William Black v. Diamond Offshore Drilling, Inc., Diamond Offshore Drilling Limited, and Diamond Offshore General Company

Reversed and Remanded and Opinion filed May 15, 2018.
In The
Fourteenth Court of Appeals
NO. 14-17-00011-CV
WILLIAM BLACK, Appellant
V.
DIAMOND OFFSHORE DRILLING, INC., DIAMOND OFFSHORE
DRILLING LIMITED, AND DIAMOND OFFSHORE GENERAL
COMPANY, Appellees
On Appeal from the 281st District Court
Harris County, Texas
Trial Court Cause No. 2015-74728
OPINION
Appellant William Black appeals the trial court’s dismissal of his personal-
injury claims against appellees Diamond Offshore Drilling, Inc., Diamond Offshore
Drilling Limited, and Diamond Offshore Company, claiming the trial court erred in
determining that non-signatory appellees could enforce the forum-selection clause
contained in his employment contract. We reverse and remand.
I. BACKGROUND
Appellant, a citizen of the United Kingdom, signed a contract of employment
(“Agreement”),1 effective January 29, 2008, with Diamond Offshore Drilling
(Bermuda) Limited (“Diamond Bermuda”).2 Diamond Bermuda is a corporation
organized under the laws of Bermuda with its principal place of business in
Bermuda. The employment contract (“Agreement”) between appellant and
Diamond Bermuda contains a forum-selection clause wherein both parties consent
to the jurisdiction of the courts of Bermuda to hear and determine any claims,
disputes, suits (whether for personal injury or any other kind) brought by one party
to the agreement against the other pertaining to the contract or any matter related to
or arising out of the contract. The forum-selection clause within the employment
agreement provides as follows:
18. CONSENT TO JURISDICTION, AGENT AND METHOD
FOR SERVICE OF PROCESS
18.1 As part of the consideration for value received to this Agreement
and as a term of this Agreement, and regardless of the location of any
present or future principal place of business of either party (and/or their
successors or assigns, dependants [sic], executors or administrators),
each party (and/or their successors or assigns, dependants [sic],
executors or administrators) hereby irrevocably consents in advance to
the exclusive jurisdiction of the courts of Bermuda, to hear and
determine any claims, disputes, suits, actions or proceedings (whether
for personal injury compensation or damages of any kind, whether
brought by the Employee, or by the Employee’s dependants [sic],
executors, or administrators) (hereinafter referred to as “Legal Action”)
1
The Agreement is styled as Diamond Offshore Drilling (Bermuda) Limited Terms and
Conditions of International Employment, and defines employee as William Wilson Black and
employer as Diamond Offshore Drilling (Bermuda) Limited.
2
In appellant’s brief, appellant contends that Diamond Bermuda “as party to the
Employment Agreement, is the sole Appellee with the right to invoke and enforce the forum-
selection clause contained therein.” Thus, appellant asserts he only appeals the trial court’s order
dismissing appellant’s claims against the non-signatory defendants.
2
brought against such party by the other party and pertaining to this
Agreement or to any matter relating to or arising out of this Agreement
and further agrees that the courts of Bermuda shall be an appropriate
forum for such action.
* * *
18.4 Each party (and/or their successors or assigns, dependants [sic],
executors or administrators) hereby irrevocably waives any objection
that it may now or hereafter have to venue in the courts of Bermuda,
including without limitation any claim, based upon improper venue or
Forum Non Conveniens. The Employee (and/or his successors or
assigns, dependants [sic], executors or administrators) agrees not to
seek, and hereby waives, any right to, compensation from the courts of
any other state, nation or jurisdiction or to seek any review of the
judgment of any of the courts of Bermuda by any court of any other
state, nation, or jurisdiction.
On January 2, 2015, appellant was working as an assistant mechanic aboard
the Ocean Valiant while the vessel was stationed in a shipyard in Spain for repairs.
The vessel was owned by appellee Diamond Rig Investments, Limited, a United
Kingdom company based in London, England. While working on the vessel,
appellant sustained severe chemical burns on his buttocks when he sat on a chemical
container marked corrosive.
On June 8, 2016, appellant filed an amended petition in Harris County, Texas,
with claims arising under theories of negligence and unseaworthiness in accordance
with the Jones Act and general duties imposed by common law (general maritime
law) against appellees Diamond Offshore Drilling, Inc., Diamond Offshore Drilling,
Limited, and Diamond Offshore General Co. Appellees Diamond Offshore Drilling,
Inc. and Diamond Offshore General maintain their principal place of business in
Houston, Texas.
Appellant later amended his petition, adding appellee Diamond Rig
Investments Limited (i.e., the vessel owner and one of the non-signatory defendants)
3
and appellee Diamond Bermuda. In his amended petition, appellant asserts that all
appellees were his Jones Act employers at the time of his accident and that all
appellees are liable as employers for Jones Act negligence and maintenance and cure
payments under general maritime law.
On August 1, 2016, appellees Diamond Offshore Drilling, Inc., Diamond
Offshore Drilling, Limited, Diamond Offshore General Company, and Diamond Rig
Investments Limited filed a motion to dismiss based on the application of forum-
selection clause within the Agreement, or, in the alternative, based on forum non
conveniens.3 In their motion, appellees argued that, as non-signatories, they can
enforce the forum-selection clause in the Agreement between Diamond Bermuda
and appellant because they are “closely enough related to the signatory and the
transaction.” In a supplemental memorandum, appellees contended that appellant’s
original and first amended original petitions have virtually identical allegations of
negligence and fault against the sole signatory Diamond Bermuda, and the non-
signatory defendants participated in substantially-interdependent and concerted-
misconduct. Appellees argued this forms an equitable basis for the non-signatory
defendants to enforce the forum-selection clause in appellant’s employment
contract. Appellees further maintained that appellant’s original and first amended
original petitions identified both the signatory defendant and all non-signatory
defendants as his employer, asserting identical employment related claims for
negligence under the Jones Act and for maintenance and cure under the general
maritime law. Appellees contended that appellant raised indistinguishable factual
allegations against all appellees and established a “close-relationship” among
appellees, which according to appellees, is an indispensable element of “intertwined-
3
Diamond Bermuda made an appearance and filed its answer after the non-signatory
defendants filed their motion to dismiss.
4
claims” estoppel.
In his response and supplemental briefing, appellant argued that a plain
reading of the employment agreement limits the scope of the forum-selection clause
only to the parties of the employment agreement—appellant and Diamond Bermuda.
Appellant also maintained that the non-signatory defendants could not enforce the
forum–selection clause under theories of equitable estoppel because neither
“substantially-interdependent and concerted-misconduct” nor “closely-related” and
“intertwined-claims” are theories of equitable estoppel recognized under Texas law.
On December 5, 2016, the trial court granted the non-signatory defendants’
motion to dismiss based on the contractual forum-selection clause, but was silent as
to which of the theories argued by the non-signatories was the basis for its dismissal.
The trial court expressly found that it did not reach the arguments based on forum
non conveniens. Appellant timely filed this appeal.
II. ANALYSIS
Appellant asserts in a single issue that the trial court abused its discretion in
determining that the non-signatory defendants could enforce the forum-selection
clause contained in appellant’s employment contract. Appellant argues that the non-
signatory defendants cannot enforce the Agreement’s forum-selection clause under
the plain language of the Agreement or under any recognized theory of equitable
estoppel. Further, appellant contends that the non-signatory defendants failed to
demonstrate they were “transactional participants” and, thus, cannot use the
transactional participant doctrine to enforce the forum-selection clause.
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A. Standard of review and general principles
We review a motion to dismiss predicated on a forum-selection clause for an
abuse of discretion. In re AIU Ins. Co., 148 S.W.3d 109, 114–15 (Tex. 2004) (orig.
proceeding); Deep Water Slender Wells, Ltd. v. Shell Int’l Expl. & Prod. Co., 234
S.W.3d 679, 687 (Tex. App.—Houston [14th Dist.] 2007, pet. denied). When the
dismissal order is based on the interpretation of a contract containing a forum-
selection clause, as here, we review the trial court’s interpretation of the contract de
novo. Id. (citing Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177
S.W.3d 605, 610 (Tex. App.—Houston [1st Dist.] 2005, no pet.)). Courts interpret
unambiguous forum-selection clauses according to their plain language under
contract interpretation principles. Alattar v. Kay Holdings, Inc., 485 S.W.3d 113,
119 (Tex. App.—Houston [14th Dist.] 2016, no pet.).
When deciding whether to enforce a forum-selection clause, a court must
determine whether the claims fall within the scope of the clause. Deep Water
Slender Wells, Ltd., 234 S.W.3d at 687. The Texas Supreme Court has held that “a
reviewing court should engage in a ‘common-sense examination of the claims and
the forum-selection clause to determine if the clause covers the claims.’ ” In re Lisa
Laser USA, Inc., 310 S.W.3d 880, 884 (Tex. 2010) (orig. proceeding) (quoting In re
Int’l Profit Assocs., Inc., 274 S.W.3d 672, 677 (Tex. 2009) (orig. proceeding)). We
make this determination based on “the language of the clause and the nature of the
claims that are allegedly subject to the clause.” Deep Water Slender Wells, Ltd., 234
S.W.3d at 688 (citation omitted). In examining the claims asserted in the lawsuit, a
court does not “‘slavish[ly] adhere[ ] to a contract/tort distinction.’ ” In re Int’l Profit
Assocs., Inc., 274 S.W.3d at 677 (citations omitted). Instead, the court must be wary
of “artful pleading” that “would allow a litigant to avoid a forum-selection clause.”
Id.; see In re Lisa Laser USA, Inc., 310 S.W.3d at 884.
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The Texas Supreme Court has “borrowed from its arbitration jurisprudence”
for guidance on forum-selection clauses because an arbitration clause is “another
type of forum-selection clause.” In re Lisa Laser USA, Inc., 310 S.W.3d at 884; In
re AIU Ins. Co., 148 S.W.3d at 115; see, e.g., Loya v. Loya, 507 S.W.3d 871, 877
(Tex. App.—Houston [1st Dist.] 2016, no pet.); In re Longoria, 470 S.W.3d 616,
630 (Tex. App.—Houston [14th Dist.] 2015, orig. proceeding); Smith v. Kenda
Capital, LLC, 451 S.W.3d 453, 457 (Tex. App.—Houston [14th Dist.] 2014, no
pet.); In re Boehme, 256 S.W.3d 878, 884 (Tex. App.—Houston [14th Dist.] 2008,
orig. proceeding). “[T]here is no meaningful distinction between a non-arbitration
forum-selection clause and an arbitration clause.” Deep Water Slender Wells, Ltd.,
234 S.W.3d at 694 (citing In re AIU Ins. Co., 148 S.W.3d at 115–16).
As a general rule, an arbitration clause or forum selection clause cannot be
invoked by a nonparty to the contract. See G.T. Leach Builders, LLC v. Sapphire
V.P., L.P., 458 S.W.3d 502, 524 (Tex. 2015); Garg v. Pham, 485 S.W.3d 91, 105
(Tex. App.—Houston [14th Dist.] 2015, no pet.). In some circumstances, however,
a non-signatory may be permitted to enforce an arbitration agreement or forum
selection clause. See id.; see also In re Kellogg Brown & Root, Inc., 166 S.W.3d
732, 739 (Tex. 2005) (listing six recognized theories that may bind non-signatories:
“(1) incorporation by reference; (2) assumption; (3) agency; (4) alter ego; (5)
equitable estoppel; and (6) third-party beneficiary”). “Ultimately, we must
determine the intent of the parties as expressed in the terms of the agreement by
applying ordinary principles of state contract law to determine whether non-
signatory may enforce the forum selection clause. See id. (citing G.T. Leach
Builders, LLC, 458 S.W.3d at 524).
B. Non-signatory defendants cannot enforce forum-selection clause
1. Agreement limits its application to enforcement by parties
7
In this case, the scope of the forum-selection clause in the Agreement, as
quoted supra, is specifically limited to enforcement by the parties to the contract,
and only covers disputes brought by one party (appellant) against the other party
(Diamond Bermuda). There are no other parties to the Agreement. Moreover, the
forum-selection clause limits its application to “any claims, disputes, suits, actions
or proceedings” brought between appellant and Diamond Bermuda. The only non-
signatories permitted to enforce the forum-selection clause are expressly designated
in the Agreement as “the successors or assigns, dependants [sic], executors or
administrators” of the parties—appellant Black and Diamond Bermuda,
respectively. Appellees do not argue they are “successors or assigns, dependants
[sic], executors or administrators” of the parties. The non-signatory defendants are
not parties to or otherwise within the scope of the Agreement. See, e.g., In re Estate
of Guerrero, 465 S.W.3d 693, 701 (Tex. App.—Houston [14th Dist.] 2015, pet.
filed) (citing Van Zanten v. Energy Transfer Partners, L.P., 320 S.W.3d 845, 847
(Tex. App.—Houston [1st Dist.] 2010, no pet.) (“Generally, only signatories to an
arbitration agreement are bound by the agreement.”)).
To the extent the trial court relied on the language in the Agreement to allow
the non-signatories to enforce the forum-selection clause, the trial court abused its
discretion.
2. Equitable estoppel theories unavailing to non-signatory defendants
Appellees maintain they can enforce the forum-selection clause under
estoppel principles. Equitable estoppel theories allowing non-signatories to enforce
arbitration agreements may also apply to forum-selection clauses. Deep Water
Slender Wells, Ltd., 234 S.W.3d at 693–94. “A person who has agreed to resolve
disputes with one party in a particular forum may be required in some circumstances
to resolve related disputes with other parties in the same forum.” Smith, 451 S.W.3d
8
at 458.
a. “Substantially-interdependent and concerted-misconduct”
The non-signatory defendants seek the benefits of the contractual forum-
selection clause based on the “substantially-interdependent and concerted-
misconduct” doctrine. Under this equitable-estoppel doctrine, non-signatories may
enforce a forum-selection clause “when a signatory to the contract containing the
forum-selection clause raises allegations of substantially[-]interdependent and
concerted[-]misconduct by both non-signatories and one or more signatories to the
contract.” Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428, 446 & n. 76 (Tex.
2017); Deep Water Slender Wells, Ltd., 234 S.W.3d at 694. The Texas Supreme
Court, however, has declined to adopt the concerted-misconduct doctrine. Pinto
Tech. Ventures, L.P., 526 S.W.3d at 446 & nn. 77, 78 (citing G.T. Leach Builders,
LLC, 458 S.W.3d at 529 n. 23; In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185,
191–92 (Tex. 2007)); see also Brewer & Pritchard PC v. AMKO Resources Int’l,
LLC, No. 14-13-00113-CV, 2014 WL 3512836, at *11 (Tex. App.—Houston [14th
Dist.] July 15, 2014, no pet.) (“Texas courts have not adopted the theory of
concerted-misconduct estoppel.”). Therefore, we reject the non-signatories’
concerted-misconduct argument and will confine our analysis to direct-benefits
estoppel—the only form of equitable estoppel recognized in Texas.
To the extent the trial court relied on concerted-misconduct estoppel to
enforce the forum-selection clause, the trial court abused its discretion.
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b. “Intertwined-claims” estoppel
The non-signatory defendants also seek to enforce the contractual forum-
selection clause based on the theory of “intertwined-claims” estoppel. Intertwined-
claims estoppel involves compelling enforcement of a forum selection clause “when
a nonsignatory defendant has a close relationship with one of the signatories and the
claims are intimately founded in and intertwined with the underlying contract
obligations.” In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 193–94 (Tex.
2007) (orig. proceeding) (internal quotations omitted). Courts have employed this
exception to disregard “strategic pleading” that seeks to avoid a forum-selection
clause. See id. at 194. “[A]llowing litigation to proceed that is in substance against
a signatory though in form against a nonsignatory would allow indirectly what
cannot be done directly.” See id. at 193–94.
The Texas Supreme Court has not expressly adopted intertwined-claims
estoppel as a valid theory of estoppel. In Merrill Lynch, the Supreme Court
acknowledged that other federal circuits have estopped signatory plaintiffs from
avoiding enforcement of a forum-selection clause with non-signatories using an
“intertwined-claims” test. See 235 S.W.3d at 193. The Court, however, referenced
that test for the purpose of comparing it with concerted-misconduct estoppel, which
the court went on to reject. Id. at 193–95. The Court distinguished the two by
explaining that concerted-misconduct estoppel lacks the limiting “close
relationship” component of intertwined-claims estoppel. Id. at 194.
Although we have mentioned Merrill Lynch’s discussion of intertwined-
claims estoppel, we have not applied intertwined-claims estoppel as an independent
theory. See Cotton Commercial USA v. Clear Creek Indep. Sch. Dist., 387 S.W.3d
99, 105–07 (Tex. App.—Houston [14th Dist.] 2012, no pet.). In Cotton Commercial,
we ordered enforcement of an arbitration clause based upon the terms of the
10
arbitration agreement and the theory of direct-benefits estoppel (discussed below).4
As we explained, “any right the School District has to recover damages . . . depends
on” an agreement that contains an arbitration clause, and “[i]t would be contrary to
Texas policy favoring arbitration and against artful pleading to avoid arbitration to
allow the School District to avoid its agreement to arbitrate claims or to piecemeal
such claims in two forums simply because its contracting counterpart has merged
with another company.” Id. at 106–07.
Here, we need not decide the viability of an independent theory of
intertwined-claims estoppel because it would be inapplicable to this case. Appellant
has not relied upon strategic or artful pleading and his claims do not arise from the
underlying employment agreement. Rather, the basis for appellant’s claims is
statutory law (the Jones Act) and federal common law (general maritime law).
Because appellant’s claims are not rooted in the underlying employment agreement
that contains an arbitration clause, any argument premised on “intertwined-claims”
estoppel would fail.
To the extent the trial court relied on the intertwined-claims estoppel theory
to enforce the forum-selection clause, the trial court abused its discretion.
4
Cotton Commercial also examined the supreme court’s decision in Meyer v. WMCO-GP,
LLC, 211 S.W.3d 302 (Tex. 2006). But Meyer applied a theory of direct-benefits estoppel, not an
independent theory of intertwined-claims estoppel. Id. at 305, 308 (stating and applying principle
of direct-benefits estoppel that a claimant cannot seek to benefit from the agreement but avoid its
arbitration clause); see also Cooper Indus., LLC v. Pepsi-Cola Metropolitan Bottling Co., 475
S.W.3d 436, 442–43 (Tex. App.—Houston [14th Dist.] 2015, no pet.) (applying Meyer’s test of
direct-benefits estoppel). As we said in Garg v. Pham, “[f]or a nonsignatory to be able to enforce
an arbitration clause based on equitable estoppel, the claim must not only relate to the agreement
containing the arbitration clause, but the claimant must also seek to derive a direct benefit . . . from
that agreement.” 485 S.W.3d 91, 105 (Tex. App.—Houston [14th Dist.] 2015, no pet.).
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c. “Direct-benefits” estoppel is inapplicable to this case
Direct-benefits estoppel is an equitable estoppel theory recognized by Texas
courts that allows non-signatories to enforce arbitration and forum-selection clauses.
See Glassell Prod. Co., Inc. v. Jared Res., Ltd., 422 S.W.3d 68, 82 (Tex. App.—
Texarkana 2014, no pet.) (citing In re Merrill Lynch Trust Co. FSB, 235 S.W.3d
185, 195 (Tex. 2007) (orig. proceeding)); see also In re Kellogg Brown & Root, Inc.,
166 S.W.3d 732, 739 (Tex. 2005) (orig. proceeding). Under the theory of direct-
benefits estoppel, a non-signatory may enforce a forum-selection clause in a contract
that contains other terms on which the signatory plaintiff must rely to prosecute its
claims. Smith, 451 S.W.3d at 458; In re Cornerstone Healthcare Holding Grp., Inc.,
348 S.W.3d 538, 544–45 (Tex. App.—Dallas 2011, orig. proceeding). Direct-
benefits estoppel applies when a signatory’s claim against a non-signatory references
or presumes the existence of the written agreement containing the clause. Smith,
451 S.W.3d at 458.
The Texas Supreme Court has explained that “whether a claim seeks a direct
benefit from a contract” depends on whether “liability arises solely from the contract
or must be determined by reference to it” or whether “liability arises from general
obligations imposed by law.” In re Weekley Homes, L.P., 180 S.W.3d 127, 132
(Tex. 2005) (orig. proceeding). A claim does not seek a direct benefit from contract
if liability under the claim “arises from general obligations imposed by state law,
statutes, torts, and other common law duties, or federal law.” In re Morgan Stanley
& Co., Inc., 293 S.W.3d 182, 184 n. 2 (Tex. 2009) (orig. proceeding).
As applied to this case, under direct-benefits estoppel, the non-signatory
defendants could compel enforcement of the forum-selection clause only if appellant
sought a benefit that stems directly from the Agreement. See G.T. Leach Builders,
LLC, 458 S.W.3d at 527–28. Here, the direct-benefits estoppel theory is inapplicable
12
because appellant’s claims do not arise from the Agreement—i.e., there are no terms
within the Agreement for which appellant must rely upon in order to pursue his Jones
Act and general maritime law claims. Appellant’s claims under the Jones Act is a
statutory claim available to seaman and his general maritime claims involves the
common law.
To the extent the trial court relied on direct-benefits estoppel to enforce the
forum-selection clause, the trial court abused its discretion because the theory is
inapplicable to this case.
3. Transaction-participant doctrine precluded by the Agreement
Some intermediate Texas appellate courts and federal courts have held that
transaction participants may enforce a forum-selection clause even if they are not
actual signatories to the contract. See Pinto Tech. Ventures, L.P., 526 S.W.3d at
444. Under this theory, non-signatories may enforce forum-selection clauses when
they are “closely related to the contractual relationship.” See id. “In such
circumstances, enforcement is permitted if the relationship between a non-signatory
and a signatory to the contract is close enough that the non-signatory’s enforcement
of the forum selection clause would be ‘foreseeable’ to the opposing party.” Id.
Courts that have supported enforcement in such circumstances have reasoned that
signatories have already “agreed to litigate disputes relating to the contract in the
chosen forum such that enforcing the provision comports with the legitimate
expectations of the parties, [as] manifested in their freely negotiated agreement.” Id.
at 444–45 (internal quotations omitted).
The Texas Supreme Court, however, has not addressed whether a transaction
participant could enforce a forum-selection clause, or under what circumstances. See
Pinto Tech. Ventures, L.P., 526 S.W.3d at 445. In Pinto Tech. Ventures, L.P., the
agreement at issue stated:
13
This Agreement ... shall inure to the benefit of and be binding upon, the
successors, permitted assigns, legatees, distributees, legal
representatives and heirs of each party and is not intended to confer
upon any person, other than the parties and their permitted successors
and assigns, any rights or remedies hereunder.
Id. The court declined to decide whether a transaction participant could enforce a
forum-selection clause, concluding the express terms of the agreement preclude its
application in this case. Id. at 445. The court observed that who is actually bound
to dispute resolution in the contractually specified forum is a function of the intent
of the parties as expressed in the terms of the agreement. Id. Because the parties
were not silent on the matter with respect to their intent and, in fact, disavowed any
intent to extend contractual rights and remedies to anyone other than the parties and
their permitted successors and assignee, the court held that the non-parties to the
agreement could not rely on the transaction participant doctrine to enforce the forum-
selection clause. Id. at 446.
In this case, by its express terms, the Agreement’s forum-selection clause is
limited to each party and/or their successors or assigns, dependents, executors or
administrators. Appellees neither have argued nor have demonstrated that they are
“parties” to the agreement or otherwise explained how they fall within the term
“transaction participants.”5 As such, enforcement of the forum-selection clause by
appellees against appellant would not have been reasonably foreseeable (as
contemplated by the transaction participant theory) and is impermissible. See Pinto
Tech. Ventures, L.P., 526 S.W.3d at 445–46. Appellant’s issue is sustained.
5
In their motion to dismiss, the non-signatory defendants merely state in a conclusory
sentence that the “trial court must apply a valid forum-selection clause to all transaction
participants; to conclude otherwise would enable a party to bypass a valid forum-selection clause
by naming in its petition a closely related party who was not a party to the contract.”
14
In sum, the trial court abused its discretion in granting the non-signatory
defendants’ motion to dismiss.
III. CONCLUSION
Having sustained appellant’s issue, we reverse the trial court’s judgment and
remand the case to the trial court for further proceedings.
/s/ John Donovan
Justice
Panel consists of Justices Jamison, Busby, and Donovan.
15