Anthony G. Buzbee & Anthony G. Buzbee, LP v. Terry & Thweatt, P.C.

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ANTHONY G. BUZBEE AND ANTHONY G. BUZBEE, LP D/B/A THEBUZBEE LAW FIRM, Appellants v. TERRY & THWEATT, P.C., Appellee

No. 01-23-00123-CV

Court of Appeals of Texas, First District

November 7, 2023

On Appeal from the 334th District Court Harris County, Texas Trial Court Case No. 2020-31793

Panel consists of Justices Goodman, Rivas-Molloy, and Guerra.

MEMORANDUM OPINION

AMPARO GUERRA, JUSTICE

Appellants Anthony Buzbee and the Buzbee Law Firm (collectively, Buzbee) take this interlocutory appeal from the denial of their application to compel arbitration. See Tex. Civ Prac. & Rem. Code § 171.098(a)(1) (authorizing this interlocutory appeal). In two issues, Buzbee contends that (1) the arbitration agreement applies to the dispute between Buzbee and appellee Terry & Thweatt, P.C. (T&T); and (2) Buzbee did not waive arbitration by substantially invoking the judicial process. We affirm.

Background

This case concerns a dispute between two Houston law firms arising from the representation of a client. Though this Court discussed the underlying facts in detail in Buzbee v Terry & Thweatt, P.C., No. 01-20-00659-CV, 2022 WL 52637 (Tex. App.-Houston [1st Dist.] Jan. 6, 2022, pet. denied) (mem. op.),^[1] a brief recitation is necessary for the disposition of this appeal.

In October 2017, Jade James and her ex-husband, John Luengas, met with attorneys at T&T about retaining the firm to represent them in a potential wrongful death lawsuit relating to the death of their daughter. Id. at *1. Ultimately, James signed a representation agreement with T&T (the Contract) and agreed to pay attorney's fees on a contingency basis. Id. at *2. Specifically, the Contract entitled T&T to a 33 1/3% contingency fee if the case settled before suit or arbitration was filed, 40% if settled pretrial, and 45% after Plaintiff announced "ready" for trial in open court.

The Contract also contained an arbitration provision, which provided, in relevant part:

The Client agrees that any and all disputes and/or controversies relating to fees and/or costs payable hereunder, including fees and/or costs involving associate counsel, shall be resolved solely and exclusively by arbitration. . . . Client and Attorneys understand that by Client signing this contingency fee employment agreement, Client and Attorneys are waiving their respective rights to a judge and/or jury trial on disputes and/or controversies relating to fees and/or costs payable hereunder, including fees and/or costs involving associate counsel, to binding arbitration in the manner provided herein.

James signed the Contract with T&T on October 12, 2017; however, one day later, James met with attorneys from Buzbee's law firm. That same day, James sent an email to T&T terminating the Contract, stating that she had "decided to go with a different attorney." Id. at *2. In response, T&T advised James that it would not release its interest in her case because James did not terminate T&T for cause. Id. On October 16, 2017, Buzbee filed a wrongful death lawsuit on behalf of James. Id. Ultimately, the wrongful death suit settled at mediation. In an effort to resolve the dispute between the law firms, Buzbee offered T&T a sum that T&T contends was "far less" than its 40% contingency fee agreement with James. T&T demanded the full 40% fee. Id. Represented by Buzbee, James then initiated arbitration proceedings against T&T pursuant to the Contract, and the arbitrator awarded a fee of $5,000 to T&T. Id. at *2-3. During arbitration, Buzbee stipulated that the firm had agreed to pay any fees owed to T&T. Id. at *3.

James and Luengas each filed grievances against T&T with the State Bar of Texas. Id. at *2. T&T contends that, during the hearings before the grievance committee, James testified under oath that it was during the initial meeting with James that Buzbee promised her he would pay any fees owed to T&T on her behalf. T&T argues that because of this promise, James terminated the Contract with T&T and hired Buzbee.

This alleged promise forms the basis of the underlying suit against Buzbee. On May 27, 2020, T&T sued Buzbee for tortious interference with the Contract. The suit alleged that Buzbee knew of the Contract and "actively encouraged" James to fire T&T without cause and hire Buzbee instead. Id. at *3. T&T claims that "Buzbee personally assured James that if she ended up owing any fees to [T&T], [Buzbee] would pay those fees for James." Id. T&T claims that, due to Buzbee's interference, it lost "the full 40% contingency fee that would have been earned on the settlement of James's case." Id. T&T's suit also seeks exemplary damages, claiming that Buzbee acted with malice or gross negligence. Id.

On July 7, 2020, Buzbee moved to dismiss the suit pursuant to the TCPA. After the trial court denied the motion, Buzbee filed an interlocutory appeal, and this Court affirmed the denial in a decision issued January 6, 2022. See id. at *10. Buzbee then sought a petition for discretionary review in the Texas Supreme Court, but that court denied Buzbee's petition on October 21, 2022.

By statute, Buzbee's interlocutory appeal stayed all proceedings in the trial court pending resolution of the appeal. See Tex. Civ. Prac. & Rem. Code § 51.014(b). After the stay was lifted, Buzbee filed the subject motion to compel arbitration on December 16, 2022, asserting for the first time that T&T was required to arbitrate its dispute with Buzbee.^[2] The trial court heard the motion by submission and ultimately denied the motion on February 16, 2023. This appeal followed.

Denial of Motion to Compel Arbitration

In two issues, Buzbee argues that the trial court erred in denying his motion to compel arbitration. First, Buzbee argues that equitable estoppel requires T&T to arbitrate its dispute with Buzbee because T&T's tortious interference claim against Buzbee is based on the Contract and the Contract contains an arbitration provision. Second, Buzbee contends that he did not waive arbitration by substantially invoking the litigation process.

A. Standard of Review

We review a trial court's order denying a motion to compel arbitration for an abuse of discretion. Wagner v. Apache Corp., 627 S.W.3d 277, 283 (Tex. 2021); Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018). A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner or acts without reference to guiding rules or principles. Taylor Morrison of Tex., Inc. v. Skufca, 650 S.W.3d 660, 676 (Tex. App.-Houston [1st Dist.] Dec. 30, 2021, no pet.) (citing Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985)). We defer to the trial court's factual determinations if they are supported by the evidence, but we review the court's legal rulings de novo. Henry, 551 S.W.3d at 115. A trial court has no discretion in determining what the law is, which law governs, or how to apply the law. Skufca, 650 S.W.3d at 676.

B. The Parties' Burdens

"A party seeking to compel arbitration has the initial burden to establish the arbitration agreement's existence and show that the claims asserted against it fall within the agreement's scope." Mohamed v. Auto Nation USA Corp., 89 S.W.3d 830, 835 (Tex. App.-Houston [1st Dist.] 2002, no pet.) (combined appeal and orig. proceeding); see also Tex. Civ. Prac. & Rem. Code § 171.021(a). The initial burden to establish the existence of a valid arbitration agreement includes proving that the party seeking to compel arbitration is a signatory to the arbitration agreement or has the right to enforce the agreement. Mohamed, 89 S.W.3d at 836. A non-signatory may not enforce an arbitration agreement unless "that non-signatory entity falls into an exception, recognized under general equitable or contract law, that would allow such enforcement." Id.

"If the party seeking arbitration carries its initial burden, the burden then shifts to the party resisting arbitration to present evidence on its defenses to the arbitration agreement." Id. at 835 (citing In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999) (per curiam)).

C. Existence of a Valid Arbitration Agreement

The parties do not dispute the existence of a valid arbitration agreement between T&T and James. Rather, the question is whether Buzbee, as a non-signatory to the agreement, can compel T&T to arbitrate its dispute against Buzbee under the agreement. Buzbee argues he can compel arbitration of T&T's tortious interference claim because T&T's "right to recover and its damages depend on the existence of the contract containing the arbitration clause." See Cooper Indus., LLC v. Pepsi-Cola Metro. Bottling Co., 475 S.W.3d 436, 443 (Tex. App.-Houston [14th Dist.] 2015, no pet.). Buzbee thus argues he may compel arbitration under the doctrine of equitable estoppel. T&T disputes the application of the equitable estoppel doctrine and further argues that, in any event, Buzbee waived any right to compel arbitration.

We need not decide whether Buzbee may compel arbitration of T&T's claim under the doctrine of equitable estoppel because, even if he could, we conclude he nevertheless waived any such right by substantially invoking the judicial process.

D. Waiver of Right to Arbitrate

Assuming without deciding, that Buzbee met his initial burden to establish the existence of a valid arbitration agreement based on the doctrine of equitable estoppel, we must determine whether Buzbee waived any right to compel arbitration. See id. at 447 ("Once the arbitration movant establishes a valid arbitration agreement that encompasses the claims at issue, a trial court has no discretion to deny the motion to compel arbitration unless the opposing party proves a defense to arbitration such as waiver."). Whether a party waived its right to...