SCOTX Declines to Review Order Compelling Arbitration in Real Estate Dispute

The Supreme Court of Texas has declined to review a case where a foreign real estate investor was ordered to arbitrate its claims against a law firm that allegedly helped a partner secure a secret loan. In Immobiliere Jeuness Establissement v. Ricardo G. Cedillo et al., No. 14-15-00101-CV (August 27, 2015), a Liechtenstein-based limited partner, Immobiliere Jeuness Establissement (“IJE”), of two Texas limited partnerships (the “Original Partnerships”) sued the Texas entities for breach of contract and breach of fiduciary duty in the 215^th District Court of Harris County.  Next, the Original Partnerships signed an agreement with a San Antonio-based law firm, Davis, Cedillo & Mendoza, Inc. (“DCM”), in connection with obtaining legal representation.

The parties’ Legal Representation Agreement included an arbitration clause that stated any disputes must be resolved through binding arbitration governed by the laws of the State of Texas, held in Bexar County, Texas, using the American Arbitration Association’s Commercial Arbitration Rules.

In response to IJE’s lawsuit, DCM filed a motion to compel the dispute to arbitration. The trial court denied the firm’s motion because IJE was not a party to the Legal Representation Agreement. Next, the law firm filed an interlocutory appeal with the 14th Court of Appeals in Houston.

According to the appellate court, DCM demonstrated that a valid arbitration agreement existed, IJE was bound by its provisions, IJE’s claims fell within the scope of that agreement, and there was no basis for denying the law firm’s motion to compel arbitration. As a result, Texas’ 14th Court of Appeals in Houston reversed the trial court’s order and remanded the case. You can read more about the case history in a prior Disputing blog post.

IJE then filed a petition for review with the Texas Supreme Court in December. The foreign real estate investor asserted that the issues presented in Case No. 15-0963 were:

Issue One: Is a non-signatory derivative plaintiff bound by an arbitration agreement between conspirators merely because the derivative plaintiff steps into the shoes of the principle?

Issue Two: Does the presumption favoring arbitration apply to the initial determination of whether the non-signatory’s claims relate to or arise out of the agreement containing the arbitration provision?

Issue Three: Is it the burden of the party opposing arbitration to show their claims fall outside the scope of the arbitration agreement?

Issue Four: Did the Court of Appeals correctly conclude that Petitioner’s claims fell within the scope of the arbitration provision?

Issue Five: Does a party waive their right to arbitration by invoking abatement statutes which only apply to claims pursued in litigation, not arbitration, thereby demonstrating intent to litigate?

On January 29th, the Texas high court denied the foreign investor’s petition for review.

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