Corpus Christi COA Dismisses Interlocutory Appeal from an Order Compelling Arbitration

The Corpus Christi Court of Appeals has held it lacked jurisdiction to hear an interlocutory appeal from a trial court’s order which compelled arbitration and also refused to grant a writ of mandamus because a party failed to show an appellate remedy would be inadequate.

In Circle Zebra Fabricators, Ltd. v. Americas Welding Corp., No. 13-10-00591-CV, (Tex. App. – Corpus Christi, March 17, 2011), Circle Zebra by and through Circle Zebra Management, L.L.C. (“Circle Zebra”) entered into a Master Service Agreement (MSA) to provide certified welders for work at Keppel Amfels, Inc.’s shipyard located in Brownsville, Texas. In order to meet its obligations under the contract, Circle Zebra purchased equipment, obtained necessary insurance and hired approximately 100 welders. Circle Zebra’s resulting investment totaled more than $1,000,000.

After Circle Zebra’s welders began performing work at Keppel Amfels shipyard, Keppel Amfels requested that Circle Zebra meet with Jorge Manuel Garcia and representatives of Americas Welding Corporation (“Americas Welding”) for the stated purpose of expanding the available workforce by hiring Mexican Nationals. Circle Zebra refused to hire Americas Welding personnel and instead filed suit against Americas Welding, Keppel Amfels, Garcia, and Circle Zebra’s “chief foreman manager” Raul Castillo, Sr. alleging tortious interference, breach of contract and breach of fiduciary duty. Circle Zebra alleged that Castillo, Americas Welding, Garcia, and Keppel Amfels conspired “to convert Circle Zebra’s equipment and personnel to their use.”

Keppel Amfels filed a motion to compel arbitration based on an arbitration clause contained in the parties’ MSA. Non-signatories Americas Welding, Garcia and Castillo also filed a joint motion to compel arbitration. The trial court granted both Keppel Amfels’ and the non-signatories’ motions and stayed the trial court proceedings pending the results of arbitration. Circle Zebra appealed the order compelling arbitration and sought a writ of mandamus from the Corpus Christi Court of Appeals.

In the Court of Appeals, Keppel Amfels filed a motion to dismiss for lack of jurisdiction because the orders compelling arbitration were interlocutory and not subject to appeal. The court agreed and granted Keppel Amfels’ motion. According to the court, an order which compels arbitration and stays court proceedings is not subject to interlocutory appeal under either Texas or federal arbitration laws.

In support of Circle Zebra’s writ of mandamus, the company argued that an appeal following arbitration would be inadequate because the alleged conspiracy had put it “out of business” and its cause of action did not arise from the MSA. Additionally, Circle Zebra argued the parties’ agreement explicitly stated it did not confer benefits on third parties or provide rights to third parties to enforce its provisions. Because Circle Zebra only addressed the issue of the adequacy of remedy by appeal in a motion to amend its petition after oral argument occurred, the Corpus Christi Court held,

we deny Circle Zebra’s motion to supplement or amend its petition for writ of mandamus to discourage the practice of waiting until after oral argument to raise and address an issue which must be established as a necessary part of the petition for writ of mandamus.

According to the court, Circle Zebra also failed to meet its burden to prove the inadequacy of its appellate remedy as a matter of law. The Court of Appeals stated,

Delay and expense, standing alone, generally do not render appeal after a final judgment to be an inadequate remedy, and this is particularly true in the instant case because it is, at least in part, based on a contractual dispute, and a “party that prevails on a contractual claim can recover its fees and expenses, even if they were incurred in collateral proceedings like arbitration.”

Despite that the court dismissed Circle Zebra’s appeal for lack of jurisdiction and denied its petition for a writ of mandamus, it noted that Circle Zebra’s right to appeal the trial court’s order after arbitration was held was preserved. Additionally, the court’s ability to vacate or modify any arbitration award under the Texas or Federal Arbitration Act was also preserved.

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