The Corpus Christi Court of Appeals recently held that a family’s allegations against a funeral home for its handling of a relative’s body were subject to arbitration, even though some of the family members were not parties to the agreement to arbitrate.

After her mother passed away, Anabel Gonzalez entered into a contract with SCI Funeral Services, LLC d/b/a Funeraria del Angel (SCI) for visitation and embalmment services. The contract contained a mandatory arbitration provision.

According to Anabel and her family members, her mother’s eye and mouth opened, leaking fluid, during a visitation service held at the funeral home. As a result, Anabel and three family members filed suit against SCI asserting causes of action for negligence, emotional infliction of emotional distress, breach of fiduciary duty, and violations of the Deceptive Trade Practices Act.

SCI moved to compel arbitration, arguing that the family’s claims were governed by the arbitration clause in its contract with Anabel. Anabel dropped her trial court claims against SCI and refiled in arbitration. Her family member’s, however, maintained their suit against SCI in the trial court and filed a response to SCI’s motion to compel arbitration, contending they did not enter into a valid arbitration agreement with SCI. SCI argued that Anabel’s family members were bound by the arbitration agreement as third-party beneficiaries of the contract between SCI and Anabel.  The trial court denied SCI’s motion to compel arbitration, and SCI appealed.

To determine whether the family members’ claims were subject to arbitration, the Court of Appeals addressed two issues: (1) whether a valid, enforceable arbitration agreement existed and (2) whether the claims at issue fell within the scope of the agreement.

Texas courts have held that non-parties to an agreement to arbitrate may be subject to arbitration under certain circumstances, one of which occurs when the non-party is a third-party beneficiary to the agreement. A person is a third-party beneficiary of a contract when the parties to a contract intend to secure a benefit to that person and the parties entered into the contract directly for that person’s benefit. The contracting parties’ intent to secure a benefit for the third-party “must be clearly and fully spelled out.” However, the contract need not specifically state “third-party beneficiary” or use any similar “magic words” and the third party’s expectation or intent to benefit from the contract is not relevant.

The contract between Anabel and SCI stated the agreement to arbitrate “applies to any claim or dispute between or among…any person who claims to be a third party beneficiary of this agreement.” The Corpus Christi Court of Appeals noted prior cases in which Texas courts have held that contracts for funeral services can be intended to benefit immediate family members of the deceased. Because the family members in this case were immediate family members of Anabel’s mother (the deceased), they were intended to receive a benefit through the contract between Anabel and SCI. Therefore, the Court held that there was a valid, enforceable arbitration agreement.

Whether a claim falls within the scope of an arbitration agreement depends on the factual allegations of the pleadings, not the causes of action asserted. That is, “[i]f the facts alleged touch matters, have a significant relationship to, are inextricably enmeshed with, or are factually intertwined with the contract containing the arbitration agreement, then the claim is arbitrable.” Here, the family’s factual allegations against SCI all referenced to SCI’s handling of their relative’s body in preparation for funeral services. The contract between Anabel and SCI specifically authorized SCI “to prepare and care for the body of the decedent named in [the] Agreement and to conduct the funeral services…listed in said Agreement.” Therefore, the Court found that the family’s allegations were significantly related to, or inextricably enmeshed or factually intertwined with the contract. As a result, the family’s claims fell within the scope of the arbitration clause which stated it applied to “any claim or dispute”.

This case offers an important reminder that even those who are not parties to an arbitration agreement may be subject to binding arbitration. If you should have any questions regarding the scope of enforceability of an arbitration agreement, please contact us at info@gstexlaw.com.  The attorneys in our Austin and Dallas offices have significant experience in drafting and interpreting arbitration clauses.

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