Court Opinion

ID: 9928307
Source: CourtListenerOpinion
Date Created: 2024-01-31 15:12:19.086003+00
Date Added: 2024-06-11T09:52:37.781048
License: Public Domain

In the
                       Court of Appeals
         Sixth Appellate District of Texas at Texarkana

                            No. 06-23-00081-CV

GULF COAST VETERINARY SURGERY – SAN ANTONIO MANAGEMENT LLC AND
      VETERINARY SPECIALISTS OF NORTH AMERICA LLC, Appellants

                                     V.

     JOCELYN COOPER, DVM, AND TIGE WITSBERGER, DVM, Appellees

                   On Appeal from the 57th District Court
                           Bexar County, Texas
                       Trial Court No. 2023CI06566

               Before Stevens, C.J., van Cleef and Rambin, JJ.
               Memorandum Opinion by Chief Justice Stevens
                                    MEMORANDUM OPINION

        This is an interlocutory appeal from an order dated August 29, 2023, in the 57th Judicial

District Court in Bexar County1 denying a motion to compel arbitration. On appeal, Gulf Coast

Veterinary Surgery – San Antonio Management LLC (Gulf Coast) and Veterinary Specialists of

North America LLC (VSNA) claim the trial court abused its discretion in refusing to refer their

contract dispute with veterinarians Jocelyn Cooper and Tige Witsberger to arbitration.

        Cooper and Witsberger agreed to binding arbitration in their employment contracts with

their original employer, Gulf Coast Veterinary Surgery—San Antonio, PLLC (the Practice).

Thereafter, another company, VSNA, purchased Cooper’s and Witsberger’s interests in the

Practice, including the Practice’s contractual obligations with Cooper and Witsberger. A month

after the purchase, and as a part of the transaction, Gulf Coast was formed to manage VSNA.

Cooper and Witsberger left Gulf Coast and VSNA, and they sued both Gulf Coast and VSNA,

seeking the “fair value for their membership interests” in the veterinary practice and a

declaratory judgment on the contract provisions applicable to those valuations.

        Gulf Coast and VSNA moved to compel arbitration under the terms of Cooper’s and

Witsberger’s employment contracts. The trial court, not the arbitrator, considered and denied the

request. Gulf Coast and VSNA claim that both the trial court’s determination of arbitrability and

the trial court’s denial of their request to compel arbitration were an abuse of discretion. We find

that, although the trial court properly considered the issue of arbitrability, this dispute should

1
 Originally appealed to the Fourth Court of Appeals, this case was transferred to this Court by the Texas Supreme
Court pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001 (Supp.). We are unaware of
any conflict between precedent of the Fourth Court of Appeals and that of this Court on any relevant issue. See
TEX. R. APP. P. 41.3.
have been referred to arbitration. Accordingly, we reverse the trial court’s judgment and remand

the case to the trial court for entry of an order compelling arbitration and staying the litigation.

I.      Factual Background

        On May 30, 2014, Cooper and Witsberger both signed employment contracts with the

Practice.   As a part of their employment contracts, they agreed to arbitrate their disputes,

employment and otherwise, as follows:

        [A]ll disputes arising out of this agreement or arising in any way with Employee’s
        employment or any relationship whatsoever with the Practice, its agents, servants
        and/or employees shall be resolved exclusively through binding arbitration under
        the rules then in effect of the American Arbitration Practice or a mutually
        agreeable arbitrator.

        In 2016, Cooper and Witsberger sold their interests in their veterinary business with the

Practice to VSNA. After VSNA purchased Cooper’s and Witsberger’s interests in the Practice,

Cooper and Witsberger did not sign new or separate employment contracts with VSNA. Instead,

Cooper and Witsberger both signed an asset purchase agreement on June 30, 2016, whereby

VSNA acquired their interests in the Practice.

        In the asset purchase agreement, VSNA, as the “Purchaser,” agreed to purchase from the

Practice, as the “Seller,” “all contracts:”

        The Acquired assets shall include the following, without limitation, to the extent
        that the same are owned by the Seller:

                ....

                        (b) all Contracts (but not including any Employee Benefit Plan or
        Contracts which the primary focus of which is Taxes) related to Seller, including
        those set forth on Schedule 1.1(b) (the “Assumed Contracts”) . . . .
       Within a month of the sale, on July 25, 2016, Gulf Coast was formed to manage the

Practice.   At the same time of Gulf Coast’s creation, VSNA, the Practice, Cooper, and

Witsberger executed an “Amendment No. 1 to Asset Purchase Agreement.” In Paragraph 2.1 of

the Amendment, the signatories agreed that VSNA and Gulf Coast would be interchangeable:

“All references to ‘Veterinary Specialists of North America LLC,’ ‘VSNA’ and ‘Purchaser’ in

the Asset Purchase Agreement shall be deemed to mean ‘Gulf Coast Veterinary Surgery – San

Antonio Management LLC’ [(Gulf Coast)].”

       Two years later, in 2018, the Practice and VSNA executed another contract with Cooper

and Witsberger entitled “First Amendment to Employment Agreement.” Cooper and Witsberger

also signed those contracts. In those contracts, VSNA was granted the authority to enforce

“remedies and rights” of the Practice:

              WHEREAS, the Practice has retained the services of Veterinary
       Specialists of North America LLC (“VSNA”) (d/b/a Compassion-First Pet
       Hospitals) and its related affiliates (hereinafter collectively, “VSNA”) to provide
       management services to the Practice. Accordingly, VSNA is and shall be a third-
       party beneficiary of this Amendment, and to the extent that any remedies or rights
       are provided to the Practice herein, such rights and remedies may be enforced by
       VSNA as if it were a party hereto; . . . .

As a part of those contracts, Cooper and Witsberger also recognized that “all of the terms and

provisions of the Existing Agreement [employment contract were] and [would] remain in full

force and effect and [were thereby] ratified and confirmed by the Parties.”

       In 2022, Cooper and Witsberger left VSNA and Gulf Coast and sought to recover money

from them for their membership interests and obtain a declaratory judgment related to the

valuation of those interests. Under the terms of the contract creating Gulf Coast, “[a]ny member
may withdraw or resign as a Member of the Company by giving not less than ninety (90) days’

prior written notice of such withdrawal or resignation to the Company.” Cooper and Witsberger

claim they complied with that provision and now seek to have the “fair value for their

membership interests” and a declaratory judgment on this issue.

       VSNA and Gulf Coast did not agree to their terms for departure and the “fair value for

their membership interests,” and Cooper and Witsberger filed suit on April 3, 2023. Cooper and

Witsberger claim breach of contract and seek a declaratory judgment. In response, VSNA and

Gulf Coast moved to compel arbitration.

II.    Standard of Review

       The denial of a motion to compel arbitration is reviewed for abuse of discretion. See

In re Labatt Food Serv., L.P., 279 S.W.3d 640, 642–43 (Tex. 2009) (orig. proceeding); CHG

Hosp. Bellaire, LLC v. Johnson, No. 01-20-00437-CV, 2022 WL 3720136, at *4 (Tex. App.—

Houston [1st Dist.] Aug. 30, 2022, no pet.) (op. on remand) (holding “[w]e review interlocutory

appeals of orders denying motions to compel arbitration for an abuse of discretion”). Whether

the claims in dispute fall within the scope of a valid arbitration agreement and whether a party

has waived its rights to arbitrate are questions of law, which are reviewed de novo. See In re

Labatt Food Serv., L.P., 279 S.W.3d at 642–43; Enter. Field Servs., LLC v. TOC-Rocky

Mountain, Inc., 405 S.W.3d 767, 773 (Tex. App.—Houston [1st Dist.] 2013, pet. denied).

       Both the Federal Arbitration Act (FAA) and the Texas Arbitration Act (TAA) may apply

to arbitration agreements. See Ewing Constr. Co. v. Benavides Indep. Sch. Dist., No. 04-19-

00797-CV, 2020 WL 1277756, at *2 (Tex. App.—San Antonio Mar. 18, 2020, pet. denied)
(mem. op.) (citing In re D. Wilson Constr. Co., 196 S.W.3d 774, 778–79 (Tex. 2006) (orig.

proceeding)). In Cooper’s and Witsberger’s employment agreements, the “[g]overning [l]aw” is

specified to be “the laws of the State of Texas.” Such contractual language has been interpreted

“as invoking both the FAA and the TAA to the extent they are not inconsistent.” Id. at *2.

III.   Analysis

       Upon review, we find that (1) the trial court properly determined the question of

arbitrability, (2) non-signatories VSNA and Gulf Coast may enforce the arbitration agreements

against Cooper and Witsberger, and (3) Cooper and Witsberger’s claims are within the scope of

the arbitration agreements.

       A.      The Trial Court Properly Determined the Question of Arbitrability

       As an initial matter, VSNA and Gulf Coast claim the trial court abused its discretion by

deciding the issue of arbitrability. We find that it did not.

       As a general principle, “absent unmistakable evidence that the parties intended the

contrary, it is the courts rather than arbitrators that must decide ‘gateway matters’ such as

whether a valid arbitration agreement exists.” In re Weekley Homes, L.P., 180 S.W.3d 127, 130

(Tex. 2005) (orig. proceeding) (quoting Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452

(2003)). Such a “gateway matter” includes “[w]hether an arbitration agreement is binding on a

nonparty.” Id. Because whether, as non-signatories, VSNA and Gulf Coast may enforce the

arbitration agreements is a “gateway matter” under In re Weekley Homes, L.P., the trial court in

this case properly considered this issue.
        VSNA and Gulf Coast do not agree with this assessment and argue that the employment

contracts in this case require the issue of arbitrability be decided by an arbitrator and require

“binding arbitration” be “under the rules then in effect of the American Arbitration Practice or a

mutually agreeable arbitrator.” They claim such a provision is the same as providing that

arbitration be conducted “in accordance with the AAA or similar rules,” which “constitutes a

clear and unmistakable agreement that the arbitrator must decide whether the parties’ disputes

must be resolved through arbitration.” TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico,

LLC, 667 S.W.3d 694, 708 (Tex. 2023).

        We disagree with this argument. Unlike TotalEnergies, the arbitration provisions in this

case do not contain such “a clear and unmistakable agreement.” Id. As recognized above, the

relevant contract provisions in this action provide that “binding arbitration” be made “under the

rules then in effect of the American Arbitration Practice or a mutually agreeable arbitrator.” The

“American Arbitration Practice” is not the “AAA” or the “American Arbitration Association” as

was present in TotalEnergies.        The parties do not appear to dispute that the “American

Arbitration Practice” is not even a real organization.        That said, there is no “clear and

unmistakable agreement” that the parties desired an arbitrator to decide the issue of arbitrability.

Id.   Because there was no such agreement, the trial court did not abuse its discretion in

considering the issue of arbitrability.
       B.      VSNA and Gulf Coast May Enforce the Arbitration Agreement

       As non-signatories to the employment contracts, VSNA and Gulf Coast can both enforce

the arbitration agreements between the Practice and Cooper and the Practice and Witsberger on

the basis of assumption.

       The determination whether to compel arbitration involves a two-step process. See In re

Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding) (citing In re

FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001) (orig. proceeding); In re Oakwood

Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999) (per curiam) (orig. proceeding)). First,

there must be “a valid arbitration agreement.” Id. Second, “the claims raised fall within that

agreement’s scope.” Id. As a part of the first element, courts consider “[w]hether a non-

signatory may enforce an arbitration agreement’s terms.” Jody James Farms, JV v. Altman Grp.,

Inc., 547 S.W.3d 624, 633 (Tex. 2018) (citing G.T. Leach Builders, LLC v. Sapphire V.P., LP,

458 S.W.3d 502, 525 (Tex. 2015)).

       There are six situations where arbitration with non-signatories may be compelled. See id.

(citing In re Kellogg Brown & Root, Inc., 166 S.W.3d at 739).                 The situations are

“(1) incorporation by reference, (2) assumption, (3) agency, (4) alter ego, (5) equitable estoppel,

and (6) third-party beneficiary.” Id.; see Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d

347, 356 (5th Cir. 2003).

       At issue in the current action is the second basis: assumption. “To assume a contractual

obligation, there must be promissory words or words of assumption on behalf of the assignee.”

Wagner v. Apache Corp., 627 S.W.3d 277, 286 (Tex. 2021) (citing Jones v. Cooper Indus., Inc.,
938 S.W.2d 118, 124 (Tex. App.—Houston [14th Dist.] 1996, writ denied)).                 As further

emphasized in Wagner, such contractual obligations are assumed when “all” obligations are

assumed: “All obligations means all obligations.” Id. Because VSNA and Gulf Coast purchased

the Practice’s contracts and assumed those contracts, they also purchased Cooper’s and

Witsberger’s employment contracts and assumed rights under those contracts.

               1.      VSNA May Enforce the Arbitration Agreement

       As noted above, in 2016, VSNA assumed Cooper’s and Witsberger’s arbitration

agreements when VSNA purchased Cooper’s and Witsberger’s interests in the Practice. As

stated in the asset purchase agreement, the “Assets to be Purchased” included “(b) all Contracts

(but not including any Employee Benefit Plan or Contracts which the primary focus of which is

Taxes) related to Seller, including those set forth on Schedule 1.1(b) (the ‘Assumed Contracts’).”

       In their briefing, Cooper and Witsberger claim that Schedule 1.1(b) is not included in the

record and the contracts specifically listed in Schedule 1.1(b) could impact the result of this case.

We disagree. Because there is no limitation in this provision on the type of contract and the

word “including” is used, this would necessarily include employment contracts.             See, e.g.,

Houston Bank & Tr. Co. v. Lansdowne, 201 S.W.2d 834, 838 (Tex. App.—Galveston 1947, writ

ref’d n.r.e.) (recognizing that “including” generally acts as a term of enlargement, not limitation).

Thus, we find that, when VSNA purchased their interests in the Practice, VSNA also purchased

their employment contracts.

       The fact that only the employment contracts, and not the asset purchase agreement

between VSNA and the Practice, contained an arbitration clause is not relevant. See Kirby
Highland Lakes Surgery Ctr., L.L.P. v. Kirby, 183 S.W.3d 891, 893–94 (Tex. App.—Austin

2006, orig. proceeding). In Kirby, a physician and his wife brought a breach of contract suit

against the physician’s partners. See id. The purchase and sale agreement did not contain an

arbitration clause, but the Third Court of Appeals enforced the “extremely broad” arbitration

clause contained only in the partnership agreement. Id. at 898. The court in Kirby held that,

because “the Partnership Agreement contains a broad arbitration clause extending to disputes

‘related to’ that agreement; that agreement and the Purchase and Sale Agreement were executed

at the same time as parts of a single transaction; and the Partnership Agreement was essential to

the overall transaction.” Id.

       In Cooper and Witsberger’s case, VSNA went as far as to purchase and assume “all

Contracts” as a part of the asset purchase agreement. As in Kirby, this assumption was a part of

the purchase and appears to be integral to the purchase, despite the fact the employee agreements

were executed in 2014 and the sale from the Practice to VSNA did not occur until 2016.

Notably, when the “First Amendment to Employment Agreement” was ratified two years later in

2018, Cooper and Witsberger also recognized that “all of the terms and provisions of the

Existing Agreement [were] and [would] remain in full force and effect and [were thereby]

ratified and confirmed by the Parties.” The fact those terms were reaffirmed demonstrates they

were important to VSNA. Indeed, if Cooper and Witsberger planned to be released from those

broad arbitration provisions at that time, they should not have reaffirmed the terms of the

existing employment agreements.
               2.     Gulf Coast May Enforce the Arbitration Agreement

       In addition to VSNA, Gulf Coast also purchased those employment contracts. Shortly

after the agreement was reached with the Practice, VSNA, the Practice, Cooper, and Witsberger

all agreed that the asset purchase agreement included Gulf Coast such that VSNA would be

interchangeable with Gulf Coast. Consequently, under the contract terms of the parties, Gulf

Coast also purchased the Practice’s contracts.

       C.      Cooper and Witsberger’s Claims Are Within the Scope of the Arbitration
               Agreement

       Because VSNA and Gulf Coast are permitted to enforce the arbitration agreements

against Witsberger and Cooper, the remaining question under the two-part analysis explained in

Kellogg is whether the claims in dispute fall within the agreement’s scope. See In re Kellogg

Brown & Root, Inc., 166 S.W.3d at 737. Under the terms of the employment agreements, both

Cooper and Witsberger agreed to resolve “all disputes arising out of this agreement or arising in

any way with Employee’s employment or any relationship whatsoever with the Practice, its

agents, servants and/or employees . . . exclusively through binding arbitration.”

       In the present action, Cooper and Witsberger are seeking breach of contract damages and

declaratory relief. They seek to recover from VSNA and Gulf Coast. According to the terms of

their employment contracts, “all disputes” are to be submitted to binding arbitration. This is an

expansive and broad arbitration provision and is not just limited to employment disputes. See,

e.g., Frost Bank v. Steven A. Davis, M.D., P.A., No. 04-20-00522-CV, 2021 WL 2446210, at *3

(Tex. App.—San Antonio June 16, 2021, no pet.) (mem. op.) (citing In re Dillard Dep’t Stores,

Inc., 186 S.W.3d 514, 515 (Tex. 2006) (per curiam) (orig. proceeding)) (compelling arbitration
for negligence, conversion, fraudulent inducement, and breach of contract based upon an

expansive and broad arbitration agreement between the parties requiring “ALL DISPUTES” be

referred to arbitration).

        This is especially true where, as here, Witsberger and Cooper are professionals and

cannot be characterized as merely “employees,” but they have ownership interests in dispute.

Even if the contracts were not assumed, this lawsuit would likely qualify under their arbitration

agreements as it applies to “all disputes arising out of this agreement or arising in any way with

Employee’s employment or any relationship whatsoever with the Practice, its agents, servants

and/or employees.” As such, this case must be referred to binding arbitration.

IV.     Conclusion

        We reverse the trial court’s judgment and remand the case to the trial court for entry of an

order compelling arbitration and staying the litigation.

                                                      Scott E. Stevens
                                                      Chief Justice

Date Submitted:         January 12, 2024
Date Decided:           January 31, 2024