In Ruff v. Ruff, a beneficiary of a trust sued a former trustee, and that dispute was sent to arbitration. No. 05-18-00326-CV, 2020 Tex. App. LEXIS 6344 (Tex. App.—Dallas August 11, 2020, no pet. history). After the arbitration ruled for the beneficiary, awarding her over $49 million, the former trustee appealed arguing that the dispute should not have been sent to arbitration.

The court of appeals affirmed the arbitration award. It stated that “it is well-established that one document containing an arbitration clause is sufficient to require arbitration of claims arising under other documents—if they are part of one transaction.” The court then described the transaction in having three trustees resign and the appointment of a successor trustee:

Here, the Frost Release was part of a larger transaction whereby the prior trustees (Mark, Kelly, and Tracy) resigned and Frost was appointed to replace them. As Mike described to the trial court, this transaction involved an interrelated seven-step process: Mark, Kelly, and Tracy resign as trustees; the resigning trustees ask the Trust protectors to appoint a new trustee; the beneficiaries (including Mike) each waive the thirty-day notice of the trustees’ resignations; the Trust protectors appoint Frost as trustee; Suzann accepts Frost as trustee and executes the Frost Release; each beneficiary, including Mike, signs a release and indemnity agreement; and Frost accepts the trustee position. Each document executed in each step was part of the same transaction and each one was necessary for the transaction to be completed. Consequently, they are construed as a single, unified agreement.

Id. The court then held that the beneficiary’s claims against the former trustee were subsumed in this larger transaction that contained an arbitration clause:

Significantly, each of the Frost transition documents (including the Frost Release and the releases signed by Mike, Tracy, Kelly, and Mark) ratify the FSA. And each of the releases contain an identical arbitration clause. Although Suzann, Mike, Kelly, Tracy, Mark and Frost all signed separate documents, each was for the single purpose of effecting Kelly, Tracy, and Mark’s resignations as co-trustees and Frost’s appointment as successor trustee. When parties include an arbitration clause in one document that is an essential part of the overall transaction, courts presume that they intended the arbitration clause to reach all aspects of the transactions governed by other contemporaneously executed agreements that are part of the same transaction. The single transaction here concerns the issues Mike sought to arbitrate, including the validity and enforceability of the Trust, the FSA’s release, and the acknowledgement and appointment of Frost as successor trustee. And as later discussed, those issues necessarily relate to and are intertwined with Suzann’s counterclaims. Therefore, in this context, Mike’s status as a non-signatory to the specific Frost Release is not dispositive. His March 1, 2010, release, and all the other documents comprising that single transaction, include an arbitration clause in which the parties agree to submit their disputes to arbitration. Mike is a party to that agreement.

Id. The court also held that the claims fell within the scope of the arbitration clause: “In light of the clause’s expansive, inclusive language, we cannot conclude that Suzann’s tort claims are not within its broad scope. Indeed, Mike’s breach of fiduciary duties and related torts are inextricably enmeshed and factually intertwined with the very agreement he claims releases him from liability. Suzann’s claims cannot be made without reference to that contract.” Id. The court also held against the former trustee on the theories of third-party beneficiary and direct-benefits estoppel.

Photo of David Fowler Johnson David Fowler Johnson

dfjohnson@winstead.com
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the Texas Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

dfjohnson@winstead.com
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the Texas Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law ReviewSt. Mary’s Law JournalSouth Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law