By Rick Freeman In a recent article herein, Karl and Rob discussed the recent opinion by the Texas Supreme Court – In re Weekley Homes, L.P. In that decision the Texas Supreme Court compelled a non-signatory to a contract to submit her personal injury claim to arbitration pursuant to the home purchase contract. Basically, the Court says that if you gain benefits from the contract, you are subject to the contract’s arbitration clause. To quote Justice Brister’s non-judicious pun “(a) non-party cannot both have his contract and defeat it too.” Conversely, in a recent decision by Judge Harmon out of the U.S. District Court, S.D. Texas, non-signatories were allowed to compel arbitration of a claim. Much like the tropical Atlantic and Gulf, storm after storm of litigation is spinning off in some way related to the Enron debacle. In In Re Enron, (MDL-1446, CIV.A H-01-3624) [.pdf link] decided on August 1, 2005, Judge Harmon ruled that non-signatories to a contract could compel arbitration of claims. In a very short summary of a long and complicated set of facts, some outside Enron directors moved to compel arbitration with regard to the distribution of the proceeds of $200 million in excess D&O liability insurance coverage. The D&O proceeds had been interpleaded into the registry of the court. Although the outside directors were not signatories to the insuring contracts, the Court held that they could compel arbitration since they were the intended third-party beneficiaries of the contracts. The Court went on to say, like the Texas Supreme Court did in the Weekley case, that the ultimate question of whether the parties agreed to arbitrate is determined by state contract law and not federal law. Once there has been is a determination that state contract law compels arbitration under the FAA, the FAA has created its own body of federal substantive law applicable to any arbitration agreement within FAA coverage. Another interesting aspect of Judge Harmon’s opinion is that, although the non-signatories could compel arbitration, the Court ultimately ruled that under Texas contract law the Court would not compel arbitration. (I will leave it to the interested reader to review the opinion for the Court’s reasoning.)
Continue reading...The Texas Supreme Court issued a per curiam opinion this morning reversing the Fourteenth Court of Appeals and a trial court, both of which had previously denied a special appearance in a suit involving the alleged wrongful denial of insurance claims. The Court held that the district court could not properly exercise specific personal jurisdiction over Commonwealth General Corporation (“CNC”) just because CNC was the sole shareholder of a Texas insurance company. “Stock ownership and the related right of control that stock ownership gives to stockholders are insufficient to destroy the distinctness of corporate entities for jurisdictional purposes.” According to the Supreme Court, since no evidence existed that CNC did anything other than wholly own the Texas insurance company whose denial of claims was the subject of the lawsuit, denial of CNC’s special appearance was inappropriate, at least on specific jurisdictional grounds. The Court remanded the question of whether or not general jurisdiction over CNC exists in Texas to the Court of Appeals. Cause No. 04-0829, CNC v. York and Roberson Technorati Tags: litigation, Texas Supreme Court, law
Continue reading...The Third Court of Appeals issued three opinions this morning. The first, which came from a case against the City of San Angelo Fire Department, explains an affirmative defense to the Texas Tort Claims Act’s waiver of sovereign immunity for claims involving the use of a motor vehicle. While sovereign immunity is usually waived in Texas in cases where a governmental employee negligently operates a motor vehicle, there is no waiver in cases where the claim arises out of the action of an employee responding to an emergency call in compliance with applicable laws and ordinances. The plaintiff in the underlying case had sued the San Angelo Fire Department after she got into a wreck with a fire engine responding to a report of a burning daycare center. According to the Court of Appeals, San Angelo established that its fire fighter had obeyed applicable regulations in responding to the call, so the City’s sovereign immunity from the claim was not waived by the Tort Claims Act, and the trial court had no subject-matter jurisdiction over the City. Finally, the Court found that the fire fighter in question was entitled to official immunity, as he was performing a discretionary act at the time of the accident, and he was acting in good faith as the first unit responding to what he believed was a burning daycare facility with children trapped inside. Cause No. 03-04-00179-CV, City of San Angelo and Kelly Hood v. Hudson The Third Court of Appeals also issued memorandum opinions in a case for termination of parental rights and a restricted appeal of a default divorce.
Continue reading...On Friday, the Texas Supreme Court handed down an opinion granting Petition for Writ of Mandamus compelling a non-signatory to an arbitration clause to arbitrate personal injury claims the Court itself admits do not stem from the contract which contains the arbitration clause. The plaintiff in the underlying case asserted personal injury claims against a home builder, claiming that she developed asthma from the dust created by the home builder’s repairs of the home in which she lived (but which she did not own), so she decided to get help with injuries from lawyers as https://www.spauldinginjurylaw.com/savannah/. The purchase agreement which obligated the home builder to undergo the repairs contained an arbitration clause, and the home builder attempted to compel arbitration of the asthma claims. The asthmatic plaintiff was not a signatory to the purchase agreement. The Texas Supreme Court adopted a doctrine of “direct-benefits estoppel,” asserting that since the asthmatic plaintiff insisted upon and enjoyed benefits of the contract (specifically its warranty and repair provisions), she could not subsequently avoid the contract’s arbitration clause. The Court declines to establish a firm test for lower courts to apply when “deciding what particular conduct embraces or merely shakes hands with” the contract, stating instead that trial courts must “exercise some discretion based on the facts of each case.” In other words, the rule in Texas, as of Friday, seems to be: if a party embraces a contract containing an arbitration clause, it cannot then avoid arbitration of tort claims unrelated to the contract, but if the party merely shakes hands with the contract, then arbitration is not required. The Court acknowledges that since the U.S. Supreme Court has not adopted direct-benefits estoppel, “its application and boundaries are not entirely clear.” The case was complicated by the fact that the home was purchased by the asthmatic plaintiff’s elderly father and then given to a trust for the plaintiff’s benefit, the idea being that the elderly father would live with his daughter and her family during his sunset years, after which the daughter would own the house. That being the case, the daughter supervised the construction and repairs, despite not being an owner of the home. So, the factual relationship between the daughter, the trust which owned the property, and the home builder which repaired the home and allegedly caused the daughter’s asthma was complex, to say the least. Emerging from this unusual set of facts is a vaguely defined doctrine which may prove to have a broad impact, given the seeming ubiquity of arbitration clauses in today’s consumer contracts. Finally, it seems worth noting that, according to the Texas Supreme Court, neither party challenged the trial court ruling that the FAA, as opposed to the TAA, governed the contract which contained the arbitration clause. As we’ve noted on this blog before, TAA analysis would place far stricter requirements on arbitration clauses which purport to require arbitration of personal injury claims than does the FAA. Cause No. 04-0119, In RE: Weekley Homes, LP Technorati Tags: arbitration, ADR, Texas Supreme Court, law
Continue reading...Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.
Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.