in Re David J. Kroupa, D.C.

Opinion issued December 8, 2005

In The

Court of Appeals

For The

First District of Texas

NO. 01-05-00224-CV

DAVID J. KROUPA, D.C., Appellant

V.

ERNEST CASEY, Appellee

On Appeal from the 269th District Court

Harris County, Texas

Trial Court Cause No. 2003-46191

* * *

__________

NO. 01-05-00376-CV

__________

IN RE DAVID J. KROUPA, D.C., RELATOR

Original Proceeding on Petition for Writ of Mandamus

MEMORANDUM OPINION

In dual proceedings, appellant-relator, David J. Kroupa, D.C. (“Kroupa”),

challenges the trial court’s order that denied his motion to compel arbitration against

appellee-real party in interest, Ernest Casey (“Casey”).

In one issue, Kroupa

contends that the trial court erroneously denied his motion to compel arbitration. We

dismiss the interlocutory appeal for want of jurisdiction and conditionally grant the

petition for writ of mandamus.

Background

In early 2003, Casey received chiropractic treatment from Kroupa at Kroupa’s

office in Houston. On August 20, 2003, Casey sued Kroupa, alleging that Kroupa

had been negligent and grossly negligent by (1) failing to properly evaluate Casey;

(2) failing to take X-rays before treatment; and (3) giving improper chiropractic

manipulation. Kroupa responded by filing an original answer and a motion to compel

arbitration. On September 1, 2004, Kroupa filed his first amended motion to compel

arbitration, seeking arbitration pursuant to both the Federal Arbitration Act (“FAA”)

and the Texas Arbitration Act (“TAA”). On January 6, 2005, the trial court denied

Kroupa’s first amended motion to compel arbitration. After Kroupa filed a motion

for reconsideration of the trial court’s order, the trial court held a second hearing,

during which the court expressed concern with sending a medical malpractice case

to arbitration. On February 17, 2005, the trial court signed a second order that denied

Kroupa’s Motion for Reconsideration of Amended Motion to Compel Arbitration.

We stayed all trial proceedings on April 26, 2005. Kroupa now challenges the trial

court’s order via an interlocutory appeal and a petition for writ of mandamus.

Appeal

The TAA and the FAA provide alternative procedural vehicles for relief. In

re Educ. Mgmt. Corp. , 14 S.W.3d 418, 425 (Tex. App.—Houston [14th Dist.] 2000,

orig. proceeding). If the trial court’s denial of arbitration is based on the TAA, the

order is subject to interlocutory appeal. T ex. Civ. Prac. & Rem. Code Ann . §

171.098(a)(1) (Vernon 2005). Relief from a denial of arbitration under the FAA must

be pursued by mandamus. EZ Pawn Corp. v. Mancias , 934 S.W.2d 87, 91 (Tex.

1996) (orig. proceeding).

The trial court did not expressly determine whether the FAA or the TAA

applies. See 9 U.S.C. §§ 1-16 (2000); T ex. Civ. Prac. & Rem. Code Ann . §§

171.001-.098 (Vernon 2005). However, the parties’ contract provides that “any

dispute as to medical malpractice . . . will be determined by submission to arbitration

as provided by state and federal law,” and the Supreme Court of Texas and this Court

have both approved application of the FAA when a contract “relates to” interstate

commerce and the parties agree that federal law applies. See In re Firstmerit Bank,

N.A. , 52 S.W.3d 749, 754 (Tex. 2001) (orig. proceeding); see also In re Tenet

Healthcare, LTD , 84 S.W.3d 760, 765 (Tex. App.—Houston [1st Dist.] 2002, orig.

proceeding). As a threshold matter, we first determine which act applies.

The FAA governs a written arbitration clause in any contract “evidencing a

transaction involving commerce.” See 9 U.S.C. § 2 . This provision extends to all

transactions affecting commerce and is coextensive with the reach of the Commerce

Clause of the United States Constitution. Allied-Bruce Terminix Co. v. Dobson , 513

U.S. 265, 277 , 115 S. Ct. 834 , 838–43 (1995); see In re L & L Kempwood Assocs ., 9

S.W.3d 125, 127 (Tex. 1999) (orig. proceeding). A contract “evidenc[es] a

transaction involving commerce” if it in fact turns out to involve interstate commerce.

Allied-Bruce , 513 U.S. at 277–81, 115 S. Ct. at 841–43.

The FAA displaces state law only to the extent that the state law conflicts with

the FAA’s purpose of enforcing the parties’ contractual obligation to arbitrate. Volt

Info. Sciences, Inc. v. Bd. of Trustees , 489 U.S. 468 , 477–78, 109 S. Ct. 1248, 1255

(1989); In re H.E. Butt Grocery Co ., 17 S.W.3d 360, 378 (Tex. App.—Houston [14th

Dist.] 2000, orig. proceeding). Thus, if the arbitration clause is enforceable under the

FAA, an analysis of enforceability under the TAA is unnecessary. See In re Anaheim

Angels Baseball Club, Inc ., 993 S.W.2d 875 , 877 n.1 (Tex. App.—El Paso 1999, orig.

proceeding [mand. denied]). In deciding whether to compel arbitration, the trial court

is entitled to rely on affidavits, pleadings, discovery, and stipulations. Jack B. Anglin

Co. v. Tipps , 842 S.W.2d 266, 269 (Tex. 1992) (orig. proceeding).

Attached to his motion to compel arbitration, Kroupa included an affidavit

discussing how his transaction with Casey affected interstate commerce. Kroupa

states that every aspect of his practice depends on transactions that he has had with

companies outside of Texas. He states that he uses various types of communications

with companies outside Texas, including telephone calls, interstate fax transmission,

United States Mail, and the Internet. He states that 90% of his patients pay for their

treatments through insurance and that most of the insurance companies are located

outside of Texas. All of his insurance bills are submitted via the Internet through a

company located in Nebraska. To operate his company, Kroupa had to obtain

malpractice insurance from a company located in California. In the course of treating

Casey, Kroupa used an adjusting table, a hand massager, an interferential current

machine, and a hydroculator purchased outside of Texas. In addition, when Casey

first came to Kroupa’s office, Casey represented that he would be paying through

Medicare. Kroupa states that based on Casey’s representation, he accepted Casey as

a patient. Dr. Kroupa submitted Casey’s bill for payment through Medicare.

Casey, on the other hand, argues that interstate commerce is not affected. In

an affidavit attached to his response to Kroupa’s motion to compel arbitration, Casey

stated the following:

All chiropractic services provided by Dr. Kroupa to the [sic] me

were provided at the [sic] Dr. Kroupa’s office in Katy, Texas. I

did not cross any state lines in order to obtain the chiropractic

services. I first became aware of the [sic] Dr. Kroupa’s

chiropractic services by noticing the sign in the shopping center

where his office was located. Billing for the services provided

were made and prepared at the [sic] Dr. Kroupa’s office. I would

be handed a bill when the treatment was finished and before I left.

No interstate mail or phone calls were made between Dr. Kroupa

and me.

In considering the evidence that Kroupa presented to the trial court on the

transaction’s affect on interstate commerce, we acknowledge that the term

“commerce” is broadly construed. See In re Nexion Health at Humble, Inc. , 173

S.W.3d 67, 69 (Tex. 2005) (orig. proceeding) (per curiam); In re L & L Kempwood

Assocs ., 9 S.W.3d at 127 ; In re Tenet Healthcare , 84 S.W.3d at 765 .

The underlying proceedings in this case involve negligence in providing

medical services to a client. Kroupa produced evidence that he uses equipment,

material, and services acquired from out of state, including equipment purchased from

out of state in his delivery of healthcare services to Casey; makes out-of-state

transactions through interstate forms of communication; receives most of his

insurance payments from out of state; receives Medicare payments from out of state,

and accepted Casey as a Medicare patient; and acquired his malpractice insurance

from out of state. Casey does not dispute these allegations.

Kroupa contends that a number of Texas cases support his claim that the

activities he described establish the substantial effect of his practice on interstate

commerce necessary to bring this suit within the scope of the FAA. We agree. See

In re Nexion Health , 173 S.W.3d at 69 (holding that Medicare payments paid to

relator were sufficient to establish interstate commerce and the FAA’s application);

In re Firstmerit Bank, N.A. , 52 S.W.3d at 754 (holding that installment contract for

sale of mobile home related to interstate commerce and was subject to FAA; secured

lender and its servicing agent were corporations in another sate and received

payments there and arbitration addendum stated loan involved Interstate Commerce

Clause and was governed by FAA); In re Tenet Healthcare , 84 S.W.3d at 765

(concluding that FAA applied when relator hospital treated patients who lived out-of-state, received goods and services from out-of-state, received payments from out-of-state insurance carriers, received Medicaid and Medicare payments, and agreement

specifically referred to FAA); BWI Cos. v. Beck , 910 S.W.2d 620 , 622–23 (Tex.

App.—Austin 1995, orig. proceeding) (holding that arbitration agreement between

employer and employee involved interstate commerce, even though employee worked

and made deliveries only in Texas, because employer had facilities in Texas and other

states); Palm Harbor Homes, Inc. v. McCoy , 944 S.W.2d 716, 720 (Tex. App.—Fort

Worth 1997, orig. proceeding) (holding that FAA applied because, inter alia ,

manufactured homes contained components that were bought and shipped from

fourteen other states and countries and housing bond was issued by out-of-state

insurance company); Lost Creek Mun. Util. Dist. v. Travis Indus. Painters, Inc. , 827

S.W.2d 103, 105 (Tex. App.—Austin 1992, writ denied) (holding that arbitration

agreement between Texas residents, concerning work performed in Texas, involved

interstate commerce because paint and epoxy were manufactured outside Texas, and

contractor’s performance bond was issued by nonresident surety company). Thus, we

conclude that the transaction between Kroupa and Casey affected interstate commerce

and that the FAA applies.

Because the FAA applies, mandamus, and not interlocutory appeal, is the

procedural vehicle for the relief that Kroupa requests. We dismiss Kroupa’s

interlocutory appeal and consider the merits of his petition for writ of mandamus.

Mandamus

Standard of Review

Mandamus is an extraordinary remedy that will issue only to correct a clear

abuse of discretion or the violation of a legal duty when there is no adequate remedy

at law. In re Masonite Corp ., 997 S.W.2d 194, 197 (Tex. 1999) (orig. proceeding).

When a trial court erroneously grants a party’s motion to compel arbitration, the

movant has no adequate remedy at law and is entitled to a writ of mandamus. See In

re Am. Homestar, Inc ., 50 S.W.3d 480, 483 (Tex. 2001) (orig. proceeding). We

review the trial court’s order for abuse of discretion. Jack B. Anglin , 842 S.W.2d at

271 ; Trico Marine Servs., Inc. v. Stewart & Stevenson Technical Servs . Inc. , 73

S.W.3d 545, 548 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (combined appeal

& orig. proceeding). A trial court abuses its discretion when it errs in determining

what the law is or in applying the law to the facts. In re Bruce Terminix Co ., 988

S.W.2d 702, 703 (Tex. 1998); Trico Marine Servs ., 73 S.W.3d at 548 . The trial

court’s order does not state its grounds for denying Kroupa’s motion to compel

arbitration. Thus, we review the grounds stated in Kroupa’s motion and reverse the

trial court’s order if any of the grounds are meritorious. See In re H.E. Butt Grocery ,

17 S.W.3d at 367 .

Agreement to Arbitrate

In his mandamus petition, Kroupa argues that the trial court erred in denying

his motion to compel arbitration because he submitted an agreement to arbitrate and

because Casey’s claims were within the scope of their agreement.

Whether an enforceable agreement to arbitrate exists is a legal question subject

to de novo review. In re Kellogg Brown & Root , 80 S.W.3d 611, 615 (Tex.

App.—Houston [1st Dist.] 2002, orig. proceeding). Although an arbitration

agreement need not assume any particular form, the language of the agreement must

clearly indicate the intent to arbitrate. See Massey v. Galvan , 822 S.W.2d 309, 316

(Tex. App.—Houston [14th Dist.] 1992, writ denied). Without an agreement to

arbitrate, arbitration cannot be compelled. Freis v. Canales , 877 S.W.2d 283, 284

(Tex. 1994) (orig. proceeding).

Under both the TAA and the FAA, 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. See T ex. Civ. Prac. & Rem.

Code Ann . § 171.021(a) (Vernon 2005); 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 J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 227 (Tex. 2003)

(orig. proceeding); Mohamed v. Auto Nation USA Corp ., 89 S.W.3d 830, 835 (Tex.

App.—Houston [1st Dist.] 2002, orig. proceeding).

In its motion to compel arbitration, Kroupa relied on the following clause to

show the parties’ intent to arbitrate:

Agreement to Arbitrate : It is understood that any dispute as to

medical malpractice that is as to whether any medical services

rendered under this contract were unnecessary or unauthorized or

were improperly, negligently, or incompetently rendered, will be

determined by submission to arbitration as provided by state and

federal law, and not by a lawsuit or resort to court process except

as state and federal law provides for judicial review of arbitration

proceedings. Both parties to this contract by entering into it, are

giving up their constitutional right to have any such dispute

decided in a court of law before a jury and instead are accepting

the use of arbitration.

Further, the agreement encompasses a broad range of disputes:

All claims must be Arbitrated . It is also understood that any

dispute that does not relate to medical malpractice including

disputes as to whether or not a dispute is subject to arbitration,

will also be determined by submission to binding arbitration.

At the bottom of the agreement is the statement:

NOTICE: BY SIGNING THIS CONTRACT YOU ARE

AGREEING TO HAVE ANY ISSUE OF MEDICAL

MALPRACTICE DECIDED BY NEUTRAL ARBITRATION

AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR

COURT TRIAL.

Casey’s name appears at the top of the document, and his signature is on the

bottom of the document.

In his response to Kroupa’s petition for writ of mandamus, Casey neither

disputes that this clause mandates arbitration nor disputes that his claims are within

the scope of this clause. After reviewing the arbitration agreement, we conclude that

Kroupa has presented a valid enforceable arbitration agreement and that Casey’s

claims are within the scope of the agreement. Once a party seeking to compel

arbitration establishes that an agreement exists under the FAA and that the claims

raised are within the agreement’s scope, the trial court has no discretion but to compel

arbitration and stay its proceedings pending arbitration. Cantella & Co. v. Goodwin ,

924 S.W.2d 943, 944 (Tex. 1996) (orig. proceeding). Accordingly, the trial court

erred by denying Kroupa’s motion to compel arbitration pursuant to the FAA.

Conclusion

We conclude that the trial court improperly denied Kroupa’s motion to compel

arbitration. A party who is erroneously denied the right to arbitrate under the FAA

has no adequate remedy at law, and mandamus relief is appropriate. Id . at 945. Thus,

we conditionally grant the writ of mandamus in cause no. 01–05–00376–CV and

direct the trial court to order that Casey’s claims proceed to arbitration under the

FAA. We dismiss the appeal in cause no. 01–05–00224–CV for want of jurisdiction.

We withdraw our April 26, 2005 order that stayed all proceedings in the trial court.

Evelyn V. Keyes

Justice

Panel consists of Justices Taft, Keyes, and Hanks.