G M Oil Properties, Inc. ("GM Oil") Gary Moores ("Moores") And Bill O. Wood ("Wood") v. Sheridan Wade

Opinion issued

January 26, 2012

In

The

Court of

Appeals

For

The

First District

of Texas

————————————

NO. 01-08-00757-CV

———————————

GM Oil PROPERTIES, Inc., GARY MOORES,

and BILL O. WOOD , Appellants

V.

SHERIDAN

WADE ,

Appellee

On Appeal from the 133rd

District Court

Harris County, Texas

Trial Court Case No. 2006-53389

MEMORANDUM

OPINION

In

this interlocutory appeal, Bill O. Wood, challenges the trial court’s August 4,

2010 order denying his motion to compel arbitration between himself and Sheridan

Wade. The order expressly applies only to

Wade’s claims against Wood in Wood’s individual capacity. [1] Wood raises two issues in which he contends

that Wade is required to arbitrate these claims pursuant to a provision found

in the corporate bylaws of GM Oil Properties, Inc., a company of which Wood is

a corporate officer, and Wade is a former shareholder.

We affirm the trial court’s

order denying Wood’s motion to compel arbitration.

Background

A. Sheridan Wade’s Claims against Bill Wood,

Individually

Sheridan Wade sued Bill O. Wood

in his individual capacity for acts and omissions related to an alleged

business partnership between Wade and Wood pertaining to a business venture

involving GM Oil. Among Wade’s causes of

action against Wood in his individual capacity are claims for breach of contract

and for breach of fiduciary duty. Wade

alleges that Wood breached two contracts that he had entered into with her in

the context of their business partnership and that he breached his fiduciary

duty to Wade as her business partner.

With respect to her claims

against Wood in his individual capacity, Wade makes the following allegations: [2]

· In early 2005, Wade

formed a business partnership with Scott Davis, and they agreed “to a diverse

business plan including real estate investments, financial services, and oil

and gas investments.”

· Wade and Davis met

John Preston and Bill Wood with whom they “agreed to all join together to

collectively as partners pursue . . . business opportunities.”

· Wood represented to

Wade, Davis, and Preston that “he was well versed in oil and gas and knew of a

potential investment in Oklahoma — the ‘GM Oil deal.’”

· Wood stated that he

needed Wade’s and Davis’s “services and expertise to find potential investors,

and he offered to work with them in obtaining the property for the benefit of

his partnership with [Wade], Davis, and Preston.”

· Wade and her three

partners “agreed the first project of the partnership would for the purposes of

obtaining the Oklahoma property (the GM Oil deal) and they would divide the

partnerships’ ownership interest as follows: [Wade] would own 10%, Davis 30%,

Preston 30% and [ ]Wood 30%.”

· Wade was “convinced

by Wood’s assurances that the GM Oil deal would be extremely financially

rewarding for her and all involved.”

· Wade and Davis told

“Wood that a private placement memorandum would have to be prepared, along with

a detailed analysis of the project.”

· Wade gathered “all

pertinent information and assimilated the same into an organized and detailed format,”

“evaluated and studied the potential of the GM Oil deal, and prepared summaries

of the data.” Wade and Davis also worked

to generate interest by investors “in the deal.”

· Wade and Davis asked

Wade’s father to assist in obtaining a loan for the project.

· Wade, Davis,

Preston and [] Wood offered Wade’s father “4% of the venture and [sic] [GM Oil]

company as compensation for locating the financing.”

· Wade’s father

arranged “for a loan in the amount of $75,000 to provide the necessary capital

to produce the [placement] memorandum.”

· Investing much time

and effort, Wade and Davis “sought out and met with numerous potential sources

of significant financing needed to complete the [GM Oil] deal.”

· Wood “consistently

reassured his partners and told them their efforts would be rewarded” with “the

ownership interests promised.” Wade,

however, was offered “employment as the Secretary of the corporate entity (GM

Oil) with a salaried position in the company’s offices.”

· Closing on the GM

Oil financing was set for August 25, 2005.

· Before the closing,

“Wood met with [Wade], Davis and Preston in Texas and suddenly represented that

the only way the closing could take place would be if it appeared that [] Wood

held all the stock of the partners (excepting the 4% broker fee)” in “Steadfast

Eastern Oklahoma LLC,” the company the four partners had established for the

purpose of acquiring GM Oil.

· Wood requested that

each partner sign his or her interest in Steadfast Eastern Oklahoma LLC “over

to him for purposes of the closing only.”

· “Wood, in turn,

promised that immediately after closing he would return the other parties’

ownership interests by conveying to [Wade], Davis, and Preston each 10% of his

ownership of GM Oil, or 10% of his purported 96% equaling a 9.6% ownership in

the shares of GM Oil.”

· Each partner

transferred his or her shares in Steadfast Eastern Oklahoma to Wood with each

retaining one percent interest in the company.

· Wood, Davis,

Preston, and Wade signed a Stockholders’ Agreement evidencing the agreement

regarding the transfer of the Steadfast Eastern Oklahoma stock to Wood and

reflecting Wood’s agreement to tender a portion of his stock interest in GM Oil

to his three partners.

· “After the closing,

GM Oil issued 10,000 shares of GM Oil stock [to Wade] based on the 1% of

ownership that was excluded from the agreement with Wood.”

· Wade was “forced to

sell these 1% shares back to the company after a few months because of the

delay in actually receiving her promised job in Oklahoma.”

· Wade received “value

for the sale of those shares, and she is making no complaint about the issuance

or repurchase of the 10,000 shares of GM Oil in this lawsuit.”

· “Although Wood kept

up the assurances and representations to [Wade] in Houston for a short period

following the final closing, he has failed and refused to convey back the

shares as he promised . . . .”

Wade sued Wood in his

individual capacity for breach of contract, fraud, conversion, breach of

fiduciary duty, and conspiracy. With

regard to these claims, Wade asserts that Wood breached his oral partnership

agreement with her by failing to transfer 10 percent ownership of GM Oil to

her. Wade also claims that Wood breached

the written Shareholder’s Agreement by failing to transfer 10 percent of his GM

Oil stock to her. Wade further asserts

that Wood knowingly made false statements to her to induce her assistance in

acquiring financing and investment funds for GM Oil, which she did. Finally, Wade asserts that Wood had a

fiduciary duty to her as her business partner and that his conduct constituted

a breach of that duty.

In addition to suing Wood in

his individual capacity, Wade sued Wood as a representative of GM Oil and as a

representative of its founder and corporate officer, Gary Moores . Wade also directly sued GM Oil and Moores for fraud and conspiracy. Wade contends that GM Oil and Moores “aided and abetted” Wood in much of the conduct for

which Wade seeks to hold Wood liable.

B. Wood’s Arbitration Claim

Wood answered the suit,

asserting, inter alia, that Wade’s claims were subject to an arbitration

agreement. Wood also denied that he had

entered into a partnership agreement with Wade or that he had promised that

Wade would receive a 10 percent ownership interest in GM Oil. Moores , an Oklahoma

resident, and GM Oil, an Oklahoma corporation, each filed a special appearance

contesting personal jurisdiction.

Asserting that Wade’s claims

against them were subject to an arbitration agreement found in GM Oil’s bylaws,

GM Oil, Moores , and Wood initiated an arbitration

proceeding in Oklahoma before the American Arbitration Association. In response, Wade requested and obtained a

temporary restraining order in the instant suit, prohibiting GM Oil, Moores , and Wood from proceeding with the Oklahoma

arbitration.

Wade amended her petition to

include a request for a judicial declaration that her claims are not subject to

arbitration. Wade also filed a motion

for partial summary judgment regarding the arbitration issue.

Wood filed a motion to

compel arbitration in the trial court, relying on the following provisions in

GM Oil’s bylaws:

Section 12. Miscellaneous.

12.01 .

Resolutions of

Controversies and Claims . In the

event of any controversy of claim, whether based on contract, tort, statute, or

other legal of equitable theory (including any claim of fraud,

misrepresentation, or fraudulent inducement) between or among the parties and

relating to the Corporation (“Dispute”), the parties agree as follows:

. . . .

(b) Arbitration .

If not resolved by mediation,

the parties shall resolve the Dispute by arbitration pursuant to this Section

and the then current rules and supervision of the American Arbitration

Association. . . .

. . . .

(e) Covered

Parties. The duties to mediate and

arbitrate shall extend to any Director, officer, employee, Shareholder,

principal agent, trustee in bankruptcy or otherwise, affiliate,

subsidiary, third-party beneficiary, or guarantor of a party making or defending

a claim that would otherwise be subject to this Section. . . .

Wood asserted that Wade’s claims

against him fell within the scope of the arbitration provision in the bylaws. Specifically, Wood averred that (1) Wade’s

claims “ relat [ ed ] to the

Corporation”; that is, they related to GM Oil, and (2) Wood was a “covered

party” because she had been a shareholder in GM Oil “from approximately August

31, 2005 through November 16, 2005,” during which time the bylaws were in

effect.

GM Oil and Moores did not join in the motion to compel

arbitration. Their special appearances remained

pending before the trial court.

The trial court conducted a

hearing on Wood’s motion to compel arbitration on October 8, 2007. The parties, including Wade’s counsel, made

clear to the trial court that the only issue to be decided was whether Wood

could compel arbitration. No

determination would be made with respect to arbitration and Wade’s claims

against GM Oil and Moores because the special

appearances were still pending.

Ten months later, on August

7, 2008, the trial court signed an order denying Wood’s motion to compel

arbitration. Wood, GM Oil, and Moores filed this interlocutory appeal regarding the trial

court’s order denying the motion to compel arbitration.

Wood, GM Oil, and Moores filed a motion requesting that we abate the appeal

to allow the trial court to clarify ambiguous language found in the order. A reading of the order showed that it was

unclear whether the trial court had intended to deny only Wood’s right to

compel arbitration of Wade’s claims or whether the order was intended also to

preclude GM Oil and Moores from compelling

arbitration. In this respect the order

provided, “[T]his Court has determined that [Wade’s] claims in this action

against the Defendants are not

subject to a valid and enforceable arbitration agreement and do not fall within

the scope of such arbitration agreement . . . .” (Emphasis added.)

We abated this appeal and

ordered the trial court to clarify, modify, or reconsider the order. In our abatement order, we pointed out that

it was “unclear from the order whether the order was intended to apply only to

[Wade’s] claims against Wood or whether it was intended to apply to [] Wade’s

claims against all three defendants.”

On October 12, 2009, the

trial court signed its “Order of Clarification and Reconsideration.” The order provided “ that this Court’s

order of August 7, 2008 intended to apply to Plaintiff Wade’s claims against

all three Defendants: Bill O. Wood, GM Oil Properties, Inc. and Gary Moores .” The order

also stated,

“[T]his Court has determined that Plaintiff Sheridan

Wade’s claims in this action against Defendants Bill O. Wood, GM Oil

Properties, Inc. and Gary Moores are not subject to a

valid and enforceable arbitration agreement and do not fall within the scope of

such arbitration agreement and hereby REAFFIRMS the denial of Defendant Wood’s

Motion to Compel Arbitration.”

Wood, Moores ,

and GM Oil filed a petition for writ of mandamus in this Court, asserting that

the trial court erred when it “adjudicated their arbitration defenses” before

ruling on GM Oil’s and Moores’s special appearances. See In

re GM Oil Props., Inc. , No. 10 – 00001 – CV, 2010 WL 2653279 , *2 (Tex. App.—Houston [1st

Dist.] July 1, 2010, orig. proceeding.). We

agreed and held that the trial court had abused its discretion when it

determined that Wade’s claims against GM Oil and Moores

were not subject to arbitration before it determined whether it had personal

jurisdiction over those defendants. Id. at *3. We ordered the trial court either (1) to

vacate its October

12, 2009 Order of Clarification and

Reconsideration or (2) to modify the order to limit its application to Wade’s

claims against Wood and to delete the order’s language stating that Wade’s

claims against GM Oil and Moores are not subject to,

or within the scope of, a valid arbitration clause. Id.

We also abated this appeal and

ordered that it be reinstated on the filing of a supplemental clerk’s record

containing (1) the trial court’s modified order denying Wood’s motion to compel

arbitration or, (2) in the event that the trial court vacated the October 12, 2009 order, an order replacing that order and

denying arbitration. See id. at

*4.

We reinstated the appeal

after receiving a supplemental clerk’s record containing an order from the

trial court denying Wood’s motion to compel arbitration. The order, signed August 4, 2010, expressly

states that the trial court’s original order denying the arbitration request

applied only to Wade’s claims against Wood individually. The order also provides,

[H] aving considered the

pertinent materials submitted by the parties, including Defendant Bill Wood’s

Motion to Compel Arbitration and Plaintiff Sheridan Wade’s Motion for Partial

Summary Judgment on the Issue or Arbitration, this Court has determined that

Plaintiff Sheridan Wade’s claims in this action against defendant Bill O. Wood

is not subject to a valid and enforceable arbitration agreement and does not

fall within the scope of such arbitration agreement . . . .

Wood challenges the trial court’s

denial of his motion to compel arbitration in this interlocutory appeal,

raising two issues. [3]

Standard of Review

As a general proposition, we review

a trial court’s denial of a motion to compel arbitration under an

abuse-of-discretion standard. See Schlumberger Tech. Corp. v. Baker Hughes

Inc. , No. 01–11–00562–CV, 2011 WL 4925996, at *8 (Tex. App.—Houston [1st

Dist.] Oct. 13, 2011, no pet. h.); Okorafor v. Uncle Sam & Assocs., Inc .,

295 S.W.3d 27, 38 (Tex. App. — Houston

[1st Dist.] 2009, pet. denied). Nevertheless,

whether an arbitration clause imposes a duty to arbitrate is a matter of

contract interpretation and, as such, is a question of law for this Court to

review de novo. See BDO Seidman , L.L.P.

v. J.A. Green Dev. Corp ., 327

S.W.3d 852, 854 (Tex. App.—Dallas 2010, no pet.) (citing Tex. Petrochemicals, L.P. v. ISP Water Mgmt.

Servs ., L.L.C ., 301 S.W.3d 879, 884 (Tex. App. — Beaumont 2009, no

pet.)); see also Schlumberger Tech. Corp. ,

2011 WL 4925996, at *8 (citing Forest Oil

Corp. v. McAllen , 268 S.W.3d 51 , 55 n.9 (Tex. 2008) (“When an appeal from a

denial of a motion to compel arbitration turns on a legal determination . . .

we apply a de novo standard.”).

Significant to this appeal, we recognize that whether an enforceable

agreement to arbitrate exists is a legal question subject to de novo review. Bates v. MTH Homes–Tex., L.P ., 177 S.W.3d 419, 422 (Tex. App. — Houston [1st Dist.]

2005, no pet.).

Analysis

A. Agreement to Arbitrate Wade’s Claims

Against Wood, Individually

Wood contends that Wade is subject

to the arbitration provision in GM Oil’s bylaws requiring, inter alia, a

shareholder to arbitrate any dispute relating to the corporation, including

torts and breach of contract claims, between a shareholder and a corporate

officer. Wood points out that Wade was a

shareholder of GM Oil from August 31, 2005 until November 16, 2005 and that Wood

has been, at all relevant times, a corporate officer of GM Oil. Wood also asserts that Wade’s claims against

him individually relate to the corporation, GM Oil, within the meaning of the

arbitration provision.

In response, Wade

points out that the trial court’s August 4, 2010 order expressly

indicates that the trial court denied Wood’s arbitration request only as it

relates to her claims against Wood in his individual capacity. Wade asserts that her claims against Wood

individually do not comprise a dispute between a shareholder and a corporate

officer and are not covered by the arbitration provision in the bylaws. In this regard, Wade directs us to the

following:

·

As indicated in the factual allegations

underlying her claims, Wade does not bring this suit in her capacity as a

former GM Oil shareholder.

·

Wade’s claims against Wood individually are not

asserted against him in his role as a corporate officer.

·

Wade’s claims arise from her partnership

relationship with Wood; it does not arise from her former shareholder

relationship with GM Oil or its officers.

·

Wade sues for breach of an oral partnership

agreement with Wood in which she claims he promised her 10 percent ownership in

GM Oil and for breach of the Stockholder’s Agreement in which Wood, signing in

his individual capacity, agreed to transfer 10 percent of his personal interest

in GM Oil to Wade. She does not base her

claims on a breach of GM Oil’s bylaws or on a right asserted thereunder.

The

respective position of each party raises the following question: Did the

parties enter into an agreement to arbitrate Wade’s claims against Wood brought

by Wade in her individual capacity against Wood in his individual

capacity? In evaluating a motion to

compel arbitration, a court must determine first whether a valid arbitration

agreement exists, and then whether the agreement encompasses the claims raised.

See

In re D. Wilson Constr. Co ., 196 S.W.3d 774, 781 (Tex. 2006); In re Oakwood Mobile Homes, Inc ., 987

S.W.2d 571, 573 (Tex. 1999). It is a

foundational principle that a party cannot be compelled to arbitrate a dispute

when the party has not agreed to do so. [4]

Rachal v. Reitz , 347

S.W.3d 305, 308 (Tex. App.—Dallas 2011, pet. filed); Bates , 177 S.W.3d at 422 ;

Trico Marine Servs ., Inc. v. Stewart

& Stevenson Technical Servs ., 73 S.W.3d 545,

548 (Tex. App. — Houston

[1st Dist.] 2002, no pet.). Whether an

entity or person is a party to the arbitration agreement is included within the

broader issue of whether the parties agreed to arbitrate. See Smith/Enron Cogeneration Ltd. P’ship ,

Inc. v. Smith Cogeneration Int’l, Inc ., 198 F.3d 88 , 95 (2d Cir. 1999).

The Supreme

Court of Texas has repeatedly expressed a strong presumption favoring arbitration;

however, 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 other words, the presumption favoring

arbitration does not go so far as to create an obligation to arbitrate where

none exists. See Volt Info. Scis . , Inc. v. Bd. of Trs ., 489

U.S. 468, 479 , 109 S. Ct. 1248, 1256 (1989) (stating “arbitration under the

[FAA] is a matter of consent, not coercion”); In re Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 738 (Tex.

2005) (“Because arbitration is contractual in nature, the FAA generally does

not require parties to arbitrate when they have not agreed to do so.”). “Although arbitration is encouraged, it is a

contractual matter and, in the absence of an agreement to arbitrate, a party

cannot be forced to forfeit the constitutional protections of the judicial

system and submit its dispute to arbitration.” Jenkens & Gilchrist v. Riggs , 87 S.W.3d

198, 201 (Tex. App. — Dallas

2002, no pet.). Thus, unless a

party has agreed to arbitrate, arbitration should not be compelled. See Freis v. Canales , 877 S.W.2d 283, 284 (Tex. 1994)

(orig. proceeding).

To support his position that Wade

agreed to arbitrate her claims against him individually, Wood relies on the

general corporate law precept that bylaws constitute a contract between a

corporation and its shareholders. See, e.g., Overland Auto. Co.

v. Cleveland , 250 S.W. 453, 455 (Tex. Civ. App. — Dallas 1923, writ dism’d w.o.j .) (“The stockholders and the

corporation between themselves must abide by the articles of association and

the by-laws.”); Ainsworth v. Sw. Drug

Corp. , 95 F.2d 172, 173 (5th Cir. 1938) (“[T]he charter and by-laws of a

corporation constitute a contract between the company and its shareholders.”). Wood asserts that Wade is bound by the

arbitration provision in the bylaws because she accepted the GM Oil stock in

August 2005, thus becoming a stockholder, and then profited from the sale of

the stock in November 2005.

When deciding whether the parties

agreed to arbitrate, courts should apply ordinary state law principles

regarding the formation of contracts. [5]

First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944 , 115 S.

Ct. 1920, 1924 (1995); J.M. Davidson ,

128 S.W.3d at 227–28. In

conducting our review, “This Court may not expand upon the terms of the

contract or tolerate a liberal interpretation of it by reading into it a

voluntary, consensual agreement to arbitrate when one otherwise does not exist.” Bates ,

177 S.W.3d at 422 .

“Although an arbitration agreement does not have to assume any

particular form, the language of the agreement must clearly indicate the intent

to arbitrate.” Id.

With these

principles in mind, we turn to the arbitration provisions in GM Oil’s bylaws to

determine whether Wade agreed to arbitrate her personal claims against Wood in

his individual capacity. [6]

Who is actually bound by an arbitration

agreement is a function of the intent of the parties, as expressed in the terms

of the agreement. Bridas S.A.P.I.C. v. Gov’t of

Turkmenistan , 345 F.3d 347, 355 (5th Cir. 2003). Here, the arbitration clause states, in

relevant part, that any dispute “between or among the parties and relating to

the Corporation” shall be resolved by arbitration. [7] A subsection of the arbitration clause,

entitled “Covered Parties,” states that the duty to arbitrate extends “to any

Director, officer, employee, Shareholder, principal agent, trustee in

bankruptcy or otherwise, affiliate, subsidiary, third-party beneficiary, or

guarantor of a party making or defending a claim that would otherwise be

subject to this Section.”

When she

filed suit, Wade was not a shareholder of GM Oil, and therefore was not among

the “Covered Parties” at that time. [8]

Arguably, when construed broadly, Wade’s

claims against Wood individually, “relate” to GM Oil. Nonetheless, the arbitration clause by its own

terms, only binds, as relevant to this case, corporate officers and

shareholders regarding disputes “between or among” them. In other words, the clause applies to a

dispute only when each party involved is either enforcing a right or being

subject to an obligation arising from his or her status as a corporate officer

or a shareholder. The arbitration clause

does not purport to bind a former shareholder when, as here, she is suing in

her individual capacity on claims not derivative of or arising from her

shareholder status. Cf. Blaustein v. Huete ,

434 Fed. Appx . 304, 306 (5th Cir. 2010) (holding that defendant law firm

could not compel the plaintiff to arbitrate his individual claims, under an arbitration

agreement with the firm’s corporate client, when the plaintiff had signed the arbitration

agreement as a representative of the client corporation, not in his individual

capacity).

We conclude

that Wade did not agree to arbitrate the claims she asserts against Wood,

individually. [9] Accordingly, we hold that Wade’s claims

against Wood, individually, are not subject to the arbitration provision found

in GM Oil’s bylaws.

Alternative Theories to Compel Arbitration

According to

principles of contract and agency law, arbitration agreements may bind non-parties

to the agreement under any of six theories: (1) incorporation by reference; (2)

assumption; (3) agency; (4) alter ego; (5) equitable estoppel, and (6) third

party beneficiary. See Kellogg Brown & Root, Inc ., 166

S.W.3d at 739 .

In his

principal brief, Wood intimates that even if he is not a party in his individual capacity to the arbitration

agreement, he may nonetheless enforce the arbitration provision as “a third

party beneficiary of the bylaws’ arbitration clause,” “under general agency

principles,” and “under principles of [concerted misconduct] equitable

estoppel.” However, Wood’s argument

supporting each of these theories presumes that Wade is a party to the

arbitration agreement in her individual capacity. Wood does not address how these alternative

principles bind Wade to the agreement when, as discussed supra , the claims involved in this interlocutory appeal are brought

by Wade in her individual capacity as a non-party to the arbitration agreement. With regard to these alternative theories,

Wood makes no substantive argument showing that Wade, as a non-party, may be

bound under principles of agency and equity. [10] Thus, Wood’s alternative theories offered to

show why he, in his capacity as a non-party to the agreement, may compel

arbitration do not serve to show how Wade, in the context of this case, is

bound by the arbitration provisions in the bylaws.

We overrule

Wood’s two issues on appeal.

Conclusion

We hold that

the trial court did not abuse its discretion in denying Wood’s motion to compel

arbitration with respect to Wade’s claims against Wood, individually. We affirm the trial court’s August 4, 2010

order denying Wood’s motion to compel arbitration.

Laura

Carter Higley

Justice

Panel consists of Justices

Keyes, Higley, and Massengale.

[1]

The

initial interlocutory order denying arbitration was appealed by Bill O. Wood,

GM Oil Properties, Inc., and Gary Moores . As explained infra , that order has been modified by the August 4, 2010 order that is currently the subject of this

interlocutory appeal. See Tex.

R. App. P . 27.3. (“After an order or judgment in a civil case has been

appealed, if the trial court modifies the order or judgment, or if the trial

court vacates the order or judgment and replaces it with another appealable

order or judgment, the appellate court must treat the appeal as from the

subsequent order or judgment and may treat actions relating to the appeal of

the first order or judgment as relating to the appeal of the subsequent order

or judgment.”). The current order

applies only to Wood, individually.

[2] These allegations are found in Wade’s

seventh amended petition, which was the live pleading at the time the trial

court denied Wood’s motion to compel arbitration, the subject of this

appeal.

[3] We have jurisdiction over Wood’s

interlocutory appeal of the trial court’s August 4, 2010 order denying his

motion to compel arbitration. Wood

sought to compel arbitration under the Federal Arbitration Act, 9 U.S.C. §§ 1–16 (2008) (“FAA”), and

the Texas General Arbitration Act, Tex.

Civ. Prac . & Rem. Code Ann . §§ 171.001–.098

(Vernon 2011) (“TAA”). An appeal can be

taken from either an interlocutory order denying a motion to compel arbitration

under the FAA, see TEX. CIV. PRAC. & REM. CODE ANN. §

51.016 (Vernon Supp. 2011), or an order denying a motion to compel arbitration

under the TAA, Tex. Civ. Prac . & Rem. Code Ann. § 171.098(a )( 1).

The FAA generally governs

arbitration provisions in contracts involving interstate commerce. See

9 U.S.C. § 2 ; see also In re L & L Kempwood Assocs., L.P ., 9 S.W.3d 125, 127 (Tex. 1999). Parties may also expressly agree to arbitrate

under the FAA. The arbitration provision

in GM Oil’s bylaws indicates, “Federal substantive and procedural laws relating

to arbitration shall govern issues of arbitrability ,”

thus implicating the Federal Arbitration Act.

See In re Kellogg Brown & Root ,

80 S.W.3d 611, 617 (Tex. App. — Houston

[1st Dist.] 2002, orig. proceeding) (concluding that parties are not required

to establish that transaction at issue involves or affects interstate commerce when

parties agree to arbitrate under FAA). In any event, the TAA and the FAA may both apply

to an agreement, absent the parties’ choice of one or the other. L &

L Kempwood Assocs., L.P ., 9

S.W.3d at 127–128 . The FAA may

preempt the TAA in certain cases. See In re D. Wilson Constr. Co ., 196

S.W.3d 774, 780 (Tex. 2006); see also Nafta Traders, Inc. v. Quinn , 339 S.W.3d 84 , 97–98

(Tex. 2011). No distinct preemption

argument is made here. A party asserting

that the FAA preempts the TAA bears the burden of proof on that issue. See Ellis

v. Schlimmer , 337 S.W.3d 860,

862 (Tex. 2011). The FAA preempts

the TAA only when the TAA or other state law would not allow enforcement of an

arbitration agreement that the FAA would enforce. Id. (citing D. Wilson Constr.

Co ., 196 S.W.3d at 779 – 80).

Otherwise, appellate review may be

available under both the TAA and the FAA so long as the TAA is not preempted. Id. (citing D. Wilson Constr.

Co ., 196 S.W.3d at 780 ).

Here, it is not apparent or argued that the TAA or other state law would

not allow enforcement of the arbitration clause in GM Oil’s bylaws.

[4] 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. Kellogg Brown & Root , 80 S.W.3d at 615 .

[5] Courts also apply the rules governing contract

interpretation when construing corporate bylaws. In re

Aguilar , 344 S.W.3d 41, 49 (Tex. App. — El Paso 2011, orig. proceeding).

[6] The issue of whether Wade, in her

capacity as GM Oil shareholder, adequately assented to the arbitration

agreement found in the bylaws is not directly raised or briefed by the parties

in this interlocutory appeal. As

mentioned, Wood asserts that Wade, by virtue of her shareholder status, is

subject to the arbitration provisions in the bylaws. In any event, as discussed infra , whether Wade agreed, as a

shareholder, to arbitrate disputes relating to the corporation is not outcome

determinative in this interlocutory appeal.

Thus, we do not determine the issue of whether a shareholder can be held

to an arbitration provision found in corporate bylaws simply by virtue of his

or her shareholder status. We note that

the Third Circuit Court of Appeals has held, as a matter of first impression

under Pennsylvania law, that a shareholder of a law firm could not be compelled

to arbitrate claims against the firm pursuant to the firm’s corporate bylaws to

which she did not explicitly assent. Kirleis v. Dickie ,

McCamey & Chilcote , P.C. ,

560 F.3d 156, 163 (3d Cir. 2009).

[7] As an aside, GM Oil’s bylaws require

that a dispute must first be mediated before it may be arbitrated.

[8] Although we note that Wade was not a

shareholder at the time she filed suit, we do not suggest by this observation,

that had she been a shareholder at the time she filed suit, her claims against

Wood, individually, would have been covered by the arbitration clause. Nor do we suggest that a former shareholder

can never sue a corporation or its officers.

A survey of case authority reveals cases in which former shareholders

have sued corporations or corporate officers.

See, e.g., Koch v. Koch Indus.,

Inc ., 203 F.3d 1202 , 1209 –10

(10th Cir. 2000) (involving suit by former shareholders against corporation and

its officers and directors, alleging claims of securities fraud, common law

fraud, breach of fiduciary duty, and breach of express warranty arising out of

buyout of shareholders’ interests); Dowling

v. Narragansett Capital Corp ., 735 F. Supp. 1105 , 1110 – 12 (D.R.I. 1990)

(involving suit by former shareholders against company’s officers, directors,

controlling shareholders, and investment banking firm, alleging violations of

Securities Exchange Act of 1934 and Investment Company Act, fraud, and

negligent misrepresentation in connection with sale of company’s assets). We point to the fact that Wade was not a

shareholder at the time that she filed suit because it serves to illustrate

that she is not suing on any right or remedy she gained by virtue of her

shareholder status.

[9] In this interlocutory appeal, the trial

court’s order pertains only to Wade’s claims against Wood, individually, and

determines those claims are not subject to arbitration. Our decision is limited to the subject matter

of that order. Thus, we express no

opinion regarding whether Wade’s claims against Wood in his representative

capacity, her claims against GM Oil, or her claims against Moores

are subject to the arbitration provision.

[10] In footnote 120 of his brief, Wood

asserts that Wade is obligated to arbitrate under the doctrine of direct

benefits estoppel. See Kellogg Brown & Root, Inc ., 166 S.W.3d at 741 (concluding that

under direct benefits estoppel, a second-tier subcontractor suing a general

contractor is bound by an arbitration provision in the contract between the general

contractor and the first-tier subcontractor only when he “seeks, through the

claim, to derive a direct benefit from the contract” containing the provision);

In re Weekley

Homes, L.P ., 180 S.W.3d 127 , 132–33 (Tex. 2005) (holding that, under direct

benefits estoppel, a nonsignatory to a contract

containing an arbitration provision may be bound by the provision if the nonsignatory sought or obtained direct benefits from the

contract during its performance). In

short, this doctrine applies to bind a party to an arbitration clause found in

a contract to which the party is not a signatory, but from which he or she seeks

or has sought a direct benefit. Wood

asserts that Wade obtained a benefit under GM Oil’s bylaws when she sold her GM

Oil stock for a profit. Generally, bylaws

are “the rules and regulations or private laws enacted by the corporation to

regulate, govern and control its own actions, affairs

and concerns and its shareholders or members and its directors and officers

with relation to each other and among themselves in their relation to the

corporation.” 8 William Meade Fletcher, Fletcher Cyclopedia of the Law Of Private

Corporations § 4166; see also

Little Canada Charity Bingo Hall Ass’n v. Movers

Warehouse, Inc. , 498 N.W.2d 22, 24 (Minn. Ct. App. 1993) (stating that “the

purpose of a by-law is to establish rules for the internal government of the

corporation”). Wood does not explain how

Wade’s profit from her stock sale was a direct “benefit” of GM Oil’s

bylaws. The doctrine of direct benefits

estoppel does not apply if the claimed benefit is “indirect.” Weekley Homes , 180 S.W.3d at 134 . Nor

does it apply if the claim merely “relates” to the contract. Kellogg

Brown & Root , 166 S.W.3d at 741 . Here, Wood does not specify under which bylaw

provisions Wade directly benefited nor did he provide a copy of the bylaws,

besides the arbitration and general definitional provisions. Wood has not shown that Wade is obligated to

arbitrate her claims against him individually under the doctrine of direct

benefits estoppel.