Reversed and Rendered and Memorandum Majority and Concurring

Opinion s filed Mar ch 21 , 202 3

.

In The



## Fourteenth Court of Appeals

NO. 14

- 21

- 00398

- CV

TAYLOR MORRISON OF TEXAS, INC. AND TAYLOR WOODROW COMMUNITIES

— LEAGUE CITY, LTD. , Appellant s

V.

MATTHEW GLASS AND MADELINE GLAS S , Appellee s

On Appea l from the 122nd District Court Galveston County, Texas Trial Court Cause No. 20

- CV

- 0857

MEMORANDUM OPINION

A ppella n ts Tay l o r Morrison of Texas, Inc. and Taylor Woodrow

Communities

— League City, Ltd

. fil ed thi s interlocutory a ppeal from the trial

court ’ s order ordering arbitration before a n arbitrator other than the Judicial

Ar bitration and Media tion Servi ces ( “ JAM S ” ).2

Appellees Matthew Glass and Madeline Glass own a home built by

appellants . The Glasses sued a ppella nts fo r breach of t he implied wa rranties of

habi tability and good workmanship

, n e g ligent construction , and violation of t he

Residential Const ru ction Liability Act ( “ RCLA ” )

. 1 Appellants filed a plea in

abatement and moved to compel arbitration under t he terms of the P urchase

A greement w it h the original owner s , who w ere the predecessor s

- in

- interest to t h e

Glasses . The trial cour t denied the motion to compel arbitration with JAMS

, the

arbitrat ion s ervice named in the P urchase A greement, and ordered the p arties to

ar bitrate their claims b ef

or e a n al ternative arbitration service o r arbitra tor

.

In a single issue o n appe a l, appellants argue that the trial court erred by

ordering th e Glasses ’ dispute submitted to arbitration before a service or an

arbitrator o ther than th e on e spe cifi ed in the P ur chase A greement

, and under terms

different from those prov ided in th e a greement

. We conclude that the trial court

abused its d iscretion by attempting to modify a provision of the agreement.

Accordingly, w e rev er se and render judgment instructing the parties to arbitrate

their claims before JAMS, as contemplated in the ar bitration agreement.

I. B ACKGROUND

In 20 10, appellants entered into a P urcha se A greement with Thomas and

Kittee Cart

. The P urchase A greemen t between appell ants and the C ar t s indicated

that the C arts we re buying real property with a “resi dential si ngle

- family home to

be constructed ther eo n

. . . in a ccordance with this Pu rchase Agree ment.”

1 Appellants correctly argue on appeal that the RCLA itself does not create a cause of
action. See T e x . P rop . C ode Ann. § 2 7.005 ( “ T his chapter does not create a caus e of action or derivative liability or extend a limitations period. ” ) ; Visio n 20 /20, Ltd. v. Cameron Builders, Inc.

, 5 25 S.W.3d 854, 856 (Tex. App.

— Houston [14th Dist.] 2017, no pet.) ( “ The R CLA does not

create a cause of action but provides defenses and l imitations o n damages. The RCLA also sets forth notice provisions

. ” ) (intern a l c itations o mitted)

.3

Paragraph 11 of the P u rchas e A greem ent was titled “ Dis pute Resol ution

–

Arbitration ” which state s :

ANY AND A LL CLAIMS

. . . BY OR B ETWEEN THE P A RTIES
HE RE TO, ARISING OUT OF OR RELATED TO THIS
PU RCHASE AGRE EMENT, THE PROPERTY,

. . . OR ANY
TRANSACTIO N RELATED HERETO, WHETHER SUCH
DISPUTE IS BASED ON C ONTRACT, TORT, ST ATUTE, O R EQUITY, INCLUDI NG WITHOUT L IMITATION

, ANY DISPUTE
OVER

. . . ALLEGATIONS OF LATE NT OR PATENT DESIGN
OR CONSTRU CTION DEF ECT S

. . . SHA LL BE ARBITRATED
PURSU ANT TO THE FEDERAL ARB ITRATION ACT

.

The arb itration provision al so includ ed a d elegation clause, in dicatin g that any

q uestions regarding the enforceability of the arbitrat io n cl ause would be

determined by an ar

bit rator:

. . . ANY DISPUTE CONCERNI NG THE INTERPRETATION OR
THE ENF ORCEABILITY OF THIS A RBI TRATION AGREEMENT, INCLUDIN G

. . . ANY CHALLENGES TO THE
ENF ORCEMENT OR THE VALID ITY OF

. . . THIS
ARBITRATION AGREEM ENT, OR TH E SCOPE OF
ARBITRABLE ISSUES

. . . AN D A NY DEFENSE RELATING TO
THE ENFORC EMENT OF THIS ARBITRATION AGREEM ENT

. . . SHALL BE DE CIDED BY AN ARBITRA TO R

. . . A ND NOT
BY A COURT OF LAW.

The P urch ase A gree ment also provided that JAMS would hear any disputes

b etween the parties :

. . . SUC H D ISPUTE SHAL L BE RESOLVED BY AN D
P URSUANT TO THE ARBITRA TION RULES AND
PROCE DURES OF THE JUDICIAL ARBITRAT ION AND
MED IA TION SERVICES (“JAMS”)

. . . IN TH E EVENT TH AT
JAMS IS FOR ANY REASON UNWILLING OR UNABLE TO
SERVE AS THE ARBITRATION SERVICE, THE PART IES
SHALL SELE CT ANOTHER REPUTABL E A RBITRATON
SERVICE

.4

I n 2 014, the Glasses bo ught the hom e from t he Car ts. I n the Glasses ’

o riginal p etiti on , whic h was fi led in 202 0, they asserted causes of action for breach

of implied warranties of hab i ta bility and good workmanship

, n egl igent

construction , and violation of the RCLA against a ppell ants arising from “d esi gn

and construction defects and r elated f ra ud that hav e caused excessive moisture,

humidity, significant mold growth and mycotoxins causi ng personal in jury and

sickness a s w ell as damage to the [Glasse s ’ ] h ome and numerous other prop erties

in th eir neig hbo rhood.” The Glas ses furt he r alleged that :

[ a ppellant s ] knew of excessive moisture, humidity, significant mold
and/or mo ist ure problem s that had occurred an d were developing in
ide ntical an d/or similar homes and floorplans as th e [ Gl ass es ’ home ]. [Appellees] would not hav e entered into t he Sales Contract [wit h the Carts] and would not have closed if they had known of the ot her significan t problems in simil arl y designed houses

.

Acco rding to the Glasses, a fter purchasing the home fr om t he Carts, the h ous e

“develo ped excessive mois ture, h umidity and significant m old growth and

mycotoxins resulting from multiple design an d construct ion defects.”

Appellants moved to com pel a r bitration with JAMS pursu ant to the P urc ha se

A greemen t

. Appellant s a rgued that the P urchase A greem ent was the source of th e

Glasses ’ claims

. A ppellants a rgued that the Glasses, eve n a s non

- signa tories to the

P urchase A greement, sh ould be co m pelled to arbitrate under the P urchase

A gr eement based on direct benefit estoppe l

. In January 2021, the Gl asses f iled their first amended petition, which

cl a rified that t he Glasses were filing ca use s of act ion for “ common law breac h of

impl ied warrant ies ” and “ common law negligent con struction. ” The Glasses

advanced two arguments as t o why the trial court should deny the motion to

compel arbit ration. First, th ey argued that they were non

- signat ories to the original

P urchase A gr eement , and that appe llants did not m e et t heir burden to prov e the5

G lasses ’ c laims fell into on e of the recogn ized except ions to the general rule that a

non

- signatory cannot be compelled to arbitrat e t heir claims

. Sec ond, the Glasses

arg ue d that the arbit ration agreement is substa ntiv ely unconsci onable because it :
(1) impose s an unconscionable “winner takes all” f ee spl itting that doesn ’ t exist in

law ; (2) s eeks to contract away the abilit y of the trial c ourt to determ ine gateway

issu es ; an d (3) allows appellants t o dictate an arbi tra l for um that is inac cessible due

to prohib itive costs

, by imposing unconscionable costs o n the l osing party.

On April 21, 2021, the trial co urt conducted a hea ring on th e motion to

comp el arb itration

. At the heari ng, appellant s ar gue d that al though the G lasses

w ere not signatories to the original P urc hase A greement, they should still be

compelled to arbi trate because they relied on , an d sought benefi t s from, the

P urc hase A greement

. The Glasses reasse rted that they d i d n ot invoke the P ur c hase

A greement in their pleadings ; instead, their claims were based o n common law

causes of act io n , wi thout reference to

— or dependence on

— t he P urc hase

A gr eement

.
In Jun e 2021, the t rial court issued an order, stating in f ul l :

Having reviewed the motions, briefi ngs [,] and argument of counsel in a hearing held April 21, 2021, the Cour t DENIES t he [ A ppellants ’ ] Motion to Compel Arbitrat ion. The Court finds that the
arbitrat ion clause ci ted by [ A ppellants ] contains unconscionabl e
pro visions in that it purports to in validate or waive substantive rights and remedies authorized by statute, is prohibitive ly e xpensi ve a nd prevents the [ Glasses ] the opportun i ty to be made whole.

Th e Court fur th er finds that the arbitration pro vision re s ults in
the overall co sts of arbitrat ion to be excessive co m pared to litigation
in this Court.

The parties are ORDE RED to agr ee to an alternative arbitration

serv ice or arbitra t or. If the par ties are unable to a gr ee, the COURT
shall select an arb itrator f r om a list of three nam es proposed by each party.6

Appellants filed this interlocutory appeal

. See Tex. Civ. Pr ac. & Rem Code Ann.

§ 5 1 .016 ( permitting appeal under Fed eral Arbitration Act under same

circ umstance s as appeal from federal district court under 9 U.S.C.A.

§ 16(a)(1)(B) )

.

II. A NALYSI S

As a t hreshold matter, w e f i rst address whether we ha ve interlocu tory
appellate jurisdiction to r eview appellants ’ appeal.

A. I NTERLOC UTO R Y A PPEALS

1. Standard of R eview & Applicable Law

T he Federal Arb itration Act ( “ FAA”) app lies to the arbitration ag reem ent

here because the part i es expressly agreed to arbitrate unde r the FAA. See In re

Rubiola

, 33 4 S.W.3d 220, 223 (Tex. 2011) ( orig. proc eeding)

. Appellate courts ma y consid er appeals from interlocutory orders when a

s tatute ex plicitly authorizes an appeal

. Tex

. A & M Uni v. S ys. v. Koseoglu

, 233

S.W.3d 8 35, 840 (Tex. 2 007). Civil Practice and Remedie s Code § 51.016, which

authorizes appeals in matters subject to the F AA, prov ides that a part y may appeal

a n interlocutory order “u nder the same circumstances that a n appeal fr om a feder a l

district court ’ s ord er or decision would be permitted by 9 U.S.C. S ection 16

. ” T ex

.
C iv

. P rac

. & R em

. C ode § 51.016. Under § 16 of the F AA

, a pa rty may

immediat ely appeal a petition to order a r b it ration to proceed

. See 9 U.S.C.

§ 16 ( a )( 1 ) ( B ) ; Tex. C iv. Pr ac. & Rem. Code Ann. § § 51.016

, 171.098(a)(1); see

also Taylor Morri son of Tex., Inc. v. Skufca , 650 S.W .3d 660, 672

– 73 (Tex.

App.

— Housto n [1st D ist.] 2021, no pet.) ; In re Helix Energy So ls. Gr p. , Inc. , 303

S.W.3d 386, 395 n.7 (Tex. App.

— H ouston [ 1 4th D ist.] 2010, orig. proceeding)

.
W hen determining whether an order deni es a motion to compel arbitration,

“ [t]he substance and function of t he order viewed in the context of the record7

con tro ls our interlocutory jurisdiction.” Natgasoline LLC v. Refrac t ory C onstr.

Serv s. , Co.

, 566 S. W.3d 871, 880 (Tex. App.

— Houston [14t h Dist.] 2018, pet.

denied) (quoting McReynolds v. El ston
, 222 S.W.3d 731, 73 8 (Tex. App

. —

Houston [14t h Dist.] 2007, no pet. ) ) ; see Del Valle Indep. Sch. Dist. v. Lopez

, 8 45

S.W.2d 8 08, 8 09 (Tex. 1992) ( n oting that “it is the character and function of an

o rder that determine its classificati on” for determinin g jurisdiction over an

interlo cuto ry order )

. 2. Application

Th e p arties ’ dispute focuses on the nature of the trial court ’ s Ju n e 202 1

order . Accordin g to appellants

, we have interloc utory appellate jur isdiction

because the trial court ’ s order is properly classified as a n order denying arb itration.

Appellants argue th at our court has repeat edly concluded that an order compelling

a r bitration under terms other than those in the specific agreement is ground s for an

interlocutory appeal . In support of their argument, appellan ts cite to Natg asol ine

,
566 S .W.3d at 880 ; Tex. La Fiesta Auto Sales, LLC v. Belk , 3 49 S.W .3d 872, 878

(Tex. App.

— Hous ton [14th Dist.] 2011, no p et.) ; and McReynolds , 222 S.W.3d at

73 8

. H owever , according to the Glasses, we do not have interlocutory jurisd iction

b e cause the trial court di d not “ den y ” ap pel lant ’ s motion to compel arbitra tion

, but

ordered t he parties to arbitrat ion albeit with a n alternative ar bitrat or. In support of

their p os ition the G lasses av er that the present c as e is analogous to CMH Ho mes v.

P e rez , 3 40 S.W.3d 444, 449 (Tex. 2011)

.

I n CMH

, bot h parties agreed that the ir contract was governed by the FAA

and that they had agreed to submit to a rbitration ; howeve r, the part ies could not

agre e on a n arbitrator

. I

d. a t 44 7. After the p arties declared an impa s se, the trial

court issue d a n o rd er ti tle d “ Order on Plaintiff ’ s Motion to Compel Arbitr ation

, ”

which appointed an a rbitrato r to preside over the dispute. Id. The Supre me Court of8

Texas concluded that in terlocutory appeal wa s unavailable because th e subst ance

of the trial co urt ’ s order wa s simply to appoint an arbitra tor

. Id. at 449

. However,

b ecause the appe llant ha d requested i n the alte rnative that i ts appeal be treated as a

writ of mandamus, the Suprem e Court o f Te xas instructe d the court of appeals to

consider the is sue a s a writ of mandamus. See id.

When determining whether an order denies a motion to compel arbitration,

“[t]he substance and function o f the order viewed in the context of the record

controls our inter locutory j ur isdiction.” Natgasoline , 56 6 S.W.3d at 880 (quoting

McReynolds , 222 S.W.3d at 738 )

. Texas cases have consistently held that both t he

FA A a nd Texas Arbitration Act ( “ TAA ”) p ermit interlocutory appellate review of

an order that denies a part y ’ s ri ght to arb it rate in a specific man ner u nder a specific

contract , even if the parties a re ultimately compelled to arbitrate

. See Taylor

Morrison of Tex., In c. v. Skufca , 650 S.W.3d at 675 ; Na tgasoline , 566 S.W

. 3d at

8 76 ; Tex. La Fiesta , 349 S.W.3d at 878 ; McReyno lds , 222 S.W .3d at 738

. T he tri al

court ’ s or der effectively denied appellant s their potential contractual r ight to have

JAMS serve as t he arbitra t or

. Accordingl y, w e conclude tha t we have jurisdict ion

o ver this i nt erlocutory appeal. See 9 U. S.C.A. § 16 (a)(1)(B). 2

2 E ven if we were l ack in g subject

- matter ju risdiction over t he current appeal

, we n o te that

ma ndamus review would remain available to appell ants. See CMH Hom es v. Perez

, 340 S.W. 3d 444, 454 (Tex. 2011) ( “ [M] andamus is pr oper to correct a clear a b use of discr etion when there is no adequ ate remedy by appeal, as when a party is erroneously d eni ed it s contr a cted

- for
arbitration rights under the FAA

. ” ) ; Taylor Morr iso n of Tex. , Inc. v. Skufca , 650 S.W.3d 660,
676 (Tex. App.

— Ho uston [1st Dist.] 2021, n o pet.) (same ) ; Tex. La Fiesta Au to Sales

, LLC v. Belk , 349 S.W.3d 872 , 879 (Tex. App.

— Houston [14 th Di st.] 20 1 1, no pet.) (same) ; Aspen Tech., Inc. v. Shasha , 253 S.W. 3d 85 7, 861 (Tex. App

. — Houston [14th Dist.] 2008, no pet.) ( hol ding that, even though in t erlocutory a ppeal may appear to provide ad equate reli ef,
mandamus rel ief remained available w h en trial court e rroneously denied appellant ’ s request f or arbitration und er th e FAA a s provide d in a 2006 agreement between it and appel lee, and instead
ordered a rbitration u nder a 2001 agree men t betwee n the parties ).

O ur resolutio n of appellants ’ issue w o uld be t he same whether determined in an appeal or in an original proceed ing s eeking a writ of mandamus

.9

B

. M OTION TO C OMPEL A RBITRATIO N

Havin g determined that we have su bject

- matter jurisdiction , we next a ddress

appel lant s ’ sol e i ss ue on appeal alleging that the trial c ourt erred by orde ring

arbi tration be fo re an arbitrator other than JAMS, as was s pecified in the agreemen t

.

1. Standard of Re view & A pplicable La w

We review the trial court ’ s denial of a motion to comp el arbitratio n under an

abuse of disc retion standard. In re L abatt Food Serv., L .P. , 279 S .W .3d 640, 643

(Tex. 2009) (orig. proceeding ); Branch Law Firm L.L.P

. v. Osborn , 532 S .W.3d 1,

12 (Tex. App.

— Houston [14th Dist.] 2016, pet. denied). We defer to the trial

court ’ s factual determinations if they are supp orted by the recor d; we rev iew the

tr ia l court ’ s legal determinations de novo. In re Labatt Food Serv., L

. P.

, 279

S.W.3d at 643; Branc h Law Firm L .L.P. , 532 S.W.3d at 12.

Because arbitration is an alternative forum, the F A A establishes boundaries

limiting judicial involvement in t he process

. In re Nat ’ l Health Ins. Co. , 109

S.W.3 d 552, 556 (Tex. App.

— Tyler 2002, orig. proceeding ) . Whe n a trial court

modifies the agreement of the parties concerning the manner in which the

arbitrator is to be appointed, it transcends those boundaries. Id .; s ee a ls o 9

U.S.C.A. § 5

.

2

. Analysis

A pp ellant s argue that th e trial court e rred by order ing the case to be

submitted to arbitration in a manner different than that specified in the P urchase

A g reement . Moreover, appella nts argue that the Purchase A gr eement con ta ined a

delegation clause, which as signed t he resolution of all gateway issu es , such as
enforceability and the in terpretation o f terms , to the arbitrator ins tea d o f the trial

c ou rt

. Additionally, appellants argue t hat the Glasses f a iled t o p ro du ce evidenc e10

th at arbitration with JAMS would be prohib itively expen sive

.

T he Glass es ar gue that the trial court erred in c om pelling them t o arbitrate

th eir claims because ap pellants faile d to establish the exis tence of an arb itration

agreement be tween th em selves and t he Glasses . M ore specifically, the Glasses

ar gue tha t t hey were not pa rties to the Purchase A greement and , as no n

- signatories,

the y cannot be bound by t he arbitration agreemen t because the y do not rely on or

seek benefits from the P urchase A g re ement. But

, appellees have not filed a notice

of appea l. See Tex. R. App . P. 25.1( c) (“A party who seeks to alter the t rial court’s

judgment or other appealable order must file a notice of appeal.”). The Supreme

Court of Texas held that an appellee in the court of a pp eals who has not filed a

notice of appeal may not seek to alter the tr ial court ’ s judgment in a way that

wo uld award the appellee more relief than the trial court granted the ap pellee in its

judgment. See Lubbock C nty

. , Tex. v. Trammel ’ s Lubboc k Bail Bon ds , 8 0 S.W.3d

580, 584 (Tex. 2002) ; see als o Frontier Logistics, L.P. v. Nat’l Prop. Holdings,

L.P. , 417 S.W.3d 656, 666 (Tex. App.

— Houston [14th Dist.] 2013, pet. denied)

.
Becaus e appellees have not filed a notice of appeal, they may not seek to alter the

trial court’s order to award them more rel ief than the trial court gran ted in its order

. Frontier Logistics , 417 S.W .3d at 666. By asserting an issue challenging whether

they are bound by the agreement at issue, appellees improperly seek to alte r the

tria l court’s orde r to afford them more relief that the trial court granted.

Therefore, we focus our inquiry on appellan ts ’ claim that the trial court erred

by failing to compel the parties to subm it to arbitration with JAMS

. As we noted

above, t he tri al cour t ’ s or der effectively denied appellant s the ir contractual r ight to

have JAMS serve as the arbitra t or

. The trial court did not completely deny
appellant’s motion to compel arbitrat ion ; instead

, t he trial court found a portion of

the arbitration ag reement un conscionable and attempted to modify the ag reement11

t o remedy an “unconsc ionable provision

. ” However, t he trial court abused its

discretion in doing so

. See In re Serv. Corp. Int ’ l , 35 5 S.W.3d 662, 663 (Tex.

2011) (orig . proceeding) (per c uriam) (“ [T] rial court abused its discretion b y

appo inti ng an arbitrator instead of follow ing the agreed

- upon method of selection

outlined in the contract. ”); see also In re Highland Homes

- Houston, LLC , No. 01

-

21

- 00585

- CV, 2022 WL 4008 44, at *4 (Tex. App.

— Houston [1st Dist.] Feb. 10,

2022, orig. proce eding ) ( me m. op

. ) ( “ [W] e conclude that the A rbitrat ion Clause

. . . identified two poten tial ways for an arbitrator to be sel ected: by an agreement

between [the parties] or by the AAA

. . . . As such, we hold that the trial court

abused its discretion in a ppoint ing an [ arbitrator ] of its choosing

. . . . ” )

.

The primary purpose of the FAA is to require enforcement of arbitration
agreements “according to their terms.” In re Serv. Corp. Int ’ l

, 355 S.W.3d 655,

659 (Tex. 2011) (orig. proceeding) (per curiam) (quoting Volt Info. Scis. v. Bd. of

T rs. , 489 U .S. 468, 479 (1989) )

. Because the FAA requires the trial court to follow

the arbitrator selection method detailed in the agreement , we first determine the

method of appointment required by the agreement

.

The agreement in this case pr ovides a d i sp ute “ sha ll be resolved by and

pursuant to the a rbitration rules and procedures of the Judicial Arbitration and

Mediation Services (“ JAMS ”)

. ” The on ly exception to the use of JAMS as the

a rbitrat ion service is if “ JAMS is for any reason unwilling or unabl e to serve a s the

arbitration service [.] ” However, t here is no evi dence that JAMS was “ unwilling or

unable ” to serve as the arbitrato r. Because the agreement plainly requires

ar bitration to be conducted by JAMS unless JAMS is unwilling or unable to serve,

the trial co u rt abused its discretion b y failing to order the parties to arbitrate their

claims before JAMS because that was the agreed

- upon primary me thod of

selecti on a s outlined in the arbitration agreement

. See In re Nat’l Health Ins. Co.

,12

109 S.W.3d at 556 ( trial court has no discretion to modify or contravene specified

rules set out in a contract ) ; s ee also In re Serv. Corp. In tern. , 3 55 S.W.3d at 663

.

W e sustain appellant ’ s sole issue on appeal.

V

. C ONCLUSION

W e reverse the trial cou rt ’ s order wi th instructions to order the parties to

arbitrate their claims b efore JAMS

.

/s/ Marg ar e t “ M eg ” Poi ssa nt J us ti ce

P a nel consists of Just ices Zi mmerer, Spain, a n d P oissant (Spain, J., c oncurring)

.