In The
Court of Appeals
For The
First District of Texas
____________
NO. 01-03-00388-CV
____________
AUTO NATION USA CORP.; AUTO NATION, USA; AUTO NATION, INC.; AUTO NATION, INC. F/K/A MERCEDES BENZ OF HOUSTON–GREENWAY; HOUSTON AUTO IMPORTS GREENWAY, LTD. D/B/A MERCEDES BENZ OF HOUSTON–GREENWAY, Appellants
V.
KEBRET I. MOHAMED, Appellee
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Cause No. 2001-60221
MEMORANDUM OPINION
By interlocutory appeal and petition for writ of mandamus, appellants, AutoNation USA Corp., AutoNation, USA, AutoNation, Inc., AutoNation, Inc. f/k/a Mercedes Benz of Houston–Greenway, and Houston Auto Imports Greenway, Ltd. d/b/a Mercedes Benz of Houston–Greenway (the AutoNation parties), challenge the trial court’s order denying the AutoNation parties’ second motion to compel arbitration. We determine whether we have jurisdiction over the interlocutory appeal and, once we have jurisdiction, in four issues, the AutoNation parties contend as follows: (1) the doctrines of collateral estoppel and issue preclusion do not bar the AutoNation parties from seeking a second order compelling arbitration; (2) this Court’s ruling in Mohamed-I does not operate as law of the case; (3) the AutoNation parties proved that they are a successor-in-interest to the arbitration agreement; and (4) the trial court erred in denying the AutoNation parties’ second motion to compel arbitration. We affirm the judgment of the trial court.
Background
Kebret I. Mohamed, appellee, is a United States citizen, who was born and raised in Ethiopia. In May 1999, the Mercedes Benz Greenway dealership hired Mohamed as a valet for its car-sales business. Mohamed alleges that, shortly after he was hired, his co-workers began severely harassing him because of his race and national origin. Mohamed alleges the harassment continued until he was constructively discharged.
Mohamed signed an alternative dispute resolution agreement (“the arbitration agreement”) with his employer, Park Place, in June 1999. The arbitration agreement was between Mohamed and “Employer,” which was defined as (1) Park Place Motorcars, Park Place Lexus, Park Place Bodywerks, Park Place Porsche/Audi, or any Park Place Company and (2) any of those companies’ parent company, subsidiary company, affiliate company, directors, officers, employees, or agents. It is undisputed that Mohamed’s employer at the time of the arbitration agreement, Park Place, fell under the definition of “Employer.” Some time before Mohamed quit, but after he signed the arbitration agreement, the AutoNation parties purchased Park Place.
In November 2001, Mohamed sued the AutoNation parties and two of his supervisors for race discrimination; intentional infliction of emotional distress; and negligent hiring, supervision, and retention. In January 2002, the AutoNation parties moved to compel arbitration. Mohamed contested the arbitration agreement’s validity and enforceability. Both parties submitted summary evidence along with their arbitration pleadings. After a non-evidentiary hearing, the trial court granted the AutoNation parties’ motion to compel arbitration and abated the cause.
Mohamed filed a petition for writ of mandamus and an interlocutory appeal in this Court. On October 31, 2002, this Court dismissed the interlocutory appeal and conditionally granted the petition for writ of mandamus, instructing the trial court to vacate its order compelling arbitration. Mohamed v. AutoNation USA Corp., 89 S.W.3d 830, 832-33 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (hereinafter referred to as “Mohamed-I”). On November 21, 2002, the trial court vacated its order compelling arbitration. A few months later, on February 3, 2003, the AutoNation parties filed a second motion to compel arbitration, which the trial court denied. The AutoNation parties now file this interlocutory appeal and petition for writ of mandamus.
Interlocutory Appeal or Mandamus
The trial court did not expressly determine whether the Texas General Arbitration Act (TAA) or the Federal Arbitration Act (FAA) applied. See Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001-.098 (Vernon 2003); 9 U.S.C. §§ 1-16 (2001). The method of review depends on which act applies. Mandamus is appropriate to review an order denying arbitration when the FAA applies to the arbitration agreement. See In re Valero Energy Corp., 968 S.W.2d 916, 916-17 (Tex. 1998); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272-73 (Tex. 1992). Interlocutory appeal is appropriate to review an order denying arbitration when the TAA applies. See Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(1), (2) (Vernon Supp. 2004). The AutoNation parties stated that they filed both an interlocutory appeal and a mandamus proceeding “out of an abundance of caution.”
The arbitration agreement in this case specifically refers to the TAA; it does not mention the FAA. Section 10.1 of the arbitration agreement states, “Any proceeding pursuant to the ADR Procedure shall be an arbitration proceeding subject to the Texas General Arbitration Act.” Additionally, section 12.3 of the arbitration agreement makes the following reference to the TAA:
Applicability of Arbitration Statute. The arbitration proceeding shall be deemed an arbitration proceeding subject to the Texas General Arbitration Act. If this ADR Procedure is in conflict with any mandatory requirements of the Texas General Arbitration Act, the statute shall govern. The Arbitrator shall have all powers granted to arbitrators under the Texas General Arbitration Act.
Given the arbitration agreement’s express adoption of the TAA, we hold that this agreement falls under the TAA. See In re Kellogg Brown & Root, 80 S.W.3d 611, 617 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding). Interlocutory appeal is, thus, the appropriate method to review the order denying arbitration. See Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(1), (2).
Standard of Review
In an appeal from an interlocutory order denying a motion to compel arbitration, the applicable standard of review is that of “no evidence.” Pepe Int’l Dev. Co. v. Pub Brewing Co., 915 S.W.2d 925, 929 (Tex. App.—Houston [1st Dist.] 1996, no writ) (combined appeal & orig. proceeding). Under the “no evidence” standard, the appellate court considers only the evidence and inferences tending to support the finding under attack and disregards all evidence and inferences to the contrary. Id. We must affirm the trial court’s order if any legal theory supports it when, as in this case, there are no findings of fact or conclusions of law. See id. When a party attacks the legal sufficiency of an adverse finding on an issue on which it has the burden of proof, the party must demonstrate on appeal “that the evidence establishes, as a matter of law, all vital facts in support of the issue.” Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001); accord Burlington N. R.R. Co. v. Akpan, 943 S.W.2d 48, 50 (Tex. App.—Fort Worth 1996, no writ) (holding same in interlocutory appeal from arbitration ruling). Such a matter-of-law challenge requires us first to examine the record for evidence that supports the finding, while ignoring all evidence to the contrary. Francis, 46 S.W.3d at 241; Akpan, 943 S.W.2d at 50. Only if there is no evidence to support the finding will we then examine the entire record to determine if the contrary proposition is established as a matter of law. Francis, 46 S.W.3d at 241; Akpan, 943 S.W.2d at 50. We will sustain the matter-of-law challenge only if the contrary proposition is conclusively established. Francis, 46 S.W.3d at 241; Akpan, 943 S.W.2d at 50.
Successor-In-Interest
In point of error three, the AutoNation parties contend that they proved that they are successors-in-interest to the arbitration agreement. Therefore, the trial court erred in denying their second motion to compel arbitration of this action.
A party cannot be required to arbitrate unless it has agreed to do so. Trico Marine Servs., Inc., v. Stewart & Stevenson Technical Servs., Inc., 73 S.W.3d 545, 548 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding); see also Tex. Civ. Prac. & Rem. Code Ann. § 171.021(a) (Vernon 2003) (requiring judge to order arbitration upon finding agreement to arbitrate). The parties’ agreement to arbitrate must be clear. In this determination, Texas contract law applies. Trico Marine Servs., 73 S.W.3d at 548. Construction of an unambiguous contract is a question of law. Id.
A party seeking to compel arbitration has the initial burden to establish the arbitration agreement’s existence and to show that the claims asserted fall within the agreement’s scope. In re Kellogg Brown & Root, 80 S.W.3d at 615; see Tex. Civ. Prac. & Rem. Code Ann. § 171.021(a) (Vernon 2003). Whether an enforceable agreement to arbitrate exists is a legal question entitled to de novo review. In re Kellogg Brown & Root, 80 S.W.3d at 615. If the party seeking arbitration carries its initial burden, the burden then shifts to the party resisting arbitration to present evidence on its defenses to the arbitration agreement. See In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999); see also Tex. Civ. Prac. & Rem. Code Ann. § 171.021(b) (Vernon Supp. 2004).
Here, the AutoNation parties contend that the trial court erred in its implicit conclusion that they did not carry their burden of showing that they had the right to enforce the arbitration agreement. We disagree.
The party seeking to compel arbitration must prove that it was a party to the arbitration agreement or had the right to enforce the agreement, notwithstanding. Mohamed I, 89 S.W.3d at 836. “The burden of showing one’s status as a party or one’s right to enforce, as with the overall burden of establishing the arbitration agreement’s existence, is generally evidentiary.” Id.
Therefore, an entity that was not a party to the arbitration agreement may not enforce the agreement’s provisions unless that non-signatory entity falls into an exception, recognized under general equitable or contract law, that would allow such enforcement. One such exception is that, as with any contract, an assignee, such as a successor-in-interest, can be bound to the terms of an arbitration agreement signed by its assignor, such as a predecessor-in-interest, depending on the assignment’s terms.
Id. (Emphasis added.)
It is undisputed that the AutoNation parties were not signatories to the arbitration agreement and that they were not expressly named as parties to the agreement. Instead, the AutoNation parties allege in their Second verified Motion to Compel that, pursuant to the terms of an asset purchase agreement executed in 1999, they were assigned all rights to Mohamed’s arbitration agreements as the corporate “successors-in-interest” to Mohamed’s former employer, who had signed the arbitration agreement. At the hearing on the motion to compel arbitration, the AutoNation parties did not produce these asset-purchase agreements for the court to review. Nevertheless, in support of this assertion, the AutoNation parties provided the trial court with an authenticated “acknowledgment” of the assignment executed after this lawsuit was filed and an affidavit from Gorden Devens, Vice President-Corporate Law for AutoNation, as evidence that the language of the asset purchase agreement assigned all employment arbitration agreements to them. This evidence is insufficient as a matter of law to meet the AutoNation parties burden of conclusively establishing that they are assignees of Mohamed’s arbitration agreement and are legally entitled to enforce it against him.
Only where the terms of a contract are first determined to be ambiguous may the court consider the parties’ interpretation of a contract and admit extraneous evidence to determine the true meaning of the instrument. Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998); Transcon. Gas Pipeline Corp. v. Texaco, Inc., 35 S.W.3d 658, 666 (Tex. App.—Houston [1st Dist.] 2000, pet. denied). Parol testimony is inadmissible to establish the contents of an alleged assignment because the written assignment itself, and not the parol evidence, is the best evidence of the contents of the assignment. See Standifer v. Bond Hardware Co., 94 S.W. 144, 145 (Tex. Civ. App. 1906, no writ).
In this case, because there was no finding that the terms of the asset-purchase agreements were, in fact, ambiguous, the defendants cannot rely on any extraneous evidence to support their interpretation of the agreements to compel arbitration. Furthermore, the affidavit testimony of Gorden Devens about the terms of the purchase agreement is inadmissible because it is not the best evidence of the contents of the assignment. Id. In the absence of the purchase agreements that the AutoNation parties allege created their assignment rights, the trial court correctly held that the AutoNation parties had not met their burden of establishing that they were assignees of Mohamed’s arbitration agreement with his previous employers.
Furthermore, the AutoNation parties do not present any authority, nor have we found any, for the proposition that an “acknowledgment” of a prior agreement executed after this lawsuit is dispositive of the trial court’s legal interpretation of the language of the prior agreement. Contrary to the AutoNation parties’ assertions, any inferences that could be drawn from the affidavits and the acknowledgment cannot be used to meet their burden in this case because we may only make those inferences that support the trial court’s implied rulings. See Tex. R. App. P. 33.1.
Accordingly, the trial court did not err in finding that the AutoNation parties cannot enforce Mohamed’s employment arbitration agreement and in denying the motion to compel arbitration.
Accordingly, we hold that the AutoNation parties did not carry their initial burden of showing that each party seeking to compel arbitration was entitled to enforce the arbitration agreement. Having found that the AutoNation parties did not carry their initial burden, we do not address Mohamed’s issues relating to issue preclusion and unconscionability.
Because we have found that the trial court did not err in denying the AutoNation parties’ second motion to compel, we need not reach the remaining issues.
Conclusion
We affirm the trial court’s order denying the AutoNation parties’ motion to compel arbitration.
George C. Hanks, Jr.
Justice
Panel consists of Justices Nuchia, Hanks, and Higley.