Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:Bullock Motor Co. and a sales and service agreement with Ford Motor Co. to run a Ford dealership. The dealership agreement granted Ford a right of first refusal if Bullock decided to sell the dealership. The dealership agreement included an arbitration clause. In September 2002, WMCO-GP proposed in a purchase and sale agreement to buy the Bullock dealership. This agreement also contained an arbitration clause: “Any controversy between the parties to this Agreement involving the construction or application of any of the terms, covenants, or conditions of this Agreement, shall on the written request of one party served on the other, be submitted to binding arbitration . . .” When notified of the purchase and sale agreement, Ford indicated it would exercise its right of first refusal under the dealership agreement. The notification specifically designated Alton Meyer as the assignee, not someone form WMCO. Bullock’s assets were thus transferred to Meyer Acquisition Corp. (MAC). Though Meyer promised to reimburse WMCO for its reasonable expenses and attorneys’ fees, he did not. WMCO sued Ford, Meyer and MAC, alleging tortious interference with contract and civil conspiracy. WMCO also sought a declaration that Ford’s right of first refusal was void because it breached a confidentiality agreement within the dealership agreement. The defendants moved to stay the litigation to compel arbitration, but the trial court refused, This interlocutory appeal followed. HOLDING:Affirmed. The court notes that the parties agree that Texas law on arbitration applies, not federal law; still, some principles developed by the U.S. Supreme Court will apply. For instance, a party who has not agreed to arbitrate cannot be compelled to do so. In this case, the defendants are not parties to the purchase and sale agreement that was drawn up between Bullock and WMCO. Though non-signatories may still be bound by a contract’s arbitration clause in some cases, such as through agency, the defendants here argue that equitable estoppel applies to compel WMCO to arbitrate the dispute. “Equitable estoppel is an appropriate basis for allowing a non-signatory to compel arbitration in two different circumstances: (1) when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the non-signatory; and (2) when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the non-signatory and one or more of the signatories to the contract.” Reviewing federal appeals court decisions on arbitration clauses in business relationships similar to the one at hand (i.e., franchises, licenses or distributorships), the court observes that one common factor considered is the language of the arbitration provision itself. Arbitration clauses have then been characterized as either being broad or narrow, and the narrower the clause, the more likely that the matter should not be subject to arbitration. None of the causes of action alleged by WMCO require the purchase and sale agreement to be construed, though they may touch upon or relate to it. The issues pertain to the exercise by Ford of its right of first refusal in the dealership agreement, whose arbitration agreement that even Ford admits does not cover WMCO. The arbitration clause in the purchase and sales agreement is narrow, the court finds. The claim for equitable estoppel also fails because there are no intertwining claims against the signatory and the non-signatories. That is, WMCO makes no claims against Bullock. OPINION:McKeithen, C.J.; McKeithen, C.J., Burgess and Gaultney, JJ. DISSENT:Gaultney, J. The dissent says the claims are interlocked because they require interpretation of the purchase and sale agreement and the dealership agreement. “The Purchase and Sale Agreement contains an arbitration provision. Recently we said that when a signatory to a written agreement containing an arbitration provision must rely on the terms of the written agreement in asserting its claim against a nonsignatory, the nonsignatory may compel arbitration of the claim. . . . The principle applies here.”

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.