Dennis Zaporozhets and DVZ & Associates Inc. v. Court Appointed Receiver in Cause No. 12-DCV-199496 ( 2014 )

Reversed and Remanded and Memorandum Opinion filed October 14, 2014
In The
Fourteenth Court of Appeals
NO. 14-14-00143-CV
DENNIS ZAPOROZHETS AND DVZ & ASSOCIATES, INC., Appellants
V.
COURT APPOINTED RECEIVER IN CAUSE NO. 12-DCV-199496,
Appellee
On Appeal from the 434th Judicial District Court
Fort Bend County, Texas
Trial Court Cause No. 13-DCV-208875
MEMORANDUM OPINION
In this interlocutory appeal, Dennis Zaporozhets and DVZ & Associates,
Inc. challenge the trial court’s order denying their motion to compel arbitration of
claims brought by the court appointed receiver in Cause No. 12-DCV-199496, and
to abate the case pending arbitration. We reverse and remand.
BACKGROUND
Zaporozhets is a director of DVZ. Zaporozhets and DVZ provided
accounting, consulting, and financial services to Lindinger Services, Inc. and
Lindinger Inspection Engineers, Inc. (collectively, “Lindinger”) from November
2009 until June 2012.1 Charles Gerhardt was appointed as receiver for Lindinger
in a separate proceeding on July 24, 2012, and is referred to in this opinion as “the
Receiver.”
DVZ and Lindinger entered into a “Standard Engagement Letter” in
November 2009.2 The letter was written on DVZ letterhead and signed by
Zaporozhets in a signature block that states: “Agreed to and acknowledged for
DVZ by.” The letter states that DVZ will prepare Lindinger’s 2009 corporate tax
filings; prepare 2009 individual tax filings for Lindinger’s executives; make 2009
adjustments to Lindinger’s books for tax compliance purposes; prepare 2009
financial plans for Lindinger’s executives; review Lindinger’s qualified and
nonqualified retirement plans; and review Lindinger’s activities and transactions
annually for tax and financial planning purposes. The 2009 letter specifies a
dispute resolution procedure:
If any dispute, controversy or claim arises in connection with the
performance or breach of this agreement and cannot be resolved by
facilitated negotiations (or the parties agree to waive that process)[,]
then such dispute, controversy or claim shall be settled by arbitration
in accordance with the laws of the State of Texas and the then current
Arbitration Rules for Professional Accounting and Related Disputes
1
The parties do no distinguish between Lindinger Services, Inc. and Lindinger Inspection
Engineers, Inc. in their briefs; the parties refer collectively to the two entities as “Lindinger.”
We do the same.
2
The letter states that it confirms the terms of the engagement between DVZ and the
“Lindinger Inspection Companies.” The Receiver does not dispute that the 2009 letter binds
Lindinger Services, Inc. and Lindinger Inspection Engineers, Inc.
2
of the American Arbitration Association . . . .
DVZ and Lindinger entered into a second engagement letter on DVZ letterhead in
August 2011. Zaporozhets signed it as “Dennis Zaporozhets, CPA.” The 2011
letter states that DVZ will prepare income and franchise tax returns for Lindinger
covering 2007 to 2010, and 2010 income tax returns for Lindinger executives Peter
and Monica Townley. The 2011 letter does not reference the 2009 letter and does
not contain an arbitration provision.
The Receiver sued Zaporozhets and DVZ on behalf of Lindinger in August
2013. The Receiver also sued DVZ & Associates, CPA, PC, which did not move
to compel arbitration and is not a party to this appeal.
The Receiver alleged that Zaporozhets falsely held himself out as a certified
public accountant and failed to disclose whether he acted as an agent of DVZ or
DVZ & Associates, CPA, PC. The Receiver also alleged that Zaporozhets violated
the rules of professional accounting conduct by failing to return working papers to
Lindinger upon termination of services; holding conflicting interests; and
disclosing confidential information. The Receiver asserted a claim for breach of
fiduciary duty against Zaporozhets and DVZ for allegedly disclosing confidential
information and holding conflicting interests. The Receiver further alleged that
Zaporozhets and DVZ acted negligently in performing accounting, financial, and
consulting services for Lindinger. According to the Receiver, Zaporozhets and
DVZ failed to make tax deposits, failed to prepare financial statements on behalf of
Lindinger, gave incorrect accounting and financial advice, gave unreasonable
operational and accounting advice, made false statements about Lindinger’s
ownership, and misstated Peter and Monica Townley’s duties to Lindinger.
Zaporozhets and DVZ filed a motion to compel arbitration and to abate the
3
Receiver’s claims pending arbitration. The trial court held a non-evidentiary
hearing and denied the motion on December 16, 2013. The parties did not request
findings of fact or conclusions of law, and the trial court did not issue any.
Zaporozhets and DVZ timely filed a notice of appeal on January 31, 2014.3
ANALYSIS
In a single issue, Zaporozhets and DVZ challenge the trial court’s denial of
their motion to compel arbitration and abate the case against them pending
arbitration. Zaporozhets and DVZ argue that the arbitration provision in the 2009
letter mandates arbitration of all claims asserted against them. The Receiver
contends that the 2009 letter has been extinguished and replaced by the 2011 letter
through novation. The Receiver further argues that Zaporozhets’ and DVZ’s
claims do not fall within the scope of the 2009 letter’s arbitration provision.4
I. Application of the Texas General Arbitration Act
The 2009 letter is silent about whether the Federal Arbitration Act (“FAA”)
or Texas General Arbitration Act (“TGAA”) governs the letter’s arbitration
provision. See 9 U.S.C.A. §§ 1-16 (West 2009); Tex. Civ. Prac. & Rem. Code
Ann. §§ 171.001-.098 (Vernon 2011). The trial court did not determine which
statute applies; no party asserts that one act applies to the exclusion of the other, or
3
In compliance with Texas Rule of Civil Procedure 306a(5) and Texas Rule of Appellate
Procedure 4.2, Zaporozhets and DVZ established that they did not receive notice of the
December 16, 2013 order until January 28, 2014. Zaporozhets and DVZ timely filed their notice
of appeal within 20 days of the date on which they received actual notice of the order. See Tex.
R. App. P. 26.1(b).
4
The Receiver argued to the trial court, but does not argue on appeal, that the 2009 letter
is the product of fraud and is unenforceable. A contention that the entire contract (as opposed to
the arbitration clause itself) resulted from fraudulent inducement does not foreclose arbitration.
See In re Educ. Mgmt. Corp., 14 S.W.3d 418, 425 (Tex. App.—Houston [14th Dist.] 2000, no
pet.) (“Fraud in the inducement of an arbitration provision is a matter for the trial court whereas
fraud in the inducement of an entire agreement is a matter for the arbitrator.”). In any event, the
Receiver states in his brief that he did not provide evidence of fraud to the trial court.
4
that the FAA preempts any aspect of the TGAA relevant to this case.
When an arbitration agreement is silent about which act applies and neither
party asserts the FAA applies or preempts the TGAA, we need not address whether
the FAA applies. See Branch Law Firm, L.L.P. v. Osborn, No. 14-13-00820-CV,
2014 WL 4199206, at *4 n.10 (Tex. App.—Houston [14th Dist.] Aug. 26, 2014, no
pet. h.); Osornia v. AmeriMex Motor & Controls, Inc., 367 S.W.3d 707, 711 (Tex.
App.—Houston [14th Dist.] 2012, no pet.). The FAA and TGAA address the same
underlying substantive principles. Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56
n.10 (Tex. 2008) (noting the similarities of the acts and relying interchangeably on
cases discussing the FAA and TGAA). We proceed with our analysis under the
TGAA. See Branch Law Firm, L.L.P., 2014 WL 4199206, at *4 n.10. Because the
substantive principles applicable to our analysis are the same under either act, we
cite cases decided under the FAA and TGAA interchangeably. See Forest Oil
Corp., 268 S.W.3d at 56 n.10; Branch Law Firm, L.L.P., 2014 WL 4199206, at *4
n.10. An order denying a motion to compel arbitration under the TGAA is
immediately appealable. Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(1); see
CMH Homes v. Perez, 340 S.W.3d 444, 448 (Tex. 2011).5
II. Motion to Compel Arbitration
A. Standard of Review and Applicable Law
A trial court’s denial of a motion to compel arbitration is reviewed for abuse
of discretion. Branch Law Firm, L.L.P., 2014 WL 4199206, at *5. We defer to a
trial court’s factual determinations if supported by evidence, but review a trial
5
After a 2009 amendment to the Texas Civil Practice and Remedies Code, Texas
appellate courts also may consider interlocutory appeals of orders denying motions to compel
arbitration under the FAA. Act of May 27, 2009, 81st Leg., R.S., ch. 820, §§ 1, 3, 2009 Tex.
Gen. Laws 2061 (codified at Tex. Civ. Prac. & Rem. Code § 51.016 (Vernon Supp. 2014)); see
also CMH Homes, 340 S.W.3d at 448.
5
court’s legal determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d
640, 643 (Tex. 2009).
A party seeking to compel arbitration must establish that (1) a valid
arbitration agreement exists, and (2) the claims at issue are within the scope of the
agreement. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011). If the relevant
parties did not sign the contract in which the arbitration agreement is found,
addressing the first prong includes analysis of whether a non-signatory is bound by
or can enforce the arbitration agreement. See id. at 223-24; Osornia, 367 S.W.3d
at 711.
Arbitration cannot be ordered in the absence of an agreement to arbitrate.
Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994); In re Estate of Guerrero, No.
14-13-00580-CV, 2014 WL 4377465, at *3 (Tex. App.—Houston [14th Dist.]
Sept. 4, 2014, no pet.). Arbitration is favored under public policy, but it also is a
creature of contract. In re Poly-Am., L.P., 262 S.W.3d 337, 348 (Tex. 2008). In
deciding whether the parties have agreed to arbitrate, we do not resolve doubts or
indulge a presumption in favor of arbitration. See In re Kellogg Brown & Root,
Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding). Instead, through the
neutral application of state contract law, we decide whether an enforceable
agreement exists in the first instance and whether generally applicable contract
defenses may be applied to invalidate the arbitration agreement. See In re Poly-
Am., L.P., 262 S.W.3d at 348.
Once an arbitration agreement is found to exist, doubts regarding an
agreement’s scope are resolved in favor of arbitration because there is a strong
presumption favoring agreements to arbitrate. In re Kellogg Brown & Root, Inc.,
166 S.W.3d at 737. This policy favoring arbitration is so compelling that a court
should not deny arbitration “unless it can be said with positive assurance that an
6
arbitration clause is not susceptible of an interpretation which would cover the
dispute at issue.” Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.
1995) (internal quotation marks and emphasis omitted). In determining whether a
claim falls within the scope of an arbitration agreement, we focus on the factual
allegations of the complaint rather than the legal causes of action asserted. See id.
at 900.
B. Agreement to Arbitrate
A party seeking to compel arbitration first must establish the existence of a
valid agreement to arbitrate. See In re Rubiola, 334 S.W.3d at 223. Zaporozhets
and DVZ argue that the arbitration provision in the 2009 letter is a valid agreement
to arbitrate. The Receiver does not challenge the 2009 letter’s validity. Instead, he
argues that the trial court made an implied factual finding that the parties intended
the 2011 letter (which contains no arbitration provision) to be a novation of the
2009 letter.
1. The record does not establish novation as a matter of law
Novation is the substitution of a new agreement between the same parties or
the substitution of a new party with respect to an existing agreement. New York
Party Shuttle, LLC v. Bilello, 414 S.W.3d 206, 214 (Tex. App.—Houston [1st
Dist.] 2013, pet. denied). When a novation occurs, only the new agreement can be
enforced. Id. The party raising a novation defense must establish (1) the existence
of a previous, valid obligation; (2) a mutual agreement of the parties to a new
contract; (3) the extinguishment of the old contract; and (4) the validity of the new
contract. Id. A court can infer that a new contract is a novation of a previous
contract if the two contracts are so inconsistent with one another that they cannot
subsist together. Farkooshi v. Afisco Interest, LLC, No. 14-13-00201-CV, 2014
WL 4161708, at *4 (Tex. App.—Houston [14th Dist.] Aug. 21, 2014, no pet. h.)
7
(mem. op.). Absent such an inconsistency, “[A] second contract will operate as a
novation of a first contract only when the parties to both contracts intend and agree
that the obligations of the second shall be substituted for and operate as a discharge
of the obligations of the first.” Chastain v. Cooper & Reed, 152 Tex. 322, 325,
257 S.W.2d 422, 424 (1953); see also Farkooshi, 2014 WL 4161708, at *4.
Ultimately, whether a new contract operates as a novation is a question of intent.
Securitycomm Grp., Inc. v. Brocail, No. 14-09-00295-CV, 2010 WL 5514333, at
*16 (Tex. App.—Houston [14th Dist.] Dec. 28, 2010, pet. denied) (mem. op.).
Novation is never presumed; intent must be clear from the evidence. Id.The Receiver argues that the 2011 letter is a novation of the 2009 letter
because the terms of the two letters are so inconsistent that they cannot subsist
together. See Farkooshi, 2014 WL 4161708, at *4. The Receiver further asserts
that the 2009 letter is ambiguous. He proposes a reading of the 2009 letter limiting
its scope to 2009 tax preparation; from this premise, he argues that a conflict exists
because the 2011 letter also encompasses 2009 tax preparation. The Receiver
argues that the parties intended to extinguish the 2009 letter and replace it with the
2011 letter because the terms regarding 2009 tax preparation are inconsistent
between the two letters. For their part, Zaporozhets and DVZ argue that there is no
inconsistency between the two letters because the 2011 letter merely supplemented
— but did not replace — the 2009 letter by including additional tax years beyond
2009 to the scope of services to be provided.
a. The unambiguous 2009 letter is not limited to 2009
tax preparation
Whether a contract is ambiguous is a question of law. Shanks v. Treadway,
110 S.W.3d 444, 447 (Tex. 2003). When construing a contract, we must ascertain
the parties’ true intentions as expressed in the writing itself. See Italian Cowboy
Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011). In
8
identifying intent, we must consider the entire writing in an effort to harmonize
and give effect to all the provisions so that none will be rendered meaningless. See
id. We construe contracts “from a utilitarian standpoint bearing in mind the
particular business activity sought to be served. See Frost Nat’l Bank v. L & F
Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005). We “avoid when possible and
proper a construction which is unreasonable, inequitable, and oppressive.” Id.The 2009 letter contains a section called “Scope of Professional Services
Provided.” Under this section, four boxes are checked: tax compliance, tax
planning, financial planning, and “other.” An addendum to the letter further
delineates the services to be provided. The addendum states:
DVZ will provide the following professional services to Lindinger
Inspection Companies (the “Client”) under the terms of this
engagement letter:
a) For calendar year 2009, prepare corporate federal and state tax
filings (excluding payroll and property tax related filings);
b) For calendar year 2009, prepare individual federal and state tax
filings (excluding payroll and property tax related filings) for each
officer and executive of the Client;
c) For calendar year 2009, make adjustments and corrections to
Client’s books as necessary for tax compliance purposes;
d) For calendar year 2009, prepare a comprehensive financial plan
for each executive identified by the Client in compliance with rules
and standards established by the Certified Financial Planner Board of
Standards;
e) Review the Client’s current qualified and nonqualified
9
retirement plan(s) and provide recommendations with respect to same;
f) Periodically, but in no event less than annually, review the
Client’s activities and transactions for tax and financial planning
purposes with the intent to minimize the Client’s tax liabilities both
domestically and abroad while maximizing economic profits.
The addendum lists the following schedule of charges:
Fees will be charged based on actual time incurred at $75.00 to
$295.00 per hour (based on staff member providing services) plus out-
of-pocket expenses. Our estimated fees for calendar year 2009 are
detailed as follows:
a) Corporate federal and state filings — based on actual hours
with a minimum fee of $1,200.00
b) Individual federal and state filings — based on actual hours
with a minimum fee of $350.00
c) Comprehensive financial plan — discounted flat fee of $950.00
...
d) Tax planning — based on actual hours at $295.00 per hour
e) Business planning — based on actual hours at $295.00 per hour
f) Personal financial planning — included in comprehensive
financial plan
g) Asset management — 1.5% of assets under management for
accounts up to $500,000. 1.0% of assets under management for
accounts above $500,000.
10
The 2009 letter contains a heading titled “Professional Services Not Provided.”
Under that heading, the letter states: “DVZ will not provide audit, review,
compilation, fraud detection as well as the following professional services and they
are specifically excluded from this engagement[.]” The space following this
sentence is blank.
The Receiver argues that the scope of services provided under the 2009
letter is ambiguous because the 2009 letter contains the following clause under the
heading “Professional Fees:”
[DVZ’s] firm policies require us to collect a retained fee equal to
100% of our estimated fees for professional services to be rendered
during this engagement prior to commencing any work. All fees will
be billed against this retainer and you may be asked to replenish it
when accrued fees exceed the retainer balance.
The 2009 letter indicates elsewhere that Lindinger paid retained fees of $1,500.
The Receiver argues that the scope of services provided under the 2009 letter
therefore is limited to work for which fees totaled $1,500 because Lindinger only
paid retained fees of $1,500, and because DVZ has a firm policy of collecting fees
equal to 100 percent of estimated fees prior to commencing work. The Receiver
argues that the scope of the 2009 letter is limited to 2009 corporate federal and
state tax filings and 2009 individual federal and state tax filings because these
services together cost $1,550.6
We reject this construction of the scope of services provided under the 2009
letter. When construing a contract, we aim to ascertain the true intentions of the
parties as expressed in the writing itself. See Italian Cowboy Partners, Ltd., 341
6
The Receiver adds the costs for these services as stated in the addendum. The cost for
corporate federal and state tax filings is $1,200; the cost for individual federal and state tax
filings is $350. The Receiver does not explain why, under his interpretation, DVZ did not collect
the full cost for these services, which total $1,550.
11
S.W.3d at 333. The 2009 letter contains headings titled “Scope of Professional
Services Provided” and “Professional Services Not Provided.” The addendum
further specifies the services DVZ will provide and their cost. The addendum lists
continuing, annual services, and the retainer provision contemplates replenishment
of the retainer upon depletion. The Receiver’s argument for a restriction to the
scope of services provided impermissibly renders meaningless the enumeration of
services under the heading “Scope of Professional Services Provided” and in the
addendum. See id. (in identifying intent, a court must consider the entire writing in
an effort to harmonize and give effect to all contract provisions). We hold that the
2009 letter is not ambiguous, and that the scope of services provided under the
2009 letter includes those services enumerated in the addendum; this construction
is reasonable and gives effect to all contract provisions. See id; see also Frost
Nat’l Bank, 165 S.W.3d at 312 (a court may construe an unambiguous contract as a
matter of law).
b. The 2009 letter can subsist together with the 2011
letter
The scope of services provided under the 2009 letter includes preparation of
2009 corporate and individual tax filings; 2009 adjustments to Lindinger’s books
for tax compliance purposes; preparation of 2009 financial plans for Lindinger’s
executives; review of Lindinger’s qualified and nonqualified retirement plans; and
annual review of Lindinger’s activities and transactions for tax and financial
planning purposes. The scope of services provided under the 2011 letter is limited
to preparation of tax returns for Lindinger covering 2007 to 2010, and 2010 tax
returns for Peter and Monica Townley.
The 2011 letter contains a different costs structure than the 2009 letter with
respect to tax preparation. The 2011 letter states that corporate tax filings cost
$2,500 per year, while the 2009 letter states a minimum fee of $1,200.
12
Additionally, the 2011 letter states different terms regarding staffing, billing, use of
client documents, termination of the engagement, and choice of law.
The letters are not inconsistent with respect to non-tax preparation services.
The 2011 letter focuses exclusively on tax preparation services; it does not address
2009 adjustments to Lindinger’s books, preparation of 2009 financial plans for
Lindinger’s executives, review of Lindinger’s qualified and nonqualified
retirement plans, and annual review of Lindinger’s activities and transactions for
tax and financial planning purposes. Additionally, the 2011 letter does not
reference the 2009 letter.
Although the 2009 and 2011 letters are arguably inconsistent regarding 2009
tax preparation services, they are not so inconsistent that we can infer novation.
The 2011 letter is silent regarding all services listed in the 2009 letter other than
2009 tax preparation. Moreover, the 2011 letter did not explicitly terminate any
services in the 2009 letter, including DVZ’s annual tax and financial planning
service. We can infer only that the 2011 letter supplanted those terms in the 2009
letter pertaining to 2009 tax preparation; the 2011 letter’s silence regarding other
services in the 2009 letter does not suggest that the 2011 letter had any effect on
other services. See CTTI Priesmeyer, Inc. v. K & O Ltd. P’ship, 164 S.W.3d 675,
682 (Tex. App.—Austin 2005, no pet.) (repair contract was not a novation of
original construction contract because there was no express language of novation
in the repair contract and the repair contract varied from the original contract only
to the extent necessary for repairs); cf. New York Party Shuttle, LLC, 414 S.W.3d
at 214 (the party asserting novation must prove the extinguishment and
replacement of a prior contract).
Novation is a question of intent, which must be clearly set forth and cannot
be presumed. See Securitycomm Grp., Inc., 2010 WL 5514333, at *16. While
13
intent can be inferred from inconsistencies between contracts, the contracts must
be so inconsistent that they cannot subsist together. See Farkooshi, 2014 WL
4161708, at *4. We cannot infer from the letters alone that asserted
inconsistencies between the letters establish the parties’ intent that the 2011 letter
would serve as a novation of the 2009 letter. See Priesmeyer, Inc., 164 S.W.3d at
682. The Receiver did not submit additional evidence of novation. Therefore, we
hold that the record does not establish novation as a matter of law. See Farkooshi,
2014 WL 4161708, at *4; Securitycomm Grp., Inc., 2010 WL 5514333, at *16.
c. No fact dispute exists on this record
The Receiver did not contest the authenticity or admissibility of the 2009 or
2011 letters. He did not file evidence in the trial court.7 On appeal, he does not
assert that he adduced evidence in the trial court bearing on the motion to compel
arbitration. The trial court’s docket sheet indicates that only counsel for the parties
appeared. Zaporozhets and DVZ assert that the trial court held a non-evidentiary
hearing. The Receiver nevertheless argues that we must presume evidence
supporting the trial court’s denial of the motion to compel arbitration was
presented at the hearing because Zaporozhets and DVZ did not file a reporter’s
record with their appeal.
A reporter’s record is required on appeal if evidence is introduced in open
court. See Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 782
(Tex. 2005). Allegations on appeal that a hearing was evidentiary must be
specific. See Id. at 783. (“[T]here must be a specific indication that exhibits or
testimony was presented in open court beyond that filed with the clerk.”) (emphasis
7
The only evidence of intent was Zaporozhets’ affidavit filed as part of Zaporozhets’ and
DVZ’s reply in support of their motion to compel arbitration. The affidavit states that neither
Zaporozhets nor DVZ intended for the 2011 letter to modify, change, or impact the arbitration
provision in the 2009 letter.
14
in the original).
The Receiver does not assert that the hearing on the motion to compel
arbitration was evidentiary. He does not indicate what, if any, evidence was
adduced at the hearing. Zaporozhets and DVZ deny the hearing was evidentiary,
and the trial court’s docket sheet suggests that the parties presented only legal
argument. We determine that the hearing was non-evidentiary because the
Receiver has not specifically indicated that exhibits or testimony were presented in
open court. See id. at 783. Accordingly, we consider this appeal on the clerk’s
record alone and do not presume that evidence supporting the trial court’s decision
was adduced at the hearing. See id. at 782; cf. W & F Transp., Inc. v. Wilhelm, 208
S.W.3d 32, 36 (Tex. App.—Houston [14th Dist.] 2006, no pet.) (“We are not
aware of any cases . . . applying the common law presumption [that omitted
portions of the reporter’s record are both relevant to and support the judgment on
appeal], when the only omission from the record is nonevidentiary.”).
This case presents only legal issues. No fact dispute exists because (1) the
Receiver did not contest Zaporozhets’ and DVZ’s proof; (2) the Receiver did not
file his own controverting evidence; and (3) the trial court did not hold an
evidentiary hearing. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex.
2004) (“A genuine issue of material fact exists if more than a scintilla of evidence
establishing the existence of the challenged element is produced.”); cf. J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 231-233 (Tex. 2003) (the trial court
did not make factual findings where it did not hold an evidentiary hearing on a
motion to compel arbitration). We determine, as a matter of law, that the record
does not establish that the 2011 letter is a novation of the 2009 letter. This record
provides no basis for an implied fact-finding to the contrary. DVZ, as a signatory
of the 2009 letter, can enforce the arbitration provision contained in the 2009 letter.
15
See In re Rubiola, 334 S.W.3d at 224.
2. The Receiver does not dispute Zaporozhets’ ability to
enforce the 2009 letter’s arbitration provision
Zaporozhets is a director of DVZ, who signed the 2009 letter on behalf of
DVZ. Arbitration clauses do not automatically cover all corporate agents or
affiliates. In re Kaplan Higher Educ. Corp., 235 S.W.3d 206, 210 (Tex. 2007)
(orig. proceeding). However, where liability arises from and must be determined
by reference to a contract containing an arbitration provision, rather than general
obligations imposed by law, an agent of a contracting party may enforce the
arbitration provision in the contract against a signatory. See In re H & R Block
Fin. Advisors, Inc., 235 S.W.3d 177, 178 (Tex. 2007) (orig. proceeding). The
Receiver did not challenge Zaporozhets’ ability to enforce the arbitration provision
individually in the trial court and does not do so on appeal. Therefore, we
conclude that Zaporozhets also can enforce the arbitration provision as to claims
asserted against him individually.
C. Scope
The 2009 letter contains a valid arbitration agreement, which Zaporozhets
and DVZ both may enforce; however, arbitration is warranted only if the claims at
issue fall within the arbitration agreement’s scope. In re Rubiola, 334 S.W.3d at
223.
The Receiver argues that the scope of services provided under the 2009
letter and the arbitration provision itself are narrow. Because each is narrow, the
Receiver asserts, his claims for false representation, breach of fiduciary duty,
negligence, and violations of the rules of professional accounting conduct fall
outside the arbitration provision’s scope.
The scope of services provided under the 2009 letter is not narrow. As
16
discussed above, the services include preparation of 2009 corporate and individual
tax filings, 2009 adjustments to the Lindinger’s books for tax compliance purposes,
preparation of 2009 financial plans for Lindinger executives, review of Lindinger’s
qualified and nonqualified retirement plans, and periodic review of Lindinger’s
activities and transactions for tax and financial planning purposes.
The scope of the 2009 letter’s arbitration provision also is not narrow; as a
matter of law, it is broad. An arbitration clause is broad where it provides for
arbitration of “any dispute arising between the parties,” “any controversy or claim
arising out of or relating to the contract thereof,” or “any controversy concerning
the interpretation, performance or application of the contract.” Osornia, 367
S.W.3d at 712; see also Glassell Producing Co. v. Jared Res., Ltd., 422 S.W.3d 68,
78 (Tex. App.—Texarkana 2014, no pet.) (“Arbitration clauses in which the scope
is defined using ‘relating to’ and similar wide-reaching phrases are interpreted
broadly.”) (citing In re Guggenheim Corp. Funding, LLC, 380 S.W.3d 879, 887
(Tex. App.—Houston [14th Dist.] 2012, orig. proceeding) (per curiam)). The 2009
letter requires “any dispute, controversy or claim aris[ing] in connection with the
performance or breach of this agreement” to be arbitrated. This is a broad
provision. See Glassell Producing Co., 422 S.W.3d at 78 (clause requiring
arbitration of claims “relating to or in connection with” agreement was broad); cf.
My Cafe-CCC, Ltd. v. Lunchstop, Inc., 107 S.W.3d 860, 866 (Tex. App.—Dallas
2003, no pet.) (fraudulent inducement claim fell within the scope of forum
selection clause that applied to “‘[a]ny dispute arising under or in connection
with’” agreement and “‘any claim affecting its validity, construction, effect,
performance or termination’”).
Where an arbitration clause is broad, an allegation is within the scope of the
arbitration provision if the allegation is covered by, touches upon, has a significant
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relationship to, is inextricably enmeshed with, or is factually intertwined with the
contract that contains the arbitration agreement. Glassell Producing Co., 422
S.W.3d at 78; see also Cotton Commercial USA, Inc. v. Clear Creek Indep. Sch.
Dist., 387 S.W.3d 99, 108 (Tex. App.—Houston [14th Dist.] 2012, no pet.); In re
Helix Energy Solutions Grp., Inc., 303 S.W.3d 386, 397 (Tex. App.—Houston
[14th Dist.] 2010, no pet.). The Receiver’s allegations have a significant
relationship to the 2009 letter and must be arbitrated. See In re H & R Block Fin.
Advisors, Inc., 235 S.W.3d at 178 (compelling arbitration of claims of negligence,
gross negligence, fraud, breach of fiduciary duty, and statutory violations where
the defendant’s duties towards the plaintiff arose from a contract containing a
broad arbitration provision); cf. Greenberg Traurig, LLP v. Nat’l Am. Ins. Co., No.
14-14-00047-CV, 2014 WL 4459114, at *4 (Tex. App.—Houston [14th Dist.]
Sept. 11, 2014, no pet. h.) (“Although the relationship between parties may be
fiduciary in character, their fiduciary duties extend only to dealings within the
scope of the underlying relationship of the parties.”).
The Receiver’s claims against DVZ are based on DVZ’s professional
relationship with Lindinger, which arose out of the 2009 letter; therefore, the
Receiver’s claims against DVZ also have a significant relationship to the 2009
letter and must be arbitrated. See Greenberg Traurig, LLP, 2014 WL 4459114, at
*6 (compelling arbitration of claims for negligence, legal malpractice, and breach
of fiduciary duty because each claim was based on the defendant’s legal
representation of the plaintiff, which arose out of an agreement containing an
arbitration provision).
D. Conclusion
Because Zaporozhets and DVZ established that a valid arbitration agreement
exists in the 2009 letter, and that the Receiver’s claims are within the scope of the
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agreement, the Receiver’s claims against Zaporozhets and DVZ must be arbitrated.
See In re Rubiola, 334 S.W.3d at 223. We sustain Zaporozhets’ and DVZ’s sole
issue.
III. Disposition on Remand
Both the FAA and TGAA require courts to stay litigation of issues subject to
arbitration. 9 U.S.C.A. § 3; Tex. Civ. Prac. & Rem. Code Ann. § 171.025(a).
However, if nonarbitrable issues are severable, they may proceed. Tex. Civ. Prac.
& Rem. Code Ann. § 171.025(b); cf. In re Merrill Lynch Trust Co. FSB, 235
S.W.3d 185, 195 (Tex. 2007) (orig. proceeding) (when an issue is pending in both
arbitration and litigation, the FAA generally requires arbitration to go forward
first).
The Receiver sued DVZ & Associates, CPA, PC on behalf of Lindinger for
breach of fiduciary duty and negligence. DVZ & Associates, CPA, PC is not a
signatory to the 2009 letter and did not move to compel arbitration.8 DVZ &
Associates, CPA, PC is not a party to this appeal. Because the parties have not
addressed whether the Receiver’s claims against DVZ & Associates, CPA, PC are
severable and, if severable, whether they should be stayed, we leave to the trial
court to determine on remand whether the Receiver’s claims against DVZ &
Associates, CPA, PC should be stayed pending arbitration. See Forest Oil Corp.,
268 S.W.3d at 61-62 (ordering proceedings in the trial court stayed as to the
8
The 2009 letter states:
[DVZ] may, at our sole discretion, retain the services of another firm or
independent subcontractor (“Subcontractor”) to complete all or a portion of this
engagement. Such other firm(s) may include, but are not limited to DVZ &
Associates, CPA, P.C., a New York Professional Corporation. These
subcontracting engagements will be governed by a contract between DVZ &
Associates, Inc. and the relevant Subcontractor and are outside the scope of this
engagement letter. The Client who is a party to this engagement letter will not be
a party to the contract between DVZ & Associates, Inc. and its Subcontractor(s).
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arbitrable claims, and remanding for a determination whether the nonarbitrable
claims also should be stayed).
CONCLUSION
We reverse the trial court’s order denying Zaporozhets’ and DVZ’s motion
to compel arbitration and to abate judicial proceedings pending arbitration. We
remand the case for proceedings consistent with this opinion.
/s/ William J. Boyce
Justice
Panel consists of Justices Boyce, Jamison, and Donovan.
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