Court Opinion

ID: 6332351
Source: CourtListenerOpinion
Date Created: 2022-04-18 07:16:39.915091+00
Date Added: 2024-06-11T09:23:18.916360
License: Public Domain

Affirmed and Memorandum Opinion filed April 14, 2022.

                                     In The

                    Fourteenth Court of Appeals

                              NO. 14-20-00723-CV

                  LINKS CONSTRUCTION, LLC, Appellant

                                        V.
           UNITED STRUCTURES OF AMERICA, INC., Appellee

                   On Appeal from the 157th District Court
                           Harris County, Texas
                     Trial Court Cause No. 2020-39561

                 MEMORANDUM OPINION

      Appellee United Structures of America, Inc. (“USA”) sued appellant Links
Construction, LLC (“Links”), asserting claims stemming from the parties’
construction contract. Links moved to compel arbitration based on two provisions
in the parties’ agreement. Concluding that these provisions “directly conflict[ed]”
with each other, the trial court struck both provisions and denied Links’ motion to
compel. For the reasons below, we affirm.
                                  BACKGROUND

      The University of North Texas hired Links to oversee construction of an
indoor sports practice facility, and Links subcontracted with USA to design the
facility’s roof and provide construction materials. Links and USA executed a
Purchase Order signed October 1, 2018. Attached to the Purchase Order was
USA’s Quotation and Contract (the “Quotation”).

      The Purchase Order and the Quotation contain separate arbitration
provisions.   The Purchase Order’s provision (the “Denton Clause”) states as
follows:

      DISPUTES: Any dispute arising under or relating to this Order shall
      be subject to arbitration under the Construction Industry Arbitration
      Rules of the AAA, with venue in Denton, Texas. The prevailing party
      shall be entitled to costs and reasonable attorneys’ fees.

The Quotation’s arbitration provision (the “Houston Clause”) states:

      Applicable Law and Dispute Resolution: The rights, duties and
      obligations of the parties hereunder shall be governed and construed
      in accordance with the laws of the State of Texas, excluding its
      conflict of laws rules. Any and all disputes arising between USA, its
      Officers, Owners, Share Holders, Agents, Employees or
      Representatives and Buyer with respect to this Contract or the
      Building or Materials covered hereby shall be resolved at USA’s sole
      option either by (i) arbitration conducted in Houston, Harris County,
      Texas according to the construction industry’s arbitration rules of the
      American Arbitration Association or (ii) by the manner and forum
      USA so chooses.
USA sued Links in July 2020, asserting Links failed to remit payments owed under
the parties’ contract. Links moved to compel arbitration, citing both the Denton
and Houston Clauses. In an order signed September 28, 2020, the trial court
denied Links’ motion to compel and concluded that “the inconsistency between
these two provisions is so great that it should avoid the dispute resolution clauses
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altogether.” Links filed this interlocutory appeal.

                                      ANALYSIS

      Before turning to the trial court’s denial of Links’ motion to compel, we
begin with a threshold issue raised in Links’ appellate briefing regarding which
documents comprise the parties’ final contract.

I.    The Parties’ Final Contract

      For the first time on appeal, Links contends that the Quotation (and the
Houston Clause included therein) is not part of the parties’ final contract. Rather,
Links argues the parties’ final contract includes only the Purchase Order; therefore,
the Denton Clause is the only arbitration provision applicable to this dispute.

      But this is contrary to the position Links took on this issue in the trial court.
In its motion to compel, Links asserted as follows:

      4.     Links subcontracted with [USA], and together the parties
             formed the contract at issue in this suit (the “Subcontract”). . . .
      5.     There are two arbitration clauses within the collective
             documents which make the entirety of the Subcontract. The
             first arbitration clause (hereinafter referred to as the “Denton
             Binding Arbitration Clause”) is found on page 4 of the
             Purchase Order . . . .
      6.     The second arbitration clause (herein after referred to as the
             “Houston Binding Arbitration Clause”) is buried in small, six
             (6) point font in the “Terms and Conditions of Sale,” in
             paragraph (13) entitled, “Applicable Law and Dispute
             Resolution.”
(emphasis added). Continuing on, Links stated that:

      [t]his case is unique in that within the Subcontract there are two
      binding arbitration agreements — the first requires arbitration in
      Denton, and the second requires arbitration in Houston. . . . In the
      documents which form the contract at issue in this case, there is (i)

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      not one, but two binding arbitration agreements, and (ii) each Party’s
      claims fall within the scope of either agreement.
(emphasis added).    This stance was reiterated in Links’ reply in support of its
motion to compel, in which it stated that “[a]rbitration is required pursuant to the
contractual agreement between the Parties (the ‘Subcontract’), which contains not
one, but two different mandatory arbitration agreements.”

      We conclude that these statements constitute judicial admissions that
foreclose the argument Links advances on appeal, i.e., that the parties’ final
contract consists only of the Purchase Order and excludes the Quotation.

      A judicial admission is a clear, deliberate, and unequivocal statement of fact
that conclusively disproves a right of recovery or asserted defense. Horizon/CMS
Healthcare Corp. v. Auld, 34 S.W.3d 887, 905 (Tex. 2000); Weingarten Realty
Mgmt. Co. v. Liberty Mut. Fire Ins. Co., 343 S.W.3d 859, 870 (Tex. App.—
Houston [14th Dist.] 2011, pet. denied). To constitute a judicial admission, a
statement must be (1) made in the course of a judicial proceeding; (2) contrary to a
fact essential for the party’s recovery or defense; (3) deliberate, clear, and
unequivocal; (4) in accordance with public policy if given conclusive effect; and
(5) consistent with the opposing party’s theory of recovery.       In re Estate of
Guerrero, 465 S.W.3d 693, 705-06 (Tex. App.—Houston [14th Dist.] 2015, pet.
denied). A judicial admission dispenses with the production of evidence on an
issue and cannot be disputed by the admitting party. Holy Cross Church of God in
Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001).

      Here, the above-quoted statements from Links’ motion to compel and reply
were (1) made during the course of a judicial proceeding, (2) contrary to the
position Links now asserts on appeal, (3) deliberate, clear, and unequivocal, and
(4) not destructive of USA’s theories of recovery. See In re Estate of Guerrero,

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465 S.W.3d at 705-06. Giving these statements conclusive effect also is consistent
with public policy.     See id.    Therefore, these statements constitute judicial
admissions regarding what documents comprise the parties’ final contract. See id.;
see also, e.g., Anglo-Dutch Energy, LLC v. Crawford Hughes Operating Co., No.
14-16-00635-CV, 2017 WL 4440530, at *6-7 (Tex. App.—Houston [14th Dist.]
Oct. 5, 2017, pet. denied) (mem. op.) (the plaintiffs’ statements in their petition
that they were parties to certain agreements constituted judicial admissions that
prevented them from disputing that fact on appeal). Links is precluded from
advancing a contrary stance on appeal and cannot argue that the parties’ final
contract does not include the Quotation.

II.   Conflicting Arbitration Provisions

      Having determined that the parties’ final contract includes both the Purchase
Order and Quotation, we turn to the two arbitration provisions included therein. In
its order denying Links’ motion to compel, the trial court concluded that these
provisions “directly conflict[ed]” with each other and struck both.

      We review the denial of a motion to compel arbitration for an abuse of
discretion, deferring to the trial court on factual determinations that are supported
by the evidence and reviewing legal determinations de novo. Perry Homes v. Cull,
258 S.W.3d 580, 598 (Tex. 2008); Longoria v. CKR Prop. Mgmt., LLC, 577
S.W.3d 263, 266-67 (Tex. App.—Houston [14th Dist.] 2018, pet. denied). A trial
court abuses its discretion if it acts arbitrarily or unreasonably or without reference
to any guiding rules or principles. Longoria, 577 S.W.3d at 266.

      Arbitration cannot be ordered in the absence of an agreement to arbitrate. In
re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig.
proceeding); Morgan v. Bronze Queen Mgmt. Co., 474 S.W.3d 701, 705 (Tex.
App.—Houston [14th Dist.] 2014, no pet.). Thus, despite strong presumptions that
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favor arbitration, a valid agreement to arbitrate is a threshold requirement to
compel arbitration. In re Kellogg Brown & Root, Inc., 166 S.W.3d at 737-38;
Morgan, 474 S.W.3d at 705. Because an arbitration provision is separable from
the rest of the contract, the court must determine its validity separately from the
validity of the contract itself. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758
(Tex. 2001) (orig. proceeding) (“the Arbitration Addendum’s validity is a separate
issue from the validity of the whole contract”); TMI, Inc. v. Brooks, 225 S.W.3d
783, 792 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (“arbitration
provisions are generally separable from the contracts in which they are
contained”).

       Courts determine the validity of arbitration agreements by applying state-law
contract principles.1 D.R. Horton, Inc. v. Brooks, 207 S.W.3d 862, 867 (Tex.
App.—Houston [14th Dist.] 2006, no pet.). Accordingly, the party seeking to
compel arbitration must “show the [arbitration] agreement meets all requisite
contract elements.” J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex.
2003). The elements necessary to form a valid and binding contract are (1) an offer;
(2) acceptance in strict compliance with the offer’s terms; (3) a meeting of the minds;
(4) consent by both parties; (5) execution and delivery; and (6) consideration.
Advantage Physical Therapy, Inc. v. Cruse, 165 S.W.3d 21, 24 (Tex. App.—Houston
[14th Dist.] 2005, no pet.).

       For an agreement to be enforceable, there must be a meeting of the minds with
respect to its subject matter and essential terms. Parker Drilling Co. v. Romfor Supply

       1
          Here, neither arbitration provision states whether it is governed by the Federal
Arbitration Act (“FAA”) or the Texas Arbitration Act (“TAA”). But these same principles apply
regardless of whether the arbitration agreement is governed by the FAA or the TAA. See
Glassell Producing Co. v. Jared Res., Ltd., 422 S.W.3d 68, 76 (Tex. App.—Texarkana 2014, no
pet.) (under both the FAA and the TAA, “arbitration provisions are evaluated under state
contract interpretation law”).

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Co., 316 S.W.3d 68, 75 (Tex. App.—Houston [14th Dist.] 2010, pet. denied).
“Meeting of the minds” encompasses two inquiries: whether the parties reached an
agreement and whether that agreement is legally enforceable. Yazdani-Beioky v.
Sharifan, 550 S.W.3d 808, 823 (Tex. App.—Houston [14th Dist.] 2018, pet. denied).

       The second inquiry is a question of law for the courts. Id. To be legally
enforceable, an agreement must address all its essential terms with a reasonable degree
of certainty and definiteness such that a court can understand and enforce the parties’
obligations. Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 237 (Tex. 2016). Material and
essential terms are those that parties would reasonably regard as vitally important
elements of their bargain and are determined on a case-by-case basis. Yazdani-Beioky,
550 S.W.3d at 823.

       The Fifth Circuit recently examined a dispute similar to that presented here,
in which the parties’ agreement contained two conflicting dispute resolution
provisions. See O’Shaughnessy v. Young Living Essential Oils, L.C., 810 F. App’x
308, 311-14 (5th Cir. 2020).2               First, the parties’ agreement contained a
“Jurisdiction and Choice of Law” provision stating that, “[a]ny legal action
concerning the Agreement will be brought in the state and federal courts located in
Salt Lake City, Utah.” Id. at 312. But the agreement also contained a second
provision stating that, “[i]f mediation is unsuccessful, any controversy or claim
arising out of or relating to the Agreement, or the breach thereof, will be settled by
arbitration.” Id.

       Concluding that these provisions “irreconcilably conflict[ed],” the Fifth
Circuit held that “there was no ‘meeting of the minds’ with respect to arbitration in

       2
          Although the Fifth Circuit in O’Shaughnessy analyzed this issue under Utah law, it
applied similar legal principles for its analysis of the “meeting of the minds” element of contract
formation. See 810 F. App’x at 311.

                                                7
this case.”3 Id. The court affirmed the order denying the defendant’s motion to
compel. Id. at 315; see also Ragab v. Howard, 841 F.3d 1134, 1136-38 (10th Cir.
2016) (where the parties’ agreements contained multiple arbitration provisions, the
Tenth Circuit held that “the conflicting details in the arbitration provisions indicate
that there was no meeting of the minds with respect to arbitration”).

       Likewise here, the conflict between the Denton and Houston Clauses shows
that the parties did not have a meeting of the minds on the essential terms of their
arbitration agreement. Whereas the Denton Clause requires that “[a]ny dispute”
relating to the Purchase Order “shall” be submitted to arbitration, the Houston
Clause states that USA has the “sole option” to elect for arbitration or some other
dispute resolution method. Enforcing one clause would unquestionably violate the
other. Therefore, the parties did not reach a meeting of the minds on arbitration as
necessary to render their arbitration agreement enforceable.                See Fischer, 479
S.W.3d at 237; Yazdani-Beioky, 550 S.W.3d at 823; see also O’Shaughnessy, 810 F.
App’x at 311-14.

       Arguing that the Denton and Houston Clauses can be harmonized, Links
points to In re U.S. Home Corp., 236 S.W.3d 761 (Tex. 2007) (orig. proceeding)
(per curiam).     But the provisions at issue in In re U.S. Home Corp. are not
analogous to those presented here. In that case, the plaintiffs signed a home sales
contract with U.S. Home Corporation providing that “[a]ny controversy or claim”
relating to the contract would be determined by arbitration. Id. at 763. Also
included as part of the home’s sale was a warranty book stating that either party
“may request” arbitration. Id. at 765.

       3
        We note that “[p]recedent of the Fifth Circuit, though persuasive, is not binding on this
court.” J & J Sports Prods., Inc. v. JWJ Mgmt., Inc., 324 S.W.3d 823, 830 (Tex. App.—Fort
Worth 2010, no pet.) (citing Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex.
1993) (per curiam)).

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      Concluding that these arbitration provisions were not ambiguous, the court
reasoned that, “[w]hile the warranty’s clause allowed either party to request
arbitration, nothing in it suggest[ed] arbitration was optional if either did; to the
contrary, the clause constituted a binding promise to arbitrate if either party
requested it.” Id. Accordingly, the court held that the two arbitration provisions
could effectively be harmonized and read together to give effect to each. See id.

      In contrast here, the Denton and Houston Clauses cannot be harmonized.
The Denton Clause is a mandatory arbitration provision providing that “any
dispute” relating to the Purchase Order “shall” be submitted to arbitration. But
under the Houston Clause, USA alone has the “sole option” to choose arbitration
or some other dispute resolution method. These clauses cannot be read together
without nullifying one or the other on its essential terms. Accordingly, In re U.S.
Home Corp. does not control our analysis.

      Therefore, because the parties did not reach a meeting of the minds on the
essential terms of their arbitration agreement, the trial court did not err in denying
Links’ motion to compel arbitration.

                                   CONCLUSION

      We affirm the trial court’s September 28, 2020 order denying Links’ motion
to compel arbitration.

                                       /s/       Meagan Hassan
                                                 Justice

Panel consists of Justices Wise, Spain, and Hassan.

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