Court Opinion

ID: 4346355
Source: CourtListenerOpinion
Date Created: 2018-12-01 08:30:25.028922+00
Date Added: 2024-06-11T14:48:20.342158
License: Public Domain

In the
                  Court of Appeals
          Second Appellate District of Texas
                   at Fort Worth
                ___________________________

                     No. 02-18-00132-CV
                     No. 02-18-00135-CV
                ___________________________

              APACHE CORPORATION, Appellant

                               V.

BRYAN C. WAGNER, WAGNER OIL COMPANY, TRADE EXPLORATION
   CORPORATION, AND WAGNER & COCHRAN, INC., Appellees

             On Appeal from the 348th District Court
                     Tarrant County, Texas
                 Trial Court No. 348-296927-17

           Before Sudderth, C.J.; Meier and Gabriel, JJ.
          Memorandum Opinion by Chief Justice Sudderth
                           MEMORANDUM OPINION

                                   I. Introduction

         In two issues in this interlocutory appeal,1 Appellant Apache Corporation

complains that the trial court erred (1) by denying its motion to compel arbitration

because the parties’ indemnity dispute falls within the scope of their arbitration

agreement and (2) by deciding Appellees Bryan C. Wagner, Wagner Oil Company

(WOC), Trade Exploration Corporation (Trade), and Wagner & Cochran, Inc.

(W&C)’s motion to stay arbitration when a mandatory venue statute required that any

arbitration challenge be decided by a court in Harris County. We reverse.

                                   II. Background

A. The Parties

         Apache is a Delaware corporation with its office located in Houston. WOC is

a Texas corporation with its office located in Fort Worth, and Wagner is WOC’s

president and CEO. From January 1999 to June 2006, WOC acted as the operating

entity for Wagner’s oil and gas assets as well as for certain oil and gas assets owned by

Trade and W&C that were purchased by WOC using funds provided by those entities.

         See Tex. Civ. Prac. & Rem. Code Ann. § 15.003(b) (West 2017), § 51.016 (West
         1

2015).

                                           2
B. The Agreements

       1. Purchase and Sale Agreement Between WOC and Apache

       WOC purchased oil-and-gas-related assets2 from Apache pursuant to a June 4,

2001 purchase and sale agreement (PSA) that was negotiated by WOC and executed

by Wagner on WOC’s behalf in his capacity as its president. Wagner, Trade, and

W&C provided the funds for the approximately $25 million purchase in, respectively,

80%, 19%, and 1% shares.3 The PSA listed the “Effective Time” of the purchase and

sale as “April 1, 2001, at 7:00 a.m., at the location of the Assets.”

       With regard to Apache’s representations and warranties in the PSA, the parties

excluded compliance with “Environmental Laws,” a defined term, and WOC

acknowledged that its sole remedy for any noncompliance by Apache with

“Environmental Laws” would be provided in Article 6 of the PSA. Article 6 defined

“Environmental Law” to mean “all laws, statutes, ordinances, rules and regulations of

any governmental authority pertaining to protection of the environment in effect as of

the Effective Time and as interpreted by court decisions or administrative orders as of

the Effective Time in the jurisdiction in which such Asset is located.”          And it

       2
        These assets included oil and gas wells, leasehold estates created by oil and gas
leases, fixtures and improvements appurtenant to these wells and leases, fee mineral
interests, and “[a]ll oil, gas and other hydrocarbons produced from or attributable to”
the leases, as well as various licenses, records, and other items related to the sale.

       WOC represented in the PSA that in buying the assets, it was not acting under
       3

any specific contractual commitment to any third party, or any specific nominee
agreement with any third party, to transfer to, or to hold title on behalf of, such third
party with respect to all or any part of the assets.

                                             3
provided for (1) WOC, as the buyer, to give Apache, as the seller, written notice of

adverse environmental conditions discovered on or before June 20, 2001, (2) waiver

of those conditions for failure to give timely notice, and (3) the remedies available to

WOC. To access these remedies, WOC had to give proper notice to Apache and

then—before closing—the parties could (1) agree on an adjustment to the purchase

price to reflect the cost to remedy the adverse environmental condition, (2) remediate

the condition at Apache’s cost, or (3) remove the damaged item from the assets being

conveyed and reduce of the purchase price by the allocated value of that item.

      Article 6.3 provided that Article 6 was the

      SOLE AND EXCLUSIVE REMEDY THAT [WOC] SHALL HAVE
      AGAINST [APACHE] WITH RESPECT TO ANY MATTER OR
      CIRCUMSTANCE OR LIABILITY RELATING TO ADVERSE
      ENVIRONMENTAL CONDITIONS, ENVIRONMENTAL LAWS,
      THE RELEASE OF MATERIALS INTO THE ENVIRONMENT
      OR PROTECTION OF THE ENVIRONMENT OR HEALTH.

      Indemnity and arbitration were continuous themes in the PSA. With regard to

inspection of the leases, for example, WOC agreed to indemnify and hold harmless

Apache and its partners, joint interest owners, subsidiaries, affiliates, and their

respective officers, directors, employees, and agents “from and against any and all

losses or causes of action arising from [WOC’s] inspection of the leases, including,

without limitation, claims for (i) property damage, (ii) personal injuries or death of

employees of [WOC], its contractors, agents, consultants and representatives,

(iii) personal injuries or death of employees of [Apache], its contractors, agents, or

                                           4
consultants or representatives, and (iv) personal injuries or death of third parties.”

And any title defect adjustment disputes required resolution “by Arbitration pursuant

to Section 11.12.”

      Assignment was also addressed in the PSA in more than one place. With

regard to the post-closing obligations as to the assets’ files and records, WOC was

obligated to retain and make available to Apache for seven calendar years after the

closing date the files and records; any assignment by WOC of the purchased assets

was made subject to this requirement. Article 11.5, “Assignment,” provided that

neither party could assign all or any portion of its rights or delegate all or any portion

of its duties under the PSA “unless it continue[d] to remain liable for the performance

of its obligations . . . and obtain[ed] the prior written consent of the other Party,

which consent [could] not be unreasonably withheld.” And Article 11.10, “Parties in

Interest,” provided that the PSA would be binding upon and inure both to WOC and

Apache “and their respective successors and assigns.”

      Under Article 9.4, Apache retained some liabilities, and the PSA expressly

covered what Apache would be responsible for as compared to WOC: Except for the

retained liabilities, WOC expressly agreed to assume responsibility for and to pay,

perform, fulfill, and discharge all claims, costs, expenses, liabilities, and obligations

accruing or relating to the owning, developing, exploring, operating, and maintaining

of the assets, “whether relating to periods before or after the effective time, including,

                                            5
without limitation, all adverse environmental conditions, whether occurring before or

after the effective time, regardless of the negligence or strict liability of [Apache].”

       The parties also set forth their “express intention” that WOC was buying the

assets “as is and in their present condition and state of repair.” In doing so, WOC

released and discharged “any and all claims at law or in equity, known or unknown,

whether now existing or arising in the future, contingent or otherwise, against

[Apache] with respect to any adverse environmental conditions,” and expressly agreed

to assume the risk, set out in all capital letters,“that the assets may contain waste

materials, including naturally occurring radioactive materials, hydrocarbons, hazardous

wastes, hazardous materials or hazardous substances, and that adverse physical

conditions, including, but not limited to, the presence of unknown abandoned oil and

gas wells, water wells, sumps and pipelines may not have been revealed by [WOC’s]

investigation.”

       Article 9.5, the PSA’s primary indemnity provision, provided in all capital

letters that from and after the closing date, Apache would indemnify WOC, its

officers, directors, employees, and agents within a year of the closing for all losses,

damages, claims, demands, suits, costs, expenses, liabilities, and sanctions of every

kind and character, including reasonable attorney’s fees, court costs, and costs of

investigation arising from or in connection with the retained liabilities or any breach

by Apache of the PSA. And it provided that from and after the closing date, WOC

                                             6
      SHALL DEFEND, INDEMNIFY, RELEASE AND HOLD
      HARMLESS [APACHE] AGAINST ALL LOSSES, DAMAGES,
      CLAIMS, DEMANDS, SUITS, COSTS, EXPENSES, LIABILITIES
      AND SANCTIONS OF EVERY KIND AND CHARACTER,
      INCLUDING    WITHOUT     LIMITATION      REASONABLE
      ATTORNEYS’ FEES, COURT COSTS AND COSTS OF
      INVESTIGATION, WHICH ARISE FROM OR IN CONNECTION
      WITH (i) ANY OF THE CLAIMS, COSTS, EXPENSES,
      LIABILITIES AND OBLIGATIONS ASSUMED BY [WOC]
      PURSUANT TO SECTION 9.4, OR (ii) ANY BREACH BY [WOC]
      OF THIS AGREEMENT.

      The PSA’s arbitration clause states,

              11.12        Arbitration.       Any disputes arising out of or in
      connection with this Agreement or the application, implementation,
      validity, breach or termination of this Agreement shall be finally and
      exclusively resolved by arbitration in Houston, Texas pursuant to the
      dispute resolution provisions contained in Exhibit B. Notwithstanding
      the above, in the event a third party brings an action against [WOC] or
      [Apache] concerning this Agreement or the Assets or transactions
      contemplated herein, [WOC] and [Apache] shall not be subject to
      mandatory arbitration under this section and [WOC] or [Apache] shall
      each be entitled to assert their respective claims, if any, against each
      other in such third party action.

      Exhibit B defined “Covered Dispute” as “[a]ny and all disputes concerning or

arising out of the Agreement to which this Exhibit is attached.” It set forth that

unless the parties mutually agreed otherwise, if they were unable to resolve an

arbitrable dispute pursuant to the PSA’s dispute resolution procedures in Exhibit B,

then the claimant had fifteen days after the parties reached an impasse to serve notice

requesting that the dispute be submitted to binding arbitration “in accordance with

the terms of this Appendix and the then current American Arbitration Association

(‘AAA’) Rules for Arbitration of Commercial Disputes (‘AAA Rules’).”            It also

                                             7
provided that arbitration would be governed by the Federal Arbitration Act (FAA)

and that the arbitration hearing would be held in Houston, Texas, “at a location

designated by the arbitrator.” And it provided that the arbitrator’s decision would be

final, binding, and nonappealable with regard to “grounds of error in the application

of the law or the findings of fact.”

       2. The Apache Assignment

       The assignment, conveyance, and bill of sale from Apache to WOC (the

Apache Assignment), which “granted, sold, assigned, conveyed and delivered” the

property covered in the PSA, was made “pursuant to and subject to all of the terms

and conditions” of the PSA and listed the same effective date—“April 1, 2001,

7:00 A.M., local time”—as the PSA. Wagner executed the assignment on WOC’s

behalf on June 28, 2001.

       3. Assignment from WOC to Wagner, Trade, and W&C

       WOC, through H.E. Patterson, its senior vice president, assigned the assets to

Wagner, Trade, and W&C (the WOC Assignment) on June 29, 2001, with the same

effective date—April 1, 2001—as the PSA and Apache Assignment. Wagner signed

for himself individually and on behalf of Trade as its vice president.

Dean O. Cochran Jr. signed for W&C as its president.

       The WOC assignment describes the Apache Assignment. It further states,

“This Assignment is subject to all terms, provisions and conditions contained in the

APACHE Assignment, and Assignees assume and agree to be bound by and perform

                                          8
their proportionate parts of all obligations imposed upon [WOC] by the APACHE

Assignment.”

C. Arbitration Demand

      Apache was subsequently named as a defendant in five lawsuits in Louisiana;

none of these lawsuits were brought by parties to the PSA. On November 20, 2017,

Apache filed a demand for arbitration against Appellees with AAA, seeking to

arbitrate the issue of whether Appellees owed it the $15 million that Apache had

expended in the defense of those lawsuits, related litigation, and settlement costs.

D. The Tarrant County Declaratory Judgment Action

      On December 15, 2017,4 Appellees filed a declaratory judgment action in

Tarrant County, seeking declarations that, among other things, (1) Wagner, Trade, and

W&C were not parties to the PSA and, accordingly, not subject to the PSA’s

indemnity and arbitration clauses, (2) Apache was not a third-party beneficiary of the

WOC Assignment, (3) mandatory arbitration did not apply to a claim for defense and

indemnity arising from a third-party lawsuit against either Apache or WOC related to

the PSA or the assets or transactions contemplated in it, and such a claim had to be

brought in the third-party lawsuit, (4) the Louisiana lawsuits brought by third parties

      4
        Although Apache complains that Appellees started to participate in the
arbitration process before filing their declaratory judgment action in Tarrant County,
the record reflects that WOC objected to arbitrability and expressly refused to waive
any of its objections when it selected its arbitrator eight days before filing its Tarrant
County lawsuit. And the parties signed a rule 11 agreement in early January 2018 to
reflect that by responding to Appellees’ Tarrant County lawsuit, Apache was not
waiving any of its rights or arguments relating to arbitration, venue, or jurisdiction.

                                            9
against Apache and WOC concerned the PSA or the assets or transactions

contemplated therein,5 and (5) Appellees had no duty to defend or indemnify Apache

or to arbitrate the dispute. Apache filed a motion to transfer the case to Harris

County and a motion to abate and compel arbitration. Appellees filed an application

to stay arbitration.

E. Arbitration

       In its motion to abate and to compel arbitration, Apache argued that because

WOC had agreed that the arbitrator would decide issues of arbitrability, pursuant to

the AAA Commercial rules, which were expressly incorporated into the arbitration

agreement, the trial court was required to compel arbitration. Apache further argued

that WOC’s assignees were required to arbitrate because they had expressly assumed

the arbitration obligations in article 11.10 of the PSA and because they had agreed to

be bound by and perform all of WOC’s PSA obligations in the WOC Assignment.

Apache also contended that WOC’s assignees were required to arbitrate under

incorporation by reference and direct benefits estoppel theories.

       In their response to Apache’s motion to abate and compel arbitration,

Appellees argued that the third-party-dispute exemption in the arbitration clause

       5
        At the hearing on Apache’s motion to transfer and Appellees’ motion to stay,
Wagner and WOC’s counsel asserted that some of the plaintiffs in the declaratory
judgment action were parties to all five of the Louisiana lawsuits but that not all of the
plaintiffs were parties to all of the lawsuits, two of which had settled, two of which
had been prevailed upon by Apache, and one of which was still pending. In response
to the trial court’s query, Wagner and WOC’s counsel stated that there were no cross-
actions in the Louisiana lawsuits between the parties to the instant case.

                                           10
applied to their dispute and adopted and incorporated by reference the arguments in

their stay application. They also argued that because Wagner, Trade, and W&C were

nonsignatories to the PSA, the arbitration clause did not bind them.

F. Hearing

      On March 22, 2018, the trial court heard Apache’s motion to transfer and

Appellees’ motion to stay the arbitration proceedings.        Apache argued that the

designation of Houston in the arbitration clause as the arbitration location, plus the

provisions in civil practice and remedies code sections 171.096(a) and 15.020, meant

arbitration had to occur in Harris County and that, despite the third-party actions, the

arbitration clause applied.     Apache also argued that the WOC assignment

incorporated the arbitration clause when it was made subject to the PSA’s terms and

conditions.

      Trade and W&C’s counsel argued that the WOC Assignment did not contain

an arbitration clause or extend the PSA’s arbitration clause to them, that the WOC

Assignment was not sued on by any party, and that they were not parties to the PSA.

They further argued that venue was appropriate in Tarrant County because the PSA

and WOC Assignment were negotiated there and that WOC and Apache had only

agreed that certain disputes would be arbitrated, not that any dispute arising out of or

in connection with the PSA must be brought in Houston.

      Wagner and WOC’s counsel argued that the arbitration should be stayed until

they could get a declaration of what the arbitration agreement meant when the express

                                          11
exception in the arbitration clause showed that the parties had never contemplated

subjecting indemnity claims relating to third-party claims to the arbitration provision.

He also argued that Apache had the burden to show that the issue of arbitrability was

up to the arbitrator and that the arbitration clause was silent on that issue.

       Apache’s counsel responded that both conditions precedent in the arbitration

clause—(1) a dispute arising out of the PSA and (2) a third party’s suing Apache or

WOC related to the PSA, assets, or transactions covered thereby—had to be met

before the exception would come into play and that the broad “any disputes”

language was clear and unmistakable evidence that the parties had agreed that

threshold questions of arbitrability would be decided by the arbitrator, particularly

when the AAA Commercial rules were incorporated into the PSA through the exhibit

referenced in the arbitration clause.

G. Trial Court’s Orders

       The trial court denied Apache’s motion to transfer venue, granted Appellees a

stay of arbitration, and denied Apache’s motion to abate and compel arbitration.

Apache appealed these orders. We filed the arbitration appeal in cause number 02-18-

00132-CV and the venue appeal in cause number 02-18-00135-CV.6 We subsequently

consolidated these cases.

      Apache also filed a petition for writ of mandamus in cause number 02-18-
       6

00137-CV, which we denied on May 17, 2018.

                                            12
      In a letter ruling, the trial court elaborated that the exemption in the PSA’s

arbitration clause applied to the class of claims “referenced in th[e] second sentence”

of the clause, i.e., third-party claims, precluding mandatory arbitration of the claims at

issue. The trial court further determined that Apache had failed to establish clearly

and unmistakably that the arbitrator, rather than the court, was to decide the “gateway

matter” of whether a valid arbitration agreement existed.

                                    III. Arbitration

      We review a trial court’s denial of a motion to compel arbitration for an abuse

of discretion. Diligent Tex. Dedicated LLC v. York, No. 02-17-00416-CV, 2018 WL
4140637, at *4 (Tex. App.—Fort Worth Aug. 30, 2018, pets. filed) (mem. op.) (citing

Legoland Discovery Ctr. (Dallas), LLC v. Superior Builders, LLC, 531 S.W.3d 218, 221 (Tex.

App.—Fort Worth 2017, no pet.)). But because unambiguous contracts are construed

as a matter of law, Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 7 (Tex.

2014), we review de novo a trial court’s determination regarding whether a valid

agreement to arbitrate exists and its construction of an unambiguous arbitration

agreement. See In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig.

proceeding); In re Guggenheim Corp. Funding, LLC, 380 S.W.3d 879, 886 (Tex. App.—

Houston [14th Dist.] 2012, orig. proceeding [mand. dism’d]); see also Granite Re Inc. v.

Jay Mills Contracting Inc., No. 02-14-00357-CV, 2015 WL 1869216, at *3 (Tex. App.—

Fort Worth Apr. 23, 2015, no pet.) (mem. op. on reh’g).

                                           13
      As described by our supreme court, arbitration is a creature of contract

between consenting parties. Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624,

629 (Tex. 2018). Who is bound by an arbitration agreement is normally a function of

the parties’ intent as expressed in their agreement’s terms. Id. at 633. When relying

on a contract to compel arbitration, the movant must first establish the existence of a

valid and enforceable arbitration agreement and then must establish whether the

claims at issue fall within the arbitration agreement’s scope. Id.; In re Kellogg Brown &

Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding). Doubts about scope

are resolved in favor of arbitration, but the presumption favoring arbitration

agreements arises only after the party seeking to compel arbitration proves that a valid

arbitration agreement exists. Kellogg Brown & Root, Inc., 166 S.W.3d at 737–38.

      An arbitration clause is a “specialized kind of forum-selection clause,” Pinto

Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428, 437 (Tex. 2017), and whether claims are

covered by a forum-selection clause “should be [determined] according to a common-

sense examination of the substance of the claims made.” In re Int’l Profit Assocs., Inc.,

274 S.W.3d 672, 677–78 (Tex. 2009) (orig. proceeding). To determine whether a

claim falls within the scope of the agreement, courts must focus on the factual

allegations of the complaint, rather than the legal causes of action asserted. In re

Rubiola, 334 S.W.3d 220, 225 (Tex. 2011) (orig. proceeding); see also In re Kaplan Higher

Educ. Corp., 235 S.W.3d 206, 210 (Tex. 2007) (orig. proceeding) (stating that when an

agreement between two parties clearly provides for the substance of the dispute to be

                                           14
arbitrated, one cannot avoid it by simply pleading that a nonsignatory agent or affiliate

was pulling the strings). Because forum-selection clauses are creatures of contract, the

circumstances in which nonsignatories can be bound to one are rare. Pinto Tech.

Ventures, L.P., 526 S.W.3d at 443.

      We review a contractual provision in light of the entire contract. BBVA

Compass Inv. Sols., Inc. v. Brooks, 456 S.W.3d 711, 718–19 (Tex. App.—Fort Worth

2015, no pet.). That is, as the supreme court has instructed us,

      [w]e “construe contracts from a utilitarian standpoint bearing in mind
      the particular business activity sought to be served,” and avoiding
      unreasonable constructions when possible and proper. Reilly v. Rangers
      Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987). To that end, we consider
      the entire writing, harmonizing and giving effect to all the contract
      provisions so that none will be rendered meaningless. Moayedi, 438
S.W.3d at 7. No single provision taken alone is given controlling effect;
      rather, each must be considered in the context of the instrument as a
      whole. Id. We also give words their plain, common, or generally
      accepted meaning unless the contract shows that the parties used words
      in a technical or different sense. Id.

Plains Expl. & Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015).

      A contract is not ambiguous if its language can be given a certain or definite

meaning. Id. But if the contract is subject to two or more reasonable interpretations

after applying the pertinent contract principles, the contract is ambiguous, creating a

fact issue regarding the parties’ intent. Id. Mere disagreement over the interpretation

of an agreement does not necessarily render the contract ambiguous. Id. Further, our

primary concern is to determine the true intent of the parties as expressed by the plain

                                           15
language of the agreement. N. Shore Energy, L.L.C. v. Harkins, 501 S.W.3d 598, 602

(Tex. 2016).

A. Arbitration Agreement

      We must determine whether Apache showed, under Texas contract law, that

there was a valid agreement to arbitrate between it and Appellees.

   1. Apache–WOC Agreement to Arbitrate

      In the PSA, WOC and Apache agreed to arbitrate “[a]ny disputes arising out of

or in connection with this Agreement or the application, implementation, validity,

breach or termination of this Agreement . . . pursuant to the dispute resolution

provisions contained in Exhibit B,”7 and the Apache Assignment was made subject

“to the terms and conditions” of the PSA. Accordingly, Apache showed that there

was a valid agreement to arbitrate between it and WOC.

   2. WOC Assignees

      Determining whether a claim involving a nonsignatory must be arbitrated is a

gateway matter for the trial court, not the arbitrator. Jody James Farms, JV, 547 S.W.3d

at 629, 630 (“Who may properly adjudicate arbitrability is critical to ascertaining the

appropriate standard of review.”).

      Contract language can extend enforcement rights to nonsignatories, such as

when the arbitration agreement expressly provides that certain nonsignatories are

      7
       Within this agreement, Apache and WOC carved out an exception, the
applicability of which we address below.

                                          16
considered parties to the agreement. Pinto Tech. Ventures, L.P., 526 S.W.3d at 445. But

the mere incorporation of AAA rules does not demonstrate a clear intent to arbitrate

arbitrability as to a nonsignatory; rather, compelled arbitration cannot precede a

judicial determination that an agreement to arbitrate exists in the absence of clear and

unmistakable evidence that a party agreed to arbitrate arbitrability in disputes with

nonsignatories. Jody James Farms, JV, 547 S.W.3d at 632–33.

      The matter before us involves a signatory defendant trying to force

nonsignatory plaintiffs into a forum not selected by the nonsignatory plaintiffs. There

are six scenarios in which arbitration with nonsignatories may be required:

incorporation by reference, assumption, agency, alter ego, equitable estoppel, and

third-party beneficiary. Id. at 633 (referencing Kellogg Brown & Root, Inc., 166 S.W.3d at

739). Apache argues that WOC’s assignees are subject to three of these theories—

assumption, direct benefits estoppel,8 and incorporation by reference.9

      8
        Under “direct benefits” estoppel, a nonsignatory plaintiff seeking the benefits
of a contract is estopped from simultaneously attempting to avoid the contract’s
burdens and may be compelled to arbitrate if he seeks to enforce the terms of a
contract containing an arbitration provision, such as suing for breach of contract,
breach of warranty, or revocation of acceptance based on the contract’s written terms.
Kellogg Brown & Root, Inc., 166 S.W.3d at 739–40; see Meyer v. WMCO-GP, LLC, 211
S.W.3d 302, 307 (Tex. 2006) (“When a party’s right to recover and its damages
depend on the agreement containing the arbitration provision, the party is relying on
the agreement for its claims.”).
      9
       Documents incorporated into a contract by reference become a part of the
contract when they do more than merely mention it. See In re 24R, Inc., 324 S.W.3d
564, 567 (Tex. 2010) (orig. proceeding); Bob Montgomery Chevrolet, Inc. v. Dent Zone Co.,
409 S.W.3d 181, 189 (Tex. App.—Dallas 2013, no pet.). The language of the signed

                                           17
      Under the assumption scenario, an assignee may be held liable under another

party’s contract if it makes an express or implicit assumption of the contract’s

obligations. NextEra Retail of Tex., LP v. Inv’rs Warranty of Am., Inc., 418 S.W.3d 222,

227 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) (stating that while an implied

assumption is disfavored, it may arise when the benefit received by the assignee is so

entwined with the burden imposed by the assignor’s contract that the assignee is

estopped from denying assumption and the assignee would otherwise be unjustly

enriched). And instruments pertaining to the same transaction may be read together

to ascertain the parties’ intent. Fort Worth ISD v. City of Fort Worth, 22 S.W.3d 831, 840

(Tex. 2000) (stating that such instruments may be read together “even if the parties

executed the instruments at different times and the instruments do not expressly refer

to each other”).10 The PSA, Apache Assignment, and WOC Assignment all pertain to

document must show that the parties intended for the other document to become a
part of the agreement. Bob Montgomery Chevrolet, Inc., 409 S.W.3d at 189–90 (“[T]he
referring language in the original document must demonstrate the parties intended to
incorporate all or part of the referenced document.”); see Gross v. WB Tex. Resort
Cmtys., L.P., No. 02-12-00411-CV, 2014 WL 7334950, at *3 (Tex. App.—Fort Worth
Dec. 23, 2014, no pet.) (mem. op.); see also In re Prudential Ins. Co. of Am., 148 S.W.3d
124, 135 (Tex. 2004) (orig. proceeding) (holding that lease’s jury waiver was
incorporated by reference into guaranty agreement, which “plainly refer[red]” to the
lease when guarantors agreed to “faithfully perform and fulfill all of [the] terms,
covenants, conditions, provisions, and agreements” of the lease if the partnership
defaulted).
      10
         In Fort Worth ISD, the court read two Fort Worth ordinances and
“contemporaneous, related documents” together as a valid agreement enforceable by
the local school district, notwithstanding the city’s argument that no single instrument
reflected any agreement between the city and the school district. 22 S.W.3d at 834,

                                           18
the same ultimate transaction—the purchase, sale, and conveyance of the oil-and-gas

related assets and liabilities.

       In the WOC Assignment, a separate agreement that did not involve Apache but

that bore the same effective date and conveyed the same assets governed by the PSA

and the Apache Assignment, WOC and the other Appellees agreed that their

assignment was “subject to all terms, provisions and conditions contained in the

APACHE Assignment,” and that “Assignees assume[d] and agree[d] to be bound by

and perform their proportionate parts of all obligations imposed upon Assignor by

the APACHE Assignment.” [Emphasis added.] The Apache Assignment, between

Apache and WOC, was made subject to all of the PSA’s terms and conditions. And

the PSA itself, in article 11, which governed assignment, provided that the PSA would

be binding upon and inure both to WOC and Apache “and their respective successors

and assigns.” Wagner, albeit in his corporate capacity, signed the PSA on June 4,

2001, and the Apache Assignment on June 28, 2001, giving him intimate familiarity

with these documents’ requirements before he signed the WOC Assignment in his

personal capacity on June 29, 2001.

       Based on the above, we conclude that the remaining Appellees are also subject

to the PSA’s arbitration clause. Compare Rieder v. Meeker, No. 02-17-00176-CV, 2018
WL 5074703, at *16 (Tex. App.—Fort Worth Oct. 18, 2018, no pet. h.) (mem. op.)

838–40 (observing that, as a matter of law, a court may determine that multiple
documents comprise a written contract and that in “appropriate instances, courts may
construe all documents as if they were part of a single, unified instrument”).

                                         19
(holding that forum selection clause was enforceable against nonsignatories who were

managing board members of and closely related to a signatory because they were so

closely related to the signatory that enforcement of the clause against them was

foreseeable), with Ball Up, LLC v. Strategic Partners Corp., Nos. 02-17-00197-CV, 02-17-

00198-CV, 2018 WL 3673044, at *8 (Tex. App.—Fort Worth Aug. 2, 2018, no pet.)

(mem. op.) (holding that a nonsignatory stranger to the contract with the forum

selection clause could not enforce the clause against a signatory to attain personal

jurisdiction over it in Texas). Accordingly, we do not reach Apache’s other theories.

See Tex. R. App. P. 47.1.

       But our analysis does not end here. Apache also had the burden to establish

that the claims in Appellees’ declaratory judgment action fell within the scope of the

arbitration clause.

B. Arbitration Clause’s Scope

       The arbitration clause at issue applies broadly to any disputes “arising out of or

in connection with [the PSA] or the application, implementation, validity, breach or

termination of the PSA,” with a carved-out exception. That exception states that

notwithstanding the breadth of the first sentence’s language,

       in the event a third party brings an action against [WOC] or [Apache]
       concerning this Agreement or the Assets or transactions contemplated
       herein, [WOC] and [Apache] shall not be subject to mandatory
       arbitration under this section and [WOC] or [Apache] shall each be
       entitled to assert their respective claims, if any, against each other in such
       third party action.

                                            20
      Apache argues that the carve-out only allowed Appellees to avoid arbitration if

a third party filed suit related to the assets and Appellees filed cross-claims against

Apache in the same third-party action.        Apache complains that the trial court’s

interpretation rendered the phrase “in such third party action” surplusage.

      Appellees respond that the carve-out’s proper construction should be

understood to mean that when the claim involves a third party and the assets, the PSA

does not require arbitration, regardless of whether the issues are litigated in the third-

party action or as a stand-alone lawsuit between Apache and Appellees.

      For the exception to apply, a third party had to sue either Apache or WOC,

raising some issue connected to the PSA, the assets, or “transactions contemplated” in

the PSA. The record reflects that various third parties, in five Louisiana lawsuits, sued

Apache, and that Apache, in turn, sought arbitration with regard to its breach-of-

contract-based indemnity issues. The plain language of the last portion of the carve-

out closes with a second reference to the third-party action.11

      Considering both the language of the carve-out and the rest of the PSA to

provide context for the arbitration clause, we read the carve-out as limited to cross-

claims within a third-party action. See Plains Expl. & Prod. Co., 473 S.W.3d at 305

(explaining that courts should construe contracts by giving effect to all of the

      11
         Appellees argue that the language of the carve-out—such third-party action—
“simply refers back to the two circumstances that define the parameters of the ‘event’
that triggers the carve-out sentence” and that the second clause is permissive. For the
reasons set forth above and below, we disagree.

                                           21
provisions and bearing in mind the business activity sought to be served); see also

Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 242 (Tex. 2016) (referencing “the

fundamental principle that courts cannot rewrite the parties’ contract or add to or

subtract from its language”); Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London,

327 S.W.3d 118, 126 (Tex. 2010) (op. on reh’g) (“Courts strive to honor the parties’

agreement and not remake their contract by reading additional provisions into it.”).

       We reach this conclusion not only by applying the plain language used in the

PSA but also by taking a utilitarian view of the business activity sought to be served

here. See N. Shore Energy, L.L.C., 501 S.W.3d at 602 (“Our primary concern is to

determine the true intent of the parties as expressed by the plain language of the

agreement.”); Plains Expl. & Prod. Co., 473 S.W.3d at 305 (requiring contracts to be

construed “from a utilitarian standpoint bearing in mind the particular business

activity sought to be served”). The overriding theme of the PSA was for Apache to

walk away from all but its specific retained liabilities, handing the potentially profitable

assets to WOC in exchange for $25 million, an “as-is” sale with a sole remedy for any

noncompliance by Apache with environmental laws available only before closing so

that the parties could adjust the purchase price—“closing” here was meant as a cutoff

date for the Article 6 remedies.12 The parties agreed to a broad indemnification

        The PSA was effective April 1, 2001, signed June 4, 2001, and closed June 29,
       12

2001. While closing is typically when assets are transferred, here, as noted above,
“closing” had the additional significance of cutting off remedies with regard to
adverse environmental conditions related to the assets.

                                            22
provision, and it is clear from the PSA’s plain language that Apache did not want any

liability other than that which it specifically retained, not even for any damages

sustained during WOC’s inspection of the to-be-sold-“as is” assets. The parties also

agreed to a broad, far-reaching arbitration procedure covering “[a]ny and all disputes”

except for those involving engagement in any third-party actions. See Nat’l City Mortg.

Co. v. Adams, 310 S.W.3d 139, 144 (Tex. App.—Fort Worth 2010, no pet.) (op. on

reh’g) (observing that a defining characteristic of indemnification is that it does not

apply to claims between the parties to the agreement but rather relates to liability

claims of persons not party to the agreement); see also Prudential Sec. Inc. v. Marshall, 909
S.W.2d 896, 899 (Tex. 1995) (orig. proceeding) (reciting that the policy in favor of

enforcing arbitration agreements is so compelling that courts should not deny

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” (quoting Neal

v. Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990))); S.P., III v. N.P., No. 02-16-

00278-CV, 2017 WL 3821887, at *6 (Tex. App.—Fort Worth Aug. 31, 2017, no pet.)

(mem. op.) (“A strong presumption favors arbitration, and courts resolve any doubts

about an agreement’s ‘scope, waiver, and other issues unrelated to its validity in favor

of 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, a court

should not deny arbitration.’” (quoting BBVA Compass Inv. Sols., 456 S.W.3d at 718

(footnote omitted))).

                                             23
      Accordingly, we conclude that the trial court abused its discretion by denying

Apache’s motion to compel arbitration and sustain Apache’s first issue. Because we

sustain Apache’s first issue, we do not reach its second issue on venue. See Tex. R.

App. P. 47.1.

                                   IV. Conclusion

      The trial court erred in its construction of the parties’ arbitration agreement.

Accordingly, we sustain Apache’s first issue, vacate the trial court’s order granting the

stay of arbitration, and remand this case to the trial court to compel arbitration

pursuant to the parties’ agreement.

                                                      /s/ Bonnie Sudderth
                                                      Bonnie Sudderth
                                                      Chief Justice

Delivered: November 29, 2018

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