Dallas COA Holds Cellular Network Technology Dispute is Subject to Arbitration

Texas’ Fifth District Court of Appeals in Dallas has affirmed a lower court’s decision stating an agreement to arbitrate existed between two cellular network technology companies.  In Tecore, Inc. v. AirWalk Communications, Inc., No. 05-12-00130-CV (Dallas App. – December 4, 2013), a cellular network manufacturer, Tecore, agreed to purchase and distribute equipment manufactured by AirWalk Communications.  The parties’ Distribution and Services Agreement (“DSA”) originally lasted for a period of four years and automatically renewed each year unless one of the parties opted to terminate the contract.  The DSA did not contain an arbitration clause.

Six months before the DSA expired, AirWalk notified Tecore that it would not renew the contract and instead proposed a new agreement that included an arbitration provision.  Still, AirWalk agreed to honor the terms of the DSA until the parties entered into a new contract.  Tecore refused to sign AirWalk’s proposed agreement and sought to modify the original DSA.  Despite numerous negotiations, the companies failed to agree upon a new DSA before the original contract expired.

About five months after the DSA expired, Tecore sought to purchase equipment from AirWalk.  AirWalk stated it would only sell Tecore the products pursuant to the terms of its previously rejected DSA proposal.  AirWalk also submitted a price quote to Tecore that incorporated an attached arbitration provision.  Tecore responded by submitting a purchase order that referenced the price quote, but did not mention the attached terms.  The following month, AirWalk accepted Tecore’s purchase order.

After a dispute arose with regard to AirWalk’s performance under the purchase order, AirWalk filed a demand for arbitration with the American Arbitration Association (“AAA”).  Tecore argued the AAA had no jurisdiction over the matter and sought to terminate the proceedings.  The AAA declined to address Tecore’s jurisdictional question and appointed an arbitrator to hear the parties’ dispute.

At the hearing, the arbitrator first determined she had jurisdiction to hear the case.  She then listened to evidence and ruled in favor of AirWalk.  Following arbitration, AirWalk sought to confirm the award in district court and Tecore filed a cross-motion to vacate it.  The district court stated the arbitrator did not exceed her authority when she overruled Tecore’s jurisdictional claim and also held that the parties’ agreement included an agreement to resolve any disputes through arbitration.  Tecore then filed an appeal with Texas’ Fifth District Court of Appeals.

First, the appellate court stated the district court did not commit error when it held Tecore’s jurisdictional objection to arbitration was properly submitted to the arbitrator.  According to the court,

In this case, the trial court first determined that the arbitrator correctly determined that the parties had agreed to submit to the arbitrator the issue of whether the contract contained an arbitration clause. The court then stated in the alternative that if the parties had not agreed to submit the arbitrability of the dispute to the arbitrator, that the court had conducted an independent review of the existence of an arbitration agreement and had determined that the arbitration provision in Exhibit A of the quotation was part of the parties’ contract.

We do not reverse a case unless the trial court’s error “probably caused the rendition of an improper judgment.” TEX. R. APP. P. 44.1(a)(1). Because the trial court conducted an independent review of whether the parties’ contract included an arbitration provision, any error from the trial court’s initial determination that the parties agreed to arbitrate that issue could not have resulted in the rendition of an improper judgment. Accordingly, we do not consider whether the parties agreed to submit the arbitrability of their dispute to the arbitrator. Instead we consider whether the trial court correctly determined in its independent review of the case that the parties’ contract contained an arbitration provision.

After dismissing Tecore’s claim that the original DSA applied to the transaction at issue, the appeals court examined whether AirWalk proved the parties’ contract included an agreement to arbitrate.  According to the court,

We conclude the evidence supports the trial court’s finding that AirWalk and Tecore had a contract consisting of the quotation, the purchase order, and the acceptance of the purchase order, and that the parties’ contract included an agreement to arbitrate this dispute.

Because the district court did not commit error when it determined the contract between Tecore and AirWalk included an arbitration provision, the Dallas Court of Appeals affirmed the lower court’s decision to confirm the arbitrator’s award.