Court Opinion

ID: 4065397
Source: CourtListenerOpinion
Date Created: 2016-09-29 21:58:45.735843+00
Date Added: 2024-06-11T14:33:56.597926
License: Public Domain

ACCEPTED
                                                                           04-15-00427-CV
                                                               FOURTH COURT OF APPEALS
                                                                    SAN ANTONIO, TEXAS
                                                                      8/17/2015 6:56:49 PM
                                                                            KEITH HOTTLE
                                                                                    CLERK

                  NO. 04-15-00427-CV
                                                          FILED IN
                   IN THE                          4th COURT OF APPEALS
                                                    SAN ANTONIO, TEXAS

          COURT OF APPEALS FOR                THE 08/17/2015 6:56:49 PM
       FOURTH COURT OF APPEALS D
                                                       KEITH E. HOTTLE
                                               ISTRICT Clerk
             SAN ANTONIO, TEXAS
                          ______________

     CRAWFORD MEDICAL SUPPLIES, LLC, SAM MADDALI,
    PREM SWAROOP KALIDINDI, AND MADDALI REALTY, LLC
                     APPELLANTS
                            VERSUS

HUNTLEIGH HOME MEDICAL, LTD. AND JANE ELIZABETH FLORES
                    APPELLEES
                          ______________

APPEAL FROM THE 57TH JUDICIAL DISTRICT COURT, BEXAR COUNTY, TEXAS
                       NO. 2013-CI-00404

              BRIEF OF APPELLANTS

     PULMAN, CAPPUCCIO, PULLEN, BENSON & JONES, LLP
                   Elliott S. Cappuccio
              Texas State Bar No. 24008419
                   Leslie Sara Hyman
              Texas State Bar No. 00798274
                   Etan Z. Tepperman
              Texas State Bar No. 24088515
          2161 NW Military Highway, Suite 400
                San Antonio, Texas 78213
               (210) 222-9494 (Telephone)
                (210) 892-1610 (Facsimile)
                   Attorneys for Appellants
            APPELLANTS REQUEST ORAL ARGUMENT
                             NO. 04-15-00427-CV

                                  IN THE
                         COURT OF APPEALS FOR THE
                      FOURTH COURT OF APPEALS DISTRICT
                            SAN ANTONIO, TEXAS
                              ______________

                CRAWFORD MEDICAL SUPPLIES, LLC, SAM MADDALI,
               PREM SWAROOP KALIDINDI, AND MADDALI REALTY, LLC
                                APPELLANTS
                                    VERSUS

          HUNTLEIGH HOME MEDICAL, LTD. AND JANE ELIZABETH FLORES
                              APPELLEES
                            ______________
                        IDENTITY OF PARTIES AND COUNSEL

Appellants:                              Counsel for Appellants:
Crawford Medical Supplies, LLC           Elliott S. Cappuccio
Sam Maddali                              Leslie Sara Hyman
Prem Swaroop Kalidindi                   Etan Z. Tepperman
Maddali Realty, LLC                      Pulman, Cappuccio,
                                         Pullen, Benson & Jones, LLP
                                         2161 NW Military Highway, Suite 400
                                         San Antonio, Texas 78213

Appellees:                               Counsel for Appellees:
Huntleigh Home Medical, Ltd.             Mark Murphy
Jane Elizabeth Flores                    Davis & Santos
                                         Attorneys & Counselors, P.C.
                                         112 East Pecan Street, Suite 900
                                         San Antonio, Texas 78205

{00026740 3}                       –i–
                                           TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ........................................................................ i

TABLE OF CONTENTS .............................................................................................. ii

INDEX OF AUTHORITIES............................................................................................ iii

STATEMENT OF THE CASE .......................................................................................... 1

ORAL ARGUMENT STATEMENT .................................................................................. 2

ISSUES PRESENTED .................................................................................................... 2
STATEMENT OF FACTS ............................................................................................... 3

SUMMARY OF THE ARGUMENT .................................................................................. 7
ARGUMENT AND AUTHORITIES.................................................................................. 9

I. Standard for Enforcement of Arbitration Agreements ........................................ 9
II. The Trial Court Erred in Denying
    Defendants’ Motion to Compel Arbitration ..................................................... 11
     A. An Agreement to Arbitrate Exists ............................................................... 11

     B. Plaintiffs’ Claims Fall Within the Scope of the Arbitration Agreement ..... 14

          1. A Broad Arbitration Clause Such as the One at Issue Covers
             Contract and Tort Claims and Claims Factually Intertwined with
             Arbitrable Claims ................................................................................... 14

          2. The Arbitration Clause Covers All the Claims at Issue in this Appeal .. 16

CONCLUSION AND PRAYER .................................................................................... 21

CERTIFICATE OF COMPLIANCE ............................................................................... 23
CERTIFICATE OF SERVICE ....................................................................................... 23

{00026740 3}                                       – ii –
                                      INDEX OF AUTHORITIES

Cases                                                                                                  Page

Associated Glass, Ltd. v. Eye Ten Oaks Investments, Ltd.,
   147 S.W.3d 507 (Tex. App.—San Antonio 2004, no pet.) .............................. 11

Enter. Field Servs., LLC v. Toc-Rocky Mt., Inc.,
   405 S.W.3d 767 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) ....... 10, 15

Forest Oil Corp. v. McAllen,
  268 S.W.3d 51 (Tex. 2008)............................................................................... 11

Global Fin. Servs., L.L.C. v. Estate of Brittingham-McLean
(In re Global Fin. Servs., L.L.C.),
   No. 04-04-00854-CV, 2007 WL 1759940
   (Tex. App.—San Antonio June 20, 2007, orig. proceeding)............................ 15

In re Cutler-Gallaway Servs.,
    No. 04-07-00216-CV, 2007 WL 1481999
   (Tex. App.—San Antonio May 23, 2007, orig. proceeding)............................ 13

In re Double S Petroleum, Ltd.,
    No. 04-05-00643-CV, 2005 WL 3406295
    (Tex. App.—San Antonio Dec. 14, 2005, orig. proceeding)............................ 14

In re FirstMerit Bank, N.A.,
   52 S.W.3d 749 (Tex. 2001)..................................................................... 9, 10, 15

In re Vesta Ins. Group, Inc.,
    192 S.W.3d 759 (Tex. 2006) ............................................................................ 13

In re Weekley Homes, L.P.,
    180 S.W.3d 127 (Tex. 2005) ............................................................................ 13

Jack B. Anglin Co. v. Tipps,
   842 S.W.2d 266 (Tex. 1992) ........................................................................ 9, 15

{00026740 3}                                  – iii –
                            INDEX OF AUTHORITIES (CONTINUED)

Cases (Continued)                                                                                   Page

Stanford Dev. Corp. v. Stanford Condo. Owners Ass’n,
   285 S.W.3d 45 (Tex. App.—Houston 1st Dist. 2009, no pet.)................... 13, 14

Subsea Co. v. Payan,
   448 S.W.3d 557 (Tex. App.—Houston [14th Dist.] 2014) .............................. 10

Williams Indus. v. Earth Dev. Sys. Corp.,
   110 S.W.3d 131 (Tex. App.—Houston [1st Dist.] 2003, no pet.) ................10, 16

Statutes

Tex. Civ. Prac. Rem. Code § 171.001 ..................................................................... 9
Tex. Civ. Prac. Rem. Code § 171.021 ..................................................................... 9

{00026740 3}                                 – iv –
                            STATEMENT OF THE CASE

Nature of the Case          Appellees, Huntleigh Home Medical, Ltd. and
                            Jane Elizabeth Flores filed suit in 2013. CR 1-14.
                            On March 31, 2015, they filed an amended pleading,
                            raising claims related to an agreement between
                            Appellees and Appellants Sam Maddali and
                            Prem Swaroop Kalidindi to form Appellant
                            Crawford Medical Supplies, LLC.          CR 425-43.
                            Crawford Medical Supplies, LLC is governed by an
                            Operating Agreement containing an arbitration clause.
                            CR 71-72.       Appellants thus moved to compel
                            arbitration of Appellees’ claims against them and of
                            employment-related         claims     by     Plaintiff
                            Michael Flores that had previously been compelled to
                            arbitration, dismissed, and refiled. CR 446-556.
                            The trial court agreed that Michael Flores’s claims
                            should be arbitrated but denied the motion to compel
                            arbitration of Appellees’ claims. CR 570-71.

Trial Court                 The Honorable Michael Mery of the 37th Judicial
                            District Court, Bexar County, Texas.

Trial Court’s Disposition   The trial court denied Appellants’ Plea in Abatement
                            and Motion to Compel Jurisdiction as to the claims
                            alleged by Appellees. CR 570-71.

{00026740 3}                       –1–
                             ORAL ARGUMENT STATEMENT

      Appellants request oral argument because the question of whether an arbitration

agreement covers a plaintiff’s claims requires a case-specific comparison between

the arbitration agreement and the allegations in the plaintiff’s petition.

Oral argument would allow for the Court and the parties to conduct this

comparison together to facilitate the Court’s analysis.

                                   ISSUES PRESENTED

I.      Whether the trial court erred in refusing to compel arbitration of claims

        arising from the formation and operation of Crawford Medical Supplies, LLC

        when    those   claims   relate    to,   touch,   or   concern   the   company’s

        Operating Agreement, which contains an arbitration clause.

II.     Whether the trial court erred in refusing to compel arbitration of claims that

        are factually intertwined with arbitrable claims arising from the formation and

        operation of Crawford Medical Supplies, LLC.

{00026740 3}                              –2–
                              STATEMENT OF FACTS

     This business dispute litigation arises from decisions in November 2011 by

Plaintiffs Michael Flores and Jane Elizabeth Flores and Defendants Sam Maddali

and Prem Swaroop Kalidindi to together form Crawford Huntleigh Medical

Supplies, Ltd., which became Defendant Crawford Medical Supplies, Ltd.

(“CMS”). CR 428-29. CMS was intended to continue a business selling and/or

renting durable medical equipment such as wheelchairs, walkers, and hospital beds

that was started by Plaintiff Huntleigh Home Medical, Ltd. CR 428-29, 501.

     Plaintiffs Michael Flores and Jane Elizabeth Flores are limited partners in

Huntleigh Home Medical. CR 499. In late 2011, Huntleigh Home Medical was

unable to service its clients and was having significant financial difficulty because

virtually all of its equipment was secured by liens in favor of Jefferson Bank, the

Internal Revenue Service had a tax lien levied against its assets, and it lacked

capital to purchase new equipment. CR 428-29, 501-02.

     In November 2011, the Floreses approached Defendants Prem Kalidindi and

Sam Maddali about a possible sale of Huntleigh Home Medical. CR 501-02.

Kalidindi and Maddali understood that Huntleigh Home Medical was having

financial difficulty but nevertheless agreed to look into the possibility of

purchasing Huntleigh Home Medical and began conducting due diligence on the

{00026740 3}                        –3–
company. Id. As a result of that due diligence, Kalidindi and Maddali determined

that Huntleigh Home Medical had very little value because of the liens and that

there was little or nothing for Kalidindi and Maddali to purchase. CR 502.

     The parties’ discussions then turned toward starting a new durable medical

equipment company together.        CR 428-29, 432-33, 502.       Those discussions

culminated in the formation of CMS. CR 428-29, 502.

     From the beginning, the members of CMS were Obdulia, Ltd., Prem Kalidindi,

and Annapurna Maddali, who is Sam Maddali’s wife. CR 502. The managing

member of Obdulia, Ltd. is Richard Flores, who was Michael Flores’s father and

Jane Elizabeth Flores’s husband. Id.

     An Operating Agreement was prepared for CMS, which Jane Elizabeth Flores

signed on behalf of Richard Flores.       CR 505-31.     The Operating Agreement

provides that it “constitutes the whole and entire agreement of the Members” with

respect to its subject matter and “replaces and supersedes all prior written and oral

agreements by and among the Members or any of them.”                       CR 527.

The Operating Agreement contemplated that Michael Flores would enter into an

employment agreement with CMS, which occurred. CR 507, 533-41.

     Plaintiffs filed suit on January 9, 2013. CR 1-14. In their Original Petition,

Michael Flores asserted a claim for breach of contract/quantum meruit against

CMS for breach of his employment agreement and joined the other Plaintiffs in

{00026740 3}                        –4–
asserting various tort claims arising from their theory that CMS had stolen their

business.         CR 9-12.          Through prior counsel,1 Defendants moved to compel

arbitration (CR 32-75) and by order dated August 20, 2013, the trial court granted

the motion in part and compelled to binding arbitration Mr. Flores’s claim for

breach of the employment agreement as well as “any other claim he asserts under

that Employment Agreement” (CR 112-14).                               The Court further ordered that

“any claim made by Obdulia LLC, and including any claims asserted by Obdulia

or Michael Flores that relate to the Operating Agreement only, touching or

concerning this operating agreement is also compelled to binding arbitration”

while “the claims not compelled to arbitration may proceed in District Court.”

CR 113. The reference to claims by Obdulia is curious as Obdulia has never

asserted any claims in this litigation and was not before the trial court at the time of

the August 30, 2013 Order or any time since.

      Despite having had his claims compelled to arbitration, Michael Flores never

filed an arbitration proceeding.                      RR 14.           Instead, on March 31, 2015,

Michael Flores joined Huntleigh Home Medical and Jane Elizabeth Flores in filing

their Third Amended Petition.                    CR 425-43. In that Third Amended Petition,

Plaintiffs         allege       claims        (for      breach        of     contract/quantum             meruit,

promissory estoppel, conversion, tortious interference with contract, and

1
    The undersigned and her firm substituted in as counsel for Defendants in July 2014. CR 299-305, 307-08.

{00026740 3}                                         –5–
misappropriation of trade secrets, fraud and negligent misrepresentation,

fraudulent transfer, and money had and received) that arise from the parties’

negotiations and eventual agreement to form a new company together and the

operation of that new company, CMS. CR 433-41. Additionally, Michael Flores

asserted the exact employment claim for breach of contract/quantum meruit that

had previously been compelled to arbitration. CR 434-35.

     Because Plaintiffs’ newly filed claims all relate to, touch, or concern the

Operating Agreement, Defendants filed a Plea in Abatement and Motion to Compel

Arbitration. CR 547-55. The trial court granted the motion as to the claims pled

by Michael Flores but denied arbitration of the claims pled by Plaintiffs

Huntleigh Home Medical and Jane Elizabeth Flores. CR 570-71. This appeal

followed. CR 696-98.

{00026740 3}                       –6–
                            SUMMARY OF THE ARGUMENT

     This lawsuit arises from the parties’ agreement to form a business and the

operations of that business.      The business’s operations are governed by an

Operating Agreement and the claims at issue in this appeal touch on the subject

matter of the Operating Agreement.          The Operating Agreement contains an

arbitration clause.

     The arbitration clause in the Operating Agreement is a broad one, covering tort

claims as well as contract claims. Plaintiffs’ claims are all factually intertwined

and the evidence necessary for Plaintiffs to succeed on their non-contractual claims

will also be necessary to establish their related contract claims.

     While Plaintiffs did not personally sign the Operating Agreement,

Michael Flores and Jane Elizabeth Flores acted as agents or representatives of

CMS and one of its members and the CMS Operating Agreement expressly

provides that it shall be binding on CMS’s Members and their representatives and

assigns.       Moreover, even absent an express provision, as a matter of law,

nonsignatory agents, employees, and representatives of a party to a contract

containing an arbitration clause are covered by that arbitration clause.

Finally, Plaintiffs are bound by the arbitration clause because they are pursuing

claims arising out of the operations of CMS and thus, based upon the

Operating Agreement.

{00026740 3}                         –7–
     Because the claims that are the subject of this appeal relate to the operation of

CMS and the winding down of Huntleigh Home Medical, the operation of CMS is

governed by an Operating Agreement containing an arbitration clause, and

Plaintiffs are bound by the arbitration clause, the trial court erred in refusing to

compel arbitration of those claims.

{00026740 3}                          –8–
                           ARGUMENT AND AUTHORITIES

I. Standard for Enforcement of Arbitration Agreements

     Under Texas law, arbitration agreements are valid and enforceable. Tex. Civ.

Prac. Rem. Code § 171.001. Accordingly, a court shall order parties to arbitrate a

dispute upon a showing that an agreement to arbitrate exists that covers the claims

in question. Id. §§ 171.001, 171.021; In re FirstMerit Bank, N.A., 52 S.W.3d 749,

753 (Tex. 2001). Because the main benefits of arbitration lie in the expedited and

less expensive disposition of a dispute, the Texas Legislature and the

Texas Supreme Court have determined that a court may decide a plea in abatement

or motion to compel arbitration summarily.         See Tex. Civ. Prac. Rem. Code

§ 171.021(b); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269 (Tex. 1992).

Accordingly, a court considering a motion to compel arbitration shall determine

the applicability of the arbitration clause based upon the affidavits submitted in

support and opposition to the plea. Jack B. Anglin Co., 842 S.W.2d at 269.

     “To determine whether a party’s claims fall within an arbitration agreement’s

scope, [the trial court is to] focus on the complaint’s factual allegations rather than

the legal causes of action asserted.” In re First Merit Bank, 52 S.W.3d at 754.

Arbitration is proper when the facts alleged “‘touch matters’ covered by the

underlying agreement of which the arbitration agreement is a part.”

{00026740 3}                         –9–
Williams Indus. v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 137 (Tex. App.—

Houston [1st Dist.] 2003, no pet.).       There is a strong public policy favoring

arbitration and any doubts regarding the scope of an agreement to arbitrate are to

be resolved in favor of arbitration. In re First Merit Bank, 52 S.W.3d at 753

(“Because state and federal policies continue to favor arbitration, a presumption

exists favoring agreements to arbitrate under the FAA, and courts must resolve any

doubts about an arbitration agreement’s scope in favor of arbitration.”);

Williams Indus., 110 S.W.3d at 137 (same, citing cases under the FAA and TAA).

     Once the trial court finds a valid agreement to arbitrate and determines that the

party’s claims fall within the scope of that agreement, the court must order

arbitration. In re FirstMerit Bank, 52 S.W.3d at 753-54 (“Once the trial court

concludes that the arbitration agreement encompasses the claims, and that the party

opposing arbitration has failed to prove its defenses, the trial court has no

discretion but to compel arbitration and stay its own proceedings.”). Arbitration is

proper even where the claims in question are counterclaims.                See, e.g.,

Subsea Co. v. Payan, 448 S.W.3d 557, 561 (Tex. App.—Houston [14th Dist.]

2014) (holding that trial court had erred in overruling motion to compel arbitration

on counterclaims); Enter. Field Servs., LLC v. Toc-Rocky Mt., Inc.,

405 S.W.3d 767, 774 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) (same).

{00026740 3}                         – 10 –
     This Court generally reviews “a trial court’s determination regarding the

existence of an arbitration agreement under the Texas Arbitration Act under an

abuse of discretion standard.” Associated Glass, Ltd. v. Eye Ten Oaks Investments,

Ltd., 147 S.W.3d 507, 512 (Tex. App.—San Antonio 2004, no pet.). “The trial

court’s interpretation of the arbitration clause, however, is a legal question subject

to de novo review.” Id. And where the appeal “turns on a legal determination,”

a de novo standard is likewise applied.           Forest Oil Corp. v. McAllen,

268 S.W.3d 51, 55 n.9 (Tex. 2008).

II. The Trial Court Erred in Denying Defendants’ Motion to
    Compel Arbitration
      The claims alleged by Huntleigh Home Medical and Jane Elizabeth Flores all

relate to the agreement between the parties to form a new entity and the operation

of that new company thereafter.        Their claims therefore should have been

compelled to arbitration.

      A. An Agreement to Arbitrate Exists
      The parties’ discussions regarding the struggling Huntleigh Home Medical and

ways to continue its home health care business despite its financial woes

culminated in the formation of CMS. CMS’s Operating Agreement provides for

binding arbitration. Specifically, the Operating Agreement provides:

{00026740 3}                        – 11 –
               Except as otherwise provided in this Agreement, any dispute,
               controversy or claim arising out of or relating to this Agreement, or
               any breach thereof, including without limitation any claim that this
               Agreement, or any part hereof, is invalid, illegal or otherwise
               voidable or void, shall be submitted to binding arbitration by an
               American Arbitration Association (“AAA”) arbitrator, or such other
               arbitrator as may be agreed upon by the parties. Hearings on such
               arbitration shall be conducted in Bexar County in the State of Texas
               or if not arbitrator is available in such county, any county in the State
               of Texas. A single arbitrator shall arbitrate any such controversy.
               The arbitrator shall hear and determine the controversy in accordance
               with applicable law and in the intention of the parties as expressed in
               this Agreement, upon the evidence produced at an arbitration hearing
               scheduled at the request of either party. Judgment on the award of
               the arbitrator may be entered in any court having jurisdiction thereof.

CR 527-28

     It is irrelevant that Plaintiffs did not personally sign the Operating Agreement.

The Operating Agreement expressly provides that it shall be “binding on and inure

to the benefit of the Members and their heirs, personal representatives, and

permitted assigns.” CR 528. Jane Elizabeth Flores and Michael Flores acted as

agents or representatives of CMS. CR 502. For example, Jane Elizabeth Flores

acted as an agent or representative of CMS member Obdulia when she signed the

Operating Agreement.               CR 505-31.        Michael Flores acted as an agent or

representative of CMS and its Members when, according to Plaintiffs, he worked

to obtain “accreditation for CMS from the Accreditation Commission for Health

Care, Inc.” CR 430. Binding Plaintiffs to arbitration is thus within the express

terms of the Operating Agreement.

{00026740 3}                                – 12 –
     Arbitration of Plaintiffs’ claims would be appropriate even without such a

provision. “When contracting parties agree to arbitrate all disputes ‘under or with

respect to’ a contract . . . they generally intend to include disputes about their

agents’ actions.” In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex. 2006).

For that reason, nonsignatory agents, employees, and representatives of a party to a

contract containing an arbitration clause are covered by that arbitration clause.

See In re Cutler-Gallaway Servs., No. 04-07-00216-CV, 2007 WL 1481999, at *2

(Tex. App.—San Antonio May 23, 2007, orig. proceeding) (“When the principal is

bound under the terms of a valid arbitration clause, its agents, employees, and

representatives are covered by that agreement.” (citations omitted)).

     Even absent an agency or employment relationship, where, as here,

“a nonsignatory pursues a claim based ‘on the contract’ of another, and the

contract contains an arbitration clause, then the nonsignatory must pursue all

claims—tort     and   contract—in    arbitration.”     Stanford   Dev.   Corp.    v.

Stanford Condo. Owners Ass’n, 285 S.W.3d 45, 49 (Tex. App.—Houston 1st Dist.

2009, no pet.). Likewise, a nonsignatory may be compelled to arbitration when, as

here, the nonsignatory behaved as if he or she were a party to the agreement prior

to filing a lawsuit. In re Weekley Homes, L.P., 180 S.W.3d 127, 135 (Tex. 2005)

(holding that “when a nonparty consistently and knowingly insists that others treat

{00026740 3}                        – 13 –
it as a party, it cannot later ‘turn[] its back on the portions of the contract, such as

an arbitration clause, that it finds distasteful’” (citations omitted)).

      It is undisputed that Plaintiffs agreed to form CMS and then behaved as if they

were part of that business.         They acted as representatives and/or agents of

Obdulia, LLC, which was a party to the Operating Agreement. They bring claims

on the contract. Plaintiffs are thus bound by the terms of the arbitration clause in

the Operating Agreement and the trial court erred in refusing to compel their

claims to arbitration.

      B. Plaintiffs’ Claims Fall Within the Scope of the Arbitration Agreement
      The arbitration clause in the Operating Agreement is a broad one. It covers not

only claims of breach of the Operating Agreement but “any dispute, controversy or

claim arising out of or relating to” the Operating Agreement. CR 527-28.

               1. A Broad Arbitration Clause Such as the One at Issue Covers
                  Contract and Tort Claims and Claims Factually Intertwined with
                  Arbitrable Claims
      An arbitration clause, such as the one here, that covers not only contract claims

but “any dispute” that is “arising out of or relating to” the contract covers tort

claims as well as contract claims. See Stanford Dev. Corp., 285 S.W.3d at 49

(holding that arbitration was required of both contract claims and intertwined tort

claims); In re Double S Petroleum, Ltd., No. 04-05-00643-CV, 2005 WL 3406295,

at     *3        (Tex.   App.—San   Antonio     Dec.   14,   2005,   orig.   proceeding)

{00026740 3}                           – 14 –
(compelling arbitration of tort claims because “when an arbitration provision uses

the language ‘any dispute,’ it is considered broad”). Because “Texas law favors

the joint resolution of multiple claims to prevent multiple determinations of the

same matter,” where the evidence necessary to establish non-contractual claims

will also be necessary to establish related contract claims, all the claims are subject

to the contract’s arbitration clause.     Jack B. Anglin Co., 842 S.W.2d at 271

(“Although the City’s misrepresentation claims are grounded in a legal theory

distinct from its contract claim, they are factually intertwined, and thus are subject

to the arbitration provision of the contract.”); see also In re FirstMerit Bank,
52 S.W.3d at 755 (compelling arbitration of tort claims because “a litigant who

sues based on a contract subjects him or herself to the contract’s terms”);

Enter. Field Servs., 405 S.W.3d at 773 (“To be subject to arbitration, the

‘allegations need only be factually intertwined with arbitrable claims or otherwise

touch on the subject matter of the agreement containing the arbitration

provision.’”).

      Even if the claims are not deemed factually intertwined, where, as here, a party

is pursing claims based on a relationship created by a contract containing an

arbitration clause, both tort-based and contract-based claims arising out of that

relationship must be arbitrated.        Global Fin. Servs., L.L.C. v. Estate of

Brittingham-McLean (In re Global Fin. Servs., L.L.C.), No. 04-04-00854-CV,

{00026740 3}                         – 15 –
2007 WL 1759940, *6 (Tex. App.—San Antonio June 20, 2007, orig. proceeding)

(“[A]s Aguirre is pursuing his claims based on the relationship created by the

Customer Agreement, he must pursue all his claims, both tort-based and contract-

based, in arbitration.”); Williams Indus., 110 S.W.3d at 138 (“Each of these

extra-contractual claims arose out of, related to, or ‘touched matters’ covered by

the two subcontracts and were thus covered by the arbitration agreement.”).

               2. The Arbitration Clause Covers All of the Claims at Issue in this
                  Appeal
      Plaintiffs’ claims all arise from or relate to the formation and operation of

CMS and thus arise from or relate to the Operating Agreement. The Operating

Agreement provides that it “constitutes the whole and entire agreement of the

Members” with respect to its subject matter and “replaces and supersedes all prior

written and oral agreements by and among the Members or any of them. CR 527.

The Operating Agreement further provides,

               Each Member shall look solely to the assets   of the Company for the
               return of the Member's investment, and if     the Company property
               remaining after the payment or discharge      of all prior debts and
               obligations is consumed in full, then such    Member shall have no
               recourse against any other Members              for indemnification,
               contribution, or reimbursement.

Id. Plaintiffs’ own discovery requests to Defendants seek information regarding

capital calls “as that term is defined in the Operating Agreement” and distributions

{00026740 3}                             – 16 –
or payments from CMS to Obdulia to Plaintiffs and thus indicate that the Operating

Agreement governs the parties’ relationship. See CR 554-55.

      Plaintiffs’ allege in their Third Amended Petition that “Maddali, Michael,

Belle, and Huntleigh – agreed that they would begin the process of starting the new

home health care company and all that required, such as gaining accreditation and

negotiating contracts with third party payors, while Huntleigh wound down its

operations.”      CR 428.   They acknowledge that the “new home health care

company” is CMS. In fact, Plaintiffs’ first claim alleges that Michael Flores,

Belle Elizabeth Flores, and Huntleigh Home Medical “agreed with [Sam] Maddali

to start a new home health care company, which eventually became CMS.”

CR 433. Plaintiffs claim that Sam Maddali breached this agreement “by refusing

to allow Plaintiffs to wind down the operations” of Huntleigh Home Medical and

by taking the assets of Huntleigh Home Medical for use in CMS without paying

for them. CR 434. Setting aside, as one must on a motion to compel arbitration,

the merits of this allegation and whether or not the parties had in fact agreed that

CMS would be able to use any non-liened assets of Huntleigh Home Medical, this

claim obviously relates to the formation and operation of CMS. Complaints about

the formation and operation of CMS are, at the very least, “related to” CMS’s

Operating Agreement. The trial court erred in refusing to order CMS’s first claim

to arbitration.

{00026740 3}                       – 17 –
     Plaintiffs’ next claim, for promissory estoppel, also arises from their allegations

that (1) Maddali promised to provide support for Huntleigh Home Medical while it

wound down its operations in exchange for the Floreses’ help in starting CMS

together; and (2) that Maddali would pay Huntleigh Home Medical for any

equipment or property used. CR 435. This claim thus likewise relates to the

parties’ agreement to form CMS and, as part of CMS’s operations, wind down

Huntleigh Home Medical. Id. This claim about the formation and operation of

CMS relates to its Operating Agreement and is factually intertwined with

Plaintiffs’ claim for breach of the parties’ agreement to form CMS and the trial

court erred in refusing to order it to arbitration.

     Huntleigh Home Medical’s claim for conversion contends that CMS has

wrongfully exercised dominion and control over Huntleigh Home Medical’s

equipment, inventory, bank accounts, accounts receivable, and trade secrets.

CR 435-36. Huntleigh Home Medical’s claim for misappropriation of trade secrets

contends that Defendants used Huntleigh Home Medical’s “customer list and

customer information, customer contracts, billing software, pricing data, supplier

and vendor lists” without authorization in order to “take over Huntleigh’s existing

operations.” CR 436-37. Both claims therefore relate to Plaintiffs’ allegation that

CMS obtained Huntleigh Home Medical’s assets without compensation.

CR 435-36. Defendants were interacting with Huntleigh Home Medical solely as

{00026740 3}                          – 18 –
part of the parties’ agreement to conduct business together in the form of CMS.

Accordingly, the trial court erred in concluding that these claims, which relate to

CMS and its Operating Agreement, or are factually intertwined with the claim for

breach of the parties’ agreement to form and operate CMS, should not be

compelled to arbitration.

     Plaintiffs claim that CMS and Kalidindi tortiously interfered with Plaintiffs’

agreement with Maddali to form CMS. CR 436. Given that CMS was, in fact,

formed and thus that the agreement to form it was not interfered with, this claim

obviously relates to the operation of CMS and thus is related to its Operating

Agreement. The facts necessary to prove this claim are intertwined with the facts

necessary to prove that the agreement between Plaintiffs and Maddali to form

CMS was breached.        The trial court erred in refusing to order this tortious

interference claim to arbitration.

     Plaintiffs next claim that Defendants interfered with Huntleigh Home Medical’s

memorandum of understanding with Hospice Source.            Id.   Huntleigh Home

Medical did not enter into that memorandum of understanding with

Hospice Source until January 13, 2012, which was after the parties agreed to form

CMS and transition Huntleigh Home Medical’s business to CMS. CR. 430-31.

The Hospice Source relationship was thus, by necessity, a specific part of the

transition of Huntleigh Home Medical’s operations to CMS’s operations.          Id.

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Moreover, Plaintiffs claim that Maddali’s motivation for interfering with the

relationship was “because he planned on simply taking the Huntleigh equipment

for CMS.” CR 431. Accordingly, this claim relates to CMS’s operations and thus

to its Operating Agreement, or is factually intertwined with the claim for breach of

the parties’ agreement to form and operate CMS, and should have been compelled

to arbitration.

     For their fraud-based claims, including fraud, fraud by nondisclosure,

fraudulent inducement, negligent misrepresentation, civil conspiracy, and unjust

enrichment, Plaintiffs allege that Defendants made misrepresentations regarding

(1) the desire to start a new home health care company and wind down

Huntleigh Home Medical’s operations, (2) paying Huntleigh Home Medical for

any assets used by CMS in its operations, and (3) having CMS making payroll.

CR 437-39. Plaintiffs further allege that these statements were made “both before

and after CMS was formed.” CR 437. These claims clearly relate to the operation

of CMS, or are factually intertwined with the claim for breach of the parties’

agreement to form and operate CMS, and thus to its Operating Agreement.

The trial court erred in not compelling Plaintiffs’ fraud-based claims to arbitration.

     Finally, Belle Elizabeth Flores’s claim under the fraudulent transfer act arises

from her complaint that “Defendants transferred assets of Huntleigh with the actual

intent to hinder, delay, or defraud Belle, who was a creditor of Huntleigh” and that

{00026740 3}                         – 20 –
they did so knowing that Huntleigh Home Medical would therefore incur

“debts beyond its ability to pay as they became due.” CR 439. The specific

examples Ms. Flores gives are that “Defendants changed the identification labels

on Huntleigh Home Medical’s equipment in January 2013 [and] Defendants

transferred to Maddali Realty at least $37,000 in 2013, with over $23,000

transferred in December 2013 alone.”         Plaintiffs claim that the change of

identification labels was to “fool the banks and the IRS,” thus allowing “CMS to

simply take [the equipment] free and clear.” Thus, Plaintiffs clearly allege that the

transfer of Huntleigh Home Medical’s assets by Defendants was for use by CMS

for its operations. The payments to Maddali Realty were also to allow CMS’s

operations to continue.     Ms. Flores’s allegations thus relate to CMS and its

Operating Agreement or are factually intertwined with the claim for breach of the

parties’ agreement to form and operate CMS and should have been compelled to

arbitration.

                             CONCLUSION AND PRAYER

     Obdulia, Ltd. agreed to arbitrate any claims arising out of or relating to the

Operating Agreement. Because Plaintiffs acted as though they were personally

parties to an agreement with Defendants and are pursuing claims based on or

related to that agreement, and the document manifesting that agreement contains

{00026740 3}                        – 21 –
an arbitration clause, the trial court erred in refusing to compel arbitration of

Plaintiffs’ claims.

     WHEREFORE, Appellants, Crawford Medical Supplies, LLC, Sam Maddali,

Prem Swaroop Kalidindi, and Maddali Realty, LLC, pray that this Court reverse

the trial court’s order denying Defendants’ Plea in Abatement and Motion to

Compel Arbitration, direct the trial court to issue an order compelling this case to

arbitration, and grant Appellants all such further relief to which they are entitled.

                                              Respectfully submitted,

                                              PULMAN, CAPPUCCIO,
                                              PULLEN, BENSON & JONES, LLP
                                              2161 NW Military Highway, Suite 400
                                              San Antonio, Texas 78213
                                              Telephone: (210) 222-9494
                                              Facsimile: (210) 982-1610

                                              By: /s/ Leslie Sara Hyman
                                                  Elliott S. Cappuccio
                                                  Texas State Bar No. 24008419
                                                  ecappuccio@pulmanlaw.com
                                                  Leslie Sara Hyman
                                                  Texas State Bar No. 00798274
                                                  lhyman@pulmanlaw.com
                                                  Etan Z. Tepperman
                                                  Texas State Bar No. 24088514
                                                  etepperman@pulmanlaw.com

                                              ATTORNEYS FOR APPELLANTS

{00026740 3}                         – 22 –
                             CERTIFICATE OF COMPLIANCE
     Pursuant to Texas Rule of Appellate Procedure 9.4(i)((3), I certify that,

excluding those parts allowed to be excluded, the above and foregoing Brief of

Appellant contains 4,463 words.

                                               /s/ Leslie Sara Hyman
                                               Leslie Sara Hyman

                               CERTIFICATE OF SERVICE

     I certify that on the 17th day of August, 2015, the foregoing Brief of Appellants

was served in accordance with the Texas Rules of Appellate Procedure addressed

as follows:

          Mark Murphy
          mmnrphy@dslawpc.com
          Davis & Santos
          Attorneys & Counselors, P.C.
          112 East Pecan Street, Suite 900
          San Antonio, Texas 78205
                                                 /s/ Leslie Sara Hyman
                                                 Leslie Sara Hyman

{00026740 3}                          – 23 –