Opinion
02-23-00431-CV
12-05-2023
In re Precision Concrete & Excavation, LLC, Dawn Gosselin, and Jeremy Gosselin, Relators
Original Proceeding 17th District Court of Tarrant County, Texas Trial Court No. 017-347661-23
Before Bassel, Wallach, and Walker, JJ.
MEMORANDUM OPINION
MIKE WALLACH JUSTICE.
Relators Precision Concrete & Excavation, LLC, Dawn Gosselin, and Jeremy Gosselin filed an original petition for writ of mandamus seeking relief from several orders in the underlying suit: (1) an order for expedited discovery that also ordered the parties to mediate by December 8, 2023; (2) an agreed order to extend a temporary restraining order; and (3) a scheduling order setting trial and other dates. We grant partial relief.
Background
At 12:40 p.m. on October 26, 2023, real party in interest, N^3 Owner, L.P. d/b/a N^3, L.P.--the general contractor for two building projects (Projects)--sued Precision--one of its subcontractors--and Precision's owners, the Gosselins. N^3 alleged that Precision was behind schedule; had failed to pay its subcontractors, causing them to file lawsuits and liens against the Projects' real property; and had used funds paid to it for purposes other than the contracted-for work. N^3 raised claims for breach of contract, several types of fraud, negligent misrepresentation, conversion, common law and statutory theft, money had and received, civil conspiracy, and violations of Section 12.002 of the Texas Civil Practice and Remedies Code. N^3 sought an accounting and constructive trust, injunctive relief, exemplary damages, and attorney's fees. With respect to the injunctive relief, N^3 alleged that after it had terminated all nine contracts, Precision had submitted false invoices and threatened to file liens on the Projects' real property.
According to the petition, N^3 and Precision entered into nine contracts, and Precision had defaulted on six of them.
N^3 attached one of the parties' written Subcontractor Agreements (referred to herein as the contracts) to its petition and acknowledged, "The contracts contain an arbitration provision. Plaintiff is willing to arbitrate but brings this action for the express purposes of seeking emergency injunctive relief." Importantly, the arbitration clause provides that the parties must attempt to negotiate and mediate first:
But for project name, scope of work, and dollar amounts, the contracts "have essentially the same terms and conditions."
If at any time there shall arise between the parties a question, controversy, dispute, or claim (whether contract, warranty, tort, statutory or otherwise) in connection with, arising under, or related to this Agreement, the Project, and/or any dealings between the parties (a "Dispute"), then the parties hereby agree that before any proceeding permitted herein may be filed, they shall make a good faith attempt to resolve such Dispute first through good faith, reasonable negotiations among themselves. Should the parties not be able to resolve the Dispute within thirty (30) days after the date of the first written communications between the parties regarding the Dispute (the "Informal Negotiation Period"), then the parties shall attempt to resolve said Dispute by submitting it to non-binding mediation ("Mediation"), and either party may send written notice to the other ("Mediation Notice") requesting such Mediation, and after any such Mediation Notice is given both parties agree to promptly proceed in good faith in attempting to resolve the Dispute by Mediation, and each party agrees to cooperate with the other in connection therewith and take all reasonable actions necessary to proceed with the Mediation . . . .
. . . .
. . . Should the parties be unable to resolve any Dispute through Mediation as provided above, then, upon the earlier of fifteen (15) days after the mediator's written determination that such Dispute remains
unresolved or forty-five (45) days after a Mediation Notice is given and the Dispute remains unresolved, either party may elect to require that the Dispute be resolved by binding arbitration ("Arbitration") in accordance with this Paragraph 6.3.2. Unless other procedures are agreed to by the parties in writing, Arbitration between the parties pursuant to this Paragraph 6.3.2 shall be governed by the then existing applicable rules of the American Arbitration Association and the rules and procedures set forth [in the contract] . . . .
On the day the petition was filed, the trial court granted a temporary restraining order (TRO) prohibiting Relators from (1) filing or maintaining any lien or encumbrance on the Projects' real property; (2) using funds paid by N^3 for anything other than the Projects; (3) using supplies purchased with N^3's funds for anything other than the Projects; (4) destroying, deleting, hiding, hypothecating, altering, or otherwise modifying or moving any of N^3's property or information; and (5) interfering with N^3's completion of the Projects. The TRO set a hearing on N^3's request for injunctive relief for November 7, 2023, at 9:00 a.m.
The next day, October 27, at 10:07 a.m., counsel for N^3 emailed Relators' counsel and urged that the parties engage in "limited expedited discovery" before the temporary injunction hearing. He invited Relators' counsel to make suggestions regarding discovery or to indicate their opposition to discovery and stated his intent to file a motion for expedited discovery later that day. Relators' counsel responded at 4:16 p.m., opposing expedited discovery and giving formal notice to mediate pursuant to Section 6.3.1 of the contracts. Two minutes later, N^3's motion for expedited discovery was file-stamped.
The certificate of conference states that Relators' counsel had not yet responded to the 10:07 a.m. email.
On October 30, 2023, at 8:47 a.m., N^3's counsel responded to Relators' counsel, expressly stating, "We are not opposed to mediating this dispute." She went on to say, "[H]owever, we do not believe that any mediation will be productive at this time or at anytime before we obtain some basic information from your clients." She listed that information as including but not limited to (1) an accounting of the Projects' status, (2) an accounting of funds N^3 paid to Precision that were used for other purposes, (3) outstanding orders that had not been delivered, (4) copies of all liens releases and affidavits of payment on the Projects, and (5) copies of all change orders between N^3 and Precision and communication related to those change orders. According to counsel's email, "This is in part why we are seeking expedited discovery in this case."
N^3 is represented by several attorneys in this dispute.
Counsel expressly stated, "[W]e have no intention of waiving arbitration either," and noted that N^3 was seeking injunctive relief as "a recognized exception to arbitration provisions in contracts." She invited Relators' counsel to send suggestions for an arbitrator.
The next day, at 3:16 p.m., N^3 filed a motion for contempt, sanctions, and attorney's fees, alleging that earlier that morning Jeremy Gosselin had violated the TRO by texting the general superintendent of the company hired by N^3 to replace Precision. A little over an hour and a half later, Relators filed a motion to stay proceedings and compel arbitration. Relators argued that the trial court was required to stay the proceedings--the motion for expedited discovery, the temporary injunction hearing, and enforcement of the TRO--pending the trial court's determination of the motion to compel. On November 2, 2023, Precision's counsel noticed a hearing on the motion to stay and compel for November 3, 2023, but he withdrew it at the court coordinator's request, "to be re-noticed at a later date."
See Tex. Civ. Prac. & Rem. Code Ann. § 171.025(a) ("The court shall stay a proceeding that involves an issue subject to arbitration if an order for arbitration or an application for that order is made under this subchapter."). Regardless of whether the Federal Arbitration Act, Texas Arbitration Act, or both apply to the contracts' arbitration provision, neither party has argued that the FAA's stay provision preempts or provides greater relief than Section 171.025. See, e.g., G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 519 n.14 (Tex. 2015); Rich v. Cantilo & Bennett, L.L.P., 492 S.W.3d 755, 759 n.2 (Tex. App.--Austin 2016, pet. denied).
Also on November 3, 2023, the trial court signed two orders: (1) an order granting N^3's motion for expedited discovery, which also orders the parties to an in-person mediation on or before December 8, 2023, and requires the parties to inform the trial court of the mediator's name and date, time, and place of mediation on or before November 9, 2023; and (2) an "Agreed" order extending the TRO. The agreed TRO extension order sets a temporary injunction hearing for December 20, 2023, at 9:00 a.m., and contains the following handwritten note: "Entry of this Agreed order does not waive any party's claim or right to arbitration." Counsel for N^3 and Relators signed the agreed order.
If this agreement was made at a hearing, we have no reporter's record of it. Nothing in the record provided to us indicates that this was anything other than an agreed order.
Four days later, N^3 served expedited requests for production on Relators. The next day, the trial court coordinator sent an email to all counsel, seeking to set a hearing date and time for the motion to stay and compel arbitration. N^3's counsel responded, "I understood from the last hearing that the Court was going to hear this Motion on December 20, 2023." The court coordinator responded that was her understanding. Nothing in the mandamus record provided to this court indicates that Relators objected to this setting.
On November 9, 2023--the date the parties were to provide the trial court with information about the ordered mediation--the trial court entered an order setting trial, which included dates for the parties to enter into a scheduling order and to file trial documents with trial court clerk, for a pretrial hearing, and for a trial date. That same day, Relators filed their petition for writ of mandamus and request for temporary emergency relief with this court. We granted their motion in part, staying the trial court's discovery order and the dates in its order setting trial. However, the motion to stay and compel arbitration has not been ruled on by the trial court and remains pending.
Although we stayed the discovery order, which also contains an order to mediate, we did not prohibit the parties from scheduling or engaging in mediation.
General Mandamus Standard of Review
Mandamus relief is an extraordinary remedy. In re Acad., Ltd., 625 S.W.3d 19, 25 (Tex. 2021) (orig. proceeding). The party seeking mandamus relief must show both that the trial court clearly abused its discretion and that the party has no adequate remedy by appeal. In re Allstate Indem. Co., 622 S.W.3d 870, 875 (Tex. 2021) (orig. proceeding). Mandamus relief is also appropriate when the trial court's order is void rather than voidable. In re Panchakarla, 602 S.W.3d 536, 539 (Tex. 2020) (orig. proceeding).
A trial court abuses its discretion when a decision is arbitrary, unreasonable, and without reference to guiding principles. Id.; see Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding). We defer to a trial court's factual determinations that have evidentiary support, but we review the trial court's legal determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding). An error of law or an erroneous application of the law to the facts is always an abuse of discretion. See In re Geomet Recycling LLC, 578 S.W.3d 82, 91- 92 (Tex. 2019) (orig. proceeding).
Analysis
Having expressly invoked the contracts' mediation provisions, Relators' primary concern in this mandamus proceeding is not the trial court's order requiring the parties to mediate the dispute. Rather, Relators' primary complaint is that the trial court should have immediately stayed all proceedings in the trial court upon the filing of the motion to stay and compel arbitration. Relators seek to avoid any enforcement of the TRO, the expedited discovery, and the temporary injunction hearing.
No void orders
First, Relators argue that, regardless of their agreement to the TRO extension order, that order should be vacated because the trial court was without jurisdiction to enter it and it is therefore void. According to Relators, because the contracts delegate arbitrability questions to the arbitrator, the trial court was without jurisdiction to take any action at all after it was notified of the arbitration clause's existence, regardless of whether the parties engaged in mediation as provided by the contracts. Relators cite a single case for this proposition, but that case is inapposite; it uses the phrase "jurisdiction" in referring to whether the arbitration panel in that case "had the power to rule on the merits of the parties' dispute." First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 941, 946, 115 S.Ct. 1920, 1922-23, 1925 (1995). That case did not deal with questions of exclusive jurisdiction or intimate that the trial court was somehow divested of jurisdiction because the dispute was arbitrable. See id.; cf. In re Gulf Expl., LLC, 289 S.W.3d 836, 840-41 (Tex. 2009) (orig. proceeding) (noting that "disputes about arbitrability and the merits" involve issues of dominant jurisdiction and that stay, rather than dismissal, is appropriate when trial court is faced with arbitrability issues that must be decided by the arbitrator because the trial court may be needed to decide certain other issues while arbitration is pending).
We agree with Relators' assertion that by agreeing to the TRO extension order, they did not waive their right to a ruling on the motion to compel.
Relators also cite Section 171.025(a) of the Civil Practice and Remedies Code-- the stay provision--for the proposition that the TRO extension order is void, but that section likewise does not operate to divest jurisdiction from the trial court. See In re Medina, No. 04-20-00390-CV, 2021 WL 603360, at *4 (Tex. App.--San Antonio Feb. 17, 2021, orig. proceeding) (mem. op.) (noting that imposition of stay is not automatic and thus requires trial court action, and that "a party may sometimes waive the right to a stay by failing to object to the trial court's actions").
Relators next contend that the trial court's order setting trial is void because it was entered in violation of Section 171.025(a). But this argument fails for the same reason. See id.
Accordingly, Relators' have not shown that they are entitled to mandamus relief on the grounds that the TRO extension order is void.
Expedited discovery order and trial-setting order require relief
In light of Relators' expressed intent to invoke the contracts' arbitration clauses and N^3's expressed intent not to waive arbitration, Relators contend that the trial court's expedited discovery order--which allows broad discovery on the merits of the underlying dispute and is not limited to arbitrability--was an abuse of discretion. We agree.
Regardless of whether the parties are able to resolve the dispute via mediation, they do not dispute the scope of the arbitration clause or its applicability to this dispute if mediation is unsuccessful. After a motion to compel arbitration has been filed, discovery that is merits-based and not limited to the issues in the motion to compel is overly broad. See In re Hous. Pipe Line Co., 311 S.W.3d 449, 451-52 (Tex. 2009) (orig. proceeding). The trial court has no discretion to compel such discovery before the arbitration issue has been resolved, and a party is entitled to mandamus relief from such an order. In re Gen. Datatech, LP, No. 02-20-00315-CV, 2020 WL 6534341, at *1 (Tex. App.--Fort Worth Nov. 6, 2020, orig. proceeding) (mem. op.). For the same reason, the order setting trial was premature. Cf. In re Pediatrix Med. Servs., No. 05-05-00986-CV, 2005 WL 1776039, at *1 (Tex. App.-- Dallas July 28, 2005, orig. proceeding) (ordering trial judge to vacate scheduling order entered after motion to compel arbitration was filed).
Unlike the TRO extension order, nothing indicates that Relators agreed to this order. And despite the crossing of the expedited discovery motion (with its no-response certificate of conference) and Relators' counsel's email to N^3's counsel opposing merits discovery, Relators clearly opposed discovery in their motion to stay and compel.
We hold that the trial court abused its discretion by entering the order for expedited discovery and the order setting trial and that Relators are entitled to relief from those orders. We therefore conditionally grant Relators' mandamus petition in part and order the trial court to vacate its November 3, 2023 order granting N^3's motion for expedited discovery and November 9, 2023 order setting trial. Our November 10, 2023 stay order will be automatically lifted once the trial court does so.
Nothing about our disposition should be construed to prohibit the parties from voluntarily mediating this dispute. In addition, we make no ruling on whether the trial court may ultimately consider or grant temporary injunctive relief at the currently scheduled December 20, 2023 hearing.
All other relief requested is denied. See Tex. R. App. P. 52.8.