Court Opinion

ID: 4520536
Source: CourtListenerOpinion
Date Created: 2020-03-30 07:15:18.985784+00
Date Added: 2024-06-11T08:40:56.757308
License: Public Domain

Affirm; Opinion Filed March 27, 2020

                                              In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                      No. 05-18-01090-CV

               TRENT TRUBENBACH AND DONNA BURTON, Appellants
                                   V.
                  ENERGY EXPLORATION I, L.L.C., AND ENERGY
                       EXPLORATION II, L.L.C., Appellees

                      On Appeal from the 416th Judicial District Court
                                   Collin County, Texas
                          Trial Court Cause No. 416-00031-2015

                             MEMORANDUM OPINION
                       Before Justices Pedersen, III, Reichek, and Carlyle
                                Opinion by Justice Pedersen, III
       Appellants Trent Trubenbach and Donna Burton appeal the trial court’s final judgment

confirming an arbitration award in favor of appellees Energy Exploration I, L.L.C. and Energy

Exploration II, L.L.C. Appellants raise three issues for our consideration. They first contend the

trial court erred in confirming the arbitration award because the arbitrator exceeded his authority

by determining arbitrability. Second, they assert in the alternative that if the trial court made an

independent determination regarding arbitrability, such determination was erroneous. Third, they

urge that the appellees waived their rights to enforce the arbitration provision. We affirm.

                                       I. BACKGROUND

       The timeline of the proceedings below is relevant to our consideration of this case. Kurtis

and Elizabeth Christensen formed Energy Exploration I, L.L.C. and Energy Exploration II, L.L.C.
(collectively Energy Exploration), both Iowa limited liability companies, to invest with TRU

Exploration, L.L.C. and its affiliates in certain oil and gas securities. Over time, Energy

Exploration invested in three of TRU Exploration’s joint ventures: TRU Exploration TruFire #2

Joint Venture, TRU Exploration Mississippian #1 Joint Venture, and TRU Exploration Woodford

#1 Joint Venture. Documentation for each joint venture included a joint venture agreement, a

subscription agreement, and a confidential private placement memorandum. The joint venture

agreements appointed TRU Exploration, L.L.C. as the Managing Venturer. Each subscription

agreement contained an identical arbitration clause. Each subscription agreement was signed by

Energy Exploration and was approved and accepted by the respective joint venture, a Texas joint

venture partnership, by TRU Exploration, L.L.C., Managing Venturer. Trubenbach signed each

agreement on behalf of TRU Exploration, L.L.C.

       In January 2015, Energy Exploration filed suit against TRU Exploration, L.L.C., TRU

Exploration “Creating TRU Partners,” L.L.C., Trent Trubenbach, Mason Kuehl, Robert Francis

Fox, and Donna Burton asserting various claims including, but not limited to, securities fraud,

breach of fiduciary duty, violation of the Texas Securities Act, and conspiracy. Energy Exploration

also sought a temporary restraining order, a preliminary injunction freezing assets, and an

accounting.

       TRU Exploration, L.L.C., TRU Exploration “Creating TRU Partners,” L.L.C., Trent

Trubenbach, and Donna Burton (referring to themselves as the TRU Defendants) filed a motion to

stay litigation and to compel arbitration, urging that the arbitration provisions in the subscription

agreements covered Energy Exploration’s claims. Energy Exploration opposed the motion,

arguing that the TRU Defendants had filed the motion in an effort to avoid inspection of their bank

records and financial information pertaining to the Energy Exploration’s investment. Energy

Exploration argued that: (i) the TRU Defendants were not parties to the subscription agreements

                                                –2–
that contained the arbitration provisions, (ii) its claims were outside the scope of the arbitration

provision, and (iii) even if arbitration was applicable, the court still had the authority to enforce its

temporary restraining order and to issue injunctive relief. After a hearing, the trial court denied the

TRU Defendants’ motion to compel arbitration. Likewise, the trial court was unpersuaded by their

motion for reconsideration.

          The TRU Defendants filed a notice of interlocutory appeal of the trial court’s denial of

their motion to compel arbitration.1 On February 26, 2015, this Court stayed the trial court

proceedings pending further order of this Court. In their appellate brief, the TRU Defendants

(appellants) argued that the arbitration provision in the subscription agreements covered the parties

and claims at issue. The arbitration provision states in pertinent part:

          Any controversy or claim arising out of or relating to any interpretation, breach or
          dispute concerning any of the terms or provisions of this Subscription Agreement
          or any other matter in any way affecting the Program, which disagreement is not
          settled in writing within thirty (30) days after it arises, shall be exclusively and
          solely resolved by arbitration in Denton, Texas before the American Arbitration
          Association and in accordance with the rules and procedures for commercial
          disputes then obtaining of the American Arbitration Association (or any successor
          thereto), and the award rendered in said arbitration shall be final and may be entered
          in any court in the State of Texas, or elsewhere, having jurisdiction thereof.

          In April, 2015, Energy Exploration sent a letter advising this Court that they would arbitrate

their claims against appellants before the American Arbitration Association (AAA), thus rendering

moot the issues on appeal. We directed appellants to file a response. In their response, appellants

argued that their appeal should not be dismissed as moot because an opinion on the merits was

necessary to avoid continuing disputes between the parties as to the arbitration agreement. On June

30, 2015, this Court ordered that Energy Exploration’s letter, which we construed as a motion to

dismiss, was denied. We further ordered Energy Exploration to file a responsive brief. Energy

     1
       True Exploration, L.L.C., TRU Exploration “Creating TRU Partners”, L.L.C., Trent Trubenbach, and Donna Burton, Appellants v. Energy
Exploration I, L.L.C. and Energy Exploration II, L.L.C., Appellees, Court of Appeals, Fifth District of Texas, No. 05-15-00217-CV.

                                                                  –3–
Exploration filed its appellees’ brief on July 21, 2015, and the case was scheduled for submission

on January 20, 2016.

          Meanwhile, despite the pending appeal, Energy Exploration initiated arbitration

proceedings with the AAA. On May 12, 2015, Energy Exploration filed a demand for arbitration,

asserting claims for fraud, fraud by nondisclosure, fraud in the inducement, breach of fiduciary

duty, violations of the Texas Securities Act, suit against control persons and aiders under the Texas

Securities Act, conspiracy, conversion, money had and received, exemplary damages, interest, and

attorney’s fees. Trubenbach and Burton opposed any further action by the AAA without a ruling

from this Court regarding the trial court’s denial of their motion to compel arbitration. The AAA

stayed the arbitration proceeding pending a court determination in favor of arbitration or an

agreement by the parties to proceed. Trubenbach and Burton offered to proceed with the arbitration

if Energy Exploration would reimburse them for the attorney’s fees they had incurred in

connection with their motion to compel arbitration; Energy Exploration declined.

          On December 2, 2015, TRU Exploration, LLC filed a Chapter 7 proceeding in the United

States Bankruptcy Court for the Eastern District of Texas.2 Upon receipt of the notice that TRU

Exploration had filed for bankruptcy protection, this Court abated the appeal filed by TRU

Exploration, LLC, TRU Exploration “Creating TRU Partners,” LLC, Trent Trubenbach, and

Donna Burton.

          On January 18, 2016, Energy Exploration removed the state court proceeding to the

bankruptcy court in an adversary proceeding styled Energy Exploration I, L.L.C. and Energy

Exploration II, L.L.C. v. TRU Exploration, L.L.C., TRU Exploration “Creating TRU Partners,”

L.L.C., Trent Trubenbach, Robert Francis Fox, and Donna Burton, Adversary No. 16-04007.

Energy Exploration then sought relief from the automatic stay in order to proceed with the

   2
       In re: TRU Exploration, L.L.C., Debtor, Case No. 15-42176-BTR-7, U.S. Bankruptcy Court, Eastern District of Texas (Sherman Division).

                                                                   –4–
arbitration. On July 14, 2016, the bankruptcy court modified the stay to allow Energy Exploration

to proceed with the arbitration.

          Once the stay was lifted, the arbitration proceeded. After briefing by the parties, on January

20, 2017, the arbitrator signed an order setting forth his decision that the AAA had jurisdiction

over the dispute and that there was an arbitrable issue. On July 25, 2017, the arbitrator conducted

the arbitration of the dispute. Energy Exploration appeared and presented evidence and argument

in support of their claims; Trubenbach and Burton did not appear. Following the hearing, the

arbitrator set forth his findings and signed a final award, dated August 25, 2017, in favor of Energy

Exploration and against TRU Exploration, L.L.C., TRU Exploration “Creating TRU Partners,”

L.L.C., Trent Trubenbach, Mason Kuehl, and Donna Burton.

          In September 2017, Energy Exploration filed a motion to confirm the arbitration award in

the bankruptcy adversary proceeding. Trubenbach and Burton filed objections to confirmation of

the arbitration award, a motion to abstain, a motion to remand, and a motion for withdrawal of the

reference. In December 2017, after a hearing, the bankruptcy court granted Energy Exploration’s

motion to confirm the arbitration award as to the debtor, TRU Exploration, LLC, and granted the

motion filed by Trubenbach and Burton to remand the proceeding back to the trial court for

consideration of all other matters filed therein with respect to the nondebtor defendants.

          Energy Exploration also filed a motion to dismiss the interlocutory appeal still pending in

this Court, asserting that the appeal was moot because the arbitration that appellants sought in this

appeal had already occurred. Upon receipt of the bankruptcy court’s order discharging the Chapter

7 trustee and closing the Chapter 7 bankruptcy case, this Court reinstated the appeal. 3 We then

issued a memorandum opinion on April 27, 2018, which concluded that because arbitration had

been conducted and an award issued, the controversy no longer existed and the appeal was moot.

   3
       The bankruptcy case of the debtor was closed on February 21, 2018, and the automatic stay terminated on that date.

                                                                    –5–
We vacated our previous order staying the trial court proceedings, we vacated the trial court’s

order denying appellants’ motion to stay litigation and compel arbitration, we granted Energy

Exploration’s motion, and we dismissed the appeal.

       In May 2018, Energy Exploration filed an amended motion to confirm the arbitration award

in the trial court. Trubenbach and Burton opposed confirmation and sought to have the award

vacated. They denied being parties to any agreement that contains an arbitration provision and

asserted that they did not agree to arbitrate the claims set out in Energy Exploration’s arbitration

demand. They argued that the arbitrator exceeded his authority by entering an award against non-

parties and by ruling on the issue of arbitrability. After a hearing on these issues, the trial court

entered a final judgment, granting Energy Exploration’s motion to confirm the arbitration award,

denying Trubenbach and Burton’s motion to vacate the arbitration award, and confirming the final

award of the arbitrator against TRU Exploration “Creating TRU Partners,” L.L.C., Trubenbach,

Kuehl, and Burton. After their motion for new trial was overruled by operation of law, Trubenbach

and Burton filed their notice of appeal.

                                           II. DISCUSSION

       We begin with the foundational principle that “arbitration is a matter of contract and a party

cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT

& T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986). A party seeking to

compel arbitration must establish (1) the existence of a valid, enforceable arbitration agreement

and (2) that the claims at issue fall within the agreement’s scope. In re Kellogg Brown & Root,

Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding); VSR Fin. Servs., Inc. v. McLendon, 409
S.W.3d 817, 827 (Tex. App.—Dallas 2013, no pet.). The United States Supreme Court has

repeatedly emphasized that arbitration is a matter of consent, not coercion, that the FAA does not

require parties to arbitrate when they have not agreed to do so, and that its purpose is to make

                                                –6–
arbitration agreements as enforceable as other contracts, but not more so. Roe v. Ladymon, 318
S.W.3d 502, 510 (Tex. App.—Dallas 2010, no pet.) (citing EEOC v. Waffle House, Inc., 534 U.S.
279, 293 (2002); Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 479

(1989)).

       Non-signatories are normally not bound by arbitration agreements between others.

Ladymon, 318 S.W.3d at 511. However, non-signatories to a contract containing an arbitration

clause may be allowed or required to arbitrate if rules of law or equity would apply the contract to

them generally. Id. Whether a claim involving a non-signatory must be arbitrated is a “gateway

matter” for the trial court that is subject to de novo review on appeal. Jody James Farms, JV v.

Altman Group, Inc., 547 S.W.3d 624, 629 (Tex. 2018).

A. Arbitrability

       Appellants’ first and second issues pertain to the issue of arbitrability. They first contend

that the arbitrator exceeded his authority by determining arbitrability. Second, in the alternative,

they urge that if the trial court made an independent determination as to arbitrability, that decision

was incorrect. Energy Exploration responds that because appellants repeatedly asserted that the

underlying dispute was arbitrable and that arbitration should be compelled, they “cannot maintain

assertions of fact regarding arbitrability that are contrary to their previous representations to the

trial court and this Court.”

       Absent clear and unmistakable evidence that the parties agreed to the contrary, the primary

power to decide arbitrability resides with the court, not the arbitrator. Elgohary v. Herrera, 405
S.W.3d 785, 790 (Tex. App.—Houston [1st Dist.] 2013, no pet.). Accordingly, we first consider

whether the parties “clearly and unmistakably agreed” to submit arbitrability to the arbitrator.

Trubenbach and Burton first attempted to persuade the trial court that Energy Exploration’s claims

were arbitrable. The trial court did not rule on arbitrability; it simply denied their motion to compel

                                                 –7–
arbitration. Trubenbach and Burton then urged that the claims were arbitrable in their interlocutory

appeal to this Court. Energy Exploration ultimately conceded the issue and agreed to proceed to

arbitration. So for this brief moment in time, all of the parties appeared to have consented to

arbitration and appeared to be in agreement regarding arbitrability. Of course, this “agreement”

only lasted until Energy Exploration informed Trubenbach and Burton that it agreed to their

demand for arbitration. Thereafter, all parties continued to urge that the claims were arbitrable—

just not in the same proceeding.

          Relying primarily upon the bankruptcy court’s order lifting the stay to allow the arbitration

to proceed, the arbitrator concluded that the AAA had jurisdiction over the dispute and there was

an arbitral issue. When, as in this case, the arbitrator determined arbitrability even though it was a

question for the trial court, we ordinarily would remand for the trial court to consider the issue.

See Southwinds Express Constr., LLC v. D.H. Griffin of Texas, Inc., 513 S.W.3d 66, 73 (Tex.

App.—Houston [14th Dist.] 2016, no pet.); Elgohary, 405 S.W.3d at 793–94. However, in this

case, the trial court has already considered arbitrability. According to its final judgment, the court

reviewed the parties pleadings which included their arguments as to arbitrability4 and at a hearing

on June 22, 2018, the court heard arguments made by the parties that included their arguments

regarding arbitrability. The trial court then entered a final judgment expressly denying the motion

to vacate arbitration award filed by Trubenbach and Burton and confirming the final award entered

by the arbitrator. In denying appellants’ motion, the trial court necessarily concluded that the

arbitrator did not exceed his authority by ruling on arbitrability. Because the trial court has made

an independent determination that the claims were arbitrable, we review the trial court’s

determination de novo. See Southwinds Express, 513 S.W.3d at 73; Ladymon, 318 S.W.3d at 518.

      4
        In their First Amended Motion To Vacate Arbitration Award and Supporting Memorandum of Law, Trubenbach and Burton argued that the
arbitrator exceeded his powers by ruling on arbitrability.

                                                                 –8–
       The parties do not dispute that appellants were non-signatories to the subscription

agreements that contained the arbitration agreements. Burton did not sign the subscription

agreements, and Trubenbach signed only in his representative capacity. However, appellants

argued—to the trial court and to this Court during their interlocutory appeal—that even though

they were non-signatories, they were entitled to compel Energy Exploration to arbitration under

three legal theories—agency, equitable estoppel, and third-party beneficiary status. They argued

that Energy Exploration judicially admitted that the TRU Defendants were parties to the

subscription agreements. They also argued that they were entitled to enforce the arbitration

agreement as agents of the joint ventures, and as third party beneficiaries of the subscription

agreements.

       According to the record, Energy Exploration finally decided to acquiesce to appellants’

demands for arbitration in an effort to move the case forward. Energy Exploration asserts that it

never attempted to compel appellants to arbitration; instead, it “initiated arbitration at Appellants’

own request, while Appellants were asking this Court to order the same.” (Emphasis in original).

In other words, Trubenbach and Burton sought to compel arbitration and Energy Exploration

consented. “[A]llowing willing non-signatories to compel arbitration with a party to the arbitration

agreement simply precludes a signatory from avoiding arbitration with a party when the issues the

non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the

estopped party has signed.” Shillinglaw v. Baylor Univ., No. 05-17-00498-CV, 2018 WL 3062451,

*3 (Tex. App.—Dallas June 21, 2018, pet. denied) (mem. op.) (citing In re Vesta Ins. Grp., Inc.,

192 S.W.3d 759, 762–63 (Tex. 2006) (per curiam)). “In that situation, all parties to the requested

arbitration have agreed to forego their right to a judicial forum.” Id. However, instead of being

pleased that Energy Exploration had acquiesced to their demands for arbitration, for the next three

years appellants argued to the arbitrator, the United States Bankruptcy Court, and the trial court,

                                                 –9–
that Energy Exploration could not compel them to arbitration because they were not signatories to

the arbitration agreements.

          Appellants urge that “context matters.” They argue that as non-signatories, they can compel

Energy Exploration to arbitration but Energy Exploration cannot compel them to arbitration. But

this is not a case in which non-signatories first moved to compel arbitration, then later changed

their minds, withdrew their consent, and proceeded with the litigation in a judicial forum. Here,

appellants urged diametrically opposing positions in two different courts at the same time.5

According to the record, appellants continued their efforts to compel arbitration with Energy

Exploration from January 15, 2015, the date on which they filed their motion to compel arbitration,

until April 27, 2018, the date on which this Court entered its memorandum opinion vacating and

dismissing their appeal as moot because the arbitration had been conducted and an award had been

issued. See TRU Exploration, LLC v. Energy Exploration I, LLC, No. 05-15-00217-CV, 2018 WL
1980366, *1 (Tex. App.—Dallas April 27, 2018, no pet.) (mem. op.).

          We conclude that by seeking to compel arbitration, appellants subjected themselves to the

subscription agreements’ terms, including the arbitration provisions. Their conduct in claiming

rights under the arbitration agreement and their conduct throughout the course of this proceeding

clearly reflected their willingness to forego their right to a judicial forum. See Shillinglaw, 2018
WL 3062451, at *3. Accordingly, the trial court did not err in confirming the arbitration award.

We overrule appellants’ first and second issues.

B. Waiver

          In their third issue, appellants argue that the arbitrator’s award should be vacated because

Energy Exploration waived its right to enforce the arbitration provisions. Citing Henry v. Cash

      5
        Appellants’ actions are akin to behavior prohibited by the invited error doctrine—a party may not complain of an error which the party
invited. See Haler v. Boyington Capital Grp., Inc., 411 S.W.3d 631, 637 (Tex. App.—Dallas 2013, pet. denied) (citing In re Dep’t of Family &
Protective Servs., 273 S.W.3d 637, 646 (Tex. 2009)).

                                                                   –10–
Biz, LP, 551 S.W.3d 111 (Tex. 2018) and Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) to

support their position, appellants argue that Energy Exploration waived its right to invoke

arbitration by substantially invoking the judicial process in a manner inconsistent with its claimed

right to compel arbitration. Appellants complain that by filing its lawsuit and initially refusing to

arbitrate, Energy Exploration obtained the benefit of receiving a temporary restraining order and

an order requiring the production of documents detailing the location and disposition of money it

invested in TRU Exploration, as well as documentation regarding all transfers of funds made to

certain recipients. In response, Energy Exploration asserts that it did not seek to compel appellants

to arbitration; instead, Energy Exploration acquiesced to appellants’ motion to compel arbitration.

Therefore, whether it possessed a right to compel arbitration, or subsequently waived such right,

is not at issue.

        “[A] party waives an arbitration clause by substantially invoking the judicial process to the

other party’s detriment or prejudice.” Perry Homes, 258 S.W.3d at 589–90. “Due to the strong

presumption against waiver of arbitration, this hurdle is a high one.” Id. at 590. We conclude that

appellants have not cleared the hurdle in this case.

        In considering whether a party has substantially invoked the judicial process, courts

consider a wide variety of factors and look to the specifics of each case. Henry, 551 S.W.3d at

117; G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 512 (Tex. 2015). The

necessary conduct must go beyond merely filing suit or seeking initial discovery. Perry Homes,
258 S.W.3d at 590.

        In this case, Energy Exploration filed suit and sought initial discovery. Appellants

immediately filed their motion to stay the litigation and compel arbitration. After the trial court

denied their motion, appellants promptly filed an interlocutory appeal. At that point, only three

months after filing its original petition, Energy Exploration acquiesced to the appellants’ demand

                                                –11–
for arbitration. Three months is not a substantial delay relative to the timeline of this case as a

whole. See G.T. Leach Builders, 458 S.W.3d at 514. The parties had not engaged in extensive

discovery and had not filed merits-based motions. The case had not been set for trial. Indeed, the

only prejudice claimed by appellants is the legal expenses incurred in pursuing their motion to

compel arbitration. Considering the totality of the circumstances, we conclude that Energy

Exploration did not substantially invoke the judicial process to appellants’ detriment or prejudice.

See Perry Homes, 258 S.W.3d at 589–91 (adopting totality-of-the-circumstances test). We decline

to find waiver under these circumstances. See G.T. Leach Builders, 458 S.W.3d at 514–15. We

overrule appellants’ third issue.

                                      III. CONCLUSION

       Based upon our conclusions above, we affirm the trial court’s judgment.

                                                   /Bill Pedersen, III//
                                                   BILL PEDERSEN, III
                                                   JUSTICE
181090f.p05

                                               –12–
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

 TRENT TRUBENBACH AND DONNA                          On Appeal from the 416th Judicial District
 BURTON, Appellants                                  Court, Collin County, Texas
                                                     Trial Court Cause No. 416-00031-2015.
 No. 05-18-01090-CV          v.                      Opinion delivered by Justice Pedersen, III.
                                                     Justices Reichek and Carlyle participating.
 ENERGY EXPLORATION I, L.L.C. AND
 ENERGY EXPLORATION II, L.L.C.,
 Appellees

     In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.

     It is ORDERED that appellees ENERGY EXPLORATION I, L.L.C. and ENERGY
EXPLORATION II, L.L.C. recover their costs of this appeal from appellants TRENT
TRUBENBACH and DONNA BURTON.

Judgment entered this 27th day of March, 2020.

                                              –13–