Court Opinion

ID: 9958842
Source: CourtListenerOpinion
Date Created: 2024-04-10 06:13:31.482842+00
Date Added: 2024-06-11T08:17:45.658470
License: Public Domain

REVERSED IN PART AND REMANDED; and Opinion Filed April 5, 2024

                                        In the
                             Court of Appeals
                      Fifth District of Texas at Dallas
                                No. 05-23-00591-CV

           MSF CONTRACTING GROUP, LLC, Appellant
                            V.
  JOHN HICKMAN, LLC AND SERVICE STEEL WAREHOUSE CO., LP,
                         Appellees

                On Appeal from the 219th Judicial District Court
                             Collin County, Texas
                    Trial Court Cause No. 219-00088-2023

                         MEMORANDUM OPINION
                 Before Justices Carlyle, Goldstein, and Breedlove
                            Opinion by Justice Carlyle
      MSF Contracting Group, LLC appeals from the trial court’s order partially

denying its motion to compel arbitration against John Hickman, LLC. We reverse in

part and remand for further proceedings consistent with this memorandum opinion.

See TEX. R. APP. P. 47.4.

      Hickman hired MSF to construct a commercial building in Frisco, Texas. MSF

subcontracted with Texas Steel to fabricate and install certain steel structures for the

project, and Texas Steel in turn contracted with Service Steel Warehouse Co., LP to

supply materials. After Texas Steel failed to pay Service Steel for those materials,
Service Steel filed this lawsuit against Hickman in the 219th Judicial District Court,

seeking to enforce a mechanic’s lien on Hickman’s property.

      Hickman filed third-party claims against MSF, alleging among other things

that MSF breached the parties’ contract and its statutory duties by failing to defend

and indemnify Hickman against Service Steel’s claims. Hickman also filed a

separate lawsuit against MSF and its principals in the 416th Judicial District Court,

asserting various additional claims related to the project. On MSF’s motion, the

416th Judicial District Court entered an order compelling Hickman’s claims to

arbitration under an arbitration clause contained in Hickman’s contract with MSF.

Citing the 416th court’s order, MSF then moved the 219th court to compel

Hickman’s pending third-party claims to arbitration.

      After MSF filed its motion to compel arbitration, Hickman filed a motion

asking the 219th court to: (1) consolidate its pending case with the one filed in the

416th court; (2) direct MSF to defend and indemnify Hickman for the lien claims

pending in the 219th court; (3) stay proceedings pending resolution of the arbitration

between Hickman and MSF; and (4) allow MSF’s subcontractors to bring their

claims against MSF following the arbitration.

      At the hearing on the pending motions, the trial court announced that it would

consolidate the cases and partially deny MSF’s motion to compel arbitration—

compelling all claims between Hickman and MSF to arbitration except for

Hickman’s claims for statutory defense and indemnification. It also announced that

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it would not stay its proceedings; instead, it would allow the parties to conduct

discovery and set a distant trial date with the expectation that Hickman and MSF

would complete the arbitration before trial. The trial court entered an order consistent

with its announced rulings, and MSF appeals.

      Before addressing MSF’s appellate issues, however, we must address

Hickman’s assertion that we should dismiss the appeal because MSF failed to

establish appellate jurisdiction. Hickman first argues that MSF failed to perfect its

appeal because it did not identify a “necessary party”—Service Steel—as an

appellee in its appellate filings. Although MSF failed to identify Service Steel as an

appellee in its brief, its docketing statement listed Service Steel as an “additional

appellee.” In any event, MSF perfected its appeal by filing its notice of appeal, which

invoked our jurisdiction over all parties to the trial court’s order, including Service

Steel. See TEX. R. APP. P. 25.1(b). And after receiving notice from this Court, Service

Steel filed its appellee’s brief. Under these circumstances, we do not believe

dismissal of MSF’s appeal is warranted based on its failure to identify Service Steel

as an appellee under appellate rule 38.1(a).

      Hickman also argues we should dismiss the appeal because MSF did not

otherwise establish appellate jurisdiction over its issues. Hickman asserts that the

trial court “did not deny a motion to compel arbitration, it merely determined that

discovery in the lien lawsuit could continue and that the Property Code mandated

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that [MSF] defend the lien claims.” But the trial court partially denied MSF’s motion

to compel arbitration. Indeed, the trial court’s order specifically states that

      as regards to [MSF’s] Motion to Compel Arbitration, the motion is
      denied as it pertains to the rights and obligations under Section 53.153
      of the Texas Property Code, but as it relates to other claims between
      John Hickman, LLC and MSF Contracting Group, LLC, unrelated to
      said rights, those such claims will be subject to arbitration.

To the extent MSF appeals the trial court’s decision to deny its motion to compel

Hickman’s statutory defense and indemnity claims to arbitration, we have

jurisdiction over the appeal. See TEX. CIV. PRAC. & REM. CODE § 179.098(a)(1).

      That said, to the extent MSF seeks to appeal the trial court’s decision not to

stay Service Steel’s claims pending the arbitration’s resolution, it has not preserved

that issue for our review. See TEX. R. APP. P. 33.1. The prayer for relief in MSF’s

motion to compel arbitration did not include such a stay request. And at the hearing

on its motion, MSF specifically disavowed any request to stay Service Steel’s claims

pending the arbitration: “Whether or not anything else gets stayed in this case would

be between Hickman and Service Steel and the other parties, but as to MSF and

Hickman, that should be an arbitration. That’s what we’re requesting, Your Honor.”

MSF cannot appeal the trial court’s decision to deny a stay it did not request.

      We thus turn to the sole issue properly before us—whether the trial court erred

by refusing to compel to arbitration Hickman’s statutory claims for defense and

                                          –4–
indemnity under property code § 53.153.1 A party seeking to compel arbitration must

prove that a valid arbitration agreement exists. See AdvoCare GP, LLC v. Heath, No.

05–16–00409–CV, 2017 WL 56402, at *3 (Tex. App.—Dallas Jan. 5, 2017, no pet.)

(mem. op.). “Once the existence of an arbitration agreement has been shown, the

party resisting arbitration bears the burden of proving that the dispute at issue falls

outside of the arbitration agreement’s scope.” Id. at *4.

        Hickman does not dispute that it is bound by a valid arbitration clause in its

contract with MSF. Hickman thus had the burden to prove its statutory claims were

not subject to arbitration. See id. As an initial matter, the parties’ arbitration

agreement is broad in scope, requiring arbitration of any “Claims, disputes, or other

matters in controversy arising out of or related to” the parties’ contract. The term

“Claim” is also defined by the contract as including “disputes and matters in question

between [Hickman and MSF] arising out of or relating to the Contract.”

        When an arbitration clause is broad like this one, there is a presumption of

arbitrability, and a court must compel arbitration “unless it can be said with positive

assurance that an arbitration clause is not susceptible of an interpretation which

would cover the dispute at issue.” Id. (cleaned up). Here, we cannot say with positive

    1
      MSF’s brief appears to ask only that Service Steel’s lien claim be stayed pending the arbitration
between MSF and Hickman. Nevertheless, MSF’s prayer for relief asks that “all matters in the trial court[]
case be compelled to arbitration.” To the extent MSF asks that we compel to arbitration claims brought by
Service Steel or any other lienholders who are not signatories to the arbitration agreement between MSF
and Hickman, MSF has not provided argument or relevant authorities addressing whether such claims
would be subject to arbitration. Thus, MSF presents nothing for our review. See TEX. R. APP. P. 38.1;
Sprowl v. Stiles, No. 05-18-01058-CV, 2019 WL 3543581, at *4 (Tex. App.—Dallas Aug. 5, 2019, no pet.)
(mem. op.).
                                                  –5–
assurance that the parties’ broad arbitration clause, which covers all “disputes and

matters in question . . . relating to the” contract between MSF and Hickman, would

not cover a dispute as to whether MSF must defend and indemnify Hickman in the

lawsuit filed by Service Steel.

       Hickman nevertheless argues that because its claims for defense and

indemnity arise under the property code, rather than the parties’ contract, it may

assert those claims in court. For that proposition, it cites In re Vesta Insurance Group,

Inc., 192 S.W.3d 759, 761 (Tex. 2006). In re Vesta dealt with whether a nonsignatory

to a contract with an arbitration clause could force a signatory to arbitrate a tortious

interference claim relating to the contract under the doctrine of direct benefits

estoppel. Id. In that context, the supreme court stated that although “the boundaries

of direct-benefits estoppel are not always clear, nonparties generally must arbitrate

claims if liability arises from a contract with an arbitration clause, but not if liability

arises from general obligations imposed by law.” Id. Because both Hickman and

MSF are parties to the arbitration agreement at issue, direct benefits estoppel does

not apply. Thus, the distinction the supreme court drew between claims arising out

of a contract and those arising out of general obligations imposed by law has no

bearing on this case.

       Hickman also contends that “any argument that a [statutory] defense

obligation is subject to arbitration is a non-sequitur,” asking: “How would [MSF]

defend in the arbitration claims that are pending in state court, raised by non-parties

                                           –6–
to the arbitration”? Hickman misunderstands the issue. The issue is not whether any

statutory defense obligation would apply in the arbitration; it is whether the parties

agreed to have an arbitrator, rather than a court, determine the extent to which MSF

must defend Hickman in the pending state court proceedings. Under the parties’

broad arbitration provision, any question or dispute concerning matters related to

their contract—including the extent to which the property code requires MSF to

defend or indemnify Hickman from lien claims related to their contractual

relationship—must be determined by the arbitrator rather than the court.2

        We reverse the trial court’s order to the extent it denies MSF’s motion to

compel arbitration of Hickman’s statutory claims, and we remand to the trial court

with instructions to enter an order compelling those claims to arbitration and for

further proceedings consistent with this opinion.

                                                       /Cory L. Carlyle/
230591f.p05                                            CORY L. CARLYLE
                                                       JUSTICE

    2
      We express no opinion on whether the trial court should stay its proceedings in light of our holding
that an arbitrator must determine the extent to which MSF is liable to defend and indemnify Hickman. We
note, however, that the parties are free to seek reconsideration of the trial court’s decision to deny a stay
upon remand.
                                                    –7–
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                 JUDGMENT

MSF CONTRACTING GROUP,                        On Appeal from the 219th Judicial
LLC, Appellant                                District Court, Collin County, Texas
                                              Trial Court Cause No. 219-00088-
No. 05-23-00591-CV          V.                2023.
                                              Opinion delivered by Justice Carlyle.
JOHN HICKMAN, LLC, Appellee                   Justices Goldstein and Breedlove
                                              participating.

       In accordance with this Court’s opinion of this date, the order of the trial
court is AFFIRMED in part and REVERSED in part. We REVERSE that portion
of the trial court’s order that denies MSF Contracting Group, LLC’s motion to
compel John Hickman, LLC’s statutory defense and indemnity claims to
arbitration. In all other respects, the trial court’s order is AFFIRMED. We
REMAND this cause to the trial court for further proceedings consistent with this
opinion.

       It is ORDERED that appellant MSF Contracting Group, LLC recover its
costs of this appeal from appellee John Hickman, LLC.

Judgment entered this 5th day of April, 2024.

                                        –8–