The Dallas Court of Appeals has reversed a trial court order granting a stay of arbitration in a wrongful death case involving the 2016 deaths of five residents of a senior living community in Dallas. Each of the decedents signed a lease containing arbitration clauses and waiver of jury trial. The lease made these provisions binding on the representatives of the estate, including family, heirs, executors, guardians, administrators, and assigns. The plaintiff individuals and estate representatives and defendant attempted mediation prior to suit, at which the defendant invoked the arbitration provisions. In 2019 defendant filed arbitration actions with the AAA, upon which the plaintiffs filed five suits in a Dallas County Court, alleging negligent undertaking, premises liability, negligent hiring, training, and supervising, and general negligence and seeking a declaratory judgment that their claims were not subject to arbitration. The plaintiffs moved to stay arbitration, while the defendants moved to abate each of the suits pending arbitration. AAA declined to proceed with the arbitration until the parties either agreed or the issue of arbitrability was adjudicated. After two hearings, the trial court granted the stay of arbitration and denied the defendant’s motion to abate in each case. The defendant appealed to the Dallas Court of Appeals, which consolidated the five cases for purposes of appeal.
On appeal, the defendant argued that the trial court abused its discretion by declining to order the parties to arbitration, failing to refer the arbitrability issue to the arbitration panel, improperly basing its decision on the Texas Arbitration Act rather than the controlling Federal Arbitration Act, and improperly striking its affidavits supporting its plea of abatement. The defendants also asserted that if the court finds that the statutory arbitration provisions do not apply, the case may still be arbitrated under Texas common law.
The court of appeals commenced its analysis by finding that: (1) a legal contract existed between the parties, (2) the wrongful death and survival claims brought by the beneficiaries and estates were wholly derivative of the decedents’ rights, (3) the plaintiffs are bound by the decedents’ pre-death contracts; and (4) the arbitration provisions in the decedents’ leases bind the plaintiffs. It then turned to the threshold issue of whether the trial court or the arbitrator must determine the arbitrability of the action in the first instance. Citing SCOTX’s decision in RSL Funding, LLC v. Newsome, 569 S.W.3d 116 (Tex. 2018) and its own precedent, the court of appeals held that the arbitration provisions in the leases unequivocally delegated all issues, including arbitrability, to the arbitrator as governed by the AAA’s Commercial Arbitration Rules. The trial court thus abused its discretion by ordering a stay of arbitration. The court of appeals remanded to the trial court with instructions to order the parties to arbitration.
Justice Partida-Kipness’s dissent argued that under a previous decision of the court of appeals, Roe v. Ladymon, 318 S.W.3d 502 (Tex. App.—Dallas, 2010, no pet.), the claimants were non-signatories to the lease without clear and unmistakable evidence that they authorized an arbitrator to decide the gateway issue of arbitrability. The majority distinguished this case from Roe on the basis that the non-signatory estate beneficiaries were bound by the arbitration agreement by virtue of both the specific contract language binding the family, heirs, representatives, and executors and the derivative nature of their wrongful death actions. In the Ladymon case, Ladymon signed an arbitration agreement with Roe in his capacity as a partner in the remodeling firm Roe hired to renovate her home. Unhappy with the job, Roe sought arbitration against both the firm and Ladymon in his individual capacity. The parties attended arbitration, and the arbitrator awarded damages for which the firm and Ladymon were jointly and severally liable. In confirming the award, the trial court found that the arbitrator exceeded his authority in rendering an award against Ladymon personally because there was no evidence he had specifically agreed to subject himself to arbitration and the underlying remodeling contract itself did not make Ladymon personally liable for a breach.
We would be surprised if this case goes any further. SCOTX has made it clear that nonparties to an arbitration agreement can nevertheless be bound to agreements they did not sign. In re Labatt Food Serv. L.P., 279 S.W.3d 640 (Tex. 2009); In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (holding that the FAA applies to a non-signatory to a contract with an arbitration provision if Texas law would bind a non-party to the contract generally). It is equally clear that the non-signatories here had wholly derivative claims from the decedents’ who did sign the lease. The majority of the panel got this one right.