Amateur Athletic Union of the United States, Inc., Paul Campbell, Rod Seaford, and Charles Oliver v. Augustus Bray

ACCEPTED
04-15-00268-CV
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
6/24/2015 12:20:16 PM
KEITH HOTTLE
CLERK

NO. 04-15-00268-CV

IN THE FOURTH COURT OF APPEALS FILED IN
4th COURT OF APPEALS
SAN ANTONIO, TEXAS
SAN ANTONIO, TEXAS 6/24/2015 12:20:16 PM
________________________________________________________________
KEITH E. HOTTLE
Clerk
AMATEUR ATHLETIC UNION OF THE UNITED STATES, INC., PAUL
CAMPBELL, ROD SEAFORD, AND CHARLES OLIVER,
Appellants,

v.

AUGUSTUS BRAY
Appellee.
__________________________________________________________________

On Appeal from the 57th Judicial District Court
in Bexar County, Texas, The Honorable David A. Canales, Presiding
__________________________________________________________________

APPELLEE’S BRIEF
__________________________________________________________________

Jerry Galow
State Bar No. 07594400
Justin Studdard
State Bar No. 24077158

GALOW & SMITH, P.C.
1204 Nueces
Austin, Texas 78701
Telephone: 512-481-0200
Telecopier: 512-481-0250
jerry@galowlaw.com
justin@galowlaw.com
ATTORNEYS FOR APPELLEE

ORAL ARGUMENT IS REQUESTED
 TABLE OF CONTENTS

INDEX OFAUTHORITIES.....................................................................................iii

STATEMENT ON ORAL ARGUMENT................................................................vi

ISSUES PRESENTED...........................................................................................vii

STATEMENT OF FACTS.....................................................................................1-3

SUMMARY OF THE ARGUMENT.....................................................................4-5

STANDARD OF REVIEW…………………………………………………….......6

ARGUMENT………………………...................................................................7-37

I. The trial court did not err in denying Appellants’ motion to compel
arbitration because there is no valid arbitration agreement……………...7-31

A. The arbitration agreement is not valid because AAU’s promise to
arbitrate is illusory given that the arbitration agreement does not
contain a “savings clause” requiring notice of modifications or
termination and that AAU can amend or terminate the agreement
prospectively only…………………………………………………7-11

B. There is no valid arbitration agreement between AAU and Appellee
because Appellee is a non-signatory in his individual capacity and he
did not agree to arbitrate this dispute………………………………..12

C. Appellants Paul Campbell, Rod Seaford, and Charles Oliver
cannot compel arbitration based on agency law or equitable estoppel
principles…………………………………………………………13-31

1. Appellants Paul Campbell, Rod Seaford, and Charles Oliver
cannot compel arbitration based on agency given that the contract
containing the arbitration agreement expressly provides that they are
not agents of AAU; the claims asserted against them are substantively
against them, not the AAU; and Appellee is not, in his individual
capacity, a signatory to the arbitration agreement……………….13-27
i
 2. Appellants Paul Campbell, Rod Seaford, and Charles Oliver cannot
compel arbitration based on equitable estoppel given that Appellee’s
claims arise from general obligations imposed by tort law and
Appellee is not seeking, through his claims, to derive a direct benefit
from the contract containing the arbitration provision…………..27-31

II. The trial court did not err in denying Appellants’ motion to compel
arbitration because Appellee’s claims are outside the scope of the
agreement and arise from general obligations imposed by tort law……32-33

III. The trial court did err in denying Appellants’ motion to compel arbitration
because the agreement is unconscionable given that the promise to arbitrate
was not mutual, the agreement provides insufficient remedies, and the costs
imposed by the arbitration agreement effectively prevent Appellee from
asserting his rights in an arbitration proceeding………………………..33-37

PRAYER………………………………………………………………………37-38

CERTIFICATE OF COMPLIANCE……………………………………………...38

CERTIFICATE OF SERVICE……………………………………………………39

ii
 INDEX OF AUTHORITIES

Cases:

Alexander v. Anthony Int’l. L.P.,
341 F.3d 256 (3d Cir. 2003)…………………………………………………….37

Cleveland Constr., Inc. v. Levco Constr., Inc.,
359 S.W.3d 843 (Tex. App.-Houston [1st Dist.] 2012, pet. dism'd)……………..6

Covington v. Aban Offshore Ltd.,
650 F.3d 556, (5th Cir. 2011)…………………………………………………...24

DK Joint Venture 1 v. Weyand,
649 F.3d 310 (5th Cir.2011)……………………………………………...17,18,19

Grigson v. Creative Artists Agency L.L.C.,
210 F.3d 524 (5th Cir.2000)…………………………………………………27,28

Hadnot v. Bay Ltd.,
344 F.3d 474 (5th Cir. 2003)……………………………………………………36

Hooters of Am., Inc. v. Phillips,
173 F.3d 933 (4th Cir.1999)…………………………………………………….11

Ingle v. Circuit City Stores, Inc.,
328 F.3d 1175 (9th Cir. 2003)…………………………………………………..37

In re C & H News Co.,
133 S.W.3d 642 (Tex. App.-Corpus Christi 2003, orig. proceeding)………7,9,11

In re FirstMerit Bank, N.A.,
52 S.W.3d 749, 752–53 (Tex. 2001)………………………………………7,29,32

In re Halliburton Co.,
80 S.W.3d 566 (Tex. 2002)…………………………………………………..7,8,9

In re Kellogg Brown & Root, Inc.,
166 S.W.3d 732 (Tex. 2005)…………………………………...12,13,26,28,29,30

iii
In re Kaplan Higher Educ. Corp.,
235 S.W.3d 206 (Tex. 2007) (orig. proceeding)……………………...14,15,16,17

In re Labatt Food Serv.,
279 S.W.3d 640 (Tex. 2009)………………………………………………...28,29

In re Odyssey Healthcare, Inc.,
310 S.W.3d 419 (Tex. 2010)…………………………………………………...7,9

In re Olshan Found. Repair Co.,
328 S.W.3d 883 (Tex. 2010)……………………………………………………34

In re Palm Harbor Homes, Inc.,
195 S.W.3d 672 (Tex. 2006)……………………………………………………33

In re Poly-America, L.P.,
262 S.W.3d 337 (Tex. 2008)………………………………………………9,32,36

In re Vesta Insurance Group, Inc.,
192 S.W.3d 759 (Tex. 2006)………………………………………….14,16,17,18

In re Weekley Homes, L.P.,
180 S.W.3d 127 (Tex.2005)…………………………………………………….32

In the Interest of W.E.R.,
669 S.W.2d 716 (Tex. 1984) (per curiam)……………………………………….6

J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223 (Tex. 2003)…………………………………………………...6,8

Merrill Lynch Trust Co. FSB v. Alaniz,
159 S.W.3d 162 (Tex. App.—Corpus Christi 2004)……………………………27

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Wilson,
805 S.W.2d 38 (Tex. App.—El Paso1991, no writ)…………………………….32

Meyer v. WMCO–GP, LLC,
211 S.W.3d 302 (Tex. 2006)………………………………………………...28,29

iv
Nabors Drilling USA, L.P., v. Pena,
385 S.W.3d 103 (Tex. App.-San Antonio 2012, pet. denied)………………….8,9

Olshan Found. Repair Co. v. Ayala,
180 S.W.3d 212 (Tex. App.—San Antonio 2005, pet. denied)…………………34

Prudential Sec. Inc. v. Marshall,
909 S.W.2d 896 (Tex. 1995)……………………………………………………32

Roe v. Ladymon,
318 S.W.3d 502 (Tex. App.-Dallas 2010, no pet.)……………………….17,18,25

Tenet Healthcare Ltd. v. Cooper,
960 S.W.2d 386, (Tex. App.-Houston [14th Dist.] 1998,
pet. dism'd w.o.j.)………………………………………………………………...7

Statutes:

Tex. Civ. Prac. & Rem. Code §171.022…………………………………………..33

v
 STATEMENT ON ORAL ARGUMENT

Appellee believes oral argument is necessary in this case. The arbitration

agreement in question and the parties seeking to invoke the agreement make this

case unique. This is not a typical case where certain parties negotiate and sign a

contract containing an arbitration agreement, and then one of the parties compels

the other party or the other party’s officer(s) or agent(s) to arbitrate a dispute

arising from the contract. Instead, here, the arbitration agreement in question is a

company-wide agreement between the company and its volunteers; and certain

volunteers are attempting to compel another volunteer to arbitrate his tort claims

against them. The Court’s decision is this case could be detrimental to Texas’

volunteers and employees and also make arbitration agreements easier to enforce

than other contracts. Oral argument would assist the Court in understanding the

facts, analyzing the applicable legal issues in the context of those facts and

ultimately deciding the case.

vi
 ISSUES PRESENTED

Issue One

Whether there is a valid and enforceable arbitration agreement?

A. Whether Appellant AAU’s promise to arbitrate was illusory given that
the arbitration agreement does not contain a “savings clause” requiring
notice of modifications or termination and requiring that AAU can amend or
terminate the agreement prospectively only?
B. Whether there is a valid arbitration agreement between AAU and
Appellee given that Appellee is a non-signatory in his individual capacity
and he did not agree to arbitrate this dispute.
C. Whether, under agency principles and/or the doctrine of equitable
estoppel, Appellants Paul Campbell, Rod Seaford, and Charles Oliver can
seek enforcement of an arbitration agreement contained in a contract to
which they were not signatories?
1. Whether Appellants Paul Campbell, Rod Seaford, and Charles
Oliver can, under agency theory, seek enforcement of an arbitration
agreement between AAU and Appellee, given that the contract
containing the arbitration agreement expressly provides that they are
not agents of AAU; the claims asserted against them are substantively
against them, not the AAU; and Appellee is not, in his individual
capacity, a signatory to the arbitration agreement?

2. Whether Appellants Paul Campbell, Rod Seaford, and Charles
Oliver can, under the doctrine of equitable estoppel, seek enforcement
of an arbitration agreement between AAU and Appellee, given that
Appellee’s claims arise from general obligations imposed by tort law
and Appellee is not seeking, through his claims, to derive a direct
benefit from the contract containing the arbitration provision?

vii
 Issue Two

Whether Appellee’s claims against Appellants are outside the scope of the

arbitration agreement and arise from general obligations imposed by tort law given

that Appellee’s clams are for negligence, intentional infliction of emotional

distress, and defamation based on Appellants’ act of publicly removing Appellee

from a track-meet and publicly accusing him of sexual assault without any

investigation or purposeful inquiry into the matter?

Issue Three

Whether the arbitration agreement in question is unconscionable given that

the agreement is illusory as the promise to arbitrate was not mutual, the agreement

provides insufficient remedies as it prohibits an award of punitive or exemplary

damages, and the costs imposed by the arbitration agreement are excessive and

effectively prevent Appellee from asserting his rights in an arbitration proceeding?

viii
 STATEMENT OF FACTS

Amateur Athletic Union of the United States, Inc. (“AAU”) is a non-profit

volunteer sports organization. (CR: 3). At all times relevant, Paul Campbell was a

volunteer Junior Olympic Event Director for AAU. (CR: 3). At all times relevant,

Charles Oliver was a volunteer Meet Director for AAU. (CR: 3). At all times

relevant, Rod Seaford was a volunteer Chair of the AAU’s National Board of

Review. (CR: 3).

In August 2012, AAU was holding a track-meet in Houston, Texas.

Campbell and Oliver were in attendance and acting in the course and scope of their

respective AAU roles. (CR: 3). Bray, a 30-year volunteer for AAU, including

national, regional, and district volunteer services, was working the event. (CR: 3).

Bray’s job assignment was with the Jury of Appeals, which was tasked with

making final decisions on any protests at the track-meet. (CR: 3).

On or about August 03, 2012, Bray was sitting in the protest/media area

having a discussion with a Mr. Marv Allen when an unidentified woman squeezed

her way in between where Mr. Allen and Bray were seated. (CR: 3). The

unidentified woman bumped Bray’s knee and almost stepped on his foot; and as

she did so, Bray raised his arm to prevent injury and through no fault of his own

made contact with the woman’s body. (CR: 3). Several people were in the room

1
when this occurred. (CR: 3). The woman, later identified to be Louis Buckner,

had no business being in the protest/media room, and did not belong in the room.

(CR: 3).

Oliver told the woman to contact the police department and file a charge.

Moments after the incident, Campbell, in front of approximately 10 people,

including other AAU volunteers, several police officers, and certain media

personality, stated that Bray was being charged with sexual assault. (CR: 3).

Campbell further stated in front of said persons that Bray’s AAU membership was

immediately terminated, that Bray was no longer affiliated with the AAU, and that

Bray would receive removal procedures in the mail. (CR: 3-4). Bray requested

that Campbell speak with any one or all of the several persons present in the room

when the incident occurred to get the facts of the incident, but Campbell refused to

accept any statements from those persons. (CR: 4). Campbell and Oliver coerced

Mr. Marv Allen to make false statements against Bray, statements which Mr. Allen

later recanted. (CR: 4).

Bray was escorted from the premises by police officers. (CR: 4). As he was

being escorted out by police officers, Bray noticed that Oliver was standing nearby

with a smirk on his face and that Campbell gave Oliver a nod. (CR: 4). Campbell

was heard telling Charles that “we finally got him”. (CR: 4).

2
 Bray was charged with the criminal offense of “assault by contact”. The

charge was dismissed. (CR: 4).

Bray submitted written complaints against Campbell and Oliver to the AAU

National Board of Review (“Board”). (CR: 4). The Board, chaired by Defendant

Rod Seaford, failed to exercise its powers and investigate Bray’s claims, and

dismissed Bray’s claims. (CR: 4). The Board stated that Bray “declined to

participate”, despite the fact that Bray never received any documentation

requesting participation. (CR: 4).

Bray appealed the Board’s dismissal to the AAU National Board of Appeals.

Over eleven (11) months later on July 24, 2013, the Board of Appeals sustained the

decision of the Board of Review. (CR: 4).

As a result of Campbell’s, Oliver’s, and Seaford’s acts and/or omissions,

Bray’s character, integrity, reputation, and livelihood, including his 30 years of

dedicated and decorated service to the AAU, have been damaged. (CR: 5). Bray

received numerous phone calls from AAU associates inquiring if he was guilty of

sexual assault. (CR: 5). Bray ran for the elected position of National Second Vice-

President of the AAU and received the lowest amount of votes. (CR: 5). Bray also

suffered physical injuries and mental anguish because of Campbell’s, Oliver’s, and

Seaford’s acts and/or omissions. (CR: 5).

3
 SUMMARY OF THE ARGUMENT

The trial court did not err in denying Appellants’ motion to compel

arbitration because Appellants did not establish that the arbitration agreement in

question is a valid and enforceable agreement. The arbitration agreement is not

valid and enforceable. The agreement is illusory because Appellant AAU had the

unilateral and unrestricted right to modify or terminate the arbitration agreement

without notice to Appellee and without limiting modifications or termination to

operate prospectively only. There was, and is, no mutual agreement to arbitrate.

Appellee did not sign the arbitration agreement in his individual capacity and did

not agree to arbitrate this dispute – a dispute arising from certain AAU members’

defamation of Plaintiff, for which AAU may be liable under the theory of

respondeat superior.

Appellants Paul Campbell, Rod Seaford, and Charles Oliver cannot compel

arbitration under the alleged arbitration agreement between AAU and Appellee

based on agency law. The contract containing the arbitration agreement expressly

provides that they are not agents of AAU. Appellee’s claims against them are tort

claims that are substantively against them, not the AAU. And Appellee is not a

signatory to the arbitration agreement in his individual capacity.

Appellants Paul Campbell, Rod Seaford, and Charles Oliver cannot compel

4
arbitration under the alleged arbitration agreement between AAU and Appellee

based on equitable estoppel. Appellee’s claims arise from general obligations

imposed by tort law. Appellee is not seeking, through his claims, to derive a direct

benefit from the contract containing the arbitration provision.

Appellee’s claims are outside the scope of the arbitration agreement and

arise from general obligations imposed by tort law.

The arbitration agreement is unconscionable. The promise to arbitrate was

not mutual, the agreement provides insufficient remedies, and the costs

imposed by the arbitration agreement effectively prevent Appellee from asserting

his rights in an arbitration proceeding.

5
 STANDARD OF REVIEW

In an interlocutory appeal from an order denying a motion to compel

arbitration, the reviewing court applies an abuse of discretion standard. Cleveland

Constr., Inc. v. Levco Constr., Inc., 359 S.W.3d 843, 85 (Tex. App.-Houston [1st

Dist.] 2012, pet. dism'd) (explaining standards of review for arbitration appeals).

The reviewing court defers to the trial court's factual determinations and reviews

questions of law de novo. Id.

While a strong presumption favoring arbitration exists, the presumption

arises only after the party seeking to compel arbitration proves that a valid

arbitration agreement exists. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227

(Tex. 2003). In deciding whether a party has met its initial burden, the reviewing

court does not resolve doubts or indulge a presumption in favor of arbitration. Id.

Rather, “the presumption arises only after the party seeking to compel arbitration

proves that a valid arbitration agreement exists.” Id.

When, as in the instant case, no findings of fact or conclusions of law were

filed, the reviewing court must uphold the trial court's decision if there is sufficient

evidence to support it on any legal theory asserted. In the Interest of W.E.R., 669

S.W.2d 716, 717 (Tex. 1984) (per curiam) (citing Lassiter v. Bliss, 559 S.W.2d

353, 356 (Tex. 1977)).

6
 ARGUMENT AND AUTHORITIES

I. The trial court did not err in denying Appellants’ motion to compel
arbitration because the arbitration agreement is not valid and enforceable.1

A. The arbitration agreement is not valid because AAU’s promise to
arbitrate is illusory given that the arbitration agreement does not
contain a “savings clause” requiring notice of modifications or
termination and requiring that AAU can amend or terminate the
agreement prospectively only.

“A contract must be based upon a valid consideration or mutuality of

obligation.” In re C & H News Co., 133 S.W.3d 642, 647 (Tex. App.-Corpus

Christi 2003, orig. proceeding). “When illusory promises are all that support a

purported bilateral contract, there is no mutuality of obligation and, thus, there is

no contract.” Id. If one party to the agreement can avoid its promise to arbitrate

by amending the provisions or terminating it altogether, the agreement is illusory

and unenforceable. Id. at 646 (concluding agreement was illusory because it

contained provision giving employer the ability to modify or delete provisions as

the employer deemed appropriate, with or without prior notification to employees);

In re Odyssey Healthcare, Inc., 310 S.W.3d 419, 424 (Tex. 2010) (citing In re

Halliburton Co., 80 S.W.3d 566, 570 (Tex. 2002)); Tenet Healthcare Ltd. v.

Cooper, 960 S.W.2d 386, 386–88 (Tex. App.-Houston [14th Dist.] 1998, pet.

1
A party seeking to compel arbitration under the FAA must establish: (1) the existence of a valid,
enforceable arbitration agreement, and (2) that the claims at issue fall within the agreement's
scope. In re FirstMerit Bank, 52 S.W.3d 749, 753 (Tex. 2001) (orig. proceeding).

7
dism'd w.o.j.) (holding arbitration agreement contained in employee handbook was

not supported by consideration where the employer “reserve[ed] the right to

amend, supplement, or rescind any provisions of the handbook as it deem[ed]

appropriate in its sole and absolute discretion”); J.M. Davidson, Inc. v. Webster,

128 S.W.3d at 230 n.2 (noting most courts have found illusory any contract

allowing one party to unilaterally avoid arbitration).

The Texas Supreme Court, in Halliburton, first addressed the argument that

an arbitration agreement was illusory. In re Halliburton Co., 80 S.W.3d 566, 568

(Tex. 2002); see also Nabors Drilling USA, L.P., v. Pena, 385 S.W.3d 103 (Tex.

App.-San Antonio 2012, pet. denied) (discussing Halliburton and its progeny). In

Halliburton, the employer had an alternative dispute resolution program that

required both it and its employees to submit all employment-related disputes to

arbitration. Id. at 568. The terms of the arbitration agreement included the

employer's right to modify or discontinue the program. Id. at 569–70. The terms

required the employer to give its employees notice of changes to the agreement.

Id. The terms made any amendments apply only prospectively. Id. The court held

that the agreement was not illusory because it contained a savings clause that

required notice of any modification or termination and any amendments to the

agreement would apply prospectively only. Id. at 569–70. The court held that the

8
mutual promises to submit employment disputes to arbitration constituted

sufficient consideration because both parties were bound to the promises to

arbitrate. Id. at 569. Thus, because the employer could not avoid its promise to

arbitrate by amending the provision or terminating it altogether, the court upheld

the agreement. Id. at 570.

Since Halliburton, the Texas Supreme Court has consistently held that when

an arbitration agreement contains a “savings clause” that requires notice to

employees and makes any modification or termination operate prospectively only,

it is not an illusory agreement. Nabors Drilling, 385 S.W.3d at 107 (citing In re

Polymerica, LLC, 296 S.W.3d 74, 76 (Tex. 2009) (orig. proceeding) and In re

Odyssey Healthcare, Inc., 310 at 424).

In C&H News Co., the court concluded that the arbitration agreement in

question was illusory and unenforceable. In re C & H News Co., 133 S.W.3d at

647. In C&H News Co., the arbitration agreement incorporated, by reference, the

employee handbook. Id. at 646. The handbook provided that the content therein

may be “changed, modified, deleted or amended from time to time as deem[ed]

appropriate [by the employer], with or without prior notification to employees.”

Id. The court concluded that the arbitration agreement was illusory because the

employer reserved the right to unilaterally amend the types of claims covered by

9
the agreement. Id. at 647. In other words, the court found the arbitration

agreement illusory because there was no savings clause to make the promise to

arbitrate mutual. See id. The court held that the trial court did not abuse its

discretion in refusing to compel the employee to arbitrate. Id.

Here, AAU has the unilateral and unrestricted right to amend or terminate

the arbitration agreement and avoid its promise to arbitrate. Unlike Halliburton,

the arbitration agreement contained in the AAU National Policies has no provision

requiring AAU to amend or terminate prospectively only. (CR: 41-80). The AAU

National Policies does not require notice to employees/volunteers of any

modification or termination of the arbitration agreement. (CR: 41-80). As it

stands now, the arbitration agreement bars recovery of exemplary or punitive

damages. (CR: 42). As it stands now, the arbitration agreement limits the statute

of limitations to bring a claim to one year. (CR: 42). AAU could have and can at

any time unilaterally change these and other provisions, or add additional

provisions. AAU could have and can modify or eliminate other legal rights. AAU

could have and can unilaterally change the arbitration venue to another county,

city, or even state. AAU could have and can make only claims brought against it

subject to arbitration. AAU could have and can eliminate the agreement altogether

and pursue judicial action if it so chooses. AAU can pick and choose the claims it

10
wants to arbitrate. See In re C & H News Co., 133 S.W.3d at 647 (finding

arbitration agreement illusory and thus invalid where the employer could, among

other things, “pick and choose” the claims it wanted to arbitrate). AAU can add

to, subtract from, modify, or amend the agreement in many other ways if it so

chooses. In fact, AAU has amended the arbitration clause twice, once in October

2006 and then in March 2009. (CR: 42). And, in October of 2007, AAU added a

provision denying participation in the AAU for members who file litigation rather

than arbitration, despite the issue of the invalidity, unenforceability, and unilateral

nature of the arbitration agreement. (CR: 43). AAU’s amendments and addition to

the National Policies were done absent any notice or prospective-only

requirements. What is to stop AAU from changing the rules in the middle of

arbitration if the Court decides in favor of Appellants? See Hooters of Am., Inc. v.

Phillips, 173 F.3d 933, 939 (4th Cir.1999) (arbitration agreement unenforceable in

part because Hooters reserved the right to modify the rules without notice and

“[n]othing in the rules even prohibit[ed] Hooters from changing the rules in the

middle of an arbitration proceeding.”).

Without a savings clause to make the promise to arbitrate mutual, AAU’s

“agreement” to arbitrate is illusory. The trial court did not err in denying

Appellants’ motion to compel arbitration.

11
 B. There is no valid arbitration agreement between AAU and Appellee
because Appellee is a non-signatory in his individual capacity and he
did not agree to arbitrate this dispute.

Under the FAA, ordinary principles of state contract law determine whether

there is a valid agreement to arbitrate. In re Kellogg Brown & Root, Inc., 166

S.W.3d 732, 738 (Tex. 2005). Although the FAA does not expressly require the

agreement to be signed by the parties, a party seeking to enforce a purported

arbitration agreement must establish that the parties agreed to arbitrate the dispute.

In re Big 8 Food Stores, 166 S.W.3d 869, 876 (Tex. App.—El Paso 2005, orig.

proceeding).

Here, Appellee signed two documents in the record and before this Court.

One of the documents states that submission of the document binds Officers to the

AAU Code, and the other document states that submission binds the South Texas

District to the AAU Code. (CR: 81-86). But, Appellee signed the documents only

in his capacity as Governor of the South District. There is no document in the

record and before this Court where Appellee has signed in his individual capacity

and/or agreed to arbitrate in his individual capacity. And AAU has not established

that Appellee agreed to arbitrate this dispute – a dispute arising from certain AAU

members’ defamation of Plaintiff, for which AAU may be liable under the theory

of respondeat superior. The trial court did not err in denying Appellants’ motion

12
to compel arbitration.

C. Appellants Paul Campbell, Rod Seaford, and Charles Oliver
cannot compel arbitration based on agency law or equitable estoppel
principles.

Texas courts have recognized six theories arising out of common principles

of contract and agency law that may bind non-signatories to arbitration

agreements: (1) incorporation by reference; (2) assumption; (3) agency; (4) alter

ego; (5) equitable estoppel, and (6) third-party beneficiary. In re Kellogg Brown &

Root, Inc., 166 S.W.3d at 739. Here, Appellants assert that they can compel

arbitration under the theories of agency and equitable estoppel. Each of these two

theories, neither of which requires arbitration in this case, are discussed separately

below.

1. Appellants Paul Campbell, Rod Seaford, and Charles
Oliver cannot compel arbitration based on agency given that the
contract containing the arbitration agreement expressly provides that
they are not agents of AAU; the claims asserted against them are
substantively against them, not the AAU; and Appellee is not, in his
individual capacity, a signatory to the arbitration agreement.

Because of the arbitration agreement in question and the parties involved in

this case, the agency issue before the Court is unique and important. This is not a

typical case where certain parties negotiate and sign a contract containing an

arbitration agreement, and then one of the parties compels the other party’s

officer(s) or agent(s) to arbitrate a dispute under or arising from the contract.

13
Instead, here, certain volunteers, by virtue of their membership as volunteers, each

(allegedly) have an arbitration agreement with the corporation for which they are

all volunteering; and then one of the volunteers compelled another volunteer to

arbitrate a dispute that occurred while “on the clock” with the corporation. If the

Court were to decided in favor of Appellants under this scenario, the Court’s

decision would be detrimental to Texas’ volunteers and employees as they would

be required to arbitrate any and all disputes, no matter how personal in nature,

against their co-volunteers/employees if the company/employer has an

organizational-wide arbitration agreement. Arbitration agreements would become

easier to enforce than other contracts, contrary to the FAA's purpose. As such, a

summary of the relevant law is required.

Courts have held that plaintiffs who had signed arbitration agreements could

be compelled to arbitrate their disputes with nonsignatory defendants. In re Vesta

Insurance Group, Inc., 192 S.W.3d 759 (Tex. 2006); In re Kaplan Higher Educ.

Corp., 235 S.W.3d 206, 209 (Tex. 2007) (orig. proceeding).

In Vesta, an insurance company and an independent agent agreed to arbitrate

any dispute “under or with respect to” their contract. Vesta, 192 S.W.3d at 760.

The insurance company terminated the contract, and the independent agent was

replaced with another agent. Id. at 761. Instead of litigating or arbitrating the

14
matter against the other signatory to the arbitration agreement, i.e. the insurance

company, the independent agent filed a tortious interference claim against the non-

signatory agent that replaced him, two of said agent’s affiliates, and the insurance

company’s parent company and two of its corporate officers. Id. The court,

noting the rule that “nonparties generally must arbitrate claims if liability arises

from a contract with an arbitration clause, but not if liability arises from general

obligations imposed by law”, held that “tortious interference claims between a

signatory to an arbitration agreement and agents or affiliates of the other signatory

arise more from the contract than general law, and thus fall on the arbitration side

of the scale.” Id. at 761-62. The court concluded that the non-signatory agents,

officers, and affiliates could invoke the arbitration clause because the independent

agent could not avoid his agreement to arbitrate by bringing a tortious interference

claim against them instead of a contract claim against the other signatory to the

contract. See id. at 762-63. The court reasoned that (1) every contract claim

against a corporation could be recast as a tortious interference claim against its

agents, making it easier to avoid arbitration clauses than other clauses of a contract,

contrary to the FAA's purpose; and (2) requiring arbitration of such claims

complies with the rule that the courts “look first to whether the parties agreed to

arbitrate a dispute.” Id. at 762.

15
 In Kaplan, students of a vocational college, a subsidiary of Kaplan Higher

Education Corporation (“Kaplan”), agreed to arbitrate any dispute “arising from or

relating to” their enrollment agreement. Kaplan, 235 S.W.3d at 208. The students'

enrollment agreement was signed by the students, the college, and the president of

the college. Id. Kaplan and the admissions director were not signatories to the

agreement. Id. The students filed a lawsuit against Kaplan, the college, and the

college’s president and admissions director. Id. at 208. The students’ claims,

although alleged as negligence, negligence per se, violations of the DTPA, and

negligent misrepresentation, were substantively a claim for fraudulent inducement.

Id. The defendants moved for arbitration. Id. The students, hoping to avoid

arbitration, dismissed their claims against the two signatories, leaving only their

claims against the two non-signatories. See id. The court held that the two non-

signatory agents could invoke the arbitration agreement. Id. at 209. The court,

citing Vesta, stated that “one cannot avoid [arbitration] by recasting a contract

dispute as a tortious interference claim against an owner, officer, agent, or affiliate

of the other [party to the contract].” Id. Like the court in Vesta, the court reasoned

that (1) “almost every contract claims against a corporation could be recast as

fraudulent-inducement claims against the agents or employees who took part in

negotiating the contract; and (2) because “a contracting party generally cannot

16
avoid unfavorable clauses by suing the other party's agents, this rule is necessary

‘to place arbitration agreements on equal footing with other contracts.’” Id.

(quoting E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 293, (2002)). The court

went on to state:

We emphasize again today that arbitration clauses do not
automatically cover all corporate agents or affiliates.
Like other contracts, arbitration agreements are enforced
according to their terms and according to the intentions
of the parties. Thus, for example, owners may not be able
to invoke a subsidiary's arbitration clause when they act
on their own behalf rather than for their subsidiary. But
when an agreement between two parties clearly provides
for the substance of a dispute to be arbitrated, one cannot
avoid it by simply pleading that a nonsignatory agent or
affiliate was pulling the strings.

Id. at 210 (internal citations and quotations omitted).

In Roe, the court explained that the decision in Vesta (and by implication

Kaplan) was based on principles of equitable estoppel. Roe v. Ladymon, 318

S.W.3d 502, 520 (Tex. App.-Dallas 2010, no pet.). The court explained that the

proposition for which Vesta (and Kaplan) stand for—that “a signatory plaintiff

cannot avoid its agreement to arbitrate disputes simply by bringing claims against

the [nonsignatory] officers [or] agents of the other signatory to the contract”—is

based on estoppel principles because it essentially involves holding the plaintiff to

his agreement to arbitrate. Id.; DK Joint Venture 1 v. Weyand, 649 F.3d 310, 315

17
(5th Cir.2011). The court stated that “[t]he Vesta court recognized that estoppel

principles may require a nonparty to arbitrate if it seeks through its claim to obtain

a direct benefit from the contract containing the arbitration clause.” Roe, 318

S.W.3d at 520 (citing Vesta, 192 S.W.3d at 762-63).

In Roe, a homeowner pursued arbitration against a contractor business and a

partner of the business. Id. at 507-08. The partner signed the contract not in his

individual capacity but rather in his capacity as a partner. Id. at 507. The

homeowner, citing Vesta, argued that because the partner was an agent or

representative of the contractor business whom entered into the arbitration

agreement, and “agents and representatives of parties to contracts containing

arbitration clauses are properly bound to arbitrate with the entity that signed the

agreement,” arbitration was therefore proper. Id. at 520. The court disagreed. Id.

The court explained that “by signing the contract as an agent for a disclosed

principal, the partner did not become personally bound by the terms of that

contract, including the arbitration clause.” Id. at 521. The court, recognizing that

Vesta was based on estoppel principles and involved a signatory resisting

arbitration, held that it matters whether the party resisting arbitration is a signatory

or non-signatory. See id. at 520-21; DK Joint Venture, 649 F.3d at 215. Thus,

since the party resisting arbitration, i.e. the partner, did not sign the agreement to

18
arbitrate in his individual capacity, the court found that there was no “basis to

‘estop’ him from refusing to arbitrate because he never agreed to arbitrate.” Id. at

520–21.

In DK Joint Venture, the plaintiffs pursued arbitration against certain

corporations and the CEO and CFO who controlled them. DK Joint Venture, 649

F.3d at 313. The plaintiffs alleged that the defendants had committed fraud, breach

of contract, breaches of fiduciary duty, and other wrongs in order to induce the

plaintiffs to invest money in a purported oil and gas venture. Id. The plaintiffs

relied on arbitration provisions that were contained in contracts between the

plaintiffs and the defendant corporations. Id. The court stated that “the fact that

the defendant corporations entered into the contracts containing the arbitration

agreement did not cause their agents, the CEO and CFO, who acted only as

officers on behalf of the corporations, to be personally bound by those agreements.

Id. at 314. The court held that because the CEO and CFO, i.e. the parties resisting

arbitration, were not signatories in their individual capacity, they never personally

agreed to arbitrate and were not bound by the arbitration agreements. Id. at 317.

Here, Appellants Paul Campbell, Rod Seaford, and Charles Oliver

(hereinafter the “Individual Appellants”) admit they are non-signatories to the

arbitration agreement. (Appellants’ Brief at pg. 5). There is no evidence in the

19
record and before this Court showing otherwise. As such, the Individual

Appellants contend that they are agents of the AAU and can therefore invoke the

AAU’s arbitration agreement and compel Appellee to arbitrate. However, to start

with, the Individual Appellants are not AAU’s agents. The AAU National

Policies, which contain the arbitration agreement, expressly states that the

Individual Appellants are not AAU’s agents:

Agency. Membership in the AAU does not create an
agency relationship . . . . Members shall not represent
themselves to be agents of the AAU without specific
written authorization from the National AAU. Acts of an
AAU member not related to a sanctioned AAU event are
not authorized by the AAU and therefore no agency
relationship is created thereby.

(CR: 45) (emphasis in original).

Because the AAU National Policies expressly provides that its members are not its

agents, the Individual Appellants cannot invoke the (alleged) arbitration agreement

between AAU and Appellee. The Individual Appellants cannot claim the direct

benefit of arbitration as agents of AAU when they have expressly agreed that they

are not agents of AAU. The AAU National Policies also includes a Defense

Policy, which provides that it is AAU’s policy “to defend the National and District

Officers, members and volunteers, or other appropriate persons from civil actions

arising from their authorized activity on behalf of the AAU.” (CR: 52). AAU and

20
the Individual Appellants are currently represented by the same counsel,

presumably under this policy. To the extent AAU is seeking arbitration on behalf

of the Individual Appellants, presumably to fit its joint legal representation and the

advantages that come with such an arrangement, AAU should be estopped. AAU

should not be allowed to disclaim its members as agents and at the same time

assert agency law for those same members to AAU’s benefit.

The Individual Appellants rely on Vesta and Kaplan for their contention that

they, as alleged agents of the AAU, can compel Appellee to arbitrate. Neither

Vesta nor Kaplan requires that this case be arbitrated. Both Vesta and Kaplan

involved plaintiffs trying to avoid their respective agreement to arbitrate by

recasting claims that were truly and substantively contract claims against the other

signatory to the contract as tortious interference and fraudulent-inducement claims

against non-signatory officers or agents. The plaintiffs were equitably estopped

from doing such. Here, Appellee is not recasting claims against the AAU as

claims against the Individual Appellants. Appellee’s tort claims are unrelated to

the AAU National Policies and are substantively against the Individual Appellants.

(CR: 1-9). Appellee’s claims can be summarized as follows:

Negligence:

 Appellants Campbell and Oliver breached their duty of care and
were negligent by (1) unilaterally and publicly removing Plaintiff
21
 from the track-meet, and (2) accusing Plaintiff of sexual assault
without any investigation or purposeful inquiry. (CR: 5).

Intentional Infliction of Emotional Distress:

 Appellants Campbell and Oliver intentionally or recklessly accused
Plaintiff of sexual assault and publicly stripped Plaintiff of his AAU
membership and removed him from the track-meet. (CR: 6).
 Appellant Seaford intentionally or recklessly damaged Plaintiff’s
reputation by dismissing Plaintiff’s complaint made to the AAU
Board without any investigation, thus perpetuating the damage to
Plaintiff’s reputation. (CR: 6).
Defamation:
 Appellant Campbell made false and defamatory statements regarding
Appellee, including statements falsely charging Appellee with the
commission of a crime, i.e. sexual assault. (CR: 6).
Aiding & Abetting
 Appellant Campbell’s actions accomplished a tortious result.
Appellants Oliver and Seaford knew of Campbell’s tortious conduct
and assisted, encouraged, and/or participated in accomplishing the
tortious result. (CR: 7)
Conspiracy:
 Appellants Campbell, Seaford, and Oliver committed conspiracy.
They conspired to defame Appellee and remove him from the AAU
and/or to harm his status and elected position in the AAU. (CR: 7).

Unlike Vesta and Kaplan, there is no basis to estop Appellee from refusing

22
to arbitrate. Appellee’s claims are not claims against the AAU recast as claims

against the Individual Appellants. (See CR: 1-9). Appellee is not seeking through

his claims to obtain a direct benefit from the contract containing the arbitration

clause. (See CR: 1-9). Appellee is not trying to avoid arbitration by alleging that

the non-signatory Individual Appellants were “pulling the strings” of a contract

between Appellee and AAU. (See CR: 1-9). Appellee’s claims are substantively

against the Individual Appellants. (See CR: 1-9). Appellee’s right to recover and

his damages do not depend on the AAU National Policies. (See CR: 1-9).

Appellee included AAU in the lawsuit based on the theory of respondeat superior,

and is not suing AAU based on agency law for acts allegedly done in an agency

capacity. (CR: 5-7). Although Appellee, in his Original Petition, very briefly

mentions that Appellant Charles Oliver has, in the past, violated the AAU Athletic

Handbook, such is not the basis or substance of Appellee’s claims. (CR: 4-5). It is

clear from Appellee’s Original Petition that the claims are independent from the

AAU Athletic Handbook. (CR: 1-9). More notably, this short, two-sentence

paragraph is the only mention of the AAU Athletic Handbook. (CR: 1-9). And

even more notably, this is not a reference to the AAU National Policies which

contains the arbitration agreement in question. The only arguable reference to the

AAU National Policies is Appellee’s reference to the AAU Board of Review and

23
Board of Appeals, which are contained in the Judicial Procedures and Rules of the

AAU National Policies. (CR: 4; 64-65). However, the references are simply an

explanation that Appellee exhausted the administrative procedures of the AAU

prior to filing suit. (CR: 4). Appellee is not relying on the Judicial Procedures and

Rules of the AAU National Policies to support his tort claims. (See CR: 1-9).

Furthermore, like the parties resisting arbitration in Roe and DK Joint

Venture, who were not signatories in their individual capacity and thus were not

bound by the arbitration agreements, Appellee is a non-signatory in his individual

capacity and is not bound by the arbitration agreement. There are two documents

in evidence and before the Court with Appellee’s signature: a Governance of

Districts form and a District Request and Consent form. (CR: 81 and 86). While

the first document states that submission of the document binds Officers to the

AAU Code, Appellee signed the documents only in his capacity as Governor of the

South Texas District. (CR: 81). The second document, also signed by Appellee

only in his capacity as Governor, states that submission of the document binds the

South Texas District to the AAU Code. (CR: 86). There is no document in

evidence and before this Court where Appellee has signed in his individual

capacity and/or agreed to arbitrate claims pursued in his individual capacity against

the Individual Appellants. See Covington v. Aban Offshore Ltd., 650 F.3d 556,

24
560 (5th Cir. 2011) (“Arbitration is strictly a matter of contract. If a party has not

agreed to arbitrate, the courts have no authority to mandate that he do so.”)

(quoting Bel–Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435 (3d Cir.1999)).

Moreover, the arbitration agreement here is distinguishable from all the

aforementioned cases, re-enforcing Appellee’s right to refuse to arbitrate. Here,

Appellee is not a signatory, in his individual or official capacity, to a contract for

which the Individual Appellants are parties or agents. There are essentially four

(alleged) different contracts or volunteer membership agreements—one between

AAU and Appellee, one between AAU and Appellant Campbell, one between

AAU and Appellant Oliver, and one between AAU and Appellant Seaford. In

essence, the Individual Appellants are attempting to compel their co-volunteer,

Appellee, to arbitrate under a contract Appellee has with the AAU because the

Individual Appellants also have a contract with the AAU. Simply stated, a

volunteer or employee cannot force a co-volunteer or co-employee to arbitrate a

matter simply because they each have an arbitration agreement with the same

employer. Such would go against ordinary state law contract principles. See Roe,

318 S.W.3d at 512-513 (“[W]hen deciding whether the parties agreed to arbitrate a

certain matter, courts should apply ordinary state-law principles governing the

formation of contracts . . . .”). If arbitration were to be forced under such

25
circumstances, Texas employees and volunteers would be required to arbitrate any

and all disputes, no matter how personal in nature, against their co-volunteers if the

organization has a company-wide arbitration agreement between it and its

volunteers. Arbitration agreements would become easier to enforce than other

contracts, contrary to the FAA's purpose. See Vesta, 192 S.W.3d at 762 (“‘The

FAA directs courts to place arbitration agreements on equal footing with other

contracts.’” “Accordingly, we must avoid any rule that makes it easier to avoid

arbitration clauses than other clauses of a contract.”) (quoting E.E.O.C. v. Waffle

House, Inc., 534 U.S. 279, 293 (2002); In re Kellogg Brown & Root, Inc., 166

S.W.3d 732, 740-41 (Tex. 2005) (holding that a first-tier subcontractor could not

compel the second-tier subcontractor to arbitrate based on arbitration agreement

contained in the contract between the first-tier subcontractor and general

contractor, despite the fact that the work performed by the second-tier

subcontractor was inherently related to and defined by the contract, because “if

[such] relationship were a sufficient basis for binding a non-signatory

subcontractor, arbitration agreements would become easier to enforce than other

contracts, counter to the FAA's purpose.”). Moreover, allowing volunteers to

invoke their organization’s arbitration agreement against their co-volunteers would

allow forum shopping.

26
 Because Appellee is not recasting a contract claim against AAU as a claim

against the Individual Appellants, there is no basis to estop Appellee from refusing

to arbitrate. Because Appellee is not a signatory in his individual capacity, he

never personally agreed to arbitrate and is not bound by the arbitration agreement.

The Individual Appellants are not parties or agents to the alleged arbitration

agreement between AAU and Appellee. In sum, as non-signatories, Appellants

have failed to support an agency theory which could force Appellee to arbitrate in

the absence of an agreement. The trial court did not abuse its discretion in denying

Appellants’ motion to compel arbitration.

2. Appellants Paul Campbell, Rod Seaford, and Charles Oliver
cannot compel arbitration based on equitable estoppel given that
Appellee’s claims arise from general obligations imposed by tort law
and Appellee is not seeking, through his claims, to derive a direct
benefit from the contract containing the arbitration provision.

The doctrine of equitable estoppel allows a nonsignatory party to compel

arbitration in two situations. Merrill Lynch Trust Co. FSB v. Alaniz, 159 S.W.3d

162, 170 (Tex. App.—Corpus Christi 2004) (citing Grigson v. Creative Artists

Agency, L.L.C., 210 F.3d 524, 527 (5th Cir.2000). “First, equitable estoppel

applies when the signatory to a written agreement containing an arbitration clause

must rely on the terms of the written agreement in asserting its claims against the

nonsignatory. Second, application of equitable estoppels is warranted when the

27
signatory to the contract containing an arbitration clause raises allegations of

substantially interdependent and concerted misconduct by both the nonsignatory

and one or more of the signatories to the contract.” Id. Only the first situation is

relevant and at issue here.

The Texas Supreme Court has held that a person who seeks by his claim to

derive a direct benefit from the contract containing the arbitration provision may

be equitably estopped from refusing arbitration. Meyer v. WMCO–GP, LLC, 211

S.W.3d 302, 305 (Tex. 2006) (citing In re Vesta Insurance Group, Inc., 192

S.W.3d 759, 761–62 (Tex. 2006)). “[A]lthough a non-signatory's claim may relate

to a contract containing an arbitration provision, that relationship does not, in itself,

bind the non-signatory to the arbitration provision.” In re Kellogg Brown & Root,

Inc., 166 S.W.3d at 741. “Instead, a non-signatory should be compelled to

arbitrate a claim only if it seeks, through the claim, to derive a direct benefit from

the contract containing the arbitration provision.” Id. Equitable estoppel allows a

non-signatory to compel arbitration when the signatory to a written agreement

containing an arbitration clause must rely on the terms of the written agreement in

asserting its claims against the non-signatory. Grigson v. Creative Artists Agency

L.L.C., 210 F.3d 524, 526 (5th Cir.2000).2 Nonparties generally must arbitrate

2
“Although state law determines the validity of an arbitration agreement, courts have applied
both federal and state law to determine the related, but distinct, issue of whether non-signatory

28
claims if liability arises from a contract with an arbitration clause, but not if

liability arises from general obligations imposed by law. Vesta, 192 S.W.3d at

761. “When a party's right to recover and its damages depend on the agreement

containing the arbitration provision, the party is relying on the agreement for its

claims. Meyer v. WMCO–GP, LLC, 211 S.W.3d at 307.

In FirstMerit Bank, the non-signatory plaintiffs sued the signatory defendant

for breach of contract and breach of warranty, among other claims. In re FirstMerit

Bank, N.A., 52 S.W.3d 749, 752–53, 755 (Tex. 2001). By bringing the breach-of-

contract and breach-of-warranty claims, the plaintiffs sought benefits that stemmed

directly from the terms of the contract. The court concluded that because the non-

signatory plaintiffs sought to enforce the contract, they “subjected themselves to

the contract's terms, including the Arbitration Addendum.” Id. at 756.

In Kellogg, the non-signatory plaintiff was a second-tier subcontractor. In re

Kellogg Brown & Root, Inc., 166 S.W.3d at 736. The plaintiff sued the signatory

plaintiffs should be compelled to arbitrate their claims.” In re Kellogg Brown & Root, Inc., 166
S.W.3d at 738. The FAA does not specify whether state or federal law governs the
determination of whether a non-signatory can compel arbitration or be compelled to arbitrate,
and the United States Supreme Court has not directly addressed the issue. Id. In Labatt, the court
stated that until the U.S. Supreme Court addresses this issue it will apply state substantive law
and attempt to keep it consistent with federal law. In re Labatt Food Serv., 279 S.W.3d 640, 643
(Tex. 2009). In Kellogg the court noted that it was “mindful of the extensive body of federal
precedent that has explored the extent to which non-signatories can be compelled to arbitrate”
and it “recognize[d] that it is important for federal and state law to be as consistent as possible in
this area, because federal and state courts have concurrent jurisdiction to enforce the FAA." In re
Kellogg Brown & Root, Inc., 166 S.W.3d at 739.

29
general contractor for breach of contract, and in the alternative, the signatory first-

tier subcontractor for quantum meruit. Id. The contract between the general

contractor and the first-tier subcontractor contained the arbitration clause in

question. Id. Under its estoppel theory, the first-tier subcontractor sought to

compel the plaintiff to arbitrate its claims in the ongoing arbitration between the

first-tier subcontractor and general contractor. Id. The first-tier subcontractor

contended that the non-signatory second-tier subcontractor’s labor and services

were linked inextricably to the contract containing the arbitration agreement. Id. at

740. Although the court agreed that the work performed by the non-signatory

second-tier subcontract was “at the contract's core and that, in performing the

work, [the second-tier subcontractor] relied on the [first-tier] subcontract's

specifications”, the court held that the relationship did not bind the non-signatory

to the arbitration provision. Id. at 740-41. The court held that “a non-signatory

should be compelled to arbitrate a claim only if it seeks, through the claim, to

derive a direct benefit from the contract containing the arbitration provision.” Id.

at 741. The court reasoned that the work to be performed by the second-tier

subcontractor will inherently be related to and defined by the contracts higher in

the chain, and that “if this were a sufficient basis for binding a non-signatory

subcontractor, arbitration agreements would become easier to enforce than other

30
contracts, counter to the FAA's purpose.” Id. at 740.

Here, the factual allegations of Plaintiff’s lawsuit center around general

obligations of law, and the tort claims could stand on their own. (See CR: 1-9).

The tort claims are based on allegations that the Individual Appellants publicly

removed Appellee from the track-meet and publicly accused him of sexual assault

without any investigation or purposeful inquiry into the matter. (CR: 1-9).

Appellee is not a signatory in his individual capacity. (CR: 81 and 86). Appellee’s

claims do not rely on the terms of the AAU National Policies. (CR: 1-9).

Appellee is not seeking, through his claims, to derive a direct benefit from the

AAU National Policies. (CR: 1-9). Appellee’s right to recover and his damages

do not depend on the AAU National Policies. See more-detailed discussion supra

Part I.C.1, pgs. 21-24.

Moreover, like Kellog, if Appelle’s and the Individual Appellants’

relationship as co-volunteers of the AAU was a sufficient basis for binding

Appellee to arbitration for claims against the Individual Appellants, arbitration

agreements would become easier to enforce than other contracts, counter to the

FAA's purpose.

Thus, Appellants, as non-signatories, have failed to support an equitable

estoppel theory which could force Appellee to arbitrate in the absence of a mutual

31
agreement. The trial court did not abuse its discretion in denying Appellants’

motion to compel arbitration.

II. The trial court did not err in denying Appellants’ motion to compel
arbitration because Appellee’s claims are outside the scope of the agreement
and arise from general obligations imposed by tort law.

A motion to compel arbitration should be denied when the dispute is

outside the scope of the agreement to arbitrate. See In re Poly-America, L.P., 262

S.W.3d 337, 348 (Tex. 2008); In re FirstMerit Bank, N.A., 52 S.W.3d at 754-55.

To determine whether a claim falls within the scope of the agreement, courts must

“focus on the factual allegations of the complaint, rather than the legal causes of

action asserted.” Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.

1995).

Under both Texas and federal law, whether a claim seeks a direct
benefit from a contract containing an arbitration clause turns on the
substance of the claim, not artful pleading. Claims must be brought on
the contract (and arbitrated) if liability arises solely from the contract
or must be determined by reference to it. On the other hand, claims
can be brought in tort (and in court) if liability arises from general
obligations imposed by law.

In re Weekley Homes, L.P., 180 S.W.3d 127, 132 (Tex.2005)

An arbitration agreement includes a tort claim if the tort is so interwoven with the

contract that it could not stand alone. Merrill Lynch, Pierce, Fenner & Smith, Inc.

v. Wilson, 805 S.W.2d 38, 39 (Tex. App.—El Paso1991, no writ).

32
 Here, the factual allegations of Plaintiff’s lawsuit center around general

obligations of law, and the tort claims could stand on their own. The substance of

Appelle’s claims shows that he is not seeking to obtain a direct benefit from the

AAU National Polices. See discussion supra at I.C.1 pgs. 21-24. Appellee’s

claims are outside the scope of the agreement, and the trial court did not err in

denying Appellants’ motion to compel arbitration.

III. The trial court did not err in denying Appellants’ motion to compel
arbitration because the agreement is unconscionable given that the promise to
arbitrate was not mutual, the agreement provides insufficient remedies, and
the costs imposed by the arbitration agreement effectively prevent Appellee
from asserting his rights in an arbitration proceeding.3

A court should deny a motion to compel arbitration when the arbitration

agreement in the contract that is subject to arbitration was unconscionable at the

time it was made. Tex. Civ. Prac. & Rem. Code §171.022; See In re Palm Harbor

Homes, Inc., 195 S.W.3d 672, 677 (Tex. 2006). Procedural unconscionability

refers to the circumstances surrounding the actual making of the arbitration

agreement and the bargaining process. Id. Substantive unconscionability refers to

the fairness of the terms and conditions of the arbitration agreement itself. Id.

3
To the extent Appellants rely on an argument that Appellee did not timely present evidence in
the trial court to support his argument that the arbitration agreement in question is
unconscionable, Appellants have waived any such argument as they did not object in the trial
court, and such an issue is not before this Court. See Appellants’ Brief at pg. 16.

33
 Here, the arbitration agreement is procedurally unconscionable because the

agreement was not something that Appellee negotiated, signed and entered into,

but rather an agreement that allegedly automatically applies to him by virtue of his

membership. Because the AAU can unilaterally amend the arbitration agreement,

which it last did in 2009, the terms of the 2009 amended-agreement are the terms

for which Appellee is allegedly bound. Thus, the arbitration agreement sought to

be enforced was created unilaterally by AAU and without notice to Appellee.

The arbitration agreement is substantively unconscionable because the

agreement gave AAU the unilateral and unrestricted right to amend or terminate

the arbitration agreement. The agreement gave AAU the unilateral and

unrestricted right to avoid its promise to arbitrate.

The arbitration agreement is further substantively unconscionable because

the costs imposed by the arbitration agreement are excessive and effectively

prevent Appellee from asserting his rights in an arbitration proceeding. See In re

Olshan Found. Repair Co., 328 S.W.3d 883, 892-93 (Tex. 2010). The costs are

excessive for the following reasons: (1) Appellee is unable to pay the arbitration

fees and costs, (2) the actual amount of the fees compared to the amount of the

underlying claim is excessive, and/or (3) the expected cost differential between

arbitration and litigation is so substantial that Appellee is deterred from asserting

34
his rights in the arbitration proceeding. See In re Olshan Found., 328 S.W.3d at

893-94; see, e.g., Olshan Found. Repair Co. v. Ayala, 180 S.W.3d 212, 215-16

(Tex. App.—San Antonio 2005, pet. denied).

If this lawsuit were to be arbitrated, the AAA’s Commercial Rules would

apply. (Compare CR: 41 with CR: 163). Under those rules, Appellee is required

to pay a filing fee of $750.00 and a final fee of $800.00. (CR: 122 and 150). All

other expenses of the arbitration, including required travel and other expenses of

the arbitrator, AAA representatives, and any witness and the cost of any proof

produced at the direct request of the arbitrator, will be borne equally by Appellee

and Appellants, unless the arbitrator in the award assesses such expenses or any

part thereof against Appellee or Appellants. (CR: 139). Appellee may be required

to deposit his portion of such sums of money in advance of any hearings. (CR:

140). The arbitrator will serve at a rate between $200.00 and $500.00 per hour.

(CR: 163). If compelled to arbitrate, Appellee will also incur miscellaneous

expenses such as travel, hotel, rental car, food, gas, etc. of approximately $600.00.

(CR: 165-168). In sum, with the filing fee of $750.00, the final fee of $800.00, just

40 service hours of the arbitrator (at an average rate of $350 and split between

Appellee and Appellants), and miscellaneous expenses of $600.00, the cost for

Appellee to arbitrate would be over $9,000.00. These costs would be a serious

35
financial burden on Appellee and would effectively prevent Appellee from

asserting his rights in an arbitration proceeding. (CR: 110-111). These costs are

also excessive when compared to Appellee’s out-of-pocket medical expenses and

other economic damages, which likewise total approximately $9,000.00. (See CR:

110-111). Moreover, the arbitration agreement purportedly allows Defendants to

recover consequential damages that they would not otherwise be able to recover.

(CR: 41). Litigation of this lawsuit, on the other hand, is of no cost to Plaintiff as

he has a contingency fee arrangement and is not obligated to pay for litigation

expenses unless a recovery is made on his behalf. (CR: 111). If required to

arbitrate, Appellee would have to seek new counsel in Florida, which may involve

an hourly-fee arrangement rather than a contingency-fee arrangement. All of this

deters Plaintiff from making his claims and asserting his rights in arbitration. (CR:

110-111).

The arbitration agreement is further substantively unconscionable because

AAU’s promise to arbitrate is illusory. See discussion supra Part I.A.

Additionally, the arbitration agreement prohibits an award of punitive or

exemplary damages, for which Plaintiff is seeking as part of his lawsuit. See In re

Poly-America L.P., 262 S.W.3d 337 (Tex. 2008) (finding that a prohibition of an

award of punitive damages where such damages were available under the statutory

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claim asserted was unconscionable; severing that clause from the arbitration

agreement); Hadnot v. Bay Ltd., 344 F.3d 474 (5th Cir. 2003) (affirming district

court’s decision to sever punitive damages prohibition in an employer-employee

arbitration agreement). The arbitration agreement also limits the claims that can be

brought in arbitration more than the claims that can be brought in court. Ingle v.

Circuit City Stores, Inc., 328 F.3d 1175 (9th Cir. 2003) (finding that a one year

contractual statute of limitations in an agreement to arbitrate employment disputes

that deprived claimants of the benefits of the continuing violation doctrine was

unconscionable); Alexander v. Anthony Int’l. L.P., 341 F.3d 256 (3d Cir. 2003)

(same for 30 day statute of limitations). To enforce this arbitration clause as

written would deny Appellee certain rights.

Because the arbitration agreement is unconscionable, and Appellee met its

burden to show such, the trial court did not err in denying Appellants’ motion to

compel arbitration.

PRAYER

Appellants bore the initial burden of establishing before the trial court that

they had the right to enforce the arbitration agreements contained in the AAU

National Policies. The trial court did not err in determining that the arbitration

agreement was invalid and unenforceable. The trial court properly held that the

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facts of this case support denial of arbitration.

WHEREFORE, PREMISES CONSIDERED, Appellee respectfully prays

that this Court affirm the ruling of the trial court with regard to the denial of the

motion to compel arbitration. In the alternative only, if the Court were to find that

the claims are arbitral as to one or more, but not all of the appellants, Appellee

prays that this Court sever the case accordingly. Also in the alternative only,

Appellee prays that this Court strike the unconscionable clauses. Appellee also

prays for all costs and such further relief to which he may show himself entitled.

CERTIFICATE OF COMPLIANCE

Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), the undersigned

certifies this Appellee’s Brief complies with the type volume limitations of Texas

Rule of Appellate Procedure 9.4(i)(2)(B). The undersigned prepared the Appellee’s

Brief using Microsoft Word 2007 and is relying on that software’s word-count

function. Exclusive of the exempted portions listed in Texas Rule of Appellate

Procedure 9.4(i)(2)(B), the Brief contains 8,439 words.

Respectfully submitted,

GALOW & SMITH, P.C.
1204 Nueces
Austin, Texas 78701
(512) 481-0200
(512) 481-0250 (FAX)

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 jerry@galowlaw.com
Justin@galowlaw.com
jolynn@galowlaw.com

By:____/s/ Justin Studdard__________
JERRY GALOW
State Bar No. 07594400
JUSTIN STUDDARD
State Bar No. 24077158
ATTORNEYS FOR APPELLEE
AUGUSTUS BRAY

CERTIFICATE OF SERVICE

By my signature above, I hereby certify that a true and correct copy of this

document has been served on all parties on this the 24th day of June, 2015, via

email as follows:

Lewin Plunkett Via Email: lplunkett@pg-law.com
Dannick Villasenor-Hernandez Via Email: dhernandez@pg-law.com
PLUNKETT & GRIESENBECK, INC.
1635 N.E. Looop 410, St., 900
San Antonio, Texas 78209
(210) 734-7092
(210) 734-0379 Facsimile
ATTORNEYS FOR DEFENDANTS
AMATUER ATHLETIC UNION
OF THE UNITED STATES, INC.,
PAUL CAMPBELL, ROD SEAFORD,
AND CHARLES OLIVER

39