Mid-Am. Apartments v. Trojan

On Appeal from County Court at Law No. 1 Tarrant County, Texas Trial Court No. 2021-002043-1

Before Sudderth, C.J.; Kerr and Bassel, JJ.

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MEMORANDUM OPINION

Dabney Bassel Justice

I. Introduction

In a single issue, Mid-America Apartments, L.P. d/b/a Colonial Village at Willow Creek Apartments (Landlord) challenges the trial court's denial of its motion to compel the claims of Travis Trojan and Cammy Null (Tenants) to arbitration. We sustain Landlord's argument that Tenants' claims fall within the scope of an arbitration agreement in a Texas Residential Lease Agreement (Lease) that they executed. We, however, reject Landlord's contention that an attorney's fee provision in the Lease is not unconscionable; that provision conflicts with Tenants' statutory rights under the Texas Deceptive Trade Practices Act (DTPA). But we remedy that flaw by severing the fee provision from the Lease and otherwise upholding the arbitration scheme of the Lease. Thus, we conclude that the trial court erred by refusing to compel Tenants' claims to arbitration. Accordingly, we reverse and remand.

II. Factual and Procedural Background

Tenants executed the Lease to rent an apartment from Landlord. Claiming that Landlord had wrongfully entered the apartment after Tenants had defaulted on the rent due, Tenants sued Landlord. The operative facts alleged in Tenants' petition are as follows:

3. On or about March 6, 2020, [Tenants] entered into a Lease Agreement with [Landlord] for the lease of an apartment located at 2801

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Airport Freeway in Bedford, Tarrant County, Texas. This agreement called for a one[-]year lease of the premises in question

4. Due largely to [the] COVID-19 pandemic quarantine [Tenant] Travis Trojan lost his job in December of 2020 [Tenants] were unable to pay their rent for the month of January[] 2021. [Landlord] notified [Tenants] that they were in default under their Lease Agreement[] and that they should vacate the premises. However, [Landlord] did not legally evict [Tenants] from the premises

5. On or about February 5, 2021, [Tenant] Trojan returned to the premises, only to find that [Landlord], through its agents, had removed virtually every single item in the apartment. Such actions constituted a breach of the Lease Agreement by [Landlord], as well as a criminal act. At the time of the wrongful and illegal and criminal actions of [Landlord], [Tenants] were entitled to lawful occupancy of the premises, despite the fact that they were delinquent in their rent.

Predicated on these factual allegations and after describing the items of personal property allegedly removed from the apartment, Tenants pleaded that Landlord had violated the Texas Property Code in an unspecified manner and had also violated the DTPA in an unspecified manner.

Landlord answered Tenants' suit and pleaded an affirmative defense that Tenants' "claims [were] barred due to the existence of an enforceable arbitration agreement." On the day it filed its answer, Landlord also filed a motion to compel arbitration and to dismiss all claims.

The motion to compel arbitration quoted the following arbitration provision in the Lease: "ALL CLAIMS THAT ARISE BETWEEN YOU [(TENANTS)] AND LANDLORD WILL BE RESOLVED THROUGH BINDING ARBITRATION IN ACCORDANCE WITH THE FAA AND THE RULES.

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YOU AND LANDLORD AGREE AND UNDERSTAND THAT WE MUTUALLY CHOOSE BINDING ARBITRATION INSTEAD OF LITIGATION TO RESOLVE ALL CLAIMS." The motion also referenced the expansive definition of "claim" set out in the Lease, which we will quote in detail below.

Tenants responded to the motion with two challenges to Landlord's assertion that their claims were arbitrable. First, they parsed the Lease's arbitration provision and definition of "claim":

The claims herein relate to [Landlord's] theft and wrongful disposition of [Tenants'] personal property. They do not relate to the Lease. Indeed, the actions in question took place after the [L]ease had been terminated. They do not relate to the "Property" which is defined in the [L]ease as the apartment complex. . . . They do not relate to [Tenants'] apartment or common areas[] but [to] the personal property in the apartment (a distinction not addressed in this provision in any way). And it does not involve a relationship resulting from the [L]ease. Rather, it involved the relationship between [Tenant Trojan] and his personal property.

Second, Tenants claimed that the arbitration provision was unconscionable because it provided for a broader recovery of attorney's fees than that permitted under the DTPA.

Landlord, in turn, responded to Tenants by arguing that the question of whether the claims made were arbitrable fell to the arbitrator and not to the trial court, that Tenants' claims clearly fell with the arbitration provision and the definition of "claim," and that the arbitration provision was not unconscionable.

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In a one-sentence order, the trial court denied the motion to compel arbitration. Neither side requested findings of fact and conclusions of law. Landlord perfected this interlocutory appeal.

III. Standard of Review

We generally review an order denying a motion to compel arbitration under an abuse-of-discretion standard but break down that review into discrete components. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 642-43 (Tex. 2009) (orig. proceeding). "[W]e defer to the trial court's factual determinations that are supported by evidence but review the trial court's legal determinations de novo." Rachal v. Reitz, 403 S.W.3d 840, 843 (Tex. 2013). Specifically, we review the question of the enforceability of an arbitration agreement de novo. Id.

We follow a three-step process to determine whether a claim is arbitrable: we assess (1) whether an arbitration provision is present, (2) whether the claim falls within the ambit of the provision, and (3) whether the party opposing arbitration has proved a defense to enforcement. Friedman & Feiger, LLP v. Massey, Nos. 02-18-00401-CV, 02-18-00402-CV, 2019 WL 3269325, at *3 (Tex. App.-Fort Worth July 18, 2019, pet. denied) (mem. op. on reh'g). Should we conclude that each of these questions favors arbitration, our holding will be that the trial court abused its discretion by failing to compel the matter to arbitration.^[1] Id.

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When the trial court does not file findings of facts and conclusions of law, we will uphold the refusal to compel arbitration if any viable legal theory-that was raised by the parties-supports that decision. APC Home Health Servs., Inc. v. Martinez, 600 S.W.3d 381, 389 (Tex. App.-El Paso 2019, no pet.).

IV. Analysis

A. Tenants' claims fall within the scope of the Lease's arbitration agreement.

In the second argument under its sole issue, Landlord argues that Tenants' claims fall within the scope of the arbitration agreement.^[2] We agree and conclude that the trial court erred to the extent it may have found otherwise. Tenants base their claims on the relationship created by the Lease. They claim that Landlord's action constitutes a breach of the Lease. Clearly, the acts that they alleged were wrongful related to the Lease. These allegations bring their claims within the sweeping scope of the arbitration agreement.^[3]

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1. The principles that we apply to analyze an arbitration agreement's scope

Once we determine a valid arbitration agreement exists, we apply a strong presumption in favor of arbitration. Hawk Steel Indus., Inc. v. Stafford, No. 02-19-00040-CV, 2019 WL 3819506, at *3-5 (Tex. App.-Fort Worth Aug. 15, 2019, pet. denied) (mem. op.) (citing J.M. Davidson v. Webster, 128 S.W.3d 223, 227 (Tex. 2003)). Indeed, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018) (quoting In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex. 2002) (orig. proceeding)); see also Neal v. Hardee's Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990). We apply the traditional contract principle to the interpretation of an arbitration provision, i.e., "[w]e give the language used its plain grammatical meaning unless it definitely appears that the intention of the parties would thereby be defeated." Hawk Steel, 2019 WL 3819506, at *3.

Arbitration provisions often contain sweeping phrases, such as "relating to." That phrase appears in the definition of "claim" in the arbitration provision at issue here. Use of the phrase "relating to" gives the agreement a broad scope:

Arbitration agreements containing phrases such as "relating to" are . . . interpreted broadly. See, e.g., In re Bank One, N.A., 216 S.W.3d 825[, ] 826-27 (Tex. 2007) [(orig. proceeding)] (resolving doubt as to scope of arbitration agreement covering disputes "arising from or relating in any way to this Agreement" in favor of coverage); 950 Corbindale, L.P. v. Kotts Cap[.] Holdings Ltd. P'ship, 316 S.W.3d 191, 196-97 (Tex. App.-

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Houston [14th Dist.] 2010, no pet.) (holding that broad arbitration provision defining "disputes" as "any dispute under or related to the partnership agreement or any document executed pursuant to the partnership agreement or any of the transactions contemplated by the partnership agreement shall be subject to arbitration" applied to all claims); TMI[, ] Inc. v. Brooks, 225 S.W.3d 783, 791 n.7 (Tex. App.- Houston [14th Dist.] 2007, orig. proceeding) (holding that phrase "arising out of and/or related to" in arbitration agreement is "broad form in