Natgasoline LLC and Orascom E&C USA Inc. v. Refractory Construction Services, Co LLC , 566 S.W.3d 871 ( 2018 )

Reversed and Remanded and Opinion filed December 18, 2018.
In The
Fourteenth Court of Appeals
NO. 14-17-00503-CV
NATGASOLINE LLC AND ORASCOM E&C USA INC., Appellants
V.
REFRACTORY CONSTRUCTION SERVICES, CO. LLC, Appellee
On Appeal from the 122nd District Court
Galveston County, Texas
Trial Court Cause No. 17-CV-0149
OPINION
This appeal arises from competing motions to compel arbitration in a dispute
involving the construction of a methanol plant.
Refractory Construction Services, Co. LLC sued Crawford Industrial
Services, LLC, Orascom E&C USA, Inc., and Natgasoline LLC to recover money
allegedly owed to Refractory Construction under a construction contract. Crawford,
a subcontractor, asserted cross-claims against contractor Orascom and plant owner
Natgasoline.
Orascom and Natgasoline filed a joint motion to compel a bilateral Orascom-
Crawford arbitration. Refractory Construction and Crawford jointly filed a
competing motion to compel arbitration as to all parties and all claims.
The trial court denied Orascom’s and Natgasoline’s motion to compel and
ordered a single arbitration proceeding involving all parties and all claims. Orascom
and Natgasoline appealed. For the reasons below, we reverse the trial court’s orders
compelling a single arbitration proceeding and remand for further proceedings
consistent with this opinion.
BACKGROUND
At issue are two construction contracts involving three signatories. One
contract was between contractor Orascom and subcontractor Crawford (the
“subcontract”). The second contract was between subcontractor Crawford and sub-
subcontractor Refractory Construction (the “sub-subcontract”). The subcontract and
sub-subcontract governed construction of Natgasoline’s methanol plant in
Beaumont, Texas.
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Orascom and Crawford are the only signatories to the subcontract; only Refractory
Construction signed the sub-subcontract between Refractory Construction and
Crawford.
Both the subcontract and the sub-subcontract contain identical arbitration
provisions:
11.3.3 ARBITRATION
If the matter is unresolved after submission of the matter to a mitigation
procedure or mediation, a demand for arbitration may be served by
either Party. Any arbitration shall be conducted in Harris County,
Texas, United States of America in the English language. The
arbitration shall be conducted in accordance with the Rules of
Arbitration of the International Chamber of Commerce but excluding
the emergency arbitrator appointment rules (“Rules”) in effect on the
date of this Agreement. The arbitration shall be presided over by three
(3) arbitrators appointed in accordance with the Rules. Each arbitrator
shall be fluent in English. The arbitrators’ decision, which shall be in
writing, shall be final, binding and conclusive upon the Parties and may
be confirmed or embodied in any order or judgment of any court having
jurisdiction. The foregoing agreement to arbitrate shall be specifically
enforceable and the award rendered by the arbitrators shall be final and
judgment may be entered upon it in accordance with applicable law in
any court having jurisdiction thereof.
The subcontract and the sub-subcontract also contain identical provisions addressing
multi-party disputes:
11.6 MULTI-PARTY PROCEEDING
All parties necessary to resolve a matter agree to be parties to the same
dispute resolution proceeding. To the extent disputes between the
CONTRACTOR and SUBCONTRACTOR involve in whole or in part
disputes between the CONTRACTOR and the OWNER, at the sole
discretion of the CONTRACTOR disputes between the
SUBCONTRACTOR and the CONTRACTOR shall be decided by the
same tribunal and in the same forum as disputes between the
CONTRACTOR and the OWNER.
3
Both documents define “OWNER” as Natgasoline, “CONTRACTOR” as Orascom,
and “SUBCONTRACTOR” as Crawford. In the sub-subcontract, Refractory
Construction is defined as the “SUPPLIER SUBCONTRACTOR.”
Refractory Construction sued Crawford, Orascom, and Natgasoline in
February 2017 and asserted claims for payment allegedly owed to Refractory
Construction under the sub-subcontract. Crawford asserted cross-claims against
Orascom and Natgasoline. Orascom and Natgasoline asserted affirmative defenses
against Refractory Construction and Crawford.
Orascom and Natgasoline filed a joint motion to compel bilateral arbitration
between Orascom and Crawford under the subcontract. Orascom’s and
Natgasoline’s motion also asked the trial court to stay trial court proceedings “in
their entirety pending the completion of such mandatory alternative dispute
resolution.” While Orascom’s and Natgasoline’s motion to compel bilateral
arbitration was pending, Refractory Construction and Crawford filed a joint motion
to compel a single arbitration as to all parties and all claims.
The trial court signed an order on May 24, 2017, stating in relevant part as
follows:
It is therefore, ORDERED, ADJUDGED, and DECREED that
[Refractory Construction’s and Crawford’s] Motion to Compel
Alternative Dispute Resolution as to All Claims and All Parties is in all
things GRANTED.
Or, in the alternative, it is therefore, ORDERED, ADJUGED, and
DECREED that [Orascom’s and Natgasoline’s] Motion to Stay the
Entire Case Pending Alternative Dispute Resolution between
[Orascom] and Crawford is in all things DENIED.
Orascom and Natgasoline filed a notice of appeal asserting that the trial court’s May
2017 order “constitute[d] a final, appealable order.” Orascom and Natgasoline
alternatively perfected the appeal as an interlocutory appeal. In the further
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alternative, Orascom and Natgasoline asked this court to treat their appellate brief as
a petition for writ of mandamus. Refractory Construction is the only party to appear
as appellee; Crawford did not file an appearance on appeal or an appellate brief.
Upon receipt of the appeal, this court mailed a letter to the parties’ counsel
addressing appellate jurisdiction and stating that the appeal would be dismissed
unless a response was filed “showing meritorious grounds for continuing the
appeal.” Orascom and Natgasoline filed a response asserting that appellate
jurisdiction exists because this case involves (1) an appeal from a final judgment; or
(2) a statutorily authorized interlocutory appeal; or (3) a mandamus proceeding.
Refractory Construction filed a motion to dismiss Orascom’s and
Natgasoline’s appeal for lack of jurisdiction. After receiving Orascom’s and
Natgasoline’s response, this court denied Refractory Construction’s motion to
dismiss.
The case was orally argued on May 7, 2018. After arguments were heard, this
court issued an order abating the appeal to allow the trial court to clarify its intent
with respect to the May 2017 order. The trial court signed a second order on June
6, 2018, stating that “it was the intent of the [trial court] to grant [Refractory
Construction’s and Crawford’s] Motion to Compel Alternative Dispute Resolution
as to All Claims and All Parties and that a single arbitration proceeding occur
involving All Claims and all Parties . . .” (emphasis in original). Orascom’s and
Natgasoline’s appeal was reinstated upon receipt of the trial court’s June 2018 order.
After the appeal was reinstated, the parties filed supplemental briefs addressing
jurisdictional issues.
GOVERNING LAW
We must determine as a threshold matter whether the Federal Arbitration Act
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(the “FAA”) or the Texas Arbitration Act (the “TAA”) applies to this dispute. See
generally 9 U.S.C.A. §§ 1-16 (West 2009); Tex. Civ. Prac. & Rem. Code Ann.
§§ 171.001-.098 (Vernon 2011). The arbitration provisions at issue do not refer to
the FAA or the TAA. The subcontract and sub-subcontract state that they “shall be
governed by the Law in effect at the location of the Project.” The project is located
in Beaumont, Texas.
“If an arbitration agreement does not specify whether the FAA or the TAA
applies, but states that it is governed by the laws of Texas, both the FAA and the
TAA apply unless the agreement specifically excludes federal law.” In re Devon
Energy Corp., 332 S.W.3d 543, 547 (Tex. App.—Houston [1st Dist.] 2009, orig.
proceeding); see also Roehrs v. FSI Holdings, Inc., 246 S.W.3d 796, 803 (Tex.
App.—Dallas 2008, pet. denied). We apply this precept here. See In re Devon
Energy Corp., 332 S.W.3d at 547; Roehrs, 246 S.W.3d at 803.
ANALYSIS
We initially address whether we have appellate jurisdiction to review
Orascom’s and Natgasoline’s appeal. We conclude that (1) Orascom’s appeal can
be heard under our interlocutory appellate jurisdiction; and (2) we lack appellate
jurisdiction over Natgasoline’s appeal.
The second part of our analysis examines whether the trial court’s orders
compelling a single arbitration proceeding comport with the subcontract’s and sub-
subcontract’s arbitration provisions. We conclude that they do not.
I. Appellate Jurisdiction
Orascom and Natgasoline assert that appellate jurisdiction exists here because
this proceeding is (1) an appeal from a final judgment; or (2) a statutorily authorized
interlocutory appeal; or (3) a mandamus proceeding. We address these jurisdictional
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bases under Texas procedural law. See Bison Bldg. Materials, Ltd. v. Aldridge, 422
S.W.3d 582, 585 (Tex. 2012) (Texas courts apply Texas procedural law when the
FAA governs the underlying dispute).
A. Final Judgment
An appeal generally may be taken only from a final judgment. Lehmann v.
Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001); Futch v. Reliant Sources, Inc., 351
S.W.3d 929, 931 (Tex. App.—Houston [14th Dist.] 2011, no pet.). When a
conventional trial on the merits has not occurred, “an order or judgment is not final
for purposes of appeal unless it actually disposes of all parties and all claims, or
unless the order clearly and unequivocally states that it finally disposes of all parties
and all claims.” Gutierrez v. Stewart Title Co., 550 S.W.3d 304, 309 (Tex. App.—
Houston [14th Dist.] 2018, no pet.). To determine whether an order constitutes a
final judgment, we look at the language of the order and the record in the case.
Futch, 351 S.W.3d at 931.
Orders compelling arbitration generally do not dispose of all parties and
issues; instead, they “contemplate continuing resolution through the arbitration
process.” Brooks v. Pep Boys Auto. Supercenters, 104 S.W.3d 656, 660 (Tex.
App.—Houston [1st Dist.] 2003, no pet.); see also John M. O’Quinn, P.C. v. Wood,
Nos. 12-06-00151-CV, 12-06-00188-CV, 2006 WL 3735617, at *3 (Tex. App.—
Tyler Dec. 20, 2006, orig. proceeding) (mem. op.) (when a trial court “compels
arbitration without dismissing the case,” it “retains continuing jurisdiction of the
case until a final judgment or order is entered”). An order compelling arbitration is
interlocutory unless it clearly states that it dismisses the entire case and therefore is
final. See Brooks, 104 S.W.3d at 660; see also Small v. Specialty Contractors, Inc.,
310 S.W.3d 639, 642 (Tex. App.—Dallas 2010, no pet.).
In the context of a motion to compel arbitration, a “dismissal would usually
7
be inappropriate because the trial court cannot dispose of all claims and all parties
until arbitration is completed.” In re Gulf Expl., LLC, 289 S.W.3d 836, 841 (Tex.
2009) (orig. proceeding). Retaining jurisdiction over the case permits the trial court
to take any action necessary to facilitate the arbitration’s completion. See id.(“During arbitration, a court order may be needed to replace an arbitrator, compel
attendance of witnesses, or direct arbitrators to proceed promptly.” (internal citations
omitted)). Incorporating this reasoning, the TAA requires that an order compelling
arbitration “include a stay of any proceeding.” See Tex. Civ. Prac. & Rem. Code
Ann. § 171.021(c).
The trial court’s May 2017 order grants Refractory Construction’s and
Crawford’s motion to compel arbitration; in the alternative, that order denies
Orascom’s and Natgasoline’s “Motion to Stay the Entire Case Pending Alternative
Dispute Resolution between [Orascom] and Crawford.” The trial court’s June 2018
order states that its May 2017 order was intended “to grant [Refractory
Construction’s and Crawford’s] Motion to Compel Alternative Dispute Resolution
as to All Claims and All Parties and that a single arbitration proceeding occur
involving All Claims and all Parties . . . ” (emphasis in original). Arguing that these
two orders constitute a final judgment, Orascom and Natgasoline contend that the
orders “unequivocally dispose[] of all claims and all parties” and are “clearly
intended to dispose of the entire case and all pending motions.”
We reject this contention. The orders do not state that they are final
judgments, do not dismiss the case, and do not include language suggesting finality.
The trial court’s orders do not “clearly and unequivocally state[]” that they “finally
dispose[] of all parties and all claims” in the proceeding. See Gutierrez, 550 S.W.3d
at 309; Small, 310 S.W.3d at 642.
Instead of disposing of all parties and all claims, the trial court’s orders direct
8
the parties to participate in a single arbitration proceeding. By compelling
arbitration, the trial court reasonably could have “contemplate[d] continuing
resolution” as necessary to facilitate the arbitration’s completion. See Brooks, 104
S.W.3d at 660; see also In re Gulf Expl., LLC, 289 S.W.3d at 841. Moreover, under
the TAA, the trial court was required to stay the underlying proceeding in
conjunction with the orders compelling arbitration. See Tex. Civ. Prac. & Rem.
Code Ann. § 171.021(c). In the absence of any language indicating finality, the trial
court’s orders compelling arbitration do not constitute final judgments. See
Gutierrez, 550 S.W.3d at 309; Small, 310 S.W.3d at 642.
Orascom’s and Natgasoline’s appeal was not properly perfected as an appeal
from a final judgment.
B. Interlocutory Appeal
Orascom and Natgasoline assert that their appeal properly was perfected as an
interlocutory appeal because the trial court’s orders effected an unequivocal denial
of Orascom’s and Natgasoline’s motion to compel a bilateral arbitration between
Orascom and Crawford under the subcontract.
Appellate courts may consider appeals from interlocutory orders when a
statute explicitly authorizes an appeal. Tex. A & M Univ. Sys. v. Koseoglu, 233
S.W.3d 835, 840 (Tex. 2007). The FAA and TAA permit an interlocutory appeal
from an order denying a motion to compel arbitration. See 9 U.S.C.A. § 16; Tex.
Civ. Prac. & Rem. Code Ann. § 51.016 (Vernon 2015), § 171.098(a)(1); see also In
re Helix Energy Sols. Group, Inc., 303 S.W.3d 386, 395 n.7 (Tex. App.—Houston
[14th Dist.] 2010, orig. proceeding).
When determining whether an order denies a motion to compel arbitration,
“[t]he substance and function of the order viewed in the context of the record
9
controls our interlocutory jurisdiction.” McReynolds v. Elston, 222 S.W.3d 731, 738
(Tex. App.—Houston [14th Dist.] 2007, no pet.); see also Tex. La Fiesta Auto Sales,
LLC v. Belk, 349 S.W.3d 872, 878 (Tex. App.—Houston [14th Dist.] 2011, no pet.).
The FAA and TAA permit interlocutory appellate review of an order that denies a
party’s right to arbitrate in a specific manner under a specific contract. See Tex. La
Fiesta Auto Sales, LLC, 349 S.W.3d at 878 (analyzing the FAA); McReynolds, 222
S.W.3d at 738 (analyzing the TAA). McReynolds and Texas La Fiesta guide our
analysis here.
The parties in McReynolds were engaged in arbitration proceedings pursuant
to their partnership agreement when the plaintiff sued to compel arbitration under a
separate settlement agreement. 222 S.W.3d at 736-37. The trial court denied the
plaintiff’s motion to compel and the plaintiff appealed. Id. at 737. Asserting that
the court lacked interlocutory appellate jurisdiction under the TAA, the defendant
asserted that “the court’s order did not deny the [plaintiff’s] ‘right to arbitration’ but
merely allowed pending arbitration to continue.” Id. at 738.
Rejecting the defendant’s argument, McReynolds noted that the plaintiff’s
motion to compel sought “to enforce his express contractual right of arbitration
under the Settlement Agreement,” which included arbitrating before a different
arbitrator. Id. Concluding that the trial court’s order “denied [the plaintiff’s]
potential contractual right to arbitration under the Settlement Agreement,” the court
determined that the TAA granted interlocutory jurisdiction to review the trial court’s
order. Id. at 738-39.
The parties in Texas La Fiesta similarly signed two agreements that included
separate arbitration provisions: an arbitration agreement and an employment
contract. 349 S.W.3d at 875-76. After the plaintiff sued the defendants, the
defendants moved to compel arbitration under the arbitration agreement. Id. at 876.
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The trial court denied in part the defendants’ motion to compel, concluding that the
arbitration agreement was superseded by the employment contract. Id. at 876-77.
The trial court ordered the parties to arbitrate under the employment contract. Id. at
877.
The defendants appealed and the plaintiff challenged the court’s appellate
jurisdiction. Id. Noting that “the trial court’s order did not compel arbitration under
the arbitration agreement as the [defendants] requested,” the court “conclude[d] that
the trial court’s order denied the [defendants’] their potential contractual right to
arbitration . . . as provided in the arbitration agreement.” Id. at 879. The appellate
court therefore could review the defendants’ appeal under the FAA’s interlocutory
jurisdiction provision. Id.Here, as in McReynolds and Texas La Fiesta, the parties sought different
arbitrations. Orascom and Natgasoline moved to compel arbitration under the
subcontract only as between Orascom and Crawford. In contrast, Refractory
Construction and Crawford moved to compel arbitration under the subcontract and
sub-subcontract in a single proceeding encompassing all claims and all parties. The
trial court ordered a single arbitration proceeding encompassing all claims and all
parties; it denied Orascom’s and Natgasoline’s “Motion to Stay the Entire Case
Pending Alternative Dispute Resolution between [Orascom] and Crawford.”
The subcontract authorizes arbitration only between the “Parties” to the
subcontract — namely, Orascom and Crawford. The subcontract does not permit
Refractory Construction to inject itself into the arbitration proceeding between
Orascom and Crawford.1 By requiring all parties to arbitrate all claims in a single
1
The subcontract’s “Multi-Party Proceeding” provision grants limited discretion to involve
other parties in an arbitration proceeding, but this discretion is vested solely in Orascom and
extends only to disputes between Orascom and Natgasoline. Orascom and Natgasoline do not
assert any claims against each other in the underlying proceeding. Therefore, this provision does
11
arbitration proceeding, the trial court effectively denied to Orascom its right under
the subcontract to arbitrate only with Crawford. See Tex. La Fiesta Auto Sales, LLC,
349 S.W.3d at 879; McReynolds, 222 S.W.3d at 738-39. We therefore have
jurisdiction over Orascom’s interlocutory appeal. See 9 U.S.C.A. § 16; Tex. Civ.
Prac. & Rem. Code Ann. §§ 51.016, 171.098(a)(1).
Although the denial of Orascom’s bilateral arbitration right under the
subcontract authorizes an exercise of interlocutory jurisdiction, the same logic does
not extend to Natgasoline. Unlike Orascom, Natgasoline is not a party to the
subcontract or the sub-subcontract and is not entitled to enforce the arbitration
provisions under the particular circumstances present here. See G.T. Leach Builders,
LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 524 (Tex. 2015) (“As a general rule, an
arbitration clause cannot be invoked by a non-party to the arbitration contract.”
(internal quotation omitted)). Natgasoline does not seek to invoke its own asserted
right to participate in arbitration — rather, it seeks only to compel arbitration
between two other parties under contracts it did not sign. Natgasoline has not
presented any argument or authority that would support recognizing interlocutory
appellate jurisdiction in these circumstances. Because the trial court’s orders
compelling arbitration do not deny to Natgasoline any contractual rights with respect
to arbitration, we lack jurisdiction over Natgasoline’s attempted interlocutory
appeal. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016,
171.098(a)(1); see also Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 879;
McReynolds, 222 S.W.3d at 738-39.
We turn now to Refractory Construction’s arguments challenging our
interlocutory appellate jurisdiction.
not authorize Refractory Construction to join an arbitration between Orascom and Crawford.
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Asserting that the trial court did not deny Orascom’s and Natgasoline’s
motion to compel arbitration, Refractory Construction points out that the trial court’s
May 2017 order denies only Orascom’s and Natgasoline’s “Motion to Stay the Entire
Case Pending Alternative Dispute Resolution between [Orascom] and Crawford.”
But our jurisdictional analysis is not limited to the express language of the trial
court’s order. We instead examine “[t]he substance and function of the order viewed
in the context of the record.” McReynolds, 222 S.W.3d at 738; see also Tex. La
Fiesta Auto Sales, LLC, 349 S.W.3d at 878. We also consider the trial court’s June
2018 order signed in response to this court’s request for clarification as to whether a
single arbitration proceeding was contemplated. By ordering a single arbitration
proceeding involving all claims and all parties, the trial court denied Orascom its
right under the subcontract to arbitrate only with Crawford. See Tex. La Fiesta Auto
Sales, LLC, 349 S.W.3d at 879; McReynolds, 222 S.W.3d at 738-39. This denial
gives rise to interlocutory jurisdiction. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem.
Code Ann. §§ 51.016, 171.098(a)(1).
Refractory Construction asserts that, even if Orascom’s appeal can be
construed as an interlocutory appeal from an order denying a motion to compel
arbitration, Orascom nonetheless (1) failed to appeal within 20 days after the trial
court’s May 2017 order was signed; and (2) is not entitled to an extension of time
for filing a notice of appeal.
We conclude that Orascom properly perfected its appeal from an interlocutory
order. An appeal from an interlocutory order is accelerated. Tex. R. App. P. 28.1(a).
“[I]n an accelerated appeal, the notice of appeal must be filed within 20 days after
the judgment or order is signed[.]” Id. at 26.1(b). The time to file the notice of
appeal may be extended if, within 15 days after the deadline for filing the notice of
appeal, the appealing party files in the trial court a notice of appeal and files in the
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appellate court a motion to extend time for filing a notice of appeal. Id. at 10.5(b)(2),
26.3. A motion to extend time for filing a notice of appeal must state (1) the deadline
for filing the item in question; (2) the facts relied on to reasonably explain the need
for an extension; (3) the trial court; (4) the date of the trial court’s judgment or
appealable order; and (5) the case number or style of the case in the trial court. Id.
at 10.5(b)(2).
Here, the trial court signed its order on May 24, 2017. Treating this as an
appealable interlocutory order, Orascom’s notice of appeal was due no later than 20
days later on June 13, 2017. Orascom filed its notice of appeal on June 23, 2017.
Orascom’s notice of appeal included a request for an extension of time:
[T]o the extent that a court may determine that the Judgment is not a
final judgment, [Orascom and Natgasoline] alternatively notice this
appeal as an interlocutory appeal under Texas Civil Practice &
Remedies Code §§ 51.016 and/or 171.098(a)(1) and request an
extension of time based on the good cause of the legal uncertainty, if
any, as to whether the Judgment is not actually a final judgment.
Citing Texas Rule of Appellate Procedure 10.5(b)(2), Refractory Construction
asserts that Orascom’s request is “devoid of any reference to the deadline for its
filing.” Refractory Construction also asserts that “[t]here is no reasonable legal
uncertainty” warranting an extension.
The notice’s failure to reference the deadline for its filing does not defeat
Orascom’s request for an extension of time, and Refractory Construction cites no
authority holding otherwise. Even an implied motion for an extension of time is
effective so long as the appellant “come[s] forward with a reasonable explanation to
support the late filing.” Hykonnen v. Baker Hughes Bus. Support Servs., 93 S.W.3d
562, 563 (Tex. App.—Houston [14th Dist.] 2002, no pet.); see also Jones v. Funk,
No. 14-16-00577-CV, 2016 WL 5400217, at *1 (Tex. App.—Houston [14th Dist.]
14
Sept. 27, 2016, no pet.) (per curiam) (mem. op.). A reasonable explanation includes
any plausible statement of circumstances that shows the failure to file within the
required time period was not deliberate or intentional, but was the result of
inadvertence, mistake, or mischance. Hykonnen, 93 S.W.3d at 563. “Any conduct
short of deliberate or intentional noncompliance qualifies as inadvertence, mistake,
or mischance — even if that conduct can be characterized as professional
negligence.” Id.Orascom’s notice provides a “reasonable explanation” for its untimely filing:
uncertainty with respect to the finality of the trial court’s May 24, 2017 order. This
explanation suffices to show that Orascom’s failure to file within the required time
period was not deliberate or intentional. See id.; see also Jones, 2016 WL 5400217,
at *1. Orascom’s motion for an extension of time was effective and makes its notice
of appeal timely. See Tex. R. App. P. 10.5(b)(2), 26.1(b), 26.3; see also Hykonnen,
93 S.W.3d at 563. We reject Refractory Construction’s arguments challenging our
interlocutory jurisdiction.
By ordering all parties to arbitrate all claims in a single proceeding, the trial
court denied to Orascom its right under the subcontract to arbitrate only with
Crawford. See Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 879; McReynolds,
222 S.W.3d at 738-39. But the same is not true for Natgasoline — the trial court’s
orders compelling arbitration do not divest any contractual arbitration rights
belonging to Natgasoline. Therefore, under the FAA and TAA, we have jurisdiction
to consider Orascom’s interlocutory appeal. We lack jurisdiction to consider
Natgasoline’s attempted appeal. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem. Code
Ann. §§ 51.016, 171.098(a)(1); see also Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d
at 879; McReynolds, 222 S.W.3d at 738-39.
The final section of this jurisdictional analysis examines whether mandamus
15
relief is available to Natgasoline. See CMH Homes v. Perez, 340 S.W.3d 444, 453
(Tex. 2011) (in an “uncertain legal environment,” an appellant may in the alternative
“request mandamus treatment of its appeal”).
C. Mandamus
Insofar as Natgasoline seeks to undo the trial court’s orders compelling a
single arbitration proceeding by pursuing a petition for writ of mandamus, we
conclude that any mandamus relief sought by Natgasoline would be moot. This is
so because, as discussed more fully below, we reverse the trial court’s orders
compelling arbitration in an interlocutory appeal properly pursued by Orascom.
Therefore, we decline to address Natgasoline’s arguments with respect to its
entitlement to mandamus relief.
II. Review of the Trial Court’s Orders Compelling a Single Arbitration
Proceeding
We now turn to the merits of Orascom’s authorized interlocutory appeal from
the denial of its motion to compel a bilateral Orascom-Crawford arbitration under
the subcontract.
We review the trial court’s denial of a motion to compel arbitration under an
abuse of discretion standard. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643
(Tex. 2009) (orig. proceeding); Branch Law Firm L.L.P. v. Osborn, 532 S.W.3d 1,
12 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). We defer to the trial court’s
factual determinations if they are supported by the record; we review the trial court’s
legal determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d at 643;
Branch Law Firm L.L.P., 532 S.W.3d at 12.
Under the FAA and TAA, a party seeking to compel arbitration must establish
that (1) there is a valid arbitration agreement; and (2) the claims in dispute fall within
the scope of that agreement. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig.
16
proceeding) (FAA); McReynolds, 222 S.W.3d at 739 (TAA).
The parties do not dispute that (1) a valid arbitration agreement exists between
Orascom and Crawford under the subcontract; and (2) Crawford’s claims against
Orascom fall within the scope of the subcontract’s arbitration provision. The parties
dispute whether the subcontract or the sub-subcontract authorizes the trial court to
deny a bilateral Orascom-Crawford arbitration in favor of a single arbitration
proceeding involving all parties and all claims. Refractory Construction asserts three
arguments to support a single arbitration proceeding.
1. Under the sub-subcontract and Texas Rule of Civil Procedure 39(a),
Refractory Construction is a necessary party to an Orascom-Crawford
arbitration proceeding.
2. Estoppel permits Refractory Construction to join a bilateral Orascom-
Crawford arbitration proceeding under the subcontract.
3. Permitting Orascom and Crawford to arbitrate without Refractory
Construction is contrary to public policy.
We conclude that these arguments do not authorize a single arbitration proceeding
involving all parties and all claims. Therefore, the trial court erred in denying
Orascom’s motion to compel a bilateral Orascom-Crawford arbitration under the
subcontract.
A. Refractory Construction is Not a Necessary Party to a Bilateral
Orascom-Crawford Arbitration
Relying heavily on the sub-subcontract’s “Multi-Party Proceeding” provision,
Refractory Construction asserts that “all parties in the instant litigation should be
and were properly ordered to arbitrate together.” Orascom argues that the sub-
subcontract does not support an interpretation that authorizes a single arbitration
proceeding for all parties and all claims.
“Arbitration agreements are interpreted under traditional contract principles.”
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J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). If we can give
the agreement’s language a certain and definite meaning, the agreement is
unambiguous and we construe it as a matter of law. Milner v. Milner, 361 S.W.3d
615, 619 (Tex. 2012). Our primary concern in construing an agreement is to
ascertain the intent of the parties as expressed in the instrument. Valence Operating
Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).
An agreement’s terms are accorded their “plain and ordinary meaning” unless
the agreement indicates that the parties intended a different meaning. Dynegy
Midstream Servs., Ltd. P’ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009).
We presume that the parties intended each contract provision to have effect. Va.
Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397, 403 (Tex. App.—
Houston [14th Dist.] 2009, pet. denied).
We examine and consider the agreement as a whole in an effort to harmonize
and give effect to all provisions so that none are rendered meaningless. Branch Law
Firm L.L.P., 532 S.W.3d at 12. “No single provision taken alone will be given
controlling effect; rather, all the provisions must be considered with reference to the
whole instrument.” J.M. Davidson, Inc., 128 S.W.3d at 229.
Refractory Construction focuses its arguments in particular on the sub-
subcontract’s “Multi-Party Proceeding” provision. The first sentence of this
provision states as follows: “All parties necessary to resolve a matter agree to be
parties to the same dispute resolution proceeding.”
This first sentence does not exist in isolation. To the contrary, it is followed
immediately by another sentence applying this “Multi-Party Proceeding” provision
“[t]o the extent disputes between [Orascom] . . . and [Crawford] . . . involve in whole
or in part disputes between [Orascom] . . . and [Natgasoline] . . . .”
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If a dispute between Orascom and Crawford also involves a dispute between
Orascom and Natgasoline, then “at the sole discretion of [Orascom] . . . disputes
between [Crawford] . . . and [Orascom] . . . shall be decided by the same tribunal
and in the same forum as disputes between [Crawford] . . . and [Natgasoline] . . . .”
Arguing in favor of a single arbitration proceeding encompassing all parties
and all claims, Refractory Construction first points to the sub-subcontract’s
definition of “Parties:”
The “Parties” are collectively the CONTRACTOR and the
SUBCONTRACTOR including their SubSubcontractors.
Refractory Construction contends that this definition of “Parties,” when read in
conjunction with the first sentence of the sub-subcontract’s “Multi-Party
Proceeding” provision, supports the denial of a bilateral Orascom-Crawford
arbitration in favor of a single arbitration proceeding involving all parties and all
claims.
The sub-subcontract is unambiguous and we ascertain its meaning as a matter
of law. See Milner, 361 S.W.3d at 619. Under these unambiguous terms we reject
Refractory Construction’s interpretation of the sub-subcontract — and with it,
Refractory Construction’s reliance upon the sub-subcontract to override the bilateral
Orascom-Crawford arbitration mandated under the subcontract. We do so for two
reasons.
First, the sub-subcontract defines “Parties” as a capitalized term that includes,
collectively, contractor Orascom, subcontractor Crawford, and Orascom’s and
Crawford’s sub-subcontractors. “Parties” as a capitalized term is employed in
multiple sub-subcontract provisions, including those addressing the scope of the
work, the progress schedule, indemnity, insurance, and bonds.
The sub-subcontract’s “Multi-Party Proceeding” provision, in contrast,
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utilizes the word “parties” in its uncapitalized form. Ignoring the uncapitalized use
of “parties” in favor of applying the defined, capitalized term would vitiate the sub-
subcontract’s distinction between “Parties” and “parties.” We decline to apply an
interpretation of the sub-subcontract that would render these distinctions
meaningless. See Branch Law Firm L.L.P., 532 S.W.3d at 12; Va. Power Energy
Mktg., Inc., 297 S.W.3d at 403; see also PopCap Games, Inc. v. MumboJumbo, LLC,
350 S.W.3d 699, 708 (Tex. App.—Dallas 2011, pet. denied) (“The use of different
language in different parts of a contract generally means that the parties intended
different things.”).
Second, even if we were to apply the defined term “Parties” to the sub-
subcontract’s “Multi-Party Proceeding” provision, this provision still would not
authorize Refractory Construction to compel a single arbitration proceeding
encompassing all parties (including Refractory Construction) and all claims.
The subcontract and sub-subcontract contain identical “Multi-Party
Proceeding” provisions, and we consider these contracts together to ascertain the
“Multi-Party Proceeding” provisions’ intended effect. See DeWitt Cty. Elec. Coop.,
Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999) (“Under generally accepted principles
of contract interpretation, all writings that pertain to the same transaction will be
considered together, even if they were executed at different times and do not
expressly refer to one another.”); Cleveland Constr., Inc. v. Levco Constr., Inc., 359
S.W.3d 843, 852-53 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d) (same).
The identical “Multi-Party Proceeding” provisions in both the subcontract and
the sub-subcontract provide that Orascom has sole discretion to add a party to an
arbitration proceeding between Orascom and Crawford. That additional party is
Natgasoline. Neither the subcontract nor the sub-subcontract grants Refractory
Construction a parallel right to add itself or another party to an arbitration proceeding
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between Orascom and Crawford, or to inject itself into the bilateral Orascom-
Crawford arbitration mandated by the subcontract. Refractory Construction’s
overbroad interpretation of the provisions’ first sentence cannot be harmonized with
the second sentence’s limited allocation of sole discretion to Orascom to add
Natgasoline to an Orascom-Crawford arbitration. See J.M. Davidson, Inc., 128
S.W.3d at 229; Branch Law Firm L.L.P., 532 S.W.3d at 12. Therefore, we reject
Refractory Construction’s interpretation of the sub-subcontract’s “Multi-Party
Proceeding” provision.
Refractory Construction also relies on Texas Rule of Civil Procedure 39 to
support its contention that it is a necessary party to an Orascom-Crawford
arbitration. But “absent a specific agreement[,] the rules of civil procedure and
joinder of claims and parties do not apply in arbitration.” Crossmark, Inc. v. Hazar,
124 S.W.3d 422, 434 (Tex. App.—Dallas 2004, pet. denied); see also In re F.C.
Holdings, Inc., 349 S.W.3d 811, 816 (Tex. App.—Tyler 2011, orig. proceeding
[mand. denied]).
The subcontract’s and sub-subcontract’s arbitration provisions do not invoke
the Texas Rules of Civil Procedure; the provisions state that they are governed by
the arbitration rules promulgated by the International Chamber of Commerce. Texas
Rule of Civil Procedure 39 therefore does not provide a basis to compel a
consolidated arbitration involving all parties and all claims.
B. Estoppel
Refractory Construction asserts that “equitable estoppel operates to estop
[Orascom and Crawford], signatories to the subcontract, from arbitrating in
[Refractory Construction’s] absence.”
The parties encompassed by an arbitration agreement generally are
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determined with reference to the parties’ intent as expressed by the agreement’s
terms. Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624, 633 (Tex.
2018). Arbitration with a non-signatory may be required in several circumstances,
including (1) incorporation by reference, (2) assumption, (3) agency, (4) alter ego,
(5) estoppel, and (6) third-party beneficiary. Id.; see also Cotton Commercial USA,
Inc. v. Clear Creek Ind. Sch. Dist., 387 S.W.3d 99, 104-04 & n.4 (Tex. App.—
Houston [14th Dist.] 2012, no pet.). “Estoppel” encompasses two distinct bases for
compelling arbitration with respect to non-signatories: direct benefits estoppel and
intertwined claims estoppel. See Jody James Farms, JV, 547 S.W.3d at 637-40.
Despite its status as a non-signatory to the subcontract, Refractory
Construction contends that it can join an Orascom-Crawford bilateral arbitration
under the subcontract pursuant to the direct benefits and intertwined claims bases
for estoppel. We examine each theory in turn.
1. Direct benefits estoppel
Under principles of direct benefits estoppel, “‘a litigant who sues based on a
contract subjects him or herself to the contract’s terms . . . including the Arbitration
Addendum.” G.T. Leach Builders, LLC, 458 S.W.3d at 527 (quoting In re FirstMerit
Bank, N.A., 52 S.W.3d 749, 755-56 (Tex. 2001) (orig. proceeding)). Direct benefits
estoppel prevents a claimant from seeking benefits under a contract while
simultaneously attempting to avoid the contract’s obligations, such as an obligation
to arbitrate disputes. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex.
2005) (orig. proceeding). “Thus, a non-signatory plaintiff may be compelled to
arbitrate if it seeks to enforce terms of a contract containing an arbitration provision.”
Id.Direct benefits estoppel does not apply merely because a non-signatory’s
claim “relates to” a contract containing an arbitration agreement. G.T. Leach
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Builders, LLC, 458 S.W.3d at 527. Rather, the non-signatory must “seek to derive
a direct benefit” from the agreement such that its claim “depend[s] on the existence
of the contract and [would] be unable to stand independently without the contract.”
Id. at 527-28 (internal quotations omitted); see, e.g., Rachal v. Reitz, 403 S.W.3d
840, 847-48 (Tex. 2013) (by pursuing a suit based on a trust’s terms and validity, the
non-signatory beneficiary was barred by direct benefits estoppel from avoiding a
trust’s arbitration provision); In re FirstMerit Bank, N.A., 52 S.W.3d at 752-53, 755-
56 (by suing based on the contract, the plaintiffs sought benefits that stemmed
directly from the contract; the plaintiffs therefore were subject to the contract’s
arbitration provision). If a non-signatory’s claims can stand independently of the
underlying contract, then arbitration generally should not be compelled under a
theory of direct benefits estoppel. In re Kellogg Brown & Root, Inc., 166 S.W.3d at
739-40.
To support its invocation of direct benefits estoppel as a basis for joining the
bilateral Orascom-Crawford arbitration, Refractory Construction asserts that
Orascom “call[s] for an interpretation of the sub-subcontract . . . which would
provide Orascom with the sole discretion to join parties to an arbitration under the
sub-subcontract” (emphasis in original). When Orascom asserts its interpretation of
the sub-subcontract, Refractory Construction argues that Orascom “clearly seek[s]
to derive direct benefits” from the sub-subcontract — benefits that in turn permit
Refractory Construction to join a bilateral Orascom-Crawford arbitration under the
subcontract.
We reject Refractory Construction’s contention. Direct benefits estoppel
prevents a party from asserting a claim under a contract and simultaneously avoiding
the contract’s obligations, such as an arbitration provision. See G.T. Leach Builders,
LLC, 458 S.W.3d at 527; In re Kellogg Brown & Root, Inc., 166 S.W.3d at 739.
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Here, Orascom asserts no claims against Refractory Construction under the sub-
subcontract to which Orascom is not a signatory. Orascom therefore does not seek
to derive a “direct benefit” from the sub-subcontract as necessary to invoke direct
benefits estoppel. See G.T. Leach Builders, LLC, 458 S.W.3d at 527 (direct benefits
estoppel prevents a plaintiff from asserting a claim that “depend[s] on the existence”
of the contract but simultaneously avoiding the contract’s arbitration provision); In
re Kellogg Brown & Root, Inc., 166 S.W.3d at 739 (“a non-signatory plaintiff may
be compelled to arbitrate if its claims are ‘based on a contract’ containing an
agreement to arbitrate”).
Under these circumstances, Refractory Construction cannot invoke the sub-
subcontract and direct benefits estoppel to justify a single arbitration proceeding
involving all parties and all claims in place of the bilateral Orascom-Crawford
arbitration specified under the subcontract.
2. Intertwined claims estoppel
Refractory Construction asserts that the theory of intertwined claims estoppel
prevents Orascom and Crawford from arbitrating without Refractory Construction
because Refractory Construction’s “claims are so intertwined with the subcontract.”
In Merrill Lynch Investment Managers v. Optibase, Ltd., 337 F.3d 125 (2nd
Cir. 2003), the Second Circuit discussed an “alternative estoppel theory,” also called
“intertwined-claims theory.” Id. at 131. Intertwined claims estoppel may permit a
non-signatory to compel arbitration when (1) the non-signatory has a close
relationship with a signatory to a contract with an arbitration agreement, and (2) the
non-signatory’s claims are “intimately founded in and intertwined with the
underlying contract obligations.” See In re Merrill Lynch Trust Co. FSB, 235
S.W.3d 185, 193 (Tex. 2007) (orig. proceeding); see also Jody James Farms, JV,
547 S.W.3d at 639. This estoppel formulation has not been adopted by the Supreme
24
Court of Texas. See Jody James Farms, JV, 547 S.W.3d at 639; In re Merrill Lynch
Trust Co. FSB, 235 S.W.3d at 193.
Limiting the application of intertwined claims estoppel, the Second Circuit
has clarified that the theory does not apply “whenever a relationship of any kind may
be found among the parties to a dispute and their dispute deals with the subject matter
of an arbitration contract made by one of them.” Sokol Holdings, Inc. v. BMB Munai,
Inc., 542 F.3d 354, 359 (2nd Cir. 2008). Instead, the Second Circuit decisions that
compel arbitration on the basis of intertwined claims “typically involve some
corporate affiliation between a signatory and non-signatory, not just a working
relationship.” Jody James Farms, JV, 547 S.W.3d at 640 (citing Sokol Holdings,
Inc., 542 F.3d at 359-61).
Declining to adopt intertwined claims estoppel in Jody James Farm, JV, the
Supreme Court of Texas noted that the defendants “may have an entangled business
relationship” with respect to the transaction at issue, but no evidence “show[ed] them
to be anything other than independent and distinct entities.” Id. To compel
arbitration based on intertwined claims estoppel, “the relationship must be closer
than merely independent participants in a business transaction.” Id.Here, too, the evidence does not show that Orascom, Crawford, and
Refractory Construction are “anything other than independent and distinct entities”
that contracted to participate in a construction project. See id. Intertwined claims
estoppel cannot arise solely from this working relationship. See id.; see also Merrill
Lynch Investment Managers, 337 F.3d at 131; In re Merrill Lynch Trust Co. FSB,
235 S.W.3d at 193. Because the parties are “merely independent participants in a
business transaction,” intertwined claims estoppel does not authorize a single
arbitration proceeding involving all parties and all claims. See Merrill Lynch Inv.
Managers, 337 F.3d at 131; Jody James Farms, JV, 547 S.W.3d at 639; In re Merrill
25
Lynch Trust Co. FSB, 235 S.W.3d at 193.
C. Public Policy
Refractory Construction asserts that an arbitration between Orascom and
Crawford without Refractory Construction’s participation would permit its “rights
to be adjudicated in its absence” and would leave Refractory Construction “with
effectively no remedy.”
Although arbitration is favored under public policy, it also is a creature of
contract and “cannot be ordered in the absence of an agreement to arbitrate.” Cedillo
v. Immobiliere Jeuness Establissement, 476 S.W.3d 557, 564 (Tex. App.—Houston
[14th Dist.] 2015, pet. denied); see also In re Kellogg Brown & Root, Inc., 166
S.W.3d at 738.
Here, the subcontract mandates a bilateral Orascom-Crawford arbitration
proceeding. Neither the subcontract nor the sub-subcontract permits Refractory
Construction to override this mandate in favor of a single arbitration proceeding
involving all parties and all claims. Refractory Construction’s estoppel arguments
also do not provide a basis to compel a consolidated arbitration proceeding.
Standing alone, Refractory Construction’s policy arguments do not support denying
a bilateral Orascom-Crawford arbitration under the subcontract in favor of a single
proceeding involving all parties and all claims. See In re Kellogg Brown & Root,
Inc., 166 S.W.3d at 738; Cedillo, 476 S.W.3d at 564. We reject Refractory
Construction’s public policy arguments.
CONCLUSION
In their notice of appeal and before this court, Orascom and Natgasoline assert
that appellate jurisdiction exists here because this proceeding is (1) an appeal from
a final judgment; or (2) a statutorily authorized interlocutory appeal; or (3) a
26
mandamus proceeding. We conclude that we have jurisdiction to consider
Orascom’s interlocutory appeal and lack appellate jurisdiction over Natgasoline’s
appeal.
Considering the merits of Orascom’s authorized interlocutory appeal, we
conclude that the trial court erred in denying Orascom’s motion to compel a bilateral
Orascom-Crawford arbitration under the subcontract, and in ordering instead a
single arbitration proceeding involving all parties and all claims. We reverse the
trial court’s May 24, 2017 and June 6, 2018 orders and remand for further
proceedings consistent with this opinion.
/s/ William J. Boyce
Justice
Panel consists of Justices Boyce, Christopher, and Busby.
27