Justice Alex Yarbrough
In a case transferred from the San Antonio Court of Appeals for docket equalization purposes, the Amarillo Court of Appeals has reversed a Bexar County district court’s order denying a party’s motion to compel arbitration.
Global Building, LLC v. Aulukista, LLC, Individually and Derivatively on Behalf of Global Windcrest II, LLC (No. 07-23-00126-CV; 07-23-00207-CV; filed August 9., 2023) arose from a dispute between partners in a limited partnership that owns a commercial office building in San Antonio. Aulukista and Global Windcrest II own 64% and 32% interests, respectively. The partners appointed Global Building, LLC, which is owned and operated by the principals of Windcrest, to manage the building. Windcrest’s owners subsequently became unhappy with Global’s management, and Aukulista unilaterally removed Global as manager under the building’s operating agreement. When Global refused to leave, Aukulista filed suit seeking a temporary restraining order and temporary and permanent injunctions removing Global. Global removed the case to federal court, where the parties unsuccessfully attempted mediation. The federal court remanded to state court. Aukulista set a hearing on its application for temporary injunction. Global moved to compel arbitration. After a hearing, the trial court granted Aukulista’s injunction and denied Global’s motion to compel. Global appealed.
In an opinion by Justice Yarbrough, joined by Chief Justice Quinn, he court of appeals reversed and remanded. The issue was whether Aukulista’s suit for injunctive relief was within the scope of the arbitration agreement. While the parties concurred that the arbitration clause applied to “any controversy or dispute arising out of [the operating agreement], the interpretation of any of the provisions [thereof], or the action or inaction of any Member [thereunder],” Aukulista pointed to a provision that it argued “carved out” its action for injunctive relief. That provision stated that “[n]o action at law or in equity based upon any claim arising out of or related to this Agreement shall be instituted in any court by any Member except: (i) an action to compel mediation and/or arbitration pursuant to this Section; (ii) an action for injunctive relief, or (ii) [sic] an action to enforce an award obtained in an arbitration proceeding in accordance with this Section.”
The court rejected Aukulista’s argument that the arbitration agreement did not apply to its action for injunctive relief. “The first part of the ‘carve-out’ sentence,” the court reasoned, “expresses an unambiguous prohibition upon the parties to file any lawsuit related to the operating agreement in court, and then lists exceptions to that prohibition, including ‘an action for injunctive relief.’ Although Aukulista has characterized the exception language in the arbitration clause as a ‘carve-out,’ the plain language does not exclude ‘an action for injunctive relief from the arbitrator’s jurisdiction. Rather, it merely makes the filing of suit based upon injunctive relief permissive.” Based upon a reading of the entire arbitration provision in context, “the ‘exceptions’ to the requirement to arbitrate are merely actions ancillary to arbitration, not methods by which to create new lawsuits outside the scope of the agreement to arbitrate in lieu of trial.”
As Aukulista’s suit came within the scope of the arbitration agreement, the trial court erred in denying Global’s motion to compel arbitration. It further erred by issuing a temporary injunction because the “underlying claims are subject to arbitration under the FAA” (citation omitted). Absent express language in the arbitration provision demonstrating the parties’ intent to allow a court to intervene to preserve the status quo, which was not the case here, the decision “regarding the underlying case and its probable right of relief that go to the merits of the dispute . . . was exclusively in the province of the arbitrator under the FAA.”
