Cooper Industries, LLC, Cooper Industries, LTD., Cooper US, Inc., and Cooper Industries, PLC v. Pepsi-Cola Metropolitan Bottling Co., Inc., and Whitman Insurance Company Ltd
14-14-00562-CV
Tex.Aug 25, 2015Background
- IC Industries (later Metro) sold Abex and Pneumo to PA Holdings under a Stock Purchase Agreement (SPA) that included a broad arbitration clause covering disputes arising out of the SPA and an indemnity regime allocating asbestos liabilities by date.
- Pneumo Abex later sold assets under an Asset Purchase Agreement (APA) that included an arbitration clause; Cooper Industries, LLC guaranteed Pneumo Abex’s indemnity obligations under a 1994 Mutual Guaranty which incorporated the APA’s arbitration provision.
- In 2011 Cooper and Pneumo Abex (and related entities) executed a settlement/termination transferring Pneumo Abex’s interest to a trust and releasing Cooper’s indemnities; Metro and successor Whitman sued in Texas alleging tortious interference, fraudulent transfers, and conspiracy to avoid uncapped guaranty obligations.
- Cooper moved to compel arbitration under the SPA and the Mutual Guaranty; the trial court denied the motion without findings, and Cooper appealed interlocutorily.
- The court considered (1) whether non-signatory Cooper may invoke arbitration via direct-benefits estoppel, (2) whether the Mutual Guaranty’s termination eliminated the arbitration obligation, and (3) whether Cooper waived arbitration expressly or implicitly.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can non-signatory Cooper compel Metro to arbitrate under the SPA? | Metro: Cooper is a stranger to the SPA and cannot force arbitration. | Cooper: Metro’s tort claims depend on the SPA and Cooper guaranteed Pneumo Abex’s performance, so direct-benefits estoppel applies. | Yes — Meyer/direct-benefits estoppel applies; Metro’s claims depend on the SPA so Cooper may compel arbitration. |
| Can Cooper compel Whitman/Metro to arbitrate under the Mutual Guaranty despite its termination? | Appellees: The termination and forum-selection language revoked arbitration. | Cooper: Arbitration survives termination for disputes arising in connection with the guaranty; plaintiffs seek the guaranty’s benefit so estoppel applies. | Yes — termination did not abrogate arbitration for claims arising in connection with the guaranty; plaintiffs cannot seek the guaranty’s benefit while avoiding its arbitration clause. |
| Did Cooper expressly waive the right to arbitrate by seeking other fora/relief? | Appellees: Cooper moved to dismiss/transfer and thus chose judicial forum. | Cooper: Filing motions to enforce other fora (transfer/exclusive jurisdiction) does not equal waiver; it never opposed arbitration. | No — moving to another forum or seeking transfer does not constitute express waiver. |
| Did Cooper implicitly waive arbitration by substantially invoking litigation? | Appellees: Cooper waited ~28 months, participated in discovery, and delayed seeking arbitration causing expense and prejudice. | Cooper: Did not oppose arbitration earlier; litigation focused on jurisdiction/venue and settlement; not near trial and no demonstrated unfair prejudice. | No — under totality of circumstances Cooper did not substantially invoke the judicial process nor is waiver shown. |
Key Cases Cited
- Meyer v. WMCO-GP, LLC, 211 S.W.3d 302 (Tex. 2006) (direct-benefits estoppel can bind signatory plaintiffs to arbitrate claims that depend on the contract)
- In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (gateway arbitrability determination: summary proceeding, Texas substantive law)
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (waiver by litigation conduct requires showing substantial invocation of litigation and prejudice)
- In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex. 2006) (distinguishes contract-dependent claims from general tort obligations for arbitration estoppel analysis)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (scope-of-arbitration analysis and non-signatory estoppel theories)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (once arbitration agreement covers claims, court cannot deny motion to compel unless a defense like waiver is proven)
- Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455 S.W.3d 573 (Tex. 2015) (seeking transfer or filing suit elsewhere does not necessarily waive arbitration)
- Cleveland Constr., Inc. v. Levco Constr., Inc., 359 S.W.3d 843 (Tex. App.—Houston [1st Dist.] 2012) (arbitration clause survives contract termination for disputes arising during contract term)