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FILED

17-0062
1/5/2018 5:24 PM
tex-21651834
SUPREME COURT OF TEXAS
BLAKE A. HAWTHORNE, CLERK

Case No.: 17-0062

IN THE SUPREME COURT OF TEXAS

JODY JAMES FARMS, JV,

PETITIONER,

v.

THE ALTMAN GROUP, INC. AND LAURIE DIAZ,

RESPONDENTS

On Petition for Review from the 110th District Court of Floyd County, Texas, No.
10,422; and the Amarillo Court of Appeals, Jody James Farms, JV v. The Altman
Grp., Inc. and Laurie Diaz, 506 S.W.3d 595 (Tex. App.—Amarillo 2016).

PETITIONER’S REPLY TO RESPONDENTS’ BRIEF IN RESPONSE TO


ITS BRIEF ON THE MERITS

JODY JENKINS
State Bar No. 24029634
Jenkins, Wagnon & Young, P.C.
P.O. Box 420
Lubbock, Texas 79408-0420
Ph: 806-796-7351
Fx: 806-771-8755
jjenkins@jwylaw.com

ATTORNEYS FOR PETITIONER


IDENTITY OF PARTIES AND COUNSEL

Judge Presiding at Trial:


The Honorable William P. Smith

Plaintiff/Appellant/Petitioner:
Jody James Farms, JV (“JJF”)

Plaintiff/Appellant/Petitioner’s Counsel at Trial:


Jody Jenkins
Jenkins, Wagnon & Young, P.C.
P.O. Box 420
Lubbock, Texas 79408-0420

Plaintiff/Appellant/Petitioner’s Counsel on Appeal:


Jody Jenkins
Jenkins, Wagnon & Young, P.C.
P.O. Box 420
Lubbock, Texas 79408-0420

Defendants/Appellees/Respondents:
The Altman Group, Inc. (“Altman”) and Laurie Diaz (“Diaz”)

Defendants/Appellees/Respondents Counsel at Trial:


J. Paul Manning
Field, Manning, Stone, Hawthorne & Aycock, P.C.
2112 Indiana Ave.
Lubbock, TX 79410

Defendants/Appellees/Respondents’ Counsel on Appeal:


J. Paul Manning
Anna McKim
Field, Manning, Stone, Hawthorne & Aycock, P.C.
2112 Indiana Ave.
Lubbock, TX 79410

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TABLE OF CONTENTS

INDEX OF AUTHORITIES ................................................................................. iii

SUMMARY OF ARGUMENT ............................................................................... 2

ARGUMENT & AUTHORITIES .......................................................................... 3

CONCLUSION......................................................................................................... 6

PRAYER ................................................................................................................... 7

CERTIFICATE OF COMPLIANCE .................................................................... 7

CERTIFICATE OF SERVICE .............................................................................. 8

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INDEX OF AUTHORITIES

Cases

Holman v. Laulo-Rowe Agency, 994 F.2d 666 (9th Cir. 1993) ................................. 6

In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005).............................. 3

In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) ......................................... 3

Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex. 1992)........................................ 3

Nobles v. Rural Community Insurance Services, 122 F. Supp. 2d 1290 (M.D. Ala.
2000) .......................................................................................................................... 5

Rio Grande Underwriters, Inc. v. Pitts Farms, Inc., 276 F.3d 683 (5th Cir. 2001) ... 6

Williams Farms of Homestead, Inc. v. Rain and Hail Ins. Servs., Inc., 212 F.3d 630
(11th Cir. 1997) ........................................................................................................... 5

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Case No. 17-0062

IN THE SUPREME COURT OF TEXAS

JODY JAMES FARMS, JV,

PETITIONER,

v.

THE ALTMAN GROUP, INC. AND LAURIE DIAZ,

RESPONDENTS

On Petition for Review from the 110th District Court of Floyd County, Texas, No.
10,422; and the Amarillo Court of Appeals, Jody James Farms, JV v. The Altman
Grp., Inc. and Laurie Diaz, 506 S.W.3d 595 (Tex. App.—Amarillo 2016).

PETITIONER’S REPLY TO RESPONDENTS’ BRIEF IN RESPONSE TO


ITS BRIEF ON THE MERITS

TO THE HONORABLE SUPREME COURT OF TEXAS:

Petitioner Jody James Farms, JV (“JJF”) submits this Reply to Respondents’

Response to Its Brief on the Merits challenging the decision of the Seventh Court
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of Appeals in Amarillo.

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Citations to the Clerk’s Record will be denoted as C.R. ____. Citations to the
Supplemental Clerk’s Record will be denoted as Supp. C.R.____. Jody James Farms, JV will be
referred to as JJF; The Altman Group, Inc. and Laurie Diaz will be referred to as Altman.

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I
SUMMARY OF ARGUMENT

JJF incorporates its prior argument and authorities. This short reply

addresses two issues raised by Altman: (1) multiple wrongs do not make a right;

and (2) federal crop insurance ties are not dispositive of the errors in need of

review in this matter.

Although Respondents argue the trial court considered the arguments of JJF

on three separate occasions, no evidentiary hearing was conducted and three

wrongs do not make a right. When a fact issue exist regarding the applicability of

an arbitration agreement, courts need guidance on the applicable standard for

deciding these matters and the need for an evidentiary hearing.

The underlying source of the arbitration clause is not dispositive of the need

for review by this Court. The standard for enforcement of an arbitration

agreements by non-signatory third parties is unclear, in the context of federal crop

insurance claim or otherwise. The mere fact the arbitration clause at issue is

connected to federal crop insurance does not alter the need for clarification by this

Court and JJF prays the Court grant review and rectify the uncertainties in the law.

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II
ARGUMENT AND AUTHORITIES

A. Despite the argument that the arbitrability issue was decided “three
times,” three wrongs do not make a right.
Under Texas law, it is well established that a party seeking to compel

arbitration must establish that (1) a valid arbitration clause exists, and (2) the

claims in dispute fall within that agreement’s scope. In re Kellogg Brown & Root,

Inc., 166 S.W.3d 732, 737 (Tex. 2005). Until the initial burden of proving that a

valid arbitration agreement exists, there is no presumption in favor of arbitration.

See In re Kellogg Brown & Root, Inc., 166 S.W.3d at 737. Furthermore, under the

FAA, absent unmistakable evidence that the parties intended the contrary, it is the

courts rather than arbitrators that must decide ‘gateway matters’ such as whether a

valid arbitration agreement exists. In re Weekley Homes, L.P., 180 S.W.3d 127

(Tex. 2005). Although this Court has held that the trial court may summarily

decide whether to compel arbitration on the basis of affidavits, pleadings,

discovery, and stipulations, controverted material facts must be resolved by an

evidentiary hearing. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269 (Tex.

1992).

In the case at bar, the trial court and the Seventh Court of Appeals did not

use the correct analytical framework in resolving this issue. In fact, Altman

submitted no evidence to the trial court but simply filed a motion to compel

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arbitration without even including the alleged arbitration agreement. C.R. 9-17.

The trial court then granted the motion via letter which makes no mention of

review of evidence. C.R. 26. In fact, the only potential evidence submitted was

that contained in the exhibits to JJF’s Response: all of which JJF argued created

a fact issue. Supp. C.R. 4-76. The failure to conduct an evidentiary hearing at this

level compounded the mistakes to come.

Following this erroneous ruling, JJF ask for reconsideration of the trial

court’s order. In response, Altman argued no new evidence was submitted and the

trial court could not consider new evidence without compliance with the standard

for newly discovered evidence when moving for a motion for new trial. C.R. 38-

39. Although the trial court recites in its order that it considered the evidence and

arguments of counsel, no evidence appears in the record other than an excerpt from

the insurance policy. C.R. 34-36. This second wrong did not make a right.

The alleged “third” time review was not the charm either. At this stage,

Altman filed its Petition to Confirm and Enforce Final Arbitration Award. C.R.

42. In response, JJF asked the trial court to set aside the arbitration award because

the arbitrator exceeded his authority. C.R. 57. Again, the trial court did not

conduct an evidentiary hearing but ruled solely upon the briefing. C.R. 124.

The failure to apply the correct legal standard to the review is the exact issue

in need of correction and clarification. Not only was the standard disregarded
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initially, but it was disregarded three times as emphasized by Altman. Obviously,

the operative legal standard is not as clear as Altman would have this Court believe

in light of the erroneous standard applied by the talented judges involved in the

prior review of the case at bar.

B. The fact the underlying contract was issued pursuant to the Federal
Crop Insurance Act has no bearing on the need for this Court to issue a
decision.
Regardless of the form of the alleged arbitration agreement, the trial court

and the Seventh Court of Appeals applied the incorrect legal analysis. Altman and

Diaz are not parties to the agreement and were able to compel arbitration without

presenting any evidence. Although the Federal Crop Insurance Act does preempt

certain state laws and requires arbitration of certain claims, it does not preempt the

state law claims asserted against Altman. Although Altman urges that Nobles v.

Rural Community Insurance Services, 122 F. Supp. 2d 1290 (M.D. Ala. 2000)

somehow displaces the need for review by this Court, such arguments are

misplaced. In fact, Nobles specifically held that the initial claims against the

insurance provider, Rain and Hail, should be arbitrated and “plaintiffs then are free

to pursue their ancillary claims in court.” Id. at 1298. Here, JJF did pursue

arbitration with Rain and Hail and subsequently pursued its ancillary claims in

state court against Altman. See also Williams Farms of Homestead, Inc. v. Rain

and Hail Ins. Servs., Inc., 212 F.3d 630, 634 (11th Cir. 1997) (holding that the

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FCIA does not completely preempt state law claims against agents and insurers);

Holman v. Laulo-Rowe Agency, 994 F.2d 666 (9th Cir. 1993) (holding that claims

against agents selling FCIC insurance are not completely preempted); Rio Grande

Underwriters, Inc. v. Pitts Farms, Inc., 276 F.3d 683, 685-687 (5th Cir. 2001)

(holding that Congress did not intend to so displace state law claims against agents

who sell policies reinsured by the FCIC as to convert them to federal claims and

subject them to federal jurisdiction). The fact that the underlying arbitration

agreement was connected to federal crop insurance does not obviate the need for

review by this Court as the state law claims still existed but were compelled to

arbitration under an incorrect legal analysis.

III
CONCLUSION

This Court should exercise jurisdiction over this case and overturn both

lower courts. The trial court clearly erred when it allowed an arbitrator to decide

the gateway issue of whether an arbitration agreement existed between the parties

to the dispute. The decision of the Seventh Court of Appeals to affirm further

conflicts with the controlling jurisprudence of this State. This error of law is of

great importance to the jurisprudence of Texas because it threatens to further limit

and deprive litigants of their right to have disputes adjudicated in court, while

continuing to chip away at what is left of the power to contract in Texas.

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IV
PRAYER

Wherefore, Petitioner JJF prays that this Court:

1. GRANT its Petition for Review;

2. REVERSE the Seventh Court of Appeals’ decision affirming the trial

court’s final judgment entering a final arbitration award in favor of

Respondents;

3. GRANT all other relief to which it has shown itself justly entitled.

Respectfully Submitted,

/s/ Jody D. Jenkins


Jody D. Jenkins
State Bar No. 24029634
JENKINS, WAGNON & YOUNG,
P.C.
P.O. Box 420
Lubbock, Texas 79408-0420
Ph: (806) 796-7351
Fx: (806) 771-8755
jjenkins@jwylaw.com
ATTORNEYS FOR PETITIONER

CERTIFICATE OF COMPLIANCE

I hereby certify that the word count in this Reply is 1,819 words when all
sections are included.

/s/ Jody Jenkins


Jody D. Jenkins

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CERTIFICATE OF SERVICE

The undersigned certifies that a true and correct copy of the foregoing has
been served via electronically on this 5th day of January, 2018 on the following:

J. Paul Manning
Anna McKim
Field, Manning, Stone, Hawthorne & Aycock, P.C.
2112 Indiana Ave.
Lubbock, TX 79410

/s/ Jody D. Jenkins


Jody D. Jenkins

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