NO. 05 11-01587-CV ACCEPTED 225EFJ016744465 FIFTH COURT OF APPEALS DALLAS, TEXAS 12 February 24 A10:44 Lisa Matz CLERK IN THE FIFTH COURT OF APPEALS - DALLAS DEALER COMPUTER SERVICES, INC., Appellant v. RED HILL FORD, INC., Appellee From the 193rd Judicial District Court of Dallas County, Texas Cause No. 10-04531, The Honorable Carl Ginsberg REPLY BRIEF OF APPELLANT, DEALER COMPUTER SERVICES, INC. ORAL ARGUMENT REQUESTED JOHN C. ALLEN, P.C. John C. Allen T.B.A. No.: 01042800 Aaron D. Weinberg T.B.A. No.: 00795714 Two Houston Center 909 Fannin Street, Suite 1225 Houston, Texas 77010 713-654-7000 (Telephone) 713-654-7074 (Facsimile) ATTORNEYS FOR DEALER COMPUTER SERVICES, INC.
TABLE OF CONTENTS Index of Authorities... ii, iii Introduction...1 1. There is no evidence of any prior filed arbitration between DCS and Red Hill Ford...2 (a) DCS filed first...2 (b) Red Hill Ford is not being forced to defend two simultaneous arbitrations...5 (c) There is no evidence of two simultaneous arbitrations...5 (d) There is no evidence that a second arbitration proceeding exists...6 (e) The claims asserted in the two arbitrations are not identical...8 2. The arbitrators heard and decided these exact same arguments...8 3. What is the irreparable injury?...12 4. The Temporary Injunction Order does not set a trial date...14 5. DCS has standing...17 6. The Court of Appeals has jurisdiction...19 Conclusion...20 Prayer...20 Certificate of Service...21 i
INDEX OF AUTHORITIES Alexander v. Turtur & Assoc., Inc., 146 S.W.3d 113 (Tex. 2004)...1, 4 Austin Nursing Center, Inc. v. Lovato, 171 S.W.3d 845 (Tex. 2005)...17 Bank of Texas, N.A. v. Gaubert, 286 S.W.3d 546 (Tex.App Dallas, 2009, pet. dism d w.o.j.)...2 Camping Construction Co. v. District Council of Iron Workers, 915 F.2d 1333 (9th Cir. 1990)...12, 14 Del Valle Indep. School Dist. v. Lopez, 845 S.W.2d 808 (Tex. 1992)...20 Emery Air Freight Corp. v. Local Union 295, 786 F.2d 93 (2d Cir. 1986)...12 Folse v. Richard Wolf Med. Instruments Corp., 56 F.3d 603 (5th Cir. 1995)...9 Independent Capital Mgmt., LLC v. Collins, 261 S.W.3d 792 (Tex.App. Dallas 2008, no pet.)...12 In re Aker Kvaerner IHI, 324 S.W.3d 891 (Tex.App. Houston [14th Dist.] 2010) (orig. proceeding)...10 In re Union Carbide Corp., 273 S.W.3d 152 (Tex. 2008)...17 Marmet Health Care Center, Inc. v. Brown, Cause No. 11-391, 11-394, 2012 WL 538286 (February 21, 2012)...10 Michaels v. Mariforn Shipping, S.A., 624 F.2d 411 (2d Cir. 1980)...1, 9, 10 Operation Rescue Nat l v. Planned Parenthood, 975 S.W.2d 546, 560 (Tex. 1998)... 2 Preston v. Am. Eagle Ins. Co., 948 S.W.2d 18 (Tex.App. Dallas 1997, no writ)...17 Qwest Commun.s Corp. v. AT&T Corp., 24 S.W.3d 334 (Tex.2000)...14 Senter Investments, LLC v. Veerjee, Cause No. 05-11-00718, 2012 WL 192616 (Tex.App. Dallas January 24, 2012)...15, 16, 17 Smith, Barney, Harris, Upham & Co., Inc. v. Robinson, 12 F.3d 515 (5th Cir. 1994)...9 ii
Swanson v. Community State Bank, 12 S.W.3d 163 (Tex.App. Houston [1st Dist.] 2000, no pet.)...20 Trustmark Ins. Co. v. John Hancock Life Ins. Co., 631 F.3d 869 (7th Cir. 2011)...12 Univ. of Tex. Health Science Center at San Antonio v. Bailey, 332 S.W.3d 395 (Tex. 2011)...1, 4 Wilson v. Wilson, 601 S.W.2d 104 (Tex.Civ.App. Dallas 1980, no writ)...17 9 U.S.C. 1...1 9 U.S.C. 16...19 TEX. CIV. PRAC. & REM. CODE 37.006...18 TEX. CIV. PRAC. & REM. CODE 51.014...2, 19 TEX. CIV. PRAC. & REM. CODE 51.016... 2, 19 TEX. CIV. PRAC. & REM. CODE 171.023...15 TEX. CIV. PRAC. & REM. CODE 171.086...15, 16 TEX. R. CIV. P. 60...17 TEX. R. CIV. P. 683...12, 14 iii
Introduction The two key issues in this appeal are undisputed. First, the arbitrators heard and denied the exact same request for relief that was presented to the trial court. Under the Federal Arbitration Act, 9 U.S.C. 1, et seq., a district court does not have the power to review an interlocutory ruling by an arbitration panel. The language of the Act is unambiguous. It is only after an award has been made by the arbitrators that a party can seek to attack any of the arbitrators rulings in court... a district court is without authority to review the validity of arbitrators rulings prior to the making of an award. Michaels v. Mariforn Shipping, S.A., 624 F.2d 411, 414 (2d Cir. 1980). Second, Red Hill Ford did not seek to join the Randall Ford arbitration until November 13, 2007, well after DCS filed its Demand for Arbitration on December 19, 2006. Ordinarily, an amended pleading adding a new party does not relate back to the original pleading. Univ. of Tex. Health Science Center at San Antonio v. Bailey, 332 S.W.3d 395, 400 (Tex. 2011); Alexander v. Turtur & Assoc., Inc., 146 S.W.3d 113, 121 (Tex. 2004). DCS filed first. Red Hill Ford s strained and illogical procedural arguments about standing and jurisdiction are nothing more than an effort to distract from the key issues to be determined. Contrary to Red Hill Ford s assertions, the trial court did not enter an injunction in favor of an arbitration. (Brief, p. 35). On its face, the Order Granting Temporary Injunction prohibits the AAA and the three (3) arbitrators from taking any further action in the Red Hill Arbitration until further order of this Court. (CR, Vol. IV, p. 665). 1
DCS is a party to the case and it clearly has a justiciable interest in the controversy. Red Hill Ford owes DCS $4,356,461.22 for breach of contract. (CR Vol. III, p. 541). The Court of Appeals clearly has jurisdiction to hear an interlocutory appeal of a temporary injunction under TEX. CIV. PRAC. & REM. CODE 51.014. With respect to injunctions against arbitration, in particular, the legislature has made it unmistakably clear that the court of appeals does have jurisdiction to hear interlocutory appeals of such orders. TEX. CIV. PRAC. & REM. CODE 51.016. 1. There is no evidence of any prior filed arbitration between DCS and Red Hill Ford. A trial court abuses its discretion in granting an injunction when it misapplies the law to established facts or when the evidence does not reasonably support the determination of the existence of a probable right of recovery or probable injury. Bank of Texas, N.A. v. Gaubert, 286 S.W.3d 546, 552 (Tex.App Dallas, 2009, pet. dism d w.o.j.) (vacating temporary injunction). A trial court has no discretion to grant injunctive relief without supporting evidence. Operation Rescue Nat l v. Planned Parenthood, 975 S.W.2d 546, 560 (Tex. 1998). (a) DCS filed first On November 22, 2006, DCS filed an individual arbitration demand against Randall Ford, Inc. Red Hill Ford was not a party to that case. On December 19, 2006, DCS filed an individual arbitration demand against Red Hill Ford. (CR Vol. III, p. 541). At the time that DCS filed its individual Demand for Arbitration 2
against Red Hill Ford, there was no prior filed arbitration between DCS and Red Hill Ford. DCS filed first. On January 3, 2007, a putative class action arbitration demand was filed against DCS. (CR Vol. I, p. 15, 33, Vol. III, p. 612, Vol. IV, p. 72, RR 114). That action was styled Dub Herring Ford, et al. v. Dealer Computer Services, Inc. (CR Vol. I, p. 15, 33, Vol. III, p. 612, Vol. IV, p. 72, RR 114). On January 18, 2007, Red Hill purported to join the putative class action. (CR Vol. IV, p. 73, Vol. III, p. 612). On November 13, 2007, the plaintiffs in the putative class action (including Red Hill Ford) voluntarily dismissed their claims. (CR, Vol. IV, p. 73, Vol. III, p. 612). On the same day, Randall Ford filed a counterclaim in the individual arbitration that DCS had initiated against Randall Ford almost a year earlier. (CR, Vol. IV, p. 73, Vol. III, p. 612). That counterclaim asserted for the first time allegations seeking class wide relief in the Randall Ford arbitration. Red Hill Ford claims to have joined that proceeding on November 13, 2007 when the request for class based relief was filed. It is undisputed that DCS filed its Demand for Arbitration against Red Hill Ford first. It is undisputed that Red Hill Ford did not seek to join the Randall Ford putative class action until November 13, 2007, at the earliest. The key to Red Hill Ford s argument is the unsupported suggestion that the joinder date should somehow relate back to the date DCS originally filed its individual Demand for Arbitration against Randall Ford. 3
The Texas Supreme Court has squarely rejected this proposition. Univ. of Tex. Health Science Center at San Antonio v. Bailey, 332 S.W.3d 395, 400 (Tex. 2011) ( Ordinarily, an amended pleading adding a new party does not relate back to the original pleading. ); Alexander v. Turtur & Assoc., Inc., 146 S.W.3d 113, 121 (Tex. 2004) (same). These authorities were completely unaddressed in Red Hill Ford s brief. Red Hill Ford concedes that these opinions are controlling. Red Hill Ford concedes that on the date DCS filed its individual demand for arbitration against Red Hill Ford there was no prior pending arbitration between these parties. Red Hill Ford concedes that its argument hinges on the artifice that its claims somehow relate back to the date DCS filed an individual demand for arbitration against Randall Ford even though Red Hill Ford did not seek to join that proceeding until almost a year later. Red Hill Ford s argument that the individual Randall Ford arbitration was filed first is irrelevant. The operative date for the first-to-file rule is the joinder date, not the date that DCS filed its original Demand for Arbitration against Randall Ford. Red Hill Ford cites no authority for its contention. To the extent that there is any discretion in the application of the first-to-file rule, the trial court had no business substituting its judgment for that of the arbitrators. See infra, section 2. It was simply not possible for the Randall Ford arbitration panel to assume jurisdiction over the claims between Red Hill Ford and DCS before Red Hill Ford sought to join that proceeding on November 13, 2007. As such, DCS was first to file and there is no evidence of a prior filed action. 4
(b) Red Hill Ford is not being forced to defend two simultaneous arbitrations Red Hill Ford is not being forced to do anything. Red Hill Ford claims in its brief that DCS attempted to apply the arbitration clause in the Parties contract to allow it to pursue multiple arbitrations involving the same issues against Red Hill simultaneously. (Brief, p. 19). Nothing could be further from the truth. DCS did not initiate the second arbitration. DCS has not asserted any claims against Red Hill Ford in the second arbitration. It is Red Hill Ford that wants to move the arbitration to a different forum, not DCS. Red Hill Ford is not being forced to arbitrate in two proceedings simultaneously. Red Hill Ford of its own volition chose to improperly insert itself into an unrelated arbitration proceeding in an attempt to derail the timely resolution of its dispute with DCS. Red Hill Ford was not forced to join the Randall Ford arbitration. (c) There is no evidence of two simultaneous arbitrations Likewise, there is no evidence that Red Hill Ford is being forced to defend two arbitrations simultaneously. The Red Hill Ford arbitration is ready for a final hearing on the merits, without any further delay. The Trial Court granted a Temporary Restraining Order just one (1) day before the final hearing in the Red Hill Ford arbitration was scheduled to commence. (CR Vol. I, p. 19, 85; Vol. IV, p. 603). In contrast, the Randall Ford arbitration proceeding is still in its infancy. The only discovery conducted to date related to the class action allegations. No hearing date has been scheduled and there is no prospect of an imminent adjudication. The individual Red Hill 5
Ford arbitration was filed first. The individual Red Hill Ford arbitration can and should be decided first. The prevailing party in the Red Hill Ford arbitration will surely assert the defense of res judicata in the Randall Ford arbitration. Indeed, the Randall Ford arbitration panel has already invoked res judicata to dismiss at least one dealer s claims. There are not going to be two arbitrations, and those two arbitrations are most certainly not going to be simultaneous. One of the arbitrations is going to be resolved first. Red Hill Ford simply wants to prevent the duly constituted Red Hill Ford arbitration panel from reaching the merits of the controversy first, before the alternative forum that it would prefer. But for this injunction proceeding, the Red Hill Ford arbitration would have long since been concluded. (d) There is no evidence that a second arbitration proceeding exists In its response, Red Hill Ford repeatedly avers that the Randall Ford arbitration panel has agreed to hear the Red Hill Ford dispute. (Brief, p. 8). To reach this conclusion, Red Hill Ford uses ellipsis to omit the conditions set forth in the Randall Ford arbitration panel s letter. There is no evidence that those conditions have been satisfied. Red Hill Ford would use ellipsis to cut out the following underlined language in the Randall Ford arbitration Panels response to the trial court s certified question: The panel currently does intend to hear the Red Hill Ford/Dealer Computer Services dispute pursuant to the Panel s Pre-Hearing Order No. 23, subject to two caveats and clarifications... (Compare Brief, p. 8, 20-21, and 25 to CR Vol. IV, p. 662). Red Hill Ford quotes this 6
language three (3) separate times in its brief, using ellipsis to omit the critical qualifying language in all three (3) instances. (Brief, p. 8, 20-21, and 25). Those caveats and clarifications that Red Hill Ford would omit from its quotations are the determination of DCS objections to the purported joinder of unrelated third parties into the Randall Ford arbitration. DCS has objected to the joinder because it is not authorized in the parties agreement and because those unrelated third parties including Red Hill Ford have not met the procedural requirements to pursue affirmative claims under the AAA commercial rules. The Randall Ford s acceptance of the Red Hill Ford dispute remains subject to at least two (2) major contingencies that have not been resolved: Red Hill Ford s compliance with the AAA procedural requirements and the Randall Ford arbitration Panel s decision regarding its jurisdiction over the Red Hill Ford dispute. First, Red Hill Ford concedes that it has refused to pay the required AAA filing fee in the Randall Ford arbitration proceeding. The Randall Ford arbitration panel has made clear that [t]he Dealers are expected to comply with any applicable AAA filing fee requirements in connection with those individualized claims. (CR Vol. IV, p. 464). Red Hill Ford does not deny that it has refused to comply with those requirements. (CR Vol. IV, p. 420). As such, it has not submitted a claim under AAA commercial rules that the parties agreed would govern their dispute. (CR Vol. III, p. 293). Initiation of a claim under that AAA commercial rule 5 requires payment of the appropriate filing fee. (CR Vol. III, p. 551). 7
Second, DCS has moved to reconsider the Randall Ford arbitration panel s preliminary decision to accept the joinder of unrelated parties. (CR, Vol. IV, p. 662). DCS has also moved to dismiss those parties, including Red Hill Ford, for failing to comply with the AAA commercial rules. Those motions remain pending. Red Hill Ford would ellipse out those caveats to lead the court to believe that its claim has been accepted by the Randall Ford arbitration panel. In sum, there is no evidence that Red Hill Ford has properly submitted a claim in the Randall Ford arbitration and there is no evidence that the Randall Ford arbitration panel has accepted that claim. There are important caveats on the statement that the Randall Ford arbitration panel intend[s] to hear the Red Hill Ford dispute. Those caveats have not been resolved. (e) The claims asserted in the two arbitrations are not identical DCS has not asserted a claim against Red Hill Ford in the Randall Ford arbitration. Thus, Red Hill Ford has no basis to assert a counterclaim in that arbitration. Nor does Red Hill Ford have a basis to bring affirmative defenses in that arbitration. Moreover, Red Hill Ford has asserted claims in the individual Red Hill Ford arbitration that it has expressly abandoned in the Randall Ford arbitration, including fraud and unconscionability. 2. The arbitrators heard and decided these exact same arguments The Red Hill Ford arbitration was properly initiated by DCS by filing a Demand for Arbitration. (CR, Vol. III, p. 541). The Red Hill Ford arbitration panel of two (2) former 8
judges and a thirty (30) year lawyer was properly constituted. (CR Vol. III, p. 254, 257, 260). Red Hill Ford participated in the arbitrator selection process, discovery, and motion practice. The day before the final hearing was scheduled to commence, Red Hill Ford sought and received an ex parte Temporary Restraining Order. (CR Vol. I, p. 85). Red Hill Ford concedes that it presented identical arguments to the Red Hill Ford arbitration panel in the form of a motion to terminate the arbitration and an objection to jurisdiction. (CR, Vol. III, p. 668, p. Vol. IV, p. 639). Red Hill Ford concedes that the arbitrators denied those requests. Those motions were based on the exact same arguments that Red Hill Ford made to the trial court. Those motions were properly denied by the Red Hill Ford arbitration panel. The determination of those issues by the arbitration panel was well within its authority to decide all disputes between the parties. (CR Vol. III, p. 292). Under the auspices of a declaratory judgment, Red Hill Ford asked the trial court to overrule interlocutory procedural decisions issued by a duly constituted arbitration panel. Red Hill Ford asked the court to substitute its judgment for the arbitration panel s decision of an interim procedural issue that was properly before it. The Federal Arbitration Act prohibits interlocutory review of interim arbitration decisions. Michaels v. Mariforn Shipping, S.A., 624 F.2d 411, 414 (2d Cir. 1980); Smith, Barney, Harris, Upham & Co., Inc. v. Robinson, 12 F.3d 515, 520-521 (5th Cir. 1994); Folse v. Richard Wolf Med. Instruments Corp., 56 F.3d 603, 605 (5th Cir. 1995). The Court of Appeals for the Fourteenth District put it simply: a trial court does not have the power to review any interlocutory ruling by an arbitration panel... until an award has been made, a 9
court is simply without authority to review the validity of arbitrators interlocutory rulings. In re Aker Kvaerner IHI, 324 S.W.3d 891, 894 (Tex.App. Houston [14th Dist.] 2010) (orig. proceeding), citing Michaels v. Mariform, 624 F.2d at 414. Red Hill Ford concedes that these authorities are controlling. 1 Red Hill Ford concedes that it asked the trial court to substitute its judgment for the interim procedural rulings by the Red Hill Ford arbitration panel. Red Hill Ford s brief is silent with respect to these longstanding and well-settled principles of law. The fact that the arbitrators denied these requests for relief is the touchstone to this appeal. The declaratory judgment that Red Hill Ford seeks is nothing more than a declaration that the arbitrators got it wrong. Red Hill Ford claims in its brief that Red Hill sought a viable cause of action against the AAA for a declaratory judgment to declare its rights, status and legal relations under the arbitration agreement. (Brief, p. 11). It further claims that Red Hill Ford s declaratory judgment action asked the trial court to settle and afford relief to Red Hill from uncertainty and insecurity with respect to its rights, status, and legal relations with the AAA under the arbitration agreement in the DCS/Red Hill contract. Red Hill Ford also sought temporary and permanent injunctive relief pursuant to the trial court s equity jurisdiction, because Red Hill was being deprived of a fundamentally fair hearing and its due process rights in violation of the Texas, Michigan, and federal constitutions in the Red 1 Red Hill Ford concedes that the underlying dispute involves interstate commerce and that the Federal Arbitration Act controls. As recently as February 21, 2012, the Supreme Court reaffirmed that State and federal courts must enforce the Federal Arbitration Act (FAA), 9 U.S.C. 1, et seq. with respect to all arbitration agreements covered by that statute. Marmet Health Care Center, Inc. v. Brown, Cause No. 11-391, 11-394, 2012 WL 538286 at *1 (February 21, 2012). The Supreme Court likewise reaffirmed the emphatic federal policy in favor of arbitral dispute resolution. Id. at * 1. 10
Hill Arbitration. (Brief, p. xi). In reality, Red Hill Ford s sole complaint is that the arbitrators erred when they denied Red Hill Ford s ill-founded motion to terminate the arbitration and its objection to jurisdiction. The arbitrators were well within their authority when they decided these issues. The Declaratory Judgment Act does not authorize trial courts to tell arbitrators what to do. Red Hill Ford further alleges that Red Hill s complaints were about the AAA s failures to follow its rules, procedures and protocols. (Brief, p. 20). Yet the very next sentence of its brief states that [t]he trial court did not list arbitrator bias as a reason for granting the TI, making the issue of arbitrator bias irrelevant to this proceeding. (Id.). If the issue of arbitrator bias is irrelevant, then what exactly is the misconduct that the AAA is accused of committing? The only misconduct that Red Hill Ford alleges is that the arbitrators ruled against it on an interim procedural decision. Red Hill Ford seeks to mask the true nature of its claim through a jumble of jargon. It is undisputed Red Hill Ford asked the trial court to enjoin a duly constituted arbitration panel from holding an arbitration hearing when the arbitrators had expressly heard and determined that the arbitration was proper. Red Hill Ford asked the trial court to overrule the interlocutory ruling of the arbitration panel and the trial court obliged despite an express prohibition under controlling law. The injunction set forth in the trial court s order is prohibited by the Federal Arbitration Act, and as such, constitutes an obvious abuse of discretion. When the arbitrators heard and denied these same requests for relief, interlocutory review of their decision is not available. 11
3. What is the irreparable injury? Red Hill Ford s brief ignores the considerable body of law holding that the time and expense of an arbitration proceeding do not constitute irreparable injury. The only potential injury from waiting until the arbitrators have made their award is delay and the out-of-pocket costs of paying the arbitrators and legal counsel. Long ago the Supreme Court held that the delay and expense of adjudication are not irreparable injury if they were, every discovery order would cause irreparable injury. Trustmark Ins. Co. v. John Hancock Life Ins. Co., 631 F.3d 869, 872 (7th Cir. 2011); Camping Construction Co. v. District Council of Iron Workers, 915 F.2d 1333, 1349 (9th Cir. 1990); Emery Air Freight Corp. v. Local Union 295, 786 F.2d 93, 100 (2d Cir. 1986). These cases were cited in DCS brief. They are completely unaddressed in Red Hill Ford s response. Red Hill Ford has failed to cite even a single authority holding that proceeding with an arbitration constitutes an irreparable injury. What exactly is the irreparable injury? The trial court s order simply asserts in conclusory fashion that Plaintiff will suffer irreparable injury before the Court can render judgment in this cause and/or if it is forced to defend two simultaneous arbitrations between the same parties. (CR Vol. IV, p. 665). The failure to articulate the irreparable injury in the Temporary Injunction order is an abuse of discretion in and of itself. TEX. R. CIV. P. 683 requires a Temporary Injunction to set forth the reasons for its issuance and to be specific in its terms. Independent Capital Mgmt., LLC v. Collins, 261 S.W.3d 792, 795 (Tex.App. Dallas 2008, no pet.). 12
Red Hill Ford admits in its response that The trial court did not find arbitration of the dispute itself to be an injury, nor did it find injury in the possibility of an adverse judgment, or the out-of-pocket costs of a single arbitration. (Brief, p. 22-23). It s brief continues: Rather, the injury was subjecting Red Hill to two simultaneous arbitrations. The reasoning is clearly set forth in the TI Order. (Brief, p. 23, emphasis in original). The trial court s order does not set forth the reasons for its issuance but merely a conclusion. If the injury is not the risk of an adverse award and it is not the fees and expenses of litigating, how could Red Hill Ford possibly be injured merely by waiting until the arbitrators have issued a final award? First, Red Hill Ford s claim of irreparable injury is speculative, at best. Red Hill Ford might win the arbitration, in which case it will suffer no injury at all. Second, there are not going to be two simultaneous arbitrations. The winner of the first proceeding will assert the defense of res judicata in the second. The Randall Ford arbitration panel has already shown that it will be receptive to such arguments. Third, there is nothing imminent about the second arbitration proceeding. The Randall Ford arbitration panel has not even decided whether to accept Red Hill Ford s claims, nor has it set a schedule for discovery or a final hearing. Nor has Red Hill Ford complied with the procedural requirements to submit a claim. If the alleged injury is merely from having to arbitrate simultaneously as Red Hill Ford alleges, there is no evidence that the Randall Ford arbitration proceeding is imminent. 13
Fourth, even if there were two simultaneous arbitrations which there are not an arbitration award is not self executing. An arbitration award cannot be enforced until it has been confirmed by a court into a judgment. The opportunity for vacatur of the award at that stage precludes any finding of irreparable injury. Camping Construction Co. v. District Council of Iron Workers, 915 F.2d 1333, 1349 (9th Cir. 1990). Finally, why is there not an adequate remedy at law? If the irreparable injury is solely the fees and expenses of litigation, those injuries can easily be reduced to money damages. Red Hill Ford would analogize this case to an anti-suit injunction. (Brief, p. 23-24). But the Randall Ford arbitration panel did not purport to enjoin the prior arbitration proceeding, nor did Red Hill Ford ask it to do so. The reason Red Hill Ford did not ask for an order staying the individual arbitration is because it did not pay its filing fee in the Randall Ford case and it knows that it has no basis to ask that arbitration panel for relief because the arbitrators have not yet accepted its claim. Red Hill Ford is not part of the Randall Ford case. 4. The Temporary Injunction Order does not set a trial date Red Hill Ford concedes, as it must, that the Order Granting Temporary Injunction does not include an order setting the cause for trial on the merits as required by TEX. RULE CIV. P. 683. Red Hill Ford does not dispute that the Texas Supreme Court has repeatedly made clear that compliance with this requirement is mandatory. Qwest Commun.s Corp. v. AT&T Corp., 24 S.W.3d 334, 337 (Tex.2000). The effect of the trial court s order is transform a temporary injunction into a permanent injunction. But the basis for the order the temporary injunction standard was 14
merely that it was probable that Plaintiff will prevail on the merits at the trial of this cause. (CR Vol. IV, p. 664). If there is never going to be a trial of this cause then this conclusion is unsupportable. To enter a permanent injunction, there must be a finding that the plaintiff is actually entitled to the relief sought, not merely that it is probable that it will prevail at the trial on the merits. In its response, Red Hill Ford relies on a single unreported case from the Court of Appeals that has not yet been subjected to appellate review. Senter Investments, LLC v. Veerjee, Cause No. 05-11-00718, 2012 WL 192616 (Tex.App. Dallas January 24, 2012). The plaintiff in that case held a commercial lease containing a right of first refusal on the leased property. The defendant entered into a contract to sell the property. The trial court granted a temporary injunction to preserve the subject matter of the dispute, pursuant to TEX. CIV. PRAC. & REM. CODE 171.086. In the same order, it compelled the parties to arbitration. The order did not contain a trial date because the merits of the dispute were to be determined in arbitration. Senter Investments is distinguishable. First, the temporary injunction in this case was not rendered under TEX. CIV. PRAC. & REM. CODE 171.086. Section 171.086 does not authorize an injunction barring a pending arbitration. The Texas Arbitration Act provides only one ground to stay an arbitration proceeding a showing that there is not an agreement to arbitrate. TEX. CIV. PRAC. & REM. CODE 171.023. The injunction in this case is to bar a pending arbitration. The Texas Arbitration Act does not provide any authority for enjoining an ongoing arbitration aside from the lack of an agreement to arbitrate. 15
Second, the order in Senter Investments also compelled arbitration between the parties. It did not contain an order setting the cause for trial on the merits because the trial on the merits was the arbitration being compelled. TEX. R. CIV. P. 683. The Order granting Temporary Injunction in this case does not set a trial date or compel arbitration. It merely bars a properly submitted arbitration from proceeding. Red Hill Ford argues in its brief that the trial court s order also orders Red Hill Ford and DCS to proceed in the Randall arbitration. (Brief, p. 39). The order contains no such language. Third, the temporary injunction is not an order in support of arbitration under TEX. CIV. PRAC. & REM. CODE 171.086. The order states clearly and unequivocally: IT IS THEREFORE ORDERED that a temporary injunction is GRANTED in favor of Plaintiff and against Defendants, and that Defendants, including the American Arbitration Association (AAA), Hon. Pat Boone, Hon. Russell Roden, and Eric Benton, also known as the Red Hill Arbitration Panel, acting by appointment by the AAA, Kathleen Gossett-Cantrell, Kimberly L. Emerson, and any others acting in concert with them are hereby immediately ENJOINED from any further action in the Red Hill Arbitration until further order of this Court. (CR Vol. IV, p. 665, emphasis in original). In Senter Investments, the court enjoined the sale of property that would be the subject of an underlying arbitration. Here the court enjoined the arbitration itself. The order in this case is not an order in support of an arbitration, it is an order precluding an arbitration, particularly since Red Hill Ford has no valid claims in the Randall Ford arbitration. Had the court proceeded to fully investigate the factual background of the Randall Ford arbitration as it would at a trial following a temporary injunction it would have reached 16
this inescapable conclusion. Fourth, Red Hill Ford s interpretation of section 171.086 as permitting a trial court to enjoin an ongoing arbitration proceeding would conflict with the Federal Arbitration Act s prohibition on interlocutory relief, resulting in a preemption of the state law provision. In Senter Investments, the trial court exercised its authority to preserve the subject matter of an arbitral dispute. This case, in contrast, is plain old forum shopping. In this case, the sole purpose of the Temporary Injunction is to stop an arbitration from proceeding. 5. DCS has standing DCS is a party to the case and it clearly has a justiciable interest. DCS properly intervened under TEX. R. CIV. P. 60. Red Hill Ford s motion to strike the intervention was denied. Having properly intervened, DCS became a party for all purposes, absent a ruling by the court striking the intervention. Wilson v. Wilson, 601 S.W.2d 104, 105 (Tex.Civ.App. Dallas 1980, no writ). An intervenor is a party for purposes of appeal unless the intervention is stricken. Preston v. Am. Eagle Ins. Co., 948 S.W.2d 18, 20 (Tex.App. Dallas 1997, no writ). The standard for intervention is the same as the standard used to determine standing. TEX. R. CIV. P. 60 authorizes a party with a justiciable interest in a pending suit to intervene in the suit as a matter of right. In re Union Carbide Corp., 273 S.W.3d 152, 154 (Tex. 2008). Likewise, the issue of standing focuses on whether a party has a sufficient relationship with the lawsuit so as to have a justiciable interest in its outcome. Austin Nursing Center, Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). A plaintiff has standing 17
when it is personally aggrieved. Id. Red Hill Ford owes DCS $4,356,461.22 for breach of contract. (CR Vol. III, p. 541). Red Hill Ford does not dispute the trial court s determination that DCS has a justiciable interest in the controversy. DCS has been aggrieved by the entry of an injunction by the trial court prohibiting the timely disposition of a properly initiated arbitration proceeding. Red Hill Ford posits that in a thorough and exhaustive search of Texas cases it could not find a case where a court had ruled on this issue. (Brief, p. 14). The better question, however, is whether Red Hill Ford can find a case where (1) a party; (2) with a justiciable interest was found to lack standing. From the outset of this lawsuit, Red Hill Ford has sought to deny DCS even the right to be heard. It sought an ex parte restraining order against only the AAA and its administrators. (CR Vol. I, p. 9). Now it claims that DCS cannot challenge an injunction barring an arbitration to which DCS is a party. Red Hill Ford claims to seek a declaratory judgment. Under TEX. CIV. PRAC. & REM. CODE 37.006(a), DCS is not only a proper party to this case but a necessary party. When declaratory relief is sought, all persons who have or claim any interest that would be effected by the declaration must be made parties. Id. DCS is a party to the case and it has a justiciable interest. Red Hill Ford s standing arguments are more properly focused on its own claims. The fact that the injunction was sought only against the AAA and the three (3) arbitrators makes clear that the relief the trial court granted was an interlocutory review of an interim decision in an ongoing arbitration proceeding. These kinds of actions against jurisprudential agencies 18
are generally (and properly) prohibited. (See CR. Vol. I, p. 169-176). The party most aggrieved by Red Hill Ford s action is DCS. 6. The Court of Appeals has jurisdiction TEX. CIV. PRAC. & REM. CODE 51.014 provides for an appeal from an interlocutory order of a district court, county court at law, or county court that... (4) grants or refuses a temporary injunction. The Order Granting Temporary Injunction in this case states that a temporary injunction is GRANTED. (CR Vol. IV, p. 665, emphasis in original). TEX. CIV. PRAC. & REM. CODE 51.016 authorizes an interlocutory appeal under the same circumstances that an appeal from a federal district court s order or decision would be permitted under 9 U.S.C. Section 16. This statute, enacted in 2009, cured an anomaly in the law that required parallel mandamus proceedings (under the Federal Arbitration Act) and interlocutory appeals (under the Texas Arbitration Act). When the legislature changed the law, it signaled the clear intent to grant jurisdiction over interlocutory appeals of an interlocutory order granting, continuing, or modifying an injunction against an arbitration that its subject to this title. 9 U.S.C. 16. Red Hill Ford s arguments about jurisdiction are premised on an alternative reality. Red Hill Ford argues that even though it is labeled as an Order Granting a Temporary Injunction, arguably it is not. (Brief, p. 40). Red Hill Ford argues that [i]t is not an injunction against an arbitration. It is an injunction in favor of an arbitration. (Brief, p. 35). These arguments cannot be reconciled with the plain language of the order. If there was any question that the court of appeals had jurisdiction, the Texas Supreme Court has held that it 19
is the character and function of an order that determine its classification. Del Valle Indep. School Dist. v. Lopez, 845 S.W.2d 808, 809 (Tex. 1992). A trial court cannot circumvent an interlocutory appeal merely by the label that it attaches to the order; it is the substance of the order that determines whether it is appealable. Swanson v. Community State Bank, 12 S.W.3d 163, 165 (Tex.App. Houston [1st Dist.] 2000, no pet.). The character and substance of the order in this case is solely to enjoin a pending arbitration proceeding. Conclusion If Red Hill Ford truly seeks to serve the goals of arbitration, then the way forward is clear. The Red Hill Ford arbitration panel is fully prepared to hear this case. Discovery is complete. Briefs, exhibits, and witness lists have been filed. The only thing that remains is the evidentiary hearing itself and the issuance of an award. There are not going to be two simultaneous arbitrations. The properly constituted arbitration panel in Red Hill Ford is prepared to resolve the parties dispute in a final, timely and efficient manner. There is no authority, nor any reason, for the trial court to interfere with the timely completion of the Red Hill Ford arbitration. Prayer WHEREFORE, PREMISES CONSIDERED, Appellant prays that the trial court s Order granting Temporary Injunction be reversed. 20
Respectfully submitted, JOHN C. ALLEN, P.C. By: /s/ John C. Allen John C. Allen T.B.A. No.: 01042800 Aaron D. Weinberg T.B.A. No. 00795714 Two Houston Center 909 Fannin Street, Suite 1225 Houston, Texas 77010 713-654-7000 (Telephone) 713-654-7074 (Facsimile) ATTORNEYS FOR APPELLANT, DEALER COMPUTER SERVICES, INC. 21
Certificate Of Service I hereby certify that a true and correct copy of the foregoing instrument was forwarded to the following counsel of record via certified mail, return receipt requested, facsimile and/or messenger on this February 24, 2012 James D. Blume Richard Faulkner Shelly Skeen Joshua Northam Blume, Faulkner, Skeen & Northam, PLLC Attorneys At Law 111 W. Spring Valley Road, Ste. 250 Richardson, Texas 75081 (Telephone) 214-373-7799 (Fax) 214-373-7783 ATTORNEYS FOR RED HILL FORD, INC. James McConn Hays, McConn, Rice & Pickering 1233 West Loop South Suite 1000 Houston, Texas 77027 ATTORNEYS FOR AMERICAN ARBITRATION ASSOCIATION, INC. /s/ John C. Allen John C. Allen Aaron D. Weinberg 22