in Re: Bnp Paribas ( 2008 )

COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
NUMBER 13-07-353-CV
IN RE BNP PARIBAS
On Petition for Writ of Mandamus
NUMBER 13-07-358-CV
BNP PARIBAS, Appellant,
v.
VIRGO COMMODITIES CORP., ET AL., Appellees.
On Appeal from the 107th District Court
of Cameron County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez, Justices Garza and Vela
Memorandum Opinion by Justice Vela
Relator, BNP Paribas (“BNP”), brought a petition for writ of mandamus and
interlocutory appeal contesting the trial court’s denial of its motion to compel arbitration.
For the reasons discussed below, we conditionally grant the petition for mandamus, Cause
No. 13-07-353-CV, and, granting full relief under our mandamus jurisdiction, we dismiss
as moot the interlocutory appeal, Cause No. 13-07-358-CV. See Am. Std. v. Brownsville
Indep. Sch. Dist., 196 S.W.3d 774, 781 (Tex. 2006).
I. Background
Real parties in interest, Virgo Commodities Corp., Alamo Feeders, Inc., Mid Valley
Grain Co., USA Meat and Grain Co., Inc., and The Laredo Grain Co., buy and sell
agricultural commodities such as grain. BNP executed identical master sale and purchase
agreements with each of the real parties through which BNP helped finance the real
parties’ operations by purchasing their accounts receivable. The master sale and purchase
agreements contained an arbitration clause and were signed by BNP’s employee, Jovenal
“Jerry” M. Cruz.
Real parties in interest demanded arbitration against BNP and Cruz alleging, inter
alia, that Cruz made unauthorized demands for payment to real parties while employed by
BNP.
Arbitration commenced, but Cruz failed to appear or pay for his share of the fees.
Real parties brought suit in state court against Cruz, then subsequently included BNP as
a defendant in that suit. In the state court proceeding, BNP filed a motion to compel
arbitration. The trial court denied BNP’s motion to compel arbitration. This original
2
proceeding and interlocutory appeal ensued. This Court granted an emergency stay of the
trial court proceedings and requested a response from the real parties in interest.1 The
Court also consolidated the petition for writ of mandamus and interlocutory appeal.
II. Federal or State Arbitration
We first address whether this matter is governed by the Federal Arbitration Act
(“FAA”) or the Texas General Arbitration Act (“TGAA”). See 9 U.S.C. §§ 1-16; TEX . CIV.
PRAC . & REM . CODE ANN . §§ 171.001-.098 (Vernon 2005); In re Educ. Mgmt. Corp., 14
S.W.3d 418, 422 (Tex. App.–Houston [14th Dist.] 2000, orig. proceeding) (holding that
question of whether transaction affects interstate commerce, and thus whether federal act
governs, is one of fact where arbitration agreement is silent as to application of federal or
Texas act). The FAA "applies to all suits in state or federal court when the dispute
concerns 'a contract evidencing a transaction involving commerce.'" Jack B. Anglin Co.,
Inc. v. Tipps, 842 S.W.2d 266, 269-70 (Tex. 1992) (orig. proceeding) (quoting 9 U.S.C.S.
§ 2 (2000)); In re Profanchik, 31 S.W.3d 381, 384 (Tex. App.–Corpus Christi 2000, orig.
proceeding). The United States Supreme Court has held that the word "involving" in the
FAA is broad and the functional equivalent of "affecting," signaling Congress's intent to
exercise its Commerce Clause powers to the fullest. Allied-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265, 268 (1995); L&L Kempwood Assocs., L.L.P., v. Omega Builders,
Inc., 9 S.W.3d 125, 127 (Tex. 1999) (orig. proceeding) (per curiam).
1
The Court GRANTS the m otion for leave to file a responsive brief filed by real parties in interest and
DENIES relator’s m otion to strike the real parties’ responsive brief. Any other m otions, not disposed of herein,
or previously disposed of by this Court, are DISMISSED as m oot.
3
BNP, a French Public Limited Company, acted through its Houston unincorporated
branch in entering the master sale and purchase agreements with real parties. The real
parties in interest are all Texas corporations. Pursuant to the agreements, BNP purchased
accounts receivable from the real parties in interest. The accounts receivable represent
debt obligations owed to the real parties by Mexican importers of United States agricultural
products. Real parties utilized the proceeds from the sales of their accounts receivable to
BNP to purchase agricultural products from the Midwest, which were then shipped into
Texas and sold into Mexico.
We conclude that the master sale and purchase agreements evidenced interstate
commerce. See 9 U.S.C. § 1 (stating that the definition of “commerce" includes, inter alia,
commerce among the several States or with foreign nations); Citizens Bank v. Alafabco,
Inc., 539 U.S. 52, 56 (2003) (discussing the impact of economic transactions, such as
commercial lending, on interstate commerce); see also Serv. Corp. Int'l v. Lopez, 162
S.W.3d 801, 807-08 (Tex. App.–Corpus Christi 2005, no pet.); Stewart Title Guar. Co. v.
Mack, 945 S.W.2d 330, 333 (Tex. App.–Houston [1st Dist.] 1997, orig. proceeding); see
also Anglin, 842 S.W.2d at 270. Accordingly, the transactions at issue are governed by
the FAA.
III. Standard of Review
A writ of mandamus will issue to correct a clear abuse of discretion when there is
no adequate remedy by appeal. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992).
A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as
to amount to a clear and prejudicial error of law or if it clearly fails to correctly analyze or
4
apply the law. In re Ford Motor Co., 165 S.W.3d 315, 317 (Tex. 2005). The relator has
the burden to establish that the trial court abused its discretion. See id. If a trial court
erroneously denies a party's motion to compel arbitration under the FAA, the movant has
no adequate remedy at law and is entitled to a writ of mandamus. In re Nexion Health at
Humble, Inc., 173 S.W.3d 67, 69 (Tex. 2005); Serv. Corp. Int’l, 162 S.W.3d at 808.
IV. Validity and Scope of the Arbitration Agreement
A party seeking to compel arbitration by a writ of mandamus must establish the
existence of a valid agreement to arbitrate under the FAA and show that the claims in
dispute are within the scope of the agreement. In re Bank One, N.A., 216 S.W.3d 825, 826
(Tex. 2007) (per curiam); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex.
2005) (orig. proceeding). In determining the validity of agreements to arbitrate which are
subject to the FAA, we generally apply state-law principles governing the formation of
contracts. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006) (citing First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). Whether a valid arbitration
agreement exists is a legal question subject to de novo review. Am. Std., 196 S.W.3d at
781. If the trial court finds there is a valid agreement to arbitrate, the burden shifts to the
party opposing arbitration to prove his defenses. J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 227 (Tex. 2003).
Once a valid agreement to arbitrate has been established, the court must then
determine whether the nonmovants' claims fall within the scope of the arbitration clause.
In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001). To determine whether an
existing arbitration agreement covers a party's claims, a court must "focus on the
5
complaint's factual allegations rather than the legal causes of action asserted." Id. at 754.
Federal policy embodied in the FAA favors agreements to arbitrate and courts must resolve
any doubts about an arbitration agreement's scope in favor of arbitration. Id. at 753. If the
arbitration agreement encompasses the claims and the party opposing arbitration has
failed to prove its defenses, the trial court has no discretion but to compel arbitration and
stay its own proceedings. Id. at 753-54; D.R. Horton, Inc. v. Brooks, 207 S.W.3d 862, 866-
67 (Tex. App.–Houston [14th Dist.] 2006, no pet.); Feldman/Matz Interests, L.L.P. v.
Settlement Capital Corp., 140 S.W.3d 879, 883 (Tex. App.–Houston [14th Dist.] 2004, no
pet.).
The master sale and purchase agreements provide that:
Upon the demand of either Buyer or Seller, any dispute between the parties
that concerns any purchased Account or that arises out of the relationship
of the parties under this Agreement or any document delivered hereunder
shall be resolved by binding arbitration held in Houston, Texas.
The Agreement was signed by Jerry M. Cruz Vice President, on behalf of BNP, and was
notarized by Cruz “on behalf of said bank.”
We conclude that BNP has established valid agreements to arbitrate with real
parties in interest. We also conclude that the real parties’ claims, which concern additional
payments made under the agreements, fall squarely within the broad scope of the
arbitration provision, which applies to “any dispute between the parties” regarding the
purchased accounts or any dispute “that arises out of the relationship of the parties.” See
Am. Std. v. Brownsville Indep. Sch. Dist., 196 S.W.3d at 783.
Real parties contend that BNP lacks standing to compel arbitration because an
arbitration agreement, requiring arbitration between real parties and Cruz, individually,
6
does not exist. Real parties further argue that BNP lacks standing to assert the right to
arbitration on behalf of Cruz.
The Texas Supreme Court has addressed a similar situation wherein investors sued
their individual investment advisor and his employer, but sought to avoid arbitration on
grounds that the arbitration agreement at issue had been signed by their investment
advisor in his capacity as an agent for his employer, but not in his personal capacity. In
re H&R Block Fin. Advisors, Inc., 235 S.W.3d 177, 178 (Tex. 2007). The court rejected this
argument thusly:
Nor can the Bonds skirt arbitration with Bullock when the substance of the
suit is against both him and his employer. Bullock had no duty to provide
investment advice to the Bonds but for their contract with Olde/H&R Block,
and the damages the Bonds seek is the investment they made through that
contract. As Bullock's liability arises from and must be determined by
reference to the parties' contract rather than general obligations imposed by
law, the suit is subject to the contract's arbitration provisions. In re Weekley
Homes, L.P., 180 S.W.3d 127, 131-32 (Tex. 2005); see also In re Vesta Ins.
Group, Inc. 192 S.W.3d 759, 762 (Tex. 2006) ("When contracting parties
agree to arbitrate all disputes 'under or with respect to' a contract (as they did
here), they generally intend to include disputes about their agents' actions .
. . .").
See id. Such is the case herein. As stated previously, the arbitration agreement was
signed by Cruz on behalf of BNP. When the principal, that is, BNP, is bound by a valid
arbitration agreement, "its agents, employees, and representatives are covered by that
agreement." Merrill Lynch Trust Co. FSB v. Alaniz, 159 S.W.3d 162, 168 (Tex.
App.–Corpus Christi 2004, orig. proceeding); McMillan v. Computer Translation Sys. &
Support, Inc., 66 S.W.3d 477, 481 (Tex. App.–Dallas 2001, orig. proceeding). Accordingly,
Cruz, as an employee of BNP, is included in the arbitration agreement at issue. Moreover,
as a signatory and party to the arbitration agreement, BNP clearly has standing to assert
7
the right to arbitrate. In re Choice Homes, Inc., 174 S.W.3d 408, 412 (Tex. App.–Houston
[14th Dist.] 2005, orig. proceeding) (“To have standing a party must be affected by the
controversy at hand.”).
We would further note that real parties brought the same causes of action against
both BNP and Cruz and alleged concerted, coordinated acts by these parties, and all of
real parties’ causes of action arise from the same operative facts concerning the payment
of extra-contractual fees. See Brown v. Anderson, 102 S.W.3d 245, 250 (Tex.
App.–Beaumont 2003, pet. denied) (finding substantially interdependent and concerted
misconduct where the causes of action against the non-signatory defendants are "based
upon the same operative facts and are inherently inseparable from the causes of action
against the signatory-defendant"). Accordingly, we reject the real parties’ arguments
pertaining to standing.
Because an order denying arbitration must be upheld if it is proper on any basis
considered by the trial court, we will next consider real parties’ alleged defenses to the
agreement. See In re H.E. Butt Grocery Co., 17 S.W.3d 360, 367 (Tex. App.–Houston
[14th Dist.] 2000, orig. proceeding); City of Alamo v. Garcia, 878 S.W.2d 664, 665 (Tex.
App.–Corpus Christi 1994, no writ).
V. Defenses
In real parties’ response to BNP’s motion to compel arbitration, real parties raise
three defenses to the motion to compel. First, real parties contend that BNP has materially
breached its agreement to arbitrate by failing to pay one-half of the costs of arbitration. In
the instant case, BNP and real parties, collectively, each paid one-third of the arbitration
fees. Cruz failed to pay his one-third share. Under protest, BNP has now paid Cruz’s
8
share of the fees. Accordingly, this issue is effectively moot. See Camarena v. Texas
Employment Comm'n, 754 S.W.2d 149, 151 (Tex. 1988) (matter is "moot" if the issues
presented in the case are no longer "live" or if the parties lack a legally cognizable interest
in the outcome). Moreover, we would note that real parties’ complaint regarding BNP’s
alleged failure to pay its share of the arbitration fees is a matter of procedural arbitrability,
and thus is a matter to be determined at arbitration. See In re Pisces Foods, L.L.C., 228
S.W.3d 349, 352 (Tex. App.–Austin 2007, orig. proceeding).
Second, real parties also contend that BNP materially breached the arbitration
agreement by calling into question the inherent fairness of the arbitration procedure. In this
regard, real parties specifically allege that BNP engaged in improper, ex parte
communications with the arbitration tribunal. The record before the Court fails to contain
evidence substantiating any such alleged improper communications. We conclude that
real parties have failed to carry their burden to establish this alleged defense to arbitration.
Finally, real parties contend that complete relief cannot be afforded in arbitration
given Cruz’s failure to participate in arbitration. We need not address this alleged defense
in detail, however, because real parties’ generalized allegation of harm is not substantiated
by affidavit or other evidentiary support. Cf. In re Oakwood Mobile Homes, Inc., 987
S.W.2d 571, 573 (Tex. 1999) (requiring non-movant to present evidence of defenses to
arbitration). Moreover, real parties’ argument is belied by the International Dispute
Resolution Procedures, applicable in the instant case, which specifically provide that if a
party fails to file a statement of defense, fails to appear at a hearing, or fails to produce
evidence, the arbitration “tribunal may proceed with the arbitration” and “may make the
[arbitration] award on the evidence before it.” Accordingly, we reject this alleged defense
9
to the arbitration agreement.
VI. Conclusion
A party denied the right to arbitration under the FAA has no adequate remedy by
appeal and is entitled to mandamus relief to correct a clear abuse of discretion. See L&L
Kempwood Assocs., L.P., 9 S.W.3d at 128. Because we conclude that the trial court
clearly abused its discretion in denying arbitration of the parties' dispute, we conditionally
grant mandamus relief. The stay previously imposed by this Court is lifted. See TEX . R.
APP. P. 52.10(b) (“Unless vacated or modified, an order granting temporary relief is
effective until the case is finally decided.”). We direct the trial court to vacate its order
denying arbitration and to issue an order compelling arbitration.
We are confident that the trial court will comply and our writ will issue only if it does
not. Having finally disposed of the petition for mandamus in Cause No. 13-07-353-CV, we
dismiss as moot the interlocutory appeal in Cause No. 13-07-358-CV. See Am. Std. v.
Brownsville Indep. Sch. Dist., 196 S.W.3d at 781.
ROSE VELA
Justice
Memorandum Opinion delivered and
filed this 29th day of May, 2008.
10