in Re: Copart, Inc., Copart of Houston, Inc., and Houston Copart Salvage Auto Auctions, LP

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
IN RE: No. 08-18-00034-CV
§
COPART, INC., COPART OF An Original Proceeding
HOUSTON, INC., AND HOUSTON § in Mandamus
COPART SALVAGE AUTO
AUCTIONS, L.P., §
RELATORS. §
OPINION
Relators, Copart, Inc., Copart of Houston, Inc., and Houston Copart Salvage Auto
Auctions, L.P. (referred to collectively as Copart) have filed a mandamus petition against the
Honorable Luis Aguilar, Judge of the 243rd District Court of El Paso County, Texas, to challenge
the trial court’s order permitting the real party in interest, Maria Ordaz, to engage in pre-arbitration
discovery. We conditionally grant mandamus relief.
FACTUAL SUMMARY
The real party in interest, Maria Ordaz, filed suit against Copart alleging employment
discrimination and retaliation causes of action under the Texas Labor Code.1 Copart’s counsel
emailed a motion to compel arbitration to counsel for Ordaz prior to filing the motion. The motion
was supported by the affidavit of Kallie Sirles, a Human Resource Generalist at Copart, Inc.
1
The suit is styled Maria R. Ordaz v. Copart, Inc., Copart of Houston, Inc., and Houston Copart Salvage Auto
Auctions, L.P. (cause number 2017DCV4011).
Attached to Sirles’ affidavit are several exhibits, including the arbitration agreement electronically
signed by Ordaz. Sirles’ affidavit addressed the existence of its arbitration agreement, the receipt
of the arbitration agreement by Ordaz, Ordaz’s acknowledgement and signature of the arbitration
agreement, and that the records attached to her affidavit are business records kept in the ordinary
course of business.
After receiving the motion to compel arbitration, Ordaz’s counsel called opposing counsel
and unsuccessfully attempted to confer regarding dates for the deposition of Sirles. Copart’s
counsel unsuccessfully attempt to obtain opposing counsel’s agreement to submit a joint motion
to compel arbitration. Ordaz subsequently noticed Sirles for deposition. Copart filed its motion
to compel arbitration and a motion to quash the deposition notice. Ordaz responded by filing a
motion to compel discovery in which she sought pre-arbitration discovery pursuant to Section
171.086(a) of the Civil Practice and Remedies Code. Following a hearing, the trial court granted
Ordaz’s motion to compel discovery and denied Copart’s motion to quash the deposition notice.
PRE-ARBITRATION DISCOVERY
In Issue One, Copart argues that the trial court clearly abused its discretion by granting
Ordaz’s motion to compel discovery and denying Copart’s motion to quash the deposition notice
for Kallie Sirles. Ordaz did not file a response to the motion to compel arbitration, but she argued
in her motion to compel discovery that she is entitled to pre-arbitration discovery under Section
171.086(a) of the Civil Practice and Remedies Code.
Standard of Review
To be entitled to mandamus relief, a relator must generally meet two requirements. First,
the relator must show that the trial court clearly abused its discretion. In re Prudential Insurance
Company of America, 148 S.W.3d 124, 135 (Tex. 2004). A trial court abuses its discretion when
-2-
it acts arbitrarily, capriciously, and without reference to guiding principles. In re Green, 527
S.W.3d 277, 279 (Tex.App.--El Paso December 2, 2016, orig. proceeding); In re Mid-Century
Insurance Company of Texas, 426 S.W.3d 169, 178 (Tex.App.--Houston [1st Dist.] 2012, orig.
proceeding). Mandamus relief is appropriate when a trial court improperly orders pre-arbitration
discovery. See In re Houston Pipe Line Co., 311 S.W.3d 449, 451 (Tex. 2009); In re VNA, Inc.,
403 S.W.3d 483, 488 (Tex.App.--El Paso 2013, orig. proceeding); In re ReadyOne Industries, Inc.,
400 S.W.3d 164, 168-69 (Tex.App.--El Paso 2013, orig. proceeding); In re ReadyOne Industries,
Inc., 394 S.W.3d 680, 685-86 and 688 (Tex.App.--El Paso 2012, orig. proceeding); In re ReadyOne
Industries, Inc., 420 S.W.3d 179, 186-87 (Tex.App.--El Paso 2012, orig. proceeding).
Relevant Law and Analysis
Texas law encourages parties to resolve disputes through arbitration. See G.T. Leach
Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 508 (Tex. 2015); TEX.CIV.PRAC.&REM.
CODE ANN. §§ 154.002, 154.027. To that end, Section 171.021 of the Civil Practice and Remedies
Code mandates a trial court to order the parties to arbitrate on the application of a party showing
an agreement to arbitrate and the opposing party’s refusal to arbitrate. TEX.CIV.PRAC.&REM.CODE
ANN. § 171.021(a)(West 2011). Motions to compel arbitration are ordinarily decided in summary
proceedings “on the basis of affidavits, pleadings, discovery, and stipulations.” Kmart Stores of
Texas L.L.C. v. Ramirez, 510 S.W.3d 559, 565 (Tex.App.--El Paso 2016, pet. denied), quoting
Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex. 1992). A summary motion to compel
arbitration is essentially a motion for partial summary judgment, subject to the same evidentiary
standards. In re Jebbia, 26 S.W.3d 753, 756-57 (Tex.App.--Houston [14th Dist.] 2000, orig.
proceeding); see Jack B. Anglin, 842 S.W.2d at 269; Kmart Stores of Texas, 510 S.W.3d at 565.
A party seeking to compel arbitration must establish the existence of an arbitration agreement and
-3-
show that the claims raised fall within the scope of the agreement. In re Oakwood Mobile Homes,
Inc., 987 S.W.2d 571, 573 (Tex. 1999)(orig. proceeding). If the movant has proven there is an
arbitration agreement as a matter of law, the trial court must compel arbitration. In re Jebbia, 26
S.W.3d at 757.
If a party opposing the motion to compel arbitration denies the existence of the agreement,
the court is required to summarily determine that issue. TEX.CIV.PRAC.&REM.CODE ANN.
§ 171.021(b). The non-movant can resist summary arbitration by raising an issue of material fact
regarding the existence of the agreement or whether the claims fall within the scope of the
agreement. In re Jebbia, 26 S.W.3d at 757. Additionally, the non-movant can resist summary
arbitration by presenting some evidence supporting every element of a defensive claim that there
is no enforceable agreement to arbitrate. In re Jebbia, 26 S.W.3d at 757. If the non-movant raises
an issue of fact, then the trial court must forego summary disposition and conduct an evidentiary
hearing sometimes referred to as a “Tipps hearing.” See Kmart Stores of Texas, 510 S.W.3d at
565. Conversely, if the movant carries its burden and the non-movant does not raise a material
issue of fact, the trial court is required to compel arbitration. In re Jebbia, 26 S.W.3d at 757.
Ordaz did not file a response to the motion to compel arbitration contesting the existence
of the arbitration agreement or raising a defense to its enforcement. In her motion to compel
discovery, Ordaz made the following statement: “Plaintiff denies any enforceable arbitration
agreement.” She did not, however, offer any evidence in support of the statement. Consequently,
she has not established that she is entitled to an evidentiary Tipps hearing on the existence or
enforceability of the arbitration agreement.
Citing Section 171.086(a)(4) and (6) of the Civil Practice and Remedies Code, Ordaz
contends that the trial court has discretion to order pre-arbitration discovery. The statute provides
-4-
as follows:
Before arbitration proceedings begin, in support of arbitration a party may file an
application for a court order, including an order to:
. . .
(4) obtain from the court in its discretion an order for a deposition for discovery,
perpetuation of testimony, or evidence needed before the arbitration proceedings
begin;
. . .
(6) obtain other relief, which the court can grant in its discretion, needed to permit
the arbitration to be conducted in an orderly manner and to prevent improper
interference or delay of the arbitration.
TEX.CIV.PRAC.&REM.CODE ANN. § 171.086(a)(4), (6).
The Supreme Court has held that the statute expressly authorizes pre-arbitration discovery
when a trial court cannot fairly and properly make its decision on the motion to compel arbitration
because it lacks sufficient information regarding the scope of an arbitration provision or other
issues of arbitrability. In re Houston Pipe Line Co., 311 S.W.3d 449, 451 (Tex. 2009)(citing
TEX.CIV.PRAC.&REM.CODE ANN. §§ 171.023(b), 171.086(a)(4),(6)). This is not, however, an
authorization to order discovery as to the merits of the underlying controversy. In re Houston Pipe
Line, 311 S.W.3d at 451. Motions to compel arbitration and any reasonably needed discovery
must be resolved without delay. Id.; Tipps, 842 S.W.2d at 269.
In Houston Pipe Line, the relator signed an agreement to purchase gas from O’Connor &
Hewitt, Ltd., based on a specific price index. In re Houston Pipe Line, 311 S.W.3d at 450. The
contract included an arbitration provision. O’Connor later sued several defendants, including
Houston Pipe Line, alleging they had manipulated the index downward. Id. As a signatory to the
contract, Houston Pipe Line sought to enforce the arbitration provision. Id. Other defendants who
were not parties to the agreement sought to compel arbitration based on a direct benefits equitable
-5-
estoppel theory. Id. O’Connor resisted arbitration by attacking the scope of the arbitration
provision and arguing it would be impossible to identify all potential defendants and to complete
damages calculations within the sixty day period specified by the arbitration provision for
discovery. Id. Rather than rule on the motion to compel arbitration, the trial court ordered
discovery to assist it in ruling on the motion to compel arbitration. Id. More specifically, the trial
court ordered discovery to determine if additional defendants could equitably invoke the
arbitration clause, whether O’Connor’s claims fell within the scope of the arbitration clause, and
if the time limitations imposed by the clause were jurisdictional. In re Houston Pipe Line, 311
S.W.3d at 450-51. The Supreme Court held that while the trial court has discretion to order pre-
arbitration discovery, the trial court abused its discretion because it ordered discovery which
related to the ultimate liability of the defendants rather than the scope of the arbitration agreement
and arbitrability, and the discovery was not limited to the issues raised by the motion to compel
arbitration. Id. at 451. On rehearing, the Court observed that the trial court retained jurisdiction
to order limited discovery related to scope or arbitrability if necessary. Id. at 452 (Opn. on reh’g).
In an opinion issued this same date, we held that Section 171.086(a)(4) and (6) plainly
contemplates that the party seeking discovery under the statute must file an application for a court
order granting such relief. In re DISH Network, No. 08-17-00161-CV (Tex.App.--El Paso
October 24, 2018, orig. proceeding); citing TEX.CIV.PRAC.&REM.CODE ANN. § 171.086(a)(4),
(6)(“a party may file an application for a court order, including an order to . . . (4) obtain from the
court in its discretion an order for a deposition for discovery, perpetuation of testimony, or
evidence needed before the arbitration proceedings begin….”). We further held that the party
seeking pre-arbitration discovery must show that the pre-arbitration discovery sought by the party
is reasonably necessary. In re DISH Network, No. 08-17-00161-CV (Tex.App.--El Paso
-6-
October 24, 2018, orig. proceeding); citing In re Houston Pipe Line, 311 S.W.3d at 452 (Opn. on
reh’g). This requirement is consistent with our holdings in the In re VNA and In re ReadyOne
cases that pre-arbitration discovery is available on a particular defense if the party opposing
arbitration shows or provides a colorable basis or reason to believe that the discovery requested is
material in establishing the defense. See In re VNA, Inc., 403 S.W.3d at 488; In re ReadyOne
Industries, Inc., 420 S.W.3d at 186. Ordaz argues that we should overrule the In re VNA and In re
ReadyOne cases, but we decline to do so.
In her motion to compel discovery, Ordaz stated that she “denies any enforceable
arbitration agreement.” She also asserted that she is not required to accept Sirles’ testimony as
true and is entitled to cross-examine Sirles and conduct other reasonable discovery on the question
of whether an enforceable arbitration agreement exists. Additionally, Ordaz stated her intent to
notice Copart’s corporate representative for deposition. Ordaz asked the trial court to order that
she be permitted to conduct this discovery pursuant to Section 171.086(a)(4) and (6). As illustrated
by In re Houston Pipe Line, Section 171.086(a)(4) and (6) does not give the trial court unlimited
discretion to order pre-arbitration discovery. The trial court’s discretion in this regard is limited
to situations where the trial court cannot fairly and properly make its decision on the motion to
compel arbitration because it lacks sufficient information related to the specific issues identified
by the party resisting arbitration. See In re Houston Pipe Line, 311 S.W.3d at 451. The burden is
on the party seeking pre-arbitration discovery under Section 171.086(a) to show that the discovery
is necessary and related to the issues raised by the party’s motion. See id.
Ordaz’s motion to compel discovery generally contests whether an arbitration agreement
exists. This is an issue of arbitrability. See G.T. Leach Builders, 458 S.W.3d at 520. The motion
does not, however, provide any basis for the trial court to conclude that it lacks sufficient
-7-
information to determine whether an arbitration agreement exists. Consequently, the trial court
abused its discretion by compelling the deposition under these facts. In her mandamus response,
Ordaz contests the validity of her electronic signature on the arbitration agreement, but she did not
raise this argument in her motion or at the hearing as a basis for obtaining pre-arbitration discovery
under Section 171.086(a)(4) and (6). Even if Ordaz had raised this issue in the trial court, the
discovery order is overbroad because it did not limit the deposition of Sirles to this issue. See In
re Houston Pipe Line, 311 S.W.3d at 451. Issue One is sustained. It is unnecessary to address
Issue Two.
We conditionally grant the writ of mandamus and direct the trial court to vacate the orders
compelling the deposition of Sirles and denying Copart’s motion to quash the deposition notice.
As the Supreme Court observed in Houston Pipe Line, the trial court retains discretion to order
limited discovery pursuant to a properly filed Section 171.086(a) motion. See In re Houston Pipe
Line, 311 S.W.3d at 452 (Opn. on reh’g). The trial court’s order must limit discovery to the
specific issues identified by the Section 171.086(a) motion. If Ordaz fails to file within thirty days
from the date of this opinion a motion establishing she is entitled to pre-arbitration discovery
pursuant to Section 171.086(a)(4) and (6) or fails to present evidence sufficient to entitle her to a
Tipps evidentiary hearing, the trial court is ordered to summarily rule on the motion to compel
arbitration. The motion to compel arbitration and any reasonable discovery should be resolved
without delay. See In re Houston Pipe Line, 311 S.W.3d at 452 (Opn. on reh’g). The writ of
mandamus will issue only if the trial court fails to comply.
October 24, 2018
YVONNE T. RODRIGUEZ, Justice
Before McClure, C.J., Rodriguez, and Palafox, JJ.
-8-