Professional Documents
Culture Documents
01-16-00783-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
11/17/2016 3:48:44 PM
CHRISTOPHER PRINE
CLERK
01-16-00783-CV
Penn C. Huston
State Bar No. 00796804
MouerHuston PC
349 Heights Boulevard
Houston, Texas 77007
phuston@mouerhuston.com
(832) 410-4540
COUNSEL FOR APPELLANT
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”)
i
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
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
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
Jureczki v. Banc One Tex., N.A., 252 F. Supp. 2d 368, 374 (S.D. Tex. 2003) ........ 12
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
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
9 U.S.C. § 4 ............................................................................................................. 10
v
STATEMENT OF THE CASE
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
viii
STATEMENT OF FACTS
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”:
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
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 parties agreed in the Representative Agreement that the terms of the
3
whether oral or in writing, previously entered into by the parties with
respect to Representative’s appointment as an independent
manufacturer’s representative.
CRS owes MacDonald Systems money for work that it did as CRS’s manufacturer’s
agreement:
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.
Systems alleges that it developed a modification of CRS’s product that would create
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.
CRS asked the trial court to compel arbitration pursuant to the arbitration
Systems acknowledged that the parties had entered into the Representative
Agreement but opposed the motion and argued that the agreement’s arbitration
issue in the lawsuit do not fall within the defined term “Products” in the
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
The letter therefore pre-dates the Representative Agreement, which contains the
Arbitration MacDonald Systems argued that residential products are not subject to
6
V. THE TRIAL COURT’S RULING.
I. SUMMARY
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
which would cover the dispute at issue, the trial court erred when it denied CRS’s
Determining the validity of an arbitration agreement, and whether or not a claim falls
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
III. THE TRIAL COURT COMMITTED REVERSIBLE ERROR WHEN IT DENIED CRS’S
APPLICATION TO COMPEL ARBITRATION.
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
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
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
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
contract law of the state. In re Rubiola, 334 S.W.3d 220, 224 (Tex.2011). The
contract between two corporate entities. The language is legible and clearly states
dispute that the parties entered into the Representative Agreement. See App Tab 3,
but argued that the arbitration provision does not apply. App Tab 4, CR 38, ¶ 2. The
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
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,
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
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
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
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
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)).
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
13
a. The Factual Allegations in MacDonald Systems’ Petition Demonstrate
that the Claims Relate to the Representative Agreement
The Petition further alleges that as part of calling on one particular customer in its
CRS’s products and promises were allegedly made that were later breached. Id. at ¶
11.
Representative Agreement. Focusing on the facts alleged in the Petition, those facts
with, and are ‘factually intertwined’ with the Representative Agreement and are,
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.
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
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
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
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
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.
Systems was authorized to sell to be in writing. See e.g. App Tab 1, CR 25 at §2(e)
“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.
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
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
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.
MacDonald Systems’ Petition “relate to” the terms of the Representative Agreement
IV. CONCLUSION
In light of: (1) the factual allegations in the Petition demonstrating the
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
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
Respectfully submitted,
MOUERHUSTON PC
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.
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
22
APPENDIX
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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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.
25
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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.
a. Products. The Company shall keep Representative informed of all new Products for
which it may solicit orders in accordance with this Agreement.
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.
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
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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.
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.
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.
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
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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.
7. Additional Covenants.
b. Confidential Information.
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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.
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.
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:
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.
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.
-
>* DocuSigned by:
By: By:
(Signature)
Name: Eric Streed - CEO Name: Andy MacDonald Title: Presi dent
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.
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.
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:
The parties further agree that the following business entities are “Excluded Entities” that are not part of
the Market:
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.
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.
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
Defendant CRS Industries, Inc. (improperly sued as CosaTron, Inc. ') files this application
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
attached here as part of the Declaration of Eric Streed attached as Exhibit “A.” The Manufacturer’s
. . .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.
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:
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:
15
and other data or information pertaining to the Products as they exist now or in
the future.
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
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
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.
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
16
arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable.” 9
U.S.C. § 2.
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.
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
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.”
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
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.
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
18
Interpreting similar language, the Houston Court of Appeals, 14th District confirmed that
this language is broad:
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
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
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
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
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
(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
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.
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:
“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.
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.
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.
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
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
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.
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.
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.
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;
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,
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
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.
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.
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.
Respectfully submitted,
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
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
ORDER
JUDGE PRESIDING
41
APPROVED AS TO FORM AND ENTRY REQUESTED:
42
'CosaTron
®
Andy MacDonald
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,
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
“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.”
/Ipdffiy Mjxipdnald
44
1
'*** 'CosaTron
Advanced TSsÿrioiogy for ;; vrfoc-r Af«" Quality
Andy MacDonald
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
Signed: (jUr%\ 1
9/13/2016
JUDGE PRESIDING
46
___
APPROVED AS TO FORM AND ENTRY REQUESTED;
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
“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.”
/Ipdffiy Mjxipdnald
44
1
'*** 'CosaTron
Advanced TSsÿrioiogy for ;; vrfoc-r Af«" Quality
Andy MacDonald
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
Signed: (jUr%\ 1
9/13/2016
JUDGE PRESIDING
46
Appendix
Tab 7
§ 171.021. Proceeding to Compel Arbitration, TX CIV PRAC & REM § 171.021
Currentness
(a) A court shall order the parties to arbitrate on application of a party showing:
(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.
§ 171.098. Appeal
Currentness
(a) A party may appeal a judgment or decree entered under this chapter or an order:
(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.
9 U.S.C.A. § 2
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.
(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.
End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.
Currentness
(a) A written agreement to arbitrate is valid and enforceable if the agreement is to arbitrate a controversy that:
(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.
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.
(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.
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.
End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.