Jody James Farms, JV v. Altman Group, Inc.
506 S.W.3d 595
Tex. App.2016Background
- JJF purchased a Crop Revenue Coverage Insurance Policy for 2010 from Rain & Hail, L.L.C. via The Altman Group; Diaz is an Altman agent.
- The policy is FCIC-reinsured and contains a broad Section 20 governing mediation, arbitration, reconsideration, and review.
- In November 2010 JJF incurred a loss on a Grain Sorghum crop; Rain & Hail denied the claim partly for untimeliness and partly for storage/record issues.
- The Rain & Hail denial was arbitrated and the arbitrator upheld Rain & Hail’s denial.
- JJF sued Altman and Diaz, alleging fiduciary duty and DTPA violations for not timely submitting the claim; Altman and Diaz moved to compel arbitration under FAA and the trial court ordered arbitration.
- The arbitrator ruled for Altman and Diaz; the trial court confirmed the award; JJF appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrability was properly decided by the arbitrator | JJF contends no agreement to arbitrate with Altman/Diaz exists or that scope excludes them. | Altman/Diaz argue the policy's broad arbitration clause and AAA rules authorize arbitrability questions to be decided by the arbitrator. | Arbitrator empowered to decide arbitrability; award affirmed. |
| Whether there was a valid arbitration agreement binding on JJF with Altman and Diaz | JJF asserts no agreement to arbitrate with Altman/Diaz. | Policy incorporated AAA rules; defendants argue there was an agreement to arbitrate as to disputes involving determinations by Rain & Hail. | There was a valid arbitration agreement incorporated by the policy, and the arbitrator could decide its applicability. |
| Whether the scope of the arbitration clause covers the claims against Altman and Diaz | Claims against Altman/Diaz are outside the policy’s arbitration provision and not tied to Rain & Hail’s determinations. | All disputes involving determinations by Rain & Hail fall under arbitration per Section 20; nonparties may be bound as necessary. | The scope encompassed the disputes asserted against Altman and Diaz via the policy’s arbitration clause. |
| Whether the arbitrator exceeded powers by ruling on arbitrability | No agreement to arbitrate exists for these claims; arbitrator acted beyond authority. | Express incorporation of AAA rules shows intent to submit arbitrability to the arbitrator. | No excess of authority; arbitrator properly resolved arbitrability consistent with the policy and AAA rules. |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (who resolves arbitrability depends on what parties agreed)
- In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (state law governs gateway arbitrability questions in FAA context)
- Haddock v. Quinn, 287 S.W.3d 158 (Tex. App.-Fort Worth 2009) (general AAA reference does not always show clear intention to arbitrate arbitrability)
- Burlington Resources, Inc. v. San Juan Basin Royalty Trust, 249 S.W.3d 34 (Tex. App.-Houston [1st Dist.] 2007) (ref to AAA rules alone may not show clear intent to arbitrate arbitrability)
- Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671 (5th Cir. 2012) (majority view: express adoption of AAA rules signals agreement to arbitrate arbitrability)
- Oracle Am., Inc. v. Myriad Group A.G., 724 F.3d 1069 (9th Cir. 2013) (AAA rules incorporation constitutes clear evidence to arbitrate arbitrability)