Texas Supreme Court Reverses Richmont Holdings Decision

On Friday, the Supreme Court of Texas reversed and remanded the Second District in Fort Worth’s ruling in Richmont Holdings, Inc., et al. v. Superior Recharge Systems, L.L.C., et al. (No. 12-142). The interlocutory appeal arose after Richmont Holdings purchased the assets of Superior Recharge Systems.

A provision in the purchase agreement stated:

“Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration.”

As part of the asset purchase, one of Richmont Holdings’ affiliates, Superior Acquisition, agreed to hire Superior Recharge Systems owner and manager Jon Blake. An employment contract stated Blake would serve as general manager of Superior Acquisition for a period of two years and included a non-compete clause. The employment agreement did not include an arbitration provision. After six months, however, Blake’s employment with the company was terminated.

Blake filed a lawsuit against Richmont Holdings, Superior Acquisition, and others (Richmont) seeking damages related to his employment agreement. Richmont answered Blake’s complaint and then filed a motion to compel arbitration 18 months later. Richmont also submitted a copy of the asset purchase agreement in support of the company’s motion to compel arbitration. Blake responded by stating Richmont previously waived its right to arbitrate by substantially invoking the judicial process. The trial court agreed with Blake.

On appeal, The Second District of Texas affirmed the trial court’s holding on different grounds. According to the Fort Worth court, Richmont failed to establish that an arbitration agreement applied to the parties’ dispute. The court stated the employment agreement dispute arose separately from the asset purchase agreement. Because of this, the appellate court did not reach the waiver issue.

Richmont appealed the matter to the Supreme Court of Texas stating the Second District incorrectly determined that the parties had no valid agreement to engage in arbitration. Blake conceded that the arbitration provision in the parties’ asset purchase agreement applied to the dispute but again stated that Richmont waived its right to arbitrate.

According to the Texas Supreme Court,

The court of appeals’ conclusion that the arbitration provision in the asset purchase agreement has no application to Blake’s lawsuit is contrary to the parties’ contentions and has no support in the record. Moreover, the court’s failure to recognize the arbitration agreement here is contrary to our precedent, which mandates enforcement of such an agreement absent proof of a defense.

Finally, the case was reversed and remanded to the Second District Appeals Court for consideration of Blake’s waiver defense.