Chuck Davis Chevrolet, Inc., John C. Gnemi, and John Jay Davis v. Davis and Davis Joint Venture--Appeal from 270th District Court of Harris County

Affirmed and Memorandum Opinion filed November 9, 2004

Affirmed and Memorandum Opinion filed November 9, 2004.

In The

Fourteenth Court of Appeals

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NO. 14-04-00468-CV

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CHUCK DAVIS CHEVROLET, INC., JOHN C. GNEMI,

AND JOHN JAY DAVIS, Appellants

V.

 DAVIS & DAVIS JOINT VENTURE, Appellee

On Appeal from the 270th District Court

Harris County, Texas

Trial Court Cause No. 04 03687

M E M O R A N D U M O P I N I O N

Appellants, Chuck Davis Chevrolet, Inc., John C. Gnemi, and John Jay Davis, bring this accelerated appeal from an interlocutory order denying their motion to compel arbitration under the Texas Arbitration Act (ATAA@).[1] We affirm.

Facts and Procedural Background

Appellant John Jay Davis (AJay@) and his brother, James Donohue Davis (AJim@), own land leased to the Chuck Davis Chevrolet Dealership (ADealership@). Jay and Jim formed a joint venture, the Davis & Davis Joint Venture (AJoint Venture@), for the purpose of managing the income from the land leased to the dealership.

Jim sold his stock and interests in the dealership to Dealership Acquisition Limited Partnership (ADALP@) pursuant to a purchase agreement. The purchase agreement contained an arbitration clause, providing that any disputes between the parties relating to the lease, joint venture agreement, or the purchase agreement would be arbitrated.

When the primary lease term expired, the parties were unable to agree on the fair market rental. Jay, the dealership, DALP, and the Joint Venture, A(John Jay Davis 1/2),@ filed a demand for arbitration. Jim responded to the arbitration request and the arbitration is currently proceeding. Subsequently, Jim filed suit on behalf of the Joint Venture against the dealership, its general manager John Gnemi, and Jay, asserting various causes of action. Appellants filed motions to compel arbitration under the TAA, and both parties submitted copies of the various contracts involved as summary evidence.[2] The trial court denied appellants= motions without explanation, and this interlocutory appeal ensued.

Analysis

Appellants assert the trial court erred in denying their motions to compel arbitration, arguing the Joint Venture agreed to arbitrate any disputes between the parties. Initially, however, we must address appellee=s contention that, because the Federal Arbitration Act (AFAA@)[3] applies to a dispute under the purchase agreement, and appellants filed an interlocutory appeal rather than a writ of mandamus, we lack jurisdiction over this appeal.

1. Jurisdiction

Texas appellate courts have jurisdiction to hear appeals from final judgments and from those interlocutory orders and judgments specifically authorized by statute. Lehmann v. Har Con Corp., 39 S.W.3d 191, 195 (Tex. 2001); Qwest Communications Corp. v. AT&T Corp., 24 S.W.3d 334, 336 (Tex. 2000).

In Jack B. Anglin Co., Inc. v. Tipps, the Texas Supreme Court concluded that when a trial court refuses to enforce an arbitration agreement pursuant to the FAA, a litigant must pursue review of that order through a writ of mandamus rather than an interlocutory appeal. 842 S.W.2d 266, 272 (Tex. 1992). In making this determination, the Tipps court noted that interlocutory orders such as an order denying arbitration may be appealed only if permitted by statute, and although the TAA provides for interlocutory appeals of orders denying arbitration filed pursuant to the TAA, the statute does not provide for appeal of an order denying arbitration under the FAA.[4] Id. at 272. Consequently, the Tipps court concluded, Alitigants who allege entitlement to arbitration under the [FAA], and in the alternative, under the [TAA], are burdened with the need to pursue parallel proceedingsCan interlocutory appeal of the trial court=s denial under the [TAA], and a writ of mandamus from the denial under the [FAA].@ Id.[5] However, in Tipps, the litigant sought arbitration pursuant to the FAA and, in the alternative, the TAA. Id. at 267. This case is procedurally distinct from Tipps and from many cases decided relying on that case.

Here, appellants did not allege entitlement to arbitration under the FAA. Appellants sought to compel arbitration pursuant to section 171.021 of the TAA. Appellants also did not pursue parallel proceedings in this court; they filed only this interlocutory appeal. An interlocutory appeal of an order denying arbitration under the TAA is expressly permitted under section 171.098 of that statute. Therefore, to the extent appellants pursued appeal of the trial court=s order denying arbitration under the TAA, we are authorized to entertain this interlocutory appeal. See Tex. Civ. Prac. & Rem. Code ' 171.098. We turn to the trial court=s order.

2. Denying Arbitration under the TAA

Appellants moved to compel arbitration under the TAA. The trial court=s order denies appellants= motions to compel without explanation. Because we conclude that the FAA applies to a dispute under the purchase agreement and appellants sought to compel arbitration only under the TAA, we affirm the trial court=s ruling.

The FAA applies to suits in state and federal courts when the dispute concerns a Acontract evidencing a transaction involving commerce.@ Tipps, 842 S.W.2d at 270B71; see also 9 U.S.C. ' 2 (1999). The Supreme Court has held that Ainvolving commerce@ should be construed broadly to include any contract Aaffecting commerce@ and extending as far as the Commerce Clause. Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 268, 273B77 (1995); see also In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127 (Tex. 1999); 9 U.S.C. ' 1 (stating Acommerce@ means commerce Aamong the several States@). Commerce need only be involved or affected, a substantial effect on interstate commerce is not required. In re Educ. Mgmt Corp., Inc., 14 S.W.3d 418, 423 (Tex. App.CHouston [14th Dist.] 2000, orig. proceeding). A[I]f some, but not all, aspects of a transaction affect interstate commerce, the FAA applies.@ Id.

In this case, the purchase agreement directly evidences that the FAA applies. First, when an agreement references both the FAA and the TAA, as the purchase agreement does, the FAA prevails. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 91 (Tex. 1996). Indeed, for the FAA not to apply, an agreement must specifically exclude application of that statute. In re L & L Kempwood, 9 S.W.3d at 127B28. The purchase agreement also involves a sale of stock, and the sale of securities is construed as involving interstate commerce. See In re Merrill Lynch, Pierce, Fenner & Smith Inc., 131 S.W.3d 709, 712 (Tex. App.CDallas 2004, no pet.); Eurocapital Group, Ltd. v. Goldman Sachs & Co., 17 S.W.3d 426, 430 (Tex. App.CHouston [1st Dist.] 2000, no pet.). In the purchase agreement the parties acknowledge that consummation of the transaction is contingent on the approval of General Motors Corporation. This is another indication that the agreement involves interstate commerce. See In re Nasr, 50 S.W.3d 23, 25B26 (Tex. App.CBeaumont 2001, orig. proceeding) (finding mention of WalMart in discovery documents indicated interstate commerce was involved). Finally, the record reflects that the dealership is a Delaware corporation, evidencing diversity between the parties. See, e.g., Allied Bruce, 513 U.S. at 282 (considering the fact that parties resided in different states as a factor in applying the FAA); In re L & L Kempwood, 9 S.W.3d at 127 (noting that parties to the contract resided in different states and therefore, it was one involving interstate commerce); Transcore Holdings, Inc. v. Rayner, 104 S.W.3d 317, 320 (Tex. App.CDallas 2003, pet. denied) (finding FAA applied because case involved a Delaware corporation that purchased all of the stock of a Texas corporation, the stockholders were Texas residents, and the parties to the agreement were located in three separate states).

If there is doubt whether the FAA or the TAA applies to a dispute, litigants have been advised to pursue both avenues of relief. See Tipps, 842 S.W.2d at 272. Nevertheless, appellants pursued relief only under the Texas statute. Because the record evidences that the FAA applies to the arbitration provision in the purchase agreement, we cannot conclude that the trial court erred in denying appellants= motions to compel arbitration under the TAA. Moreover, we cannot consider the issues presented by appellants= motions to compel arbitration under the FAA.[6] See Tex. R. App. P. 33.1.

Accordingly, the trial court=s judgment is affirmed.

/s/ Eva M. Guzman

Justice

Judgment rendered and Memorandum Opinion filed November 9, 2004.

Panel consists of Justices Yates, Edelman, and Guzman.

[1] See Tex. Civ. Prac. & Rem. Code Ann. '' 171.001B.098. (Vernon 1997).

[2] A trial court may summarily determine whether to compel arbitration based on pleadings, affidavits, and discovery. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex. 1992).

[3] See 9 U.S.C.A. '' 1B16 (1999).

[4] The TAA provides, in part, that a party may appeal an order Adenying an application to compel arbitration made under Section 171.021.@ Tex. Civ. Prac. & Rem. Code Ann. ' 171.098(a)(1) (Vernon Supp. 2002).

[5] Prior to Tipps, the courts of appeals had permitted appeal under the TAA, and mandamus or appeal under the FAA. 842 S.W.2d at 272 n.11.

[6] Appellants have requested we construe their appeal as a mandamus. We decline to do so because the two are distinct legal mechanisms, and because of appellants= failure to request arbitration under the FAA in the trial court.