Frontera Generation Ltd. Partnership v. Mission Pipeline Co. , 2012 Tex. App. LEXIS 10744 ( 2012 )

COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
NUMBER 13-12-00265-CV
FRONTERA GENERATION LIMITED PARTNERSHIP, Appellant,
v.
MISSION PIPELINE COMPANY
N/K/A MISSION PIPELINE, LLC, Appellee.
On appeal from the 275th District Court
of Hidalgo County, Texas.
NUMBER 13-12-00321-CV
IN RE FRONTERA GENERATION LIMITED PARTNERSHIP
On Petition for Writ of Mandamus.
OPINION
Before Chief Justice Valdez and Justices Rodriguez and Garza
Opinion by Chief Justice Valdez
By appeal and original proceeding, Frontera Generation Limited Partnership
(“Frontera”) seeks to set aside a temporary injunction that was entered pending
arbitration under the Federal Arbitration Act (“FAA”) that Frontera contends “effectively”
compels it to arbitrate.1 These two matters arise from a dispute between Frontera and
Mission Pipeline Company n/k/a Mission Pipeline, LLC (“Mission”) regarding the
operation of a series of pipelines and related equipment which transport natural gas to
the Frontera natural gas fueled electric generating facility in Hidalgo County, Texas.
Because these two matters are related and involve substantially similar facts and
issues, we issue a single opinion disposing of both matters in the interests of judicial
economy. See e.g., Holmes v. Beatty, 290 S.W.3d 852, 854 (Tex. 2009). As stated
herein, we affirm the injunction in cause number 13-12-00265-CV, and we deny the
petition for writ of mandamus in cause number 13-12-00321-CV.
I. BACKGROUND
In 1999, Frontera built a natural gas burning electric generating facility in Hidalgo
County, Texas. When the Frontera facility was constructed, there were no natural gas
pipelines connecting the facility to existing interstate pipelines, such as the Tennessee
Gas Pipeline (“TGP”) or the Texas Eastern Pipeline (“TETCO”). Frontera entered into
an agreement with Mission to acquire, construct, and operate a series of pipelines and
related equipment to transport natural gas (the “Mission system”) to the Frontera facility
from the interstate pipelines of upstream providers, including TGP and TETCO. The
transaction was accomplished with two contracts, a Gas Pipeline and Interconnect,
Construction, Sale, and Firm Capacity Agreement (the “Firm Capacity Agreement”) and
1
In the original proceeding filed in appellate cause number 13-12-00321-CV, Frontera contends
that the trial court abused its discretion “by entering an order that effectively compels Frontera . . . to
arbitration,” and in the appeal filed in appellate cause number 13-12-00265-CV, Frontera contends that
the trial court erred by entering a temporary injunction pending arbitration under the FAA.
2
a Firm Transportation and Capacity Agreement (the “Transportation Agreement”), along
with a penumbra of agreements related to financing the transaction. Frontera financed
the construction of the system by advancing $5,067,078.26 to Mission, and in
exchange, Mission executed a Demand Note payable to Frontera in the event of a
default. The Demand Note is secured by an Amended and Restated Deed of Trust,
Financing Statement, Fixture Filing and Security Agreement with Assignment of Rents
(“Deed of Trust”) and a Security Agreement and Assignment of Rights and General
Pledge (“Security Agreement”) that gives Frontera a security interest in Mission’s
assets. Additionally, Mission’s shareholders entered into a Stock Pledge Agreement in
which they granted Frontera a security interest in their shares of stock and equity in
Mission.
The Firm Capacity Agreement and the Transportation Agreement each include
an identical arbitration clause:
Any dispute relating to this Agreement shall be resolved by binding,
self-administered arbitration pursuant to the Commercial Arbitration Rules
of the American Arbitration Association (“AAA”) and all such proceedings
shall be subject to the Federal Arbitration Act. A single arbitrator shall be
selected under the expedited rules of the AAA. ONLY DAMAGES
ALLOWED PURSUANT TO THIS AGREEMENT MAY BE AWARDED
AND THE ARBITRATOR SHALL HAVE NO AUTHORITY TO AWARD
TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE
UNDER ANY CIRCUMSTANCES REGARDLESS OF WHETHER SUCH
DAMAGES MAY BE AVAILABLE UNDER TEXAS LAW.
In approximately 2006, Frontera stopped using the Mission System due to
concerns over the quality of the gas being provided by TGP and TETCO and, instead,
purchased gas from another source. In 2011, Frontera received notice that its primary
source of gas would be out of service for several days and asked TGP to supply gas
through the Mission system. TGP stated that it could not deliver gas through the
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system because there was no longer an active meter at the interconnect. On April 13,
2011, Frontera notified Mission that it could not obtain gas volumes through the system.
Over the next several months, the parties discussed the situation and disagreed
regarding the cause, fault, and consequences. Frontera contended that Mission was
required to provide firm capacity under the agreements and that Mission had the
obligation under the agreements to keep the Mission System ready and available if
Frontera chose to use it. In contrast, Mission contended that Frontera had abandoned
the Mission System and that any alleged problems with the Mission system were
caused by Frontera’s five-year abandonment of the system and caused by TETCO and
TGP’s independent actions of deactivating the lines and removing their equipment.
On February 10, 2012, Frontera sent Mission a demand for payment and a notice
of foreclosure sale for Mission’s assets. On March 1, 2012, Mission obtained a
temporary restraining order. On March 2, 2012, Mission filed its original complaint in
arbitration. On April 13, 2012, the trial court entered a temporary injunction prohibiting
Frontera from, among other things, attempting a foreclosure sale of Mission’s assets.
The injunction provides in relevant part:
The Court has examined the pleadings and evidence submitted by
Plaintiff and Defendant and the Court has found that it is likely that Plaintiff
will prevail on the merits of its claims against Defendant and is entitled to
equitable relief. The court finds that Plaintiff has a probable right of
recovery at the arbitration of its claims and defenses against Frontera for
declaratory relief and/or breach of contract.
The Court further finds that Plaintiff will suffer imminent and
irreparable injury, specifically loss and/or damage to title and possession
of its property, assets, collateral and stock unless Defendant is
immediately enjoined from proceeding, directly or indirectly with (i) the
Foreclosure Sale as provided and described in Frontera’s February 10,
2012 correspondence to Plaintiff; (ii) the Disposition of Collateral as
provided and described in Frontera’s February 10, 2012 correspondence
to Plaintiff; (iii) any other sale, foreclosure, action or relief provided and
4
described in Frontera’s February 10, 2012 correspondence to Plaintiff; and
(iv) any attempt to enforce any remedies provided in the Firm Capacity
Agreement, the Transportation Agreement and the Collateral Documents
(including the Deed of Trust, Demand Note, Security Agreement and
Stock Pledge Agreement). The Court further finds that if Plaintiff’s
application for temporary injunction is not granted, and Defendant is not
enjoined from proceeding with the Foreclosure Sale and/or disposition of
Plaintiff’s collateral, stock and assets, Plaintiff will have no adequate
remedy at law as Plaintiff will lose title and possession of its collateral,
stock, and assets.
The Court further finds that the harm Plaintiff will suffer if its
application for temporary injunction is not granted far outweighs any
hardship that may result to Defendant. The Court further finds that the
relief Plaintiff seeks is not adverse to the public interest in that Plaintiff is
merely seeking to maintain the status quo pending arbitration of its claims
and defenses against Defendant. Accordingly, the Court finds that Plaintiff
is entitled to a temporary injunction.
IT IS THEREFORE ORDERED that the clerk issue a writ of
injunction enjoining Defendant, and Defendant is immediately enjoined,
from directly or indirectly, for itself or on behalf of or in conjunction with
any other person, trustee, company, partnership, corporation or business
of whatever nature, proceeding with:
a. The Foreclosure Sale as provided and described in
Frontera’s February 10, 2012 correspondence to Plaintiff . . .
b. The Disposition of Collateral as provided and described in
Frontera’s February 10, 2012 correspondence to Plaintiff . . .
c. Any other sale, foreclosure, action or relief provided and
described in Frontera’s February 10, 2012 correspondence
to Plaintiff . . .
d. Any attempt to enforce any remedies provided in the Firm
Capacity Agreement, the Transportation Agreement and the
Collateral Documents (including the Deed of Trust, Demand
Note, Security Agreement and Stock Pledge Agreement);
and
e. Engaging in any transaction that would affect title or
possession to the property, assets, collateral and stock of
Plaintiff.
5
The temporary injunction set the case for trial on the merits and ordered that “this case
is stayed pending the outcome of the arbitration pending before the American
Arbitration Association and styled as Case N
umber: 50 459 T 00164 12, Mission Pipeline Company v. Frontera Generation Limited
Partnership.” This appeal and original proceeding ensued.
II. APPEAL IN CAUSE NO. 13-12-00265-CV
By appeal, Frontera raises three issues, contending the trial court abused its
discretion: (1) by entering a temporary injunction pending arbitration under the FAA; (2)
by entering a temporary injunction based on legally and factually insufficient evidence of
a probable right of recovery; and (3) by entering a temporary injunction based on legally
and factually insufficient evidence of a probable, imminent, and irreparable injury.
A. STANDARD OF REVIEW
In general, a temporary injunction is an extraordinary remedy and does not issue
as a matter of right. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993). The purpose
of a temporary injunction is to preserve the status quo of the litigation's subject matter
pending a trial on the merits. Butnaru, 84 S.W.3d at 204. The status quo is "the last,
actual, peaceable, non-contested status which preceded the pending controversy." In
re Newton, 146 S.W.3d 648, 651 (Tex. 2004) (quoting Janus Films, Inc. v. City of Fort
Worth, 163 Tex. 616, 358 S.W.2d 589, 589 (1962) (per curiam)). To obtain a temporary
injunction, the applicant must ordinarily plead and prove three specific elements: (1) a
cause of action against the defendant; (2) a probable right to the relief sought; and (3) a
probable, imminent, and irreparable injury in the interim. Butnaru, 84 S.W.3d at 204.
The applicant is not required to establish that he will prevail on final trial; rather, the only
6
question before the trial court is whether the applicant is entitled to preservation of the
status quo pending trial on the merits. Walling, 863 S.W.2d at 58.
In an interlocutory appeal from a temporary injunction, we do not review the
merits of the applicant's case. See Davis v. Huey, 571 S.W.2d 859, 861 (Tex. 1978);
Menna v. Romero, 48 S.W.3d 247, 252 (Tex. App.—San Antonio 2001, pet. dism'd
w.o.j.). Rather, we limit our review to whether there has been a clear abuse of
discretion in issuing the temporary relief. Davis, 571 S.W.2d at 861; Menna, 48 S.W.3d
at 252. We may not substitute our judgment for that of the trial court; instead, we
merely determine whether the court's action was so arbitrary as to exceed the bounds of
reasonable discretion. Davis, 571 S.W.2d at 861; Menna, 48 S.W.3d at 252. An abuse
of discretion does not exist where the trial court bases its decision on conflicting
evidence. Davis, 571 S.W.2d at 861.
B. PENDING ARBITRATION
By its first issue, Frontera contends the trial court abused its discretion by
entering a temporary injunction pending arbitration under the FAA. The Fifth Circuit has
held that a district court may issue injunctive relief to protect the status quo pending
resolution of a motion to compel arbitration. Janvey v. Alguire, 647 F.3d 585, 595 (5th
Cir. 2011). But the Fifth Circuit has not yet addressed "whether the commands of the
[FAA] require that a federal court immediately divest itself of any power to act to
maintain the status quo once it decides that the case before it is arbitrable." Id. at 594
(quoting RGI, Inc. v. Tucker & Assocs., Inc., 858 F.2d 227, 228–29 (5th Cir. 1988)). In
RGI, Inc. v. Tucker & Associates, Inc., 858 F.2d 227, 228 (5th Cir. 1988), the Fifth
Circuit noted that the other federal circuits were split on this issue. Id. The Fifth Circuit
concluded that its resolution of the differences between the two views was unnecessary
7
because the circuits opposing injunctive relief left open the possibility of granting
injunctive relief where the parties had contemplated its use beforehand. Id. at 230. The
Fifth Circuit noted that the agreement in that case contained a provision requiring the
agreement to continue in full force and effect until an arbitration decision was reached.
Id. The Fifth Circuit reasoned that the bargained-for provision clearly contemplated that
the status quo would continue pending arbitration and injunctive relief was therefore
appropriate to prevent one of the parties from terminating the contract. Id.
The majority of other federal circuits that have addressed this issue have held
that a district court may enter injunctive relief to preserve the status quo pending
arbitration. See, e.g., Toyo Tire Holdings of Americas Inc. v. Cont’l Gen. Tire N. Am.
Inc., 609 F.3d 975, 980–81 (9th Cir. 2010); Performance Unlimited, Inc. v. Questar
Publishers, Inc., 52 F.3d 1373, 1380 (6th Cir. 1995); Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Salvano, 999 F.2d 211, 214 (7th Cir. 1993); Blumenthal v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1052 (2d Cir. 1990); Ortho Pharm. Corp.
v. Amgen, Inc., 882 F.2d 806, 812 (3d Cir. 1989); Merrill Lynch, Pierce, Fenner & Smith,
Inc. v. Dutton, 844 F.2d 726, 726-28 (10th Cir. 1988); Teradyne, Inc. v. Mostek Corp.,
797 F.2d 43, 51 (1st Cir. 1986); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley,
756 F.2d 1048, 1051-54 (4th Cir. 1985); Roso-Lino Beverage Distribs., Inc. v. Coca-
Cola Bottling Co. of N.Y., 749 F.2d 124, 125 (2nd Cir. 1984); Sauer-Getriebe KG v.
White Hydraulics, Inc., 715 F.2d 348 (7th Cir. 1983); but see Peabody Coalsales Co. v.
Tampa Elec. Co., 36 F.3d 46, 47–48 (8th Cir. 1994) (holding that the court may issue
injunctive relief in arbitrable dispute only if contract contains “qualifying language” that
permits such relief and only if such relief can be granted without addressing the merits).
8
Recent Texas district court analysis follows suit. Amegy Bank N.A. v. Monarch Flight II,
LLC, 870 F. Supp. 2d 441, __ (S.D. Tex. 2012).
The Texas cases that have considered whether or not a trial court can issue
injunctive relief pending arbitration are in conflict. Some courts of appeal have applied
the exception to the rule as articulated in RGI and have held that injunctive relief is only
proper if the parties’ contract contemplated it. See, e.g., Metra United Escalante, L.P.,
v. The Lynd Co., 158 S.W.3d 535, 539–40 (Tex. App.—San Antonio 2004, no pet.)
(concluding that where the contract at issue contained no express language
demonstrating that the parties contemplated court intervention to maintain the status
quo, the RGI exception was inapplicable and “[w]e therefore follow the general rule
applied by federal courts in Texas and conclude that the issuance of a preliminary
injunction is not appropriate when the underlying claims are subject to arbitration under
the FAA”). Other courts have held that injunctive relief is improper altogether when
arbitration is pending. See, e.g., Feldman/Matz Interests, L.L.P. v. Settlement Capital
Corp., 140 S.W.3d 879, 883 (Tex. App.—Houston [14th Dist.] 2004, no pet.)
(acknowledging the split among federal courts but concluding that its precedent in
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. McCollum, 666 S.W.2d 604, 608 (Tex.
App.—Houston [14th Dist.] 1984, writ ref’d n.r.e.) and Fifth Circuit precedent compel the
conclusion that injunctive relief is improper pending arbitration). Some courts have held
that injunctive relief is entirely proper. See, e.g., Senter Invs., L.L.C. v. Veerjee, 358
S.W.3d 841, 845 (Tex. App.—Dallas 2012, no pet.); Structured Capital Res. Corp. v.
Arctic Cold Storage, LLC, 237 S.W.3d 890, 895 (Tex. App.—Tyler 2007, no pet.).
We conclude that, under the FAA, the trial court may enter injunctive relief to
preserve the status quo pending arbitration. As stated previously, this determination is
9
supported by the majority of federal circuits that have considered this issue and current
Texas federal district court analysis. Moreover, this determination is congruent with the
Texas Arbitration Act. See TEX. CIV. PRAC. & REM. CODE ANN. § 171.086(a) (West 2011)
(allowing for a court to enter orders restraining or enjoining the destruction of all or an
essential part of the subject matter to be arbitrated). This position also comports with
the concept that courts may issue other orders pending arbitration. See, e.g., CMH
Homes v. Perez, 340 S.W.3d 444, 450 n.4 (Tex. 2011) (stating that a stay, rather than
dismissal, is appropriate for a state court following a determination that a matter should
be arbitrated because “a court order may be needed to replace an arbitrator, compel
attendance of witnesses, or direct arbitrators to proceed promptly”). Holding otherwise
could render arbitration meaningless if parties are able to alter the status quo before
arbitrators are able to address the merits of a dispute.
In this case, the temporary injunction was issued in support of arbitration to
preserve the status quo and the meaningfulness of the arbitration process. Accordingly,
we overrule Frontera’s first issue.
C. PROBABLE RIGHT OF RECOVERY
By its second issue, Frontera contends that the trial court erred by entering a
temporary injunction based on legally and factually insufficient evidence of a probable
right of recovery. In examining this issue, we emphasize that a ruling on a temporary
injunction is not a ruling on the merits, but rather a determination regarding whether the
applicant has shown a probable right to relief and a probable, imminent, and irreparable
injury in the interim. See Dallas/Fort Worth Int’l Airport Bd. v. Ass’n of Taxicab
Operators, USA, 335 S.W.3d 361, 364–65 (Tex. App.—Dallas 2010, no pet.).
10
The First Court of Appeals recently addressed the difficulties inherent in applying
the requirement that a temporary injunction be supported by a probable right to
recovery:
We recognize that courts are often particularly careful when it
comes to the element of "probable right of recovery," sometimes referred
to as "likelihood of success on the merits," because, by its plain language,
this element seems to infringe upon two well-engrained judicial
prohibitions: against advisory opinions and against forming opinions
about the merits of the case before the conclusion of the evidence. But
the phrase "probable right of recovery" is a term of art in the injunction
context. To show a probable right to recover, an applicant need not show
that it will prevail at trial. Nor does a finding of probable right of recovery
indicate a trial court's evaluation of the probability that the applicant will
prevail at trial. Consequently, a finding of probable right to recover has no
precedential effect on the case at the trial stage.
Instead, to show a probable right of recovery, the applicant must
plead a cause of action and present some evidence that tends to sustain
it. The evidence must be sufficient to raise "a bona fide issue [] as to [the
applicant's] right to ultimate relief."
Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354 S.W.3d 887, 897 (Tex.
App.—Houston [1st Dist.] 2011, no pet.) (internal citations omitted). Accordingly, in
examining this issue, we apply the foregoing standard of review and do not interfere
with the ultimate discretion that will be vested in the arbitration proceeding.
In the instant case, Mission sought a declaratory judgment that it did not breach
the contracts with Frontera and alleged a cause of action for breach of contract against
Frontera. Jerry Dearing, the president of Mission, testified that Frontera abandoned the
Mission system, this abandonment caused TETCO and TGP to deactivate the meters
and remove their equipment, and TETCO and TGP’s actions were not within Mission’s
control. Further, the agreements between the parties required Frontera to pay a
monthly Base Transportation Charge payment, and Frontera ceased making this
payment in October 2011. Without addressing the merits of these contentions, we
11
conclude that the evidence presented in the record is sufficient to raise a bona fide
issue as to Mission’s right to ultimate relief. See id. We overrule Frontera’s second
issue.
D. PROBABLE, IMMINENT, AND IRREPARABLE INJURY
In its third issue, Frontera contends that the trial court erred by entering a
temporary injunction based on legally and factually insufficient evidence of a probable,
imminent, and irreparable injury. An injury is irreparable if the injured party cannot be
compensated adequately in damages or if the damages cannot be measured by any
certain pecuniary standard. Butnaru, 84 S.W.3d at 204. To demonstrate probable
injury or harm, an applicant must show an injury for which there can be no real legal
measure of damages or none that can be determined with a sufficient degree of
certainty. Marketshare Telecom, L.L.C. v. Ericsson, Inc., 198 S.W.3d 908, 925-26 (Tex.
App.—Dallas 2006, no pet.).
In this case, Frontera alleged that Mission breached its agreement and sought to
foreclose on all of Mission’s property, both real and personal, including the Mission
system. The foreclosure sale was scheduled within approximately one month after
demand and was scheduled for a specific, imminent date. Dearing testified that Mission
would not have any assets after the sale and the foreclosure sale would “dissolve the
company.” In Texas, the potential loss of rights in real property is a probable, imminent,
and irreparable injury that qualifies a party for a temporary injunction. Rus-Ann Dev.,
Inc. v. ECGC, Inc., 222 S.W.3d 921, 927 (Tex. App.—Tyler 2007, no pet.); Franklin
Savs. Ass'n v. Reese, 756 S.W.2d 14, 15-16 (Tex. App.—Austin 1988, no writ) (op. on
reh'g). Viewing the evidence in the light most favorable to the trial court's order, see
James v. Easton, 368 S.W.3d 799, 805 (Tex. App.—Houston [14th Dist.] 2012, pet.
12
denied), we hold that the trial court reasonably could have concluded that Mission
established that it faced probable, imminent, and irreparable injury in the absence of a
temporary injunction. Accordingly, we overrule Frontera’s third issue.2
III. MANDAMUS IN CAUSE NO. 13-12-00321-CV
By original proceeding, Frontera raises three issues contending the trial court
abused its discretion by entering an order that effectively compels it to arbitration with
Mission because: (1) Mission failed to make an adequate record of the existence of a
valid and enforceable arbitration agreement and an arbitrable issue; (2) Mission failed to
plead for such relief; and (3) another district court has dominant jurisdiction over the
dispute. The Court requested and received a response to the petition for writ of
mandamus from Mission, and further received a reply thereto from Frontera.
A. STANDARD OF REVIEW
An order compelling arbitration and staying proceedings in district court is not
subject to interlocutory appeal under either the federal or state arbitration schemes.
See Chambers v. O’Quinn, 242 S.W.3d 30, 31–32 (Tex. 2007) (per curiam); Labidi v.
Sydow, 287 S.W.3d 922, 926 (Tex. App.—Houston [14th Dist.] 2009, no pet.)
(combined appeal & orig. proceeding); see also 9 U.S.C. § 16(a) (specifying which
orders under the FAA are subject to appeal); TEX. CIV. PRAC. & REM. CODE ANN. §
51.014(a) (West 2008) (omitting orders compelling arbitration from delineated
categories of appealable interlocutory orders); TEX. CIV. PRAC. & REM. CODE ANN. §
2
By a supplemental brief filed in this matter, Mission contends that Frontera has waived its
argument regarding the trial court’s alleged lack of authority to grant injunctive relief because, after
Frontera filed its brief in this cause, it sought and obtained a stay of the arbitration from the trial court.
Mission contends that an order staying arbitration equates to a temporary injunction and thus, Frontera
has explicitly acknowledged the trial court’s authority to grant injunctive relief. Mission cites no authority
supporting the proposition that Frontera’s actions in seeking a stay of arbitration waived its appellate
issues concerning the temporary injunction in this cause. We have overruled Frontera’s appellate issues
and need not address the issue of waiver. See TEX. R. APP. P. 47.1
13
51.016 (West Supp. 2011) (providing that a party may appeal from a “judgment or
interlocutory order . . . under the same circumstances that an appeal from a federal
district court’s order or decision would be permitted by” the FAA); TEX. CIV. PRAC. &
REM. CODE ANN. § 171.098(a)(1), (2) (West 2008) (specifying which orders under the
Texas Arbitration Act are subject to appeal). Instead, orders compelling arbitration and
staying litigation are subject to appeal after the rendition of final judgment. See Perry
Homes v. Cull, 258 S.W.3d 580, 587 (Tex. 2008); Chambers, 242 S.W.3d at 32.
Mandamus is an “extraordinary” remedy. In re Sw. Bell Tel. Co., L.P., 235
S.W.3d 619, 623 (Tex. 2007) (orig. proceeding); see In re Team Rocket, L.P., 256
S.W.3d 257, 259 (Tex. 2008) (orig. proceeding). To obtain mandamus relief, the relator
must show that the trial court clearly abused its discretion and that the relator has no
adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36
(Tex. 2004) (orig. proceeding); see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 462
(Tex. 2008) (orig. proceeding). A trial court abuses its discretion if it reaches a decision
so arbitrary and unreasonable as to constitute a clear and prejudicial error of law, or if it
clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P.,
164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam); Walker v. Packer, 827
S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). To satisfy the clear abuse of discretion
standard, the relator must show that the trial court could “reasonably have reached only
one decision.” Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996)
(quoting Walker, 827 S.W.2d at 840).
Historically, mandamus was treated as an extraordinary writ that would issue
“only in situations involving manifest and urgent necessity and not for grievances that
may be addressed by other remedies.” Walker, 827 S.W.2d at 840. Now, whether a
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clear abuse of discretion can be adequately remedied by appeal depends on a careful
analysis of the costs and benefits of interlocutory review. See In re McAllen Med. Ctr.,
Inc., 275 S.W.3d at 462. “An appellate remedy is ‘adequate’ when any benefits to
mandamus review are outweighed by the detriments.” In re Prudential Ins. Co. of Am.,
148 S.W.3d at 136. According to the Texas Supreme Court:
Mandamus review of significant rulings in exceptional cases may be
essential to preserve important substantive and procedural rights from
impairment or loss, allow the appellate courts to give needed and helpful
direction to the law that would otherwise prove elusive in appeals from
final judgments, and spare private parties and the public the time and
money utterly wasted enduring eventual reversal of improperly conducted
proceedings.
Id.
B. ANALYSIS
As an initial matter, we note that this case comes to us with a rather unique
procedural posture. Specifically, we are being asked to determine whether or not the
trial court abused its discretion in “effectively” compelling Frontera to arbitration without
a record pertaining to the arbitrability of this case. According to the record provided,
Mission has filed a complaint in arbitration, but has not filed a motion to compel
arbitration, and Frontera has not filed a response contesting arbitration. The matter has
not been fully litigated. Based on the pleadings before us in these two causes, it
appears that Frontera seeks to utilize the fact that arbitration is pending to argue that
the trial court erred in issuing the temporary injunction, but, inconsistently, seeks to
avoid the arbitration. In short, Frontera has not asked the trial court to determine that
the dispute is not arbitrable. As a general rule, mandamus will not issue to compel an
action that has not first been demanded and refused. See In re Perritt, 992 S.W.2d 444,
446 (Tex. 1999) (orig. proceeding); Terrazas v. Ramirez, 829 S.W.2d 712, 723 (Tex.
15
1991) (orig. proceeding). Accordingly, we reject Frontera’s contention that the trial court
erred in “effectively” compelling arbitration.
We would obtain the same result in an analysis on the merits. Under previous
law, mandamus was available to review orders either compelling or denying arbitration
under the FAA Act. See Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994). However,
in 2006, in order to ensure consistency between federal and state procedures, the
Texas Supreme Court held that mandamus was generally not available to review orders
compelling arbitration so that federal and state procedure would be consistent. See In
re Palacios, 221 S.W.3d 564, 565 (Tex. 2006) (orig. proceeding). In Palacios, the
Texas Supreme Court noted that mandamus relief might be available, but only if the
party seeking relief from an order staying a case for arbitration meets the “particularly
heavy” burden to show “clearly and indisputably that the district court did not have the
discretion to stay the proceedings pending arbitration.” Id. (quoting Apache Bohai Corp.
v. Texaco China, B.V., 330 F.3d 307, 310–11 (5th Cir. 2003)). The Texas Supreme
Court has reaffirmed this proposition and clarified that “this ‘exception’ applies not to the
question whether an order compelling arbitration was correct, but to the question
whether the case should have been dismissed rather than stayed.” In re Gulf
Exploration, LLC, 289 S.W.3d 836, 841 (Tex. 2009) (orig. proceeding); see Small v.
Specialty Contrs., Inc., 310 S.W.3d 639, 642 (Tex. App.–Dallas 2010, no pet.) (“Courts
may review an order compelling arbitration if the order also dismisses the entire case
and is therefore a final, rather than interlocutory, order.”).
Moreover, even if a case falls within the foregoing parameters for mandamus
review, mandamus is nonetheless “generally unavailable” because petitioners can
“rarely” show that they lack an adequate remedy by appeal. See In re Gulf Exploration,
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LLC, 289 S.W.3d at 842. Generally, the adequacy of an appellate remedy “depends on
a careful balance of the case-specific benefits and detriments of delaying or interrupting
a particular proceeding”; however, because both the federal and state arbitration acts
specifically exclude immediate review of orders compelling arbitration, “any balancing
must tilt strongly against mandamus review.” Id. Nevertheless, mandamus review may
be appropriate “in those rare cases when legislative mandates conflict.” Id. According
to the supreme court, “such conflicts are few, so the balance will generally tilt toward
reviewing orders compelling arbitration only on final appeal.” Id. In such cases,
“mandamus may be essential to preserve important substantive and procedural rights
from impairment or loss [and] allow the appellate courts to give needed and helpful
direction to the law that would otherwise prove elusive in appeals from final judgments.”
Id. at 843 (quoting In re Prudential Ins. Co., 148 S.W.3d at 136). The court further
noted that delay and expense, standing alone, generally do not render appeal after a
final judgment to be an inadequate remedy, and this is particularly true in arbitration
cases “because arbitration clauses are usually contractual and cover contractual
claims,” and a “party that prevails on a contractual claim can recover its fees and
expenses, even if they were incurred in collateral proceedings like arbitration.” Id.
(citations omitted).
In the instant case, Frontera alleges that it lacks an adequate remedy by appeal
because the order compelling arbitration “places Frontera at high risk of having to shut
down its plant in the event of any interruption from its primary supplier of natural gas,”
so that it is at risk for economic harm and “places regional businesses and citizens at
risk of being without electricity.” In contrast, Mission contends that the order at issue is
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not really an order compelling arbitration, but is more appropriately reviewed as a
temporary injunction, which is not subject to mandamus review.
Because both the federal and state arbitration acts specifically exclude
immediate review of orders compelling arbitration, our analysis regarding the adequacy
of a remedy by appeal “tilts strongly against mandamus review.” See In re Gulf
Exploration, LLC, 289 S.W.3d at 842. This matter does not involve conflicting legislative
mandates. See id. at 843. Delay and expense, standing alone, generally do not render
appeal after a final judgment to be an inadequate remedy, and this is particularly true in
this case because it is, at least in part, based on a contractual dispute, and a “party that
prevails on a contractual claim can recover its fees and expenses, even if they were
incurred in collateral proceedings like arbitration.” See id. In sum, Frontera has not
carried its burden to show that it lacks an adequate remedy by appeal. Compare id.
and Abdel Hakim Labidi, 287 S.W.3d at 926 (concluding that there was an adequate
remedy by appeal for an order compelling arbitration where clients sued their lawyers
for breach of contract and breach of fiduciary duty), with In re Sthran, 327 S.W.3d 839,
846 (Tex. App.—Dallas 2010, orig. proceeding) (concluding that relator lacked an
adequate remedy by appeal where “legislative mandates might be construed to conflict”
and it was “not clear that any fees and expenses incurred as a result of arbitration
[would] be recoverable” in a tort action), and In re Villanueva, 311 S.W.3d 475, 483–84
(Tex. App.—El Paso 2009, orig. proceeding) (concluding that relator lacked an
adequate remedy by appeal where relator would not be able to recover fees and
expenses in tort action and, more compellingly, because the case involved “conflicting
rulings” which were “significant rulings in exceptional cases”). In this regard, we note
that the Mission system has been inoperable for an extended period of time and all of
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the damages that Frontera asserts that it might incur if this issue is reviewed by appeal
rather than mandamus are speculative and conclusory. Accordingly, we deny the
petition for writ of mandamus.
IV. CONCLUSION
As stated herein, we affirm the injunction in cause number 13-12-00265-CV and
we deny the petition for writ of mandamus in cause number 13-12-00321-CV.
_________________
Rogelio Valdez
Chief Justice
Delivered and filed the
28th day of December, 2012.
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