514 S.W.3d 844
Tex. App.2017Background
- After mediation the parties (Celltex, K‑Stemcell, Biostar, and Park) signed a Rule 11 settlement agreement containing an arbitration clause covering “any disagreement resulting from negotiation and completion of this documentation.”
- Celltex moved to compel arbitration because parties could not agree on drafting the documents to consummate the Agreement; the trial court granted the motion (Sept. 22, 2014).
- An arbitrator issued an award; the trial court confirmed the award (Feb. 12, 2015). Biostar filed a notice of restricted appeal and K‑Stemcell filed a regular appeal; both challenged the order compelling arbitration and the order confirming the award.
- Celltex argued appellate jurisdiction was lacking as to the order compelling arbitration; appellee also sought frivolous‑appeal damages (denied).
- Biostar and K‑Stemcell argued the trial court should decide enforceability/gateway arbitrability issues and later contended lack of notice to Biostar required vacatur of the award.
Issues
| Issue | Plaintiff's Argument (Celltex) | Defendant's Argument (Biostar / K‑Stemcell) | Held |
|---|---|---|---|
| Jurisdiction to review order compelling arbitration | Final judgment confirming award allows review of prior interlocutory order | Notices of appeal cited confirming order, not the Sept. 22 order; compelling order not interlocutory appealable | Court had jurisdiction: appeal from final confirmation brings earlier order up for review |
| Proper appeal vehicle for Biostar (restricted v. ordinary) | N/A (Celltex argued ordinary appeal timing issues) | Biostar filed a notice of restricted appeal within 30 days; argues it didn’t participate below so restricted appeal applies | Majority treated Biostar as having invoked ordinary‑appeal timetable (court reviewed merits); concurrence argued the appeal should be treated as restricted — but result unchanged |
| Who decides arbitrability/enforceability of Rule 11 Agreement | Agreement valid and covers negotiation/completion disputes; arbitrability gateway issues may be for arbitrator when challenge goes to whole contract | Trial court should decide formation/enforceability (e.g., board approval condition precedent) | Prima Paint separability and subsequent Texas authorities control: challenges to the contract as a whole go to the arbitrator; court did not err in sending arbitrability to arbitrator |
| Notice to Biostar and vacatur of award | N/A | Arbitrator failed to give Biostar separate notice; this is arbitrator misconduct requiring vacatur under Tex. Civ. Prac. & Rem. Code §171.088 | Complaint waived: Biostar never sought vacatur below; K‑Stemcell’s late challenge after confirmation waived; court affirmed confirmation |
Key Cases Cited
- Freis v. Canales, 877 S.W.2d 283 (Tex. 1994) (arbitration cannot be ordered absent agreement to arbitrate)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (state contract law governs arbitrability; presumption favoring arbitration)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (standard of review for arbitrability determinations)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (separability doctrine—arbitration clause separable from contract)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (arbitrator decides challenges to contract validity unless challenge is to arbitration clause itself)
- In re Morgan Stanley & Co., Inc., 293 S.W.3d 182 (Tex. 2009) (application of separability doctrine in Texas)
- Chambers v. O’Quinn, 242 S.W.3d 30 (Tex. 2007) (orders compelling arbitration reviewable after final judgment)
- Hamm v. Millennium Income Fund, L.L.C., 178 S.W.3d 256 (Tex. App.—Houston [1st Dist.] 2005) (judgment confirming arbitration award is final and enforceable)