Hudson Insurance Company v. BVB Partners ( 2015 )


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  •                                                                                ACCEPTED
    13-15-00163-CV
    THIRTEENTH COURT OF APPEALS
    CORPUS CHRISTI, TEXAS
    5/21/2015 4:58:03 PM
    DORIAN RAMIREZ
    CLERK
    CASE NO. 13-15-00163-CV
    13TH COURT OF APPEALS         FILED IN
    13th COURT OF APPEALS
    CORPUS CHRISTI – EDINBURG, TEXAS
    CORPUS   CHRISTI/EDINBURG, TEXAS
    5/21/2015 4:58:03 PM
    DORIAN E. RAMIREZ
    HUDSON INSURANCE      COMPANY Clerk
    v.
    BVB PARTNERS
    TRIAL COURT CASE NO. CL-14-3125-D
    COUNTY COURT AT LAW NO. 4 - HIDALGO COUNTY, TEXAS
    BRIEF OF APPELLEE BVB PARTNERS
    APPELLEE REQUESTS ORAL ARGUMENT
    David E. Wood
    SBN 21887100
    1317 E. Quebec Ave.
    McAllen, TX 78503
    956-458-2052
    956-581-4457 (fax)
    e-mail: wood_candace@yahoo.com
    Attorney for Appellee BVB Partners
    TABLE OF CONTENTS
    INDEX OF AUTHORITIES                        2
    STATEMENT OF THE CASE                       3
    STATEMENT REGARDING ORAL ARGUMENT           3
    STATEMENT OF FACTS                          3
    SUMMARY OF THE ARGUMENT                     6
    ARGUMENT                                    7
    PRAYER                                     15
    CERTIFICATE OF COMPLIANCE                   16
    CERTIFICATE OF SERVICE                16
    1
    INDEX OF AUTHORITIES
    Black v. Dallas Cty. Child Welfare Unit,
    
    835 S.W.2d 626
    , 630 n. 10 (Tex. 1992)………………………… 8
    FD Frontier Drilling (Cypress) Ltd. v. Didmon,
    
    438 S.W.3d 688
    , 692-693 (Tex. App. - Houston - 1st Dist. 2014,
    pet. denied)…………………………………. …………………...7,8
    In Re LaBatt Food Services,
    
    279 S.W.3d 640
    , 643 (Tex. 2009)………………………………..7
    Nobles v. Rural Community Ins. Services,
    
    122 F. Supp. 2d 1290
    (M.D. Ala. 2000)…………………………..11
    Nobles v. Rural Community Ins. Services,
    
    303 F. Supp. 2d 1279
    , (M.D. Ala. 2004)………………………….11
    Nobles v. Rural Community Ins. Services,
    
    303 F. Supp. 2d 1292
    (M.D. Ala. 2004)…………………………..11, 12, 13
    In Re Oakwood Mobile Homes, Inc.,
    
    987 S.W.2d 571
    , 573 (Tex. 1999)………………………………..7, 9, 15
    In Re Weekley Homes, LP,
    
    180 S.W.3d 127
    …………………………………………………. 10
    In Re Wilson Const. Co.,
    
    196 S.W.3d 774
    , 783 (Tex. 2006)………………………………. 9
    Worford v. Stamper,
    
    801 S.W.2d 108
    , 109……………………………………………. 8
    TRAP 38.1(g)……………………………………………………4, 5
    TRAP 38.1(i)…………………………………………………….9
    Texas Civil Practice and Remedies Code § 51.016……………..7
    2
    STATEMENT OF THE CASE
    This is a suit for damages. (CR Vol. 1, p. 4). Hudson Insurance
    Company (Hudson) filed a Motion to Compel Arbitration and Motion to Stay.
    (CR Vol. 1, p. 11). On March 17, 2015, the trial court signed an order denying
    said motions. (CR Vol. 2, p. 122).
    ORAL ARGUMENT
    Oral argument will aid the decisional process by bringing clarity and
    context to the facts of this case.
    STATEMENT OF FACTS
    BVB Partners (BVB) farmed cotton in Hidalgo County in 2013.
    Hudson insured BVB's 2013 cotton crop. As per BVB's petition - on or about
    January 23, 2013, in the course of its business and for BVB's guidance,
    Hudson falsely informed BVB that it would pay the lower priced enterprise
    unit premium/subsidy on prevented planting coverage if BVB put their 522.7
    acres of cotton in one unit and planted at least a 20 acre block.
    This was a misrepresentation relied on by BVB to their detriment
    because when they made their prevented planting claim, Hudson told them
    they were not entitled to the reduced premium/subsidy because they had not
    planted at least 20 acres or 20% of at least two separate units. The
    misrepresentation caused BVB's premium to be $48.00 per acre higher which
    3
    caused them to be charged at least $25,000.00 more for crop insurance than
    they would have been charged had Hudson not misrepresented as set forth
    above. BVB alleged: that Hudson did not exercise reasonable care or
    competence in obtaining or communicating the false information; BVB
    justifiably relied on the false information; and the negligent misrepresentation
    proximately caused their damages. (CR Vol. 1, p. 4).
    Hudson answered BVB's suit with a general denial and a request that
    their claims be referred to arbitration. (CR Vol. 1, p. 8). Hudson then filed its
    Motion to Compel Arbitration and Motion to Stay. (CR Vol. 1, p. 11). The
    parties presented extensive briefing and arguments regarding the motions
    before the court signed the order denying the motion to compel arbitration.
    (CR Vol. 2, pgs. 4, 77, 81, 93, 104, 111, 118, 122)
    Pursuant to TRAP 38.1(g), BVB responds to Hudson's Statement of
    Facts as follows to contradict, correct, and clarify statements contained
    therein:
    1. The part of the arbitration provision in the crop insurance policy
    quoted by Hudson actually reads: "If you and we fail to agree on any
    determination made by us … the disagreement must be resolved through
    arbitration in accordance with the rules of the American Arbitration
    Association". (CR Vol. 1 pgs. 78-79).
    4
    2. The payments BVB received from Hudson were all based on
    premiums they paid Hudson. (Appellant's Brief, Exhibit 3).
    3. BVB has never complained about Hudson's determination as to the
    "premium/applicable premium rate"; and agrees that Hudson's determination
    about it was correct. (CR Vol. 1, p. 4, CR Vol. 2, p. 104). BVB alleged that
    Hudson's misrepresentations about the requirements for obtaining the lower
    priced enterprise unit premium proximately caused their damages.
    4. BVB objects to Hudson's statement of fact wherein it describes its
    Motion to Compel Arbitration and Motion to Stay as "establishing" that the
    arbitration provision "encompasses" BVB's claim. BVB objects to Hudson's
    statement of fact about the Supplement it filed to the motion to compel/stay
    wherein it states that the supplement "demonstrated" that BVB's claim must
    be arbitrated. Both statements are argument in violation of TRAP 38.1(g).
    5. Nothing in the Reporter's Record is inconsistent with BVB's position
    as referenced above. Also, as per Plaintiff's Response to Defendant's Reply Re
    Motion to Compel Arbitration and Motion to Stay filed on February 3, 2015,
    BVB alleged that Ms. Helweg's affidavit (CR Vol. 2, p. 91) was incredible and
    unsupported by any fact in light of the actual allegations in BVB's petition.
    Her affidavit was also controverted. (CR Vol. 2, p. 103).
    5
    6. There is, apparently, nothing in the record which shows that BVB
    "inevitably disagreed with Hudson's ultimate premium determination". There
    is evidence that BVB agrees that Hudson's ultimate premium determination
    was correct. (CR Vol. 1, p. 4; CR Vol. 2, p. 104, paragraph 5). There appears
    to be nothing in the record that shows that BVB and Hudson disagree about
    any "determination" made by Hudson.
    SUMMARY OF THE ARGUMENT
    BVB's claim against Hudson is outside the scope of the arbitration
    provision. BVB's cause of action is negligent misrepresentation based on
    Hudson's misrepresentation about the requirements for obtaining the lower
    priced enterprise unit premium for crop insurance.
    The arbitration provision is not broad. Unlike most arbitration
    provisions, it does not apply to any disagreement between the parties, but only
    to a disagreement about a "determination" made by Hudson. (CR Vol. 1, pgs.
    78-79).
    There is no disagreement between the parties about any "determination"
    made by Hudson. BVB did not allege that Hudson decided to give them false
    information about the requirements for obtaining the enterprise unit premium.
    BVB only alleged negligent misrepresentation.
    6
    A party seeking to compel arbitration must establish that the claims fall
    within the scope of the arbitration provision. In Re Oakwood Mobile Homes,
    Inc., 
    987 S.W.2d 571
    , 573 (Tex. 1999). Hudson did not establish that BVB's
    claim against it is within the scope of the arbitration provision.
    ARGUMENT
    Standard of Review
    The only issue in this case is whether Hudson established, under the
    facts relevant herein, that BVB's claims were within the scope of the
    arbitration provision.
    The abuse of discretion standard of review is applied to interlocutory
    appeal of orders denying motions to compel arbitration in a matter subject to
    the Federal Arbitration Act and appealed pursuant to section 51.016 of the
    Texas Civil Practice and Remedies Code as is this case (see Hudson's brief,
    Statement of Jurisdiction). FD Frontier Drilling (Cypress) Ltd. v. Didmon,
    
    438 S.W.3d 688
    , 692-693 (Tex. App. - Houston - 1st Dist. 2014, pet. denied).
    Under that standard, the court must defer to the trial court's factual
    determinations if they are supported by evidence. F. D. Frontier Drilling
    (Cypress) Ltd. v. Didmon, 
    438 S.W.3d 688
    , 692-693 (Tex. App. - Houston -
    1st Dist. 2014, pet. denied). In Re LaBatt Food Services, 
    279 S.W.3d 640
    , 643
    (Tex. 2009).
    7
    Legal determinations are reviewed de novo, and whether a claim falls
    within the scope of an arbitration agreement "involves" the trial court's legal
    interpretation of the agreement, and such interpretations are reviewed de
    novo. F. D. Frontier Drilling (Cypress) Ltd. v. Didmon, 
    438 S.W.3d 688
    , 692-
    693 (Tex. App. - Houston - 1st Dist. 2014, pet. denied).
    No findings of fact or conclusions of law were requested or filed for
    this case. It is therefore implied that the trial court made all the findings
    necessary to support its decision. In determining whether some evidence
    supports the decision and the implied findings of fact, it is proper to consider
    only that evidence most favorable to the issue and to disregard entirely that
    which is opposed to it or contradictory. Worford v. Stamper, 
    801 S.W.2d 108
    ,
    109. Black v. Dallas County Child Welfare Unit, 
    835 S.W.2d 626
    , 630 n. 10
    (Tex. 1992).
    The trial court had before it BVB's petition, the arbitration provision,
    the affidavit of Bruce Shields, and BVB's repeated admission that it was not
    complaining about or disagreeing with Hudson's "ultimate premium
    determination". (CR Vol. 1, p. 4; CR Vol. 1, p. 11; CR Vol. 2, p. 77; CR Vol.
    2, p. 104; CR Vol. 2, p. 118). As per Worford and Black, the Court must
    "disregard entirely" anything opposed to that evidence.
    8
    The trial court found that there was no disagreement between the parties
    about any determination made by Hudson at issue in BVB's suit. Pursuant to
    that finding, the only legal determination that could reasonably be made about
    whether BVB's claim falls within the scope of the arbitration provision, is that
    Hudson failed to establish that BVB's claims were within its scope.
    Scope of the Arbitration Provision
    Arbitration is not automatic. A trial court is actually correct to deny
    arbitration if, under the facts of the case, it finds that the provision is not
    susceptible of an interpretation that covers the issue in dispute. In Re D.
    Wilson Const. Co., 
    196 S.W.3d 774
    , 783 (Tex. 2006). Hudson failed to carry
    its burden to show that BVB's claim is within the scope of the arbitration
    provision as it was obliged to do. In Re Oakwood Mobile Homes, Inc., 
    987 S.W.2d 571
    , 573 (Tex. 1999).
    With regard to Hudson's law of "direct benefits estoppel" argument,
    there appears to be nothing in In Re D. Wilson Const. Co., 
    196 S.W.3d 774
    (Tex. 2006), that even mentions it. BVB objects to this argument because
    TRAP 38.1(i) requires appropriate citations to authorities in support of the
    argument, and this argument has no such support.
    9
    BVB has never contended and does not now contend that the arbitration
    provision is not valid or that they would not have to arbitrate this case if there
    actually was a disagreement between the parties about a determination made
    by Hudson with which they disagree. Since the issue of whether BVB's claim
    falls within the scope of the provision is the only issue, BVB's argument will
    focus only on that issue.
    The arbitration provision herein is narrow in comparison with the
    arbitration language in the cases cited by Hudson. They require arbitration of
    any disagreement between the parties. It is not surprising that the courts have
    decided that almost any disagreement falls within the broad scope of those
    provisions.
    The arbitration provision in this case applies only to disagreements
    about determinations made by Hudson, in contrast with broad arbitration
    provisions such as the one cited by the Supreme Court of Texas in In Re
    Weekley Homes, LP, 
    180 S.W.3d 127
    , which required arbitration of "any
    claim, dispute, or cause of action".
    It is not hard to write a broad arbitration provision, but the arbitration
    provision in this case is not like those in the cases cited by Hudson.
    10
    If the RMA had meant to write a broad arbitration provision into the
    crop insurance policies issued by insurers like Hudson, it could have easily
    done so with broad language such as appears in the referenced cases. The
    arbitration provision in this case is different, and Hudson is stuck with that
    provision, not the one they wish they had.
    "Nobles" is Dispositive
    There are three Nobles opinions: (1) Nobles v. Rural Community Ins.
    Services, 
    122 F. Supp. 2d 1290
    (M.D. Ala. 2000); (2) Nobles v. Rural
    Community Ins. Services, 
    303 F. Supp. 2d 1279
    , (M.D. Ala. 2004); and (3)
    Nobles v. Rural Community Ins. Services, 
    303 F. Supp. 2d 1292
    (M.D. Ala.
    2004).
    Nobles v. Rural Community Ins. Services, 
    303 F. Supp. 2d 1292
    (M.D.
    Ala. 2004), is on point for this case. It dealt with basically the same arbitration
    provision. Both it and the second Nobles opinion show that the plaintiff
    farmers' state-law claims against their crop insurance company were
    reinstated after the parties submitted the issue of the farms' insurability to
    arbitration.
    The farmers in Nobles v. Rural Community Ins. Services, 
    303 F. Supp. 2d 1292
    (M.D. Ala. 2004) filed suit against a private insurance company selling
    FCIC reinsured crop insurance such as Hudson.
    11
    They claimed the insurer failed to pay their claims because it
    determined that their farm land was not insurable after having represented to
    them that it was insurable before they purchased the insurance. The court in
    the first Nobles case ordered arbitration on the issue of the insurer's
    determination that the farm was not insurable under crop insurance rules,
    because there was an obvious disagreement between the parties on that issue.
    After the parties completed arbitration (wherein the arbitrator found
    that the farm was insurable), the court reinstated the farmers' claims for breach
    of contract, fraud/negligent or wanton training, suppression of material facts
    and negligence/wantonness, and bad faith, so they could seek relief on those
    state law claims. The insurance company complained that it should not have
    to defend such claims because crop insurance regulations required that they
    find that the farm was not insurable. The court ruled against them and said
    (emphasis added):
    "The key act underlying Nobles and Hales' fraud claim, for example, is not
    RCIS' denial of their insurance coverage, but is instead RCIS' act of telling
    them that their land was insurable. While RCIS maintains that it was required
    to find that 4,990 acres of Nobles and Hales' cotton crop were uninsurable due
    to FCIC rules, it certainly was not required to misrepresent to them that their
    land was insurable when in fact it was not. Similarly, the basis for Nobles and
    Hales' suppression-of-material-fact and negligence-and-wantonness claims is
    RCIS' failure to tell Nobles and Hales about 9(a)'s one-in-three requirement.
    Again, while RCIS may have been required under FCIC rules to find that
    4,990 acres of Nobles and Hales' cotton crop were uninsurable, those rules did
    not require it to fail to tell Nobles and Hales about the requirements of 9(a)."
    12
    Nobles v. Rural Community Ins. Services, 
    303 F. Supp. 2d 1292
    (M.D.
    Ala. 2004) shows what is and is not supposed to go to arbitration regarding
    farmers' claims against their crop insurers. Real disagreements about actual
    determinations made by the insurer must be arbitrated. Misrepresentation
    about FCIC rules, which is BVB's claim, is not within the scope of the
    arbitration provision because misrepresentation is not a "determination", it is
    a tort that is to be handled in court.
    In response to Hudson's assertion that the arbitration provision in
    Nobles was more narrow than the provision in this case, BVB says there is
    nothing to support this. Apparently, the RMA simply deleted the word
    "factual" for being superfluous, and changed the language so it would apply
    only to determinations made by the insurer. Hudson does not make a case for
    how Nobles would have been decided differently had the present provision
    been at issue there, because it would have made no difference.
    Hudson goes to some length arguing that BVB's filing suit against it
    shows     they   disagreed     with      Hudson's   determination   about   the
    "premium/applicable premium rate". This argument is disingenuous, but it
    seems to be the only one Hudson has, since it is unable to point to any actual
    disagreement between the parties about any determination made by Hudson.
    13
    The trial court found otherwise because BVB never made any such
    claim, and clearly stated that they agreed that the determination was correct.
    When, in response to BVB's prevented planting claim, Hudson
    correctly determined that BVB did not qualify for the reduced premium
    because all their cotton was in one unit, it was apparent that Hudson had
    misrepresented the requirements by its prior representation that they would
    qualify if they put all their cotton in one unit. BVB's cause of action for
    negligent misrepresentation was complete at that point because it was not until
    then that they sustained damages. If Hudson had determined to charge BVB
    the lower premium then BVB would have no negligent misrepresentation case
    because there would be no damages. Nevertheless, this does not amount to a
    disagreement between the parties about a determination made by Hudson. It
    just shows a ripe cause of action for negligent misrepresentation.
    In response to Hudson's "direct benefits estoppel" argument, BVB says
    that it does not deny and never has denied that the insurance contract in
    question contains a valid arbitration clause. The cases cited by Hudson about
    this doctrine are not relevant to this case because none of them stand for the
    proposition that anyone who benefits in any way pursuant to an agreement
    with an arbitration provision must then go to arbitration even if their claim is
    not within the scope of the provision.
    14
    In any event, the "benefits" BVB received were nothing more than the
    result of their bargained for agreement under the policy whereby they get
    insurance coverage in exchange for premiums they pay.
    BVB is not making any "equitable objection" to arbitration. BVB's
    position is that its claim is not within the scope of the arbitration provision.
    In Re Oakwood Mobile Homes, Inc. is still the law, and it requires that
    Hudson establish that BVB's claim falls within the scope of the arbitration
    provision. Hudson failed to do this, so the trial court was correct in denying
    its motion to compel arbitration.
    PRAYER
    Wherefore, appellee BVB Partners prays that the trial court is affirmed,
    and for such other and further relief, at law or in equity, to which they may be
    entitled.
    Respectfully submitted,
    /s/ David E. Wood
    SBN 21887100
    1317 E. Quebec Ave.
    McAllen, TX 78503
    956-458-2052
    956-581-4457 (fax)
    e-mail: wood_candace@yahoo.com
    Attorney for Appellee BVB Partners
    15
    CERTIFICATE OF COMPLIANCE
    I certify that the number of words in this computer generated brief is
    3039.
    /s/ David E. Wood
    CERTIFICATE OF SERVICE
    I certify that this brief was e-filed and sent to appellant's attorney, Steve
    E. Couch, by e-service through the electronic filing manager on May 21, 2015.
    /s/ David E. Wood
    16