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In re Kellogg Brown & Root, Inc.

In re Kellogg Brown & Root, Inc.

Supreme Court of Texas

December 1, 2004, Argued ; May 20, 2005, Delivered

NO. 03-1129

Opinion

 [*734]  In this original proceeding, the question is whether Kellogg Brown &  [**2]  Root, Inc. ("KBR"), as a non-signatory to a contract containing an arbitration clause, must arbitrate its claims against Unidynamics, Inc. ("Unidynamics") and MacGREGOR (FIN) Oy ("MacGregor")--the signatories to the contract. The trial court denied MacGregor's motion, which sought to compel KBR to pursue its claims in an ongoing arbitration between MacGregor and Unidynamics. The court of appeals held that the trial court abused its discretion and conditionally granted mandamus relief, ordering the trial court to vacate its order denying MacGregor's motion and "issue an order compelling KBR to arbitrate all claims."  126 S.W.3d 176, 184. KBR sought mandamus relief in this Court.

Approximately two months after KBR filed its petition here, the arbitration between MacGregor and Unidynamics concluded. As a result, the relief MacGregor requested in the lower courts--that KBR be compelled "to pursue its claims in the arbitration between MacGregor (FIN) and Unidynamics"--is no longer available. The case is not moot, however, because the parties continue to dispute whether KBR should be compelled to "arbitrate all claims" pursuant to the court of appeals' order.  Id. at 184. [**3]  Because we conclude that KBR cannot be so compelled, we conditionally grant mandamus relief and order the court of appeals to vacate its order.

I Factual Background

In October 1999, MacGREGOR (USA), Inc. contracted with Ingalls Shipbuilding, Inc. ("Ingalls") to build elevator trunks for two cruise ships. MacGREGOR (USA) assigned the contract to its sister company,  [*735]  MacGREGOR (FIN) Oy 1 [**4]  ("MacGregor"). In August 2000, MacGregor subcontracted part of the job to Unidynamics, which agreed to fabricate a set of the elevator trunks for one of the ships. 2 In June 2001, Unidynamics and KBR entered into a second-tier subcontract, under which KBR agreed to furnish labor, equipment, and facilities to fabricate the elevator trunks. In the fabrication subcontract between MacGregor and Unidynamics, the parties agreed that: "Any disputes arising from the interpretation or application of this contract including any document pertaining thereto, shall be settled by arbitration in accordance with General Conditions (ECE 188), (Appendix 10)." 3 The second-tier subcontract between Unidynamics and KBR did not contain an arbitration provision.

After the ship buyer declared bankruptcy in November 2001, Ingalls directed MacGregor to cease work and notify its subcontractors to do the same. MacGregor directed Unidynamics to comply with "the same instructions that Ingalls gave MacGregor." Unidynamics conveyed those instructions to KBR. On or around November 5, 2001, KBR ceased work, stored the elevator trunks and other equipment, and sent Unidynamics invoices for unpaid fabrication services and storage costs. Because KBR had not been paid in full, it asserted liens on the elevator trunk fabrications, parts, and other materials (the "collateral").

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166 S.W.3d 732 *; 2005 Tex. LEXIS 393 **; 48 Tex. Sup. J. 678

IN RE KELLOGG BROWN & ROOT, INC., RELATOR

Subsequent History: Writ of mandamus granted In re MaCgregor (FIN) Oy, 2005 Tex. App. LEXIS 9329 (Tex. App. Houston 1st Dist., Nov. 10, 2005)

Prior History:  [**1]  ON PETITION FOR WRIT OF MANDAMUS.

MacGregor (FIN) Oy v. Kellogg, Brown & Root, Inc. (In re MacGregor (FIN) Oy), 126 S.W.3d 176, 2003 Tex. App. LEXIS 5903 (Tex. App. Houston 1st Dist., 2003)

CORE TERMS

arbitration, non-signatory, fabrication, subcontract, collateral, state law, arbitration provision, trial court, estoppel, moot, arbitration agreement, court of appeals, direct benefit, ownership, courts, trunks, liens, quantum meruit claim, quantum meruit, elevator, parties, arbitration clause, mandamus relief, subcontractor, contracts

Business & Corporate Compliance, Pretrial Matters, Alternative Dispute Resolution, Mandatory ADR, Civil Procedure, Justiciability, Mootness, General Overview, Contracts Law, Contract Conditions & Provisions, Arbitration Clauses, Arbitration, Federal Arbitration Act, Arbitration Agreements, Validity of ADR Methods, Evidence, Inferences & Presumptions, Burdens of Proof, International Trade Law, Dispute Resolution, International Commercial Arbitration, Arbitration, Contracts Law, Estoppel, Equitable Estoppel, Administrative Law, Agency Adjudication, Alternative Dispute Resolution, Jurisdiction, Subject Matter Jurisdiction, Jurisdiction Over Actions, Concurrent Jurisdiction, Preliminary Considerations, Federal & State Interrelationships, Business & Corporate Law, Duties & Liabilities, Causes of Action & Remedies, Breach of Contract, Labor & Employment Law, Collective Bargaining & Labor Relations, Labor Arbitration, Enforcement, Pleading & Practice, Pleadings, Rule Application & Interpretation, Remedies, Equitable Relief, Third Parties, Beneficiaries, Types of Contracts, Construction Contracts, Real Property Law, Construction Law, Contracts, Sales of Goods, Commercial Law (UCC), Documents of Title (Article 7), Warehouse Receipts, Liens, Perfections & Priorities, Liens, Warehousemen's Liens, Nonmortgage Liens