AutoNation USA Corporation v. Erika Green

Opinion issued April 8, 2004 .

In The

Court of Appeals

For The

First District of Texas

NO. 01-03-00543-CV

AUTONATION USA CORP.; AUTONATION, USA;

AUTONATION, INC.; AUTONATION, INC. A/K/A

MERCEDES BENZ OF HOUSTON–NORTH;

HOUSTON AUTO IMPORTS NORTH, LTD.;

HOUSTON AUTO IMPORTS NORTH LTD.

D/B/A MERCEDES BENZ OF HOUSTON NORTH;

AUTONATION INC., A/K/A MERCEDES BENZ OF

HOUSTON–GREENWAY; HOUSTON AUTO

IMPORTS GREENWAY, LTD. D/B/A MERCEDES

BENZ OF HOUSTON–GREENWAY , Appellants

V.

ERIKA GREEN, Appellee

On Appeal from the 127th District Court

Harris County, Texas

Trial Court Cause No. 2002-59054

MEMORANDUM OPINION

By interlocutory appeal, appellants, AutoNation USA Corp.; AutoNation, USA;

AutoNation, Inc.; AutoNation, Inc. a/k/a Mercedes Benz of Houston–North; Houston

Auto Imports North, Ltd.; Houston Auto Imports North, Ltd. d/b/a Mercedes Benz

of Houston North; AutoNation Inc., a/k/a Mercedes Benz of Houston–Greenway;

Houston Auto Imports Greenway, Ltd. d/b/a Mercedes Benz of Houston–Greenway

(collectively, “the AutoNation parties”), challenge an order denying a motion to

compel arbitration and to stay proceedings of appellee/real party in interest, Erika

Green. We determine (1) whether we have jurisdiction over the mandamus

proceeding or the accompanying interlocutory appeal and (2) whether the AutoNation

parties carried their burden of showing that they have the right to enforce Green’s

arbitration agreement . We affirm the judgment of the trial court.

Background

Green began working at the Mercedes-Benz of Houston—Greenway in October

1998 as Client Relations Manager. Park Place Motor Cars of Houston, Ltd. (Park

Place) owned the dealership at that time. On October 12, 1998, Green signed an

“Alternative Dispute Resolution Agreement” (the arbitration agreement) with Park

Place. The arbitration agreement covered all discrimination claims based on an

employee’s “race, color, religion, sex, or national origin.”

In 1999, Park Place sold the dealership’s assets to Houston Auto Imports

Greenway, Ltd. d/b/a Mercedes Benz of Houston—Greenway (HAIG). In November,

2000, Green was transferred to Mercedes Benz of Houston North dealership, owned

by Houston Auto Imports North, Ltd. (HAIN). Green claimed that she was

transferred pursuant to a settlement agreement based on a sexual-harrassment and

discrimination claim that she had made. However, Green stated that, after the

transfer, she continued to be ostracized, received a reduction in pay, and had conflicts

with management because of her earlier discrimination claim. Green was fired in

October 2001.

On November 15, 2002, Green filed a lawsuit against the AutoNation parties

for race and gender discrimination, intentional infliction of emotional distress, breach

of contract, fraud, and other employment-related wrongs.

The AutoNation parties

answered the lawsuit and filed a motion to compel arbitration under the arbitration

agreement. The trial court denied the AutoNation parties’ motion, and they perfected

this appeal. Interlocutory Appeal or Mandamus

The trial court did not expressly determine whether the Texas General

Arbitration Act (TAA) or the Federal Arbitration Act (FAA) applied. See Tex. Civ.

Prac. & Rem. Code Ann. §§ 171.001-.098 (Vernon 2003); 9 U.S.C. §§ 1-16 (2001).

The method of review depends on which act applies. Mandamus is appropriate to

review an order denying arbitration when the FAA applies to the arbitration

agreement. See In re Valero Energy Corp. , 968 S.W.2d 916, 916-17 (Tex. 1998);

Jack B. Anglin Co. v. Tipps , 842 S.W.2d 266, 272-73 (Tex. 1992). Interlocutory

appeal is appropriate to review an order denying arbitration when the TAA applies.

See Tex. Civ. Prac. & Rem. Code Ann . § 171.098(a)(1), (2) (Vernon Supp. 2004).

The AutoNation parties stated that they filed both an interlocutory appeal and a

mandamus proceeding “out of an abundance of caution.”

The arbitration agreement in this case specifically refers to the TAA; it does not

mention the FAA. Section 10.1 of the arbitration agreement states, “Any proceeding

pursuant to the ADR Procedure shall be an arbitration proceeding subject to the Texas

General Arbitration Act.” Additionally, section 12.3 of the arbitration agreement

makes the following reference to the TAA:

Applicability of Arbitration Statute . The arbitration proceeding

shall be deemed an arbitration proceeding subject to the Texas General

Arbitration Act. If this ADR Procedure is in conflict with any

mandatory requirements of the Texas General Arbitration Act, the

statute shall govern. The Arbitrator shall have all powers granted to

arbitrators under the Texas General Arbitration Act.

Given the arbitration agreement’s express adoption of the TAA, we hold that this

agreement falls under the TAA. See In re Kellogg Brown & Root , 80 S.W.3d 611,

617 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding). Interlocutory appeal

is, thus, the appropriate method to review the order denying arbitration. See Tex.

Civ. Prac. & Rem. Code Ann . § 171.098(a)(1), (2).

Standard of Review

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

arbitration, the applicable standard of review is that of “no evidence.” Pepe Int’l Dev.

Co. v. Pub Brewing Co. , 915 S.W.2d 925, 929 (Tex. App.—Houston [1st Dist.] 1996,

no writ) (combined appeal & orig. proceeding). Under the “no evidence” standard,

the appellate court considers only the evidence and inferences tending to support the

finding under attack and disregards all evidence and inferences to the contrary. Id .

We must affirm the trial court’s order if any legal theory supports it when, as in this

case, there are no findings of fact or conclusions of law. See id . When a party attacks

the legal sufficiency of an adverse finding on an issue on which it has the burden of

proof, the party must demonstrate on appeal “that the evidence establishes, as a matter

of law, all vital facts in support of the issue.” Dow Chem. Co. v. Francis , 46 S.W.3d

237, 241 (Tex. 2001); accord Burlington N. R.R. Co. v. Akpan , 943 S.W.2d 48, 50

(Tex. App.—Fort Worth 1996, no writ) (holding same in interlocutory appeal from

arbitration ruling). Such a matter-of-law challenge requires us first to examine the

record for evidence that supports the finding, while ignoring all evidence to the

contrary. Francis , 46 S.W.3d at 241 ; Akpan , 943 S.W.2d at 50 . Only if there is no

evidence to support the finding will we then examine the entire record to determine

if the contrary proposition is established as a matter of law. Francis , 46 S.W.3d at

241 ; Akpan , 943 S.W.2d at 50 . We will sustain the matter-of-law challenge only if

the contrary proposition is conclusively established. Francis , 46 S.W.3d at 241 ;

Akpan , 943 S.W.2d at 50 .

Arbitration

A party cannot be required to arbitrate unless it has agreed to do so. Trico

Marine Servs., Inc., v. Stewart & Stevenson Technical Servs., Inc. , 73 S.W.3d 545,

548 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding); see also Tex. Civ.

Prac. & Rem. Code Ann. § 171.021(a) (Vernon 2003) (requiring judge to order

arbitration upon finding agreement to arbitrate). The parties’ agreement to arbitrate

must be clear. In this determination, Texas contract law applies. Trico Marine

Servs. , 73 S.W.3d at 548 . Construction of an unambiguous contract is a question of

law. Id.

A party seeking to compel arbitration has the initial burden to establish the

arbitration agreement’s existence and to show that the claims asserted fall within the

agreement’s scope.

In re Kellogg Brown & Root , 80 S.W.3d at 615 ; see Tex. Civ.

Prac. & Rem. Code Ann. § 171.021(a) (Vernon 2003). Whether an enforceable

agreement to arbitrate exists is a legal question entitled to de novo review. In re

Kellogg Brown & Root , 80 S.W.3d at 615 . If the party seeking arbitration carries its

initial burden, the burden then shifts to the party resisting arbitration to present

evidence on its defenses to the arbitration agreement. See In re Oakwood Mobile

Homes, Inc. , 987 S.W.2d 571, 573 (Tex. 1999); see also Tex. Civ. Prac. & Rem.

Code Ann. § 171.021(b) (Vernon Supp. 2004).

Here, the AutoNation parties contend that the trial court erred in its implicit

conclusion that they did not carry their burden of showing that they had the right to

enforce the arbitration agreement. We disagree.

The party seeking to compel arbitration must prove that it was a party to the

arbitration agreement or had the right to enforce the agreement, notwithstanding.

Mohamed v. AutoNation USA, Corp. , 89 S.W.3d 830, 836 (Tex. App.—Houston [1st

Dist.] 2002, no pet.) (combined appeal & orig. proceeding). “The burden of showing

one’s status as a party or one’s right to enforce, as with the overall burden of

establishing the arbitration agreement’s existence, is generally evidentiary.” Id .

Therefore, an entity that was not a party to the arbitration agreement

may not enforce the agreement’s provisions unless that non-signatory

entity falls into an exception, recognized under general equitable or

contract law, that would allow such enforcement. One such exception

is that, as with any contract, an assignee, such as a successor-in-interest,

can be bound to the terms of an arbitration agreement signed by its

assignor, such as a predecessor-in-interest, depending on the

assignment’s terms.

Id .

It is undisputed that the AutoNation parties were not signatories to the

arbitration agreement and that they were not expressly named as parties to the

agreement. However, the AutoNation parties allege in their verified motion to

compel that, pursuant to two asset-purchase agreements executed in August 1999,

they are corporate “successors-in-interest” to Green’s former employer, who had

signed the arbitration agreement. At the hearing on the motion to compel arbitration,

the AutoNation parties did not produce these asset-purchase agreements for the court

to review, nor did they request a continuance to produce it later. Furthermore, in

response to questioning by the trial court, counsel admitted that (1) the AutoNation

parties were “asset purchasers” and not “corporate successors” of the original

signatories to the arbitration agreement, and (2) the employment arbitration

agreements, such as Green’s, were not specifically recited in the asset-purchase

agreements as assets purchased by the AutoNation parties. Nevertheless, the

AutoNation parties provided the trial court with affidavits and an authenticated

“acknowledgment,” executed after this lawsuit was filed, as evidence that Green’s

former employer and the AutoNation parties interpreted the language of the asset-purchase agreements as assigning all employment arbitration agreements to them.

This evidence is insufficient as a matter of law to meet the AutoNation parties’

burden of conclusively establishing that they are assignees of Green’s arbitration

agreement and are legally entitled to enforce it against her.

Only where a contract is first determined to be ambiguous may the court

consider the parties’ interpretation of a contract and admit extraneous evidence to

determine the true meaning of the instrument. Kelley-Coppedge, Inc. v. Highlands

Ins. Co. , 980 S.W.2d 462, 464 (Tex. 1998); Transcon. Gas Pipeline Corp. v. Texaco,

Inc. , 35 S.W.3d 658, 666 (Tex. App.—Houston [1st Dist.] 2000, pet. denied). Parol

testimony is inadmissible to establish the contents of an alleged assignment because

the written assignment itself, and not the parol evidence, is the best evidence of the

contents of the assignment. See Standifer v. Bond Hardware Co. , 94 S.W. 144 , 145

(Tex. Civ. App. 1906, no writ).

In this case, because there was no finding that the asset-purchase agreements

were, in fact, ambiguous, the defendants cannot rely on any extraneous evidence to

support their interpretation of the agreements to compel arbitration. See Transcon.

Gas , 35 S.W.3d at 666 . In the absence of the purchase agreements that defendants

allege created their assignment rights, the trial court did not err in holding that

defendants had not met their burden of establishing that they were assignees of

Green’s arbitration agreement with her previous employers.

Furthermore, the AutoNation parties do not present any authority, nor have we

found any, for the proposition that an “acknowledgment” of a prior agreement

executed after this lawsuit is dispositive of the trial court’s legal interpretation of the

language of the prior agreement. Contrary to the AutoNation parties’ assertions, any

inferences that could be drawn from the affidavits and the acknowledgment cannot

be used to meet their burden in this case because we may only make those inferences

that support the trial court’s implied rulings. See Tex. R. App. P . 33.1.

Accordingly, the trial court did not err in finding that the AutoNation parties

cannot enforce Green’s employment arbitration agreement and in denying the motion

to compel arbitration.

Accordingly, we hold that the AutoNation parties did not carry their initial

burden of showing that each party seeking to compel arbitration was entitled to

enforce the arbitration agreement.

Having found that the AutoNation parties did not

carry their initial burden, we do not address Green’s issues relating to issue

preclusion and unconscionability. Conclusion

We affirm the trial court’s order denying the AutoNation parties’ motion to

compel arbitration.

George C. Hanks, Jr.

Justice

Panel consists of Justices Taft, Jennings, and Hanks.