627 S.W.3d 277
Tex.2021Background
- In 2001 Apache sold oil-and-gas assets to Wagner Oil under a PSA that contained a broad arbitration clause and a broad indemnity provision obligating Buyer to indemnify Seller for claims arising from assumed obligations or Buyer breaches.
- The PSA stated it bound the parties and their successors and assigns; Apache concurrently executed an Assignment referencing the PSA’s terms.
- Wagner Oil later assigned the assets to Bryan Wagner, Trade Exploration, and Wagner & Cochran; that assignment expressly stated assignees "assume and agree to be bound by and perform their proportionate parts of all obligations imposed upon Assignor by the APACHE Assignment."
- Beginning in 2010 landowners sued Apache in Louisiana for alleged pre-sale contamination. In 2017 Apache demanded arbitration against Wagner Oil and the assignees for indemnity and defense; the assignees filed a declaratory-judgment suit in Tarrant County seeking to avoid arbitration.
- The trial court stayed arbitration and denied Apache’s motions to compel/arbitrate and to transfer venue; the court of appeals reversed, concluding the carve-out in the PSA applies only to cross-claims in a third-party action and that the assignees had assumed the arbitration obligation.
- The Texas Supreme Court affirmed the court of appeals: (1) the carve-out does not permit separate suits for indemnity arising from third-party claims, so those claims must be arbitrated; (2) the non‑signatory assignees assumed Wagner Oil’s arbitration obligation; (3) the Court refused to order transfer to Harris County (venue relief requires mandamus and was not sought here).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of PSA’s third‑party carve‑out: whether indemnity/defense claims arising from third‑party suits may be litigated in a separate suit rather than arbitrated | Carve‑out covers disputes arising from third‑party claims generally, so indemnity/declaratory claims can be litigated in a separate suit | Carve‑out applies only to claims asserted in the third‑party action (e.g., cross‑claims); separate suits remain subject to arbitration | Court held carve‑out limited to claims asserted in the third‑party action (cross‑claims); separate declaratory suits on indemnity fall within arbitration clause |
| Whether non‑signatory assignees are bound to arbitrate | Assignees only agreed to perform their proportionate share of divisible obligations (e.g., indemnity), not an indivisible arbitration obligation | Assignment language ("assume and agree to be bound by and perform their proportionate parts of all obligations") shows assignees expressly assumed all obligations, including arbitration | Court held assignees expressly assumed Wagner Oil’s obligations and are bound to arbitrate under an assumption theory |
| Venue/transfer to Harris County | Plaintiffs filed in Tarrant County; Apache asked transfer to Harris County under mandatory venue statutes and sought arbitration | Apache argued trial court should have transferred or at least not adjudicated arbitration because arbitration demand was pending in Harris County | Court declined to order transfer on interlocutory appeal; held venue relief must be pursued by mandamus and Apache did not seek it here |
Key Cases Cited
- In re Kellogg Brown & Root, 166 S.W.3d 732 (Tex. 2005) (establishes standard for compelling arbitration and scope analysis)
- Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013) (strong presumption favoring arbitration when agreement valid)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (requirement to harmonize contract language and avoid rendering terms meaningless)
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (characterizes broad arbitration clauses and scope analysis)
- Rent‑A‑Center, W., Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (arbitration is a matter of contract and must be enforced according to its terms)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (parties can be forced only to arbitrate issues they agreed to submit)
- In re D. Wilson Constr. Co., 196 S.W.3d 774 (Tex. 2006) (resolving doubts about arbitration scope in favor of arbitration)
- Lone Star Gas Co. v. Mexia Oil & Gas, Inc., 833 S.W.2d 199 (Tex. App.—Dallas 1992, no writ) ("subject to" language does not alone create an express assumption of obligations)