Opinion issued September 11, 2014




                                      In The
                               Court of Appeals
                                      For The
                          First District of Texas
                       ————————————
                          NO. 01-12-00949-CV
                        ———————————
                   HALLIBURTON COMPANY, Appellant
                                         V.
                               KBR, INC., Appellee


                    On Appeal from the 165th District Court
                             Harris County, Texas
                       Trial Court Case No. 2012-39503


                                   OPINION
      This case involves the arbitration of a dispute in which Halliburton

Company claims to have overpaid its share of tax liabilities related to a corporate

separation from its wholly-owned subsidiary, KBR, Inc. The parties agree that the

dispute must be arbitrated, but they disagree as to which of two separate arbitration

agreements governs certain aspects of the dispute. In this interlocutory appeal,
Halliburton presents two issues challenging the trial court’s order denying its

application to compel KBR to arbitrate all aspects of the dispute before a single

accounting referee, as provided in the parties’ Tax Sharing Agreement.

Halliburton also presents a third issue responding to KBR’s motion to dismiss this

appeal.

      We deny KBR’s motion to dismiss this appeal. We affirm the trial court’s

order denying Halliburton’s application to compel arbitration.

                               Background Summary

      In 2007, Halliburton spun off its wholly-owned subsidiary KBR. Before the

spinoff, all financial transactions between the companies were recorded in an

intercompany account as items payable or receivable. At the end of 2004, the

account reflected that KBR owed Halliburton $1.2 billion. In October 2005,

Halliburton contributed approximately $300 million of the intercompany account

balance to KBR’s equity in the form of a capital contribution and converted the

remaining balance in the intercompany account into two long-term notes payable

to Halliburton subsidiaries.

      Preceding the 2007 corporate separation, Halliburton and KBR signed a

number of contracts, including the parties’ Master Service Agreement (“MSA”),

entered into on November 20, 2006. It states, “[T]he parties intend to set forth in

this Agreement, including . . . the Ancillary Agreements contemplated hereby, the



                                         2
principal arrangements between [Halliburton and KBR] regarding the separation of

the KBR Group from the Halliburton Group, the IPO [initial public offering] and

certain future transactions.”

      One of the Ancillary Agreements referenced in the MSA is the Tax Sharing

Agreement (“TSA”), entered into on November 15, 2006 and amended on

February 26, 2007. The TSA provides, “[T]he Parties wish to set forth the general

principles under which they will allocate and share various Taxes . . . and related

liabilities” and further “to provide for the allocation between the Halliburton Group

and the KBR Group of all responsibilities, liabilities and benefits relating to all

Taxes paid or payable by either group” for the relevant taxable periods.

      The MSA and the TSA each contain agreements to arbitrate. Paragraph, 7.1,

found in Article VII of the MSA, reads as follows:

      7.1 Agreement to Arbitrate. The procedures for discussion,
      negotiation and arbitration set forth in this Article VII shall be the
      final, binding and exclusive means to resolve, and shall apply to all
      disputes, controversies or claims (whether in contract, tort or
      otherwise) that may rise out of or relate to, or arise under or in
      connection with: (a) this Agreement and/or any Ancillary Agreement,
      (b) the transactions contemplated hereby or thereby, including all
      actions taken in furtherance of the transactions contemplated hereby
      or thereby on or prior to the date hereof, or (c) for a period of ten
      years after the IPO Closing Date, the commercial or economic
      relationship of the parties, in each case between or among any
      member of the Halliburton Group and the KBR Group. . . .

      The arbitration article also provides that the arbitration will be conducted by

a panel of three arbitrators from the American Arbitration Association (“AAA”).


                                         3
Paragraph 7.6(b) of the MSA provides that the AAA Panel has the authority to

determine issues of arbitrability. It reads,


      The arbitrators shall have full power and authority to determine issues
      of arbitrability but shall otherwise be limited to interpreting or
      construing the applicable provisions of this Agreement, any Ancillary
      Agreement or any Prior Transfer Agreement, and will have no
      authority or power to limit, expand, alter, amend, modify, revoke or
      suspend any condition or provision of this Agreement, any Ancillary
      Agreement or any Prior Transfer Agreement . . . .

      The TSA’s arbitration provision, found in Section 8.11, requires that “[a]ny

disagreement between [KBR and Halliburton] with respect to any matter that is the

subject of this Agreement, including, without limitation, any disagreement with

respect   to   any    calculation    or   other    determinations     by   Halliburton

hereunder . . . shall be resolved by a nationally recognized independent accounting

firm chosen by and mutually acceptable to the Parties.” Under this provision,

arbitration would be conducted by a single person from an accounting firm, known

as an Accounting Referee. In contrast to the MSA, the TSA contains no provision

addressing determinations of arbitrability.

      After the corporate separation, a dispute arose between the two companies

regarding whether Halliburton had paid more than its required share of tax

liabilities for certain years preceding the corporate spinoff. During each pre-

spinoff year, Halliburton had filed a single, consolidated tax return for itself and its




                                           4
subsidiaries, including KBR. Even though a consolidated return was filed, the tax

liabilities were allocated between the two companies.

      In 2011, Halliburton notified KBR that it had determined, pursuant to the

TSA, that it had paid more than its share of tax liabilities for a number of pre-

separation years. Halliburton claimed that the amount of the overpayment was

approximately $256 million. It sought reimbursement from KBR for that amount.

      KBR pointed out that Halliburton had paid the funds for its share of the tax

liabilities into the intercompany account. It asserted that the account had been

settled in anticipation of the corporate spinoff. KBR claimed that, contrary to

Halliburton’s position, under the circumstances, there was no basis in the TSA for

Halliburton to reopen the settled account or to reallocate and recalculate tax

liabilities that were paid based on filed tax returns.

      Ultimately, the companies could not agree on a resolution of Halliburton’s

overpayment claim. In January 2012, Halliburton sent a notice to KBR, requesting

the appointment of an Accounting Referee, as provided in the TSA, “to resolve the

disputes between the parties concerning the amounts owed by KBR to Halliburton

under the TSA.”

      KBR responded that Halliburton’s request for an Accounting Referee to

calculate—under the methods prescribed in the TSA—the amount of tax

obligations owed by Halliburton for the pre-spinoff tax years was premature. KBR



                                           5
averred that first a determination had to be made whether Halliburton was entitled

to pursue a claim to recover funds that it had paid into the intercompany account.

KBR asserted that this preliminary determination was governed by provisions in

the MSA. 1

      To support its position, KBR pointed to a release provision in the MSA. The

provision states that KBR is released from liability for claims arising from acts or

events that occurred prior to, or in association with, the corporate spinoff, unless

such claims were specifically preserved in another agreement. KBR recognized

that Halliburton claimed that it was entitled to reimbursement under the TSA.

KBR alleged, however, that Halliburton had not pointed to any provision in the

TSA that preserved Halliburton’s claim for reimbursement of monies paid into the

settled intercompany account. Because the claim arises from pre-spinoff events

and was not preserved in another agreement, KBR argued it was covered by the

MSA’s release provision.

      KBR also asserted that Halliburton’s reimbursement claim was barred by the

limitations provision in the MSA.       That provision requires a party to give

notification that it seeks to arbitrate a claim within two years of when a party knew

or should have known of the claim.

1
      KBR agreed that certain discrete tax claims between the parties, aside from the
      $256 million overpayment claim, were governed by the Tax Sharing Agreement
      and could be resolved by an Accounting Referee. However, those claims are not
      involved in this appeal.

                                         6
      In addition, KBR cited the 2005 settlement of the intercompany account. In

settling the account, Halliburton had contributed approximately $300 million of the

intercompany account balance to KBR’s equity in the form of a capital

contribution and converted the balance in the intercompany account into two long-

term notes payable to Halliburton. KBR averred that, because it had paid the notes

in full, Halliburton’s overpayment claim was barred by the principle of accord and

satisfaction.

      KBR served Halliburton with a demand for arbitration under the MSA. In

the demand, KBR requested the AAA Panel declare (1) Halliburton’s overpayment

claim for $256 million was discharged when KBR paid the notes it owed for

settlement of the intercompany account; (2) Halliburton released its overpayment

claim pursuant to the release provisions of the MSA; and (3) Halliburton’s

overpayment claim is time-barred under the MSA’s limitations provision.

      Halliburton maintained its position that all aspects of the dispute, including

whether it is entitled to pursue reimbursement from KBR, are within the scope of

TSA’s arbitration provision. Unable to reach an agreement with KBR regarding

which agreement’s arbitration provision controlled, Halliburton filed an application

in the trial court to compel arbitration under the TSA and to stay any proceedings

under the MSA. Among its arguments, Halliburton asserted that the trial court, not

the AAA Panel, should determine which arbitration agreement controls the



                                         7
resolution of the discrete dispute regarding whether Halliburton is entitled to

pursue the overpayment claim.

      KBR responded to Halliburton’s application and filed a cross-motion to

compel arbitration under the MSA. In its filing, KBR asserted that the AAA Panel

should determine which arbitration agreement controls the discrete dispute. KBR

cited the section of the MSA, which provides that the AAA Panel has full power to

determine issues of arbitrability. Halliburton replied, asserting that, regardless of

whether it is permitted to determine issues of arbitrability under the MSA, the

AAA Panel is not authorized to determine whether the dispute is arbitrable under

the TSA.

      The trial court conducted a hearing on the parties’ competing arbitration

motions. Two days later, on September 19, 2012, the trial court signed an order

denying Halliburton’s application to compel arbitration under the TSA and to stay

proceedings under the MSA. In the same order, the trial court granted KBR’s

cross-motion to compel arbitration under the MSA.

      Halliburton appeals the trial court’s order denying its application to compel

arbitration under the TSA. Halliburton presents three issues in its appellate brief.

      While the interlocutory appeal was pending in this Court, arbitration

proceeded before the AAA Panel under the MSA, as ordered by the trial court. In

its written arbitration award, the AAA Panel (1) held that it “ha[d] jurisdiction over



                                          8
the claims presented”; (2) held that “Halliburton’s TSA claims are barred by

§ 7.3(b) of the MSA”; and (3) ordered “the parties to return to the Accounting

Referee within 30 days of the Final Award for determination of the Parties’

remaining TSA claims.” Halliburton submitted its TSA claims to the Accounting

Referee, who determined that “Halliburton is owed a net amount of $104,525,604

from KBR under the TSA.”

      In the trial court, Halliburton filed a motion to vacate the AAA Panel’s

award. See 9 U.S.C. § 10. Halliburton asserted that the award should be vacated

because the AAA Panel did not have jurisdiction to determine its own jurisdiction

to arbitrate the dispute or to decide any part of the dispute under the MSA.

Halliburton maintained that the entire dispute should be decided under the TSA.

The motion to vacate the award remains pending in the trial court.

                               Appellate Jurisdiction

      KBR has moved to dismiss this appeal for lack of jurisdiction, asserting that

the trial court’s order is not appealable. Halliburton responds to the motion in its

third issue, asserting that this Court has jurisdiction over the denial of its

application to compel arbitration. The parties have also filed post-submission

briefing regarding additional jurisdictional issues. Because it is a threshold matter,

we consider the jurisdictional issues first before discussing the merits of the appeal.

See CMH Homes v. Perez, 340 S.W.3d 444, 447 (Tex. 2011).



                                          9
A.    Final Judgment or Interlocutory Appeal

      Halliburton first asserts that the trial court’s order is appealable because it is

a final judgment, not an interlocutory order. An order is final and appealable only

if “it actually disposes of every pending claim and party or . . . it clearly and

unequivocally states that it finally disposes of all claims and all parties.” Lehmann

v. Har–Con Corp., 39 S.W.3d 191, 205 (Tex. 2001). The trial court’s September

19, 2012 order does not contain finality language.         Nevertheless, Halliburton

argues that the order is a final judgment because all claims asserted by the parties

in the trial court have been disposed of in the September 19, 2012 order. It asserts

that the only claims raised by the parties in the trial court were the competing

claims regarding the appropriate arbitral forum. Halliburton argues that, because it

disposes of these claims, the order is a final judgment for purposes of appeal. We

disagree.

      The competing filings in the trial court show that Halliburton had a live

claim against KBR when the trial court signed the order denying Halliburton’s

application to compel arbitration under the TSA. To be sure, there would be no

need for arbitration if all claims between the parties had been resolved when the

order was signed.     Although Halliburton’s motion to vacate the Accounting

Referee’s award is currently pending in the trial court, no final judgment has been

signed confirming the award. Because it does not dispose of all issues remaining



                                          10
between the parties, but instead contemplates continuing resolution of

Halliburton’s overpayment claim against KBR through the arbitration process, we

conclude that the trial court’s order denying Halliburton’s application to compel

arbitration is an interlocutory order. See Brook v. Pep Boys Auto. Supercenters,

Inc., 104 S.W.3d 656, 660 (Tex. App.—Houston [1st Dist.] 2003, no pet.).

B.    Appealability of Interlocutory Order

      “Unless a statute authorizes an interlocutory appeal, appellate courts

generally only have jurisdiction over final judgments.” CMH Homes, 340 S.W.3d

at 447. “We strictly apply statutes granting interlocutory appeals because they are

a narrow exception to the general rule that interlocutory orders are not immediately

appealable.” Id. KBR asserts that the order is not an appealable interlocutory

order under any statute.

      The parties agree that the Federal Arbitration Act (“FAA”) governs both

arbitration agreements involved in this dispute. When a matter is subject to the

FAA, a party may appeal an order “under the same circumstances that an appeal

from a federal district court’s order or decision would be permitted” by section 16

of the FAA. TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (Vernon Supp. 2013);

see CMH Homes, 340 S.W.3d at 448.

      Section 16 of the FAA provides that an appeal may be taken from an order

“denying a petition under section 4 of this title to order arbitration to proceed.” 9



                                         11
U.S.C. § 16(a)(1)(B). Section 16 further provides that an appeal may not be taken

from an interlocutory order compelling arbitration. 9 U.S.C. § 16(b)(3).

      Asserting that the appeal must be dismissed, KBR points out that the general

purpose of FAA section 16 is to permit the immediate appeal of orders that are

hostile to arbitration. See CMH Homes, 340 S.W.3d at 451 n.7. KBR argues that

the trial court’s order is not hostile to arbitration because it requires the parties to

arbitrate under the MSA. KBR characterizes the order as an order compelling

arbitration. KBR asserts that the denial of Halliburton’s application to arbitrate

was only a “necessary consequence” of the trial court’s grant of KBR’s motion to

compel arbitration under the MSA. KBR points out that section 16 states that an

order compelling arbitration is not immediately appealable.             See 9 U.S.C.

§ 16(b)(3). However, it is the substance and function of the order viewed in the

context of the record that controls our interlocutory jurisdiction, not KBR’s

characterization of the order.     See Schlumberger Technology Corp. v. Baker

Hughes Inc., 355 S.W.3d 791, 800 (Tex. App.—Houston [1st Dist.] 2011, no pet.)

(holding that order granting Baker Hughes’s motion to compel arbitration under

one agreement, but denying Schlumberger’s motion for arbitration under different

agreement, was an appealable interlocutory order).

      In the context of this record, we conclude that the substance and function of

the order in this case supports its characterization as one denying a motion to



                                          12
compel arbitration. See 9 U.S.C. § 16(a)(1)(B). Here, when KBR refused to

arbitrate pursuant to the terms of the TSA, Halliburton petitioned the trial court to

enforce its alleged contractual right to have arbitration proceed pursuant to the

terms of TSA.       Thus, “[t]he trial court considered two related arbitration

agreements, granted a motion seeking to compel arbitration under one of them, and

denied a motion seeking to compel arbitration under the other.” Schlumberger,

355 S.W.3d at 800. Despite ordering arbitration to proceed under the MSA, the

trial court specifically denied Halliburton’s asserted contractual right to arbitrate

under the terms of the TSA. See id. Based on the trial court’s characterization of

Halliburton’s application as one to compel arbitration, its express denial of the

application, and the resulting denial of Halliburton’s asserted contractual right to

arbitrate under the TSA, we conclude that the trial court’s order is an appealable

order under FAA section 16. See id.; see also 9 U.S.C. § 16(a)(1)(B); Tex. La

Fiesta Auto Sales, LLC v. Belk, 349 S.W.3d 872, 878 (Tex. App.—Houston [14th

Dist.] 2011, no pet.); McReynolds v. Elston, 222 S.W.3d 731, 738 (Tex. App.—

Houston [14th Dist.] 2007, no pet.).

C.    Expert Determination versus Arbitration

      KBR has filed a post-submission brief in which it asserts that the process by

which the Accounting Referee resolves Halliburton’s claims under the TSA is not

arbitration, but rather, is an expert determination. For this reason, KBR asserts that



                                         13
Halliburton is not entitled to interlocutory appeal of its order denying its motion to

compel arbitration under the TSA because, if the resolution of the dispute under

the TSA is not arbitration, then Halliburton is not entitled to relief under the FAA,

including an interlocutory appeal. See 9 U.S.C. § 16(a)(1)(B).

      We examine federal case law to determining whether resolution of the

dispute under the TSA constitutes arbitration for purposes of the FAA. See CMH

Homes, 340 S.W.3d at 449 (“[A]n interlocutory appeal in this case is permitted

only if it would be permitted under the same circumstances in federal court under

section 16.”); see also Little v. Tex. Dep’t of Crim. Justice, 148 S.W.3d 374, 382

(Tex. 2004) (examining federal law when interpreting state statute that

incorporates federal statute).

      KBR and Halliburton both rely on Fit Tech, Inc. v. Bally Total Fitness

Holding Corp., 374 F.3d 1 (1st Cir. 2004) as authority for their respective positions

in which they assert that the alternate dispute resolution provision in the TSA is, or

is not, an arbitration provision. We agree that Fit Tech is instructive because it

involved the question of whether an “accountant remedy” provision was an

arbitration provision. See id. at 6.

      In Fit Tech, the court reasoned that whether the accountant remedy is

arbitration “does not depend on nomenclature used in the agreement”; rather it

depends on “how closely the specified procedure resembles classic arbitration and



                                         14
whether treating the procedure as arbitration serves the intuited purposes of [the

legislature].” Id. at 7. The court held that “the common incidents of arbitration of

a contractual dispute” include the following: (1) whether the remedy is “final”; (2)

whether it involves an “independent adjudicator”; (3) whether there are

“substantive standards”; and (4) whether there is “an opportunity for each side to

present its case.” Id.

      The court concluded that “this is arbitration in everything but name.” Id. In

reaching its conclusion, the court remarked that “[s]electing an expert to handle

arbitration is by no means uncommon.” Id. at 6 n.4. Supporting its conclusion, the

court noted that the accountant remedy is “final.” Id. at 7. The court also observed

that the accountant remedy incorporates “common incidents of arbitration of a

contractual dispute.” Id. Specifically, an “independent adjudicator” determines

the remedy, and the agreement contains “substantive standards” for the remedy.

Id. Because the accountant remedy would be decided on the parties’ written

submissions, each side has an opportunity to present its case. Id.

      The Fit Tech court observed that the accountant remedy has an uncommon

feature: it is limited to resolving accounting issues; thus, non-accounting disputes

between the parties could not be resolved by the accounting remedy. However, the

court stated that “arbitrations sometimes do cover only a part of the overall dispute

between the parties.” Id.



                                         15
      In this case, the following provision sets forth the procedure for the

Accounting Referee to resolve certain disputes under the TSA:

      Section 8.11 Resolution of Certain Disputes. Any disagreement
      between the Parties with respect to any matter that is the subject of
      this Agreement, including, without limitation, any disagreement with
      respect to any calculation or other determinations by Halliburton
      hereunder, which is not resolved by mutual agreement of the Parties,
      shall be resolved by a nationally recognized independent accounting
      firm chosen by and mutually acceptable to the Parties hereto (an
      “Accounting Referee”). Such Accounting Referee shall be chosen by
      the Parties within fifteen (15) business days from the date on which
      one Party serves written notice on the other Party requesting the
      appointment of an Accounting Referee, provided that such notice
      specifically describes the calculations to be considered and resolved
      by the Accounting Referee. In the event the Parties cannot agree on
      the selection of an Accounting Referee, then the Accounting Referee
      shall be any office or branch of the public accounting firm of Deloitte
      & Touche.        The Accounting Referee shall resolve any such
      disagreements as specified in the notice within thirty (30) days of
      appointment; provided, however, that no Party shall be required to
      deliver any document or take any other action pursuant to this Section
      8.11 if it determines that such action would result in the waiver of any
      legal privilege or any detriment to its business. Any resolution of an
      issue submitted to the Accounting Referee shall be final and binding
      on the Parties hereto without further recourse. The Parties shall share
      the costs and fees of the Accounting Referee equally.

      As in Fit Tech, we conclude that the procedure outlined in Section 8.11 of

the TSA “is arbitration in everything but name” because it has the “common

incidents” of arbitration. See id. Section 8.11 meets the four-prong Fit Tech test

for determining whether a dispute-resolution process is arbitration. As to the first

three prongs, Section 8.11 provides for a “final and binding” determination by an




                                        16
“independent” accounting firm in accordance with the “substantive standards” set

forth in the TSA. See id. Thus, these prongs are met.

      As to the fourth prong, KBR asserts that Section 8.11 does not provide an

opportunity for each side to present its case because it does not contemplate an

evidentiary hearing or discuss discovery. Halliburton correctly points out that the

accounting remedy in Fit Tech also did not provide for an evidentiary hearing or

discovery.   Nonetheless, the court held that each side was presented an

“opportunity to be heard” because the accountant remedy was based on the parties’

“written submissions.” See id.

      Here, Section 8.11 provides that the Accounting Referee will resolve “[a]ny

disagreement between the Parties with respect to any matter that is the subject of

[the TSA Agreement],” as provided in a party’s “written notice,” which must

“specifically describe[] the calculations to be considered and resolved by the

Accounting Referee.” The provision also contemplates at least some form of

discovery because it states, “[N]o Party shall be required to deliver any document

or take any other action pursuant to this Section 8.11 if it determines that such

action would result in the waiver of any legal privilege or any detriment to its

business.” These requisites provide an opportunity for the parties to present their

respective cases to the Accounting Referee that is comparable to the Fit Tech

provision, which specified that the accounting remedy would be based on the



                                        17
“written submissions” of the parties. See id. In short, the dispute resolution

process outlined in Section 8.11 is not, as KBR asserts, an expert determination;

rather, it is a form of arbitration. See id.; see also Harker’s Distribution, Inc. v.

Reinhart Foodservice, L.L.C., 597 F.Supp.2d 926, 939–41 (N.D. Iowa 2009)

(holding that an “accounting remedy” is arbitration); Hodges v. MedAssets Net

Revenue Systems, No. 1:07–cv–2985–WSD, 2008 WL 476140, at *3 (N.D. Ga.

Feb. 19, 2008) (determining that the resolution clause, providing that “any

disputes” would be submitted to independent accounting firm, was a form of final

and binding arbitration).

D.    Mootness of Appeal

      In post-submission briefing, KBR and Halliburton also addressed whether

this interlocutory appeal is moot because the parties have arbitrated their dispute

since this appeal was filed. KBR asserts that the appeal is moot “because the

district court will consider the same arguments presented in this appeal when it

decides Halliburton’s motion to vacate” the AAA Panel’s award made pursuant to

the MSA.

      We disagree that the trial court’s consideration of the same issues in

determining the motion to vacate as have been raised in this interlocutory appeal

renders this appeal moot. To the contrary, an appeal becomes moot only “when

the court’s action on the merits cannot affect the rights of the parties.” VE Corp. v.



                                         18
Ernst & Young, 860 S.W.2d 83, 84 (Tex. 1993). Here, the disposition of this

appeal has the potential to affect the rights of the parties with respect to the trial

court’s decision on Halliburton’s motion to vacate the arbitration award.

      In support of its vacatur motion, Halliburton asserts, as it does in this appeal,

that the AAA Panel was without jurisdiction to determine issues of arbitrability

with respect to a determination of its own jurisdiction to decide the defensive

issues raised by KBR. As discussed infra, our determination of whether the AAA

Panel has jurisdiction to arbitrate issues of arbitrabilty regarding the parties’ claims

is also dispositive of this interlocutory appeal. For this reason, our decision on the

merits in this appeal has the potential to determine the pending motion to vacate.

See, e.g., Northwest Independent School Dist. v. Carroll Independent School Dist.,

No. 02-10-00105-CV, 2014 WL 2770488, *2 (Tex. App.—Fort Worth June 19,

2014, no pet.) (holding that decision on question of law in earlier, interlocutory

appeal was “law of the case” in subsequent appeal from final judgment). In other

words, our action on the merits in this appeal can affect the rights of the parties in

this case. See VE Corp., 860 S.W.2d at 84. Thus, we hold that this appeal is not

moot. See id.

E.    Conclusion Regarding Jurisdiction

      For the reasons discussed, we hold that we have jurisdiction over this

interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE § 51.016; 9 U.S.C.



                                          19
§ 16(a)(1)(B). We deny KBR’s motion to dismiss and sustain Halliburton’s third

issue.

               Denial of Halliburton’s Motion to Compel Arbitration

         In its first issue, Halliburton asserts that the trial court erred by denying its

application to compel arbitration under the TSA and concomitantly granting

KBR’s cross-motion to compel arbitration under the MSA.                  The first issue

addresses the threshold dispute of who decides issues of arbitrability in this case:

the AAA Panel or the court.           Halliburton points out that the TSA does not

expressly reserve issues of arbitrability for the arbitrator. In other words, the TSA

is silent regarding who determines whether a dispute is arbitrable under the TSA.

For this reason, Halliburton asserts that only the court may decide whether KBR’s

defensive claims should be decided by the Accounting Referee under the TSA or

whether the defensive claims should be decided by the AAA Panel under the MSA.

In contrast, KBR points out that the MSA expressly states that the AAA Panel will

determine issues of arbitrability.

         If KBR is correct that the AAA Panel may determine the arbitrability of the

dispute, then the trial court properly denied Halliburton’s application to compel

arbitration under the TSA and properly granted KBR’s cross-motion to compel

arbitration before the AAA Panel pursuant to the MSA. Thus, we first determine




                                            20
whether the AAA Panel had authority to arbitrate issues of arbitrability involving

the TSA in this case.2

A.    AAA Panel’s Authority to Determine Arbitrability Issue

      Threshold questions of arbitrability are to be resolved by courts unless the

parties clearly and unmistakably agree to submit these issues to arbitration.


2
      Halliburton argues that “arbitrability” is not at issue here because the parties agree
      that the claims should be arbitrated. The controversy concerns who should decide
      whether KBR’s defensive claims are arbitrated under the TSA by the Accounting
      Referee or under the MSA by the arbitrators. Halliburton asserts that a “who
      should decide question” is not a question of arbitrability. We disagree. In
      Howsam v. Dean, the United States Supreme Court defined the phrase “questions
      of arbitrability” to encompass

             the kind of narrow circumstance where contracting parties would
             likely have expected a court to have decided the gateway matter,
             where they are not likely to have thought that they had agreed that an
             arbitrator would do so, and, consequently, where reference of the
             gateway dispute to the court avoids the risk of forcing parties to
             arbitrate a matter that they may well not have agreed to arbitrate.

      Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S. Ct. 588,
      592 (2002). As examples of such “questions of arbitrability,” the Court
      cited cases involving disputes about whether an arbitration contract bound
      parties who did not sign the agreement (First Options of Chicago, Inc. v.
      Kaplan, 514 U.S. 938, 943–44, 115 S. Ct. 1920, 1924 (1995)), whether an
      arbitration agreement survived a corporate merger and bound the resulting
      corporation (John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 547, 84
      S. Ct. 909, 913 (1964)), and whether an arbitration clause, in a concededly
      binding contract, applied to a particular type of controversy (AT&T Techs.,
      Inc. v. Commc’ns Workers, 475 U.S. 643, 649, 106 S. Ct. 1415, 1419
      (1986)). See id. at 84, 123 S. Ct. at 592. In short, issues of contract
      formation with respect to arbitration are typically questions of arbitrability.
      See Granite Rock Co. v. Int’l Brotherhood of Teamsters, 561 U.S. 287, 297,
      130 S. Ct. 2847, 2856 (2010). Here, the issue of whether KBR’s defensive
      claims should be arbitrated under the MSA or under the TSA fits into this
      rubric. It is an issue of arbitrability.

                                            21
Schlumberger, 355 S.W.3d at 802 (citing First Options of Chicago, Inc. v. Kaplan,

514 U.S. 938, 943, 115 S. Ct. 1920, 1923 (1995); In re Weekley Homes, L.P., 180

S.W.3d 127, 130 (Tex. 2005)). Here, the determination of whether the parties

agreed to submit the arbitrability of KBR’s defensive claims to the AAA Panel

depends on an interpretation of the parties’ contracts, which we review de novo.

See id. (citing In re Dillard Dep’t Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006);

J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003)).

       To support its position that the arbitrators are empowered to decide under

which agreement the entire dispute should be arbitrated, KBR points to the

following provisions in the MSA:

                             ARTICLE VII
                   ARBITRATION; DISPUTE RESOLUTION

       7.1 Agreement to Arbitrate. The procedures for discussion,
       negotiation and arbitration set forth in this Article VII shall be
       the final, binding and exclusive means to resolve, and shall apply
       to all disputes, controversies or claims (whether in contract, tort or
       otherwise) that may rise out of or relate to, or arise under or in
       connection with: (a) this Agreement and/or any Ancillary
       Agreement, (b) the transactions contemplated hereby or thereby,
       including all actions taken in furtherance of the transactions
       contemplated hereby or thereby on or prior to the date hereof, or (c)
       for a period of ten years after the IPO Closing Date, the commercial or
       economic relationship of the parties, in each case between or among
       any member of the Halliburton Group and the KBR Group. . . .

....




                                         22
       7.6 Discovery and Certain Other Matters

....
             (b) The arbitrators shall have full power and authority to
             determine issues of arbitrability but shall otherwise be
             limited to interpreting or construing the applicable provisions of
             this Agreement, any Ancillary Agreement or any Prior Transfer
             Agreement, and will have no authority or power to limit,
             expand, alter, amend, modify, revoke or suspend any condition
             or provision of this Agreement, any Ancillary Agreement or
             any Prior Transfer Agreement . . . .

(Emphasis added.) Read in context, the arbitrability provision found in MSA

Article 7.6(b) shows a clear and unmistakable intent by the parties to allow the

AAA Panel to determine whether a dispute is arbitrable under the MSA or under

an ancillary agreement, such as the TSA. Nonetheless, Halliburton argues that the

MSA’s arbitrability provision has no application to the determination of whether

the parties’ entire dispute should be arbitrated under the TSA because the MSA

and TSA “are complete and separate contracts.”

       Halliburton points out that the TSA is entirely silent regarding who

determines issues of arbitrability, which includes the determination of whether the

TSA arbitration clause applies to the resolution of KBR’s defensive issues.

Halliburton relies on the legal precept that, when an arbitration agreement is silent

about who determines issues of arbitrability, the court, rather than the arbitrator,

determines the issue. See In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643

(Tex. 2009). It is on this basis that Halliburton asserts that the court, rather than


                                         23
the AAA Panel, has the authority to determine whether KBR’s defensive issues fall

within the scope of the the TSA’s or MSA’s arbitration provision.

      KBR responds that the TSA and the MSA are not “complete and separate”

agreements. Instead, the two agreements must be construed as a single, integrated

contract. KBR points out that the MSA and TSA each provide that it “shall be

governed and construed in accordance with Delaware law.” Delaware courts have

embraced the principle that agreements executed in close temporal proximity by

the same parties in connection with a single business transaction are to be

harmonized and construed together as a single contract. See, e.g., E.I. du Pont de

Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1115 (Del. 1985) (“Where two

agreements [relating to one transaction] are executed on the same day and are

coordinated to the degree outlined above, in essence, they form one contract and

must be examined as such.”); Martin Marietta Materials, Inc. v. Vulcan Materials

Co., 56 A.3d 1072, 1119 (Del. Ch. 2012) (“[T]he JDA and the NDA are

interrelated agreements that relate to the same course of commercial activity and so

should be read together and harmonized despite the two week time difference

between their effective dates.”) 3; Ashall Homes Ltd. v. ROK Entm’t Grp. Inc., 992


3
      In Martin Marietta Materials, Inc. v. Vulcan Materials Co., 56 A.3d 1072, 1119
      n.192 (Del. Ch. 2012), the court also cited the following authority: RESTATEMENT
      (SECOND) OF CONTRACTS § 202(2) (1981) (“A writing is interpreted as a whole,
      and all writings that are part of the same transaction are interpreted together.”);
      17A C.J.S. CONTRACTS § 315, at 337 (1999) (“In the absence of anything to

                                          24
A.2d 1239, 1248 (Del. Ch. 2010) (reading related contemporaneous agreements

together because they effectuated separate steps of single integrated transaction);

Baypo Ltd. P’ship v. Tech. JV, LP, 940 A.2d 20, 27 (Del. Ch. 2007) (recognizing

that agreements, contemporaneously executed as part of one business transaction,

must be read together as one document); Karish v. SI Int’l, Inc., No. Civ. A. 19501,

2002 WL 1402303, at *3 (Del. Ch. June 24, 2002) (same).

      Here, we agree with KBR that the MSA and the TSA must be harmonized

and construed together as one contract. The agreements, between the same parties,

signed five days apart, are facets of the same transaction entered into for the

unitary purpose of effectuating the corporate separation of KBR from Halliburton.

      Each agreement provides an integral component to the transaction. The

MSA is the broader umbrella agreement, providing the structure for the corporate

separation, while the TSA sets out the more technical principles by which KBR

and Halliburton will allocate and share tax liabilities in the context of the corporate

separation.   Although the parties used the MSA and a number of ancillary

agreements to govern the various aspects of the corporate spinoff, the MSA and the


      indicate a contrary intention, writings executed at the same time and relating to the
      same transaction are construed together as a single contract, as though they were
      as much one in form as they are in substance, in order to determine the intent,
      rights, and interests of the parties.”); 11 WILLISTON ON CONTRACTS § 30:26 (4th
      ed. 1999) (“[I]nstruments executed at the same time, by the same contracting
      parties, for the same purpose, and in the course of the same transaction will be
      considered and construed together as one contract or instrument, even though they
      do not in terms refer to each other.”).

                                           25
TSA were each dependent on the entire transaction.            In other words, the

agreements were vital and interrelated parts of one deal. Indeed, each agreement

anticipates and contemplates the execution of the other. The MSA recites, “[T]he

parties intend to set forth in this Agreement, including the Schedules hereto and

the Ancillary Agreements contemplated hereby, the principal arrangements

between and among them and the members of their respective Groups regarding

the separation of the KBR Group from the Halliburton Group, the IPO and certain

future transactions.” (Emphasis added.) The MSA specifically defines the TSA as

an ancillary agreement. Thus, the MSA and TSA should be read together as one

integrated agreement.

      Halliburton asserts that, even when the two agreements are read together, a

conflict nonetheless exists between the arbitration provisions of the TSA and of the

MSA. In support of this position, Halliburton cites the following TSA provision,

which it asserts precludes the application of the MSA’s arbitrability provision to

arbitration sought under the TSA’s arbitration clause:

      Section 8.16 Entire Agreement; Termination of Prior Agreements.

      (a) This Agreement contains the entire agreement between the Parties
      with respect to the subject matter hereof and supersedes all other
      agreements, whether or not written, in respect of any Tax . . . .

      (b) Without limiting the foregoing, the Parties acknowledge and agree
      that in the event of any conflict or inconsistency between the
      provisions of this Agreement and the provisions of the Master
      Separation Agreement or the Master Separation and Distribution


                                        26
      Agreement (as applicable), the provisions of this Agreement shall take
      precedence and to such extent shall be deemed to supersede such
      conflicting provisions under the Master Separation Agreement or the
      Master Separation and Distribution Agreement . . . .

Halliburton also relies on the following provision of the MSA:

      9.2 Conflicting Agreements; Entire Agreement
       . . . Except as otherwise expressly provide herein, in the event of a
      conflict between this Agreement and any Prior Transfer Agreement,
      any Ancillary Agreement or any agreement set forth on Schedule 9.2
      hereto, the provisions of such Prior Transfer Agreement, such
      Ancillary Agreement or such agreement set forth on Schedule 9.2
      hereto, as applicable, shall prevail over the provisions hereof.

      The above provisions specify that the TSA supersedes the MSA with respect

to the subject matter of the TSA and, concomitantly, to the extent that the

provisions of the two agreements conflict or present inconsistencies. Halliburton

avers that a conflict exists between the TSA’s and the MSA’s arbitration

provisions. Halliburton intimates that the TSA’s complete silence regarding the

issue of arbitrability creates a conflict with the MSA’s express provision, which

mandates that issues of arbitrability be decided by the AAA Panel.

      We disagree with Halliburton’s reading. The TSA’s silence on the subject

of arbitrabilty does not present a conflict with the MSA when, as discussed, the

two agreements must be read as one, integrated contract. To the contrary, when

the agreements are read as one contract, entered into to effectuate a singular




                                        27
transaction, the TSA’s silence regarding arbitrability reinforces the application of

the MSA’s arbitrability clause to arbitration sought under the TSA.

      In contrast to the TSA’s silence, the MSA’s arbitration provision expressly

addresses arbitrability. It states, “The procedures for . . . arbitration set forth in this

Article [] shall be the final, binding and exclusive means to resolve, and shall apply

to all disputes, controversies or claims . . . that may rise out of or relate to, or arise

under or in connection with . . . any Ancillary Agreement,” including the TSA.

       Halliburton correctly points out that the parties specifically reserved for

arbitration under the TSA “[a]ny disagreement between the Parties with respect to

any matter that is the subject of [the TSA].” This corresponds to TSA section

8.16(a), which provides, “This Agreement contains the entire agreement between

the Parties with respect to the subject matter hereof . . . .”

      In making its argument that the MSA and TSA arbitration provisions

conflict, Halliburton fails to account for the limiting “subject matter” language

contained in the TSA; that is, it fails to account for the fact that the TSA

supersedes the MSA only as to the subject matter of the TSA. To aid in the

determination of what constitutes the “subject matter” of the TSA, we turn to the

Tax Sharing Agreement’s opening provisions, which state: “[T]he Parties wish to

set forth the general principles under which they will allocate and share various

Taxes . . . and related liabilities” and “to provide for the allocation between the



                                            28
Halliburton Group and the KBR Group of all responsibilities, liabilities and

benefits relating to all Taxes paid or payable by either group” for the relevant

taxable periods. In short, the subject matter of the agreement is the allocation and

sharing of taxes and tax liabilities between parties incident to the corporate spin-

off.

       The MSA’s arbitrability provision, specifying that the AAA Panel will

decide issues of arbitrability, is neither “the subject matter” of the TSA nor does it

conflict with the TSA’s arbitration provision, which is silent regarding issues of

arbitrability.   Admittedly, the provisions cited by Halliburton require that no

express provision of the TSA be overridden by that of the MSA; however, the cited

provisions do not reflect any intent to disrupt or to negate the effects of the subject

matter expressly included in the MSA but not addressed in the TSA. Such subject

matter addressed in the MSA includes who decides issues of arbitrability.

Specifically, the parties expressly agreed in the MSA that “[t]he arbitrators shall

have full power and authority to determine issues of arbitrability . . . .”

       Reading the TSA and MSA as one, integrated agreement, we conclude that

the AAA Panel was the proper tribunal to determine whether KBR’s defensive

claims should be arbitrated under the TSA or under the MSA. No conflict exists

between the TSA and MSA with respect to the issue of arbitrability, which is not

addressed in the TSA. We make no determination whether KBR’s defensive



                                           29
claims fall within the scope of the TSA arbitration provision or within the MSA

arbitration provision. That determination is one of arbitrability reserved for the

arbitrators in this case.

       We hold that the trial court could have properly determined that the AAA

Panel was authorized, under the MSA arbitrability provision, to determine its own

jurisdiction to arbitrate KBR’s defensive claims. Thus, we further hold that the

trial court did not err in denying Halliburton’s application to compel arbitration.

       We overrule Halliburton’s first issue.4

                                      Conclusion

       We deny KBR’s motion to dismiss the appeal. We affirm the trial court’s

order denying Halliburton’s application to compel arbitration.




                                                 Laura Carter Higley
                                                 Justice

Panel consists of Justices Jennings, Keyes, and Higley.




4
       Because Halliburton’s first issue is dispositive of this interlocutory appeal, we do
       not reach Halliburton’s second issue, which challenges other possible grounds on
       which to uphold the trial court’s order.

                                            30
