COURT REJECTS ARGUMENT THAT “THIS AGREEMENT” LITERALLY MEANS ONLY “THIS AGREEMENT”

Advocare GP, LLC v. Heath
Dallas Court of Appeals, No. 05-16-00409-CV (January 5, 2017)
Justices Lang, Myers (Opinion), and Evans

Kelli Hinson

Advocare hired Richard Heath to serve on its board of directors. His offer letter referred to an attached non-disclosure agreement. Heath signed both the letter and the NDA and was terminated less than two months later. Heath sued Advocare asserting breach of contract—including breach of the written offer letter and an alleged oral agreement to hire Heath as CEO—as well as various tort claims. Advocare moved to abate the case and compel arbitration based on an arbitration agreement in the NDA, which provided “any controversy, dispute or claim arising out of or in any way related to or involving the interpretation, performance or breach of this Agreement shall be resolved by binding arbitration.” The trial court held that Advocare’s affirmative defense of breach of the NDA must go to arbitration, but that the rest of the case could proceed in court.

The Dallas Court of Appeals disagreed, writing: “We reject appellee’s contention that the arbitration provision’s use of the phrase ‘this Agreement’ narrows its application to literally ‘this Agreement,’ i.e., the NDA itself.” The NDA was specifically referenced in the offer letter, and the two agreements were signed at the same time, so the Court held they were effectively part of the same “Agreement.” Moreover, the Court noted the arbitration provision was written broadly to include all claims “in any way related to or involving” the Agreement and so should be construed to “embrace all disputes between the parties having a significant relationship to the contract.” Under that standard, and given that Advocare contended it terminated Heath for violating the NDA, all claims (including those in tort) were covered by the arbitration agreement.