## COURT OF A PP EA LS T H I R T E E N T H D I S T R I C T O F T E X AS C O R P U S C H R IS T I - 

## EDI NBURG
NUM BER 13-07- 353- CV I N R E B N P P AR I B AS
On Peti tion for Wr it of M andamus
NUM BER 13-07- 358- CV BN P PA RIB AS, A pp ellan t,
v. VIRG O C OM M ODIT IES C ORP ., ETA L., A pp ellees .

On A p p ea l f ro m th e 10 7t h D is tr ic t C o u rt of C amero n Co un ty , T exas . 

## ME MOR A N D U M OP I N I ON2



### B efo re C h ie f Ju st ic e Va ld ez , J u st ic es G arza a n d V el a M em o ra n d u m Op in io n b y J u st ic e Ve la Rel ator , BN P Par iba s ( “B NP ”) , broug ht a peti ti on for w ri t of mandamus and int er loc utor

y appeal co ntes ti ng the tr ial co urt’ s d eni a l of its moti on to co mpel ar bit ra ti on. For the rea sons d iscussed below, we con dition ally g rant th e pet ition fo r man dam us, Cau se No. 13 -07-35 3-CV, an d, gran ting fu ll relief und er our ma nda mu s jurisdiction, w e dism iss as moot the inter loc utor y appeal, Cau se No. 13- 07- 358- CV

. See Am

. Std. v. Brow nsville Indep. Sch. D is t. , 196 S.W .3d 774 , 781 (Tex. 2006 ). I. Bac kg ro und Rea l par ti es in int erest , Virg o Commodit ies Cor p., Al amo Feeders, Inc ., Mi d Val ley Grain Co., USAMeat an d Grain Co., Inc., an d T he L are d o Grain Co., buy and sell agricultural comm oditie s such as grain. BNP execute d iden tical ma ster sale an d pu rchase ag re ements w it h eac h of the re al par ti es throug h w hich B NP hel ped finan ce the real partie s’ operat ions by purchasin g the ir account s receiv able . Th e ma ster sale an d pu rchase ag re ements co ntai ned an ar bit ra ti on c lau se and w ere si g ned by BN P’ s e mploy ee, J ov enal “J er ry” M. C ru z . Rea l par ti es in int erest demanded ar bit ra ti on ag ain st BN P and Cr uzal leg ing , i nter ali a, t hat C ru zmade unautho ri z ed demands for pay ment t o real par ti es w hil e empl oy ed by BN P. Arbitratio n com me nced , butCruz failed to app ear or p ay for h is sh are of the fees. Rea l par ti es broug ht s uiti n sta te cour t ag ain st Cr uz , then subs eq uentl y i ncl uded B NP as a defendant in that sui t. In the s tate co u rtp ro ceedi ng , BN P fil ed a moti on to co mpel
ar bit ra ti on. The tr ial co u rtd eni ed BN P’ s mot ion to compel ar bit ra ti on. This or ig ina lT he Cour t G R AN T S t he m ot i on f or l eav e t o f i l e a r esponsi v e br i eff i l ed b y r eal par t i es i n i nt er est and 1 D EN I ES r el at or ’ s m ot i on t o st r i k e t he r eal par t i es’ r esponsi v e br i ef

. Anyot herm ot i ons, not di sposed ofher ei n, o r p re v i o u s l y d i s p o s e d o f b y th i s C o u rt, a re D IS M IS S E D a s m o o t. 3 proceed ing and int er loc utor y appeal ens ued. This Cou rt g ra nted an emerg ency sta y of the tr ial co urt proc eedi ng s a nd req uest ed a re spons e from t he real par ti es in int erest

. The 1 Cou rtal so cons oli dated the p eti ti on for w ri t of mandamus and int er loc utor y appeal

. II. F ederal or

Sta te A rb it ra ti on W e f ir s ta ddre ss w het her this m atte r is gov erne d by the Fede ral Arbitration Act (“ FAA ”)o r th e Tex as General Ar bit ra ti on Act ( “TGA A” ). See9 U .S.C . §§ 1- 16; T EX . C IV . P RAC . & R EM . C OD E A NN . §§ 171.001 -. 098 ( Ver non 200 5) ; In re Edu c. Mgm t. Corp ., 14 S.W .3d 4 18, 4 22 ( T ex . Ap p.–H oust on [1 4th D is t.] 2000, or ig . proceed ing ) (h old ing that question of

w het her transa ction af

fects i nte rstate com me rce, and thu s w het her fede ral act g ov er ns, i s o ne of fact w here ar bit ra ti on ag re ement is si len t as to appl ic ati on of federal or Tex as act ). The F AA "ap pli e s to a ll su it s i n s tate or federal co urt w hen t he di sput e conce rns 'a cont ract evidencing a transa ction involv ing comm erce.'" Jack B. Angli n C o., Inc . v . T ipp s , 842 S.W .2d 2 66, 2 69- 70 ( Tex . 199 2) ( or ig . proceed ing ) (q uoti ng 9 U .S.C .S. § 2 ( 2000) ); In re Profa nchik , 3 1 S. W .3 d 38 1 , 3 8 4 (T e x. Ap p .– Co rp u s Ch ris ti 20 0 0 , o rig. proceed ing ). The Uni ted Stat es Supreme C our t has hel d tha t t he word "i nv olv ing " i n the FAA i s b ro ad and the funct ion al eq uiv a le n t o f "af fecti ng ," s ig nal ing C ong re ss 's i ntentto
ex erci se it s C ommerc e C lau se pow ers t o the full est

. Alli ed-Bru c e T

e rminix Cos. v. Dob son , 513 U .S. 265, 268 ( 1995) ; L&L Kem pwood As socs., L.L. P. , v. Om ega Builders , Inc ., 9 S. W .3d 1 25, 1 27 ( Tex . 199 9) ( or ig . proceed ing ) (p er cu ri am).4

BN P, a F re nch Publ ic Limi ted Compan y , act ed throug h it s Hou sto n uni ncor porated branch in enter ing the master sal e and purchas e ag re ements w it h re al par ti es. The real par ti es in int erestare al l Tex as cor porati ons. Pu rs uant to t he agreements , BN P purchas ed
acc ounts recei v abl e from t he real parti es in int erest . The acc ounts recei v abl e represent debt obli g ati ons ow ed to the re al par ti es by M ex ic an i mport ers o f Uni ted S tates ag ri cul tural product s. R eal par

ti es uti li z ed th e proceed s from the sal es of t hei r acc ounts recei v abl e to BN P to purchas e ag ri cul tural product s from the Mi dwest , w hic h w ere then s h ip p e d i nto Tex as and s old i nto M ex ic o. W e concl ude that the mas ter sa le and purchas e ag re ements ev ide nced int ersta te
commerce. Se e 9 U. S.C

. § 1 (s tati ng that the d efini ti on of “ commerce" inc lud es, i nter al ia,
commerce among the sev eral Stat es or w it h forei g n nat ion s) ; Citizens Ban k v. Alafab co , In c. , 5 3 9 U .S . 52, 56 (2 003) ( dis cus si ng the impact of ec onomictransacti ons, su ch as commerci al len din g , on int ersta te c ommerc e) ; see als o Ser v. Cor p. Int' l v. Lopez , 162 S.W .3d 8 01, 807 -08 (Te x . App .–Corp us Christi 2005 , no pe t.); Stewart Title Guar. Co. v. Mack , 945 S.W .2d 330, 333 (Tex . App.–H oust on [1st Di st. ] 1997, ori g . proceed ing ); see also An glin , 842 S.W .2d a t 270

. Acc ordin g ly , t he transacti o n s a t issue are g ov er ned by the F AA. III

. Standa rd of Rev iew A w rit of man dam us w ill issue to correct a clear abu se of discretion when the re is no adeq uate re medy

by appeal

. See W

alk er v. Packer

, 827 S.W .2d 833 , 840 (Tex. 1992 ). A tri al cour

t abuses its di sc re ti on if itreach es a decis ion so arbi trar y and unreason abl e as to amoun t to a cl ear

and pre jud ic ial er ro r of law

or i f it cl ear ly

fail s t o c or re ctl y

anal yz e or5

appl y the law

. In r

e F or d Motor C o. , 165 S.W .3d 3 15, 3 17 ( Tex . 200 5)

. The re lator has the b urden t o es tabl ish th a t th e tri al cour t abu sed it s d is creti on. See i d. If a trial court
er ro neous ly

denies a party 's moti on to co mpel ar bit ra ti on unde r the F AA, the mov ant h as no adeq uate remedy

at law and is entitl ed to a w ri t of mandamus

. In r e Nexi on Health at Hum ble , Inc ., 173 S. W .3d 6 7, 69 ( Tex . 200 5) ; S e r v . C o r p . In t ’l , 162 S.W .3d a t 808

. IV. Val idi ty

and Scop e of the Ar bit ra ti on Ag re ement A par ty se eki ng to compel ar bit ra tion by a w ri t of mandamus mustes tabl is h the existence of

a v alid a gr e e m e n tt o arbitrat e un der the FAA and show tha t the claims in dis pute are w it hin the sc ope of the ag re ement. In reBank One, N.A. , 216 S.W .3d 8 25, 8 26 (Tex . 200 7) ( per

cu ri am); In r

e Kel logg Br own & R oot, Inc

. , 1 6 6 S

. W

. 3 d 7 3 2 , 7 3 7 (T e x. 200 5) (orig . procee ding). In de term ining the validity of agreeme nts to arbitrate w hich are subj ectto the F AA, w e g enerall y appl y st ate- law

pr in ci ple s g ov er nin g the formati on of cont ra cts

. In re Pal

m Har bor Hom es, Inc ., 19 5 S. W .3 d 67 2 , 6 7 6 (T e x. 20 0 6 ) (ci ti n g First Opti ons of Chicago, Inc . v

. Kapla n , 514 U .S. 938, 944 (1 995) ). W hether a v ali d ar bit ra ti on ag re ement ex is ts is a l eg al q uest ion su bje ct to de nov o rev iew

. Am . Std. , 196 S.W .3d a t 781. If the tr ial courtf ind s there is a v ali d ag re ement t o ar bit ra te, the b urden s hifts to the par ty o p p o sin g arbi trati on to prov e hi s d efenses. J.M. D avi dson, Inc . v

. Webster

, 128 S.W .3d 2 23, 2 27 ( Tex . 200 3)

. Onc e a v ali d ag re ement t o ar bit ra te ha s b een es tabl is hed, the c our t mus t t hen deter mine w hether

the nonmov ants ' cl aims fall w it hin the sc ope of the ar bit ra ti on c lau se. In r e F ir stMer it Bank , N.A. , 52 S.W .3d 7 49, 7 53 ( Te x. 2 0 0 1 ). To det er mine w hether an ex is ti ng a r b i t ra t i o n a g re e me n tc o v e rs a p a rty ' s c l a i ms , a c o u rtm u s t" fo c u s o n the6

compl ain t' s fact ual al leg ati ons ra ther than the leg al caus es of acti on as ser ted." Id. at 754. F e d e ra l p o li cy e m b o d ie d in t h e F AA fa vo rs a gre e m e n t s t o a rb it ra t e a n d c o u rt s m u s tre s o lve any doubts about an arbi trati on ag re ement' s s cope in fav or of ar bit ra ti on. Id. at 753. If the
ar b i t ra t i o n a g re e me n t e n c o mp a s s e s t h e c l a i ms a n d t h e p a rty o p p o s i n g a r b i t ra t i o n has faile d to prov e i ts defenses , the tri al cour t has no dis creti on but to compel ar bit ra ti on and sta y i ts ow n proceed ing s. Id . at753- 54; D.R. Horton, In c. v. Brooks , 207 S.W .3d 862, 86 6- 6 7 ( Tex . Ap p.–H oust on [1 4th D is t.] 2006, no p et.) ; Feldm an /M at z In te r es ts, L.L .P. v. Sett lem ent Capital

C or p. , 140 S.W .3d 8 79, 8 83 (Tex . Ap p.–H oust on [1 4th D is t.] 2004, no pet .). The maste r sal e and purchas e ag re ements prov ide that : Upo n the demand of ei ther Buy er or Sel ler , any dis pute betw een t he par ti es tha t conce rns any purchase d Accou nt or tha t arises outof the relat ionsh ip of the par

ti es u n d e r thi s Ag re ement or any doc ument de li v ered hereunder shall be resolv ed b y

bindin g arbitratio n he ld in Housto n, T exas. The Ag re ement was si g ned by Je rr y M . C ru zVi ce Presi dent, on beha lf of BN P, a nd was not ariz ed b y

Cruz“on beh alf

of said ban k.” W e c o n clude that BN P has es tabl is hed v ali d ag re ements to ar bit ra te w it h real par ti es in int erest

. W e al so conc lud e that the real parti es’ cl aims , w hic h c oncer n addi ti onal pay ments made under the ag re ements , fall sq u a re ly w it hin the broad s cope of the
ar bit ra ti on prov is ion , whic h appl ies to “a ny di sput e betw een t he par ti es” reg ardin g the purch ased accou nts or an y disput e “thatarises out of the relation ship of the pa rties.” See Am . Std. v

. Br ownsv il le Indep. Sch. D is t. , 196 S.W .3d a t 783

. Rea l par ti es contend t hat B NP l ack s s tandi ng to compel ar bit ra ti on bec ause an a rb it ra t io n a gre e m e n t , re qu ir in g a rb it ra t io n b e twe e n re a l p a rt ie s a n d Cr u z, in d ivi d u a ll y,7

does not e x is t. R eal par ti es furth e r arg ue th at B NP l ack s s tandi ng to ass ert t he r ig ht t o ar bit ra ti on on behal f of

C ru z . The Tex as Supreme C our t has address ed a si mil ar si tuati on w herein i nv est ors s ued thei r ind iv idu al inv est ment adv is or and his emplo yer , butso ug ht t o av oid ar bit ra ti on on g ro unds that the a rb it ra ti on ag re ement ati ss ue had been sign e d b y thei r inv est ment adv is or i n hi s c apaci ty

as an a g ent for

hi s e mploy er , butnot in his personal c a p a city

. In
reH&R Block Fin. Adv is or s, Inc ., 235 S.W .3d 177 , 178 (Te x . 200 7). Th e cou rt rejected this
arg ument t husl y : Nor ca n the Bonds sk ir

t ar bit rati on w it h Bul loc k w hen t he s ubst ance of the su it i s a g ain st both him and hi s e mploy er . Bul loc k h ad no duty to prov ide investme nt ad v ice to the Bond s but for their cont ract w ith Olde /H&R Block, and t he damag es the Bonds seek is the inv est ment t hey made t hroug h tha t cont ra ct. As Bul loc k' s l iab il ity ar is es from and must be det er m in e d by re ferenc e to the par

ti es' cont ra ct ra ther

than g eneral obl ig ati ons impos ed by law , t he suitis subj ectto the c ontract 's ar bit ra ti on p ro v is ion s. In r e Weekley Hom es, L.P

. , 180 S.W .3d 1 27, 131- 32 ( Tex . 200 5) ; see a lso In re Vesta Ins. Gr oup, Inc . 192 S.W .3 d 759, 762 (Tex . 200 6) ( "W hen c ontract ing par ti es agree to arbitra te all dispu tes 'un der or w ith respe ct to' a con tract (as the y did here ), they g ene rally

inten d to i nclud e dispu tes abou t the ir ag ent s' actions . . . ."). See i d. Suc h i s t he c ase herein

. As sta ted p re v iou sl y , t he ar bit ra ti on ag re e m e n t was signed by Cru zo n be ha l f of B N P. W he n th e pr i nc i pa l , th ati s , BN P, i s b ou nd b y a v alid
ar bit ra ti on ag re ement, " it s a g ents , empl oy ees, and re present ati v es are c ov ered by that ag re ement." Me rril

l Lynch Trust Co. FSBv. Alaniz , 1 5 9 S

. W

. 3 d 1 6 2 , 1 6 8 (T e x. App.–C or pus Chr ist i 2 0 0 4 , or ig . proceed ing ); McMi ll an v . C om puter T ra nsl ati on Sy s. & Support, Inc. , 6 6 S

. W

. 3 d 4 7 7 , 4 8 1 (T e x. A p p . – Da ll a s 2 0 0 1 , o ri g. p ro c e e d in g)

. Ac c o rd in gl y, Cruz , as an e mp loyee of B NP, is inclu ded in the arb itration agreeme nt atissue. Moreover,
as a signatory and p arty to the a rbitration a greem ent , BNP clearly has sta ndin g to asse rt8

the ri g ht to arbi trate. In r e Choice Hom es, Inc ., 174 S.W .3d 408, 412 ( Tex . Ap p.–H oust on [14th D is t.] 2005, or ig . proceed ing ) (“ To hav e s ta ndi ng a pa rty mustbe a ffect ed by

the cont rov ersyat han d.”). W e w ould f urthe r note th at real pa rties b rought the sa me cause s of action against both BN P and Cr uzand all eg ed c oncer ted, coordin ated act s b y thes e p a rt ie s, a nd al l of
re al par ti es’ caus es of acti on ar is e from the same o perati v e facts co ncer nin g the pay ment of extra- cont ra ctu al fees. See B ro wn v. Ander son , 1 0 2 S

. W

. 3 d 2 4 5 , 2 5 0 (T e x. App.–B eaumont 2003, pet. deni ed) ( findi ng su bst anti a lly i n terdependentand conc erted mis condu ct w here the ca uses of act ion ag ain st the n on- si g nator y defendants are "bas ed upon t he s ame o p e ra ti ve facts and are i nherentl y i nsepa ra ble from t he c auses of act ion ag ain st the s ig nator

y -d efend ant") . Ac cordin g ly , we reje ct the real par ti es’ arg uments per tai nin g to sta ndi ng . Beca use a n orde r denying arbitratio n mu st be up held if it is prope r on any basis
cons ide re d by

the tr ial co urt, w e w il l next c onsi der real p a rt ie s’ a lleg ed defenses to the
a g re e me nt. See In r

e H.E. Butt

Gr ocer y C o. , 17 S.W .3d 3 60, 3 67 ( Tex . Ap p.–H oust on [1 4 th D is t.] 2000, or ig . proceed ing ); City of Alam o v. Garcia , 878 S.W .2d 664 , 665 (Te x. App .–Corp us Christi 1994 , no wr it). V. Defense s In real pa rties’ respon se to BNP’s m otion to co m p e l a rb it ration , real parties raise three defense s to the mo tion to com pel. First, real partie s cont end tha t BNP ha s mat erially breache d i ts ag re ement t o ar bit ra te by fail ing to pay

one- hal f of

the cos ts of arbi trati on. In the ins tant cas e, BN P and re al par ti es, col lecti v ely , each pai d one- thi rd of the a rb it ra ti on fees. C r uzfai l ed t o pa y h i s o ne - th i rd s ha re. U nd er p rot es t, B N P ha s n ow p ai d C r uz ’s9

share of the fees. Acc ordin g ly , t his i ss ue i s e ffect iv ely moot. See Cam ar

e n a v. Te xas Employment Com m 'n , 754 S.W .2d 1 49, 1 51 ( Tex . 198 8) ( m a tt e r is "moot" if the is sues prese nte d in the ca se are no longer " liv e" o r if t he partie s la ck a legally cogniz able interest in the out c o m e ). Mo reover, w e w ould note thatreal parties’ com plaintregarding BNP’s
a ll e ge d fa il u re t o p a y it s sh a re o f t h e a rb it ra t io n fe e s is a m a tt e r o f p ro c e d u ra l a rb it ra b il it y, and thus is a matter

to be det er mined at ar bit ra ti on. See In re Pisces Foo ds, L. L.C. , 228 S.W .3d 349 , 352 (Tex. App. –Au stin 20 07, orig . procee ding). Seco nd, real par

ti es also contend t hat B NP mater ial ly breache d the ar bit ra ti on agreem entbycalling into q uest ion the inhe rent fa irness of the arbitratio n proce dure . In this
re g ard, real par

ti es spec ific all y

al leg e tha t BN P enga ged in i mprop er , ex par te
com mu nicatio ns w ith the arbitration tribuna l. The record before the Court fails to cont ain
ev ide nce subst a n ti a ting any su ch all eg ed i mprop er co mmunic ati ons. W e c oncl ude t hat
re al par ti es hav e fail ed to ca rr

y thei r burden t o establ is h this alle g ed defense to a rb it ra ti on. Fi nal ly, real par

ti es cont end t hat c omplet e reli ef cannotbe a fforded i n ar bit ra ti on giv en Cruz’s failure to p articipat e in arbitratio n. W e ne ed n ot ad dress this alleg ed d efense in detai l, how ev er , bec ause re al par ti es’ generali z ed all eg ati on of harm i s n ot s ubst anti ated by aff ida v itor

othe r ev ide nti ar

y su ppor t. Cf . In r e Oakwood Mobi

le Hom es, Inc ., 987 S.W .2 d 5 7 1 , 573 ( Tex . 199 9) ( re q uir ing non- mov ant t o present ev ide nce of defenses t o ar bit ra ti on)

. Mo re ov er , real par ti es’ arg ument i s b eli ed by the Inter nati onal D is pute R e s o l u t i o n P ro c e d u re s , a p p l i c a b l e i n t h e i n s t a n tc a s e , w h i c h sp e c i fi c a l l y p ro v i d e t h a ti f a party fa ils to file a state me nt of defense , f a il s t o a p pea r at a hea ring, or fails to prod uce ev ide nce, the ar bit ra ti on “ tr ibu nal may proc eed w it h the ar bit ra ti on” and “may make the [arbitrat ion] a w ard on the evidence before i t.” Accordingly , w e reject th is alleged defense10

to t he ar bit ra ti on ag re ement. VI. C oncl usi on A par ty deni ed the r ig ht t o ar bit ra ti on unde r the F AA ha s n o adeq uate re medy by appeal and is enti tl ed to mandamus reli ef to c or re ct a c lea r abuse of dis creti on. See L& L Ke mp wo o d

A s s o cs. , L.P. , 9 S.W .3d at 128 . Becau se w e con clude thatthe trial court clearlyabu sed its discretio n in den y ing arbitration of t he partie s' d ispute , w e con dition ally g ra nt manda mus reli ef. The s tay prev iou sl y

imposed by

this Cour

t i s l ifted. SeeT EX . R. A PP . P. 52. 10(b ) ( “Unless v acat ed o r mod if ied, a n orde r gr a n t in g tem pora ry relief is effect iv e unt il the cas e i s fin all y dec id e d .” ). W e di re ct the t ri al cour t t o v acat e i ts order deny ing ar bit ra ti on and to i ss ue an order co mpell ing ar bit ra ti on. W e are c onfident that the t ri al cour t w il l compl y

and our w ri t w il l is sue onl y if i t doe s n o t

. Ha vin g f in a ll y d is p o s e d o f t h e p e t it io n fo r m a n d a m u s in Ca u s e No

. 1 3 -0 7 -3 5 3 -C V , we dis mis s a s mootthe int er locut o ry app eal i n C ause No. 13- 07- 358- CV

. See Am. Std. v. Br ownsv il le Indep. Sch. D is t. , 196 S.W .3d a t 781

.

RO SE V ELA J u s t i c e Me moran dum Opi nio n del iv ered and filed thi s 2 9th d ay

of Ma y , 200 8.