National Claims Negotiators LLC v. Juan Guerra ( 2020 )

AFFIRMED; and Opinion Filed March 31, 2020
In the
Court of Appeals
Fifth District of Texas at Dallas
No. 05-19-00495-CV
NATIONAL CLAIMS NEGOTIATORS LLC, Appellant
V.
JUAN GUERRA, AMANDA CARDENAS, CESAR QUINONES,
FERNANDO MARIN, KEVIN CLAY, BARRY NIX, SANDRA NIX, JUAN
DELTORO, GLEN MOORE, GAIL MOORE, ESMERELDA HERNANDEZ,
AND FERMIN LOPEZ, Appellees
On Appeal from the 162nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-16-07967
MEMORANDUM OPINION
Before Justices Pedersen, III, Reichek, and Carlyle
Opinion by Justice Carlyle
A group of homeowners1 filed this lawsuit against multiple attorneys, “door-
to-door solicitors,” and insurance adjusters, including public adjuster National
Claims Negotiators LLC (NCN), alleging fraud and other individual and class claims
regarding insurance proceeds for roof repairs. The attorney defendants moved to
1
The homeowner plaintiffs/appellees in this case are Juan Guerra, Amanda Cardenas, Cesar Quinones,
Fernando Marin, Kevin Clay, Barry Nix, Sandra Nix, Juan Deltoro, Glen Moore, Gail Moore, Esmerelda
Hernandez, and Fermin Lopez.
compel arbitration of claims asserted against them by two appellees, Juan Guerra
and Juan Deltoro, with whom they had signed arbitration agreements. After the trial
court granted that motion, NCN moved to stay the litigation against it until the
attorney defendants’ arbitration concluded. The trial court denied NCN’s motion to
stay. NCN then filed this interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE
§ 51.016; 9 U.S.C. § 16(a)(1).
In a single issue on appeal, NCN contends the trial court abused its discretion
by denying NCN’s requested stay. We affirm in this memorandum opinion. See TEX.
R. APP. P. 47.7.
Background
In their live petition, appellees described the defendants as falling into three
groups: door-to-door solicitors, public insurance adjusters, and attorneys. According
to appellees, defendants “have set up a scam using Texas insurance policyholders as
pawns to make themselves rich at the expense of Texas homeowners.” The
“elaborate web” begins with the door-to-door solicitors “telling a homeowner his/her
roof is damaged and they can get the homeowner’s insurer to buy the homeowner a
new roof.” “Following these door-to-door salesmen attempting to collect payment
from the homeowner’s insurer, the next play is to bring in a ‘public adjuster’ or
person(s) alleged to be public adjusters as the second level of the claim.” The public
adjuster “will then charge the homeowner a ten percent (10%) fee ‘to represent’ the
homeowner” and “charge the homeowner additional fees to inspect the home and
–2–
for reports to allegedly advance the homeowner’s claims.” When the public adjuster
“fails to recover any payment, or more likely does nothing substantive to settle the
homeowner’s claims,” an attorney “is brought in.” The door-to-door solicitors
“provide the homeowner with agreements to sign for the public adjuster and the
lawyer.” The homeowner ultimately receives a “settlement share” with
“inappropriate” amounts deducted. Appellees alleged that “[b]y the time a lawyer
gets involved, the homeowner is saddled with a 10% contingency fee from the public
adjuster as well as other unnecessary and perhaps even fraudulent expenses” and
“the lawyer then heaps a 30% or more contingency fee as well as other unnecessary
and perhaps even fraudulent expenses on the Texas homeowner.”
The petition separately described each appellee’s experience involving the
defendants and asserted (1) claims against “all defendants” for fraud, barratry,
breach of fiduciary duty, violation of the Texas Deceptive Trade Practices Act,
aiding and abetting breaches of fiduciary duty, conspiracy, and vicarious liability;
(2) claims against NCN and other non-attorney defendants for “alter ego”; (3) claims
against the door to door solicitors for conversion; and (4) “class claims” against each
defendant group for fraud and breach of fiduciary duties. Mr. Guerra and Mr. Deltoro
were the only appellees whose complained-of experiences involved the attorney
defendants. Ten appellees, including Mr. Guerra and Mr. Deltoro, alleged
involvement with adjuster defendants they described as including “and/or NCN.”
–3–
After the trial court compelled arbitration of Mr. Guerra and Mr. Deltoro’s
claims against the attorney defendants, thus staying litigation as to those claims,
NCN filed a motion to “stay all proceedings with respect to the claims against NCN”
pending conclusion of the arbitration. NCN’s motion to stay asserted (1) no plaintiffs
other than Mr. Guerra and Mr. Deltoro have “a contractual or other relationship with
NCN”; (2) “[t]he claims of Plaintiffs Guerra and Deltoro are factually and legally
tied to the claims against the Attorney Defendants”; (3) “[t]he arbitrated and litigated
disputes against NCN and the Attorney Defendants involve the same facts and the
same transactions for roof repairs”; (4) those disputes “are inherently inseparable”;
and (5) “the litigation would impact the arbitration.”2 According to NCN, “[t]here
would be need for testimony from NCN representatives for the arbitration of claims
2
Specifically, NCN contended:
Plaintiffs allege that the conduct and liability of NCN and the Attorney Defendants is
imputed to the other defendants through vicarious liability, making the claims against the
Attorney Defendants and NCN intertwined and inseparable. Plaintiffs allege that NCN and
the Attorney Defendants “have devised and operated a scheme – conspiracy,” indicating
that the wrongful acts were conspired by both Attorney Defendants and NCN, collectively.
Guerra alleges that he protested expenses taken out of his settlement, which included
expenses paid to both the Attorney Defendants and NCN. Plaintiffs allege that the
“Defendants, singularly or in combination, made material misrepresentations which were
knowingly false with the intent Plaintiffs rely on same.” Plaintiffs allege that NCN and the
Attorney Defendants, collectively, violated the Texas Government Code. Plaintiffs allege
that NCN and the Attorney Defendants breached their fiduciary duties, which included the
deduction of expenses and fees from Guerra’s settlement, which were part of the Attorney
Defendants’ case expenses and which included the payment to NCN. Plaintiffs allege that
NCN and the Attorney Defendants, collectively, violated the Texas DTPA. Plaintiffs allege
that NCN and the Attorney Defendants aided and abetted the breach of fiduciary duties
owed to Plaintiffs, including breaches of duties aided by the Attorney Defendants and
NCN.
(citations to petition omitted).
–4–
against the Attorney Defendants and testimony from the Attorney Defendants for
the claims against NCN before the court,” and “[f]actual and legal findings would
also have a critical impact on the different claims as well.”
In their response, appellees asserted that because NCN “has no right to
arbitration” and the attorney defendants have not joined in seeking a stay, NCN “has
no standing to seek any stay.” Appellees also contended (1) “[t]he arbitration
involves claims only against the Attorney Defendants which deal with: overcharging
of expenses; fraud in securing any fee agreement with Guerra and Deltoro as well as
the Attorney Defendants’ performance dealing with same; breach of fiduciary duties
where the [Attorney Defendants’] conduct overcharged Guerra and Deltoro, case
running, and settling claims without consent; DTPA claims concerning the [Attorney
Defendants’] services, fee agreement, failure to disclose and unconscionability;
aiding and abetting breaches of fiduciary duties; conspiracy to violate the DTPA,
barratry statutes, and to intent to defraud; and barratry”; (2) “[t]hese claims against
the [Attorney Defendants] are not inherently inseparable from those against NCN
and could be separately brought”; (3) “[w]hether the [Attorney Defendants]
committed fraud, breached their fiduciary duties, violated the DTPA, committed
barratry, engaged in a conspiracy, or otherwise will not determine whether the
Defendants in this litigation can be held legally liable for conversion, fraud,
conspiracy, barratry, DTPA violations and/or breach of fiduciary duties”; (4) “[t]he
class claims are actually divided between the [Attorney Defendants] and all other
–5–
Defendants” and are “not inseparable”; and (5) “[b]ecause neither the same operative
facts nor inseparable claims are controlling, the litigation will not critically impact
the arbitration proceeding with the [Attorney Defendants].”
Following a hearing,3 the trial court denied NCN’s motion to stay.
Standard of review and applicable law
We apply an abuse of discretion standard of review when considering a trial
court’s ruling on a motion to stay litigation pending the outcome of arbitration. Star
Sys. Int’l Ltd. v. 3M Co., No. 05-15-00669-CV, 2016 WL 2970272, at *4 (Tex.
App.—Dallas May 19, 2016, no pet.) (mem. op.) (citing In re Merrill Lynch Trust
Co. FSB, 235 S.W.3d 185, 196 (Tex. 2007) (orig. proceeding)); see also Downer v.
Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985) (trial court
abuses its discretion if it acts arbitrarily, unreasonably, or without reference to any
guiding rules and principles).
The Federal Arbitration Act requires courts to stay litigation of issues that are
subject to arbitration. See 9 U.S.C. § 3; Merrill Lynch, 235 S.W.3d at 195. Although
“[a]s a general rule, the mandatory stay applies only to parties to the arbitration
agreement,” a non-signatory party’s claims can be subject to the mandatory stay if
the “issues presented in the nonparty-party litigation if litigated would have rendered
the arbitration redundant and thwarted the federal policy favoring arbitration.” Zuffa,
3
The appellate record contains no reporter’s record of the hearing.
–6–
LLC v. HDNet MMA 2008 LLC, 262 S.W.3d 446, 450 (Tex. App.—Dallas 2008, no
pet.) (quoting Adams v. Ga. Gulf Corp., 237 F.3d 538, 540 (5th Cir. 2001) (per
curiam)). An order “refusing a stay of any action under [FAA] section 3” is subject
to interlocutory appeal. 9 U.S.C. § 16(a)(1)(A).
When an issue is pending in both arbitration and litigation, arbitration should
be given priority to the extent it is likely to resolve issues material to the lawsuit.
Merrill Lynch, 235 S.W.3d at 195. Courts should “ensure that an issue two parties
have agreed to arbitrate is not decided instead in collateral litigation.” Id. at 196.
Issues that are not the subject of arbitration need not be stayed until the arbitration
is concluded. Carr v. Main Carr Dev., LLC, 337 S.W.3d 489, 500 (Tex. App.—
Dallas 2011, pet. denied).
“[T]he fact that nonarbitrable claims against third parties are based on facts
related to arbitrable claims does not alone make a stay of those claims necessary.”
Diligent Tex. Dedicated LLC v. York, No. 02-17-00416-CV, 2018 WL 4140637, at
*5 (Tex. App.—Fort Worth Aug. 30, 2018, pet. denied) (mem. op.). “The question
is not ultimately one of weighing potential harm to the interests of the non-signatory,
but of determining whether proceeding with litigation will destroy the signatories’
right to a meaningful arbitration.” Zuffa, 262 S.W.3d at 450 (quoting Waste Mgmt.,
Inc. v. Residuos Industriales Multiquim, S.A., 372 F.3d 339, 343 (5th Cir. 2004)).
Factors courts consider include whether (1) the arbitrated and litigated disputes
involve the same operative facts, (2) the claims asserted in the arbitration and
–7–
litigation are “inherently inseparable,” and (3) the litigation has a “critical impact”
on the arbitration. Id. (citing Waste Mgmt., 372 F.3d at 343).
Appellees’ jurisdictional challenge is without merit
As a threshold matter, we begin with appellees’ contention on appeal that
“NCN, as a non-signatory to the arbitration agreement underlying this appeal, does
not effectively have standing to seek a stay.” Appellees cite Waste Management, in
which the Fifth Circuit stated that if a non-signatory’s asserted basis for a requested
stay of litigation during arbitration under FAA section 3 was not meritorious, the
non-signatory lacked “standing” to move for a section 3 stay and could not bring an
interlocutory appeal under FAA section 16. See Waste Mgmt., 372 F.3d at 343. More
recently, the U.S. Supreme Court stated,
By [§ 16(a)(1)(A)’s] clear and unambiguous terms, any litigant who
asks for a stay under § 3 is entitled to an immediate appeal from denial
of that motion—regardless of whether the litigant is in fact eligible for
a stay. . . . Jurisdiction over the appeal, however, “must be determined
by focusing upon the category of order appealed from, rather than upon
the strength of the grounds for reversing the order[.]”
Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 627–28 (2009).
Appellees cite no authority, and we have found none, limiting the
relationships that can give rise to a non-signatory’s standing to seek a litigation stay
during arbitration or conditioning a non-signatory’s standing to seek such a stay on
the signatory showing support. We do not find Waste Management’s standing
–8–
analysis instructive and we conclude NCN did not lack standing to seek the
requested stay.4 See id.
The trial court did not abuse its discretion by denying NCN’s motion to stay
The parties agree that the FAA applies in this case. The claims subject to
arbitration include only Mr. Guerra and Mr. Deltoro’s claims against the attorney
defendants. NCN contends the trial court abused its discretion by denying the
requested stay because “Plaintiffs’ claims against NCN are based on the same
operative facts and inherently inseparable from Plaintiffs’ claims against the
Attorney Defendants in arbitration[] and the litigation will have a critical impact on
the arbitration.” Further, in its appellate reply brief, NCN asserts that although its
motion in the trial court requested a stay of “all proceedings” in this case, NCN
sought to stay “solely the claims alleged by Plaintiffs Guerra and Deltoro,” and not
“the entirety of the litigation.”5
We begin with NCN’s argument regarding factor one, whether the arbitrated
and litigated disputes involve the same operative facts. See Zuffa, 262 S.W.3d at 450
(quoting Waste Mgmt., 372 F.3d at 343). According to NCN, because “Guerra and
Deltoro each allege the same claims collectively against all defendants,” “the proof
4
NCN’s appellate brief states that if this court concludes it lacks jurisdiction over this appeal, “NCN
requests that the Court treat this appeal as a petition for mandamus relief.” In light of our conclusion above,
we need not address NCN’s alternative request.
5
NCN does not argue on appeal that the trial court abused its discretion to the extent it refused to stay
litigation of appellees’ class claims.
–9–
required in the arbitration will be intertwined with the proof required in the
litigation.” We disagree.
The record shows (1) each appellee relies on a separate, distinct set of
underlying facts and there is no single incident or contract common to all appellees,
even though the petition describes a pervasive “scam” and alleges the same causes
of action against multiple defendants; (2) the petition alleges that the adjuster
defendants, including “and/or NCN,” made representations to, and imposed
individual charges on, each appellee; (3) while the arbitration includes only two
appellees and the attorney defendants, the litigation involves all twelve appellees
and their experiences with the defendants at various chronological stages of the
alleged fraud, including distinctions as to each defendant group’s roles and acts; and
(4) NCN’s motion in the trial court requested a stay of “all proceedings.” “[T]he fact
that nonarbitrable claims against third parties are based on facts related to arbitrable
claims does not alone make a stay of those claims necessary.” Diligent, 2018 WL
4140637, at *5.
As to factors two and three, NCN further contends the claims are “inherently
inseparable” and the litigation will have a critical impact on the arbitration because
(1) “the plaintiffs only allege that they suffered one harm: the reduction or loss of
their homeowners’ insurance proceeds”; (2) “[i]n order to determine whether the
Attorney Defendants engaged in a conspiracy with NCN, aided and abetted NCN in
breaching a fiduciary duty it allegedly owes to Plaintiffs, or is [sic] vicariously liable
–10–
for the actions of NCN, the arbitrator will necessarily review the same operative
facts as the jury in the litigation”; and (3) “if the litigation is allowed to proceed, it
may resolve some of the same issues to be determined to arbitration.” See Zuffa, 262
S.W.3d at 450 (quoting Waste Mgmt., 372 F.3d at 343). NCN asserts this case is
analogous to Merrill Lynch, but we are not persuaded by the comparison. See 235
S.W.3d at 185.
In Merrill Lynch, an investor and his wife sued a Merrill Lynch, Inc. wealth
management employee and two Merrill Lynch-affiliated entities: a life insurance
company (ML Life) and a trustee company (ML Trust). The plaintiffs’ petition
described misrepresentations, omissions, and fiduciary breaches pertaining to an
“insurance sale” and “alleged a dozen multifarious claims, all related to [their]
insurance trust, and all asserted against the defendants collectively without
differentiating the actions of each.” Id. at 188. The plaintiffs had signed an
arbitration agreement only with Merrill Lynch, Inc., which was not named as a
defendant. The trial court granted the defendants’ motion to compel arbitration as to
the claims against the employee, but denied it as to both ML affiliates. Id. at 190–
91. ML Life and ML Trust then moved to stay the litigation against them pending
arbitration. After the trial court denied the stay, the ML affiliates sought mandamus
relief. Our supreme court concluded (1) “if the alleged misrepresentations and
omissions by [the employee] must be arbitrated, that proceeding must be given
priority so that it is not rendered moot by deciding the same issues in court,” and
–11–
(2) “[a]ssuming the same issues must be decided both in arbitration (against [the
employee]) and in court (against the affiliates), we hold the latter must be stayed
until the former is completed.” Id. at 195–96.
Unlike Merrill Lynch, this case involves a petition with multiple plaintiffs
unrelated by anything but similar harm from a similar scheme; the petition describes
multiple transactions, differentiating the defendants’ actions. Rather than alleging
“one harm,” appellees describe damages based on their individual interactions at
various stages of their experiences with members of the three defendant groups. See
Matthews v. Priority Energy Servs., LLC, No. 6:15-cv-448-RWS-KNM, 2016 WL
7633990, at *5 (E.D. Tex. Dec. 2, 2016) (“[B]ecause Plaintiffs are seeking remedies
for different violations, the claims are not inherently inseparable.”). Likewise, the
conspiracy and vicarious liability claims are dependent on each appellee’s
experience regarding the defendants alleged to have harmed that appellee.
On this record, we cannot conclude the trial court abused its discretion by
denying NCN’s requested stay. See Star Sys. Int’l, 2016 WL 2970272, at *4
(concluding parallel litigation did not “threaten to undermine or moot the
arbitration” involving same causes of action against similarly situated defendants);
see also Zuffa, 262 S.W.3d at 450 (“The question is not ultimately one of weighing
potential harm to the interests of the non-signatory, but of determining whether
proceeding with litigation will destroy the signatories’ right to a meaningful
arbitration.”).
–12–
We decide against NCN on its sole issue and affirm the trial court’s order.
/Cory L. Carlyle/
CORY L. CARLYLE
JUSTICE
190495F.P05
–13–
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
NATIONAL CLAIMS On Appeal from the 162nd Judicial
NEGOTIATORS LLC, Appellant District Court, Dallas County, Texas
Trial Court Cause No. DC-16-07967.
No. 05-19-00495-CV V. Opinion delivered by Justice Carlyle.
Justices Pedersen, III and Reichek
JUAN GUERRA, AMANDA participating.
CARDENAS, CESAR QUINONES,
FERNANDO MARIN, KEVIN
CLAY, BARRY NIX, SANDRA
NIX, JUAN DELTORO, GLEN
MOORE, GAIL MOORE,
ESMERELDA HERNANDEZ, AND
FERMIN LOPEZ, Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.
It is ORDERED that appellees Juan Guerra, Amanda Cardenas, Cesar
Quinones, Fernando Marin, Kevin Clay, Barry Nix, Sandra Nix, Juan Deltoro,
Glen Moore, Gail Moore, Esmerelda Hernandez, and Fermin Lopez recover their
costs of this appeal from appellant National Claims Negotiators LLC.
Judgment entered this 31st day of March, 2020.
–14–