brent-w-coon-pc-and-brent-w-coon-v-walter-umphrey-pc-bryan-o ( 2009 )

In The

Court of Appeals

Ninth District of Texas at Beaumont

____________________

NO. 09-09-00264-CV ____________________

BRENT W. COON, P.C., and BRENT W. COON, Appellants/Cross-Appellees

V.

WALTER UMPHREY, P.C., BRYAN O. BLEVINS, P.C., PAUL F. FERGUSON, JR., P.C., PROVOST UMPHREY TOBACCO PARTNERSHIP, MICHAEL R. RAMSEY, P.C., and PROVOSTUMPHREY LAW FIRM, L.L.P., Appellees/Cross-Appellants

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On Appeal from the 58th District Court Jefferson County, Texas Trial Cause No. E-180,900

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MEMORANDUM OPINION  

This accelerated appeal challenges several interlocutory rulings of the trial court in a declaratory judgment action concerning an agreement to submit a dispute between lawyers to binding arbitration through the American Arbitration Association ("AAA"). Appellants Brent W. Coon, P.C. and Brent W. Coon (collectively "Coon") contend the trial court erred by denying Coon's motion to dissolve an agreed stay against the AAA and contend that the trial court erred in denying Coon's alternative motion to disqualify the arbitrator selected by appellees Walter Umphrey, P.C., Bryan O. Blevins, P.C., Paul F. Ferguson, Jr., P.C., Provost Umphrey Tobacco Partnership, Michael R. Ramsey, P.C., and ProvostUmphrey Law Firm, L.L.P. (collectively "Umphrey"). Umphrey contends this Court lacks jurisdiction and in the alternative contends the trial court erred in denying Umphrey's motion to disqualify the arbitrator selected by Coon. We hold that our appellate jurisdiction extends only over part of an order that addresses three motions, and find no reversible error in that part of the order. ⁽¹⁾ Accordingly, we affirm that part of the trial court's order that denies a motion to dissolve the stay.

A Rule 11 agreement entered into by the parties provided that their dispute would be arbitrated in AAA Case No. 70 194 Y 00687 07, and set out a process for selecting arbitrators. See Tex. R. Civ. P. 11. Pursuant to the agreement of the parties, the trial court signed an "Agreed Order on Cross Motions to Compel and Stay Arbitration and Related Issues." This agreement was apparently motivated by the AAA's decision to appoint a single arbitrator "to make the determination of which [arbitration] clause is applicable." The agreed order set out the following process for selecting arbitrators:

A panel of three (3) arbitrators shall serve in the arbitration proceedings. The three (3) arbitrators shall be selected as follows: one (1) arbitrator shall be selected collectively by [Coon]; one (1) arbitrator shall be selected by the ProvostUmphrey Tobacco Partnership; and one (1) arbitrator shall be mutually agreed to by [Coon] and the ProvostUmphrey Tobacco Partnership. If [Coon] and the ProvostUmphrey Tobacco Partnership cannot mutually agree on an arbitrator, then such arbitrator shall be chosen by the two selected arbitrators. Each side will designate their respective arbitrator within thirty (30) days of the signing of this Order. The third arbitrator will be selected within thirty (30) days after the two party appointed arbitrators become incumbent (i.e. after successful completion of the conflict process resulting in both party appointed arbitrators being effectively appointed). If this procedure fails, it shall be resolved as provided in this paragraph, subject to all above reservations and the reservations contained in paragraph 11 of this Order. The AAA is stayed from deciding the arbitrator selection issues unless permitted by court order. All issues regarding selection of arbitrators shall be submitted to the Court in the first instance for disposition subject to all reservations.

Among its many provisions, the agreed order included the following: (1) the parties agreed that Paragraph 14 of the Redemption and Withdrawal Agreement between Provost Umphrey Tobacco Partnership and Brent W. Coon, effective May 14, 2001, is the valid agreement to arbitrate; (2) Coon and Umphrey would arbitrate their disputes set forth in Coon's demand for arbitration in AAA Case No. 70 194 Y 00687 07; (3) "the method of selection of arbitrators in AAA No. 70 194 Y 00687 07 is governed by Paragraph 14 contained in the Coon Tobacco Withdrawal Agreement"; (4) "Section 14 of the Coon Tobacco Withdrawal Agreement is the method for selecting the arbitrators for the arbitration compelled hereunder"; (5) if the arbitrator selection process failed, the dispute over arbitrator selection would be submitted to the trial court for disposition; (6) the parties agreed that the arbitrator selection procedures ordered by the AAA "are stayed and selection of the arbitrators shall be exclusively as provided in this Order"; (7) the trial court stayed "this and all related proceedings as to the issues subject to the arbitration compelled by this Order" but excepted from the stay "enforcement of these orders, applications for orders or process for appointment of arbitrators, enforcement of the arbitration agreement, enforcement of this order" and proceedings covered by subchapter D of Chapter 171, Civil Practice and Remedies Code.

Among many issues reserved in the Rule 11 agreement, the agreed order reserved the following: (1) "the right to argue that the appropriate selection process could be or could not be determined by the AAA Rules, by the Court, or by some other rules or method"; (2) "[the] right to contend that all other procedures related to the arbitration are or are not governed by AAA Rules and are or are not subject to AAA jurisdiction"; (3) the right to "make appropriate motions" and "any other dilatory, merits, substantive, discovery, or procedural motion, objection, or plea that may be filed in the arbitration or this case, which does not conflict with this order"; and (4) "the right to appeal any order of this Court, with the exception of this Order."

Objecting to the arbitrator selected by Umphrey pursuant to this agreement, Coon filed a "Motion to Dissolve Stay against American Arbitration Association and Alternative Motion to Disqualify." Arguing that the selection of their appointed arbitrator could not be challenged by Coon, Umphrey filed a combined response and alternative motion to disqualify the arbitrator selected by Coon. On May 28, 2009, the trial court signed an interlocutory order that denied Coon's motion to dissolve the stay against the AAA, denied Coon's motion for an order for the AAA to decide disqualification issues, denied both motions to disqualify the opposing party's arbitrators, and ordered the parties to select the third arbitrator in accordance with the order on the Rule 11 agreement. Coon filed notice of accelerated appeal. Umphrey challenges our jurisdiction but filed a notice of accelerated appeal in the alternative, should this court find jurisdiction over Coon's appeal.

First, Umphrey argues that this appeal must be dismissed for lack of appellate jurisdiction. A person may appeal from an interlocutory order of a district court that "grants or refuses a temporary injunction or grants or overrules a motion to dissolve a temporary injunction as provided by Chapter 65[.]" Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (Vernon 2008). Umphrey contends that section 171.098 is the sole source of appellate review in arbitration proceedings. See id. § 171.098(a) (Vernon 2005).

The order Coon appeals in this proceeding denies "Defendants' Motion for order dissolving the stay against AAA" and "Defendants' Motion for an order that the AAA decide the issue of the disqualification of party-appointed arbitrators[.]" Umphrey argues these rulings cannot be appealed pursuant to section 51.014(a)(4) because the order must be read in connection with the earlier agreed order. Umphrey argues that the "limited stay" in the agreed order is merely an order to "permit the arbitration to be conducted in an orderly manner and to prevent improper interference or delay of the arbitration" and not an injunction. Compare Tex. Civ. Prac. & Rem. Code Ann. § 171.086(a)(6) (Vernon 2005), and Tex. Civ. Prac. & Rem. Code Ann. § 65.011 (Vernon 2008). The agreed order must be considered in its context. On February 20, 2008, Umphrey filed an "Emergency Motion for Temporary Restraining Order" against the AAA and the defendants. In this motion, Umphrey invoked section 65.011 to support its claim for injunctive relief. Umphrey alleged the AAA has no authority to determine "the way in which the arbitrators are selected to the panel." Umphrey argued irreparable harm, a probable right to relief, lack of an adequate remedy at law, and imminent harm. The agreed order was entered in the course of the hearing on Umphrey's "petition for temporary injunction." The agreed order did grant a "temporary injunction as provided by Chapter 65." See id. § 51.014(a)(4) (Vernon 2008).

Umphrey also argues that the order denying the motion to dissolve the temporary injunction is not appealable because the AAA was dismissed from the suit. Umphrey's "Emergency Motion for Temporary Restraining Order" asked for injunctive relief from the AAA. An amended petition subsequently filed by Umphrey named the AAA as a defendant. The agreed order included an injunction of the arbitrator selection process by the AAA. There is no indication in this record that the AAA ever entered an appearance in this case. Reciting that "the AAA represented to the parties and this Court that 'whether or not the AAA is a party to this action, the AAA will abide by any court order directing the manner in which the underlying arbitration should, or should not, proceed'" and expressly "[b]ased upon those representations," the trial court granted Umphrey's motion to dismiss "all causes of action against the AAA[.]" Although Umphrey contends on appeal that "there is no stay (no purported injunction) to dissolve," the trial court did not amend the agreed order to delete the injunctive relief granted in that order. In the order denying Coon's motion to dissolve the stay, the trial court ruled that the agreed order "remains in full force and effect." Because the trial court denied a motion to dissolve a temporary injunction, that part of the trial court's order of May 28, 2009, is appealable. Accordingly, we assert our appellate jurisdiction to review Coon's contention that the trial court erred in refusing to dissolve the injunction.

Coon contends the trial court erred in denying Coon's motion to dissolve the stay because Rule 17(b) of the AAA's Commercial Arbitration Rules provides that the AAA shall determine whether the arbitrator should be disqualified. ⁽²⁾ In this case, however, the parties altered the applicability of the Commercial Arbitration Rules in a binding Rule 11 agreement. See Tex. R. Civ. P. 11. Coon expressly agreed that if the "selection process fails" the parties would "submit these issues to the 58^th Judicial District Court for future disposition." "Wherever possible, a trial court should give effect to agreements between the parties." In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 846 (Tex. 2008) (citing Johnson v. Swain, 787 S.W.2d 36, 38 (Tex. 1989)). Here, the parties agreed to a stay of the AAA arbitrator-selection procedures, agreed to their own arbitrator-selection procedure, agreed to submit arbitrator-selection issues to the trial court, and agreed that they would not appeal the order that created the injunction. That agreement was in writing, signed and filed with the papers as part of the record. See Tex. R. Civ. P. 11. Under these circumstances, the trial court did not err in denying Coon's motion to dissolve the temporary injunction.

Both Coon and Umphrey raise appellate issues regarding the trial court's rulings on their motions to disqualify the party-selected arbitrator. These rulings fall outside the scope of section 51.014(a)(4). See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4). Coon cites section 171.098(a)(1) of the Civil Practice and Remedies Code to support his argument that interlocutory appellate relief is appropriate. See id. § 171.098(a)(1) (Vernon 2005). A motion to disqualify an arbitrator does not equate to an order denying an application to compel arbitration made under section 171.021 of the Civil Practice and Remedies Code. Id. § 171.021. In fact, the trial court did compel arbitration in AAA Case No. 70 194 Y 00687 07 in accordance with the parties' agreement.

We find no error in the trial court's order denying Coon's motion to dissolve the temporary injunction. To the extent of our appellate jurisdiction over the issues raised in the brief of the appellant, we overrule those issues and affirm the trial court's order denying Coon's motion to dissolve a temporary injunction. Neither party has demonstrated the presence of interlocutory appellate jurisdiction over the trial court's orders denying the parties' motions to disqualify the party-selected arbitrators, and we express no opinion thereon.

AFFIRMED.

_______________________________

CHARLES KREGER

Justice

Submitted on August 6, 2009

Opinion Delivered September 24, 2009

Before McKeithen, C.J., Gaultney and Kreger, JJ.  

DISSENTING OPINION

The majority reads the Agreed Order as an agreement to submit the arbitrator-selection issues to the trial court. However, the Agreed Order states in part as follows:

The parties reserve the right to argue that the appropriate selection process could be or could not be determined by the AAA Rules, by the Court, or by some other rules or method.

. . . .

Coon and the PUT Parties do not admit or agree through this Order that this Court has or does not have jurisdiction to hear or decide any other issues in arbitration.

. . . .

The parties reserve the right to challenge the Court's jurisdiction as not being cognizable under applicable law.

Appellees state in their brief that "[t]he Agreed Order preserved each party's position on the question of who should decide future disputes over selection of the arbitrators (the Court or the AAA), but the partie[s] agreed to present that question to the trial court for determination." The question was presented to the trial court, and is presented to this Court in this proceeding. That question, whether the trial court or the AAA may decide a dispute over selection of the arbitrators, is not answered by the Agreed Order.

The Agreed Order does say that the parties agree the method for selecting the arbitrators for the arbitration is to be governed by the arbitration agreement. The arbitration agreement provides that the AAA Rules apply. The Rules provide for the AAA to resolve arbitrator-selection issues.

A trial court's refusal to compel arbitration pursuant to a contract is an appealable order under the Texas Arbitration Act, and is subject to mandamus if the agreement is governed by the Federal Arbitration Act. The appeal and the mandamus proceeding here request that the trial court be ordered to compel arbitration pursuant to the terms of the arbitration agreement. When a court compels arbitration by arbitrators selected in a manner differently from that provided in the arbitration agreement, the court is in effect refusing to compel arbitration as agreed to by the parties. See In re Nat'l Health Ins. Co., 109 S.W.3d 552 (Tex. App.--Tyler 2002)(orig. proceeding); see also In re Farmpro, Inc., No. 06-05-00125-CV, 2005 Tex. App. LEXIS 9247 (Tex. App.--Texarkana Nov. 8, 2005) (orig. proceeding). The trial court must allow the parties recourse to their own contractual method of selection of the arbitrators. See In re La. Pac. Corp., 972 S.W.2d 63, 65 (Tex. 1998). The parties did not agree to stay the arbitration indefinitely. The arbitration selection process has not failed. See id. at 64-65. I respectfully dissent.

____________________________

DAVID GAULTNEY

Justice

Dissent Delivered

September 24, 2009

1. Both parties also seek mandamus relief in a companion proceeding In re Coon, No. 09-09-00263-CV (Tex. App.--Beaumont Sept. 24, 2009, orig. proceeding), which we address in a separate opinion.

2. See AAA Commercial Arbitration Rule 17, available at http://www.adr.org/ commercial_arbitration.