Opinion
No. 05-08-01091-CV
Opinion issued November 7, 2008.
Original Proceeding from the 191st Judicial District Court, Dallas County, Texas Trial Court, Cause No. 08-5498-J.
Before Justices WRIGHT, O'NEILL, and LANG.
Opinion By Justice O'Neill
MEMORANDUM OPINION
Relator Crosstex CCNG Processing Ltd. seeks mandamus relief to direct the trial court to vacate the portion of its July 25, 2008 order that requires the parties to submit to a non-administered arbitration and to modify its order to require the parties to submit to an arbitration administered by the American Arbitration Association (AAA). Relator argues the trial court abused its discretion by ruling that the parties' agreement to arbitrate in accordance with the rules of the AAA does not require administration of the arbitration by the AAA. We agree. The facts of this original proceeding are known to the parties so we do not recite them here in detail. Further, because all dispositive issues are clearly settled in law, we issue this memorandum opinion and order pursuant to rule 52.8(d) of the Texas Rules of Appellate Procedure. See Tex. R. App. P. 52.8(d). Accordingly, we conditionally grant writ of mandamus to direct the trial court to vacate the portion of its July 25, 2008 order that requires the parties to submit to a non-administered arbitration, and to modify its order to require the parties to submit to an arbitration administered by the AAA. On November 23, 2005, relator and real party in interest, Denbury Onshore, LLC, entered into a gas processing agreement, in which relator agreed to process natural gas owned by real party. The agreement included an arbitration provision, which in part, provides: "Except as modified in this Agreement, the arbitration shall be conducted in accordance with the rules of arbitration of the Federal Arbitration Act and, to the extent an issue is not addressed by the federal law of arbitration, by the Patent Arbitration Rules of the American Arbitration Association."
After a dispute arose regarding the gas processing agreement, real party filed a petition for declaratory judgment and to compel arbitration under the Federal Arbitration Act (FAA). In its motion to compel, real party asserted that relator refused to arbitrate. In its response to the motion to compel, relator stated that it did not refuse to arbitrate and that the parties agree that their disputes must be arbitrated. However, relator explained that it is willing to arbitrate the disputes between the parties in a AAA-administered arbitration as bargained for in the processing agreement, but that real party is attempting to avoid its agreement that the arbitration should be administered by the AAA.
After a hearing before the trial court regarding whether the arbitration had to be AAA administered arbitration, the trial court ordered the parties to arbitration "in accordance with the arbitration agreement and the Federal Arbitration Act." The trial court added: "Such arbitration shall not be administered by the American Arbitration Association; that is, it shall be a non-administered arbitration." In its petition for writ of mandamus, relator argues the trial court has abused its discretion by denying its contracted-for right to an AAA-administered arbitration.
Traditionally, mandamus will not issue unless: (1) the trial court has committed a clear abuse of discretion; and (2) there is no adequate remedy by appeal. In re Mo. Pac. R.R. Co., 998 S.W.2d 212, 215 (Tex. 1999) (orig. proceeding) (citing Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992). A clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion, and may result in appellate reversal by extraordinary writ. In re Tex. Am. Express, Inc., 190 S.W.3d 720, 724 (Tex.App.-Dallas 2005, orig. proceeding). Mandamus is proper to correct a clear abuse of discretion when there is no adequate remedy by appeal, as when a party is denied its contracted-for arbitration rights under the FAA. In re D. Wilson Constr. Co, 196 S.W.3d 774, 780 (Tex. 2006). Mandamus is the proper means by which to seek review of an order compelling arbitration under the FAA. In re Poly-America, L.P., 262 S.W.3d 337, 345 (Tex. 2008).
In its petition for writ of mandamus, relator argues that by agreeing to arbitrate in accordance with the AAA rules, the parties made those rules part of the processing agreement. Rule 3 of the Patent Arbitration Rules provided: "When parties agree to arbitrate under these rules, or when they provide for arbitration by the AAA and an arbitration is initiated under these rules, they thereby authorize the AAA to administer the arbitration." See Am. Arb. Ass'n, Archived Patent Arb. R. 3, available at http://www.adr.org/sp.asp?id=22013, modified by Resolution Patent Disputes Suppl. R., Supp. R. Patent Disp. 1 (effective Jan. 1, 2006), available at http://www.adr.org/sp.asp?id=27417 . Relator asserts that by agreeing to arbitrate "in accordance with . . . the Patent Arbitration Rules of the American Arbitration Association," relator and real party authorized the AAA to administer the arbitration and that the trial court had no discretion to disregard the rules agreed to by the parties.
We agree that when the parties agreed to arbitrate in accordance with the Patent Arbitration Rules, they authorized the AAA to administer the arbitration. See Ambulance Billings Sys. Inc. v. Gemini Ambulance Serv., Inc., 103 S.W.3d 507, 515 (Tex.App.-San Antonio 2003, no pet.). Because the parties agreed that the AAA rules govern the administration of the arbitration, they are bound by the AAA rules providing for an AAA administered arbitration. See In re Nat'l Health Ins. Co., 109 S.W.3d 552, 556 (Tex.App.-Tyler 2002, orig. proceeding).
Arbitration agreements are interpreted by applying contract principles. Id. A court cannot change an arbitration agreement because it or one of the parties comes to dislike the provisions of the arbitration agreement or thinks that something else is needed. Id. Therefore, the trial court failed to correctly analyze and apply the law when it altered the agreement by ordering the parties to submit to an arbitration not administered by the AAA. The trial court's failure to analyze and apply the law constitutes an abuse of discretion.
Mandamus will issue when the failure to do so would "vitiate and render illusory the subject matter of an appeal." Jack B. Anglin co. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992) (orig. proceeding). Here the subject matter of the prospective appeal would be the right to proceed immediately with an AAA administrated arbitration. An appeal after the non-AAA administered arbitration would vitiate that right. We conclude relator has no adequate remedy by appeal.
The trial court abused its discretion by ordering the parties to submit to a non-AAA administered arbitration. The relator does not have an adequate appellate remedy. Therefore, we conditionally grant the writ of mandamus and direct the trial court to vacate the portion of its July 25, 2008 order that requires the parties to submit to a non-administered arbitration, and to modify its order to require the parties to submit to an arbitration administered by the AAA. We are confident that the trial court will act promptly to modify its order in accordance with this opinion. The writ will issue only if it fails to do so.