elements of agency.”).
37 See Exxon Mobil Corp. , 520 S.W.3d at 589.12 3. Third-Party-Beneficiary Status Like other contracts, arbitration agreemen ts may also be enforced by third-party beneficiaries, so long as “the parties to the contract intended to secure a be nefit to that third party and entered into the contract direct ly for the third party’s benefit.” 38 The benefit must be more than incidental, and the contracting parties’ intent to “confer a dir ect benefit to a third party must be clearly and fully spelled out or enforcement by the th ird party must be denied.” 39 Whether “the third party intended or expected to benefit from the contract” is irrelevant, because “only the ‘intention of the contracting parties in this respect is of controlling importance.’” 40 As a matter of interpretation, a mere descri ption of the contract’s inte nded use cannot—on its own—confer third-party-beneficiary status. 41 The contract between Jody James and Rain & Hail does not facially benefit the Agency, but the Agency gleans an intended benefit by reading the contract in the context of the Federal Crop Insurance Act, which sets out guidelines for the FCIC’s administration of the Act. 42 The FCIC’s board must “encourage the sale of Fe deral crop insurance through licensed private insurance agents . . . , in which case the agent . . . shall be reasonably compensated from premiums

38 In re Palm Harbor Homes, Inc. , 195 S.W.3d 672, 677 (Tex. 2006); see also In re NEXT Fin. Grp., Inc. , 271 S.W.3d 263, 267 (Tex. 2008) (ruling that securities brokera ge firm could compel arbitration based on arbitration agreement in application for securities industry registration signed by plaintif f employee because the brokerage firm was “a clearly intended third-party beneficiary”).
39 MCI Telecomms. Corp. v. Tex. Utils. Elec. Co. , 995 S.W.2d 647, 651 (Tex. 1999).
40 First Bank v. Brumitt , 519 S.W.3d 95, 102 (Tex. 2017) (quoting Banker v. Breaux , 128 S.W.2d 23, 24 (Tex. 1939)).
41 S. Tex. Water Auth. v. Lomas , 223 S.W.3d 304, 306-07 (Tex. 2007).
42 See 7 U.S.C. § 1507(c).13 paid by the insured for such sales and renewals r ecognizing the function of the agent . . . to provide continuing services while the insurance is in effect.” 43 But as the Agency concedes, the statute’s language is nothing more than a statement of intent. A statement of intent is not enough, and no other language in the st atute or the contract provides direct benefits to the Agency. The in surer might pay the Agency for continuing service throughout the life of the insurance policy, but th e agreement between Jody James and Rain & Hail makes no provision for making any such payments nor even identifies a ny amount owed to the Agency. The Federal Crop Insura nce Act intends general benefice nce for insurance agents, but nothing more. The circumstances here are comparable to South Texas Water Authority v. Lomas , 44 in which we held that the City of Kingsville’s ci tizens were not third-pa rty beneficiaries to a water-supply contract between Kingsvill e and the South Texas Water Authority. 45 The water authority’s enabling legislation stated its purpose wa s to act “for the benef it of the people of this state,” 46 and the water-supply contract at issue speci fied that the water’s intended use was for municipal and industrial customers. 47 The contract did not, however, identify any of the specific citizens claiming third-party beneficiary status, a nd we held the citizens were not third-party beneficiaries because “general beneficen ce does not create third-party rights.” 48 The same is true

43 Id

. 44 223 S.W.3d 304 (Tex. 2007).
45 Id. at 306.
46 Id. at 307.
47 Id. at 306.
48 Id.14 here. The contract between Jody James and Rain & Hail does not express an intent to make the insurance agency a direct beneficiary. Any benefit to the Agency is, at best, indirect and incidental. 4. Estoppel We have recognized equitable estoppel as a basis for compelling arbitration, and the Agency contends, as its principal argument, that Jody James is estopped fro m resisting arbitration of its claims. Our arbitration-est oppel jurisprudence is rooted in a theory of promi ssory estoppel: “When a promisor induces substantial action or forbearance by another, promissory estoppel prevents any denial of that promise if in justice can be avoide d only by enforcement.” 49 Estoppel in the arbitration context is based on principles of contract and agency and does not create a requirement to arbitrate where none existed before. 50 Estoppel simply “‘prevents a party from insisting upon his strict legal ri ghts when it would be unjust to allow him to enforce them.’” 51 In that spirit, we have recognized and applie d the doctrine of dire ct-benefits estoppel, 52 which the Agency asserts requires arbitration in this case. The Agency also urges that an “alternative estoppel theory” applies, notwithstanding our past reluctance to adopt novel formulations of estoppel to compel arbitration. 53

49 In re Weekley Homes, L.P. , 180 S.W.3d 127, 133 (Tex. 2005).
50 In re Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 738 (Tex. 2005).
51 Weekley Homes , 180 S.W.3d at 133 (quoting Wheeler v. White , 398 S.W.2d 93, 96 (Tex. 1965)).
52 Id. at 131, 134 (citing Kellogg Brown & Root , 166 S.W.3d at 741).
53 See, e.g. , In re Merrill Lynch Trust Co. FSB , 235 S.W.3d 185, 191-95 (Tex. 2007) (declining to recognize “concerted-misconduct estoppel”); see also G.T. Leach Builders, LLC v. Sapphire V.P., LP , 458 S.W.3d 502, 529 (Tex. 2015) (“[T]he fact that the claims would not have ar isen but for the existence of the general contract is not enough to establish equitable estoppel.”).15 a. Direct-Benefits Estoppel Direct-benefits estoppel applies to parties w ho seek “to derive a di rect benefit” from a contract with an arbitration agreement. 54 This estoppel theory precl udes a plaintiff from seeking to hold the non-signatory liable ba sed on the terms of an agreement that contains an arbitration provision while simultaneously as serting the provision lacks for ce because the defendant is a non-signatory. 55 Simply put, a person “cannot both have his contract and defeat it too.” 56 When a claim depends on the contract’s existence and cannot stand independentl y—that is, the alleged liability “arises solely from the contract or must be determined by reference to it” 57 —equity prevents a person from avoiding the arbitrati on clause that was part of that agreement. 58 But “when the substance of the claim arises from general ob ligations imposed by state law, including statutes, torts and other common law duties, or federal law,” direct-benefits estoppel is not implicated even if the claim refers to or relates to the contract or would not have arisen “but for” the contract’s existence. 59 In the archetypal direct-benefits case, the pa rty opposing arbitration seeks to enforce the terms of an agreement with an arbitration clause. In Rachal v. Reitz , 60 for instance, we held a trust beneficiary’s suit to remove the trustee was arbi trable even though the beneficiary did not sign the

54 G.T. Leach Builders , 458 S.W.3d at 527 (internal quotation marks omitted).
55 Id.
56 Weekley Homes , 180 S.W.3d at 135.
57 Id. at 132.
58 G.T. Leach Builders , 458 S.W.3d at 527-28.
59 Id. at 528.
60 403 S.W.3d 840 (Tex. 2013).16 trust agreement. 61 Though the complainant could not allege a contract claim, the lawsuit was nevertheless premised on the trustee’s alleged violation of the trust’s terms. 62 The trustee sought to compel arbitration based on the trust’s arbi tration provision, and we agreed arbitration was required. 63 By pressing a lawsuit that was necessarily based on the trust’s terms and validity, the beneficiary was barred by direct-b enefits estoppel from avoiding th e trust’s arbitration provision. 64 In comparison, we held in G.T. Leach Builders v. Sapphire V.P. 65 that a mere relationship between the signatory’s claims and the contract containing an arbitrat ion provision was not enough to compel a signatory to arbitr ate claims against third partie s under a direct-b enefits estoppel theory. 66 The signatory, Sapphire V.P., was the deve loper of a hurricane-d amaged condominium project. Sapphire sued several insurance brokers, alleging they allowed an insurance policy to expire shortly before the hurrican e. Sapphire also sued the pr oject’s general contractor and engineers for negligent construction. 67 Each party had a separate co ntract with Sapphire, but only the general contract had an arbitration provision. 68 Sapphire was obligated to arbitrate its claims against the general co ntractor based on its agreement to do so in the general contract, 69 and the insurance brokers and engineers argued they were similarly entitled to arbitrate Sapphire’s clai ms against them under a direct-benefits estoppel

61 Id. at 842, 847-48.
62 Id.
63 Id. at 842.
64 Id. at 847.
65 458 S.W.3d 502 (Tex. 2015).
66 Id. at 527-30.
67 Id. at 509-10.
68 Id. at 510, 523.
69 Id.17 theory. 70 Sapphire’s allegations against the engineer s and insurance brokers, however, relied on duties under their separate contracts for engin eering and insurance services, respectively. 71 Even though Sapphire’s claims against the engineers a nd insurance brokers might not have existed but for the general contract to construct the condominium project, those claims relied on duties independent from it. 72 Because the claims did not depend on the general contra ct, direct-benefits estoppel did not apply. 73 Like Sapphire’s allegations against the e ngineers and insurance brokers, Jody James’s claims are independent of the insurance policy. Jody James might seek a measure of loss that equates to the amount of a contract loss, but dire ct-benefits estoppel does not apply simply because “the claim refers to . . . the contract.” 74 Instead, liability “‘must be determined by reference to it.’” 75 Rather than relying on the insurance policy, Jody James’s complaint premises the Agency’s liability on tort and DTPA duties that ar e general, non-contract obligations. To establish a fiduciary relationship, Jody James must prove a relationship between the parties involving “a high degree of trust and confid ence . . . prior to, and apart from” the insurance
contract. 76 A fiduciary duty generally “arises fr om the relationship of the parties and not from the

70 Id. at 527, 529.
71 Id. at 528-29.
72 See id.
73 Id.
74 Id. at 528 (emphasis added).
75 Id. (quoting In re Weekley Homes L.P. , 180 S.W.3d 127, 132 (Tex. 2005)).
76 Schlumberger Tech. Corp. v. Swanson , 959 S.W.2d 171, 176-77 (Tex. 1997).18 contract.” 77 Likewise, DTPA claims are created by statute, 78 and “a DTPA claim for misrepresentation is considered separate and distinct from any breach of contract.” 79 This is not a case of mere artful pleading. 80 The insurance policy does not impose any duties or obligations on the Agency. At most, by permitting Jody James to report claims through an insurance agent, the policy may assume that an Agency has a pre-existin g duty to follow through in filing an insurance claim. But without co ntractually mandated duties, Jody James would be unable to maintain a contract cl aim against the Agency under the in surance policy even if it were inclined to do so. Instead of enforcing expectatio ns created by contract, a ny liability is necessarily extra-contractual. Accordingly, direct-b enefits estoppel has not been shown here. b. “Alternative Estoppel Theory” The Agency also relies on the Second Circuit Court of Appeals’ “alternative estoppel theory,” 81 also referred to as an “intertwined-claim s” theory, to support compelled arbitration. 82 Under this estoppel theory, non-signatories can succe ssfully compel arbitration when (1) they have a “close relationship” with a signatory to a cont ract with an arbitration agreement and (2) the claims are “intimately founded in and intertwined with the u nderlying contract obligations.” 83 In In re Merrill Lynch Trust Co. , we acknowledged the existence of this theory wit hout deciding its

77 Manges v. Guerra , 673 S.W.2d 180, 183 (Tex. 1984) (emphasis added).
78 See T EX
. B US

. & C OMM

. C ODE § 17.43 (“The remedies provided in this subchapter are in addition to any other procedures or remedies provided for in any other law.”).
79 Jack B. Anglin Co., Inc. v. Tipps , 842 S.W.2d 266, 270-71 (Tex. 1992).
80 Cf. Weekley Homes , 180 S.W.3d at 131-32 (“[W ]hether a claim seeks a dir ect benefit from a contract containing an arbitration clause turns on the substance of the claim, not artful pleading.”).
81 Merrill Lynch Inv. Mgrs. v. Optibase, Ltd. , 337 F.3d 125, 131 (2d Cir. 2003).
82 See In re Merrill Lynch Trust Co. FSB , 235 S.W.3d 185, 193 (Tex. 2007).
83 Thomas-CSF, S.A. v. Am. Arbitration Ass’n , 64 F.3d 773, 779 (2d Cir. 1995).19 validity in Texas. 84 Since then, the Fifth Circuit Court of Appeals has predicted we would adopt this estoppel formulation. 85 We need not consider the viability of such a theory in this case, because even if we were to embrace it, the Agency has not shown its applicability. The Second Circuit carefully limited the al ternative estoppel theo ry’s application, explaining its precedent does not “mean that whenever a relati onship of any kind may be found among the parties to a dispute and their dispute deals with the su bject matter of an arbitration contract made by one of them, that party wi ll be estopped from refusing to arbitrate.” 86 Rather, “the obligation to arbitrate depends on consent” ; alternative estoppel requ ires not only a dispute intertwined with the contract but also a relations hip between the parties th at developed in a manner that makes it “unfair” not to compel arbitration. 87 In defining any form of arbitration estoppel, we are guided by simila r concerns. Like the Second Circuit, we focus on the principle that ar bitration is “a matter of consent, not coercion.” 88 This is why, when defining the contours of direct -benefits estoppel, we ha ve insisted the doctrine cannot “create liability for noncontracting parties that does no t otherwise exist.” 89 More recently, we rejected the even looser concerted-misconduc t estoppel theory, because the FAA is only meant “to make arbitration agreements ‘as enforceab le as other contracts, but not more so.’” 90 Any

84 See 235 S.W.3d at 193 (using the theory as an example of how other federal circuit courts treat estoppel).
85 Hays v. HCA Holdings, Inc. , 838 F.3d 605, 612 (5th Cir. 2016); see also Cotton Comm’l USA, Inc. v. Clear Creek Indep. Sch. Dist. , 387 S.W.3d 99, 105 (Tex. App.—Houston [14th Dist.] 2012, no pet.).
86 Sokol Holdings, Inc. v. BMB Munai, Inc. , 542 F.3d 354, 359 (2d Cir. 2008).
87 Id. at 358, 361.
88 Merrill Lynch Trust , 235 S.W.3d at 192 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ. , 489 U.S. 468, 479 (1989)).
89 In re Weekley Homes, L.P. , 180 S.W.3d 127, 134 (Tex. 2005).
90 Merrill Lynch Trust , 235 S.W.3d at 192 (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co. , 388 U.S. 395, 404 n.12 (1967)).20 arbitration doctrine forcing an unwilling party into arbitration must thus have some basis in fairness and consent. Regardless of how intertwined Jody James’s claims are with the insurance policy, which is a matter of debate, the relationship between th e Agency and Rain & Hail is not close enough to imply any consent by Jody James to arbitrate this lawsuit. Con cerns for consent and fairness mandate a particularly close relations hip to invoke alte rnative estoppel. 91 The Second Circuit’s alternative-estoppel cases compe lling arbitration typically invol ve some corporate affiliation between a signatory and non-signatory, 92 not just a working relationshi p. In contrast, the Agency’s relationship to Rain & Hail is no closer than that of any other independent broker or salesman. The Agency, Jody James, and Rain & Hail may ha ve an entangled busin ess relationship with respect to the crop-insurance tran saction, but no evidence, nor even allegations, show them to be anything other than independent and distinct enti ties. A reasonable consumer would not anticipate being forced to litigate complaints against an in dependent insurance agent in the same manner they agreed to litigate disputes with the insurer. To co mpel arbitration based on this alternative-estoppel theory, the relationship must be closer than merely independent participants in a business transaction.

91 See Sokol Holdings , 542 F.3d at 361 (“In each case, the promise to arbitrate by x , the entity opposing arbitration, was reasonably seen on the basis of the relationships among the parties as extending not only to y , its contractual counterparty, but also to y 1 , an entity that was, or would predictably become, with x ’s knowledge and consent, affiliated or associated with y in such a manner as to make it unfair to allow x to avoid its commitment to arbitrate on the ground that y 1 was not the very entity with which x had a contract.”).
92 See id. at 359-61 (surveying cases).21 III. Conclusion No party may be compelled to arbitrate unless they have agreed to arbitrate or are bound by principles of agency or contract law to do so. Jody James and the Agency did not agree to arbitrate any matter—not the question of arbitrability and not the merits of this dispute. Nor may Jody James be compelled to arbitrate under agency, third-party-beneficiary, or estoppel theories. We therefore reverse the court of appeals’ judg ment, vacate the arbitration award, and remand to the trial court for further proceedings.

_______________________________ Eva M. Guzman Justice
OPINION DELIVERED: May 11, 2018