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ACCEPTED

01-16-00783-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
11/17/2016 3:48:44 PM
CHRISTOPHER PRINE
CLERK

01-16-00783-CV

IN THE COURT OF APPEALS FILED IN


1st COURT OF APPEALS
FOR THE FIRST JUDICIAL DISTRICT HOUSTON, TEXAS
HOUSTON, TEXAS 11/17/2016 3:48:44 PM
CHRISTOPHER A. PRINE
Clerk

CRS Industries, Inc.,


Appellant,
v.
MacDonald Systems, Inc.
Appellees.

ACCELLERATED APPEAL FROM THE 152 JUDICIAL DISTRICT


COURT
HARRIS COUNTY, TEXAS
CAUSE NO. 2016-41521

APPELLANT’S BRIEF ON THE MERITS

Penn C. Huston
State Bar No. 00796804
MouerHuston PC
349 Heights Boulevard
Houston, Texas 77007
phuston@mouerhuston.com
(832) 410-4540
COUNSEL FOR APPELLANT

ORAL ARGUMENT REQUESTED


IDENTITY OF PARTIES AND COUNSEL

The following is a list of all parties to the trial court’s Order from which relief
is being sought.

The Appellant is a defendant in the case below, and the Appellee is the
plaintiff. The case also includes an additional defendant, Stuart Tillman. This
petition will usually refer to the Appellant as “CRS,” the Appellee as “MacDonald
Systems” and the additional defendant as “Mr. Tillman.”
Appellant
CRS Industries, Inc. (“CRS”)

Counsel for Appellant

Attorney: Penn C. Huston


State Bar No. 00796804
MouerHuston PC
349 Heights Boulevard
Houston, Texas 77007
phuston@mouerhuston.com
Telephone: (832) 410-4540
Fax: (832) 209-8158

i
Appellee

MacDonald Systems, Inc.

Counsel for Appellee

Randy L. Wooten
State Bar No. 24993400
Randy L. Wooten PC
5625 FM 1960 Road West, Suite 214
Houston, Texas 77069
(281) 580-6419
(281) 580-7628 Facsimile
rlwooten@rlwootenlaw.com

Additional Defendant

Stuart Tillman

Counsel for Additional Defendant

Gary F. Cerasuolo
State Bar No. 00789927
Smith and Cerasuolo, LLP
7500 San Felipe St., Suite 777
Houston, Texas 77063
(713) 787-0003
(713) 782-6785 Facsimile
gfc@texasweblawyer.com

   

ii
TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ....................................................................... i 


STATEMENT OF THE CASE .......................................................................................... vi 
STATEMENT REQUESTING ORAL ARGUMENT...................................................... vii 
STATEMENT OF ISSUES PRESENTED ...................................................................... viii 
STATEMENT OF FACTS .................................................................................................. 1 
I.  THE PARTIES’ RELATIONSHIP AND CONTRACT......................................................... 1 
II.  THE PARTIES’ ARBITRATION AGREEMENT. .............................................................. 4 
III.  MACDONALD SYSTEMS’ LAWSUIT AGAINST CRS ................................................... 4 
IV.  CRS’S REQUEST TO COMPEL ARBITRATION............................................................. 6 
V.  THE TRIAL COURT’S RULING.................................................................................... 7 
I.  SUMMARY ................................................................................................................. 7 
II.  STANDARD OF REVIEW. ............................................................................................ 8 
III.  THE TRIAL COURT COMMITTED REVERSIBLE ERROR WHEN IT DENIED CRS’S
APPLICATION TO COMPEL ARBITRATION. .................................................................. 9 
A.  Enforceability of Arbitration Agreements..................................................... 9 
B.  The Arbitration Provision is Valid .............................................................. 11 
C.  The Dispute Falls Within the Scope of the Arbitration Agreement ............ 11 
IV.  CONCLUSION ........................................................................................................... 19 
V.  PRAYER ................................................................................................................... 19 
9.4 CERTIFICATE OF COMPLIANCE .......................................................................... 21 
CERTIFICATE OF FILING AND SERVICE .................................................................. 22 

iii
TABLE OF AUTHORITIES
CASES
AutoNation USA Corp. v. Leroy, 105 S.W.3d 190 (Tex.App.—Houston
[14th Dist.] 2003, no pet.) ................................................................................... 12

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006) ................... 10

Gary v. Pham, 485 S.W.3d 91, 102 ((Tex. App.—Houston [14th Dist.] 2015,
no pet.) ................................................................................................................. 8

Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581 (2007) .......................... 10

In re Advance PCS Health L.P., 172, S.W.3d 603, 605 (Tex. 2005) ........................ 9

In re Dillard Dept. Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006) .......................... 9

In re Rubiola, 334 S.W.3d 220, 224 (Tex. 2011) .................................................... 11

Jureczki v. Banc One Tex., N.A., 252 F. Supp. 2d 368, 374 (S.D. Tex. 2003) ........ 12

McReynolds v. Elston, 222 S.W.3d 731, 739 (Tex. App.—Houston [14th


Dist.] 2007, no pet.) .............................................................................................. 8

Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S.


1, 24 (1983) ........................................................................................................... 9

Neal v. Hardee's Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990).......................... 13

Osornia v. AmeriMex Motor & Controls, 367 S.W.3d 707, 711 (Tex.App.—
Houston [14th Dist.] 2012, no pet.) .................................................................... 12

Pennzoil Exploration & Prod. Co. v. Ramco Energy, 139 F.3d 1061, 1067
(5th Cir. 1998)...............................................................................................10, 12

Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 498 (Tex.App.—San


Antonio 2000, no pet.) ........................................................................................ 13

Pers. Sec. & Safety Sys. v. Motorola Inc., 297 F.3d 388, 392-95 (5th Cir.
2002) ................................................................................................................... 12

Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002) ..................... 10

Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995) ....................... 13

iv
Rent-a-Center, West Inc. v. Jackson, 561 U.S. 63, 130 S.Ct 2772, 2776
(2010) .................................................................................................................. 10

STATUTES
TEX. CIV. PRAC. & REM. CODE § 171.021............................................................... 10

9 U.S.C. § 2 ............................................................................................................... 9

FL. STAT. § 682.02 .................................................................................................... 9

TEX. CIV. PRAC. & REM. CODE § 171.001................................................................. 9

9 U.S.C. § 4 ............................................................................................................. 10

FL. STAT. § 682.03 .................................................................................................. 10

TEX. CIV. PRAC. & REM. CODE § 171.098.................................................................vi

v
STATEMENT OF THE CASE

Nature of underlying MacDonald Systems filed suit in the trial court


proceeding: below against CRS (improperly sued as
“Cosatron, Inc.”) and Stuart Tillman.
MacDonald Systems asserted claims for
promissory estoppel, quantum meruit, and breach
of contract for alleged conduct relating to
MacDonald Systems’ role as a Manufacturer’s
Representative for CRS. The claims against CRS
are subject to an arbitration agreement. The court
denied CRS’s application to compel arbitration.
This is an interlocutory appeal from the trial
court’s Order.

Trial court: The Honorable Robert Schaffer, Judge of the


152nd Judicial District Court, Harris County,
Texas.

Course of Proceeding: The trial court signed an Order denying CRS’s


Motion to Compel Arbitration Stay Proceedings
(CR 46) on September 13, 2006. On October 3,
2016, CRS filed a Notice of Appeal of the trial
court’s Order denying the Motion to Compel
Arbitration Stay Proceedings. CR 50.

Trial court CRS seeks relief from the trial court’s Order
disposition: entered on September 13, 2016 denying CRS’s
application to compel arbitration (CR 46). 1

1
In an abundance of caution, CRS is challenging the trial court’s ruling through both interlocutory
appeal and a mandamus action. TEX. CIV. PRAC. & REM. CODE § 171.098. A Petition for
Mandamus was filed with this Court on October 3, 2016. If this court determines that raising this
issue through its mandamus action is the only proper method, CRS asks that the court treat this
appeal as such.

vi
STATEMENT REQUESTING ORAL ARGUMENT

The Court should grant oral argument in this matter, as it will give the Court a more
complete understanding of the facts presented in this appeal and would significantly aid
the Court in deciding this case. See Tex. R. App. P. 39.1(c).

vii
STATEMENT OF ISSUES PRESENTED

1. The parties’ arbitration agreement requires arbitration of all claims


“related to” the Manufacturer’s Representative Agreement between CRS and
MacDonald Systems. The allegations in the lawsuit refer to the Manufacturer’s
Representative Agreement and, along with the parties’ briefing on the Application
to Compel Arbitration, otherwise demonstrate that the claims relate to the
agreement. Did the trial court commit reversible error when it denied CRS’s
application to compel arbitration?

viii
STATEMENT OF FACTS

CRS Industries, Inc.2 makes air purification systems. App Tab 3, CR 4, ¶ 9.


MacDonald Systems, Inc. served as an “independent manufacturer’s representative”
for CRS. Id. at ¶¶ 9-10. As a manufacturer’s representative, MacDonald Systems
was authorized to market, sell, and promote certain CRS products.

I. THE PARTIES’ RELATIONSHIP AND CONTRACT.

A written contract called a “Manufacturer’s Representative Agreement”


governs the relationship between CRS and MacDonald Systems. App Tab 1, CR 24.3
The Representative Agreement governs the entirety of the relationship. It appoints
MacDonald Systems as a manufacturer’s representative, identifies the products that
MacDonald Systems is authorized to sell, and expressly states that MacDonald
Systems shall not sell any other CRS products. Id.
More specifically, the 9-page Representative Agreement (plus exhibits)
contains provisions establishing the terms of the relationship under which
MacDonald Systems served as a manufacturer’s representative. For example, the
Representative Agreement states that MacDonald Systems’ role as a manufacturer’s
representative is defined by the terms and conditions of the Representative
Agreement:

1. Appointment. Under the terms and conditions of this


Agreement, the Company hereby appoints and designates
Representative to serve as an independent manufacturer’s
representative for the Company’s products . . .

2
CRS Industries, Inc. was improperly named CosaTron, Inc. in Plaintiff’s Original Petition. In
fact, “CosaTron” is a d/b/a for CRS Industries, Inc.
3
The representative agreement is included in Tab 1 to the appendix as a stand-alone document. It
is in the record as CR 24-36.

1
App Tab 1, CR 24 at § 1 (italics added for emphasis, bolding in original).
The Representative Agreement defines which products MacDonald Systems
can and cannot sell. Exhibit A to the Representative Agreement states that the
“Products” that MacDonald Systems is authorized to market, sell, and promote are
CRS’s commercial products. Id. at Ex. A, CR 33.
The Representative Agreement also governs the relationship between CRS
and MacDonald Systems with regard to residential air purification systems. Exhibit
A to the Representative Agreement states that residential products are excluded from
the defined term “Products,” meaning that MacDonald Systems does not have the
authority to market, sell, and promote the residential products. App Tab 1, CR 33.
The body of the Representative Agreement contains a provision in which the parties
agreed that MacDonald Systems would not sell, market, or solicit any CRS products
other than the commercial products that fall within the defined term “Products”:

e. Non-Product Sales. Representative and its employees and


agents shall not sell, market or solicit any orders for the Company’s
products other than the defined Products, except as mutually agreed
upon in writing by the parties.

App Tab 1, CR 25 at § 2(e). Therefore, the Representative Agreement forbids

MacDonald Systems from selling, marketing, or soliciting any orders for the

residential products that Exhibit A expressly excludes from the defined term

“Products.”

The Representative Agreement establishes other terms that govern the entirety

of the parties’ relationship. For example, the Representative Agreement contains a

provision governing the ownership of company materials:

2
a. Rights to Materials/Information. All Company records,
files, memoranda, reports, selling aids, displays, catalogs, price lists,
customer lists, technical information, plans, documents, equipment and
any other materials relating to the Company’s business (together will
all copies thereof in electronic or any other form), which Representative
shall possess, use or prepare or come in contact with in the course of,
or as a result of, its performance of services under this Agreement shall
remain the Company’s sole property. Following the termination of
Representative’s appointment under this Agreement or at such earlier
time as the Company may request in its absolute and sole discretion,
Representative shall immediately return to the Company all such
Company materials and information.

App Tab 1, CR 28 at § 7.

The Representative Agreement also addresses the ownership of any

modification or enhancement of CRS’s products:

a. Intellectual Property. The Company retains sole and


exclusive ownership of all copyrights, patents, trade secrets, know-
how and other proprietary and intellectual property rights in the
Products, whether or not registered and including, without limitation,
all registrations and applications with respect thereto, all “Trademarks”
(as defined in the following provision), and all modifications,
enhancements, documentation, designs, engineering details,
schematics, drawings and other data or information pertaining to the
Products as they exist now or in the future.
App Tab 1, CR 25-26 at § 3 (emphasis added).

The parties agreed in the Representative Agreement that the terms of the

Representative Agreement supersede and replace all prior understandings and

agreements between the parties:

13. Entire Agreement. This Agreement contains the entire


agreement of the parties relating to the subject matter hereof and
supersedes and replaces any other understandings and agreements,

3
whether oral or in writing, previously entered into by the parties with
respect to Representative’s appointment as an independent
manufacturer’s representative.

App Tab 1, CR 31, §13 (emphasis added).

II. THE PARTIES’ ARBITRATION AGREEMENT.

The Representative Agreement contains an arbitration provision. The


arbitration provision uses broad language capturing any claim “related to” the
Representative Agreement:

. . .all claims, disputes and other matters in question arising out of or


relating to this Agreement or to the breach hereof shall be decided
by arbitration in the City of Tampa, Florida by a panel of three
arbitrators: one to be chosen by Representative, one to be chosen by the
Company, and the third to be chosen by the two arbitrators so selected.
In the event the two arbitrators chosen by the parties cannot agree on
the appointment of the third arbitrator, such arbitrator will be nominated
in accordance with the civil procedure law of Florida and all arbitration
shall be conducted in conformity to the same law.

App Tab 1, CR 31 at §16 b. (emphasis added).

III. MACDONALD SYSTEMS’ LAWSUIT AGAINST CRS


MacDonald Systems sued CRS in Harris County District Court alleging that

CRS owes MacDonald Systems money for work that it did as CRS’s manufacturer’s

representative. App Tab 3, CR 3.

MacDonald Systems’ Original Petition in the trial court describes the

Representative Agreement and MacDonald Systems’ performance under that

agreement:

Plaintiff is an entity that acts as a corporate representative for various


companies to help them market their products.

4
In 2012 MacDonald and CosaTron entered into a Manufacturer’s
Representative Agreement. Under that agreement, MacDonald
served as an independent manufacturer’s representative and
assisted CosaTron with sales of its various products.

App Tab 3, CR 4 at ¶¶ 9-10.

The Petition further describes that the customer relationship at issue in

MacDonald Systems’ allegations is a company that MacDonald Systems called upon

as part of its work as CRS’s representative:

Plaintiff was aware of a HVAC company in Houston, Texas called


DuPure Water Filters, who MacDonald called on regarding the use
of CosaTron products.

App Tab 3, CR 4-5 at ¶¶ 10-11.

MacDonald Systems’ Petition alleges facts that relate to the intellectual

property provision in the Representative Agreement. For example, MacDonald

Systems alleges that it developed a modification of CRS’s product that would create

a new market for the product:

Andy MacDonald, one of the principals of MacDonald Systems,


Inc., came up with an idea for an air filtration system (hereinafter
referred to as the “System”) that would incorporate a CosaTron
product and create a new market for DuPure. CosaTron and DuPure
both fell in love with Andy MacDonald’s design.

Id. at 5, ¶ 11 (emphasis added).

While it is not mentioned in MacDonald Systems’ lawsuit, MacDonald

Systems also still owes money to CRS. That debt arises from an air filtration system

5
that MacDonald Systems sold to Hobby Airport. That claim will need to be

arbitrated.

IV. CRS’S REQUEST TO COMPEL ARBITRATION.

CRS asked the trial court to compel arbitration pursuant to the arbitration

provision in the Representative Agreement. CR 14, App Tab 2. MacDonald

Systems acknowledged that the parties had entered into the Representative

Agreement but opposed the motion and argued that the agreement’s arbitration

provision did not apply because—MacDonald Systems claims—the products at

issue in the lawsuit do not fall within the defined term “Products” in the

Representative Agreement. App Tab 4, CR 38-40.

In opposing the Motion to Compel Arbitration, MacDonald Systems also

attached a letter from Stuart Myers who was the President of CRS at the time of the

letter. App Tab 5, CR 45. The letter is dated March 29, 2012. Id. The Representative

Agreement was fully executed on September 3, 2012. App Tab 1, CR 32 at p. 20.

The letter therefore pre-dates the Representative Agreement, which contains the

merger provision. Although it had never explained a distinction between residential

and commercial products in its petition, in response to CRS’s Application to Compel

Arbitration MacDonald Systems argued that residential products are not subject to

the Representative Agreement and, therefore, the arbitration provision in the

Representation Agreement did not apply. App. Tab 4, CR 38-40.

6
V. THE TRIAL COURT’S RULING.

The trial court conducted a hearing on September 9, 2016. It denied CRS’s


Motion to Compel Arbitration on September 13, 2016. App Tab 6, CR 46. The
signed Order does not explain the reasons for the ruling. Id. This petition for
mandamus seeks review of that Order.

I. SUMMARY

As demonstrated by each of the following, this dispute “relates to” the


Representative Agreement and therefore falls within the agreement’s broad language
requiring arbitration:

1. The “Background/Statement of Facts” in MacDonald Systems’


Petition, which is very brief, expressly refers to the Representative
Agreement and repeatedly refers to the relationship governed by that
agreement, demonstrating that the claims relate to the Representative
Agreement.

2. The Representative Agreement governs MacDonald Systems’ rights


with regard to all CRS products, not just commercial products. The
agreement grants MacDonald Systems the right to sell the “Products”
(which are defined as commercial products), and it also expressly
forbids MacDonald Systems from selling other CRS products (which
includes the residential application that MacDonald Systems now
explains is the basis for its claims). Because the Representative
Agreement directly addresses and prohibits MacDonald Systems’ sale
of non-commercial CRS products, MacDonald Systems’ claims relate
to the Representative Agreement.

3. The merger provision in the Representative Agreement makes clear that


the Representative Agreement supersedes all prior agreements and
understandings between the parties. The Representative Agreement,
therefore, superseded the March 29, 2012 letter that MacDonald
Systems attached to its response. Litigation of the dispute will
inherently necessitate the application of the agreement’s merger
provision to that letter, and, therefore, should be determined by an
arbitrator.

7
4. MacDonald Systems’ quantum meruit claim argues that MacDonald
System is entitled to compensation for its “creation of the System”
which incorporated a CRS product. The Representative Agreement
expressly addresses the ownership of all modifications and
enhancements of CRS products.

For each of these reasons, particularly in light of strong state and federal

policy favoring arbitration and requiring arbitration unless it can be said with

positive assurance that an arbitration clause is not susceptible of an interpretation

which would cover the dispute at issue, the trial court erred when it denied CRS’s

Application to Compel Arbitration and that order should be vacated.

II. STANDARD OF REVIEW.

This Court reviews a trial court’s rulings on questions of law de novo.

Determining the validity of an arbitration agreement, and whether or not a claim falls

within the scope of an arbitration agreement, are questions of law reviewed de

novo. Gary v. Pham, 485 S.W.3d 91, 102 (Tex. App.—Houston [14th Dist.] 2015,

no pet.) (appellate court undertakes de novo review of these issues based on the fact

allegations pled in the petition); McReynolds v. Elston, 222 S.W.3d 731, 739 (Tex.

App.—Houston [14th Dist.] 2007, no pet.). On the other hand, factual conclusions

drawn by the trial court are generally reviewed under a no-evidence standard.

McReynolds, 222 S.W.3d at 739. In this case, the trial court did not give reasons for

its order denying CRS’s Motion, so there are no factual conclusions for this Court

to review.

8
A party seeking to compel arbitration must establish the existence of a valid

arbitration agreement and show that the claims presented fall within the scope of that

agreement. In re Dillard Dept. Stores, Inc., 186 S.W.3d 514 515 (Tex. 2006); In re

Advance PCS Health L.P., 172, S.W.3d 603, 605 (Tex. 2005). The strong

presumption in favor of arbitration arises after a valid arbitration agreement is

proven to exist. J.M. Davidson Inc., 128 S.W.3d at 227.

III. THE TRIAL COURT COMMITTED REVERSIBLE ERROR WHEN IT DENIED CRS’S
APPLICATION TO COMPEL ARBITRATION.

A. Enforceability of Arbitration Agreements.


The law is well settled that where parties have entered into a valid agreement

to arbitrate, it must be enforced. The Federal Arbitration Act4 states: “A written

provision in any . . . contract evidencing a transaction involving commerce to settle

by arbitration a controversy thereafter arising out of such contract or transaction . . .

shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2 (App Tab 9).

The FAA reflects a “congressional declaration of a liberal federal policy

favoring arbitration agreements.” Moses H. Cone Memorial Hospital v. Mercury

4
The Federal Arbitration Act applies to the Representative Agreement because the
transaction involves commerce. See App Tab 1, CR 24-26 and App Tab 3, CR 3 stating that
plaintiff is a Texas company and CRS is a Florida company with its principal office in North
Carolina. While the Federal Arbitration Act applies, the law is the same in both Florida and Texas.
FL. STAT. § 682.02 (App Tab 10); TEX. CIV. PRAC. & REM. CODE § 171.001 (App Tab 11). The
Manufacturer’s Representative Agreement contains a Florida choice of law provision and the
arbitration provision states that the arbitration will be conducted in conformity with Florida law.

9
Construction Corp., 460 U.S. 1, 24 (1983). “Congress enacted the FAA to replace

judicial indisposition to arbitration with a ‘national policy favoring [it] and plac[ing]

arbitration agreements on equal footing with all other contracts.’” Hall St. Assocs.,

L.L.C. v. Mattel, Inc., 552 U.S. 576, 581 (2007) (quoting Buckeye Check Cashing,

Inc. v. Cardegna, 546 U.S. 440, 443 (2006)). The Supreme Court has also stated that

“[t]he FAA reflects the fundamental principle that arbitration is a matter of contract

[and] requires courts to enforce [arbitration agreements] according to their terms.”

Rent-a-Center, West Inc. v. Jackson, 561 U.S. 63, 130 S.Ct 2772, 2776 (2010)

(citations omitted).

The FAA requires that a court “shall” enter an order directing arbitration

where the parties have entered into an arbitration agreement. 9 U.S.C. § 4 (App Tab

12); also see TEX. CIV. PRAC. & REM. CODE § 171.021 (App Tab 9) and FL. STAT. §

682.03 (App Tab 13). The court must grant an application to compel arbitration

“unless it can be said with positive assurance that an arbitration clause is not

susceptible of an interpretation which would cover the dispute at issue.” Pennzoil

Exploration & Prod. Co. v. Ramco Energy, 139 F.3d 1061, 1067 (5th Cir. 1998); see

also Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002) (“[A]ll

doubts concerning the arbitrability of claims should be resolved in favor of

arbitration.”). Thus, determining whether a dispute is subject to arbitration involves

two considerations: “(1) whether a valid agreement to arbitrate between the parties

10
exists; and (2) whether the dispute in question falls within the scope of that

arbitration agreement.” Pennzoil, 139 F.3d at 1065.

B. The Arbitration Provision is Valid

An agreement to arbitrate is valid if it meets the requirements of the general

contract law of the state. In re Rubiola, 334 S.W.3d 220, 224 (Tex.2011). The

arbitration provision in the Representative Agreement is contained in a written

contract between two corporate entities. The language is legible and clearly states

the intention to arbitrate.

MacDonald Systems’ Petition expressly invokes the Representative

Agreement containing the arbitration provision demonstrating that there is no

dispute that the parties entered into the Representative Agreement. See App Tab 3,

CR 4 at ¶ 10. In its Response to CRS’s Application to Compel Arbitration,

MacDonald Systems acknowledged the existence of the Representative Agreement

but argued that the arbitration provision does not apply. App Tab 4, CR 38, ¶ 2. The

arbitration provision is, therefore, valid.

C. The Dispute Falls Within the Scope of the Arbitration Agreement

1. The provision contains broad “related to” language.

While some arbitration provisions are narrow in scope—providing for

arbitration of only certain types of claims—the arbitration provision at issue here

contains “relating to” language that is the hallmark of a broad arbitration provision:

11
“. . . all claims, disputes and other matters in question arising out of or relating to

this Agreement or to the breach hereof shall be decided by arbitration . . .” App

Tab 1, CR 31 at § 16(b)(emphasis added).

Interpreting similar language, the Houston Court of Appeals, 14th District

confirmed that this language is broad:

The language in the arbitration provision here, requiring arbitration of


any controversy or claim “arising out of or relating to” the Purchase
Agreement or the breach thereof, is recognized as broad language
favoring arbitration.

AutoNation USA Corp. v. Leroy, 105 S.W.3d 190 (Tex.App.—Houston [14th Dist.]

2003, no pet.); see also Osornia v. AmeriMex Motor & Controls, 367 S.W.3d 707,

711 (Tex.App.—Houston [14th Dist.] 2012, no pet.) (distinguishing as narrow an

arbitration provision which lacked “relating to” language).

It is significant that the parties entered into a broad arbitration clause. The

courts have recognized that “[b]road arbitration clauses . . . are not limited to claims

that literally ‘arise under the contract,’ but rather embrace all disputes between the

parties having a significant relationship to the contract regardless of the label

attached to the dispute.” Pennzoil Exploration & Prod. Co. v. Ramco Energy, 139

F.3d 1061, 1067 (5th Cir. 1998). “If the court finds that the clause is broad, any

dispute between the parties falls within the scope of the clause if it is connected with

or related to the contract.” Jureczki v. Banc One Tex., N.A., 252 F. Supp. 2d 368,

374 (S.D. Tex. 2003); see also Pers. Sec. & Safety Sys. v. Motorola Inc., 297 F.3d

12
388, 392 (5th Cir. 2002) (provision requiring arbitration of disputes “arising out of

or relating to” the agreement required arbitration of claims relating to violation of a

separate stock purchase agreement).

2. All doubts are resolved in favor of arbitration.

The Texas Supreme Court has also emphasized that under the FAA, “any

doubts as to whether [a plaintiff’s] claims fall within the scope of the agreement

must be resolved in favor of arbitration.” Prudential Sec. Inc. v. Marshall, 909

S.W.2d 896, 899 (Tex.1995). Indeed, “[t]he policy in favor of enforcing arbitration

agreements is so compelling that a court should not deny arbitration ‘unless it can

be said with positive assurance that an arbitration clause is not susceptible of an

interpretation which would cover the dispute at issue.’” Id. (quoting Neal v.

Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990)).

3. Plaintiff’s claims “relate to” the Representative Agreement

In determining whether a claim falls within the scope of an arbitration clause,

courts must “focus on the factual allegations of the complaint, rather than the legal

causes of action asserted.” Marshall, 909 S.W.2d at 900. In Pennzoil Co. v. Arnold

Oil Co., 30 S.W.3d 494, 498 (Tex.App.—San Antonio 2000, no pet.), the court

explained that “if the facts alleged ‘touch matters,’ have a ‘significant relationship’

to, are ‘inextricably enmeshed’ with, or are ‘factually intertwined’ with the contract

that is subject to the arbitration agreement, the claim will be arbitrable.”

13
a. The Factual Allegations in MacDonald Systems’ Petition Demonstrate
that the Claims Relate to the Representative Agreement

MacDonald Systems’ Petition makes repeated reference to the Representative

Agreement, MacDonald Systems’ actions under that agreement, and allegations

which implicate portions of the agreement.

The Background/Statement of Facts section of the Petition—which is barely

more than a page—contains several references to the Representative Agreement.

The Petition explains that MacDonald Systems served as a representative of CRS

and expressly references the Representative Agreement. App Tab 3, CR 4 at ¶ 10.

The Petition further alleges that as part of calling on one particular customer in its

role as CRS’s representative, MacDonald Systems conceptualized a modification of

CRS’s products and promises were allegedly made that were later breached. Id. at ¶

11.

It is telling that MacDonald System’s own brief description of the factual

background allegedly supporting its claims found it necessary to refer to the

Representative Agreement. Focusing on the facts alleged in the Petition, those facts

‘touch matters,’ have a ‘significant relationship’ to, are ‘inextricably enmeshed’

with, and are ‘factually intertwined’ with the Representative Agreement and are,

therefore, arbitrable. See Pennzoil Co., 30 Sw.3d at 498.

14
b. MacDonald Systems’ Distinction Between Commercial and
Residential Products Does Not Prevent the Claims from “Relating to”
the Representative Agreement

In the trial court, MacDonald Systems argued that the product in question is

for residential use, not commercial, and, therefore, the provisions of the

Representative Agreement did not apply. App Tab 4, CR 38 at § 3. Interestingly,

MacDonald Systems’ Petition makes no mention of the distinction between

commercial and residential products. App Tab 3, CR 3. Even accepting the

distinction as part of MacDonald Systems’ claims, the claims still relate to

Representative Agreement.

The Representative Agreement does not relate exclusively to commercial

products. To the contrary, the Representative Agreement relates to and governs the

parties’ relationship with regard to all CRS products. It defines which products

MacDonald Systems can sell, market, and solicit orders for and those that it cannot.

The residential products that appear to be the basis of MacDonald Systems’ claims

fall within the products that the Representative Agreement prohibits MacDonald

Systems from selling:

e. Non-Product Sales. Representative and its employees and


agents shall not sell, market or solicit any orders for the Company’s
products other than the defined Products, except as mutually agreed
upon in writing by the parties.

App Tab 1, CR 25 at § 2(e).

15
MacDonald Systems is incorrect to say that the Representative Agreement

does not apply to the CRS non-commercial products. Instead, the Representative

Agreement expressly states that MacDonald Systems “shall not sell, market, or

solicit any orders for” the residential products. The Representative Agreement

therefore governs the residential products and MacDonald Systems’ claims “relate

to” the agreement.

MacDonald System’s argument seems to suggest that the arbitration provision

should be read as though it says that only claims related to “Products” - as that term

is defined in the agreement - are subject to arbitration. But that is not what the

arbitration agreement says. It is not limited to claims related to the “Products.” It

includes all claims related to the Representative Agreement, and the Representative

Agreement governs both what MacDonald Systems can sell (the commercial

products) and what it cannot sell (everything else, including residential). MacDonald

System’s position that the terms of the Representative Agreement only apply to

commercial products is wrong, and it was, therefore, error to deny CRS’s

Application to Compel Arbitration.

c. MacDonald Systems’ Claims relate to the Representative Agreement’s


Merger Provision and Requirements that Modifications be in Writing

In its Response to CRS’s Application to Compel Arbitration, MacDonald

Systems attached a letter from a former President of CRS, Stuart Myers. App Tab

5, CR 45. The letter is dated March 29, 2012. Id. The Representative Agreement

16
was executed by CRS on August 27, 2012 and by MacDonald Systems on September

3, 2012. App Tab 1, CR 33. That is, the Representative Agreement was signed after

the letter.

The Representative Agreement contains a merger provision which states:

13. Entire Agreement. This Agreement contains the entire


agreement of the parties relating to the subject matter hereof and
supersedes and replaces any other understandings and agreements,
whether oral or in writing, previously entered into by the parties with
respect to Representative’s appointment as an independent
manufacturer’s representative.

App Tab 1, CR 31 at § 13.

Similarly, other provisions in the Representative Agreement require any

subsequent agreement adding additional products to the items that MacDonald

Systems was authorized to sell to be in writing. See e.g. App Tab 1, CR 25 at §2(e)

and Exhibit A to the Representative Agreement stating:

“Products” also includes such other products as the Company and the
Representative shall mutually agree upon in writing from time to
time during the term of this Agreement, including other subsequent
products or product lines assigned to Representative in which the
Company later enters during Representative’s engagement with the
Company.

App Tab 1, CR 33, Exhibit A to Representative Agreement.

Resolving MacDonald Systems’ claims, in which MacDonald Systems alleges

that it had an agreement to sell CRS’s residential products, will require consideration

of the Representative Agreement which states: (1) that MacDonald Systems shall

17
not sell, market, or solicit orders for CRS’s residential products, (2) this agreement

supersedes any prior agreement whether written or oral, and (3) any alleged

subsequent agreement must be in writing. The allegations in the Petition are directly

controlled by the Representative Agreement. Accordingly, MacDonald Systems’

claims not only “relate to” the Representative Agreement (which alone would be

enough to require arbitration) but they are also directly governed by certain parts of

the Manufacturer’s Representative Agreement.

d. MacDonald Systems’ Claims relate to the Representative Agreement’s


Intellectual Property Provision

MacDonald Systems claims also relate to the Representative Agreement’s

intellectual property provision. App Tab 1, CR 25-26, at § 3.

MacDonald Systems alleges that it that it developed a modification or

enhancement of a CRS product:

Andy MacDonald, one of the principals of MacDonald Systems, Inc.,


came up with an idea for an air filtration system (hereinafter referred to
as the “System”) that would incorporate a CosaTron product and create
a new market for DuPure.

App Tab 3, CR 3, at ¶ 11. MacDonald Systems further alleges:

Under the terms of the contract with Defendants, Defendants agreed to


pay Plaintiff $300 per System unit as his compensation for the creation
of the System. Defendants had reasonable notice that Plaintiff fully
expected compensation for the services that he rendered.

Id. at ¶ 18. The Representative Agreement addresses the ownership of all

modifications and enhancements of CRS’s products:

18
a. Intellectual Property. The Company retains sole and
exclusive ownership of all copyrights, patents, trade secrets, know-
how and other proprietary and intellectual property rights in the
Products, whether or not registered and including, without limitation,
all registrations and applications with respect thereto, all “Trademarks”
(as defined in the following provision), and all modifications,
enhancements, documentation, designs, engineering details,
schematics, drawings and other data or information pertaining to the
Products as they exist now or in the future.

App Tab 1, CR 25-26, § 3. This is another way in which the allegations in

MacDonald Systems’ Petition “relate to” the terms of the Representative Agreement

and, therefore, require arbitration pursuant to the parties’ agreement.

IV. CONCLUSION
In light of: (1) the factual allegations in the Petition demonstrating the

relationship of MacDonald Systems’ claims to the Representative Agreement, (2)

the “relating to” language in the clause itself which courts recognize as broad and

thus requiring arbitration of any dispute touching on the agreement, and (3) the

recognized law and public policy that any doubts be resolved in favor of arbitration,

MacDonald Systems’ claims against CRS fall within the scope of the arbitration

provision and must be arbitrated.

V. PRAYER
For all these reasons, CRS requests that the Court issue a ruling and opinion

that: (1) vacates the trial court’s Order signed on September 13, 2016, (2) instructs

the trial court to compel arbitration in accordance with the parties’ contract and stay

19
the claims against CRS pending competition of the arbitration and (3) grants all other

relief to which CRS may be entitled.

Respectfully submitted,

MOUERHUSTON PC

By: /s/ Penn C. Huston


Penn C. Huston
State Bar No. 00796804
MouerHuston PC
349 Heights Boulevard
Houston, Texas 77007
phuston@mouerhuston.com
(832) 410-4540

COUNSEL FOR APPELLANT


CRS INDUSTRIES, INC.

20
CERTIFICATE OF FILING AND SERVICE

I hereby certify that on November 17, 2016, this brief was electronically filed
with the Clerk of the First Court of Appeals. Further, on the same day, the petition
was served by electronic mail to counsel for Plaintiffs/Appellees at the addresses
below.

Counsel for Appellees:


Randy L. Wooten
Bar No. 24993400
5625 FM 1960 Road West, Suite 214
Houston, Texas 77069
(281) 580-6419
(281) 580-7628 Facsimile
rlwooten@rlwootenlaw.com

Gary F. Cerasuolo
Bar No. 00789927
7500 San Felipe St., Suite 777
Houston, Texas 77063
(713) 787-0003
(713) 782-6785 Facsimile
gfc@texasweblawyer.com

/s/ Penn C. Huston


Penn C. Huston

22
APPENDIX

Manufacturer’s Representative Agreement ...................................................... Tab 1

Application to Compel Arbitration and Stay Proceedings ............................... Tab 2

Original Petition ................................................................................................. Tab 3

Opposition to Application .................................................................................. Tab 4

Declaration of Andy MacDonald with March 29, 2012 letter from


Stuart Meyers ..................................................................................................... Tab 5

September 13, 2016 Order ................................................................................. Tab 6

TEX. CIV. PRAC. & REM. CODE § 171.021.......................................................... Tab 7

TEX. CIV. PRAC. & REM. CODE § 171.098.......................................................... Tab 8

9 U.S.C. § 2 ........................................................................................................ Tab 9

FL. STAT. § 682.02 ........................................................................................... Tab 10

TEX. CIV. PRAC. & REM. CODE § 171.001........................................................ Tab 11

9 U.S.C. § 4 ...................................................................................................... Tab 12

FL. STAT. § 682.03 ........................................................................................... Tab 13


Appendix
Tab 1
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

CRS INDUSTRIES, INC.


MANUFACTURER’S REPRESENTATIVE AGREEMENT

CRS INDUSTRIES, INC., a Florida corporation also doing business as CosaTron® and whose
principal United States office is located in Tampa, Florida (the “Company”) and MacDonald
Systems Inc. a Texas corporation whose principal United States office is located in Houston, TX (the
“ Representative”) hereby agree to be bound by this Agreement, as follows:

1. Appointment. Under the terms and conditions of this Agreement, the Company hereby appoints
and designates Representative to serve as an independent manufacturer’s representative for the Company's products
identified in Exhibit A attached hereto (hereinafter the “Products”) to the distribution and marketing channel
defined in Exhibit B attached hereto (collectively defined as, the “Market”), and to sell the Products in the sales
territory identified in Exhibit C attached hereto and in such other territories as the parties may agree upon from time
to time in writing (hereinafter the “Territory”). Representative hereby accepts such appointment, under the terms
and conditions set forth in this Agreement

Representative and the Company agree that during the term of this Agreement, Representative shall be the
Company’s exclusive manufacturer’s representative for the Products to the Market in the Territory provided that,
regardless of anything to the contrary in this Agreement, the Company shall at all times have the right to market, sell
and promote Products to the Market in the Territory if the Representative does not have an ongoing business
relationship in a particular business category, with specific OEM accounts or for test marketing new products or new
applications. Representative and the Company understand and agree that the particular Product mix,
Product pricing, Product specifications, and/or Representative’s assigned market and Territory, may be modified by
the Company as business circumstances evolve upon advance notification.

2. Responsibilities of Representative.

a. Best Efforts. Representative agrees to use its best efforts to effectively promote the sale
of the Products to the Market within the Territory. Representative further agrees to: (1) keep the
Company informed in a timely manner about the services Representative provides, including the
provision of periodic written reports regarding general marketing efforts, sales forecasts and sales/quota
progress; and (2) devote the time, energy, skill and staffing reasonably necessary to perform the
contracted services.

b. Sales Targets. Representative agrees to achieve such annual sales quotas and general
targets as may be established by the Company and Representative on an annual basis. The parties agree
that Representative’s initial annual targets and quotas are attached to this Agreement as Exhibit D and that
such targets and quotas shall be updated and established by mutual agreement of the Company and
Representative in and around January of each year of this Agreement beginning in January 2013.
Nonetheless, the Company and Representative agree that such targets and quotas may be modified and
updated periodically in the discretion of the Company in the event of extraordinary events, such as
Company acquisitions and/or the addition of new business and/or product lines by the Company.
Representative shall not be bound by any re-sale pricing that the Company suggests.

c. Sales Support. Representative agrees that each employee or other agent assigned by it to
promote the sale of the Company’s Products shall attend a general Product training session provided by the
Company within ninety (90) days of their assignment by Representative, unless the Company and
Representative mutually agree otherwise. Representative shall also advise the Company promptly of any
change in its sales organization, sales personnel, product line or method of operation which might adversely
affect the sale of Products to the Market in the Territory.

d. Promotion: Website Link. Representative will advertise and promote the Products in a
commercially reasonable manner and will transmit Product information and promotional materials to its

1
\368681 14

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DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

customers and prospects as reasonably necessary. Representative agrees to provide a link on its website to
the Products on the Company’s website and to identify the Company’s relationship and Products in its
catalogues and general marketing materials.

e. Non-Product Sales. Representative and its employees and agents shall not sell, market
or solicit any orders for the Company’s products other than the defined Products, except as mutually agreed
upon in writing by the parties.

f. No Sales Outside the Territory. Representative and its employees and agents shall not
sell, market or solicit any orders for Products outside of the Territory or to any market other than the
defined Market, except as mutually agreed upon in writing by the parties.

g- Conflicts. Representative and its employees and agents may be engaged in non-profit
and/or for profit, business or commercial activities for other parties as a consultant, independent contractor,
employee or otherwise during the term of this Agreement. However, during the term of this Agreement,
and unless prior written consent to do so is given by the President of the Company, Representative agrees
that it and any of its employees or agents shall not for Representative’s behalf or on behalf of any person or
entity other than the Company, sell, market, solicit orders for, or act as a manufacturer's representative,
sales agent or broker for any other products that (i) compete with the Products, or (ii) are the same as or
similar to the Products.

h. Compliance with Laws. In the performance of Representative’s duties under this


Agreement, Representative and its employees and agents shall comply in all material respects with all
applicable laws and regulations of any state or country in which customers to whom Representative sells or
solicits orders for Products are located, or of any political subdivision or governmental agency thereof,
including, but not limited to, all applicable United States Export Control Regulations. Representative and
its employees and agents shall not pay or give (whether directly or indirectly) to any employee, officer or
agent of any govermnent or other entity any payment which would constitute a bribe, kickback or illegal
payment under United States or applicable foreign law, including but not limited to the United States
Foreign Corrupt Practices Act. Upon the Company’s request, but no less than annually, Representative will
provide to the Company a written, signed statement certifying its compliance with such applicable laws.

i. Unauthorized Representations. Representative specifically agrees to make only those


representations and warranties with respect to the Products or its performance as are contained in the
material supplied by the Company with the Products, and agrees to indemnify and save the Company
harmless from any and all claims from any third party, including the costs and attorney fees related thereto,
arising from any additional representations or warranties made by Representative. Representative and its
employees and agents shall have no authority, and shall not represent that they have authority, to make any
representations, warranties or agreements on behalf of the Company, to accept orders for the Company, to
bind the Company in any manner, or to sign the Company’s name.

j- Authorized Representations. Representative and its employees and agents are


authorized only to represent that they are the Company’s authorized manufacturer’s representative for the
solicitation of orders for the sale of Products to the Market within the Territory. Representative, shall not
issue any printed or written matter, stationary or advertisement representing itself to be the Company's
manufacturer’s representative without securing the Company’s written approval of the form and text.

k. Expenses. Representative shall be responsible for paying all expenses incurred by it in


the performance of this Agreement, including, without limitation, employee pay/benefits, rent, office
expenses, packaging and supply expenses, courier or overnight delivery service expenses, mileage and
vehicle expenses, other travel expenses, and tool, equipment, advertising, licensing, tax, insurance,
entertainment, meal, personnel and telephone expenses.

3. Intellectual Property; Use of Trademarks.

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DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

a. Intellectual Property. The Company retains sole and exclusive ownership of all
copyrights, patents, trade secrets, know-how and other proprietary and intellectual property rights in the
Products, whether or not registered and including, without limitation, all registrations and applications with
respect thereto, all “Trademarks” (as defined in the following provision), and all modifications,
enhancements, documentation, designs, engineering details, schematics, drawings and other data or
information pertaining to the Products as they exist now or in the future.

b. Use of Trademarks and Trade Names. Representative recognizes and agrees for all
purposes that all names, trade names, trademarks or service marks (and the goodwill associated therewith),
logos and identifying slogans affixed to the Products or any accompanying labels, containers and cartons,
or otherwise used in connection with the marketing of the Products, whether or not registered and all
modifications, enhancements, documentation, designs, engineering details, schematics, drawings and other
data or information pertaining to the foregoing (collectively, the “Trademarks”) constitute the exclusive
property of the Company and cannot be used by Representative except in connection with promoting the
sale of the Products pursuant to the terms of this Agreement. Representative may use the Trademarks with
the Representative’s own company name or logo with the denotation “exclusive distributor of the
Cosatron® products”, but only in such manner as permitted by the Company from time to time and in
connection with the distribution, promotion and sale of the Products and any other functions performed by
the Representative pursuant to this Agreement. Representative shall not change or remove any Trademarks
or third-party marks or other proprietary notices on or contained within the Products. On termination or
expiration of this Agreement, the Company will immediately discontinue use of the CosaTron® logo and
all other Trademarks. Nothing in this Agreement shall be construed as giving the Representative any right,
title or interest to the Trademarks, including but not limited to the CosaTron® logo.

4. Responsibilities of the Company,

a. Products. The Company shall keep Representative informed of all new Products for
which it may solicit orders in accordance with this Agreement.

b. Literature/Samples. The Company will supply Representative with catalogs,


promotional literature, data, product bulletins, application advice, and other authorized sales literature and
materials relating to the Products in such quantities and at such times as the Company, in its sole discretion,
deems appropriate to augment the Representative's performance hereunder. Some or all of the information
that may be furnished to Representative by the Company will be confidential and proprietary to the
Company, and will be subject to the terms of Section 7 below. Requests for literature in quantities, which
in the sole discretion of the Company are abnormal for the Territory, may be billed to the Representative at
the Company's fully burdened cost.

c. Product Training. The Company, in its sole discretion, agrees to provide and schedule
from time to time general Product training for Representative's employees or other agents assigned by it to
promote the sale of the Company’s Products, including the Product training outline in Section 2(c) above.
Representative, in turn, shall assist the Company in arranging, coordinating and conducting such training,
including any Product training held within the Territory.

5. Orders. Performance, and Terms of Sale

a. Orders: Approval. All orders placed by Representative shall be by a firm, binding


purchase order from Representative. A purchase order shall not be considered binding on the Company
until received and accepted by it, and the Company reserves the right at all times to accept or refuse to
accept any purchase order for the Products for any reason whatsoever. In the event of any conflict between
the terms of Representative’s purchase order and the terms of this Agreement, the terms of this Agreement
will prevail.

b. Fulfillment. The Company will use its best efforts to fill Representative's orders in a
commercially reasonable time, however, from time to time, orders may be, at the Company's discretion,
reduced or delayed, due to such causes as, but not limited to, temporary production shortfall, strikes, labor

26
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

disputes, accidents, floods, fire, transportation difficulties, raw materials shortages, natural disaster, act of
God or government, or any other cause within or beyond the reasonable control of the Company. The
Company shall not be liable in damages nor will Representative have the right to terminate this Agreement
for the Company’s delay or default in performing under this Agreement if such delay or default is caused
by any condition beyond the Company’s reasonable control.

c. Pricing. All sales made to Representative by the Company shall be on those terms and
prices as determined by the Company from time to time and in its sole discretion. Representatives must
submit a credit application and provide a current financial statement, when requested by the Company. The
Company reserves the right to grant or deny credit at any time at its own discretion.

d. Request for Pricing; Contribution Commission to other Representatives. At the time


of any request for pricing for a Product, Representative must disclose the name and address of the proposed
purchaser of the Product (the “Representative Customer”), the location or address where the Product will
be installed and the name of any other Company Representative who Representative knows or reasonably
should know has contributed to the proposed sale and/or installation of the Product to the Representative’s
Customer, whether such contribution is in design, installation, Representative Customer referral or
influence, or destination matters (the “Contributing Representative”). Representative agrees to pay each
Contributing Representative the contribution commission (“Contribution Commission”) established from
time to time by the Company for the Contributing Representative's contribution to the proposed sale. In
lieu of direct payment from Representative to the Contributing Representative(s), the Company may
include the amount of the Contribution Commission payable in the price of the Product to Representative,
and the Company will then pay the Contributing Representative(s) the Contribution Commission directly.

e. Payment. All invoices for orders placed by Representative and accepted by the
Company shall be rendered due and payable by Representative prior to shipment unless the Company
grants credit terms to Representative in writing. If the Company grants credit terms to Representative,
payment will be due thirty (30) days after the invoice date. Interest will be charged on all past due amounts
at a rate of 1.5% per month.

f. No Unapproved Credits. No credits to outstanding invoices will be taken for bill-backs


prior to the Company's approval of those credits.

g- Shipping. Notwithstanding anything to the contrary in this Agreement or in any


purchase order, all Products sold hereunder will be sold FOB at the Company's location in Tampa, Florida,
USA. Representative accepts all physical control and all financial responsibility for all Products when such
Products are accepted for shipment by the freight forwarder in Tampa, Florida, USA.

h. Security Interest. Representative hereby grants to the Company a security interest in all
the Products it accepts, to secure the performance and payment of all obligations and indebtedness owed
the Company by Representative, and agrees not to take any action which may compromise the Company's
security, or to pass interest to another party without specific prior written approval from the Company.

6. Duration and Termination.

a. Term. Subject to the right of either party to terminate this Agreement earlier as set forth
below, Representative shall provide services to the Company pursuant to this Agreement for an initial
period beginning September 1, 2012 and ending August 31, 2013. Thereafter, this Agreement shall be
automatically renewed for incremental twelve (12)-month terms until sooner terminated for the reasons
specified below, unless either party provides written notice to the other party at least sixty (60) calendar
days prior to the expiration of the then-current term, indicating that such party does not wish to renew this
Agreement.

b. Termination. During the initial term of this Agreement (and any extended term, if and
as applicable), this Agreement shall terminate immediately upon the occurrence of any of the following

27
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

events: (a) Representative’s dissolution or bankruptcy; (b) assignment or attempted assignment of this
Agreement without the Company’s prior written consent; (c) sale or transfer of Representative’s business,
whether effected by sale or transfer of assets or stock, merger, share exchange or other method, unless
otherwise agreed to in writing by the Company; (d) upon the close of business on the date the Company
gives Representative written notice of Termination for Cause (as defined below); or (e) ninety (90) days
following the date the Company or Representative gives the other party written notice of termination
“without cause”, for any or no reason.

c. Cause. For purposes of this Agreement, “Termination for Cause” shall mean
termination of this Agreement by the Company as the result of: (i) Representative’s breach of any of its
obligations pursuant to Sections 2, 5c., 5d. and 5e., and 7 hereof; (ii) any act of dishonesty, fraud or gross
neglect of assigned consulting duties by Representative in connection with Representative’s engagement by
the Company or against any affiliated Company organization or Contributing Representative; (iii)
Representative has failed to pay any invoice in accordance with Section 5 above and failed to pay all past
due amounts within ten (10) days of written notice of such failure; (iv) Representative entering into any
sales representation, distribution or similar agreement in any location with a source other than the Company
for a product line deemed in the Company's judgment to be competitive with a Company Product; or (v) a
material breach by Representative of any of the other terms and conditions of this Agreement.

d. Survival. The provisions of Sections 3, and 5 through and including 18 of this


Agreement shall survive any termination of this Agreement and/or Representative's appointment for
whatever reason.

e. Miscellaneous. In the event of termination by the Company “without cause”,


Representative agrees to perform services up to the effective date of termination, if and as requested by the
Company. Moreover, in the event of termination by Representative pursuant to this Section 6, the
Company, in its discretion, may accept such termination as effective on the termination date proposed by
Representative or by such other earlier date designated by the Company.

7. Additional Covenants.

a. Rights to Materials/Information. All Company records, files, memoranda, reports,


selling aids, displays, catalogs, price lists, customer lists, technical information, plans, documents,
equipment and any other materials relating to the Company’s business (together with all copies thereof in
electronic or any other form), which Representative shall possess, use or prepare or come in contact with in
the course of, or as a result of, its performance of services under this Agreement shall remain the
Company’s sole property. Following the termination of Representative’s appointment under this
Agreement or at such earlier time as the Company may request in its absolute and sole discretion,
Representative shall immediately return to the Company all such Company materials and information.

b. Confidential Information.

i. Representative agrees that neither it nor any employee or agent of


Representative will disclose to any person or use, for Representative or any
other person or entity, any Confidential Information or Trade Secrets of the
Company obtained by Representative in the course or as a result of its
engagement under this Agreement during the term of this Agreement and for a
period of: (i) three (3) years following the Effective Date with respect to any
Confidential Information; and (ii) so long as any Trade Secret remains a “trade
secret” under applicable law. Upon termination of such above specified period,
or upon the request of the Company, all such Confidential Information and
Trade Secrets held by Representative, whether in written form or any other
media including, but not limited to, drawings, papers, documents, designs,
manuals, specifications, prototypes, schematics, computer software or any other
materials or models, shall be returned to the Company, together with any
reproductions or copies thereof.

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DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

ii. The preceding limitation


on the use or disclosure of Confidential Information or Trade Secrets shall not
preclude Representative from disclosure or use of Confidential Information or
Trade Secrets: (1 ) known generally to the public (other than information known
generally to the public as a result of a violation by Representative or any of its
employees or agents of the provisions of this Section); (2) acquired lawfully by
Representative outside of its affiliation with the Company; or (3) required by
law or court order (provided that Representative shall notify the Company
immediately of the possibility that such disclosure may be required).

iii. For purposes of the


foregoing, "Confidential Information" includes items which are either: (i)
marked “Confidential”, or with some similar designation; or (ii) proprietary or
confidential data, documents, materials or information, excluding “Trade
Secrets” (as hereafter defined), which is valuable to the Company and its
affiliates, and the details of which are not generally known to the competitors of
the Company or its affiliates (including, without limitation, information relating
to the Company’s Products and technology, marketing and sales activities and
procedures, research data, price lists, customer requirements, prospect lists,
billing data, and the names of the Company’s suppliers and the terms and
conditions of the Company’s dealings with them). “Trade Secrets” unless
otherwise defined by applicable Florida law, which changes are automatically
incorporated herein by this reference, are defined as business or technical
information of the Company or its affiliates, including but not limited to a
formula, pattern, program, device, compilation of information, method,
technique, or process that: (i) derives independent actual or potential
commercial value from not being generally known or readily ascertainable
through independent development or reverse engineering by persons who can
obtain economic value from its disclosure or use; and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.

c. Remedies. Representative acknowledges and agrees that the Company would suffer
irreparable injury in the event of a breach by it, or any of its employees or agents, of any of the provisions
of this Section 7 and that the Company shall be entitled to an injunction, without bond, restraining
Representative from any breach or threatened breach thereof, and to the reimbursement of costs and
attorneys' fees relating to any such proceeding or any other legal action to enforce such provisions.
However, nothing herein shall be construed as prohibiting the Company from pursuing any other remedies
at law or in equity which it may have for any such breach or threatened breach of any provision of this
Section 7, as any other breach of this Agreement, including the recovery of damages from Representative.

8. Liability.

a. Exclusive Warranty and Remedies. The Company only warrants the Products to the
extent set forth in the Company's standard warranty identified as amended from time to time (the
“Warranty”). Products provided by the Company shall function substantially in conformance with their
published specifications. THIS WARRANTY IS GIVEN IN LIEU OF ALL OTHER EXPRESS
WARRANTIES. COMPANY DISCLAIMS ALL OTHER WARRANTIES OR CONDITIONS, EXPRESS
OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OR CONDITIONS OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE OR PURPOSE. Any software
provided by a third party vendor will be licensed and warranted directly by the copyright owner.

b. LIMITED LIABILITY. If any Product sold hereunder fails to meet the foregoing
Warranty, the Company’s obligation, and the Representative and third party’s sole remedy, shall be the
replacement or repair of the defective Product or reimbursement of the price thereof at the Company’s
option. The liability, if any, of the Company for damages whether arising from breach of warranty,
negligence, indemnity, strict liability or other tort, or otherwise with respect to the Products is limited to an

29
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

amount not to exceed the price of the Product giving rise to the liability. EXCEPT AS PROVIDED IN
THIS SECTION 8., THE COMPANY MAKES NO EXPRESS OR IMPLIED WARRANTIES IN
CONNECTION WITH THE SALE OF THE PRODUCTS, INCLUDING ANY EXPRESS OR
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. IN NO EVENT SHALL THE COMPANY HAVE ANY LIABILITY TO
REPRESENTATIVE OR ANY THIRD PARTY OTHER THAN FOR REPLACEMENT OF,
REPAIR OF OR REIMBURSEMENT FOR ANY NON- CONFORMING PRODUCT, WITH
COMPANY LIABILITY FOR MATTERS SUCH AS LOSS OF ANTICIPATED PROFITS,
FAILURE TO ACHIEVE ANTICIPATED COST SAVINGS, GOODWILL, REPUTATION OR
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGE SUFFERED BY
REPRESENTATIVE OR ANY THIRD PARTY BEING SPECIFICALLY HEREBY EXCLUDED.
The Company disclaims all responsibility for product installation and post-installation performances.
Representative agrees to indemnify the Company for all losses, including attorney’s fees, caused by
Representative’s conduct or installation or post-installation performance of the Products. This
indemnification obligation shall survive the termination or expiration of this Agreement for any reason
whatsoever.

c. Notice of Claim. Each Party shall promptly give notice in writing to the other Party in
the event that it becomes aware of any claim by third parties alleging any fault or defect (however arising)
in any Product or arising out of its use.

9. Relationship Between the Parties. Representative understands and agrees that it is an


independent contractor, and Representative and its employees and agents are not agents or employees of the
Company. Except as expressly set forth in this Agreement, Representative and its employees and agents are free to
exercise their own judgment concerning the time, place and manner of performing Representative’s obligations
hereunder. In addition, Representative and its employees and agents will not be treated as employees with respect to
the services provided pursuant to this Agreement for federal or state tax purposes or for any other reason. This
Agreement does not create a franchise, and the parties are not joint venturers or partners.

10. Taxes/Benefits. Because this Agreement creates an independent contractor relationship, the
parties understand that the Company has no obligation to withhold any state or federal income taxes, social security,
or other taxes from payments to Representative, nor shall it make any workers’ compensation or unemployment
benefit payments, contributions or payroll tax payments on behalf of Representative and anyone employed or
engaged by Representative. Representative agrees that neither it nor any of its employees or agents shall be entitled
to participate in any employee benefit plans, retirement, insurance or other benefit programs of the Company.
Vacation time, sick time and holiday pay will likewise be Representative's sole responsibility, and time off for
such activities by Representative’s employees and agents should not and shall not be billed to the Company.
Because Representative is an independent contractor, the Company is not required to withhold any tax for any
commission or other payments made to Representative, and the Company will issue a Form 1099 for all
compensation paid to Representative.

11. Representative Warranties. Representative represents and warrants to the Company that its
engagement with the Company, and Representative’s use on the Company’s behalf of any skills and knowledge it
and its employees and agents possess, will not breach any confidentiality, non-compete or non-solicitation
agreement or other contract with any current or former employer, contractor or any other third-party and, to the best
of Representative's knowledge, will not violate any law. Representative agrees that it will provide the Company
with a copy of any and all agreements with third-parties that limit Representative's or its assigned employees' and
agents’ right to disclose to the Company any ideas, inventions, discoveries, or other information or to otherwise
perform services for or on behalf of the Company. Representative further represents and warrants to the Company
that it and its employees and agents have not brought and will not use in the performance of their services for the
Company any materials or documents of a current or former employer or contractor that are not generally available
to the public, unless Representative has obtained written authorization from the employer, contractor or other owner
for their possession and use and provided the Company with a copy thereof. In addition, Representative understands
and agrees that, during its engagement with the Company, Representative should not directly or indirectly breach
any obligation of confidentiality that it or its employees and agents have to current or former employers, contractors
or to other persons or entities.

30
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

12. Assignment: Subcontracting. This Agreement shall be binding upon the parties and their
respective successors, heirs (if applicable) and permitted assigns; provided, however, that Representative may not
assign, sub-license, transfer, subcontract, or delegate any of its duties, responsibilities, rights, title or interest in this
Agreement to any third party without the prior written consent of the President of the Company. Representative
further acknowledges and agrees that in the event of the transfer and/or assignment of this Agreement to a successor
or assignee of the Company, this Agreement shall remain valid and be fully enforceable by such entity.

13. Entire Agreement. This Agreement contains the entire agreement of the parties relating to the
subject matter hereof and supersedes and replaces any other understandings and agreements, whether oral or in
writing, previously entered into by the parties with respect to Representative’s appointment as an independent
manufacturer’s representative.

14. Amendments/Waiver. This Agreement shall not be amended or modified except by an


agreement in writing signed by duly authorized representatives of the parties hereto. In addition, failure of either
party to enforce at any time or for any period of time the provisions of this Agreement shall not be construed to be a
waiver of such provisions or of the right of such party thereafter to enforce such provisions.

15. Notices. Any notice to be given hereunder shall be in writing and delivered personally, sent by
reputable overnight courier service, or sent by certified or registered mail, postage prepaid, return receipt requested,
addressed to the party concerned at the following address:

If to the Company: If to Representative:

CRS Industries, Inc. MacDonald Systems Inc.


6304 Benjamin Road 12804 Willow Centre
Suite 502 Bldg. C
Tampa, FL 33634 Houston, TX 77066
Attn: Eric Streed Attn: Andy MacDonald

Either party may change its address for purposes of this Agreement by notice given in compliance with this
Section. All such notices, requests, demands and communications shall be deemed to have been given on the date of
delivery if personally delivered or sent by certified mail or reputable courier service, or on the third business day
following the mailing thereof if sent by first class registered mail, postage prepaid.

16. Governing Law/Arbitration.

a. Governing Law. The parties agree that this Agreement shall be construed in accordance
with the laws of the State of Florida, regardless of where the Representative is located or its services are
performed and irrespective of conflict of law principles. The United Nations Convention on the
International Sale of Goods shall not apply to this Agreement or the sale of Products hereunder.

b. Arbitration. Except as set forth in Section 7.c. hereof, all claims, disputes and other
matters in question arising out of or relating to this Agreement or to the breach hereof shall be decided by
arbitration in the City of Tampa, Florida by a panel of three arbitrators: one to be chosen by
Representative, one to be chosen by the Company, and the third to be chosen by the two arbitrators so
selected. In the event the two arbitrators chosen by the parties cannot agree on the appointment of the
third arbitrator, such arbitrator will be nominated in accordance with the civil procedure law of Florida
and all arbitration shall be conducted in conformity to the same law.

17. Counterparts. This Agreement may be signed and delivered in two or more counterparts, all of
which when so signed shall have the full force and effect of an original. Signatures delivered by facsimile or other
electronic transmission shall have the same force and effect as manual signatures delivered in person.

31
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

18. Construction. The parties have jointly negotiated this Agreement, and any ambiguity in the
language shall not be construed with the presumption in favor of or against any party. The titles and headings are
for reference purpose only, and shall not in any manner limit the construction of this Agreement, which shall be
considered as a whole.

IN WITNESS WHEREOF, each party has executed this Agreement as of the day and year first above
written.

CRS INDUSTRIES, INC. MACDONALD SYSTEMS, INC.

-
>* DocuSigned by:

By: By:
(Signature)

Name: Eric Streed - CEO Name: Andy MacDonald Title: Presi dent

Date: August 27, 2012 'Date:


9/3/2012

32
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

EXHIBIT A
TO
INDEPENDENT MANUFACTURER’S REPRESENTATIVE AGREEMENT BETWEEN
CRS INDUSTRIES, INC. AND MACDONALD SYSTEMS, INC.

EFFECTIVE AS OF SEPTEMBER 1, 2012

PRODUCTS

The term “Products” shall mean the products identified in the product summary below, sold under the
“Cosatron®” name from time to time by the Company (or under any other name, trade name or assumed name the
Company may use from time to time) to any segment of the Market, as such market is defined in Exhibit B to this
Agreement. “Products” also includes such other products as the Company and the Representative shall mutually
agree upon in writing from time to time during the term of this Agreement, including other subsequent products or
product lines assigned to Representative in which the Company later enters during Representative’s engagement
with the Company.

Commercial

The parties, however, agree that unless otherwise stated above, the following products are “Excluded
Products” that are not part of the covered “Products” under this Agreement:

Residential

Acknowledged By:
by:

9/3/2012 'b\
Date: - v 0D~07 '17BB9534C0. . .
Signature of Representative

33
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

EXHIBIT B
TO
INDEPENDENT MANUFACTURER’S REPRESENTATIVE AGREEMENT BETWEEN
CRS INDUSTRIES, INC. AND MACDONALD SYSTEMS, INC.

EFFECTIVE AS OF SEPTEMBER 1, 2012

MARKET

The term “Market” shall mean the following identified and agreed-to sales segments for such Product uses
as may be reasonably defined from time to time by the Company, whether in commercial or non-commercial
applications:

The Commercial Channel Market segment, which includes the direct sale of Products to the following new
customer account entities established by Representative without the joint assistance of the Company, unless
otherwise specified below:

• None specified as of this date

The parties further agree that the following business entities are “Excluded Entities” that are not part of
the Market:

No exclusions as of this date

DocuSigned by:
Acknowledged By:
16\
Date: 9/3/2012
- S 66P67<17BB953/1C0
Signature of Representative

34
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

EXHIBIT C
TO
INDEPENDENT MANUFACTURER’S REPRESENTATIVE AGREEMENT BETWEEN
CRS INDUSTRIES, INC. AND MACDONALD SYSTEMS, INC.

EFFECTIVE AS OF SEPTEMBER 1, 2012

TERRITORY

The Territory assigned to Representative as of the initial date of this Agreement is:

On File at Company

NB: No changes have been made in any territory assignments as a result of this Agreement on this date

Acknowledged By:
-
* DocuSigned by:

9/3/2012
I\AM1)6\AALJL
Date: -Si -
6EF6717BB0531C0...
Signature of Representative

35
DocuSign Envelope ID: 13776286-CD63-4FAE-871B-76525B1BB9AD

EXHIBIT D
TO
INDEPENDENT MANUFACTURER’S REPRESENTATIVE AGREEMENT BETWEEN
CRS INDUSTRIES, INC. AND MACDONALD SYSTEMS, INC.

EFFECTIVE AS OF SEPTEMBERl, 2012

INITIAL SALES TARGETS

Calendar Year Sales Target


2012 $10,000
2013 $50,000
2014 $75,000

Acknowledged By:
-
* DocuSigned by:

Date: 9/3/2012
- ...
A - 0Cr0717&B9534Cfr7
Signature of Representative
-

36
Appendix
Tab 2
7/24/2016 7:12:20 PM
Chris Daniel - District Clerk Harris County
Envelope No. 11792502
By: KATINA WILLIAMS
Filed: 7/25/2016 12:00:00 AM

CAUSE NO. 2016-41521

MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT OF


§
Plaintiff, §
§
vs. § HARRIS COUNTY, TEXAS
§
COSATRON, INC. and §
STUART TILLMAN §
§
Defendants. § 152ND JUDICIAL DISTRICT
§

DEFENDANT CRS INDUSTRIES, INC.’S APPLICATION TO


COMPEL ARBITRATION & STAY PROCEEDINGS

Defendant CRS Industries, Inc. (improperly sued as CosaTron, Inc. ') files this application

to compel arbitration and stay proceedings and respectfully shows as follows:

Summary

Plaintiff’s claims against CRS are subject to a broad arbitration provision requiring
arbitration in Florida. Plaintiff’s allegations demonstrate that this lawsuit relates to
the agreement containing that arbitration provision and that resolution of the claims
will require the interpretation and application of that agreement. CRS, therefore,
requests that the court stay this proceeding and order plaintiff to pursue its claims
against CRS, if at all, through arbitration as required by the parties’ agreement.

Factual Background

A. The Contract Containing the Arbitration Provision

As plaintiff states in paragraph 10 of Plaintiff’s Original Petition, plaintiff and CRS

Industries, Inc. entered into a Manufacturer’s Representative Agreement. The agreement is

attached here as part of the Declaration of Eric Streed attached as Exhibit “A.” The Manufacturer’s

Representative Agreement contains a broad arbitration provision which states:

. . .all claims, disputes and other matters in question arising out of or relating to
this Agreement or to the breach hereof shall be decided by arbitration in the

1
Defendant CRS Industries, Inc. is improperly named CosaTron, Inc. in Plaintiffs Original Petition. In fact,
“CosaTron’' is a d/b/a for CRS Industries, Inc.

14
City of Tampa, Florida by a panel of three arbitrators: one to be chosen by
Representative, one to be chosen by the Company, and the third to be chosen by
the two arbitrators so selected. In the event the two arbitrators chosen by the parties
cannot agree on the appointment of the third arbitrator, such arbitrator will be
nominated in accordance with the civil procedure law of Florida and all arbitration
shall be conducted in conformity to the same law.

Ex. A at §16 b. (emphasis added).

B. The Substance of Plaintiff’s Allegations

Plaintiff filed this lawsuit on June 17, 2016. Plaintiff’s Original Petition describes the

Manufacturer’s Representative Agreement and the plaintiff’s performance under that agreement:

In 2012 MacDonald and CosaTron entered into a Manufacturer’s


Representative Agreement. Under that agreement, MacDonald served as an
independent manufacturer’s representative and assisted CosaTron with sales of its
various products.

Plaintiff was aware of a HVAC company in Houston, Texas called DuPure Water
Filters, who MacDonald called on regarding the use of CosaTron products.

Plain. Orig. Pet. at (||‘|| 10-11. The allegations in the Petition further implicate specific portions of

the Manufacturer’ s Representative Agreement. For example, plaintiff alleges that it developed a

modification of CRS’s product that would create a new market for the product:

Andy MacDonald, one of the principals of MacDonald Systems, Inc., came up


with an idea for an air filtration system (hereinafter referred to as the
“System”) that would incorporate a CosaTron product and create a new market
for DuPure. CosaTron and DuPure both fell in love with Andy MacDonald’s
design.

Id. at 11 (emphasis added). The ownership of any modification or enhancement of CRS’s

products is addressed in the Manufacturer’s Representative Agreement which contains a provision

addressing the ownership of intellectual property related to CRS’s products:

Intellectual Property. The Company retains sole and exclusive ownership of


all copyrights, patents, trade secrets, know-how and other proprietary and
intellectual property rights in the Products, whether or not registered and including,
without limitation, all registrations and applications with respect thereto, all
“Trademarks” (as defined in the following provision), and all modifications,
enhancements, documentation, designs, engineering details, schematics, drawings

15
and other data or information pertaining to the Products as they exist now or in
the future.

Ex. A at § 3. a. (emphasis added).

Plaintiff’s claims also potentially relate to the merger provision in the Manufacturer’s

Representative Agreement. While plaintiff’s petition is unclear about when the alleged

representations were made, based on a demand letter that plaintiff sent before filing suit, it appears

that plaintiff believes that the representations were made before the parties entered into the

Manufacturer’s Representative Agreement. But the Manufacturer’s Representative Agreement

contains a merger provision which states:

Entire Agreement. This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and supersedes and replaces any other
understandings and agreements, whether oral or in writing, previously entered
into by the parties with respect to Representative’s appointment as an independent
manufacturer’s representative.

Id. at §13 (emphasis added). Any resolution of plaintiff’s claims against CRS will require the

consideration and potential application of the merger provision in the Manufacturer’s

Representative Agreement to the claims.

While it is not mentioned in plaintiff’s Petition, plaintiff also still owes money to CRS for

a debt that was incurred in connection with plaintiff’s actions as CRS’s representative. If litigation

proceeds, CRS will pursue a claim for that debt which should also be arbitrated.

Argument and Authorities

A. Enforceability of Arbitration Agreements

The law is well settled that where parties have entered into a valid agreement to arbitrate,

it must be enforced. The Federal Arbitration Act states: “A written provision in any . . . contract

evidencing a transaction involving commerce to settle by arbitration a controversy thereafter

16
arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable.” 9

U.S.C. § 2.

The Federal Arbitration Act applies to the Manufacturer’s Representative Agreement

because the transaction clearly involves commerce. See Ex. A. and Plain. Orig. Pet. stating that

plaintiff is a Texas company and CRS is a Florida company with its principal office in North

Carolina. While the Federal Arbitration Act applies, the law is the same in both Florida2 and Texas.

FL. STAT. § 682.02; TEX. CIV. PRAC. & REM. CODE § 171.001.

The FAA reflects a “congressional declaration of a liberal federal policy favoring

arbitration agreements.” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460

U.S. 1, 24 (1983). “Congress enacted the FAA to replace judicial indisposition to arbitration with

a ‘national policy favoring [it] and placing] arbitration agreements on equal footing with all other

contracts.’” Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581 (2007) (quoting Buckeye

Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)). The Supreme Court has also stated

that “[t]he FAA reflects the fundamental principle that arbitration is a matter of contract [and]

requires courts to enforce [arbitration agreements] according to their terms.” Rent-a-Center, West

Inc. v. Jackson, 561 U.S. 63, 130 S.Ct 2772, 2776 (2010) (citations omitted).

The FAA requires that a court “shall” enter an order directing arbitration where the parties

have entered into an arbitration agreement. 9 U.S.C. § 4; also see TEX. CIV. PRAC. & REM. CODE

§ 171.021 and FL. STAT. § 682.03. The court must grant an application to compel arbitration

“unless it can be said with positive assurance that an arbitration clause is not susceptible of an

interpretation which would cover the dispute at issue.” Pennzoil Exploration & Prod. Co. v.

Ramco Energy, 139 F.3d 1061, 1067 (5th Cir. 1998); see also Primerica Life Ins. Co. v. Brown,

2
The Manufacturer’s Representative Agreement contains a Florida choice of law provision and the arbitration
provision states that the arbitration will be conducted in conformity with Florida law.

17
304 F.3d 469, 471 (5th Cir. 2002) (“[A]ll doubts concerning the arbitrability of claims should be

resolved in favor of arbitration.”)- Thus, determining whether a dispute is subject to arbitration

involves two considerations: “(1) whether a valid agreement to arbitrate between the parties exists;

and (2) whether the dispute in question falls within the scope of that arbitration agreement.”

Pennzoil, 139 F.3d at 1065.

B. The Arbitration Provision is Valid

An agreement to arbitrate is valid if it meets the requirements of the general contract law

of the state. In re Rubiolci, 334 S.W.3d 220, 224 (Tex. 2011). The arbitration provision in the

Manufacturer’s Representative Agreement is contained in a written contract between two

corporate entities. The language is legible and clearly states the intention to arbitrate.

The plaintiff’s Petition expressly invokes the contract containing the arbitration provision

demonstrating that there is no dispute that the parties entered into the contract. See Plain. Orig.

Pet. atI10. There seems to be no reasonable basis for claiming that the arbitration provision is

invalid. That leaves only the issue of whether the dispute in question falls within the scope of the

arbitration provision.

C. The Dispute Falls Within the Scope of the Arbitration Agreement

1. The provision is broad

While some arbitration provisions are narrow in scope—providing for arbitration of only

certain types of claims—the arbitration provision at issue here contains “relating to” language that

is the hallmark of a broad arbitration provision: “. . . all claims, disputes and other matters in

question arising out of or relating to this Agreement or to the breach hereof shall be decided by

arbitration . . .” Ex. A at § 16. b. (emphasis added).

18
Interpreting similar language, the Houston Court of Appeals, 14th District confirmed that
this language is broad:

The language in the arbitration provision here, requiring arbitration of any


controversy or claim “arising out of or relating to” the Purchase Agreement or the
breach thereof, is recognized as broad language favoring arbitration.

AutoNation USA Corp. v. Leroy, 105 S.W.3d 190 (Tex.App.-Houston [14th Dist.] 2003, no pet.);

see also Osornia v. AmeriMex Motor & Controls, 367 S.W.3d 707, 711 (Tex.App.-Houston [14th

Dist.] 2012, no pet.) (distinguishing as narrow an arbitration provision which lacked “relating to”

language).

“Broad arbitration clauses ... are not limited to claims that literally ‘arise under the

contract,’ but rather embrace all disputes between the parties having a significant relationship to

the contract regardless of the label attached to the dispute.” Pennzoil Exploration & Prod. Co. v.

Ramco Energy, 139 F.3d 1061, 1067 (5th Cir. 1998). “If the court finds that the clause is broad,

any dispute between the parties falls within the scope of the clause if it is connected with or related

to the contract.” Jureczki v. Banc One Tex., N.A., 252 F. Supp. 2d 368, 374 (S.D. Tex. 2003); see

also Pers. Sec. & Safety Sys. v. Motorola Inc., 297 F.3d 388, 392 95 (5th Cir. 2002) (provision

requiring arbitration of disputes “arising out of or relating to” the agreement required arbitration

of claims relating to violation of a separate stock purchase agreement).

The Texas Supreme Court has also emphasized that under the FAA, “any doubts as to

whether [a plaintiff’s] claims fall within the scope of the agreement must be resolved in favor of

arbitration.” Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995). Indeed, “[t]he

policy in favor of enforcing arbitration agreements is so compelling that a court should not deny

arbitration ‘unless it can be said with positive assurance that an arbitration clause is not susceptible

of an interpretation which would cover the dispute at issue.’” Id. (quoting Need v. Hardee's Food

Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990)).

19
2. Plaintiff's claims “relate to ” the Manufacturer’s Representative Agreement
In determining whether a claim falls within the scope of an arbitration clause, courts must

“focus on the factual allegations of the complaint, rather than the legal causes of action asserted.”

Marshall, 909 S.W.2d at 900. In Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 498 (Tex.App.-

San Antonio 2000, no pet.), the court explained that “if the facts alleged ‘touch matters,’ have a

‘significant relationship’ to, are ‘inextricably enmeshed’ with, or are ‘factually intertwined’ with

the contract that is subject to the arbitration agreement, the claim will be arbitrable.”

As described in the factual background section above, plaintiff’s claims relate to the

Manufacturer’s Representative Agreement which contains the arbitration provision. Plaintiff’s

Petition states barely more than one page of factual allegations. The longest of the seven

paragraphs—paragraph 14—does not even relate to CRS. In the remaining six paragraphs the

Petition makes repeated reference to the Manufacturer’s Representative Agreement, plaintiff’s

actions under that agreement, and allegations which implicate portions of the agreement.

The Petition explains that plaintiff served as a representative of CRS and expressly

references the Manufacturer’s Representative Agreement. Plain. Orig. Pet. at (J[ 10. The Petition

further alleges that as part of calling on one particular customer in its role as CRS ’s representative,

plaintiff conceptualized a modification of CRS’s products and promises were allegedly made that

were later breached. Id. at CJ[ 11. The few facts that are plead fall within the arbitration provision’s

language which encompasses all claims and disputes relating to the agreement.

The claims also relate to the Manufacturer’s Representative Agreement because particular

provisions of the agreement will need to be interpreted and applied. For example, the intellectual

property provision and merger provision in the Manufacturer’s Representative Agreement directly

relate to plaintiff’s allegations. Ex. A. at § 3 and 13. Accordingly, plaintiff’s claims not only “relate

20
to” the Manufacturer’s Representative Agreement (which alone would be enough to require

arbitration) but they are also directly governed by certain parts of the Manufacturer’s

Representative Agreement.

In light of: (1) the factual allegations demonstrating the relationship of plaintiff’s claims to

the Manufacturer’s Representative Agreement, (2) the “relating to” language in the clause itself

which courts recognize as broad and thus requiring arbitration of any dispute touching on the

agreement, and (3) the recognized law and public policy that any doubts be resolved in favor of

arbitration, plaintiff’s claims against CRS fall within the scope of the arbitration provision and

must be arbitrated.

Conclusion

For the foregoing reasons, CRS respectfully requests that this court stay this proceeding

and order plaintiff to pursue its claims against CRS, if at all, through arbitration as required by the

parties’ agreement.

Respectfully submitted,

MOUERHUSTON PC

By: /s/ Penn C. Huston


Penn C. Huston
State Bar No. 00796804
MouerHuston PC
349 Heights Boulevard
Houston, Texas 77007

(832)410-4540
Counselfor defendants

21
CERTIFICATE OF SERVICE

Ihereby certify that on this 24th day of July, 2016, a true and correct copy of the foregoing
was served via electronic filing and email:

Randy L. Wooten
5625 FM 1960 Road West, Suite 214
Houston, Texas 77069
(281) 580-6419
(281) 580-7628 Facsimile
rlwooten @ rlwootenlaw.com

Gary F. Cerasuolo
7500 San Felipe St., Suite 777
Houston, Texas 77063
(713)787-0003
(713)782-6785 Facsimile
gfc@texasweblawyer.com

/s/ Penn C. Huston


Penn C. Huston

22
Appendix
Tab 3
6/17/2016 10:49:37 AM
Chris Daniel - District Clerk Harris County
Envelope No. 11199744
2016-41521 / Court: 152 By: Nelson Cuero
Filed: 6/17/2016 10:49:37 AM

CAUSE NO.

MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT OF


Plaintiff §
§
V. § HARRIS COUNTY, TEXAS
§
COSATRON, INC. and §
STU ART TILLMAN §
Defendants § JUDICIAL DISTRICT

PLAINTIFF’S ORIGINAL PETITION

TO THE HONORABLE JUDGE OF SAID COURT:

COMES NOW, Plaintiff MACDONALD SYSTEMS, INC., and files its Original
Petition complaining of Defendants COSATRON, INC. and STUART TILLMAN, and for
cause would show the Court the following:

I. DISCOVERY CONTROL PLAN


1. Pursuant to Rule 190.1 of the Tex. R. Civ. P., Plaintiffs intend to conduct
discovery under Level 2 of Rule 190.3 of the Tex. R. Civ. P.

II. RELIEF SOUGHT


2. Pursuant to Rule 47(c) of the Tex. R. Civ. P., Plaintiff affirmatively pleads that it
seeks monetary relief over $200,000 but not more than $ 1,000,000.

III. PARTIES AND SERVICE


3. Plaintiff MACDONALD SYSTEMS, INC. (hereinafter referred to as

“MacDonald”) is a private for-profit corporation duly incorporated and existing under the laws
of the State of Texas, with its principal place of business located in Harris County, Texas.

4. Defendant COSATRON, INC. (hereinafter referred to as “CosaTron”) is a foreign


corporation existing under the laws of the State of Florida which does business is Hands County,

MACDONALD SYSTEMS V. CSS INDUSTRIES BT AL


.PLAINTIFF'S ORIGINAL PETITION PAGE 1 OF 6

3
Texas. CosaTron’ s principal address is 40 ODELL SCHOOL ROAD. SUITE 1, CONCORD,
NORTH CAROLINA, 28027. Defendant CosaTron may be served with process by serving the
Texas Secretary of State at: SERVICE OL PROCESS, SECRETARY OF STATE, JAMES E.
RUDDER BUILDING, 1019 BRAZOS, ROOM 105, AUSTIN, TEXAS 78701.

5. Defendant STUART TILLMAN (hereinafter referred to as “Tillman”) is an


individual who resides in Harris County, Texas and may be served with process at his usual
place of abode, 5016 LILLIAN STREET, HOUSTON, TEXAS 77007.

IV. JURISDICTION AND VENUE


7. Venue is proper in Hands County, Texas pursuant to TEX. CIV. PRAC. AND REM.
CODE, ANN., § 15.002(a) because all or a substantial part of the events or omissions giving rise to
the claim occuned in Harris County, Texas and because Defendant Tillman was a resident of
Harris County, Texas at all times relevant to this claim.

8. The damages in this case far exceed the minimal jurisdictional requirements of
this Court. This Court has subject matter jurisdiction over the claims and has personal
jurisdiction over the Defendants. Plaintiff is seeking damages of over $200,000 but less than
$1,000,000.

V. BACKGROUND/STATEMENT OF FACTS
9. Defendant CosaTron is a national provider of air filter systems and products.
Plaintiff is an entity that acts as a corporate representative for various companies to help them
market their products.

10. In 2012 MacDonald and CosaTron entered into a Manufacturer’s Representative


Agreement. Under that agreement, MacDonald served as an independent manufacturer’s
representative and assisted CosaTron with sales of its various products.

11. Plaintiff was aware of a HVAC company in Houston, Texas called DuPure Water
Filters, who MacDonald called on regarding the use of CosaTron products. As a result of this

MACDONALD SYSTEMS V. CSS INDUSTRIES B3J AL


.PLAINTIFF'S ORIGINAL PBSOTION PAGE 2 OF 6

4
discussion, Andy MacDonald, one of the principals of MacDonald Systems, Inc,, came up with
an idea for an air filtration system (hereinafter referred to as the “System”) that would

incorporate a CosaTron product and create a new market for DuPure. CosaTron and DuPure
both fell in love with Andy MacDonald’s design.

12. The parties agreed that MacDonald would be compensated for his design and
creativity by being allowed to purchase the System from CosaTron and then sell it to DuPure for
$300 more per unit than it paid for the System.

13. Once all of the key elements were in place, CosaTron’ s CEO requested a face-to-
face meeting with DuPure and Plaintiff. Immediately prior to said meeting, the CEO of
CosaTron fired Plaintiff and proceeded to the meeting with DuPure without Plaintiff being
present or involved.

14. Sometime thereafter, Plaintiff contacted Tillman, the owner of DuPure, about the
System and whether or not CosaTron and DuPure had completed their discussions regarding the
System. Tillman replied by asking Plaintiff to hold off on filing a lawsuit so that Tillman could
sell his company to a third party. Tillman agreed to “take care of’ Plaintiff in exchange for
Plaintiff not filing a lawsuit regarding the System designed by Andy MacDonald. Plaintiff
agreed, and DuPure was sold to Cirrus Air. After the sale, Plaintiff approached Tillman about
his promise of compensation, but Tillman simply ignored all of Plaintiff’s efforts to discuss the
System.

15. It is believed that Cirrus Air is still buying the System that Plaintiff designed from
CosaTron and is actively selling the product to homeowners everywhere.

VI. CLAIMS
Promissory Estoppel

16. Each of the Defendants made a promise to Plaintiff upon which the Plaintiff
reasonably and substantially relied to its detriment. Plaintiffs reliance was reasonably

MACDONALD SYSTEMS V. CHS INDUSTRIES ET AL


PLAINTIFF'S ORIGINAL PSIKTION PAGE M m 6
5
foreseeable by each of the Defendants, and the injustice caused can be avoid only by enforcing
the promise made by each of the Defendants to compensate Plaintiff $300 per System unit sold.

17. Additionally, Tillman promised the Plaintiff that if the Plaintiff would let him sell
his company without there being any litigation over the System, Tillman would “take care of’
Plaintiff. Plaintiff reasonably and substantially relied upon the promise to its detriment.
Plaintiffs reliance was reasonably foreseeable by Tillman and the injustice caused can be avoid
only by enforcing Tillman’s promise to “take care of’ the Plaintiff.

Quantum Meruit
18. Alternatively, Plaintiff brings this action to recover in quantum meruit for
valuable services rendered to the Defendants, which the Defendants knowingly and willingly
accepted and which were beneficial to the Defendants. Under the terms of the contract with
Defendants, Defendants agreed to pay Plaintiff $300 per System unit as his compensation for the
creation of the System. Defendants had reasonable notice that Plaintiff fully expected
compensation for the services that he rendered.

19. Failure to allow Plaintiff to recover for the reasonable value of the services it
rendered on behalf of the Defendants would result in the unjust enrichment of each of the
Defendants. Plaintiff does not know the exact amount of sales of the System itself, and therefore
cannot accurately estimate the damages it has sustained.

Breach of Contract
20. Plaintiff and each of the Defendants entered into an agreement with regard to the
production of the System, and as a result of that agreement, Plaintiff was to receive $300 per unit
sold from CosaTron to DuPure and/or its successor, Cirrus Air. The System is currently being
sold by CosaTron directly to Cirrus Air, and the Plaintiff has not received any compensation for
any of said sales.

MACDONALD SYSTEMS V. CHS INDUSTRIES ET AL


PLAINTIFF'S ORIGINAL PSIKTION PAGE 4 gar 6

6
V. CONDITIONS PRECEDENT
21. All conditions precedent to Plaintiff s right to recover for the Defendants have
occurred, have been performed, or have been waived by Defendant.

VI. ATTORNEY’S FEES


22. As a result of Defendants’ actions, Plaintiff was required to employ the services
of RANDY L. WOOTEN, P.C., a duly-licensed Texas attorney, to prosecute this matter.
Plaintiff is entitled to reasonable and necessary attorney’s fees pursuant to Chapter 27 of the
Texas Business & Commerce Code and Chapter 38 of the Texas Civil Practice & Remedies
Code.

VII. DAMAGES
23. Defendants are liable to Plaintiff for damages of any kind, penalties, costs,
expenses, pre-judgment interest, and attorney’s fees in an amount in excess of $200,000.

VIII. RIGHT TO AMEND


24. Plaintiff specifically reserves the right to amend and/or supplement the allegations
in this petition concerning the facts, the liability of the Defendants, and damages in order to
conform with the evidence as it is discovered prior to trial and introduced at the trial of this
cause, in accordance with the evidence, the Texas Rules of Civil Procedure, and this Court’s
orders to amend.

IX. PRAYER
WHEREFORE, PREMISES CONSIDERED, Plaintiff MACDONALD SYSTEMS, INC.
prays that Defendants COSATRON, INC. and STUART TILLMAN be cited to appeal' and
answer herein, and that, after a trial on the merits of this case, Plaintiff shall have and recover
final judgment against Defendants for the following:
a. Judgment against Defendants, jointly and severally, for actual damages,
consequential damages, and economic damages;
b. Pre-judgment interest at the maximum rate permitted by law;

MACDONALD SYSTEMS V. CSS INDUSTRIES BT AL


.PLAINTIFF'S ORIGINAL PETITION PAGE 5 OF 6

7
c. Post-judgment interest at the maximum rate permitted by law until paid in
full;
d. Reasonable and necessary attorney’s fees;
e. Costs of court; and
f. Such other and further relief, both general and special, legal and equitable,
to which Plaintiff may show itself justly entitled.

Respectfully submitted,

RANDY L. WOOTEN, P.C.

By _ /s/ Randy L. Wooten _


Randy L. Wooten
SBN 21993400
5625 FM 1960 Road West, Suite 214
Houston, TX 77069-4210
(281)580-6419
(281)580-7628 Facsimile
BLWooten@rhy-ooteniaw.com

ATTORNEY FOR PLAINTIFF

MACDONALD SYSTEMS V. CSS INDUSTRIES BT AL


.PLAINTIFF'S ORIGINAL PETITION PAGE 6 OF 6

8
Appendix
Tab 4
9/8/2016 3:16:24 PM
Chris Daniel - District Clerk Harris County
Envelope No. 12596510
By: KATINA WILLIAMS
Filed: 9/8/2016 3:16:24 PM

CAUSE NO. 2016-41521

MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT


Plaintiff §
V. § HARRIS COUNTY, TEXAS
§
COSATRON, INC. and §
STUART TILLMAN §
Defendants § 152nd JUDICIAL DISTRICT

PLAINTIFF’S RESPONSE TO APPLICATION TO COMPEL ARBITRATION AND


STAY PROCEEDINGS

TO THE HONORABLE JUDGE OF SAID COURT:

COMES NOW, Plaintiff MACDONALD SYSTEMS, INC. (“MacDonald”) and files


this Response to Defendant CRS INDUSTRIES, INC.’s (“CRS”) Application to Compel
Arbitration and Stay Proceedings and would show the Court the following:

1. CRS’s Application to Compel Arbitration and Stay Proceedings is based on its


belief that the Manufacturer’s Representative Agreement (the “Agreement”) executed by CRS
and MacDonald is the controlling agreement that dictates how the parties are to proceed with
claims against each other.

2. Plaintiffs claims against CRS are not subject to the broad arbitration provision set
out in the Agreement because the Agreement is not applicable to the facts of this case.

3. The Agreement specifically states that MacDonald will serve as an independent


manufacturer’s representative for CRS’s products identified in Exhibit A to the Agreement (see
Exhibit A to the Exhibit A attached to Plaintiffs Application herein). Exhibit A, “Products,”
only includes commercial product lines and specifically excludes all residential product lines.

4. The product in question, a filter system, is strictly for use on a residential basis
and therefore it is not covered under the provisions of the Agreement.

MSySMsfiKBD .STSTBUS V. COSATHON ET AL


EBSPONSE TO APPLICATION FOR AKSITKATIOH PAGE x nr 3

38
5. The CRS CEO and/or president at that time, Stuart P. Myers, sent a letter to
MacDonald, attached here to as Exhibit 1 and incorporated herein for all purposes, stating that
the product would be the subject of a separate contract for residential sales.

6. Because the product in question is not subject to the Manufacturer’s


Representative Agreement, the arbitration clause therein is not applicable to this case.

WHEREAS, PREMISES CONSIDERED, Defendant CRS’s Application to Compel and


Stay Proceedings should be denied and the Plaintiff should be allowed to go forward in this
Court with its claims against Defendants.

Respectfully submitted,

RANDY L. WOOTEN, P.C.

By. _/s/ Randy L. Wooten _


Randy L. Wooten
SBN 21993400
5625 FM 1960 Road West, Suite 214
Houston, TX 77069-4210
(281) 580-6419
(281) 580-7628 Facsimile
RLWooten@rlwootenlaw.com

ATTORNEY FOR PLAINTIFF

MACDONALD SYSTEMS V. COSATRON ET AL


RESPONSE TO APPLICATION FOR ARBITRATION PAGE 2 OF 3

39
CERTIFICATE OF SERVICE

Pursuant to TEX. R. CIV. P. Rule 21(a), Ihereby certify that on the 8th day of September 2016, a true and correct
copy of the foregoing RESPONSE TO APPLICATION TO COMPEL ARBITRATION AND STAY
PROCEEDINGS was forwarded to all interested counsel, as listed below, via USPS First-Class Mail;
_ USPS First-Class CMRRR; hand delivery; confirmed facsimile; or _x _e-mail:

Penn C. Huston
MouerHuston PC
349 Heights Blvd.
Houston, TX 77007
phiiston@mouerhiiston.com

Gary F. Cerasulo
Smith & Cerasulo, LLP
7500 San Felipe, Suite 111
Hosuton, TX 77063
gfc@tesirswebIawy.er,com

_/s/ Randy L, Wooten_


RANDY L. WOOTEN

MACDONALD SYSTEMS V. COSATRON BT AL


RESPONSE TO APPLICATION FOR ARBITRATION PAGE 3 OF 3

40
9/8/2016 3:16:24 PM
Chris Daniel - District Clerk
Harris County
Envelope No: 12596510
By: WILLIAMS, KATINA L
Filed: 9/8/2016 3:16:24 PM

CAUSE NO. 2016-41521

MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT


Plaintiff §
V. § HARRIS COUNTY, TEXAS
§
COSATRON, INC. and §
STUART TILLMAN §
Defendants § 152nd JUDICIAL DISTRICT

ORDER

CAME ON to be heard Defendant CRS INDUSTRIES, INC.’s Application to Compel


Arbitration and Stay Proceedings, and having reviewed same the Court is of the opinion that the
Application should be in all things DENIED;
IT IS THEREFORE ORDERED, AJUDGED, and DECREED that Defendant CRS
INDUSTRIES, INC.’s Application to Compel Arbitration and Stay Proceedings is DENIED.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiffs case shall
remain on the active docket of this Court and that Plaintiff may proceed with the prosecution of its
case.

SIGNED on this day of ., 2016.

JUDGE PRESIDING

MACDONALD SYSTEMS V. COSATBON BT AL


RESPONSE TO APPLICATION FOR ARBITRATION PAGE 1 OF 2

41
APPROVED AS TO FORM AND ENTRY REQUESTED:

RANDY L. WOOTEN, P.C.

By. _/ s/ Randy L, Wooten _


Randy L. Wooten
SBN 21993400
5625 FM 1960 Road West, Suite 214
Houston, TX 77069-4210
(281) 580-6419
(281) 580-7628 Facsimile
RLWooten@ liwootenlaw.com

ATTORNEY FOR PLAINTIFF

MACDONALD SYSTEMS V. COSATRON ET AL


RESPONSE TO APPLICATION FOR ARBITRATION PAGE 2 OF 2

42
'CosaTron
®

Advanced TecHnology for" irsioo" A*:' CSyaiiTy

March 29, 2012?

Andy MacDonald

MacDonald Systems, Inc.

12804 Willow Center #C

Houston, Texas 77066

Re: residential application of COSATRON products

Dear Andy:

Tiis letter serves aÿconfirmatidnÿthat MacDonald Systems, Inc. is COSATRON systems for
r !sideritial applications in your assigned territory. A new sales rep agreement is in the works for all agents, but it is
not quite ready.

fi s the authorized agent in your area, you already have sole control over all sales of company products to
customers in your territory. We understand your customer Dupure wants to have an exclusive agreement
covering the sales of residentialÿ applied systems for their current operation any markets they enter. This letter
acknowledges Dupure as a national account with authority to sell residentially applied COSATRON systems
v rherever they establish distribution and COSATRON or other authorized sales agents for the company will respect
tne accounts established and serviced by Dupure, with one exception. In most similar arrangements, the company
would control sales and pricing to the national account. COSATRON does business through our agents and,
t lerefore, Dupure is YOUR account. We will be very happy to support your requests and those of your customer
Dupure, but COSATRON will not engage in direct sales to Dupure without your involvement. All sales to Dupure,
regardless of the ultimate destination for the product, will be through MacDonald Systems, Inc.

I,s we move forward with new contracts, MacDonald Systems, Inc. will be offered a separate contract for
residential sales. In the new contract, we are reserving the option of having different distribution channels for
residential, industrial, and commercial products. In this case, we are committing in advance to offer you the
residential contract in addition to and separate from your commercial sales agent agreement. Until this contract is
ready, this letter is your confirmation of our agreement and our agreement to protect you and your customer
[ lupure for all of your residential projects. This protection is NOT limited to your current assigned territory; it is for
projects wherever Dupure ships equipment. The new residential contract will NOT include any destination credit
for residential products shipped across territory lines. In fact, no commission or profit splits are anticipated unless
t here is clear effort by more than one agent which ultimately affects the sale.

sincerely,

Stuart P> Myejre, presidfeni®

I 43
I
9/8/2016 4:06:32 P VI
Chris Daniel - District Clerk Harris County
Envelope No. 12599214
By: KATINA WILLIAk, S
Filed: 9/8/2016 4:06:32 P VI

CAUSE NO. 2016-41521

MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT


Plaintiff §
V. § HARRIS COUNTY, TEXAS
§
COSATRON, INC. and §
STUART TILLMAN §
Defendants § 152nd JUDICIAL DISTRICT

DECLARATION OF ANDY MACDONALD

“My name is Andy MacDonald, and my business address is 12804 Willow Centre, Suite
C, Houston, Texas 77066. Iam an officer of MacDonald Systems, Inc.
“Attached to this Declaration is a true and correct copy of a letter I received from Stuart P.
Myers, the then-President of CosaTron.
“I declare under penalty of perjury that the foregoing is true and correct.”

Executed in Harris County, Texas on the 8th day of September, 2016.

/Ipdffiy Mjxipdnald

MACDONALD SYSTEMS V. COSATRON ET AL


DECLARATION PAGE 1 OF 2

44
1

'*** 'CosaTron
Advanced TSsÿrioiogy for ;; vrfoc-r Af«" Quality

March 29, 20121

Andy MacDonald

MacDonald Systems, Inc.

12804 Willow Center #C

Houston, Texas 77066

Re: residential application of COSATRON products

Dear Andy:

This letter serves aÿcpnfirmÿtioh that MacDonald Systems, Inc. is fgEllllSteHH5COSATRON systems for
residential applications in your assigned territory. A new sales rep agreement is in the works for all agents, but it is
not quite ready.

As the authorized agent in your area, you already have sole control over all sales of company products to
customers in your territory. We understand your customer Dupure wants to have an exclusive agreement
covering the sales of residentially applied systems for their current operation any markets they enter. This letter
acknowledges Dupure as a national account with authority to sell residentially applied COSATRON systems
wherever they establish distribution and COSATRON or other authorized sales agents for the company will respect
the accounts established and serviced by Dupure, with one exception. In most similar arrangements, the company
would control sales and pricing to the national account. COSATRON does business through our agents and,
therefore, Dupure is YOUR account. We will be very happy to support your requests and those of your customer
Dupure, but COSATRON will not engage in direct sales to Dupure without your involvement. All sales to Dupure,
regardless of the ultimate destination for the product, will be through MacDonald Systems, Inc.

As we move forward with new contracts, MacDonald Systems, Inc. will be offered a separate contract for
residential sales. In the new contract, we are reserving the option of having different distribution channels for
residential, industrial, and commercial products. In this case, we are committing in advance to offer you the
residential contract in addition to and separate from your commercial sales agent agreement. Until this contract is
ready, this letter is your confirmation of our agreement and our agreement to protect you and your customer
Dupure for all of your residential projects. This protection is NOT limited to your current assigned territory; it is for
projects wherever Dupure ships equipment. The new residential contract will NOT include any destination credit
for residential products shipped across territory lines. In fact, no commission or profit splits are anticipated unless
there is clear effort by more than one agent which ultimately affects the sale.

Sincerely,

Stuart P. Myers,'president'
E*(MVvV
45l
9/8/2016 3:16:24 PM
Chris Daniel - District Clerk
Harris County
Envelope No: 12596510
By: WILLIAMS, KATINA L.
Filed: 9/8/2016 3:16:24 PM
Pgs-2

CPROY
CAUSE NO. 2016-41521
STPRY
MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT
Plaintiff §
V. § HARRIS COUNTY, TEXAS
§
COSATE ON, INC. arid §
STUART TILLMAN §
Defendants § 152nd JUDICIAL DISTRICT

ORDER

CAME ON to be heard Defendant CRS INDUSTRIES, INC.’s Application to Compel


Arbitration and Stay Proceedings, and having reviewed same the Court is of the opinion that the
Application should be in all things DENIED;
ST IS THEREFORE ORDERED, AJODGED, and DECREED that Defendant CRS
INDUSTRIES, INC.’s Application to Compel Arbitration and Stay Proceedings is DENIED.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiffs case shall
remain on the active docket of this Court and that Plaintiff may proceed with the prosecution of its
case.

SIGNED on this day of , 2016.

Signed: (jUr%\ 1
9/13/2016
JUDGE PRESIDING

MACDONALD SYSTEMS V. COSATRON ET AL


RESPONSE TO APPLICATION FOR ARBITRATION PAGE 1 OF 2

46
___
APPROVED AS TO FORM AND ENTRY REQUESTED;

RANDY L, WOOTEN, P.C.

By Is! Randy L. Wooten


Randy L. Woolen
SBN *21993400
5625 FM 3960 Road West, Suite 214
Houston, TX 77069-4210
(281) 580-6419
(281) 580-7628 Facsimile
RLWooten @ rlwootenlaw.com

ATTORNEY FOR PLAINTIFF

MACDONALD SYSTEMS V. COSATRGN ET All


RESPONSE TO APPLICATION FOR ARBITRATION PAGE 2 OF 2

47
Appendix
Tab 5
9/8/2016 4:06:32 P VI
Chris Daniel - District Clerk Harris County
Envelope No. 12599214
By: KATINA WILLIAk, S
Filed: 9/8/2016 4:06:32 P VI

CAUSE NO. 2016-41521

MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT


Plaintiff §
V. § HARRIS COUNTY, TEXAS
§
COSATRON, INC. and §
STUART TILLMAN §
Defendants § 152nd JUDICIAL DISTRICT

DECLARATION OF ANDY MACDONALD

“My name is Andy MacDonald, and my business address is 12804 Willow Centre, Suite
C, Houston, Texas 77066. Iam an officer of MacDonald Systems, Inc.
“Attached to this Declaration is a true and correct copy of a letter I received from Stuart P.
Myers, the then-President of CosaTron.
“I declare under penalty of perjury that the foregoing is true and correct.”

Executed in Harris County, Texas on the 8th day of September, 2016.

/Ipdffiy Mjxipdnald

MACDONALD SYSTEMS V. COSATRON ET AL


DECLARATION PAGE 1 OF 2

44
1

'*** 'CosaTron
Advanced TSsÿrioiogy for ;; vrfoc-r Af«" Quality

March 29, 20121

Andy MacDonald

MacDonald Systems, Inc.

12804 Willow Center #C

Houston, Texas 77066

Re: residential application of COSATRON products

Dear Andy:

This letter serves aÿcpnfirmÿtioh that MacDonald Systems, Inc. is fgEllllSteHH5COSATRON systems for
residential applications in your assigned territory. A new sales rep agreement is in the works for all agents, but it is
not quite ready.

As the authorized agent in your area, you already have sole control over all sales of company products to
customers in your territory. We understand your customer Dupure wants to have an exclusive agreement
covering the sales of residentially applied systems for their current operation any markets they enter. This letter
acknowledges Dupure as a national account with authority to sell residentially applied COSATRON systems
wherever they establish distribution and COSATRON or other authorized sales agents for the company will respect
the accounts established and serviced by Dupure, with one exception. In most similar arrangements, the company
would control sales and pricing to the national account. COSATRON does business through our agents and,
therefore, Dupure is YOUR account. We will be very happy to support your requests and those of your customer
Dupure, but COSATRON will not engage in direct sales to Dupure without your involvement. All sales to Dupure,
regardless of the ultimate destination for the product, will be through MacDonald Systems, Inc.

As we move forward with new contracts, MacDonald Systems, Inc. will be offered a separate contract for
residential sales. In the new contract, we are reserving the option of having different distribution channels for
residential, industrial, and commercial products. In this case, we are committing in advance to offer you the
residential contract in addition to and separate from your commercial sales agent agreement. Until this contract is
ready, this letter is your confirmation of our agreement and our agreement to protect you and your customer
Dupure for all of your residential projects. This protection is NOT limited to your current assigned territory; it is for
projects wherever Dupure ships equipment. The new residential contract will NOT include any destination credit
for residential products shipped across territory lines. In fact, no commission or profit splits are anticipated unless
there is clear effort by more than one agent which ultimately affects the sale.

Sincerely,

Stuart P. Myers,'president'
E*(MVvV
45l
Appendix
Tab 6
9/8/2016 3:16:24 PM
Chris Daniel - District Clerk
Harris County
Envelope No: 12596510
By: WILLIAMS, KATINA L.
Filed: 9/8/2016 3:16:24 PM
Pgs-2

CPROY
CAUSE NO. 2016-41521
STPRY
MACDONALD SYSTEMS, INC. § IN THE DISTRICT COURT
Plaintiff §
V. § HARRIS COUNTY, TEXAS
§
COSATE ON, INC. arid §
STUART TILLMAN §
Defendants § 152nd JUDICIAL DISTRICT

ORDER

CAME ON to be heard Defendant CRS INDUSTRIES, INC.’s Application to Compel


Arbitration and Stay Proceedings, and having reviewed same the Court is of the opinion that the
Application should be in all things DENIED;
ST IS THEREFORE ORDERED, AJODGED, and DECREED that Defendant CRS
INDUSTRIES, INC.’s Application to Compel Arbitration and Stay Proceedings is DENIED.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiffs case shall
remain on the active docket of this Court and that Plaintiff may proceed with the prosecution of its
case.

SIGNED on this day of , 2016.

Signed: (jUr%\ 1
9/13/2016
JUDGE PRESIDING

MACDONALD SYSTEMS V. COSATRON ET AL


RESPONSE TO APPLICATION FOR ARBITRATION PAGE 1 OF 2

46
Appendix
Tab 7
§ 171.021. Proceeding to Compel Arbitration, TX CIV PRAC & REM § 171.021

Vernon's Texas Statutes and Codes Annotated


Civil Practice and Remedies Code (Refs & Annos)
Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
Chapter 171. General Arbitration (Refs & Annos)
Subchapter B. Proceedings to Compel or Stay Arbitrations (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 171.021

§ 171.021. Proceeding to Compel Arbitration

Currentness

(a) A court shall order the parties to arbitrate on application of a party showing:

(1) an agreement to arbitrate; and

(2) the opposing party's refusal to arbitrate.

(b) If a party opposing an application made under Subsection (a) denies the existence of the agreement, the court shall
summarily determine that issue. The court shall order the arbitration if it finds for the party that made the application.
If the court does not find for that party, the court shall deny the application.

(c) An order compelling arbitration must include a stay of any proceeding subject to Section 171.025.

Credits
Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.

V. T. C. A., Civil Practice & Remedies Code § 171.021, TX CIV PRAC & REM § 171.021
Current through the end of the 2015 Regular Session of the 84th Legislature

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1


Appendix
Tab 8
§ 171.098. Appeal, TX CIV PRAC & REM § 171.098

Vernon's Texas Statutes and Codes Annotated


Civil Practice and Remedies Code (Refs & Annos)
Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
Chapter 171. General Arbitration (Refs & Annos)
Subchapter D. Court Proceedings (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 171.098

§ 171.098. Appeal

Currentness

(a) A party may appeal a judgment or decree entered under this chapter or an order:

(1) denying an application to compel arbitration made under Section 171.021;

(2) granting an application to stay arbitration made under Section 171.023;

(3) confirming or denying confirmation of an award;

(4) modifying or correcting an award; or

(5) vacating an award without directing a rehearing.

(b) The appeal shall be taken in the manner and to the same extent as an appeal from an order or judgment in a civil
action.

Credits
Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.

V. T. C. A., Civil Practice & Remedies Code § 171.098, TX CIV PRAC & REM § 171.098
Current through the end of the 2015 Regular Session of the 84th Legislature

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1


Appendix
Tab 9
§ 2. Validity, irrevocability, and enforcement of agreements to arbitrate, 9 USCA § 2

United States Code Annotated


Title 9. Arbitration (Refs & Annos)
Chapter 1. General Provisions (Refs & Annos)

9 U.S.C.A. § 2

§ 2. Validity, irrevocability, and enforcement of agreements to arbitrate

Currentness

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole
or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a
contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract.

CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 670.)

9 U.S.C.A. § 2, 9 USCA § 2
Current through P.L. 114-221.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1


Appendix
Tab 10
682.02. Arbitration agreements made valid, irrevocable, and..., FL ST § 682.02

West's Florida Statutes Annotated


Title XXXIX. Commercial Relations (Chapters 668-688) (Refs & Annos)
Chapter 682. Arbitration Code (Refs & Annos)

West's F.S.A. § 682.02

682.02. Arbitration agreements made valid, irrevocable, and enforceable; scope

Effective: July 1, 2013


Currentness

(1) An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between
the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity
for the revocation of a contract.

(2) The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.

(3) An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract
containing a valid agreement to arbitrate is enforceable.

(4) If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an
agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless
the court otherwise orders.

(5) This section also applies to written interlocal agreements under ss. 163.01 and 373.713 in which two or more parties
agree to submit to arbitration any controversy between them concerning water use permit applications and other matters,
regardless of whether or not the water management district with jurisdiction over the subject application is a party to
the interlocal agreement or a participant in the arbitration.

Credits
Laws 1957, c. 57-402, § 1; Fla.St.1965, § 57.11; Laws 1967, c. 67-254, § 12. Amended by Laws 1998, c. 98-402, § 3, eff.
June 10, 1998; Laws 2010, c. 2010-205, § 26, eff. July 1, 2010; Laws 2013, c. 2013-232, § 7, eff. July 1, 2013.

West's F. S. A. § 682.02, FL ST § 682.02


Current through the 2016 Second Regular Session of the Twenty-Fourth Legislature.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1


Appendix
Tab 11
§ 171.001. Arbitration Agreements Valid, TX CIV PRAC & REM § 171.001

Vernon's Texas Statutes and Codes Annotated


Civil Practice and Remedies Code (Refs & Annos)
Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
Chapter 171. General Arbitration (Refs & Annos)
Subchapter A. General Provisions (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 171.001

§ 171.001. Arbitration Agreements Valid

Currentness

(a) A written agreement to arbitrate is valid and enforceable if the agreement is to arbitrate a controversy that:

(1) exists at the time of the agreement; or

(2) arises between the parties after the date of the agreement.

(b) A party may revoke the agreement only on a ground that exists at law or in equity for the revocation of a contract.

Credits
Amended by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.

V. T. C. A., Civil Practice & Remedies Code § 171.001, TX CIV PRAC & REM § 171.001
Current through the end of the 2015 Regular Session of the 84th Legislature

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1


Appendix
Tab 12
§ 4. Failure to arbitrate under agreement; petition to United States..., 9 USCA § 4

United States Code Annotated


Title 9. Arbitration (Refs & Annos)
Chapter 1. General Provisions (Refs & Annos)

9 U.S.C.A. § 4

§ 4. Failure to arbitrate under agreement; petition to United States court having jurisdiction
for order to compel arbitration; notice and service thereof; hearing and determination

Currentness

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for
arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under
Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties,
for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days' notice in
writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided
by the Federal Rules of Civil Procedure. The court shall hear the parties, and upon being satisfied that the making of
the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing
the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under
such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the
making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall
proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default, or if the matter
in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the
party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application,
demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to
a jury in the manner provided by the Federal Rules of Civil Procedure, or may specially call a jury for that purpose. If
the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder,
the proceeding shall be dismissed. If the jury find that an agreement for arbitration was made in writing and that there
is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.

CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 671; Sept. 3, 1954, c. 1263, § 19, 68 Stat. 1233.)

9 U.S.C.A. § 4, 9 USCA § 4
Current through P.L. 114-221.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1


Appendix
Tab 13
682.03. Proceedings to compel and to stay arbitration, FL ST § 682.03

West's Florida Statutes Annotated


Title XXXIX. Commercial Relations (Chapters 668-688) (Refs & Annos)
Chapter 682. Arbitration Code (Refs & Annos)

West's F.S.A. § 682.03

682.03. Proceedings to compel and to stay arbitration

Effective: July 1, 2013


Currentness

(1) On motion of a person showing an agreement to arbitrate and alleging another person's refusal to arbitrate pursuant
to the agreement:

(a) If the refusing party does not appear or does not oppose the motion, the court shall order the parties to arbitrate.

(b) If the refusing party opposes the motion, the court shall proceed summarily to decide the issue and order the parties
to arbitrate unless it finds that there is no enforceable agreement to arbitrate.

(2) On motion of a person alleging that an arbitration proceeding has been initiated or threatened but that there is no
agreement to arbitrate, the court shall proceed summarily to decide the issue. If the court finds that there is an enforceable
agreement to arbitrate, it shall order the parties to arbitrate.

(3) If the court finds that there is no enforceable agreement to arbitrate, it may not order the parties to arbitrate pursuant
to subsection (1) or subsection (2).

(4) The court may not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the
claim have not been established.

(5) If a proceeding involving a claim referable to arbitration under an alleged agreement to arbitrate is pending in court,
a motion under this section must be made in that court. Otherwise, a motion under this section may be made in any
court as provided in s. 682.19.

(6) If a party makes a motion to the court to order arbitration, the court on just terms shall stay any judicial proceeding
that involves a claim alleged to be subject to the arbitration until the court renders a final decision under this section.

(7) If the court orders arbitration, the court on just terms shall stay any judicial proceeding that involves a claim subject
to the arbitration. If a claim subject to the arbitration is severable, the court may limit the stay to that claim.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1


682.03. Proceedings to compel and to stay arbitration, FL ST § 682.03

Credits
Laws 1957, c. 57-402, § 2; Fla.St.1965, § 57.12; Laws 1967, c. 67-254, § 12. Amended by Laws 2013, c. 2013-232, § 8,
eff. July 1, 2013.

West's F. S. A. § 682.03, FL ST § 682.03


Current through the 2016 Second Regular Session of the Twenty-Fourth Legislature.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2

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