                          COURT OF APPEALS
                          SECOND DISTRICT OF TEXAS
                               FORT WORTH

                               NO. 02-12-00276-CV

Richard Baumeister and Sanford,           §    From the 352nd District Court
Baumeister & Frazier, LLP
                                          §    of Tarrant County (352-255054-11)

v.                                        §    February 14, 2013

James Gary Reagan                         §    Opinion by Chief Justice Livingston

                                   JUDGMENT

      This court has considered the record on appeal in this case and holds that

there was error in the trial court’s order.     We reverse the trial court’s order

denying arbitration and a stay of the underlying proceedings, and we remand the

case to the trial court to render an order in accordance with this opinion.

      It is further ordered that appellee James Gary Reagan shall pay all of the

costs of this appeal, for which let execution issue.


                                     SECOND DISTRICT COURT OF APPEALS



                                     By_________________________________
                                       Chief Justice Terrie Livingston
                    COURT OF APPEALS
                    SECOND DISTRICT OF TEXAS
                         FORT WORTH

                       NO. 02-12-00276-CV


RICHARD BAUMEISTER AND                          APPELLANTS
SANFORD, BAUMEISTER &
FRAZIER, LLP

                                  V.

JAMES GARY REAGAN                                 APPELLEE

                               ----------

      FROM THE 352ND DISTRICT COURT OF TARRANT COUNTY

                               ----------

                       NO. 02-12-00277-CV


RICHARD BAUMEISTER AND                          APPELLANTS
SANFORD, BAUMEISTER &
FRAZIER, PLLC F/K/A SANFORD,
BAUMEISTER & FRAZIER, LLP

                                  V.

FASTLANE PARTNERS, LP AND                        APPELLEES
DON SMITH

                               ----------

      FROM THE 352ND DISTRICT COURT OF TARRANT COUNTY
                                       ----------

                          MEMORANDUM OPINION1

                                       ----------

      These two appeals from the trial court’s orders denying arbitration arise

from separate cause numbers in the same trial court and concern similar

allegations involving investments in which Richard Baumeister was involved. We

reverse and remand.

                                     Background

      Appellee James G. Reagan sued Baumeister, a certified public

accountant, and his firm, Sanford Baumeister & Frazier, PLLC (Sanford), for

negligence, gross negligence, and breach of fiduciary duty. Reagan alleged that

Baumeister informed Reagan, his client, that Reagan could invest as a partner in

Allen 75 Partners, LP, which was to own real property for investment purposes.

According to the petition, Baumeister told Reagan that the partnership which then

owned the real property was being replaced and a new limited partnership,

Allen 75, was being formed. Reagan alleged that Baumeister failed to disclose

that he was a partner in the prior partnership and, as such, was going to make a

substantial profit from the formation of Allen 75. Reagan further alleged that he

would not have invested $400,000 in Allen 75 if he had known of Baumeister’s

interest in the prior partnership.


      1
       See Tex. R. App. P. 47.4.


                                           2
        In a separate suit in the same trial court, Fastlane Partners, LP made

substantially similar allegations: that Baumeister represented to Fastlane that it

could invest as a new partner in Allen 75, that Baumeister failed to disclose that

he was a partner in the prior partnership that owned the property and that he was

going to make a substantial profit from the formation of Allen 75, and that

Fastlane would not have invested $180,000 in Allen 75 if it had known of

Baumeister’s interest in the prior partnership.      Based on these allegations,

Fastlane brought a fraud claim against Baumeister and Sanford.

        In that same suit, Don Smith and ANS Real Estate, Ltd. alleged that

Baumeister advised ANS to engage in a like-kind exchange of property rather

than sell property it owned and reinvest the proceeds of the sale elsewhere.

According to ANS, based on Baumeister’s and his firm’s representations, it

bought a half interest in a property located at 901 Houston Street; Houston Street

Partners, LP, in which Don Smith invested as a limited partner, bought the other

half interest. According to ANS and Smith, appellants failed to disclose that the

Houston Street property had appraised for less than the purchase price, and they

would not have purchased their interests in the property had they known. ANS

and Smith brought claims against appellants for negligence, fraud, and excessive

fees.

        About eight months after the suits were filed, Baumeister filed a motion to

compel arbitration in both suits as to Reagan’s, Fastlane’s, and Smith’s claims

against him and Sanford. According to Baumeister, the Allen 75 and Houston


                                         3
Street limited partnership agreements (Agreements) contain provisions requiring

arbitration of these claims.     The trial court denied the motions to compel

arbitration, and both appellants timely filed these interlocutory appeals.2

                                Issues on Appeal

      In both appeals, appellants bring two issues: (1) that the trial court erred

by refusing to compel arbitration as to Reagan’s, Fastlane’s, and Smith’s claims

and (2) that the trial court erred by refusing to abate the underlying litigation

pending arbitration.

                       Whether Claims Must Be Arbitrated

      In their first issue, appellants contend that because of the broad language

of the arbitration clauses in the Agreements, any disputes arising from appellees’

investment in the partnerships must be arbitrated.

Applicable Law and Standard of Review

      The FAA provides, in relevant part, that

             [a] written provision in . . . a contract evidencing a transaction
      involving commerce to settle by arbitration a controversy thereafter
      arising out of such contract . . . shall be valid, irrevocable, and
      enforceable, save upon such grounds as exist at law or in equity for
      the revocation of any contract.




      2
       Appellants contend that the Federal Arbitration Act (FAA) applies to this
proceeding, which appellees do not dispute. See 9 U.S.C.A. §§ 1–16 (West
2009); see also Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (West Supp. 2012)
(permitting interlocutory appeal of order denying motion to compel arbitration
under the FAA).


                                          4
9 U.S.C.A. § 2. Section 2 of the FAA has been described as reflecting both a

“liberal federal policy favoring arbitration” and the “fundamental principle that

arbitration is a matter of contract.” Aldridge v. Thrift Fin. Mktg., LLC, 376 S.W.3d

877, 881 (Tex. App.––Fort Worth 2012, no pet.) (quoting AT&T Mobility LLC v.

Concepcion, 131 S. Ct. 1740, 1745 (2011)).

      Under the FAA, a party seeking to compel arbitration must satisfy a two-

pronged burden of proof in that it must first demonstrate the existence of a valid

agreement to arbitrate the dispute and then prove that the claims asserted are

within the scope of the agreement. In re Dillard Dep’t Stores, Inc., 186 S.W.3d

514, 515 (Tex. 2006) (orig. proceeding); Aldridge, 376 S.W.3d at 882. If the

party seeking arbitration carries its initial burden, the burden shifts to the opposite

party to present evidence of an affirmative defense. In re AdvancePCS Health

L.P., 172 S.W.3d 603, 607 (Tex. 2005) (orig. proceeding); Aldridge, 376 S.W.3d

at 882.

      An agreement to arbitrate is a contract, the relation of the parties is

contractual, and the rights and liabilities of the parties are controlled by the law of

contracts.   Aldridge, 376 S.W.3d at 882.       Because arbitration is generally a

matter of contract, the FAA requires courts to honor parties’ expectations.

9 U.S.C.A. §§ 1–16; AT&T Mobility LLC, 131 S. Ct. at 1752–53; Aldridge, 376

S.W.3d at 882.

      When deciding whether parties agreed to arbitrate, courts should apply

ordinary state law principles regarding the formation of contracts. First Options


                                          5
of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S. Ct. 1920, 1924 (1995); J.M.

Davidson, Inc. v. Webster, 128 S.W.3d 223, 227–28 (Tex. 2003); Aldridge, 376

S.W.3d at 882–83. In conducting such a review, a court “may not expand upon

the terms of the contract or tolerate a liberal interpretation of it by reading into it a

voluntary, consensual agreement to arbitrate when one otherwise does not

exist.” Aldridge, 376 S.W.3d at 883; In re Bates, 177 S.W.3d 419, 422 (Tex.

App.––Houston [1st Dist.] 2005, orig. proceeding).

      In resolving disputes regarding interpretation of an arbitration agreement,

courts apply standard principles of contract interpretation and construction.

Aldridge, 376 S.W.3d at 883. The plain meaning of the contractual language

should be looked to in order to ascertain the intent of the parties. Id. Although

the language of the agreement must clearly indicate the intent to arbitrate, Id.;

Bates, 177 S.W.3d at 422, courts must resolve any doubts about an arbitration

agreement’s scope in favor of arbitration, In re FirstMerit Bank, N.A., 52 S.W.3d

749, 753 (Tex. 2001) (orig. proceeding).

      We review a trial court’s determination regarding the validity of an

agreement to arbitrate de novo as a question of law. J.M. Davidson, 128 S.W.3d

at 227; Aldridge, 376 S.W.3d at 882.




                                           6
Analysis

      According to Baumeister’s motion to compel, arbitration of appellees’

claims is required by section 9.1 of the Agreements:

                                   ARTICLE IX

                                  ARBITRATION

      9.1   Arbitration. Any dispute or controversy arising out of, under, in
            connection with or in relation to this Agreement that has not
            been or cannot be resolved under Section 9.1 shall be
            exclusively resolved by arbitration by the American Arbitration
            Association in Fort Worth, Texas pursuant to the commercial
            arbitration rules then pertaining to the Fort Worth, Texas area.
            Any such arbitration shall be conducted by a single arbitrator
            with experience in commercial real estate transactions and
            partnerships in Texas, who shall be an attorney currently
            admitted to practice and in good standing in the State of
            Texas. The arbitrator shall apply Texas law as though he/she
            were bound by applicable statutes and precedents in case
            law, and shall endeavor to decide the controversy as though
            he/she [were] a judge in a Texas court of law. The arbitrator
            shall render his/her decision in writing and shall specifically
            cite the statistics and precedents applied in recognizing
            his/her decision.

      Alleged Ambiguity

      Appellees first contend that the provision is ambiguous and circular

because it refers to itself. In other words, appellees contend that the language,

“[a]ny dispute or controversy arising out of, under, in connection with or in

relation to this Agreement that has not been or cannot be resolved under Section

9.1,” which section is the arbitration provision itself, means that any dispute that

cannot be arbitrated must be resolved by arbitration. Section 9.1 does not refer

to any method of dispute resolution other than arbitration.


                                         7
      When construing a contractual provision, we do not read it in vacuum; we

review the provision in light of the entire contract. See, e.g., Clark v. Cotten

Schmidt, L.L.P., 327 S.W.3d 765, 772–73 (Tex. App.––Fort Worth 2010, no pet.).

If possible, we should avoid a construction that is unreasonable, oppressive,

inequitable, or absurd. Id. at 772; Pavecon, Inc. v. R-Com, Inc., 159 S.W.3d 219,

222 (Tex. App.––Fort Worth 2005, no pet.). Language should be given its plain

grammatical meaning unless it definitely appears that the intention of the parties

would thereby be defeated. Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529

(Tex. 1987); Clark, 327 S.W.3d at 773.

      We construe the provision as requiring that disputes related to the

Agreements that are not able to be resolved by the parties must, under section

9.1, the arbitration provision, be referred to arbitration. Even if the language

were circular––i.e., if disputes remain unresolved under the arbitration provision,

they must be referred to arbitration––it would nevertheless evidence a clear

intent to arbitrate unresolved disputes in lieu of any other method of dispute

resolution.   Thus, we conclude and hold that section 9.1 does not fail for

ambiguity. See RSI Int’l, Inc. v. CTC Transp., Inc., 291 S.W.3d 104, 107, 109

(Tex. App.––Fort Worth 2009, no pet.) (“[F]or an ambiguity to exist when the

parties advance conflicting interpretations, both interpretations must be

reasonable.”).




                                         8
      Scope of Arbitration Clause

      Next, appellees contend that appellants’ claims do not fall within the scope

of the arbitration clauses in the Agreements. To determine whether a claim falls

within the scope of an arbitration clause, courts must “focus on the factual

allegations of the complaint, rather than the legal causes of action asserted.” In

re Rubiola, 334 S.W.3d 220, 225 (Tex. 2011) (orig. proceeding). We consider

whether the facts alleged are intertwined with the contract containing the

arbitration clause. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271 (Tex. 1992)

(orig. proceeding).   If the facts alleged “touch matters,” have a “significant

relationship” to, are “inextricably enmeshed” with, or are “factually intertwined”

with the contract containing the arbitration agreement, the claim is arbitrable.

Cotton Commercial USA, Inc. v. Clear Creek ISD, No. 14-12-00272-CV, 2012

WL 5395929, at *7 (Tex. App.––Houston [14th Dist.] Nov. 6, 2012, no pet.);

Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 498 (Tex. App.––San Antonio

2000, orig. proceeding). But “[i]f the facts alleged in support of the claim stand

alone, are completely independent of the contract, and the claim could be

maintained without reference to the contract, the claim is not subject to

arbitration.” Cotton Commercial, 2012 WL 5395929, at *7; Pennzoil, 30 S.W.3d

at 498. Parties to arbitration agreements cannot avoid them by casting their

claims in tort, rather than in contract. See Grigson v. Creative Artists Agency

L.L.C., 210 F.3d 524, 526 (5th Cir.), cert. denied, 531 U.S. 1013 (2000).




                                        9
      Here, the factual allegations are that Baumeister, as appellees’ CPA and

as an officer of Sanford, advised appellees to invest in limited partnerships in

which he had financial interests––and which would own properties in which he

had financial interests––without disclosing the extent of his financial interests,

potential profit (as to Allen 75), and soundness of the investment (as to Houston

Street).

      In the two Agreements, Baumeister was listed as the registered agent for

the general partner and the person to whom legal notices for the general partner

were to be sent, and he was also listed as a limited partner. The Agreements

contained representations that each limited partner was a sophisticated investor,

that each limited partner had “been furnished with sufficient written and oral

information about the Partnership[s], and the property to be purchased to allow

him to make an informed investment decision prior to purchasing an interest in

the Partnership[s], and [had] been furnished access to any additional information

that he may require.”     They also further provided that each limited partner

“agrees to hold the General Partner and the Limited Partners and their respective

successors, assigns, harmless and to indemnify them against all liabilities, costs,

and expenses incurred by them as a result of any breach of the foregoing

representations.”

      Appellees contend that appellants’ tort claims are not arbitrable because

they are not “so interwoven with the contract or agreement containing the

arbitration provision that the claim cannot be maintained without reference to the


                                        10
terms of the contract or agreement.” They also contend that their claims do not

rely on the terms of the Agreements or allege that Baumeister breached the

Agreements in any way, but rather arise solely from his independent tort duties

owed as their CPA.

      The presumption of arbitrability is particularly applicable when the clause is

broad as it is here; a clause is broad if it provides for arbitration of “any dispute

arising between the parties,” or “any controversy or claim arising out of or relating

to the contract thereof,” or “any controversy concerning the interpretation,

performance or application of the contract.”       Cotton Commercial, 2012 WL

5395929, at *7; Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W.2d 225, 230 (Tex.

App.––Houston [14th Dist.] 1993, writ denied). When such a broad clause exists,

“absent any express provision excluding a particular grievance from arbitration,

only the most forceful evidence of purpose to exclude the claim from arbitration

can prevail.”    Cotton Commercial, 2012 WL 5395929, at *7; Ascendant

Anesthesia PLLC v. Abazi, 348 S.W.3d 454, 461 (Tex. App.––Dallas 2011, no

pet.). And an “order to arbitrate the particular grievance should not be denied

unless it may be said with positive assurance that the arbitration clause is not

susceptible of an interpretation that covers the asserted dispute.” Ascendant

Anesthesia, 348 S.W.3d at 461 (quoting BDO Seidman, LLP v. J.A. Green Dev.

Corp., 327 S.W.3d 852, 857 (Tex. App.––Dallas 2010, no pet.)).

      Here, appellees claims against Baumeister are not independent of the

Agreements and are “related to” them.            Although appellees allege that


                                         11
Baumeister had been their CPA for many years independently of the

Agreements––and the basis of their claims is his allegedly faulty or deceptive

advice and counsel––their claims are based on his alleged advice and

nondisclosure related to the investments represented by the Agreements.

Although the matters appellees complain of took place before the Agreements

were executed, they nevertheless are intextricably enmeshed and factually

intertwined with the Agreements, the execution of which was the end result of

Baumeister’s professional services.    See, e.g., Rubiola, 334 S.W.3d at 226;

Capitol Income Props.-LXXX v. Blackmon, 843 S.W.2d 22, 23 (Tex. 1992) (orig.

proceeding) (“It is also undisputed that the Plaintiffs claim that CIP breached its

fiduciary duty to them in operating and managing the partnership, in repeatedly

misrepresenting the financial health of the operation, and in fraudulently inducing

them to invest in the partnership. These claims arise out of and relate to the

limited partnership agreement.” (emphasis added)); cf. In re NEXT Fin. Group,

Inc., 271 S.W.3d 263, 267–70 (Tex. 2008) (orig. proceeding) (holding common

law Sabine Pilot claim of securities broker against his nonsignatory former

employer arbitrable because within scope of arbitration agreement between

broker and National Association of Securities Dealers, which broker agreed to

when registering with NASD). Additionally, Smith’s claim for excessive fees3

seeks to recover what he claims are excessive fees charged by Sanford to the

      3
       Although appellants sought to stay ANS’s claims pending arbitration, they
did not seek to arbitrate those claims.


                                        12
limited partnership to manage the Houston Street property; the general partner’s

ability to engage and pay for such services is spelled out in that Agreement.

      The language of the Agreements as a whole––which do not conceal

Baumeister’s role in the partnerships––evidences an intent that the Agreements

contemplate the resolution of matters involving the limited partners’ decision to

invest in the limited partnership.   In other words, appellees’ claims are that

Baumeister misused his position as their CPA to induce them to invest in limited

partnerships and if they had not invested in those limited partnerships, they

would not have been damaged; under the plain language of the arbitration

clauses, it is difficult to see how these claims are not at least “related to” the

Agreements themselves. See ConocoPhillips Co. v. Graham, No. 01-11-00503-

CV, 2012 WL 1059084, at *8–9 (Tex. App.––Houston [1st Dist.] Mar. 29, 2012,

no pet.) (mem. op.) (rejecting argument that appellees’ claims arose from

appellant’s general tort duty to them when their claims arose from their

employment, which was subject to arbitration agreement). Moreover, because

the Agreements contain indemnity provisions related to the other partners,

appellants may conceivably attempt to rely on them for potential defenses.

      The cases appellees cite are not controlling. Carr involved an arbitration

agreement that was limited to disputes between the parties and involved a

signatory attempting to compel a nonsignatory plaintiff to arbitration. Carr v.

Main Carr Dev., LLC, 337 S.W.3d 489, 498 (Tex. App.––Dallas 2011, pet.

denied). Woodhaven Homes involved two contracts for the sale of property and


                                        13
construction of a home; the arbitration provision was contained in the contract for

the home that the plaintiffs never purchased, instead buying the other home.

The contract for the home they actually bought did not contain an arbitration

provision. Woodhaven Homes, Inc. v. Alford, 143 S.W.3d 202, 204–06 (Tex.

App.––Dallas 2004, no pet.). The language of the arbitration provision in Osornia

was more limited than the language in the Agreements. Osornia v. AmeriMex

Motors & Controls, Inc., 367 S.W.3d 707, 712–13 (Tex. App.––Houston [14th

Dist.] 2012, no pet.). Fridl and Hearthshire Braeswood Plaza are similar, but they

are still factually distinguishable.   In both of those cases, the plaintiffs were

alleging actions by the signatory defendants that caused the plaintiffs to become

involved in transactions separate from and outside of the contracts in which the

arbitration clauses were contained. Fridl v. Cook, 908 S.W.2d 507, 512–13 (Tex.

App.––El Paso 1995, writ dism’d w.o.j.); Hearthshire Braeswood Plaza Ltd.

P’ship v. Bill Kelly Co., 849 S.W.2d 380, 391 (Tex. App.––Houston [14th Dist.]

1993, writ denied). But here the alleged actions of appellants culminated in the

Agreements containing the arbitration clauses.

      This is admittedly a close, factually unique case. But when faced with a

broad, nonexclusionary arbitration clause and a dispute that is conceivably

“related to” the Agreements at issue, we must defer on the side of arbitrability.

Although, as alleged by appellees, the manner in which the arbitration agreement

was procured is troubling, we cannot say with “positive assurance” that

appellees’ claims are not arbitrable. Accordingly, we are constrained––by the


                                         14
plain language of the Agreements and the FAA’s favorable policy regarding

arbitration––to conclude and hold that the trial court erred by refusing to compel

arbitration of appellees’ claims.

      Likewise, because appellees’ allegations against Sanford arise out of a

vicarious liability theory, and do not involve any additional or separate allegations

from the allegations against Baumeister individually, they likewise are arbitrable.4

See Rubiola, 334 S.W.3d at 224–25; Ascendant Anesthesia, 348 S.W.3d at 462

(holding claims against nonsignatory agent arbitrable because based on his

actions related to his role at signatory principal, against whom arbitrable claims

were alleged); Dennis v. College Station Hosp., L.P., 169 S.W.3d 282, 287 (Tex.

App.––Waco 2005, pet. denied) (holding claims against nonsignatory agent,

although otherwise not arbitrable, were arbitrable because factually intertwined

with arbitrable claims against signatory principal defendant); In re Prudential

Sec., Inc., 159 S.W.3d 279, 283 (Tex. App.—Houston [14th Dist.] 2005, orig.

proceeding); Brown v. Anderson, 102 S.W.3d 245, 250 (Tex. App.––Beaumont

2003, pet. denied) (“Where the causes of action against the non-signatory

defendants are based upon the same operative facts and are inherently


      4
        Appellees contend that Sanford has no standing to urge reversal of the
trial court’s order on appeal because it did not move for arbitration. But
Baumeister moved for arbitration of all claims, including specifically those against
Sanford; appellees did not object or specially except.               Sanford’s and
Baumeister’s notice of appeal invoked our jurisdiction over all parties. See Tex.
R. App. P. 25.1(b). Accordingly, Sanford has standing to challenge the trial
court’s order in this appeal. See Ascendant Anesthesia, 348 S.W.3d at 461–62.


                                         15
inseparable from the causes of action against the signatory-defendant, the

signatory-plaintiff may not avoid arbitration if invoked by the non-signatory

defendants.”). Moreover, the arbitration provision in the Agreements here is not

limited in scope to disputes arising solely between the parties. See In re Bath

Junkie Franchise, Inc., 246 S.W.3d 356, 364, 366 (Tex. App.––Beaumont 2008,

orig. proceeding) (holding all claims, including claims against nonsignatory

defendants, arbitrable when arbitration clause was broad––applying to “any

dispute or controversy arising out of or relating to [the Franchise Agreement]”––

and that plaintiff contended nonsignatory defendants acted with signatory

defendant in alleged wrongful acts); cf. Rubiola, 334 S.W.3d at 224–25 (involving

clause that expressly bound nonsignatory officers and agents of signatory to

contract). Accordingly, we conclude and hold that the trial court erred by refusing

to compel arbitration of the claims against Sanford as well.            We sustain

appellants’ first issue.

               Whether Suit Must Be Abated Pending Arbitration

      In their second issue, appellants contend the trial court also erred by failing

to stay the underlying proceedings pending resolution of arbitration. Federal law

requires courts to stay litigation of claims that are subject to arbitration until

arbitration is completed. 9 U.S.C.A. § 3; In re Merrill Lynch Trust Co. FSB, 235

S.W.3d 185, 195–96 (Tex. 2007) (orig. proceeding). Even when a party has

brought arbitrable claims against one party and claims not subject to arbitration

against another party in the same lawsuit, courts should stay all litigation. See In


                                        16
re Merrill Lynch Trust Co., 235 S.W.3d at 195–96. Accordingly, because we

have determined that appellees’ claims against appellants are subject to

arbitration, we conclude and hold that the litigation must be stayed pending

arbitration. See In re Helix Energy Solutions Group, Inc., 303 S.W.3d 386, 403

(Tex. App.––Houston [14th Dist.] 2010, orig. proceeding). We sustain appellants’

second issue.

                                 Conclusion

      Having sustained both of appellants’ issues, we reverse the trial court’s

order denying arbitration and a stay of the underlying proceedings, and we

remand this cause to the trial court to render an order in accordance with this

opinion.




                                                 TERRIE LIVINGSTON
                                                 CHIEF JUSTICE

PANEL: LIVINGSTON, C.J.; MCCOY and GABRIEL, JJ.

MCCOY, J., concurs without opinion.

DELIVERED: February 14, 2013




                                      17
