Aeternia Enterprises, U.S.A., Ltd. v. Magnitogorsk Steel and Wire Works

Opinion issued June 18, 2009

  In The

Court of Appeals

For The

First District of Texas

---

NO. 01–05–00964–CV

---

AETERNIA ENTERPRISES U.S.A., LTD., Appellant

V.

MAGNITOGORSK STEEL AND WIRE WORKS, Appellee

---

On Appeal from the 133rd District Court

Harris County, Texas

Trial Court Cause No. 2002–57016

---

MEMORANDUM OPINION

          Appellant, Aeternia Enterprises U.S.A., Ltd. (“Aeternia”), challenges the trial court’s order granting appellee Magnitogorsk Steel and Wire Works’s (“MMMZ”) motion to compel arbitration. Because the challenged order cannot form the basis of an appeal, we dismiss for want of jurisdiction.

          We affirm.

Background

          Aeternia and MMMZ, a Russian corporation, entered into a written contract (“the contract”) whereby Aeternia agreed to purchase nails manufactured by MMMZ. After the business dealings between the parties soured, Aeternia filed the instant suit in Harris County, Texas, against MMMZ for breach of contract. Aeternia also sued PrimeSource Building Products, Inc. (“PrimeSoure”) for tortiously interfering with the contract. Although it claimed that Aeternia owed it money under the contract, MMMZ did not file any counterclaims against Aeternia in the instant suit. Instead, based on an arbitration provision in the contract, MMMZ initiated arbitration proceedings in Russia against Aeternia. In the arbitration proceeding, MMMZ sought to recover $256,535.14 from Aeternia. MMMZ initiated the arbitration after Aeternia had filed suit in Texas, but before it was served with process.

          After it received notice of the arbitration, Aeternia sent a letter to the Russian arbitration tribunal in which the arbitration was pending. In the letter, Aeternia informed the arbitration tribunal that it had filed suit against MMMZ in Texas and would not be attending the scheduled arbitration proceeding.

          MMMZ attended the arbitration hearing, but Aeternia did not attend. Aeternia’s claims against MMMZ, which form the basis of the instant suit, were not presented to or decided by the Russian arbitration tribunal; only MMMZ’s claims were presented to and considered by the tribunal. Ultimately, the arbitration tribunal awarded $184,901.61 in favor of MMMZ and against Aeternia.

          After the arbitration tribunal issued its written determination regarding the award, MMMZ filed its “Motion to Enforce Arbitration Clause and Notice of Arbitration Award.” In the motion, MMMZ asserted that Aeternia’s claims in the instant suit are subject to the arbitration clause found in the contract between the parties. For this reason, MMMZ requested the trial court to dismiss Aeternia’s claims against it. MMMZ made no request for the trial court to enforce the Russian arbitration court’s award.

          The trial court signed an order granting MMMZ’s “Motion to Enforce Arbitration Clause.” In the order, the trial court crossed out proposed language stating that Aeternia’s claims against MMMZ were dismissed with prejudice.

          Aeternia then filed a motion requesting the trial court to sever its cause of action against PrimeSource from its cause of action against MMMZ and to “assign the severed cause a new cause number.” The trial court signed an order granting Aeternia’s motion to sever. In the order, the trial court severed Aeternia’s cause of action against PrimeSource from Aeternia’s cause of action against MMMZ. The trial court assigned the severed action against PrimeSource a new cause number, leaving only Aeternia’s cause of action against MMMZ under the original cause number. The severance order concludes by stating that “[u]pon execution of this order, the Order Enforcing Arbitration Clause issued by this court in [the original cause against MMMZ] will become the final order in such case.”

          Aeternia then filed a notice of appeal in the original cause number, resulting in the instant appeal. In the notice of appeal, Aeternia averred, “The order being appealed from is an Order Granting Motion to enforce Arbitration Clause, which was made final by an Order of Severance. . . .”

Jurisdiction

          Before reaching the merits of Aeternia’s appellate arguments, we must first determine whether we have subject matter jurisdiction over the appeal. See Royal Indep. School Dist. v. Ragsdale, 273 S.W.3d 759, 763 (Tex. App.—Houston [14th Dist.] 2008, no pet.). We conduct this inquiry sua sponte because jurisdiction is fundamental in nature and may not be ignored. Id. (citing K & S Interests, Inc. v. Tex. Am. Bank/Dallas, 749 S.W.2d 887, 890 (Tex. App.—Dallas 1988, writ denied)). We must dismiss an appeal over which we have no jurisdiction. See id. Our appellate jurisdiction is generally confined to appeals of final judgments, unless otherwise authorized by statute. See Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001).

          No right of appeal lies from an interlocutory order granting a motion to compel arbitration. See Mohamed v. Auto Nation USA Corp., 89 S.W.3d 830, 833 (Tex. App.—Houston [1st Dist.] 2002, no pet.). Instead, regardless of whether the Texas General Arbitration Act or the Federal Arbitration Act controls, only review by mandamus lies over an order compelling arbitration. Id. at 834. There is an exception to this rule.

          The Supreme Court of Texas has recognized, “Courts may review an order compelling arbitration [by appeal] if the order also dismisses the underlying action so it is final rather than interlocutory.” Perry Homes v. Cull, 258 S.W.3d 580, 586 n.13 (Tex. 2008). For example, in Childers v. Advanced Foundation Repair, the supreme court held that the order compelling arbitration was immediately reviewable by appeal because the judgment stated that it was “final, disposes of all parties in this case, is appealable, and disposes of this case in the entirety.” 193 S.W.3d 897, 989 (Tex. 2006). This holding is consistent with the general principle that, absent a conventional trial on the merits, a judgment is final, “if and only if either it actually disposes of all claims and parties then before the court, regardless of its language, or it states with unmistakable clarity that it is a final judgment as to all claims and all parties.” Lehmann, 39 S.W.3d at 192–93.

          With these principles in mind, we turn to the record in the instant case to determine whether it contains a final, appealable judgment. In so doing, we recognize that, because the law does not require that a final judgment be in any particular form, whether a judicial decree is a final judgment must be determined from its language and the record in the case. Id. at 195.

          In this case, a review of the record reveals that a final judgment has not been rendered. Unlike in Childers, the trial court did not grant MMMZ’s request to dismiss Aeternia’s claims against MMMZ. Cf Childers, 193 S.W.3d at 898. To the contrary, the trial court here explicitly and purposefully crossed out the language in the arbitration order dismissing Aeternia’s claims against MMMZ. Conspicuously absent in this case is “all-encompassing” and “unequivocal” language found in the Childers order. See id. (“This judgment is final, disposes of all parties and all claims in this case, is appealable, and disposes of this case in the entirety.”).

          The only indicia of finality found in the record is the concluding language of the severance order, which states that “the Order Enforcing Arbitration Clause . . . will become the final order” in the original cause number. However, such language alone is not the type of clear and unequivocal language that transforms an otherwise interlocutory order into a final judgment. See Lehmann, 39 S.W.3d at 205 (explaining that “[a]n order does not dispose of all claims and all parties merely because it is entitled ‘final,’ or because the word ‘final’ appears elsewhere in the order”); see also Braeswood Harbor Partners & Prop. Owners v. Harris County Appraisal Dist., 69 S.W.3d 251, 252 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (dismissing appeal from order granting summary judgment because order did not dispose of certain claims, even though order was entitled “Final Judgment” and contained Mother Hubbard clause).

          In addition, we requested the parties to brief the issue of whether the trial court rendered a final, appealable judgment. Both Aeternia and Magnitogorsk filed briefing asserting that the order compelling arbitration and the severance order combine to form a final judgment in this case. In its brief, Aeternia asserts,

At the time the arbitration order was entered, it disposed of all of [Aeternia’s] claims against [MMMZ] because it enforced an arbitration clause when the arbitration had occurred unilaterally in Russia 18 months prior to the order. When [Aeternia’s] claims against [MMMZ] were subsequently severed from [Aeternia’s] claims against PrimeSource, the Arbitration Order then became a final judgment. In its briefing, MMMZ also contends that the order compelling arbitration “disposed of” Aeternia’s claims against it, but acknowledges that the order was not a final judgment because Aeternia’s claims against PrimeSource remained. Like Aeternia, MMMZ asserts that once Aeternia’s claims against PrimeSource were severed from Aeternia’s claims against MMMZ, the arbitration order became a final judgment.

          A severance divides the lawsuit into two or more separate and independent causes. Hall v. City of Austin, 450 S.W.2d 836, 837–38 (Tex. 1970). Following a severance, a judgment that disposes of all parties and issues in one of the severed causes is final and appealable. Id. at 838. We disagree with Aeternia and MMMZ that the order compelling arbitration in this case “disposed of” Aeternia’s claims against MMMZ, regardless of whether an award was made by the Russian arbitration tribunal. An arbitration award does not dispose of all subject claims until the trial court confirms, modifies, or vacates the arbitration award. See Hisaw & Associates General Contractors, Inc. v. Cornerstone Concrete Systems, Inc., 115 S.W.3d 16, 21 (Tex. App.—Fort Worth 2003, pet. denied); see also In re Gulf Exploration, LLC, No. 07-0055, 2009 WL 1028049, at *2 (Tex. Apr. 17, 2009) (“[A]fter arbitration, a court order is needed to confirm, modify, or vacate the arbitration award.”). Here, MMMZ did not request the trial court to confirm or otherwise rule on the propriety of the arbitration award, and the trial court made no such ruling.

          Moreover, the record reveals that it was MMMZ’s claims against Aeternia that were arbitrated in the Russia. Aeternia’s claims against MMMZ were not arbitrated and remain pending in the trial court.

Conclusion

          In this case, the trial court made no written order unequivocally and clearly stating that it finally disposed of all claims in the underlying case, nor does the record reflect that the trial court otherwise disposed of Aeternia’s claims against MMMZ. See Lehmann, 39 S.W.3d at 192–93. More precisely, nothing in the record indicates that the trial court dismissed Aeternia’s claims against MMMZ, as required to transform the order compelling arbitration into a final, appealable judgment. See Perry Homes, 258 S.W.3d at 586 n.13; see also Childers, 193 S.W.3d at 898. Based on the record, we conclude that the order compelling arbitration is not an appealable judgment.

          We dismiss the appeal for lack of jurisdiction.

                                                                        Laura Carter Higley

                                                                        Justice

Panel consists of Justices Jennings, Alcala, and Higley.