Court Opinion

ID: 3101758
Source: CourtListenerOpinion
Date Created: 2015-10-16 05:15:59.635175+00
Date Added: 2024-06-11T11:51:39.777357
License: Public Domain

COURT OF APPEALS
                          SECOND DISTRICT OF TEXAS
                               FORT WORTH

                              NO. 02-12-00372-CV

TEXAS ECHO LAND AND CATTLE,                                       APPELLANT
LLP

                                        V.

GENERAL STEEL DOMESTIC                                             APPELLEE
SALES, LLC D/B/A GENERAL
STEEL CORPORATION

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          FROM COUNTY COURT AT LAW NO. 1 OF PARKER COUNTY

                                     ----------

                         MEMORANDUM OPINION1

                                     ----------

      Appellant Texas Echo Land and Cattle, LLP appeals the trial court‘s order

granting Appellee General Steel Domestic Sales, LLC d/b/a General Steel

Corporation‘s motion to compel arbitration.2 We will affirm.

      1
       See Tex. R. App. P. 47.4.
      2
       Because, as we explain later, the Federal Arbitration Act (FAA) governs
the arbitration agreement at issue in this case, and because the trial court
dismissed Texas Echo‘s suit upon compelling arbitration, we have jurisdiction
      Texas Echo is a limited partnership formed under the laws of the State of

Texas. General Steel is a Colorado entity whose principal place of business is in

Colorado.   General Steel ―markets and sells pre-engineered steel buildings,

building accessories, and related services to customers throughout the United

States.‖

      In June 2007, Randy Childers, on behalf of Texas Echo, executed a written

agreement with General Steel to purchase a steel building for $69,953. As part

of the purchase, Texas Echo paid General Steel a $14,000 deposit. One of the

agreement‘s ―Conditions‖ provided that ―[a]ny deposit received herein by the

Seller shall be non-refundable, held by the Seller as security for the completion of

this contract, and applied to the final balance.‖ Another condition contained an

arbitration agreement and required that ―[a]ny controversy or claim arising out of

or relating to this contract, or the breach thereof, shall be resolved by arbitration

over this appeal under civil practice and remedies code section 51.016 and
9 U.S.C. § 16(a)(3). See 9 U.S.C.A. § 16(a)(3) (West 2009) (providing that an
appeal may be taken from ―a final decision with respect to an arbitration that is
subject to this title‖); Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (West Supp.
2012) (providing that in a matter subject to the FAA, an appeal may be taken
from a judgment or interlocutory order only if it would be permitted under the
same circumstance in federal court under § 16); see also Green Tree Fin. Corp.-
Ala. v. Randolph, 531 U.S. 79, 85–89, 121 S. Ct. 513, 519–21 (2000)
(interpreting 9 U.S.C. § 16(a)(3) and holding ―that where, as here, the District
Court has ordered the parties to proceed to arbitration, and dismissed all the
claims before it, that decision is ‗final‘ within the meaning of § 16(a)(3), and
therefore appealable‖); cf. CMH Homes v. Perez, 340 S.W.3d 444, 450 (Tex.
2011) (―Because the trial court did not enter a dismissal or otherwise dispose of
all parties and claims, the order remains interlocutory and cannot be appealed
under section 16(a)(3)).‖).

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before the Judicial Arbiter Group, Inc. in Denver, Colorado. . . . The Federal

Arbitration Act shall govern the interpretation, enforcement, and proceedings

pursuant to this arbitration agreement.‖ Childers initialed each condition.

      Unable to resolve a dispute about sales tax under the agreement, Texas

Echo sued General Steel in July 2011 for breach of contract, misrepresentation,

and violation of the Texas Deceptive Trade Practices Act.3 According to one of

the trial court‘s unchallenged fact findings, Texas Echo terminated the agreement

and demanded that General Steel return the $14,000 deposit. General Steel

answered and filed a motion to compel arbitration; Texas Echo responded that

the arbitration agreement was induced or procured by fraud and is

unconscionable. After a hearing where Texas Echo submitted only the argument

of its counsel, the trial court granted General Steel‘s motion to compel arbitration

and dismissed Texas Echo‘s claims with prejudice.

      In its only issue, Texas Echo argues that the trial court erred by granting

General Steel‘s motion to compel arbitration because Texas Echo successfully

established its fraud and unconscionability defenses to enforcement of the

arbitration agreement. Texas Echo also contends that the arbitration agreement

is governed by the Texas General Arbitration Act (TGAA), not the FAA.

      3
       Texas Echo alleged that General Steel had ―continually attempted to
charge the Plaintiff sales tax on the sale of the steel building although the Plaintiff
provided the Defendant with a Texas Sales and Use[] Tax Exemption Certificate.‖

                                          3
      A party seeking to compel arbitration under the FAA must establish that

there is a valid arbitration clause and that the claims in dispute fall within that

agreement‘s scope.      In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig.

proceeding). The party seeking to avoid arbitration then bears the burden of

proving its defenses against enforcing the otherwise valid arbitration provision.

In re AdvancePCS Health L.P., 172 S.W.3d 603, 607 (Tex. 2005) (orig.

proceeding). Although we have been unable to locate a case in which a Texas

appellate court exercised jurisdiction under civil practice and remedies code

section 51.016 to review a ―final decision with respect to an arbitration that is

subject to this title,‖ as provided in 9 U.S.C. § 16(a)(3), we will apply the abuse of

discretion standard of review. See Sidley Austin Brown & Wood, LLP v. J.A.

Green Dev. Corp., 327 S.W.3d 859, 863 (Tex. App.—Dallas 2010, no pet.)

(applying abuse of discretion standard of review to appeal under section 51.016

involving denial of motion to compel arbitration pursuant to 9 U.S.C. § 16).

      The arbitration agreement specifically provides that the FAA ―shall govern

the . . . proceedings pursuant to this arbitration agreement,‖ and the underlying

agreement for the purchase of a steel building—between a Texas entity and a

Colorado entity—involves interstate commerce.          We therefore reject Texas

Echo‘s argument that the arbitration agreement is not governed by the FAA. See

9 U.S.C.A. § 2 (providing that the FAA applies to a dispute that concerns a

―contract evidencing a transaction involving commerce‖); Rubiola, 334 S.W.3d at

                                          4
223 (―The [FAA] generally governs arbitration provisions in contracts involving

interstate commerce.‖). We overrule this part of Texas Echo‘s issue.

      Texas Echo argues that the arbitration agreement was procured by fraud

because, according to its argument at the hearing on the motion to compel

arbitration, ―The representative of the defendant told my client that he could

cancel the contract any time. Not to worry about the arbitration clause.‖ General

Steel included several of Texas Echo‘s interrogatory responses in its brief for the

hearing on the motion to compel arbitration, and the responses clarify the basis

of Texas Echo‘s fraud defense: ―The representative told me I could cancel the

contract at anytime if I was unhappy and get my deposit back.‖

      ―While an arbitration agreement procured by fraud is unenforceable, the

party opposing arbitration must show that the fraud relates to the arbitration

provision specifically, not to the broader contract in which it appears.‖ Forest Oil

Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008); In re Merrill Lynch Trust Co.

FSB, 235 S.W.3d 185, 190 (Tex. 2007) (orig. proceeding) (noting that a defense

relating to the parties‘ entire contract, rather than the arbitration clause alone, is a

question for the arbitrator).

      Here, Texas Echo‘s fraud argument does not implicate any aspect of the

arbitration agreement.     Instead, it complains about an alleged oral statement

made by a General Steel representative regarding Texas Echo‘s ability to cancel

the entire agreement.       The extent to which the entire agreement may be

canceled and the details regarding when, where, and how a dispute will be

                                           5
resolved (the arbitration agreement) are two different things. Texas Echo failed

to prove its fraud defense. We overrule this part of its issue.

      Texas Echo argues that the arbitration agreement is unenforceable

because arbitration might subject it to substantial costs.4 The party seeking to

invalidate an arbitration agreement on the ground that arbitration would be

prohibitively expensive bears the burden of showing the likelihood of incurring

such costs. In re Olshan Found. Repair Co., LLC, 328 S.W.3d 883, 895 (Tex.

2010).    ―Evidence of the ‗risk‘ of possible costs of arbitration is insufficient

evidence of the prohibitive cost of the arbitration forum.‖ Id. Rather, parties

―must at least provide evidence of the likely cost of their particular arbitration,

through invoices, expert testimony, reliable cost estimates, or other comparable

evidence.‖ Id.

      Here, Texas Echo offered no evidence to support its contention that the

arbitration agreement is unconscionable due to excessive costs.            It merely

offered argument surmising about possible costs.           We also note that the

arbitration agreement provides that ―[t]he party initiating arbitration shall advance

all costs thereof,‖ and Texas Echo is not the party who initiated arbitration. We

hold that Texas Echo failed to prove its defense that the arbitration agreement is

unconscionable, and we overrule the remainder of its only issue.

      4
        Texas Echo argues that ―forcing [it] to travel to Colorado in order to
arbitrate the claim would involve travel costs in excess of $1000.00 which would
make the agreement unconscionable.‖

                                         6
       We hold that the trial court did not abuse its discretion by granting General

Steel‘s motion to compel arbitration. We affirm the trial court‘s order compelling

arbitration.

                                                   BILL MEIER
                                                   JUSTICE

PANEL: LIVINGSTON, C.J.; MEIER and GABRIEL, JJ.

DELIVERED: June 20, 2013

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