Court Opinion

ID: 2733449
Source: CourtListenerOpinion
Date Created: 2014-09-17 05:00:29.553537+00
Date Added: 2024-06-11T10:13:05.476528
License: Public Domain

Case: 14-20072      Document: 00512770841         Page: 1    Date Filed: 09/16/2014

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT

                                    No. 14-20072                         United States Court of Appeals
                                  Summary Calendar                                Fifth Circuit

                                                                                FILED
                                                                        September 16, 2014
JOY A. ZINANTE,                                                            Lyle W. Cayce
                                                                                Clerk
                                                 Plaintiff - Appellee
v.

DRIVE ELECTRIC, L.L.C.,

                                                 Defendant - Appellant

                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:13-CV-1820

Before REAVLEY, DENNIS, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
       Following a house fire allegedly caused by a defective electric golf cart,
the home owner, Plaintiff-Appellee Joy Zinante, brought this action against
the seller of the golf cart, Defendant-Appellant Drive Electric, L.L.C., in Texas
state court. Drive Electric successfully removed the case to federal court.
Contending that Zinante is bound by an arbitration agreement provision in the
golf cart sales contract, Drive Electric moved to compel arbitration.                          The

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
    Case: 14-20072    Document: 00512770841     Page: 2   Date Filed: 09/16/2014

                                 No. 14-20072
district court denied Drive Electric’s motion to compel and Drive Electric
appealed. For the following reasons, we AFFIRM.
      This court reviews a district court’s ruling on a motion to compel
arbitration de novo. JP Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d
596, 598 (5th Cir. 2007). The court must compel the parties to arbitrate the
dispute if: (1) the parties agreed to arbitrate the dispute, and (2) no “federal
statute or policy makes the claims nonarbitrable.” Id. Because we find that
the parties did not agree to arbitrate this or any dispute between them, we do
not reach the issue of whether federal law or policy makes the claims
nonarbitrable.
      “Generally, principles of state contract law govern the question of
whether the parties formed a valid agreement to arbitrate.” Id. Here, both
parties agree that Texas contract law controls. Under Texas law, when a party
seeks to compel arbitration, that party must establish that a valid arbitration
agreement exists. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001).
Therefore, Drive Electric must show that Zinante and Drive Electric entered
into a valid arbitration agreement.
      Zinante’s husband, Mark Zinante (“Mark”), who is not a party in this
action, purchased the golf cart at issue from Drive Electric over the internet.
Drive Electric alleges that, in the course of this transaction, Mark
electronically consented to Drive Electric’s “Terms & Conditions” of sale,
including a provision entitled “Arbitration” that states “any and all claims or
disputes arising from or relating to this agreement shall be submitted to
binding arbitration before the American Arbitration Association in the State
of Arizona.”
      Even if we assume that the arbitration clause in those Terms &
Conditions constituted an enforceable arbitration agreement against Mark,
who purchased the cart online, Drive Electric does not allege that Zinante
                                       2
     Case: 14-20072       Document: 00512770841          Page: 3     Date Filed: 09/16/2014

                                       No. 14-20072
herself agreed to arbitrate. Rather, Drive Electric argues that Zinante is
bound to the arbitration agreement between her husband Mark and Drive
Electric under either of two theories—the equitable doctrine of estoppel and
the third-party beneficiary doctrine.
       Drive Electric first argues that, because Zinante is suing on the
underlying contract, equity estops her from arguing that any terms of the
contract, including the arbitration clause, do not apply to her. See FirstMerit
Bank, N.A., 52 S.W.3d at 755-56. Under the equitable doctrine of estoppel, “a
litigant who sues based on a contract subjects him or herself to the contract’s
terms.” Id. at 755. Zinante is suing under theories of negligence 1 and gross
negligence, 2 and, thus, a sales contract between Mark and Drive Electric are
not relevant to this lawsuit. Cf. Nationwide of Bryan, Inc. v. Dyer, 969 S.W.2d
518, 521 (Tex. App. 1998) (noting that a non-signatory spouse suing for claims
related to a sales contract, breach of contract, breach of warranty, and
violations of the Deceptive Trade Practices Act, derived her right to sue from
the contract). Likewise, Zinante does not rely on or assert any terms of the
contract in her complaint. 3 Therefore, by asserting these claims she is not

       1 The Supreme Court of Texas has identified three elements for a negligence claim:
“1) a legal duty owed by one person to another; 2) a breach of that duty; and 3) damages
proximately resulting from the breach.” Greater Houston Transp. Co. v. Phillips, 801 S.W2d
523, 525 (Tex. 1990). The legal duty element encompasses “risk, foreseeability, and likelihood
of injury.” Id. Here, Zinante does not contend that the contract between Mark and Drive
Electric created the legal duty that Drive Electric owes her.
       2 The Supreme Court of Texas has identified two elements for a gross negligence claim:
(1) extreme risk; and (2) conduct with “conscious indifference to the rights, safety, or welfare
of others” despite “actual, subjective awareness of the risk.” Mobile Oil Corp. v. Ellender, 968
S.W.2d 917, 921 (Tex. 1998). Here, the sales contract between Mark and Drive Electric does
not relate to either element of gross negligence.
       3 In her original state court petition Zinante sued Drive Electric for negligence, gross
negligence, violation of the Deceptive Trade Practices Act, and common law fraud. However,
after Drive Electric removed the case to federal court and moved to compel arbitration under
the arbitration clause, Zinante amended the complaint to remove the Deceptive Trade
Practices Act and common law fraud causes of action, asserting only negligence and gross
                                               3
     Case: 14-20072       Document: 00512770841          Page: 4     Date Filed: 09/16/2014

                                       No. 14-20072
subjecting herself to the terms of the contract and the doctrine of estoppel does
not apply.
       Despite the absence of any claims asserted under the contract, Drive
Electric contends that pursuant to a variation of equitable estoppel—the
doctrine of “intertwined claims”—Zinante is suing on the contract.                      In re
Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 193-94 (Tex. 2007); Cotton
Commercial USA, Inc. v. Clear Creek Indep. Sch. Dist., 387 S.W.3d 99, 105 (Tex
App. 2012). Under the intertwined claims doctrine, when a non-signatory
defendant has a “close relationship” with a signatory to a contract that contains
an arbitration agreement, a court can compel the non-signatory defendant to
arbitrate disputes that are “intimately founded in and intertwined with the
underlying contractual obligations.” Cotton Commercial USA, Inc., 387 S.W.3d
at 105 (quotation omitted). The doctrine does not apply here because Zinante
is a non-signatory plaintiff who is suing a party that alleges an arbitration
agreement exists with her, a third-party. Moreover, as discussed, Zinante’s
claims are neither derived from, nor intertwined with, the terms of the contract
between Mark and Drive Electric so the doctrine of equitable estoppel does not
bind her to the terms of the contract.
       Drive Electric next argues that Zinante is bound to the terms of the
contract, including the arbitration provision, as a third-party beneficiary to the

negligence claims. If Zinante was suing for fraud and violations of the Deceptive Trade
Practices Act, the question of whether she derived her right to sue from the contract may
come out differently. See Nationwide of Bryan, Inc., 969 S.W.2d at 519, 521. But, the lawsuit
before us does not include fraud or deceptive trade practices because Zinante amended her
complaint. See Hibernia Nat. Bank v. Carner, 997 F.2d 94, 101 (5th Cir. 1993) (“To the extent
that [the plaintiff’s original pleading] did make a ‘judicial confession,’ that confession was
amended away.”); see also West Run Student Housing Asscs., L.L.C. v. Huntington Nat. Bank,
712 F.3d 165, 171-72 (3d Cir. 2013) (listing examples of recognition by this and other circuits
that a judicial admission or concession in a pleading may be withdrawn by a subsequent
amendment). Accordingly, none of Zinante’s claims derive from the contract and she has not
subjected herself to the terms of the contract by asserting these claims.
                                              4
    Case: 14-20072    Document: 00512770841     Page: 5   Date Filed: 09/16/2014

                                 No. 14-20072
contract. A third-party beneficiary is “one for whose benefit the contract was
made” and “not one who is benefited only incidentally by the performance of
the contract.” MCI Telecomm. Corp. v. Texas Util. Elec. Co., 995 S.W.2d 647,
651 (Tex. 1999). Texas law presumes that parties to an agreement “contracted
for themselves unless it ‘clearly appears’ that they intended a third party to
benefit from the contract.” Id. The contract must “clearly and fully spell[] out”
third-party beneficiary status. Id. Third-party beneficiary status cannot be
created by implication. Id.
      Drive Electric offers no evidence that Mark intended for his spouse,
Zinante, to benefit from his purchase of the golf cart. Instead, Drive Electric
contends that Zinante is bound to the sales contract as the wife of a signatory
because the purchase of the golf cart benefits the community estate. Drive
Electric points to no case law that supports finding third-party beneficiary
status based solely on the basis of shared community property.
      Texas law does not confer third-party beneficiary status automatically
upon one spouse when the other spouse enters a sales contract. Compare In re
Conseco Fin. Serv. Corp., 19 S.W.3d 562, 571 (Tex. App. 2000) (noting that a
non-signatory wife of a signatory to a mobile home sales contract that included
an arbitration agreement is not bound to the agreement and, therefore, is not
compelled to arbitrate her claims against the mobile home seller) with
Nationwide of Bryan, Inc., 969 S.W.2d at 520 (compelling a non-signatory wife
of a signatory to arbitrate breach of contract and related claims because she
derived her standing to sue from the contract that contained the arbitration
clause). Accordingly, the spousal relationship alone does not make Zinante a
third-party beneficiary to the contract. Furthermore, as discussed, Zinante’s
claims of negligence and gross negligence do not derive from or relate to the
contract. Therefore, Drive Electric failed to establish that Zinante is bound to

                                       5
    Case: 14-20072    Document: 00512770841     Page: 6   Date Filed: 09/16/2014

                                 No. 14-20072
the terms of the contract, including the arbitration agreement, as a third-party
beneficiary.
      In conclusion, Zinante is neither a third-party beneficiary of the
underlying contract that contained the arbitration agreement, nor does the
doctrine of equitable estoppel compel arbitration here. Therefore, the district
court’s denial of Drive Electric’s motion to compel arbitration is AFFIRMED.

                                       6