in Re: Circle Zebra Fabricators, Ltd., by and Through Its General Partner Circle Zebra Fabricators Management, L.L.C.

NUMBER 13-10-00504-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

CIRCLE ZEBRA FABRICATORS, LTD., BY
AND THROUGH ITS GENERAL PARTNER
CIRCLE ZEBRA FABRICATORS MANAGEMENT,
L.L.C., Appellant,

v.

AMERICAS WELDING CORP., RAUL CASTILLO,
SR., JORGE MANUEL GARCIA, AND
KEPPEL AMFELS, INC., Appellees.

On Appeal from the County Court at Law No. 1
of Nueces County, Texas.

NUMBER 13-10-00591-CV

IN RE CIRCLE ZEBRA FABRICATORS, LTD.,
BY AND THROUGH ITS GENERAL PARTNER CIRCLE ZEBRA
FABRICATORS MANAGEMENT, L.L.C.

On Petition for Writ of Mandamus
 Before Justices Garza, Benavides and Vela
Memorandum Opinion by Justice Garza
Circle Zebra Fabricators, Ltd., by and through its general partner Circle Zebra

Fabricators Management, L.L.C. (“Circle Zebra”), seeks to set aside an order

compelling arbitration by appeal in appellate cause number 13-10-00504-CV and by

petition for writ of mandamus in appellate cause number 13-10-00591-CV. We dismiss

the appeal and deny the petition for writ of mandamus.

I. BACKGROUND

Circle Zebra executed a Master Service Agreement (the “agreement”) with

Keppel Amfels, Inc. (“Keppel Amfels”) through which Circle Zebra agreed to provide

certified welders to Keppel Amfels for work at Keppel Amfels‟s shipyard in Brownsville,

Texas. In order to meet its obligations under the agreement, Circle Zebra purchased

equipment, obtained marine insurance, and employed approximately 100 welders.

According to Circle Zebra‟s first amended original petition, it invested more than

$1,000,000 to perform the agreement. At this time, Raul Castillo Sr. served as Circle

Zebra‟s “chief foreman manager” and ran Circle Zebra‟s business operations in South

Texas. Circle Zebra also employed LR Global, L.L.C.,1 which served as a business

consultant regarding these relationships.

Circle Zebra‟s employees began working for Keppel Amfels. At Keppel Amfels‟s

request, Circle Zebra met with Jorge Manuel Garcia and representatives of Americas

Welding Corporation (“Americas Welding”). According to Circle Zebra‟s first amended

petition, the “purpose of the meeting . . . was to enhance the labor force available to . . .
1
LR Global, L.L.C. is not a party to this appeal or original proceeding.

2
Keppel Amfels by utilizing Mexican Nationals.” Circle Zebra refused to hire Americas

Welding‟s personnel. According to Circle Zebra, Castillo, Garcia, and Americas

Welding then entered into a conspiracy to convert Circle Zebra‟s equipment and

personnel to their use, and this conspiracy was joined by Keppel Amfels, who “allowed

this . . . conduct to occur motivated solely by retaliation for [Circle Zebra‟s] refusal to

hire said Mexican Nationals.” Circle Zebra filed suit against Americas Welding, Castillo,

Garcia, Keppel Amfels, and LR Global, L.L.C. for causes of action including, inter alia,

tortious interference, fraud, breach of contract, conversion, and breach of fiduciary duty.

The agreement between Circle Zebra and Keppel Amfels contained an arbitration

clause:

ALL CLAIMS, DISPUTES[,] OR CONTROVERSIES ARISING OUT OF,
OR IN RELATION TO THE INTERPRETATION, APPLICATION[,] OR
ENFORCEMENT OF THIS AGREEMENT, SHALL BE DECIDED BY
ARBITRATION UTILIZING A SINGLE ARBITRATOR IN ACCORDANCE
WITH THE CONSTRUCTION INDUSTRY RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. THE ARBITRATOR SHALL BE
EXPERIENCED IN THE OFFSHORE INDUSTRY AND SHALL NOT BE A
PRACTICING ATTORNEY. THE ARBITRATION SHALL BE HELD IN
HOUSTON, TEXAS. THE DECISION OF THE ARBITRATOR SHALL BE
FINAL[,] BINDING[,] AND ENFORCEABLE IN ANY COURT OF
COMPETENT JURISDICTION AND THE PARTIES AGREE THAT
THERE SHALL BE NO APPEAL FROM THE ARBITRATOR‟S DECISION.

Based on this provision, Keppel Amfels filed a motion to compel arbitration and an

amended motion to compel arbitration. The non-signatories to the agreement,

Americas Welding, Castillo, and Garcia, also filed a joint motion to compel arbitration

based on this language in the agreement.

Following an evidentiary hearing, the trial court granted Keppel Amfels‟s motion

by written order rendered on June 11, 2009, and granted the non-signatories‟ motion to

compel arbitration by order rendered on August 7, 2010. Each of these orders stayed

3
the trial court proceedings pending results of the arbitration. This appeal and original

proceeding ensued. The matter has been fully briefed on appeal, and the Court

requested and received a response to the petition for writ of mandamus.

Circle Zebra attacks the trial court‟s orders on multiple grounds. Its arguments

include, but are not limited to, contentions that: its claims should not be arbitrated

because they are not based on the agreement with Keppel Amfels; the agreement was

unconscionable insofar as it, for example, purports to eliminate the right to appeal the

results of the arbitration; and its claims against the non-signatories to the agreement

should not be arbitrated because there is no agreement to arbitrate with them and the

agreement itself provides that it shall not “be construed to confer any benefit on any

third party . . . nor shall it provide any rights to such third party to enforce its provisions.”

II. APPEAL

Appellee, Keppel Amfels, has filed a motion to dismiss the appeal in cause

number 13-10-00504-CV on grounds that the orders compelling arbitration are

interlocutory orders which are not subject to appeal. A party may not appeal an

interlocutory order unless authorized by statute. Bally Total Fitness Corp. v. Jackson,

53 S.W.3d 352, 355, 359 (Tex. 2001). We construe statutes granting interlocutory

appeals strictly because they are a narrow exception to the general rule that

interlocutory orders are not immediately appealable. Tex. A&M Univ. Sys. v. Koseoglu,

233 S.W.3d 835, 841 (Tex. 2007).

An order compelling arbitration and staying proceedings in district court is not

subject to interlocutory appeal under either the federal or state arbitration schemes.

See Chambers v. O’Quinn, 242 S.W.3d 30, 31-32 (Tex. 2007) (per curiam) (explaining

4
that neither the Federal Arbitration Act nor the Texas Arbitration Act allow interlocutory

appeals from orders compelling arbitration); Abdel Hakim Labidi v. Sydow, 287 S.W.3d

922, 926 (Tex. App.–Houston [14th Dist.] 2009, no pet.) (combined appeal & orig.

proceeding); see also 9 U.S.C. § 16(a) (specifying which orders under the Federal

Arbitration Act are subject to appeal); TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)

(Vernon 2008) (omitting orders compelling arbitration from delineated categories of

appealable interlocutory orders); TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (Vernon

Supp. 2010) (providing that a party may appeal from a “judgment or interlocutory order .

. . under the same circumstances that an appeal from a federal district court‟s order or

decision would be permitted by” the Federal Arbitration Act); TEX. CIV. PRAC. & REM.

CODE ANN. § 171.098(a)(1), (2) (Vernon 2008) (specifying which orders under the

Texas Arbitration Act are subject to appeal). Instead, orders compelling arbitration and

staying litigation are subject to appeal after the rendition of final judgment. See Perry

Homes v. Cull, 258 S.W.3d 580, 587 (Tex. 2008); Chambers, 242 S.W.3d at 32.

Accordingly, we grant the motion to dismiss filed by Keppel Amfels and we dismiss the

appeal in cause number 13-10-00504-CV for want of jurisdiction.

III. MANDAMUS

Mandamus is an “extraordinary” remedy. In re Sw. Bell Tel. Co., L.P., 235

S.W.3d 619, 623 (Tex. 2007) (orig. proceeding); see In re Team Rocket, L.P., 256

S.W.3d 257, 259 (Tex. 2008) (orig. proceeding). To obtain mandamus relief, the relator

must show that the trial court clearly abused its discretion and that the relator has no

adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36

(Tex. 2004) (orig. proceeding); see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 462

5
(Tex. 2008) (orig. proceeding). A trial court abuses its discretion if it reaches a decision

so arbitrary and unreasonable as to constitute a clear and prejudicial error of law, or if it

clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P.,

164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam); Walker v. Packer, 827

S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). To satisfy the clear abuse of discretion

standard, the relator must show that the trial court could “reasonably have reached only

one decision.” Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996)

(quoting Walker, 827 S.W.2d at 840).

Historically, mandamus was treated as an extraordinary writ that would issue

“only in situations involving manifest and urgent necessity and not for grievances that

may be addressed by other remedies.” Walker, 827 S.W.2d at 840. Now, in some as

yet not completely defined set of cases, whether a clear abuse of discretion can be

adequately remedied by appeal depends on a careful analysis of the costs and benefits

of interlocutory review. See In re McAllen Med. Ctr., Inc., 275 S.W.3d at 462.

Sometimes, “[a]n appellate remedy is „adequate‟ when any benefits to mandamus

review are outweighed by the detriments.” In re Prudential Ins. Co. of Am., 148 S.W.3d

at 136. According to the Texas Supreme Court:

Mandamus review of significant rulings in exceptional cases may be
essential to preserve important substantive and procedural rights from
impairment or loss, allow the appellate courts to give needed and helpful
direction to the law that would otherwise prove elusive in appeals from
final judgments, and spare private parties and the public the time and
money utterly wasted enduring eventual reversal of improperly conducted
proceedings.

Id. at 136.

6
 Under previous law, mandamus was available to review orders either compelling

or denying arbitration under the Federal Arbitration Act. See Freis v. Canales, 877

S.W.2d 283, 284 (Tex. 1994). However, in 2006, in order to ensure consistency

between federal and state procedures, the Texas Supreme Court held that mandamus

was generally not available to review orders compelling arbitration so that federal and

state procedure would be consistent. See In re Palacios, 221 S.W.3d 564, 565 (Tex.

2006) (orig. proceeding). In Palacios, the Texas Supreme Court noted that mandamus

relief might be available, but only if the party seeking relief from an order staying a case

for arbitration meets the “particularly heavy” burden to show “clearly and indisputably

that the district court did not have the discretion to stay the proceedings pending

arbitration.” Id. (quoting Apache Bohai Corp. v. Texaco China, B.V., 330 F.3d 307, 310-

11 (5th Cir. 2003)). The Texas Supreme Court recently reaffirmed this proposition and

clarified that “this „exception‟ applies not to the question whether an order compelling

arbitration was correct, but to the question whether the case should have been

dismissed rather than stayed.” In re Gulf Exploration, LLC, 289 S.W.3d 836, 841 (Tex.

2009) (orig. proceeding); see Small v. Specialty Contrs., Inc., 310 S.W.3d 639, 642

(Tex. App.–Dallas 2010, no pet.) (“Courts may review an order compelling arbitration if

the order also dismisses the entire case and is therefore a final, rather than

interlocutory, order.”).

Moreover, even if a case falls within the foregoing parameters for mandamus

review, mandamus is nonetheless “generally unavailable” because petitioners can

“rarely” show that they lack an adequate remedy by appeal. See In re Gulf Exploration,

LLC, 289 S.W.3d at 842. Generally, the adequacy of an appellate remedy “depends on

7
a careful balance of the case-specific benefits and detriments of delaying or interrupting

a particular proceeding”; however, because both the federal and state arbitration acts

specifically exclude immediate review of orders compelling arbitration, “any balancing

must tilt strongly against mandamus review.” Id. Nevertheless, the supreme court held

that mandamus review may be appropriate “in those rare cases when legislative

mandates conflict.” According to the supreme court, “such conflicts are few, so the

balance will generally tilt toward reviewing orders compelling arbitration only on final

appeal.” Id. In such cases, “mandamus may be essential to preserve important

substantive and procedural rights from impairment or loss [and] allow the appellate

courts to give needed and helpful direction to the law that would otherwise prove elusive

in appeals from final judgments.” Id. at 843 (quoting In re Prudential Ins. Co., 148

S.W.3d at 136). The court further noted that delay and expense, standing alone,

generally do not render appeal after a final judgment to be an inadequate remedy, and

this is particularly true in arbitration cases “because arbitration clauses are usually

contractual and cover contractual claims,” and a “party that prevails on a contractual

claim can recover its fees and expenses, even if they were incurred in collateral

proceedings like arbitration.” Id. (citations omitted).

In the instant case, Circle Zebra‟s petition for writ of mandamus does not address

the adequacy of its remedy by appeal. Following oral argument in this cause, Circle

Zebra filed an opposed motion to supplement or amend its petition to address this

issue. According to Circle Zebra‟s motion and attached “First Supplement to its Petition

for Writ of Mandamus,” mandamus is appropriate and an appeal following arbitration is

inadequate because Circle Zebra has been “put out of business,” and its cause of action

8
does “not arise from or rely on the contract containing the arbitration clause.” Circle

Zebra further contends that the Master Service Agreement expressly states that it does

not confer benefits on third parties and it does not provide rights to third parties to

enforce its provisions, and accordingly, the non-signatory defendants should not be able

to enforce the arbitration clause in that agreement. Finally, Circle Zebra contends that:

[W]here there is no signed agreement with the non-signatory defendants,
and Circle Zebra has been put out of business, Circle Zebra does not
have an adequate remedy at law and the order compelling arbitration is
reviewable by this court.

Further, the effect of ordering a company that has been put out of
business to arbitration, where there is no arbitration agreement and[] the
agreement relied on says it cannot be enforced by third parties, is
essentially a final order that equitably should be the subject of an appeal.

Each of these issues was extant and could have been addressed in Circle Zebra‟s

petition for writ of mandamus before the real parties in interest filed their responses to

the petition for writ of mandamus and before this matter was submitted to the Court at

oral argument. Therefore, we deny Circle Zebra‟s motion to supplement or amend its

petition for writ of mandamus to discourage the practice of waiting until after oral

argument to raise and address an issue which must be established as a necessary part

of the petition for writ of mandamus. See Walker, 827 S.W.2d at 840-42 (stating that

the relator bears the burden to show that remedies other than mandamus are

inadequate); In re Christus Health, 276 S.W.3d 708, 710 (Tex. App.–Houston [1st Dist.]

2008, orig. proceeding) (same); In re William Roberts, 18 S.W.3d 736, 738 (Tex. App.–

San Antonio 2000, orig. proceeding) (same). Yet, even if we had granted leave for

Circle Zebra to supplement or amend its petition, we would not have found that Circle

9
Zebra met its burden to prove that its appellate remedy was inadequate as a matter of

law.

Because both the federal and state arbitration acts specifically exclude

immediate review of orders compelling arbitration, our analysis regarding the adequacy

of Circle Zebra‟s remedy by appeal “tilts strongly against mandamus review.” See In re

Gulf Exploration, LLC, 289 S.W.3d at 842. The matter does not involve conflicting

legislative mandates. See id. at 843. Delay and expense, standing alone, generally do

not render appeal after a final judgment to be an inadequate remedy, and this is

particularly true in the instant case because it is, at least in part, based on a contractual

dispute, and a “party that prevails on a contractual claim can recover its fees and

expenses, even if they were incurred in collateral proceedings like arbitration.” See id.

In sum, Circle Zebra has not carried its burden to show that it lacks an adequate

remedy by appeal. Compare id. and Abdel Hakim Labidi, 287 S.W.3d at 926

(concluding that there was an adequate remedy by appeal for an order compelling

arbitration where clients sued their lawyers for breach of contract and breach of

fiduciary duty) with In re Sthran, 327 S.W.3d 839, 846 (Tex. App.–Dallas 2010, orig.

proceeding) (concluding that relator lacked an adequate remedy by appeal where

“legislative mandates might be construed to conflict” and it was “not clear that any fees

and expenses incurred as a result of arbitration [would] be recoverable” in a tort action),

and In re Villanueva, 311 S.W.3d 475, 483-84 (Tex. App.–El Paso 2009, orig.

proceeding) (concluding that relator lacked an adequate remedy by appeal where

relator would not be able to recover fees and expenses in tort action and, more

10
compellingly, because the case involved “conflicting rulings” which were “significant

rulings in exceptional cases”). Accordingly, we deny the petition for writ of mandamus.

IV. CONCLUSION

The Court, having examined and fully considered the matters in these causes, is

of the opinion that it lacks jurisdiction over the appeal in appellate cause number 13-10-

00504-CV and that the petition for writ of mandamus in appellate cause number 13-10-

00591-CV should be denied. In so holding, we note that the writ of mandamus is a

discretionary writ, and its denial, without comment on the merits, does not deprive an

appellate court from considering the matter in a subsequent appeal. Chambers, 242

S.W.3d at 32; see In re AIU Ins. Co., 148 S.W.3d 109, 119 (Tex. 2004) (stating that the

“failure to grant a petition for writ of mandamus is not an adjudication of, nor even a

comment on, the merits of a case in any respect, including whether mandamus relief

was available”). Similarly, although the language in the arbitration agreement provides

that “[t]he decision of the arbitrator shall be final[,] binding[,] and enforceable in any

court of competent jurisdiction and the parties agree that there shall be no appeal from

the arbitrator‟s decision,” this language indicates that a party may not appeal the merits

of the arbitration; not that the parties agreed to waive the right to appeal the trial court‟s

decision to compel arbitration, or that the parties waived the right to appeal the district

court‟s judgment confirming or vacating the arbitration decision. See In re Gulf

Exploration, LLC, 289 S.W.3d at 842 (“If a trial court compels arbitration when the

parties have not agreed to it, that error can unquestionably be reviewed by final

appeal.”). As acknowledged by Keppel Amfels in its response to the petition for writ of

mandamus, the “no appeal” language does not affect Circle Zebra‟s ability to vacate or

11
modify an arbitration award on grounds listed in the Texas Arbitration Act or the Federal

Arbitration Act. See 9 U.S.C. §§ 10, 11; TEX. CIV. PRAC. & REM. CODE ANN. §§ 171.088,

171.091 (Vernon 2005); Silicon Power Corp. v. GE Zenith Controls, Inc., 661 F. Supp.

2d 524, 538 (E.D. Pa. 2009); see also Rollins, Inc. v. Black, 167 Fed. Appx. 798, 2006

WL 355852, at *1 n.1 (11th Cir. 2006) (per curiam, not designated for publication) (“A

„binding, final, and non-appealable‟ arbitral award . . . simply means the parties have

agreed to relinquish their right to appeal the merits of their dispute; it does not mean the

parties relinquish their right to appeal an award resulting from an arbitrator‟s abuse of

authority, bias, or manifest disregard of the law.”); Barsness v. Scott, 126 S.W.3d 232,

238 (Tex. App.–San Antonio 2003, pet. denied) (holding that a “no appeal” provision in

an arbitration agreement did not preclude review of a judgment on fraud, misconduct or

gross mistake, or those grounds for vacatur or modification listed in the Texas

Arbitration Act). Accordingly, we dismiss the appeal and deny the petition for writ of

mandamus.

DORI CONTRERAS GARZA
JUSTICE

Delivered and filed the
17th day of March, 2011.

12