Cleveland Construction, Inc. v. Levco Construction, Inc.
359 S.W.3d 843
| Tex. App. | 2012Background
- CCI appeals trial court's denial of motion to compel arbitration; contract with Whole Foods contains arbitration clause for CCI-Levco disputes, Ohio venue; bond with Surety incorporates Construction Contract terms and allows Surety to complete work; Levco sues in Texas; Levco seeks to invalidate arbitration clause as illusory and argues venue law nullifies Ohio arbitration; bond and underlying contract interplay drive scope; court stays arbitration and then reverses.
- Arbitration clause: scope and validity under FAA; underlying contract consideration; survival after termination; bond terms incorporate arbitration; Levco’s termination and Surety involvement.
- Bond and arbitration interplay create cross-party obligations; Legality of venue provision and FAA preemption central; trial court erred in denying arbitration.
- LEVCO contends arbitration illusory, no mutual obligation; CCI argues valid, with mutual consideration via underlying contract and bond.
- CCI argues valid arbitration agreement; Levco argues illusory and non-surviving; court finds validity and scope.
- The court held that a valid arbitration agreement existed, and the claims fell within its scope, so arbitration should proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is there a valid FAA arbitration agreement? | CCI: valid under FAA; underlying contract sustains mutual obligation. | Levco: clause illusory and unenforceable. | Yes; agreement valid and enforceable. |
| Does the arbitration clause survive contract termination? | CCI: survival implied by bond and contract. | Levco: savings/termination voids clause. | Survives termination. |
| Does Texas venue law 272.001 defeat arbitration in Ohio under FAA preemption? | CCI: FAA preempts venue restrictions; Ohio venue valid. | Levco: 272.001 voids out-of-state venue. | FAA preempts 272.001; venue in Ohio upheld. |
| Does bond provision affect arbitrability? | CCI: bond incorporates arbitration terms. | Levco: bond issues separate; no impact on arbitration. | Bond supports arbitration. |
| Scope: do claims arise from Construction Contract and Bond? | CCI: disputes encompass contract and bond obligations. | Levco: some claims post-termination outside scope. | Claims within scope. |
Key Cases Cited
- OPE Int’l LP v. Chet Morrison Contractors, Inc., 258 F.3d 443 (5th Cir. 2001) (FAA preemption of state-venue restrictions under Supremacy Clause)
- In re Palm Harbor Homes, Inc., 195 S.W.3d 672 (Tex. 2006) (contract writings read together; mutual obligation implied)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (burden shifts to oppressor to raise defenses to arbitration)
- Kellogg Brown & Root, Inc. v. DynCorp Int’l, Llc, 166 S.W.3d 732 (Tex. 2005) (valid agreement and scope determine enforcement)
- Allied–Bruce Terminix Co. v. Dobson, 513 U.S. 265 (1995) (federal policy favoring arbitration)
- OPE Int’l LP v. Chet Morrison Contractors, Inc., 258 F.3d 443 (5th Cir. 2001) (FAA preempts state arbitration venue constraints)
- Henry v. Gonzales, 18 S.W.3d 684 (Tex. App.—San Antonio 2000) (arbitration clause survives contract termination; separability)
- In re AdvancePCS Health L.P., 172 S.W.3d 603 (Tex. 2005) (mutual obligation provided by underlying contract)
- In re Koch Indus., Inc., 49 S.W.3d 439 (Tex. App.—San Antonio 2001) (arbitration clause survival)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (FAA standard for existence of valid arbitration agreement)
- Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex. App.—Houston 1992) (mandamus relief appropriate to compel arbitration)