Jody James Farms, Jv v. the Altman Group, Inc. and Laurie Diaz
547 S.W.3d 624
| Tex. | 2018Background
- Jody James Farms (insured) bought federally reinsured crop insurance from Rain & Hail; the policy contains an arbitration clause requiring disputes between "you" (insured) and "we" (insurer) to go to AAA arbitration.
- The Altman Group and agent Laurie Diaz (the Agency) were not signatories to the policy and are not named in it; Jody James alleges the Agency failed to timely report a crop loss, causing denial of the claim.
- Jody James arbitrated its coverage dispute with Rain & Hail and lost; the arbitrator found the claim untimely and no presentable loss.
- Jody James then sued the Agency in court for breach of fiduciary duty and DTPA violations seeking damages tied to the denied claim; the Agency moved to compel arbitration under the insurer’s policy.
- Trial court compelled arbitration as to the Agency; the arbitrator and court of appeals upheld arbitration and the take-nothing award; the Supreme Court granted review on whether a non‑signatory can compel a signatory to arbitrate and who decides arbitrability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides arbitrability when dispute involves a non‑signatory | Trial court must decide whether arbitration agreement exists between Jody James and Agency | Incorporation of AAA rules delegates arbitrability to the arbitrator | Court: Questions whether signatory must arbitrate with non‑signatory are gateway issues for the court; no clear and unmistakable evidence here to delegate to arbitrator. |
| Does the insurance policy’s arbitration clause cover claims against non‑signatories | Policy governs only disputes between insurer and insured; does not name or bind agents | Policy’s incorporation of AAA rules and broad language covers “all disputes involving determinations made by us” | Held: Policy does not reasonably encompass disputes between insured and unnamed third parties; no direct agreement to arbitrate with Agency. |
| Can Agency compel arbitration based on agency or third‑party‑beneficiary status | Agency: its role as agent or intended beneficiary of the federal scheme binds it to the policy’s arbitration clause | Jody James: No contractual provision shows insurer controlled Agency or intended to confer direct contractual benefits | Held: No evidence Rain & Hail controlled the Agency (no agency); contract/statute does not create direct third‑party beneficiary rights to compel arbitration. |
| Can estoppel (direct‑benefits or alternative theories) force arbitration | Agency: equitable estoppel (direct‑benefits or "intertwined‑claims") precludes Jody James from avoiding arbitration | Jody James: Claims are extra‑contractual tort/DTPA duties independent of the policy | Held: Direct‑benefits estoppel inapplicable because claims arise from general duties, not the contract; alternative estoppel not met—relationship not sufficiently close or consented. |
Key Cases Cited
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (arbitration is a matter of contract; courts enforce parties’ chosen procedures)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (presumption favors judicial determination of arbitrability absent clear and unmistakable evidence to delegate)
- Stolt‑Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) (arbitrator’s power derives from parties’ agreement)
- In re Rubiola, 334 S.W.3d 220 (Tex. 2011) (gateway arbitrability questions are for the court)
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (direct‑benefits estoppel requires that liability be determined by reference to the contract)
- Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013) (trust beneficiary’s suit premised on trust terms was arbitrable under direct‑benefits estoppel)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (discussing scenarios where non‑signatories may be bound by arbitration via contract/agency principles)