The 15th Court of Appeals has sorted out a something of a fire drill involving suits filed by the same plaintiff against the same defendants in two Business Court Divisions that produced different rulings regarding arbitrability.
Karl Drusch and TrueAero, LLC v. Stratton Borchers (No. 15-25-00224; 15-26-00087; September 29, 2026) arose from a dispute between an aviation services company and its former president. In October 2024, the aviation company fired its president, Borchers. Borchers sued Drusch, CEO and majority owner of the aviation company’s holding company, and several affiliated entities in the Business Court’s First Division. In April 2025, the First Division granted Drusch’s motion to compel arbitration of Plaintiff’s employment-related claims, pursuant to an arbitration provision in the holding company’s Operating Agreement. During the arbitration, the parties became involved in a dispute over a promissory note that Borchers executed in 2021 in favor of the aviation company. Borchers used the note to buy memnbership units in the holding company, and the parties executed a security agreement pledging Borchers’ 975 membership units in the holding company as collateral. That agreement had a default provision giving the holding companty the right to dispose of the collateral if Borchers failed to pay the note. Borchers failed to pay the amount owed under the note by its maturity date of October 1, 2025.
The holding company subsequently sent Borchers a demand letter for principal and interest of more than $90,000, attorney’s fees, and expenses. The letter further stated that the company intended to conduct a private sale of Borchers’ units on or after October 20, 2025. Borcher paid the principal and interest, but did not pay the attorney’s fees. The company took this poorly and sold his membership interests to Drusch for $100,000. Borchers then sued Drusch and the holding company in the Business Court’s Eighth Division seeking injunctive relief to prevent and recover his units. Defendants moved to dismiss for failure to meet the $5 million amount in controversy threshold, and alternatively to compel arbitration.
While all this went on, the AAA arbitrator set a final hearing on the pending arbitration for March 30, 2026. Prior to the hearing, the Eighth Division denied arbiration, granted a TI, and urged the parties to file motions for summary judgment. Defendants filed an interlocutory appeal in the 15th Court in December 2025 and requested a stay of trial court proceedings. The court of appeals denied the stay, so Defendants filed a petition for writ of mandamus and motion to stay in SCOTX. SCOTX granted the stay on February 11. Borchers then filed an emergency motion asking the arbitrator to stay the arbitration, which the arbitrator denied. Borchers also asked the First Division to stay the arbitration, pending the outcome of the Eighth Division litigation. The First Division responded by confirming its order compelling arbitration but staying the arbitration pending the outcome over at the Eighth Division. The parties then finished briefing in SCOTX, and in the meantime Drusch filed another interlocutory appeal in the 15th Court. SCOTX granted review on the issue of whether a stay is mandatory pending appeal of the First Division’s prder staying arbitration. This occurred in June 2026, and the case is set for oral argument on December 1, 2026. The parties finally got around to finishing briefing on the merits of the First Division’s order in the 15th Court on June 22, 2026.
Returning now to the Eighth Division, the trial court rejected Defendants’ jurisdictional challenge, refused to compel arbitration because the security agreement didn’t have an arbitration provision, and granted a TI preventing Drusch from transferring the contested units pending trial. Defendants appealed. Over in the First Division, the trial court amended its prior arbitration order to limit it to claims arising under the Operating Agreement (the one with the arbitration clause), but stayed the arbitration because of “a substantial bona fide dispute exists concerning the arbitrability” of the claims under the Security Agreement, and “the Eighth’s Division’s ruling on arbitrability remains subject to ongoing appellate review.” Defendants appealed that as well.
In an opinion by Chief Justice Brister, the court of appeals affirmed in part and reversed in part. First, the court took up the Eighth Division’s ruling denying Defendants’ jurisdictional challenge. Agreeing with the Eighth Division that the record didn’t “readily establish” that the amount in controversy pleaded was “a sham or plainly incredible.” Defendants’ expert asserted that the amount was “$0,” despite the fact that they accepted membership units as collateral for a $93,000 loans, and that after repossession Druscher bought them for $100,000. Additionally, Defendants’ expert report showed that the holding company “had consistent gross receipts of $40 to $60 million over the last five years.” In any event, Druscher “implicitly agreed that it met the statutory amount in controversy by involking the First Division’s jurisdiction to compel arbitration. Drusch also conceded that the Eighth Division dispute would “cancel Borchers’ first suit,” so “he implicitly agreed that the same amount was in controversy.” Drusch, consequenty, didn’t prove that the pleaded amount in controversy “was plainly false.”
But, the court ruled, the Eighth Division erred by failing to compel arbitration. Here “there were two competing agreements—one with both arbitration and delegation clauses, and one with neither.” So, the question became whether an agreement to arbitrate existed, a decision for the court, not the arbitrator. The Eighth Division concluded that an agreement did not exist because “the parties did not agree to arbitrate the claims asserted here.” Then again, the operating agreement delegated the issue of the scope of arbitrability to the arbitrator. Consequently, “[t]he question for the trial courts here was not what was to be arbitrated, but who should decide what was to be arbitrated.” That’s a question for the arbitrator. When Borchers limited his suitin the Eighth Division to the collateral under the security agreement, it didn’t get rid of the arbitration agreement in the operating agreement because the security agreement contained a merger clause. For that reason, “the only reasonable interpretation is that the arbitration agreement doescontinue to exist.” The Eighth Division thus erred by failing to compel arbitration.
As to the TI, the court held that the Eighth Division did not err in granting it. Borchers alleged that the holding company “had no right to dispose of his units because he tendered full and timely payment during the cure period except for the improper demand for $5,000 in attorney’s fees and expenses.” The Business Court agreed, basing its ruling on the absence in the contract of an express provision allowing the creditor to recover attorney’s fees. The trial court thus rightly held that Borchers was likely to prevail at trial or in arbitration, though there was no guarantee of that. The trial court didn’t abuse its discretion. It likewise didn’t abuse its discretion in ruling that Borchers would suffer irrreparable injury if his membership units were sold away. Drusch argued that Borchers suffered no irreparable injury because he could be compensated by money damages. Perhaps, but as the courts of appeals pointed out, if Borchers lost his units, he would also lose his standing to pursue his arbitration claims, since he would no longer be subject to the operating agreement. At the same time, Drusch would suffer any injury if the sale of Borchers’ units was put in abeyance.
Now for the First Division’s decision to stay arbitration. The court held that the First Division erred for two reasons: (1) a court may stay an arbitration commenced only upon a showing that there wasn’t an agreement to arbitrate, which there was in this case; and (2) both the FAA and TAA require courts to stay litigation of issues that are subject to arbitration. Either way, the arbitrator had to decide whether Borchers or Drusch owned the disputed collateral, and the arbitration “must be given priority so that it is not rendered moot by deciding the same issues in court.” The trial court made a mistake when it stayed arbitration “for the litigation to proceed.”
Chief Justice Brister observed that much duplication could have been avoided if the parallel cases were consolidated in the Business Court or by other means. In any event, the upshot of the whole affair is that the arbitrator will decide.
