In Branch Law Firm LLP et al. v. Osborn, No. 14-13-00820-CV, the Fourteenth District Court of Appeals in Houston recently affirmed a trial court’s denial of a motion to compel arbitration because the entire agreement containing the arbitration clause was never submitted into evidence.
After a dispute arose between an attorney, Osborn, and his former law firm over a share of fees from multidistrict Avandia litigation, the law firm sought to compel arbitration based on a clause in the Avandia settlement agreement. But Osborn was not a party to the settlement agreement. The law firm nonetheless argued that Osborn was seeking the benefits of the agreement and the broad arbitration clause covered Osborn’s claims.
Because the settlement agreement was confidential and Osborn was not a party to it, only redacted portions of the “relevant” parts of the agreement (as decided by the law firm’s counsel) were produced to Osborn and placed in the record. Osborn fought to get the entire, unredacted agreement before the trial court to no avail. The trial court nonetheless denied the law firm’s motion to compel arbitration. The law firm appealed.
On appeal, the Fourteenth Court never reached the scope issue. It held instead that because the court did not have the entire agreement (only the portions deemed relevant by the law firm’s counsel) the court could not harmonize the arbitration clause with the entire settlement agreement, as principles of contract interpretation require. The majority thus held that the law firm failed to meet its burden to prove the existence of a valid arbitration agreement binding Osborn.
That Osborn did not have access to a copy of the entire agreement himself was also important to the court. Without it, he lacked the ability to counter the law firm’s arguments with reference other provisions that may have affected the interpretation of the arbitration provision. And assurances by the law firm’s counsel that all the relevant portions of the agreement were before the court were not sufficient either. No matter how broad the arbitration provision, the court could not decide the issue without the entire agreement.
Justice Donovan dissented, arguing that the provisions provided made it clear the scope of the dispute fell within the arbitration clause.
Tips: If you want to enforce a provision of an agreement (arbitration clause, release, etc.) be sure to get the entire agreement before the trial court and into the record. Confidentiality concerns are not enough to preclude introduction of the entire agreement. Adequate measures (filing under seal, confidentiality agreements, etc.) need to be taken to ensure the court sees the entire agreement, especially if the other party does not have a complete copy. And be sure to object to this if you’re the one trying to get the full agreement before the court.
This is an easy argument for opposing counsel to make on appeal that the entire agreement seeking to be enforced is not in the record. Certainly this can be corrected back in the trial court, but not until after you’ve racked up lots of appellate fees and wasted lots of time on something that could have been taken care of on the first run. Better to do it right the first time.