Magnolia Hi-Fi, LLC v. Samir Gulati

Affirmed and Memorandum Opinion filed February 27, 2024.

In The

Fourteenth Court of Appeals

NO. 14-23-00240-CV

MAGNOLIA HI-FI, LLC, Appellant

V.
SAMIR GULATI, Appellee

On Appeal from the County Court at Law No. 2
Travis County, Texas
Trial Court Cause No. C-1-CV-22-000489

MEMORANDUM OPINION

This is an interlocutory appeal from an order denying a motion to compel
arbitration. For the reasons given below, we overrule all issues presented and affirm
the trial court’s order.

BACKGROUND

Samir Gulati filed an original petition against Magnolia Hi-Fi, LLC, alleging
that he had purchased certain products and services from Magnolia, and that the
products and services were defective. Gulati further alleged that Magnolia was given
an opportunity to remedy the defects but that Magnolia had failed to do so. On the
basis of these defects, Gulati claimed that Magnolia was liable for breach of contract
and violations of the DTPA.

Magnolia moved to compel arbitration based on three separate agreements,
each of which contained an arbitration clause. The first was a “Product Swap”
agreement between Gulati and Magnolia. The second and third were agreements
allegedly between Gulati and Best Buy, of which Magnolia claimed to be a
subsidiary. Gulati’s name did not appear in either agreement with Best Buy, but
Magnolia produced affidavit testimony that Gulati was nonetheless a party to the
agreements.

In a response, Gulati argued that the Product Swap agreement did not contain
an effective arbitration clause, because immediately above the agreement’s
typewritten arbitration provision, Gulati had added the following handwritten
notation: “I do not agree to waive my right to sue.” Gulati initialed and dated this
notation, as well.

As for the two remaining agreements, Gulati presented many arguments. He
argued that any agreement he had with Best Buy was not an agreement with
Magnolia, a separate entity. He also argued that the affidavit offered in support of
the agreements was deficient. He objected, for instance, that the affidavit lacked a
jurat, which was statutorily required. He objected that the affiant lacked personal
knowledge. He also objected that the exhibits attached to the affidavit were not
properly authenticated and were inadmissible as hearsay.

The trial court conducted an oral hearing on the motion, where it opined that
the affidavit offered in support of the two agreements with Best Buy was “really
insufficient,” and that none of its exhibits should be considered. As for the remaining
agreement with Magnolia, the trial court expressed the following opinion: “I don’t
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feel, based on the information that’s been presented to me, that the party agreed to
waive his right to it, a jury.”

The trial court later signed an order denying Magnolia’s motion to compel.
That order also contained rulings on Gulati’s evidentiary objections. The trial court
overruled Gulati’s objection that the affiant lacked personal knowledge. But the trial
court sustained Gulati’s objections that the affidavit lacked a jurat and that the
exhibits attached to the affidavit were not properly authenticated and were
inadmissible as hearsay. Pursuant to these rulings, the trial court struck the entirety
of the affidavit and all of its exhibits.

Magnolia now brings this interlocutory appeal, challenging the trial court’s
order. See Tex. Civ. Prac. & Rem. Code § 171.098(a)(1) (authorizing an
interlocutory appeal from the denial of a motion to compel arbitration).

ANALYSIS

We review a trial court’s ruling on a motion to compel arbitration for an abuse
of discretion. See Meritage Homes of Tex., LLC v. Pouye, No. 03-21-00281-CV,
2023 WL 4139033, at *2 (Tex. App.—Austin June 23, 2023, no pet.) (mem. op.).1
Under this standard, we defer to the trial court’s factual determinations if they are
supported by the record, but we review its legal determinations de novo. Id.

As the party seeking to compel arbitration, Magnolia had the initial burden of
proving the existence of a valid arbitration agreement with Gulati. See Cielo Prop.
Group, LLC v. Mulcahy, No. 03-18-00587-CV, 2019 WL 3023312, at *1 (Tex.
App.—Austin July 11, 2019, pet. denied) (mem. op.). Magnolia believes that it

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Because the Texas Supreme Court transferred this case to our court for purposes of docket
equalization, we endeavor to cite the precedent of the transferor court, which was the Third Court
of Appeals.

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satisfied this burden with respect to both the Product Swap agreement and the two
Best Buy agreements.

As for the Product Swap agreement, Magnolia acknowledges Gulati’s
handwritten notation stating, “I do not agree to waive my right to sue,” but Magnolia
emphasizes that Gulati did not otherwise strike out or cross through the typewritten
arbitration clause. Absent some other marking that fully excised the arbitration
clause, Magnolia argues that the trial court was required to harmonize both the
typewritten arbitration clause and Gulati’s handwritten notation. Magnolia also
explains that harmony was actually achievable in this case because Gulati could
retain the right to sue (and not be in breach of the Product Swap agreement by filing
suit) but still be obligated to arbitrate his claims after filing suit.

Magnolia does not cite to any authority in support of this argument, and we
disagree with it. Gulati’s handwritten notation—which, again, states that he does not
agree to waive his right to sue—cannot be harmonized with the typewritten
arbitration clause, which states the exact opposite: “BY AGREEING TO
ARBITRATION, YOU AND MAGNOLIA UNDERSTAND EACH IS
AGREEING TO WAIVE ITS RIGHT TO SUE OR GO TO COURT TO ASSERT
OR DEFEND ITS RIGHTS UNDER THIS CONTRACT.”

Due to the irreconcilable conflict between these two provisions, the trial court
could have reasonably determined that the parties had not mutually assented to
arbitration, and thus, that Magnolia had not satisfied its initial burden of proving the
existence of a binding arbitration agreement. See Houston Expl. Co. v. Wellington
Underwriting Agencies, Ltd., 352 S.W.3d 462, 472 n.50 (Tex. 2011) (citing
Williston on Contracts and observing the principle that where a provision in a
preprinted contract irreconcilably conflicts with a handwritten addition made by a
party, the handwritten provision will control). We therefore conclude that the trial

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court did not abuse its discretion by declining to enforce the Product Swap’s
arbitration clause. Cf. Stability Healthcare Staffing, LLC v. Beres, No. 03-19-00145-
CV, 2019 WL 3559103, at *1 (Tex. App.—Austin Aug. 6, 2019, no pet.) (mem. op.)
(concluding that a business partner had not agreed to be bound by the terms of an
arbitration clause where the partner intentionally refused to sign an agreement that
contained the clause and that would have also changed his status to that of an
employee without an ownership interest in the business).

Magnolia also argues that Gulati was bound by the separate arbitration clauses
in the two remaining Best Buy agreements. Magnolia’s argument here requires a
consideration of the affidavit and exhibits that the trial court struck. But critically,
Magnolia does not challenge all of the trial court’s rulings striking that evidence.

Magnolia affirmatively argues that the trial court should not have struck the
affidavit insofar as the affiant made her statements under penalty of perjury, which
responds to Gulati’s objection that the affidavit was deficient for lack of a jurat.
Magnolia also affirmatively argues that the trial court should not have struck the
evidence for lack of authentication. However, Magnolia makes no argument
regarding the trial court’s ruling on Gulati’s hearsay objection, which was
analytically separate from his authentication objection. See H2O Solutions, Ltd. v.
PM Realty Group, LP, 438 S.W.3d 606, 623 n.6 (Tex. App.—Houston [1st Dist.]
2014, pet. denied) (“Authenticity of a document and admissibility of that document
under an exception to the hearsay rule are separate inquiries.”).

Because Magnolia did not challenge the trial court’s hearsay ruling or
otherwise show that the evidence was admissible under a hearsay exception, Gulati
responds that Magnolia has waived such arguments for purposes of this appeal. We
agree with Gulati. See Haubold v. Med. Carbon Research Inst., LLC, No. 03-11-
00115-CV, 2014 WL 1018008, at *3 (Tex. App.—Austin Mar. 14, 2014, no pet.)

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(mem. op.) (“Where a judgment may rest upon more than one ground, an appellant
who does not challenge each ground waives his right to complain of the ruling to
which no error was assigned, and the judgment will be affirmed on the ground as to
which no complaint is made.”).

In effect, the trial court’s ruling striking the affidavit and exhibits must stand.
And without that evidence, Magnolia cannot establish the existence of a binding
arbitration agreement with Gulati. We must accordingly conclude that the trial court
did not abuse its discretion by denying Magnolia’s motion to compel arbitration.

CONCLUSION

The trial court’s order denying the motion to compel arbitration is affirmed.

/s/ Tracy Christopher
Chief Justice

Panel consists of Chief Justice Christopher and Justices Wise and Jewell.

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