Bryan Zachary v. Sis-Tech Applications LLP Sis-Tech Solutions LP Sis-Tech Apps LLC and Sis-Tech Solutions GP Inc.

Opinion issued May 19, 2011

In The

Court of Appeals

For The

First District of Texas

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NO. 01-10-00834-CV

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BRYAN ZACHARY, Appellant

V.

SIS-TECH APPLICATIONS, LLP, SIS-TECH SOLUTIONS, LP,
SIS-TECH APPS, LLC, AND SIS-TECH SOLUTIONS, GP, INC.,
Appellees

On Appeal from 281st District Court

Harris County, Texas

Trial Court Cause No. 2010-55825

MEMORANDUM OPINION

          Bryan Zachary brings this interlocutory appeal from an order denying his application for an order to stay arbitration proceedings and to preclude appellees, SIS-Tech Applications, LLP, SIS-Tech Solutions, LP, SIS-Tech Apps LLC, and SIS-Tech Solutions, GP, Inc. (collectively “SIS-Tech”), from further prosecuting its demand for arbitration.  Zachary contends on appeal that the trial court abused its discretion by denying his request because no agreement to arbitrate exists.  We conclude that we lack jurisdiction to review this interlocutory order and therefore dismiss the appeal.

Background

          Zachary and Angela Summers founded SIS-Tech during the 1990s.  In 2004, they restructured it into two divisions: SIS-Tech Solutions, focusing on engineering safety-process systems, and SIS-Tech Applications, focusing on commercialization.  Pursuant to a set of partnership and shareholder agreements executed on March 4, 2004, Zachary obtained ownership of 39.9% of SIS-Tech Solutions and 50% of SIS-Tech Applications, with Summers owning the remainder.

          In addition to being a part owner, Zachary was also a SIS-Tech employee.  The ownership agreements contemplate that “[i]n no event shall a person or entity who is not an employee or Manager of [SIS-Tech], own any . . . Interest in [SIS-Tech] . . . .”  To that end, the ownership agreements provide:

If the employment of a[n] [owner] with [SIS-Tech] is terminated for cause . . . such [owner] shall be deemed to have given notice to [SIS-Tech] and the other [owners], as of the date of such termination of employment, offering to sell all of his or her [ownership] Interest upon the terms and conditions provided in this Article 2 for a price determined in accordance with the provisions of Article 6 hereof, minus any sums or damages which are due, payable or owed to [SIS-Tech] by the [owner] or which arise as a result of such [owner]’s actions relating to such termination.

Article 6 provides that if the owners cannot agree upon the value of the ownership interest, then an appraisal procedure will determine the “fair market value” of the ownership interest.  Under that procedure, the seller and the purchaser each must appoint an appraiser qualified to evaluate minority interests in closely held corporations.  If either party fails to appoint an appraiser, “the appraiser appointed by the other shall determine the fair market value . . . .”  The agreements each state that “[a]ll claims and disputes relating to or arising under this Agreement shall be subject to arbitration in accordance with the rules of the American Arbitration Association.”

          SIS-Tech terminated Zachary’s employment, citing job-performance deficiencies, “sleeping on the job,” absenteeism, and complaints regarding his “erratic and unprofessional behavior.”  About three weeks later, Zachary and SIS-Tech entered into a severance agreement and release.  SIS-Tech agreed to pay Zachary’s COBRA premiums for three months and to pay Zachary $30,000 minus lawful withholdings and applicable wage garnishments.  In exchange, Zachary agreed to release SIS-Tech from any claims that he may have against it concerning his employment or termination.  The severance agreement further states in paragraph 9:

Notwithstanding the foregoing, Zachary’s ownership interest in any SIS-Tech Entity shall not be impaired and he shall remain entitled to all benefits associated therewith under the laws of the State of Texas.

In contrast to the arbitration provision in the ownership agreements, paragraph 10 provides:

Any dispute or conflict arising out of or relating to this Agreement must be brought in a state or federal court that has jurisdiction over matter in Harris County, Texas.

The severance agreement also contains an integration clause, stating:

This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to Zachary’s employment by [SIS-Tech] and termination of employment with [SIS-Tech].

          Nine months later, SIS-Tech demanded arbitration against Zachary with the American Arbitration Association.  Two days later, Zachary filed suit.  In his amended petition, Zachary sought an order staying arbitration under section 171.023 of the Texas Civil Practice and Remedies Code on the ground that no agreement to arbitrate exists because the severance agreement supersedes the ownership agreements’ arbitration provisions.  Zachary moved that the trial court enjoin SIS-Tech from pursuing further arbitration proceedings.

          At the hearing on Zachary’s request, his counsel explained, “The relief [sought] is synonymous on both fronts, Your Honor, whether you look at it under a temporary injunction purview or under the Chapter 171 standard; and that is, simply to enjoin them from prosecuting the arbitration[.]”  The trial court orally announced its factual finding that Zachary had failed to show that the severance agreement supersedes the ownership agreements.  It then entered an interlocutory order denying Zachary’s request for injunctive relief.

Analysis

          As a threshold matter, we determine whether we have jurisdiction over this interlocutory appeal.  Kilroy v. Kilroy, 137 S.W.3d 780, 783 (Tex. App.—Houston [1st Dist.] 2004, no pet.).  If we conclude that we do not have jurisdiction, we must dismiss the appeal. Id.  An appellate court has jurisdiction over an interlocutory order only if permitted by statute.  Ogletree v. Matthews, 262 S.W.3d 316, 319 n.1 (Tex. 2007); see Tex. Civ. Prac. & Rem. Code Ann. § 51.014 (West 2008).  A statute authorizing an appeal from an interlocutory order is in derogation of the general rule that only final judgments are appealable; thus, we strictly construe such a statute.  Walker Sand, Inc. v. Baytown Asphalt Materials, Ltd., 95 S.W.3d 511, 514 (Tex. App.—Houston [1st Dist.] 2002, no pet.).

          The Texas General Arbitration Act (“TAA”), specifically authorizes appeals from only certain types of interlocutory orders relating to arbitration proceedings.  See Tex. Civ. Prac. & Rem. Code Ann. § 171.098 (West 2005); W. Dow Hamm III Corp. v. Millennium Income Fund, L.L.C., 237 S.W.3d 745, 751 (Tex. App.—Houston [1st Dist.] 2007, no pet.).  Section 171.098(a) states:

A party may appeal a judgment or decree entered under this chapter or an order:

(1)   denying an application to compel arbitration made under Section 171.021;

(2)   granting an application to stay arbitration made under Section 171.023;

(3)   confirming or denying confirmation of an award;

(4)   modifying or correcting an award; or

(5)   vacating an award without directing a rehearing.

Tex. Civ. Prac. & Rem. Code Ann § 171.098(a).  Under section 171.023(a), “[a] court may stay an arbitration commenced or threatened on application and a showing that there is not an agreement to arbitrate.”  Id. § 171.023(a) (West 2005).  The plain language of section 171.098(a)(2) authorizes an interlocutory appeal from an order granting an application to stay but not from an order denying an application to stay.  See id. § 171.089(a)(2).  This case presents the latter order.  Thus, we lack jurisdiction to review the order under section 171.098(a).  See id. § 171.098(a); Walker Sand, 95 S.W.3d at 514–15.

          Zachary responds that the trial court’s denial of his application is reviewable on appeal because he requested injunctive relief in the form of a stay of all arbitration proceedings.  “[A] person may appeal from an interlocutory order . . . that . . . refuses a temporary injunction . . . .”  Tex. Civ. Prac. & Rem. Code Ann. § 51.014(4). 

          This Court has held that “when the injunctive relief sought is nothing more than a request to prohibit arbitration, no interlocutory appeal lies.”  Neutral Posture, Inc. v. Bodybilt, Inc., No. 01-02-00448-CV, 2002 WL 31320052, at *1 (Tex. App.—Houston [1st Dist.] Oct. 17, 2002, no pet.) (not designated for publication); see also Elm Creek Villas Homeowner Ass’n, Inc v. Beldon Roofing & Remodeling Co., 940 S.W.2d 150, 154 (Tex. App.—San Antonio 1996, no writ).  “[O]ne should not be able to disguise a non-appealable, interlocutory order as a denial of an injunction simply to obtain an appeal that would otherwise be improper.”  Neutral Posture, 2002 WL 31320052, at *1; see also Elm Creek Villas, 940 S.W.2d at 154–55.

          Zachary’s application for an order staying arbitration and a temporary injunction enjoining SIS-Tech from further prosecuting its demand for arbitration sought the same relief—a halt to the underlying arbitration proceeding.  See Neutral Posture, 2002 WL 31320052, at *2. Zachary is attempting to appeal an otherwise unappealable order by re-characterizing it as a request for injunctive relief.  See id. We hold that a trial court’s order refusing a temporary injunction enjoining further prosecution of a demand for arbitration may not be challenged by interlocutory appeal because an order denying an application to stay arbitration is an interlocutory order with no legislatively authorized avenue for appeal before a final judgment.  See Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a); Neutral Posture, 2002 WL 31320052, at *1.  We hold that we lack jurisdiction over this appeal.  See id. at *2.

Conclusion

We dismiss the appeal for lack of jurisdiction.

                                                                   Jane Bland

                                                                   Justice

Panel consists of Chief Justice Radack and Justices Bland and Wilson.[1]

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[1]           The Honorable Randy Wilson, Judge of the 157th District Court of Harris County, participating by assignment.