Valerus Compression Services, LP and Valerus Services Company, LLC v. William Austin
417 S.W.3d 202
| Tex. App. | 2013Background
- Austin (former CFO) bought partnership interests governed by a Partnership Agreement that contains a broad arbitration clause covering disputes “arising out of or in connection with this Agreement.”
- After Austin’s employment ended, parties executed a Separation Agreement addressing severance and partnership interests; Section 4 protected Austin from forced redemption but allowed him to request redemption; Separation Agreement also fixed venue in Houston and contained a merger clause and a fee-shifting provision.
- Valerus later asserted Austin violated the Partnership Agreement’s non‑compete and forcibly redeemed Austin’s partnership interests under the Partnership Agreement formula. Austin sued in Houston district court seeking declaratory relief and related remedies, arguing the Separation Agreement controlled.
- Valerus moved to compel arbitration (and initiated AAA arbitration). The trial court denied the motion to compel and granted Austin’s emergency motion to stay the AAA arbitration; Valerus appealed both interlocutory orders under Tex. Civ. Prac. & Rem. Code §171.098.
- The court of appeals reversed: it held the Separation Agreement did not abrogate the Partnership Agreement’s arbitration clause, Austin’s claims fall within that clause, and the trial court erred in denying the motion to compel and in staying arbitration.
Issues
| Issue | Plaintiff's Argument (Austin) | Defendant's Argument (Valerus) | Held |
|---|---|---|---|
| Whether the Separation Agreement revoked/extinguished the Partnership Agreement arbitration clause for forced redemption disputes | Separation Agreement’s Section 4, venue clause (exclusive Houston courts), and merger clause supersede or revoke arbitration for forced redemption | Separation Agreement lacks unequivocal language extinguishing the Partnership Agreement; venue clause expressly contemplates arbitration; provisions can be harmonized | Held: Separation Agreement did not revoke the arbitration clause; arbitration survives |
| Whether Austin’s claims fall within the arbitration clause’s scope | Claims arise under the Separation Agreement and thus are outside the Partnership Agreement’s arbitration scope | Claims necessarily require interpretation of the Partnership Agreement and are factually intertwined with arbitrable issues | Held: Austin’s claims fall within the Partnership Agreement’s arbitration clause |
| Whether Valerus waived or is estopped from invoking arbitration | Execution/terms of the Separation Agreement and Valerus’s conduct waived or estop Valerus from compelling arbitration | Waiver/estoppel defenses rest on premise that Separation Agreement abrogated arbitration; premise rejected | Held: Waiver and estoppel defenses fail |
| Whether the trial court properly stayed the pending AAA arbitration | Arbitration should be stayed because Separation Agreement removed arbitration for these disputes; to avoid inconsistent rulings | Because a valid arbitration agreement exists covering these claims, the court should not stay arbitration; movant must show absence of agreement to arbitrate | Held: Trial court erred in staying arbitration; stay reversed |
Key Cases Cited
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (contract interpretation requires harmonizing all provisions)
- In re D. Wilson Constr. Co., 196 S.W.3d 774 (Tex. 2006) (courts should not deny arbitration unless clause clearly inapplicable)
- In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001) (once arbitration agreement encompasses claims and defenses fail, court must compel arbitration)
- Ellis v. Schlimmer, 337 S.W.3d 860 (Tex. 2011) (resolve doubts about scope, waiver, and related issues in favor of arbitration)
- In re B.P. Am. Prod. Co., 97 S.W.3d 366 (Tex. App.—Houston [14th Dist.] 2003) (claims need only be factually intertwined with arbitrable claims)
- TransCore Holdings, Inc. v. Rayner, 104 S.W.3d 317 (Tex. App.—Dallas 2003) (subsequent agreement can preclude earlier arbitration where it unequivocally releases prior agreements)
- Cleveland Constr., Inc. v. Levco Constr., Inc., 359 S.W.3d 843 (Tex. App.—Houston [1st Dist.] 2012) (standard of review for interlocutory appeals under §171.098)