The Austin Court of Appeals has affirmed a trial court order denying a motion to compel arbitration by non-signatories to hospital company agreements under a direct-benefit benefits estoppel theory.
Nutex Health Inc.; Nutex Health, LLC; and Tyvan, LLC v. Kyle ER, LLC; Kyle Assets, LLC; and Micro Hospital EP, PLLC (No. 03-24-00289-CV; May 8, 2026) arose from a dispute between hospital administrators (Nutex and Tyvan) and hospital companies over the alleged mismanagement of the hospital’s administrative services. The companies, which own and operate an emergency-care hospital in Kyle, contracted with the third-party administrators to run the facility. The parties had two services contracts, neither of which contained arbitration provisions. The first dispute broke out between Nutex’s CEO, one Dr. Vo, and other companies with ownership interests over a proposed merger involving the exchange of shares of Nutex with membership interests in Kyle ER. Senator and Dr. Donna Campbell chose not to participate and retained her membership interest in Kyle ER. She requested the books and records of the three hospital companies from Dr. Vo, invoking various company agreements. Each of these agreements had a dispute resolution provision culminating in mandatory arbitration.
When Nutex allegedly failed to respond, Dr. Campbell invoked the dispute-resolution provisions of the company agreements. Eventually, she filed the underlying lawsuit, alleging breach of contract and an accounting and declaratory relief to obtain the documents. She also alleged derivative claims against the administrators. The administrators moved to compel arbitration, asserting that Dr. Campbell, as signatory to the various Company Agreements, was bound by their arbitration provisions. Dr. Campbell filed a motion to show authority on the basis that counsel for the administrators were defending the suit without authority from the companies. Subsequently, some members of Kyle ER resolved to terminate their agreements with the administrators and remove Dr. Vo and replace him with Dr. Campbell and another physician. They filed a cross-claim against the administrators to enforce the resolutions. The trial court ordered them to recognize the termination and turn over the books and records to Dr. Campbell and the other physician. After the parties entered into an agreed order, Dr. Campbell nonsuited her claims, leaving the companies’ claims against the administrators for breaches of their service contracts.
Next, Vo and other Defendants submitted a statement of their claims against the hospital companies to the AAA, invoking the arbitration clauses, although Nutex and Tyvan were not signatories to the hospital company agreements. After a lot of back and forth in the court, the administrators moved to compel arbitration. The trial court denied the motion. Dr. Vo, et al. appealed.
In an opinion by Justice Triana, the court of appeals affirmed. The administrators contended that the doctrine of direct-benefits estoppel required parties to arbitrate claims that “presume the existence of a written agreement” containing an arbitration clause, that the companies were estopped from their obligation to arbitrate because they got a TRO, the books and records, and enforcement of the resolutions terminating the service contracts, and that the companies’ breach of contract claims are based on allegations of mismanagement arising under the company agreements.
Taking up the doctrine of direct-benefits estoppel, the court looked to SCOTX authority that a non-signatory to an arbitration agreement “should be compelled to arbitrate a claim only if it seeks, through the claim, to derive a direct benefit from the contract containing the arbitration provision.” SCOTX had also ruled that a non-signatory could be compelled to arbitrate when the plaintiff signatory’s “right to recover and its damages depend[ed] on the agreement containing the arbitration provision” (citations omitted). The question thus became whether the hospital companies received a “direct benefit under the Hospital Company Agreements by obtaining the TRO and obtaining books and records and enforcing the resolutions terminating the Service Contracts.” Additionally, the court had to resolve whether the companies’ mismanagement and contract claims were “required to be determined by reference to the Hospital Company Agreements.”
As to the first question, the court determined that the companies didn’t directly benefit under the agreements. Dr. Campbell’s initial suit, which she undertook in her individual capacity, was based on the service agreements, not the company agreements. When the claim spread to the hospital companies, it still involved the service contracts as well. None of the injunctive relief Dr. Campbell or the companies requested arose from the company agreements, and the trial court “did not need to refer to the [agreements] to determine to which entities the books and records, financial accounts, and operations systems belong.” The same went for enforcing the resolutions to terminate the administrators, resolutions taken in accordance with the terms of the services contract, which did not require notice for termination with cause.
Moving to the second question, the administrators argued that the companies’ claims sought only monetary damages and must be arbitrated because they “depend on and refer to the Hospital [Company] Agreements.” Specifically, the administrators contended that the company agreements dictated the book and recordkeeping requirements, though they couldn’t point to any provisions of the agreements that said that. Moreover, though the arbitration provisions in the company agreements would subject a request for the books and records of the companies to arbitration, they didn’t have anything to do with a request by the companies of their third-party administrators. And as to the claims of mismanagement, those had to do with the terms of the service contracts and whether the administrators breached them in various ways.
Finally, the administrators argued that since they were not liable for the companies’ claims, they could only prove their nonliability by reference to the company agreements. This argument simply rehashed the other ones involving the service contract. The fact that the company agreements contained a “business-judgment” standard protecting corporate officers and directors from certain liability for breach of fiduciary claims again had nothing to do with the administrators’ potential liability under the service contract. The trial court thus didn’t abuse its discretion by denying the administrators’ motion to compel arbitration.
