Arbitration Agreement Doesn’t Apply to Dispute Between Parties on the Same Side

Originally published by Carrington Coleman.

Swearingen v. Swearingen
Dallas Court of Appeals, No. 05-15-01199-CV (July 14, 2016)
Justices Bridges, Francis, and Myers (Opinion)
Kelli Hinson

David and William Swearingen agreed to arbitrate all disputes against United Capital Financial Advisers, Inc. (“UCFA”) related to their sale of Swearingen Financial Group to UCFA. After the sale, David and William starting fighting about how to divide the money, and David attempted to submit that dispute to arbitration. William filed a motion to stay arbitration, arguing that although he and David had agreed to arbitrate their disputes against UCFA, they did not agree to arbitrate disputes against each other. Both the trial court and the Dallas Court of Appeals agreed with William.

Under the purchase agreement, the words “we,” “us,” and “our” referred to UCFA, and “you” and “your” referred to David and William individually and collectively and to their firm, Swearingen Financial Group. The agreement provided that if a dispute arose related to the agreement, “you and UCFA agree” to arbitrate such claim “upon notice by either party to the other.” It also provided that, in the event of such arbitration, “[y]ou and we will, by joint agreement, select a single arbitrator.” The Court held that, although the agreement did not specifically state it only applied to disputes between UCFA on the one hand and David and William on the other, that is the only reasonable interpretation of the agreement. It was clear from the context that “either party” referred to David and William on one side and UCFA on the other. In addition, the agreement provided that “you” (defined as David and William) and “we” (defined as UCFA) would jointly agree to an arbitrator. The Court held it would be nonsensical for UCFA to participate in the selection of an arbitrator in a dispute between David and William. So, the Court affirmed the trial court’s judgment granting a stay of arbitration.

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