Third COA Refuses to Compel Arbitration

Well, the Texas Appellate Law Blog scooped us on a Third Court of Appeals opinion handed down today in which the Court refuses to compel arbitration under either the TAA or the FAA. We will not simply recap what Mr. Smith has already posted on the subject, but we wanted to make a couple additional points about the interesting opinion.

Really, the case is more about motion practice and Texas appellate practice than arbitrability issues. Judge Yelenosky presided over a hearing on a motion to compel arbitration. The movant had attached a copy of a contract between the parties which contained an arbitration clause, but: a) it was for a year after the period in which the facts occurred which gave rise to the claim; and b) the non-movant had specifically written a refusal to accept the arbitration clause into the contract. The movant, apparently, could not locate the earlier contract which allegedly contained a properly-signed arbitration clause.

Adding fuel to the eventual fire, the parties entered into a Rule 11 agreement whereby the non-movant agreed to not ask for a continuance of the hearing on the Motion to Compel arbitration and the movant agreed to not try to supplement the record at the hearing, unless the specific 1987 contract could be located.

On the record before him, Judge Yelenosky refused to compel arbitration, finding that the movant had not met its threshhold burden of establishing the existence of an agreement to arbitrate. The movant then filed a motion to reconsider, attaching earlier, signed agreements with arbitration clauses. The trial court denied the Motion to Reconsider.

The movant then filed both an interlocutory appeal (under the TAA) and a petition for writ of mandamus (under the FAA) (why both? More on this procedural quirk here). This is where the appellate law excitement started. First of all, the Court refused to exercise jurisdiction over the interlocutory appeal. While one can, in Texas, take an interlocutory appeal of an order refusing to compel arbitration under the TAA, one cannot, apparently, take an interlocutory appeal of an order denying a motion to reconsider a refusal of an order to compel arbitration under the TAA. That being the case, the 20 day deadline is not tolled by the filing of a motion to reconsider. This, as the Texas Appellate Law Blog noted before we did, is an important practice tip.

The jurisdictional technicality did not affect the mandamus petition under the FAA, however, and the Court fully considered that petition. The Court ruled, however, that based on the record before him, especially considering the Rule 11 agreement, Judge Yelenosky did not abuse his discretion when he found that an agreement to arbitrate between the parties had not been proven.

With respect to the Motion to Reconsider, the Court found that since that Motion added no new argument to the Motion to Compel, but instead simply added to the record, denying it was appropriate. Again, the opinion does not add any new wrinkles to the law that governs arbitrability, but it certainly highlights the often over-looked burden of establishing the existence of an agreement to arbitrate. None of the myriad cases about arbitration’s favorable treatment under Texas law applies if a movant has not made a record which establishes the existence of an agreement to arbitrate.

AXA Financial vs. Roberts, Cause No. 03-07-00079 (Tex. App. – Austin 2007) (mem. opinion).

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