     Case: 15-20375   Document: 00513582894     Page: 1   Date Filed: 07/07/2016




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT    United States Court of Appeals
                                                   Fifth Circuit

                                                                       FILED
                                                                      July 7, 2016
                                 No. 15-20375
                                                                     Lyle W. Cayce
                                                                          Clerk
RAINIER DSC 1, L.L.C.; RAINIER DSC 2, L.L.C.; RAINIER DSC 3, L.L.C.;
RAINIER DSC 4, L.L.C.; RAINIER DSC 5, L.L.C.; RAINIER DSC 6, L.L.C.;
RAINIER DSC 7, L.L.C.; RAINIER DSC 8, L.L.C.; RAINIER DSC 9, L.L.C.;
RAINIER DSC 11, L.L.C.; RAINIER DSC 13, L.L.C.; RAINIER DSC 14,
L.L.C.; RAINIER DSC 15, L.L.C.; RAINIER DSC 16, L.L.C.; RAINIER DSC
18, L.L.C.,

             Plaintiffs – Appellants,

v.

RAINIER CAPITAL MANAGEMENT, L.P.; RAINIER DSC ACQUISITION,
L.L.C.; RAINIER PROPERTIES, L.P.; RAINIER PROPERTIES G.P., L.L.C.;
FOUNDATION SURGERY AFFILIATE; FOUNDATION SURGERY
AFFILIATE OF SOUTHWEST HOUSTON, L.L.P.; FOUNDATION
SURGERY AFFILIATE OF SOUTHWEST HOUSTON, L.L.C.; WAYNE
ALANI, M.D.; EDDIE MATSE, M.D.; CHARLOTTE ALEXANDER, M.D.;
THOMAS PARR, M.D.; CARL HICKS, M.D.; VINCENT PHAN, M.D.;
GREGORY HOOVER, M.D.; TIMOTHY SITTER, M.D.; LIN JONES, M.D.;
EDWIN TAEGEL, M.D.; STAN JONES, M.D.; RAY VALDEZ, M.D.;
EUGENE LOU, M.D.; JAMES ALBRIGHT, M.D.; MARVIN LERNER, M.D.;
EUGENE ALFORD, M.D.; JAMES MARTIN, M.D.; PAUL BRINDLEY, M.D.;
J. CARY MOOREHEAD, M.D.; GARY CARD, M.D.; BRADFORD PATT,
M.D.; NEWTON DUNCAN, M.D.; STANFORD SHOSS, M.D.; JOSEPH
EDMONDS, M.D.; JOHN YOO, M.D.; JOHN JONES, M.D.; MARVIN
CHANG, M.D.; JAMES LAI, M.D.; ROBERT SICKLER, M.D.,

             Defendants – Appellees.
     Case: 15-20375       Document: 00513582894         Page: 2    Date Filed: 07/07/2016



                                      No. 15-20375


                   Appeal from the United States District Court
                        for the Southern District of Texas


Before KING, JOLLY, and ELROD, Circuit Judges.
PER CURIAM:
       In one of several appeals arising from an ill-fated real estate investment,
Plaintiffs appeal the district court’s judgments in favor of the non-arbitrating
defendants. 1 Because Plaintiffs have not shown that the district court erred
in declining to stay the litigation pending the arbitration of some parties, and
the district court properly granted summary judgment, we AFFIRM.
                                             I.
       The real estate transactions underlying this appeal have already been
described in greater depth in Rainier DSC 1, L.L.C. v. Rainier Capital
Management, L.P., 546 F. App’x 491, 492–93 (5th Cir. 2013) (“Rainier I”). In
brief, Foundation Surgery Affiliate of Southwest Houston, LLC (“Southwest”),
the owner of a surgical and imaging facility in Houston, entered into a
purchase and sale agreement in 2008 with Rainier Capital Acquisitions, LP,
which in turn assigned its interest to Rainier DSC Acquisitions, LLC (“Rainier
DSC”). Rainier DSC marketed tenant-in-common interests in the property
through a Private Placement Memorandum (the “PPM”), which described
Southwest as the seller and sole tenant and explained that Rainier Properties,
LP would manage the property and the twenty-nine physician members of
Southwest would provide medical services there.
       Rainier DSC purchased the property and sold fractional tenant-in-
common interests to Plaintiffs (the “Investors”), who each signed an agreement



       1In Appeal No. 15-20383, which is also before this panel, Plaintiffs separately appeal
the judgment confirming the arbitration award in favor of the arbitrating defendants.
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                                      No. 15-20375
with Rainier DSC that included an arbitration agreement. Two years later, in
late 2010, Southwest stopped making full rent payments, and thereafter
stopped paying rent altogether and vacated the property.
       In May 2012, the Investors sued Southwest, several Rainier entities, and
the twenty-nine individual physicians, among others. The original petition,
filed in state court, alleged various state law claims including fraud and breach
of contract, in addition to violations of federal securities law. After the case
was removed, the Rainier defendants moved to compel arbitration. At the
pretrial status conference, before the Investors had responded to the motion to
compel arbitration, the trial court dismissed the claims against Foundation
Surgery Affiliate of Southwest Houston, LLP, which no longer existed, and
against Foundation Surgery Affiliate, LLC, which the Investors had sued
because they thought it might be related to Southwest.
       The Investors subsequently filed their response to the motion to compel
arbitration, in which they “agree[d] to arbitrate this matter with the Rainier
Defendants, upon the express condition that all Rainier Defendants stipulate
to participate and be treated as one.” The Investors’ response also stated that
9 U.S.C. § 2 requires the district court to stay its proceedings when an issue
therein is referable to arbitration.
       In August 2012, following the filing of an amended complaint and
numerous motions, the district court held a second status conference. The
district court then ordered the Investors and the principal Rainier parties to
arbitration. 2 The district court also dismissed with prejudice the Investors’
claims against Foundation Surgery Affiliate, LLC and Rainier Properties GP,
LLC, denied the Investors’ motion to reconsider its earlier dismissals, and


       2The arbitrator issued his award in favor of Rainier in March 2015. The district court
severed the arbitrated claims and affirmed the award. That judgment is the subject of Appeal
No. 15-20383.
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                                   No. 15-20375
converted the physicians’ motions to dismiss into motions for summary
judgment.
      The Investors appealed, arguing that the district court’s orders after the
motion to compel arbitration should be vacated because the district court erred
by not staying the proceedings. In November 2013, we dismissed the appeal
for lack of jurisdiction because the district court had not entered an order
refusing a stay. Rainier I, 546 F. App’x 491.
      Meanwhile, in August 2013, the district court issued an opinion granting
summary judgment in favor of the physicians and five “Foundation Surgery
Affiliate” entities (collectively, “FSA”).
      The Investors appeal the adverse judgments. The Investors argue that:
(1) all orders issued by the district court after the motion to compel arbitration
should be vacated because the district court was required to stay the case; (2)
the district court erred in granting summary judgment in favor of FSA and the
physicians; and (3) the case should be reassigned on remand.
                                         II.
      As an initial matter, Rainier challenges our jurisdiction, arguing that
“[t]here has been no denial of a stay or appealable order in this case, and as
this Court has already determined, this Court therefore lacks jurisdiction to
consider the Investors’ appeal.” This argument is meritless. In Rainier I, we
held that we lacked interlocutory jurisdiction because no order denying a stay
had been entered, 546 F. App’x at 492, but the Investors now appeal from
multiple final judgments, and our jurisdiction is therefore not in doubt. See id.
at 495 n.8 (“We note that nothing precludes the Plaintiffs from appealing the
district court’s dismissal of FSA, Rainier Capital Manager, LLC, and Rainier
GP after a final judgment is entered.”).




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                                      No. 15-20375
                                            III.
                                             A.
       The Investors first argue that once presented with the motion to compel
arbitration, the district court was required to restrict its judicial scrutiny to
the issue of arbitrability, and that the district court was required to stay the
case once it determined that an issue was referable to arbitration.
       We review a district court’s denial of a motion to stay litigation pending
arbitration de novo, using the same standard as the district court. 3 Waste
Mgmt., Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339,
341 (5th Cir. 2004). Section 3 of the FAA provides:
       If any suit or proceeding be brought in any of the courts of the
       United States upon any issue referable to arbitration under an
       agreement in writing for such arbitration, the court in which such
       suit is pending, upon being satisfied that the issue involved in such
       suit or proceeding is referable to arbitration under such an
       agreement, shall on application of one of the parties stay the trial
       of the action until such arbitration has been had in accordance
       with the terms of the agreement, providing the applicant for the
       stay is not in default in proceeding with such arbitration.
9 U.S.C. § 3. “In general, Section 3 only applies to parties to an agreement
containing an arbitration clause.” Hill v. G E Power Sys., Inc., 282 F.3d 343,
346 (5th Cir. 2002). We have applied it to non-signatories only where: (1) the
arbitrated and litigated disputes involve the same operative facts; (2) the
claims asserted in the arbitration and litigation are “inherently inseparable”;
and (3) the litigation has a “critical impact” on the arbitration. Waste Mgmt.,
372 F.3d at 343; see also Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,



       3 The parties dispute whether the Investors ever applied for a stay. We assume
without deciding that the Investors’ statement that the FAA required a stay, combined with
their request for “a stay of all proceedings until the Arbitration is complete,” sufficiently
constitutes an “application” for a stay under 9 U.S.C. § 3 despite the absence of a separate
motion.
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                                   No. 15-20375
460 U.S. 1, 20 n.23 (1983) (“In some cases, . . . it may be advisable to stay
litigation among the non-arbitrating parties pending the outcome of the
arbitration. That decision is one left to the district court . . . as a matter of its
discretion to control its docket.”).
      It is undisputed that the only signatories to arbitration agreements with
the Investors were some of the Rainier parties, and they proceeded to
arbitration. A stay of the other parties’ litigation was therefore subject to the
district court’s discretion and was only warranted if: (1) the arbitrated and
litigated disputes involved the same operative facts; (2) the claims asserted in
the arbitration and litigation were “inherently inseparable”; and (3) the
litigation had a “critical impact” on the arbitration. Waste Mgmt., 372 F.3d at
343. The district court concluded that a stay “was not required because the
claims are wholly distinct,” explaining that although the claims against
Southwest and the other defendants arose out of the same transaction, “they
relate to different parts of it. Those against the promoters are securities claims
premised on fraud, while those against the tenant were for breach of the lease.
These are not inherently inseparable.”
      The Investors in their initial brief conclusorily and incorrectly argued
that “the district court must stay its own proceedings when any issues therein
are referable to Arbitration.” The brief utterly failed to address the distinction
between signatories and non-signatories, to discuss the three Waste
Management factors, or to argue that the district court had abused its
discretion. In their reply brief, the Investors argue that § 3 applies to non-
signatories and that the Waste Management factors are satisfied, but this
comes too late and is not properly before the court. See, e.g., Jones v. Cain, 600
F.3d 527, 541 (5th Cir. 2010) (“Arguments raised for the first time in a reply
brief are generally waived.”).          Accordingly, the Investors have not
demonstrated that the district court erred in declining to stay the litigation.
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                                   No. 15-20375
                                         B.
      The Investors also argue that the district court erred in granting
summary judgment in favor of FSA and the physicians because genuine issues
of material fact exist as to the Investors’ partnership by estoppel claims. We
review a district court’s summary judgment de novo, applying the same
standard as did the district court. United States v. Lawrence, 276 F.3d 193,
195 (5th Cir. 2001). Summary judgment is proper when, viewing the facts in
the light most favorable to the non-movant, no issue of material fact exists and
the moving party is entitled to judgment as a matter of law. Id.
      The Investors’ claims against FSA and the physicians are premised on
statements in the PPM that described FSA and the physicians as “partners” of
Southwest. The Investors seek to hold FSA and the physicians individually
and jointly liable for the lease payments owed by Southwest, arguing that
these statements created a partnership by estoppel.
       “Partnership by estoppel consists of two elements: (1) a representation
that the one sought to be bound is a partner; and (2) the one to whom the
representation is made must rely on the representation.”              CCR, Inc. v.
Chamberlain, No. 13-97-312-CV, 2000 WL 35721225, at *10 (Tex. App.—
Corpus Christi, June 1, 2000, pet. denied) (not designated for publication).
“The representation may be made . . . by others, provided the alleged partner
knowingly allows others to make the representation and fails to correct them.”
Id. (emphasis added); see also Storms v. Tuck, 579 S.W.2d 447, 452 (Tex. 1979)
(“The principle of estoppel by silence arises where a person is under a duty to
another to speak, but refrains from doing so and thereby leads the other to act
in reliance on a mistaken understanding of the facts. The duty to speak does
not arise until the silent party is himself aware of the facts.”) (citation omitted).
      The district court correctly granted summary judgment. The Investors’
partnership by estoppel argument relies entirely on statements made by
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                                    No. 15-20375
parties other than the physicians and FSA, most significantly in the PPM.
Even assuming, arguendo, that the statements could be reasonably construed
as a representation of partnership, which is highly doubtful, there is no
evidence that the physicians and FSA were aware of or consented to these
statements. The Investors argue that they have raised a fact issue because it
is “inconceivable” that the physicians and FSA had no knowledge of the
representations that were being made about them in light of the fact that they
received a share of the sales proceeds in 2008. This is pure conjecture and not
evidence to raise a genuine issue of material fact. Accordingly, we affirm the
summary judgment in favor of FSA and the physicians. 4
                                          IV.
      Because the Investors have not established that the district court erred
in not staying the litigation of the non-arbitrating parties during the
arbitration or in granting summary judgment in favor of FSA and the
physicians, we AFFIRM.




      4 In light of our affirmance, we do not reach the Investors’ argument that the case
should be reassigned on remand.
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