Hart of Texas Cattle Feeders, LLC, James Michael Hayes, Individually, Lynn Landrum, Individually, and Henry O. Pickett II, Individually v. Bonsmara Natural Beef Company, LLC and George Chapman, 583 S.W.3d 705

Background

Hart of Texas Cattle Feeders, LLC (Hart) entered a custom cattle feeding Agreement with Bonsmara Natural Beef Company (Bonsmara); Hart was owned by Hayes, Landrum, and Pickett.
The Agreement required Hart to feed and care for Bonsmara cattle and contained an arbitration clause allowing Hart, at its sole option, to send disputes to arbitration under the Texas Cattle Feeders Association rules.
Bonsmara sued Hart and the individual owners/officers for breach of contract, negligent performance, fraud, veil-piercing/alter-ego, agency, negligent hiring/supervision, civil conspiracy, CEA violations, and unjust enrichment.
Hart moved to compel arbitration; the trial court denied the motion. After a jury trial, the court entered judgment for Bonsmara and awarded damages and attorney’s fees.
On appeal Hart challenged the denial of arbitration; the appellate court found the arbitration clause valid, concluded the claims depend on the underlying Agreement, and held the individual owners/officers are subject to arbitration.
The appellate court reversed and remanded with instructions to compel arbitration, rendering other issues moot.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the trial court erred by denying Hart’s motion to compel arbitration under the Agreement	Bonsmara argued the arbitration clause was unenforceable as to non-signatory individual defendants and that arbitration need not apply because the individuals were sued personally	Hart argued the Agreement’s arbitration clause covers any dispute arising out of the contract and that the individual owners/officers are bound or subject to arbitration because the claims depend on the Agreement	Reversed: arbitration clause valid; claims fall within its scope; individual owners/officers’ claims (in their official capacities and tied to the contract) are subject to arbitration; trial court must compel arbitration
Whether non-signatories (individual owners/officers) can be compelled to arbitrate	Bonsmara contended non-signatories cannot enforce or be bound by the arbitration clause; also argued the Agreement’s reference to TCFA rules was unenforceable because parties were not TCFA members	Hart argued non-signatories can be bound under doctrines like equitable estoppel/direct benefits estoppel, agency, alter ego, and that the Agreement does not require TCFA membership to use its rules	Held: Non-signatories may be compelled where claims depend on the contract; individual defendants’ liability arises from the Agreement so arbitration applies; TCFA membership not required by the Agreement
Proper scope test for arbitrability (facts v. labels)	Bonsmara emphasized tort labels and individual liability separate from contract	Hart emphasized that courts look to factual allegations, not legal labels, to determine arbitrability	Held: Court applied factual-allegations test; resolved doubts in favor of arbitration and found claims depend on the Agreement
Whether arbitration gateway questions (validity/scope) are for court or arbitrator	Bonsmara implied gateway questions about non-signatories might belong to arbitrator	Hart argued gateway issues (validity/scope, non-signatory questions) are for the court	Held: Court decides gateway matters; concluded arbitration agreement valid and scope covers the dispute, so compelled arbitration

Key Cases Cited

In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001) (courts focus on factual allegations to determine arbitrability)
In re Kellogg, Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (arbitration governed by contract law; non-signatories may be bound under several theories)
G.T. Leach Builders, LLC v. Sapphire V.P., L.P., 458 S.W.3d 502 (Tex. 2015) (direct benefits estoppel requires claims to depend on the contract)
Meyer v. WMCO-GP, LLC, 211 S.W.3d 302 (Tex. 2006) (party relies on agreement when right to recover and damages depend on it)
In re Kaplan Higher Educ. Corp., 235 S.W.3d 206 (Tex. 2007) (cannot avoid arbitration by recasting contract claims as torts against corporate agents)
In re Labatt Food Serv., 279 S.W.3d 640 (Tex. 2009) (gateway matters deciding validity are for the court)