Guam Industrial Services, Inc. D/B/A Guam Shipyard v. Dresser-Rand Company

ACCEPTED
01-15-00842-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
12/3/2015 4:40:55 PM
CHRISTOPHER PRINE
CLERK

No. 01-15-00842-CV

FILED IN
IN THE 1st COURT OF APPEALS
FIRST COURT OF APPEALS HOUSTON, TEXAS
HOUSTON, TEXAS 12/3/2015 4:40:55 PM
CHRISTOPHER A. PRINE
Clerk

GUAM INDUSTRIAL SERVICES, INC.,

Appellant,
V.

DRESSER-RAND COMPANY,

Appellee

On appeal from the 61st Judicial District Court of Harris County, Texas
Trial court cause no. 2015-01910

APPELLEE’S SUR-REPLY IN OPPOSITION TO
APPELLANT’S MOTION FOR STAY OF
ARBITRATION AND ORDER COMPELLING ARBITRATION

Kyle C. Reeb
State Bar No. 24091604
Lauren B. Harris
State Bar No. 02009470
Porter Hedges LLP
kreeb@porterhedges.com
lharris@porterhedges.com
1000 Main Street, 36th1 Floor
Houston, Texas 77002
Telephone: (713) 226-6625
Facsimile: (713) 226-6225
Attorneys for Appellee Dresser-Rand
Company
TO THE HONORABLE FIRST COURT OF APPEALS:

Appellee Dresser-Rand Company (“Dresser-Rand”) files this Sur-Reply in

Opposition to Appellant’s Motion for Stay of Trial Court Order Compelling

Arbitration and Stay of Arbitration and request to void or vacate the order

compelling arbitration, and would respectfully show the Court as follows:

Preliminary Statement

1. The Shipyard’s reply merely re-hashes the same arguments and

references the same authority relied upon in its motion. The Shipyard summarily

concludes that an order compelling arbitration resolves the case on the merits, yet

fails to explain how an order compelling arbitration adjudicates any of Dresser-

Rand’s causes of action, the Shipyard’s claims, or any of its defenses. Although

Dresser-Rand’s response addresses most of the Shipyard’s arguments in the reply,

Dresser-Rand files this brief sur-reply primarily to address the Shipyard’s

allegation that Dresser-Rand has failed to advise the court of controlling federal

case authority contrary to the caselaw it cited in its response. (Reply at 3). For the

reasons below, the Shipyard’s contention is meritless.

A. Dresser-Rand’s Reference To federal Decisions Recognizing That
Compelling Arbitration Is Not A Decision on The Merits Does Not
Mischaracterize Federal Law.
The Shipyard asserts that Dresser-Rand has somehow concealed a split of

federal authority in its references to the order compelling arbitration as non

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dispositive under federal law. The Shipyard’s claim, however, is intended to do

nothing more than distract this Court from the issue before it—whether an order

compelling arbitration is tantamount to a “trial in the trial court” under the

statutory stay provision in section 51.014(b). See TEX. Civ. PRAC. & REM. CODE

§51.014(b).

Despite the fact that this case involves the interpretation of a Texas statute,

Dresser-Rand’s response briefly referenced federal authority recognizing that

federal magistrates cannot make rulings on dispositive motions, although they are

authorized to compel arbitration, federal courts have decided that a motion to

compel arbitration is a non-dispositive motion in part based on the fact that

compelling arbitration is not among the motions enumerated as having dispositive

effect in 2$ U.S.C. §636(b)(1)(A). See PowerShare, Inc. v. Syntel, Inc., 597 F.3d

10, 14 (1st Cir. 2010); also see FED. R. Civ. P. 72 (magistrates may consider “a

pretrial matter not dispositive of a party’s claim or defense... “). Motions

considered to be dispositive under the federal statute include, for example, motions

for injunctive relief, motions for judgment on the pleadings, motions for summary

judgment, or motions to dismiss. Id. Thus, Dresser-Rand referenced this

analogous line of authority in response to the Shipyard’s claim that an order

compelling arbitration is a dispositive motion.

Not only have several federal district courts reached this conclusion, but the

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First Circuit has found that a motion to stay litigation pending arbitration is non

dispositive because it “suspends” but does not eliminate the court’s authority over

the matter. See Syntel, Inc., 597 F.3d at 14. The district court still retains

jurisdiction to vacate, affirm or modify any arbitrator’s decision, and maintains the

authority to render a final judgment. Similarly, the Third Circuit has also

determined that motions to compel arbitration and stay trial proceedings are not

dispositive motions. See Virgin Islands Water & Power Auth. v. Gen. Elec. Int’l

Inc., 561 F. App’x 131, 133-34 (3d Cir. 2014); 91 C.J.S. United States Magistrates

§ 7 (2015) (recognizing that a motion to compel arbitration is a non-dispositive
motion); see also David Hittner, FEDERAL CivIL PROCEDURE BEFORE TRIAL, ch.

16-F(3)(d) (5th Cir. ed. 2015) (same).

Although the Shipyard references some contrary federal authority to attempt

to diffuse the force of the federal law comparison, the Shipyard fails to apprise the

court that many of the district court opinions it cites were disapproved by circuit

courts or even other district courts. For example, the First Circuit in Syntel

declined to follow the decision in flannery v. Tn—State Div., 402 F. Supp. 2d $19,

$21 (E.D. Mich. 2005), on which the Shipyard so heavily relies. See Syntel, 597

F.3d at 14. Similarly, the Third Circuit in Virgin Islands Water & Power Auth.,

561 F. App’x at 133-34, reversed the district court decision that the Shipyard

references. See Reply at 3 n. 8, citing Virgin Islands Water & Power Auth. v. Gen.

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Elec. Int’l, 2009 WL 1918238 (D. Vi. 2009); also see Vernon v. Qwest Commc’ns

Int’l, Inc., 857 F. Supp. 2d 1135, 1141 (D. Cob. 2012), aff’d, 925 F. Supp. 2d

1185 (D. Cob. 2013) (disapproving Coxcom, Inc. v. Egghead Telecom, Inc., 2009

WL 4016629, at l (N.D. Oki. 2009)). In reality, it is the Shipyard that

mischaracterizes the law. However, even if some limited contrary authority exists,

the reasoning of the cases finding that a motion to compel arbitration is non

dispositive is sound: it is not case-determinative because it is not a final resolution

of the merits and does not eliminate the court’s jurisdiction. See Syntel, 597 F.3d

at 14. While the Shipyard prefers to lead this Court into the weeds, these decisions

are persuasive here.

B. The Legislative History of Section 51.014(b) Also Establishes That
Pre-Trial Matters Do Not Equate To A “Trial.”

Rather than resolving any substantive claims, the trial court’s order

compelling arbitration merely requires the parties to litigate their dispute before a

panel of arbitrators in accordance with their contract. Without any direct authority,

however, the Shipyard contends that an order compelling arbitration is equivalent

to a “trial in the trial court” as that term is used in section 51.014(b). The

Legislative history of section 5 1.014(b), however, indicates otherwise.

The automatic stay provision included in section 51.014(b) was enacted in

1997 at the same time the Legislature enacted the provision allowing interlocutory

appeals of the granting or denial of a special appearance. See Acts of June 1997,

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75th Leg., RS., ch. 1296, §1, 1997 Tex. Gen. laws 4936, 4937, eff. June 20, 1997.

During the consideration of the proposed revision to the statute, opponents of the

legislation were concerned that it would allow defendants over whom jurisdiction

was proper “to delay the case while that issue is taken up on appeal.” See House

Research Organization, Bill Analysis, Tex. H.B. 453, 75th Leg., R.S. (1997)

(Exhibit A, p. 3). To alleviate concerns about delays, the Legislature enacted the

automatic stay provision, but limited it to only actual trials. As the Bill Analysis

explains:

SB 453 would not lengthen the trial process or be an unnecessary
delay in the commencement of a suit Interlocutory appeals are
...

usually decided quickly by appellate courts. Appeals concerning
jurisdictional issues are almost always determined on motions or
briefs accompanied by affidavits; no testimony is usually allowed.
While trial may not proceed while an interlocutory appeal is pending,
there would be izo prohibition in the statute against continuing
discovery.

Id. (emphasis added). Thus, the Legislature clearly intended to preclude

unnecessary delays while a jurisdictional appeal is pending and allow the case to

proceed in the trial court.

The parties agreed to arbitrate their dispute in Houston, Texas, and the trial

court’s order compelling arbitration in no way invokes an immediate trial on the

merits. Rather, the order merely allows the case to proceed in an arbitration

setting. “Arbitration is not a basis for recovery; it is, rather, the means by which

recovery is obtained.” Thomas v. Cook, 350 S.W.3d 382, 395 (Tex. App.—

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Houston [14th Dist.] 2011, pet. denied) (Hedges, C.J., dissenting), quoting Gillrnan

v. Davidson, 934 S.W.2d 803, 805 (Tex. App.—Houston [1st Dist.J 1996, orig.

proceeding). The Legislature expressly intended for pre-trial matters to continue

while a jurisdictional appeal is pending. Dresser-Rand is entitled to pursue those

same measures in arbitration while this Court determines whether the trial court

has jurisdiction over any alleged non-arbitrable claims.

C. The Outcome of the Jurisdictional Appeal Will Not Affect The Trial
Court’s Jurisdiction To Compel Arbitration.

The Shipyard does not deny that the trial court may exercise jurisdiction

over it for the sole purpose of compelling arbitration. The Shipyard repeatedly

conceded in the trial court that it possessed jurisdiction to compel arbitration. See

CR 495, citing Int’l Energy Ventures Mgrnt., L.L.C. v. United Energy Grp., Ltd.,

800 F.3d 143, 152 (5th Cir. 2015) (“When a party agrees to arbitrate in a particular

state, via express or implicit consent, the district courts of the agreed upon state

may exercise personal jurisdiction over the parties for the limited purpose of

compelling arbitration.”); also see CR502-503 (citing federal opinions holding that

a party’s agreement to arbitrate in a particular state subjects the party to the

jurisdiction of the district courts in that state for the purpose of compelling

arbitration). Thus, the Shipyard’s challenge to arbitration proceeding under the

statutorily imposed trial stay is purely illusory to the extent that any Houston trial

court could compel arbitration in this case and has jurisdiction to do so.

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 Even if this Court was to reverse the denial of the Shipyard’s special

appearance, it would not affect Dresser-Rand’s right to compel arbitration because

the Shipyard has already contractually consented to jurisdiction here for the

discrete purpose of arbitration. The issue of whether the parties must arbitrate their

dispute was not before the trial court at the time it granted the special appearance,

and Dresser-Rand is not precluded from raising it in the district court now. See

Nguyen v. Desai, 132 S.W.3d 115, 118 (Tex. App.—Houston [14th Dist.J 2004,

no pet.) (“[A]n order dismissing claims for lack of personal jurisdiction precludes

relitigation of the jurisdictional issues that were actually litigated and essential to

the dismissal ....“). Even so, the Shipyard repeatedly urged that the trial court had

jurisdiction over the Shipyard to compel arbitration.

The Shipyard clearly agreed to arbitration, and the trial court had the

authority to consider Dresser-Rand’s motion to enforce that agreement and compel

arbitration. The trial court’s ruling will not preclude this Court from deciding the

Shipyard’s appeal, and will not moot the jurisdictional issues to be decided.

Dresser-Rand respectfully requests this Court to deny the Shipyard’s motion.

WHEREFORE, Appellee Dresser-Rand respectfully requests this Court to

deny Appellant Guam Shipyard’s Motion for Stay of Trial Court Order Compelling

Arbitration and Stay of Arbitration and all relief requested therein, and for such

other and further relief to which it may show itself to be justly entitled to receive.

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Respectfully submitted,

PORTER HEDGES LLP

By: Is! Kyle C. Reeb
Kyle C. Reeb
State Bar No. 24091604
Lauren B. Harris
State Bar No. 02009470
Porter Hedges LLP
kreeb@porterhedges.com
lharris@porterhedges.com
361h
1000 Main Street, Floor
Houston, Texas 77002
Telephone: (713) 226-6625
Facsimile: (713) 226-6225
Attorneys for App eltee Dresser-Rand
Company

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 CERTIFICATE OF SERVICE
Pursuant to Rules 6.3 and 9.5(b), (d), and (e) of the Texas Rules of Appellate
Procedure, this is to certify that on this 3rd day of December 2015, a true and
correct copy of the foregoing was served on the following counsel of record by
U.S. first class mail and by electronic delivery as follows:

Fred Dietrich
The Dietrich Law Firm
2211 Norfolk St., Suite 620
Houston, Texas 77098
fdietrich@dietrich-law.com

Counsel for Appellant Guam Industrial Services, Inc.

Is! Kyle C. Reeb
Kyle C. Reeb

5195J28v3

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