

Opinion issued January
26, 2012.

In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00530-CV
———————————
 
Cleveland
Construction, Inc.,
Appellant
V.
Levco
Construction, Inc.,
Appellee

 

 
On Appeal from the 270th District
Court
Harris County, Texas

Trial
Court Case No. 1123308
 

 
 
O P I N I O N
          Appellant, Cleveland Construction, Inc. (“CCI”), appeals
the trial court’s denial of its motion to compel arbitration.  In two issues, CCI argues that the trial
court erroneously denied its motion to compel arbitration because (1) the
Federal Arbitration Act (“FAA”) applies, the arbitration provision is valid,
and the claim is within the scope of the arbitration provision, and (2) the law
favors arbitration and the FAA preempts conflicting state law.
          We
reverse and remand.
                                                                                                                                                                
Background
Whole Foods Market, Inc. (“Whole Foods”) hired
CCI to serve as general contractor to construct a store in Houston, Texas (“the
Project”).  The contract between Whole
Foods and CCI (“the Whole Foods Contract”) allowed CCI to hire subcontractors.
CCI contracted with appellee, Levco Construction, Inc. (“Levco”),
as a subcontractor, to perform certain tasks related to the construction,
including excavating, grading, digging for laying utilities, paving, and
preparing the foundation (“the Construction Contract”).  The Construction Contract contained the
following arbitration provision:
Article 30.   DISPUTE RESOLUTION
 
. . . .
30.3   Any controversy
or claims of CCI against Subcontractor [Levco] or
Subcontractor against CCI shall, at the option of CCI, be resolved by
arbitration pursuant to the Construction Industry Arbitration Rules of the
American Arbitration Association in effect on the date on which the demand for
arbitration is made.  Any such
arbitration shall be held in Lake County, Ohio. 
Any award arising out of such arbitration may be entered by any court
having jurisdiction. . . . 
 
Levco also obtained a
surety bond (“the Bond”) from Intervener, Insurors
Indemnity Company (“the Surety”).  Both
the Whole Foods Contract and the Bond issued by the Surety provided that
disputes were to be resolved in a court in the county in which the Project was
built, Harris County, Texas. 
Specifically, the Bond provided, in
part:
§
4 When the Owner [CCI] has satisfied the conditions of Section 3 [requiring
notice of Contractor Default and other conditions precedent triggering the
Surety’s obligations under the Bond], the Surety shall promptly and at the
Surety’s expense take one of the following actions:
 
§ 4.1 Arrange for the Contractor [Levco], with
consent of the Owner, to perform and complete the Construction Contract; or
 
§ 4.2 Undertake to perform and complete the Construction Contract itself,
through its agents or through independent contractors; or
 
§ 4.3 Obtain bids or negotiated proposals from qualified contractors
acceptable to the Owner for a contract for performance and completion of the
Construction Contract . . . and to pay to the Owner the amount of damages as
described in Section 6 in excess of the Balance of the Contract Price incurred
by the Owner resulting from the Contractor’s default; or
 
§ 4.4 Waive its right to perform and complete,
arrange for completion, or obtain a new contractor with reasonable promptness
under the circumstance. . . .
 
.
. . .
 
§ 6 After the Owner has terminated the Contractor’s right to complete the
Construction Contract, and if the Surety elects to act under Section 4.1, 4.2,
or 4.3 above, then the responsibilities of the Surety to the Owner shall not be
greater than those of the Contractor under the Construction Contract, and the
responsibilities of the Owner to the Surety shall not be greater than those of
the Owner under the Construction Contract. . . .
 
.
. . .
§ 9 Any proceeding, legal or equitable, under this Bond may be instituted
in any court of competent jurisdiction in the location in which the work or
part of the work is located and shall be instituted within two years after
Contractor Default or within two years after the Contractor ceased working or
within two years after the Surety refuses or fails to perform its obligations
under this Bond, whichever occurs first. . . .
 
After Levco had partially performed under the
Construction Contract, disputes arose between CCI and Levco
concerning the Project, and on, January 17, 2011, CCI sent a letter to Levco informing it that “CCI elects to terminate its Agreement
with Levco Construction.”  The work was subsequently completed by Levco under the provisions of the Bond.
          On
April 14, 2011, Levco filed suit against CCI and
Whole Foods in Texas state court. 
According to its pleadings, Levco discovered
upon beginning the work that CCI and Whole Foods had failed to obtain all
necessary construction permits and that the building design and plans were not
complete, so Levco was required to make numerous
changes.  Levco
made multiple requests to change the scope of the contracted-for work to
include the new work, including requests for additional time and
compensation.  Levco
alleges that CCI and Whole Foods refused to consent to the changes Levco sought.  Levco also alleges that CCI maintained unreasonable
deadlines, interfered with Levco’s work under the Construction
Contract, failed to pay Levco for work it had
completed from July 2010 to April 2011, and wrongfully terminated the contract in
January 2011.  Thus, Levco
was unable to pay its subcontractors, resulting in liens being filed against
the Project.  
Levco alleges
that CCI eventually reinstated Levco as a
subcontractor pursuant to section 4.1 of the Bond, but CCI “continued to refuse
to reinstate the [Construction Contract] itself.”  Levco claims that
because CCI refused to reinstate the Construction Contract between them it was
left in the position of “working essentially as a subcontractor for the [S]urety” under the terms of the Bond. Specifically, Levco alleges that, in its role as the issuer of the Bond,
the Surety mandated that Levco be allowed to continue
to work on the Project, as provided in section 4.1 of the Bond, and made an
agreement with CCI regarding payment of Levco and Levco’s subcontractors, as provided in section 6 of the
Bond.  Levco
alleges that the Surety and CCI agreed that the Surety would pay Levco’s subcontractors money owed them in exchange for CCI
releasing the corresponding payments it owed Levco
once the subcontractors released their liens on the Project.  Levco states that
the Surety complied with this agreement and paid Levco’s
subcontractors, but that CCI did not comply and
release the money it owed Levco or Levco’s subcontractors. 
Nor did CCI reinstate the Construction Contract it had terminated.  Levco contends that
CCI and Whole Foods are “now improperly withholding more than $500,000 in funds
owed to Levco.”
Levco claims
that CCI breached its agreement with Levco; that CCI
and Whole Foods breached their duties to perform with care in accordance with
the terms of the Construction Contract (as provided in both the Construction
Contract and section 6 of the Bond) and the Whole Foods Contract and to
cooperate in performance of the contracts; that CCI and Whole Foods owe it
damages under theories of quantum meruit, unjust
enrichment, and promissory estoppel; that CCI and Whole Foods violated Property
Code section 28.001; and that CCI misapplied trust funds received from Whole
Foods for payment of obligations under the Construction Contract and the
Bond.  
In addition, Levco sought a declaratory
judgment that the arbitration clause in the Construction Contract is invalid
and does not require arbitration because it is illusory, or, alternatively,
that the provision in the Construction Contract requiring arbitration in Ohio
is void because it contravenes Texas law in that “it purports to require a
subcontractor to a contract involving the improvement or real property in Texas
to submit to arbitration in a state other than Texas.”  Finally, Levco
sought attorney’s fees pursuant to Civil Practice and Remedies Code section
37.009 and chapter 38 and Property Code section 28.005, and it sought a
temporary restraining order or temporary injunction prohibiting CCI and Whole
Foods from releasing any funds related to the Project.
On April 14, the trial court granted Levco’s
temporary restraining order until April 29, 2011, and it set a hearing on Levco’s request for a temporary injunction for April 29.
CCI filed an arbitration demand with the American Arbitration
Association, alleging, under “nature of the dispute,”
Respondent [Levco] is a subcontractor to
Claimant [CCI] on the construction of a Whole Foods Market located in Houston,
Texas (“Project”).  Levco
breached the subcontract and was terminated by CCI.  Levco was bonded on
the Project and the surety, Insurer’s Indemnity Company utilized its option to
have Levco complete the work on the Project; however,
further breaches have occurred [and] CCI has been damaged by Levco’s breach in [an] amount not yet fully determined but
in [an] amount that CCI does not anticipate will exceed $150,000.  
 
CCI requested that Lake County, Ohio be the arbitration
locale.
On April 26, 2011, Levco filed an emergency
motion to stay the arbitration proceeding.
On May 11, 2011, CCI answered Levco’s suit with
a general denial and asserted the affirmative defenses that a valid contract
precluded Levco’s quantum meruit
claims, that CCI had paid Levco under the Construction
Contract, that Levco failed to meet all conditions
precedent to payment under the Construction Contract, that CCI was entitled to
the defenses of “excuse” and “justification,” and that Levco
lacked standing to assert its claims against CCI, had failed to state a claim
for which relief can be granted, and was the first to breach the Construction Contract.
CCI alleged that Levco defaulted under the Construction
Contract within a month after beginning the Project and that CCI issued notices
of default on multiple dates following. 
CCI attached several of these notices to its answer.  It also alleged that “Levco
was upside down on the Project from the beginning and failed to pay its vendors
and suppliers in a timely manner” and that “Levco’s
financial mismanagement caused numerous, unnecessary liens on the
Project.”  CCI also attached several
notices from “lower tier” subcontractors claiming they had not been paid by Levco.  This led CCI
to terminate Levco from the Project in January 2011
and to notify the Surety of Levco’s breach.  
CCI alleged that the Surety elected its option under the terms of the
Bond to arrange “for Levco to perform and complete
its obligations under the Contract.”  CCI
argues that “[b]y selecting this option, [the Surety] undertook Levco’s obligations under the Contract and CCI was to
reciprocally perform its obligations directly to [the Surety] . . . and, as
required by the Performance Bond, any money currently owed by CCI must be paid
to [the Surety], not Levco.”  CCI also alleged that it agreed to 26 of the
31 change orders submitted by Levco and that it
offered to pay the Surety the outstanding pay applications if Levco would execute a release, which Levco
refused to do.
CCI also responded to Levco’s application for a
temporary injunction and moved to compel arbitration and to stay the trial
court proceedings, or alternatively, to dismiss the trial court proceedings.
In its motion to compel arbitration, also filed on May 11, CCI argued
that the arbitration clause between it and Levco was
valid, that it was not illusory or in contravention of Texas state law, and
that the dispute at issue fell within the scope of the agreement.  CCI also argued that the FAA preempts Levco’s claim based on Business and Commerce Code section
272.001.  Levco
responded that the arbitration clause was invalid and illusory and that it
failed to survive termination of the Construction Contract.
On May 26, 2011, the Surety filed a plea in intervention, arguing that
“mandatory jurisdiction and venue with respect to the claims and causes of
action asserted by Intervenor against [CCI] herein
properly lie in this Court pursuant to the express provisions of § 9” of the
Bond.  It likewise alleged that, after
CCI terminated the Contract between itself and Levco,
CCI called upon it, as Surety, to complete Levco’s
obligations pursuant to the Bond.  The
Surety alleged that it elected to utilize Levco to
continue performance of the subcontract work with the Surety itself advancing Levco’s payroll and certain of its overhead expenses, as
provided in section 4.1 of the Bond.  In
exchange, CCI agreed to pay to the Surety “all remaining monies due and owing
or to become due and owing under the Levco
Subcontract Agreement,” in accordance with section 6 of the Bond. 
The Surety alleged that CCI subsequently breached this agreement by
failing to make those payments.  It
alleged that it had expended $983,790.49 and that “under the express provisions
of Levco’s General Indemnity Agreement and pursuant
to [its] common law rights to indemnity and equitable subrogation, [the Surety]
has a superior lien upon and is entitled to payment directly from CCI on any
and all contract sums or compensatory damages adjudged by this Court to be due
and owing . . . to Levco and/or [the Surety].”
On May 27, 2011, the trial court granted Levco’s
emergency motion to stay the arbitration proceeding initiated by CCI.  This appeal followed.
                                                                                                                                                                         
Analysis
CCI argues that the trial court erred in denying its
motion to compel arbitration because the FAA applies, the arbitration provision
in the Construction Contract is valid, and the claims in the case are within
the scope of the arbitration provision. 
It also argues that the FAA preempts any conflicting state law.  Levco, however,
argues that the arbitration provision in the Construction Contract is illusory
and, therefore, unenforceable as a matter of law; that the Construction
Contract was terminated and the arbitration provision does not contain a
survival clause that would allow it to survive termination of the contract; and
that Business and Commerce Code section 272.001 is not preempted by the FAA
because it restricts venue, rather than restricting a party’s right to arbitrate.
A.              
Jurisdiction
We first
address our jurisdiction to review the trial court’s order staying the
arbitration proceedings.  Civil Practice
and Remedies Code section 51.016 provides:
In a matter subject to the Federal Arbitration Act (9
U.S.C. Section 1 et seq.), a person may take an appeal or writ of error to the
court of appeals from the judgment or interlocutory order of a district court,
county court at law, or county court under the same circumstances that an
appeal from a federal district court’s order or decision would be permitted by
9 U.S.C. Section 16.
 
Tex. Civ. Prac. &
Rem. Code Ann. § 51.016
(Vernon Supp. 2011).  Section 16 of the
FAA, “Appeals,” provides:
(a)   An appeal may be taken from—
 
(1)   an order—
 
(A)  refusing a stay of any action under section 3 of this
title [stay of trial proceedings where issue therein is referable
to arbitration],
 
(B)   denying a petition under section 4 of this title to
order arbitration to proceed, [or]
 
(C)   denying an application under section 206 of this title to
compel arbitration. . . .
 
(2) an
interlocutory order granting, continuing, or modifying an injunction against an
arbitration that is subject to this title; or
 
(3) a final decision with respect to an arbitration that is
subject to this title.
 
(b)  Except as otherwise provided in section 1292(b) of
title 28, an appeal may not be taken from an interlocutory order—
 
(1)   granting a stay of any action under section 3 of this
title;
 
(2)   directing arbitration to proceed under section 4 of
this title;
 
(3)   compelling arbitration under section 206 of this
title; or 
 
(4)   refusing to enjoin an arbitration that is subject to this
title.
 
9 U.S.C. § 16 (2006).
Thus, an interlocutory appeal is permitted in this case only if it would
be permitted under the same circumstances under section 16 of the FAA in
federal court.  See CMH Homes v. Perez, 340 S.W.3d 444,
448–49 (Tex. 2011).  The United
States Supreme Court has held that the FAA “generally permits immediate appeal
of orders hostile to arbitration.”  Green Tree Fin. Corp.—Ala. v.
Randolph, 531 U.S. 79, 86, 121 S. Ct. 513, 519 (2000).  Several circuit courts have held that the FAA
permits interlocutory review of an order staying arbitration.  Arciniaga v. Gen.
Motors Corp., 460 F.3d 231, 234 (2nd Cir. 2006) (holding FAA subsection
16(a)(2) permits interlocutory review of stay of arbitration); KKW Enters., Inc. v. Gloria Jean’s Gourmet
Coffees Franchising Corp., 184 F.3d 42, 47 (1st Cir. 1999) (holding that
order staying pending arbitration was immediately appealable as injunction
under both 28 U.S.C. § 1292(a)(1) and FAA section 16(a)(2)); Se. Res. Recovery Facility Auth. v. Montenay Int’l Corp., 973 F.2d 711, 712 (9th Cir. 1992)
(holding it had jurisdiction over district court’s order staying arbitration
pursuant to section 16(a)(2) allowing appeal from an order enjoining
arbitration).  Furthermore, the Fifth
Circuit has held that an order granting a stay of arbitration is appealable
pursuant to 28 U.S.C. § 1292(a)(1), governing appeals
of interlocutory orders involving injunctions generally.  See Tai Ping Ins. Co. v. M/V Warschau,
731 F.2d 1141, 1143 (5th Cir. 1984).
B.              
Standard of Review
Prior to September 1, 2009, an order denying a
motion to compel arbitration under the FAA was reviewed in a mandamus
proceeding using an abuse of discretion standard.  In re
Merrill Lynch & Co., 315 S.W.3d 888, 890–91 & n.3 (Tex. 2010)
(orig. proceeding); Jack B. Anglin Co. v. Tipps, 842
S.W.2d 266, 272–73 (Tex. 1992) (orig. proceeding).  The Texas Supreme Court held that the abuse
of discretion standard, as applied to such orders, required reviewing courts to
defer to the trial court’s factual determinations if they are supported by the
evidence and to review the trial court’s legal determinations de novo.  In re
Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding).  This is the same standard by which we review
interlocutory appeals of orders denying motions to compel arbitration under the
Texas Arbitration Act (“TAA”).  See McReynolds
v. Elston, 222 S.W.3d 731, 739 (Tex. App.—Houston
[14th Dist.] 2007, no pet.) (holding, under TAA, “we
review factual conclusions under a legal sufficiency or ‘no evidence’ standard
and legal conclusions de novo”); see also
In re Trammell, 246 S.W.3d 815, 820 (Tex. App.—Dallas 2008, no pet.) (orig. proceeding) (holding same).
Civil Practice and Remedies Code section 51.016
now permits an order denying a motion to compel arbitration under the FAA to be
reviewed via interlocutory appeal.  Tex. Civ. Prac.
& Rem. Code Ann. § 51.016. 
Neither this Court nor the Texas Supreme Court has addressed the
appropriate standard of review for such interlocutory appeals.  However, various courts of appeals have
considered this issue and held that interlocutory appeals of orders denying
motions to compel arbitration should be reviewed under the abuse of discretion
standard, in which we defer to the trial court’s factual determinations and
review questions of law de novo.  See Garcia v. Huerta, 340 S.W.3d 864, 868–69
(Tex. App.—San Antonio 2011, pet. filed); SEB,
Inc. v. Campbell, No. 03-10-00375-CV, 2011 WL 749292, at *2 (Tex.
App.—Austin Mar. 2, 2011, no pet.) (mem. op.); Sidley Austin Brown & Wood, LLP v. J.A.
Green Dev. Corp., 327 S.W.3d 859, 862–63 (Tex. App.—Dallas 2010, no pet.); see also Torster
v. Panda Energy Mgmt., LP, No. 07-10-0442-CV, 2011 WL 780522, at *2 (Tex.
App.—Amarillo Mar. 7, 2011, pet. filed) (mem. op)
(citing Sidley, Austin, Brown & Wood
in holding that whether trial court erred in denying motion to compel
arbitration “depends on whether it abused its discretion”).
Thus, in reviewing an order denying a motion to
compel arbitration under the FAA, we give deference to the trial court’s
factual determinations that are supported by evidence and we review de novo its
legal conclusions.
A party seeking to compel arbitration under the
FAA must establish that there is a valid arbitration agreement and that the
claims raised fall within that agreement’s scope.  In re
Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig.
proceeding); J.M. Davidson, Inc. v.
Webster, 128 S.W.3d 223, 227 (Tex. 2003). 
If the trial court finds a valid agreement, the burden shifts to the
party opposing arbitration to raise an affirmative defense to enforcing
arbitration.  J.M. Davidson, 128 S.W.3d at 227.  The trial court’s determination as to the
validity of an arbitration agreement is a legal determination that we review de
novo.  Id.  
Under the FAA, ordinary principles of state
contract law determine whether there is a valid agreement to arbitrate.  Kellogg
Brown & Root, 166 S.W.3d at 738.  Although there is a strong presumption
favoring arbitration, that presumption arises only after the party seeking to
compel arbitration proves that a valid arbitration agreement exists.  J.M.
Davidson, 128 S.W.3d at 227.  Because arbitration is contractual in nature,
the FAA generally does not require parties to arbitrate when they have not
agreed to do so.  Kellogg Brown & Root, 166 S.W.3d at
738 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland
Stanford Junior Univ., 489 U.S. 468, 478–79, 109 S. Ct. 1248, 1255 (1989)).
C.              
Determination of Existence of Valid Agreement to
Arbitrate
CCI argues that the arbitration clause in the
Construction Contract is a valid and binding agreement to arbitrate.  Levco, however,
argues that it is illusory and unenforceable as a matter of law.  Levco also argues
that, even if the agreement to arbitrate in the Construction Contract is not
illusory, the arbitration agreement in the Construction Contract does not
contain a survival clause that would allow it to survive termination of the
contract.[1]
In determining the validity of agreements to
arbitrate that are subject to the FAA, we generally apply ordinary state contract
law principles.  In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006)
(orig. proceeding).  The elements of a
valid contract are (1) an offer, (2) an acceptance, (3) a meeting of the minds,
(4) each party’s consent to the terms, and (5) execution and delivery of the
contract with the intent that it be mutual and binding.  Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631,
636 (Tex. App.—Houston [1st Dist.] 2002, pet. denied).  “Under generally accepted principles of
contract interpretation, all writings that pertain to the same transaction will
be considered together, even if they were executed at different times and do
not expressly refer to one another.”  DeWitt Cnty. Elec.
Coop., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999); IP Petroleum Co. v. Wevanco Energy, L.L.C.,
116 S.W.3d 888, 889 (Tex. App.—Houston [1st Dist.] 2003, pet. denied)
(“Instruments pertaining to the same transaction may be read together to
ascertain the parties’ intent, even if the parties executed the instruments at
different times.”) (citing Fort Worth Indep. Sch. Dist. v. City of Fort
Worth, 22 S.W.3d 831, 840 (Tex. 2000)); see also Declaire
v. G & B McIntosh Family Ltd. P’Ship, 260 S.W.3d 34, 44 (Tex. App.—Houston [1st
Dist.] 2008, no pet.) (holding that contract can be
effective if signed by only one party if other party accepts by his acts,
conduct, or acquiescence in the terms of the contract).
CCI presented the
Construction Contract, which provides, in part:
Any controversy or claims of CCI against Subcontractor [Levco] or Subcontractor against CCI shall, at the option of
CCI, be resolved by arbitration pursuant to the Construction Industry
Arbitration Rules of the American Arbitration Association in effect on the date
on which the demand for arbitration is made. 
Any such arbitration shall be held in Lake County, Ohio.  
 
CCI argues that this is a valid arbitration
agreement.  However, Levco
argues, both here and in the trial court, that the arbitration agreement in the
Construction Contract is not valid because it is illusory.[2]  
D.              
Analysis of Levco’s
Claims that Abritration Provision is Illusory
“A promise is illusory if it does not bind the promisor,
such as when the promisor retains the option to discontinue performance.”  In re
24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (orig. proceeding) (per curiam); see also J.M.
Davidson, 128 S.W.3d at235 (Schneider, J., dissenting) (“[I]f the terms of a promise make performance optional, the
promise is illusory and cannot constitute valid consideration.”).  Arbitration agreements must be supported by
consideration, or mutuality of obligation, to be enforceable.  Palm
Harbor Homes, 195 S.W.3d at 676; Dorfman v. Max Int’l,
LLC, No. 05-10-00776-CV, 2011 WL 1680070, at *2 (Tex. App.—Dallas May 5,
2011, no pet.) (mem. op.).
In the context of stand-alone arbitration agreements,
binding promises are required on both sides as they are the only consideration
rendered to create a contract.  In re AdvancePCS Health L.P., 172 S.W.3d
603, 607 (Tex. 2005) (orig. proceeding) (per curiam);
Dorfman,
2011 WL 1680070, at *2.  When, however,
an arbitration clause is part of an underlying contract, the rest of the
parties’ agreement provides the consideration. 
AdvancePCS Health, 172 S.W.3d
at 607; see Palm Harbor Homes, 195
S.W.3d at 676–77.
Here, the plain language of the arbitration provision does
not mutually bind the parties because arbitration is “at the option of
CCI.”  However, this arbitration
provision does not stand alone—it is part of an underlying contract.  Thus, consideration, or the presence of
mutual obligation, is provided by the underlying contract.  See
AdvancePCS Health, 172 S.W.3d at 607.  
Levco seems to argue that the underlying
contract does not provide any consideration for the arbitration provision because
it, too, permits CCI to terminate, suspend, or modify its terms at its sole
discretion, without notice.  Levco’s reliance on those provisions of the Construction
Contract is misplaced.  The modification
provision’s plain language does not state that CCI is the only party that can
modify the agreement—it provides only that any modifications must be signed by
CCI’s representative to be effective. 
Furthermore, while the Construction Contract provides that termination
or suspension will be “at the sole option and convenience to CCI,” the contract
also provides that CCI must pay for work and materials already purchased at the
time it gives notice of such termination or suspension.  Thus, the parties are bound by mutual
obligations and the agreement is not illusory.
E.              
Analysis of Levco’s
Termination and Savings Clause Argument
Levco also
argues that CCI is complaining of work primarily completed after CCI terminated
the Construction Contract and that the dispute resolution clause in the
Construction Contract cannot survive the termination because it did not contain
a savings clause. 
“[A]n
arbitration agreement contained within a contract survives the termination or
repudiation of the contract as a whole.” 
Henry v. Gonzales, 18 S.W.3d
684, 690 (Tex. App.—San Antonio 2000, pet. dism’d)
(relying, in context of TAA, on line of reasoning that agreement to arbitrate
contained in written contract is separable from entire contract); see also In re Koch Indus., Inc., 49
S.W.3d 439, 445 (Tex. App.—San Antonio 2001, orig. proceeding) (holding same in
context of FAA).  Thus, a savings clause
was not required for the arbitration provision in the Construction Contract to
survive any termination by CCI.
To the
extent that Levco is attempting to argue that the
dispute between the parties does not fall within the scope of the arbitration
provision in the Construction Contract because some of the dispute between
itself and CCI arose from work that was completed after CCI terminated the
Construction Contract, this is also unavailing. 
The terms of the Bond expressly incorporate the terms of the
Construction Contract.  Section 4.1, the
provision invoked by the Surety, allows it to “[a]rrange
from the Contractor [Levco] . . . to perform and
complete the Construction Contract.” 
Section 6 of the Bond further states that if the Surety elects to act
under section 4.1, “the responsibilities of the Surety to the Owner [CCI] shall
not be greater than those of the Contractor under the Construction Contract,
and the responsibilities of the Owner to the Surety shall not be greater than
those of the Owner under the Construction Contract.”  Thus, the terms of the Bond expressly
provided for Levco to complete the work under the
terms of the Construction Contract even after CCI’s termination of the contract.
We conclude
that CCI proved, as a matter of law, the existence of a valid arbitration
agreement and that the claims between it and Levco
fall within the scope of that agreement. 
Thus, CCI is entitled to arbitrate these claims, and the trial court
abused its discretion in refusing to enforce the arbitration proceedings.  See,
e.g., Jack B. Anglin Co., 842 S.W.2d at 272–73
(recognizing, prior to enactment of Civil Practice and Remedies Code section
51.016, appropriateness of mandamus relief “[w]hen a Texas court enforces or
refuses to enforce an arbitration agreement pursuant to the [FAA]” because that
party “would be deprived of the benefits of the arbitration clause it
contracted for, and the purpose of providing a rapid, inexpensive alternative
to traditional litigation would be defeated”); see also In re Bruce Terminix Co., 988
S.W.2d 702, 704 (Tex. 1998) (orig. proceeding) (holding there is no adequate
remedy by appeal for denial of right to arbitration “because the very purpose
of arbitration is to avoid the time and expense of a trial and appeal”).
                                                                                         
FAA Preemption of State Law Venue Provision
Finally,
Levco argues that we should “affirm the trial court’s
denial of [CCI’s] Motion to Compel because the Texas Business and Commerce Code
section 272.001 prohibits compelling Levco to
arbitration in Lake County, Ohio and is not preempted by the [FAA].”  It argues that the arbitration must take place
in Harris County.
Business and Commerce Code section
272.001 provides:
If a contract contains a provision making the contract or any conflict arising under
the contract subject to another state’s law, litigation in the courts of
another state, or arbitration in another state, that provision is voidable by
the party obligated by the contract to perform the construction or repair.  
 
Tex.
Bus. & Com. Code Ann. §
272.001(b) (Vernon 2006).  Levco
argues in its appellate brief that it “exercised its option to void the
requirement in the Contract to arbitrate in Lake County, Ohio” and, “[a]s a
result, the trial court properly denied [CCI’s] motion to compel arbitration in
Lake County, Ohio.”  It further argues
that if this Court narrowly construes the word “provision” to mean only the
choice of venue rather than the arbitration clause as a whole, this statute
would not fall under the FAA’s preemption provision.
The
FAA preempts all otherwise
applicable inconsistent state laws, including any inconsistent provisions of
the TAA, under the Supremacy Clause of the United States Constitution.  U.S. Const. art. VI; see Allied–Bruce Terminix Co. v. Dobson, 513 U.S. 265, 272, 115 S. Ct. 834, 838 (1995).  The
FAA declares written provisions for arbitration “valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.”  9 U.S.C.
§ 2 (2006); OPE Int’l LP v. Chet Morrison
Contractors, Inc., 258 F.3d 443, 446 (5th Cir. 2001).  “In enacting § 2 of the [FAA], Congress
declared a national policy favoring arbitration and withdrew the power of the
states to require a judicial forum for the resolution of claims which the
contracting parties agreed to resolve by arbitration.”  OPE Int’l,
258 F.3d at 446 (quoting Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S. Ct. 852
(1984) and Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24,
103 S. Ct. 927, 941 (1983) (“Section 2 is a congressional declaration of a
liberal federal policy favoring arbitration agreements, notwithstanding any
state substantive or procedural policies to the contrary.”)).  
In OPE International,
the Fifth Circuit held that a Louisiana provision invalidating arbitration of
certain disputes out-of-state was preempted by the FAA, on the ground that the
statute “condition[ed] the
enforceability of arbitration agreements on selection of a Louisiana forum; a
requirement not applicable to contracts generally.”  Id. at
447; see also
Commerce Park at DFW Freeport v. Mardian
Constr. Co.,
729 F.2d 334, 337 (5th Cir.1984) (holding that FAA preempted provisions in
Texas Deceptive Trade Practices Act that required parties to submit to judicial
forum).
We hold that the same reasoning applies here.  Applying section 272.001 as Levco asks us to do here would prevent us from enforcing a
term of the parties’ arbitration agreement—the venue—on a ground that is not
recognized by the FAA or by general state-law contract principles.  See OPE
Int’l, 258 F.3d at
447; see also KWW Enters., Inc., 184
F.3d at 50 (“The venue in which arbitration is to take place is a ‘term’ of the
parties’ arbitration agreement.”). 
We hold that the FAA preempts application of this provision under the
facts of this case.
Levco argues that this case is
distinguishable from OPE International
because the Louisiana provision in OPE
International “declare[d] null and void and unenforceable” any
non-Louisiana venue provision, while section 272.001 declares such provisions
only “voidable.”  However, by allowing a
party to subsequently declare void a previously bargained-for provision,
application of section 272.001 would undermine the declared federal policy of
rigorous enforcement of arbitration agreements. 
See Perry v. Thomas, 482 U.S. 483,
490, 107 S. Ct. 2520, 2526 (1987) (analyzing section 2 and holding that it
embodies Congress’ intent to provide for enforcement of arbitration agreements
within full reach of the Commerce Clause” and that “[i]t’s
general applicability reflects that the preeminent concern of Congress . . .
was to enforce private agreements into which parties had entered”).
                                                                                                                                                                   
Conclusion
We reverse the order of the trial court and remand the case for further
proceedings consistent with this opinion.
 
 
                                                                   Evelyn
V. Keyes
                                                                   Justice

 
Panel
consists of Justices Keyes, Higley, and Massengale.
 
 




[1]           Levco’s
appellate brief mentions in passing that the dispute resolution provision in
the Bond conflicts with the terms of the Construction Contract.  However, it cites no authority and provides
no legal analysis on this issue. 
Therefore, to the extent Levco is attempting
to argue that the terms of the Bond prevent arbitration of its dispute with CCI
over the claims arising from the Construction Contract, that issue is waived
for lack of briefing.  See Tex.
R. App. P. 38.1(i) (requiring that appellate
“brief must contain a clear and concise argument for the contention made, with
appropriate citations to authorities” for party to assert issue on appeal); Brown v. Hearthwood
II Owners Ass’n., 201 S.W.3d 153, 161 (Tex.
App.—Houston [14th Dist.] 2006, pet. denied) (holding argument can be waived
for failure to adequately brief). 
 
Levco
also argues that the Surety is a necessary party to any arbitration
proceeding.  However, the Surety is not
before this Court as a party to the appeal, nor was it a party to the motion to
stay arbitration in the trial court. 
Thus, we are not called upon to consider the Surety’s obligations or
rights regarding arbitration.  


[2]           CCI argues that we cannot consider Levco’s arguments concerning termination of the agreement
and subsequent performance under the terms of the Bond because it was not
expressly presented to the trial court. 
This argument is unpersuasive. 
When, as here, no findings of fact and conclusions of law are filed by
the trial court, we must affirm the trial court’s order if any legal theory
supports it.  Rachal v. Reitz, 347 S.W.3d 305, 308 (Tex. App.—Dallas 2011, pet. filed).
 Levco, CCI, and the Surety all informed the trial court of
the January 2011 termination by CCI and of the subsequent arrangements under
the terms of the Bond, so the trial court was aware of this information.


