Background: Parallel Litigation in Two Business Court Divisions

Stratton Borchers filed his first lawsuit in Business Court Division 1A (Collin County), alleging that Karl Drusch and certain affiliated businesses breached a company Operating Agreement and his own Employment Agreement arising from his termination as President for one of the affiliates. Division 1A compelled arbitration pursuant to an arbitration clause in the Operating Agreement and abated the suit. The Operating Agreement provided for AAA arbitration in Texas.

During the arbitration, Drusch repossessed certain membership units Borchers had pledged as collateral under a 2021 Promissory Note and Security Agreement used to purchase them. Borchers filed a second lawsuit in Business Court Division 8B (Tarrant County) as a result. Division 8B denied Drusch's motion to dismiss for lack of subject-matter jurisdiction and his motion to compel arbitration, and granted a temporary injunction on November 25, 2025, barring Drusch from disposing of the contested units. Drusch filed an interlocutory appeal from those orders in December 2025.

Three months later, Borchers returned to Division 1A with an emergency motion to stay a final hearing in the pending arbitration scheduled for March 30, 2026. Division 1A amended its previous arbitration order to clarify that it applied only to claims arising under the Operating Agreement (which had an arbitration clause) and not to claims arising under the Security Agreement (which did not), but also stayed the arbitration in its entirety due to ongoing appellate review of Division 8B's orders in the related case. Drusch filed a second interlocutory appeal from that order on April 3, 2026.

The Delegation Doctrine Controls

The Fifteenth Court of Appeals grounded its analysis in two legal rules recently addressed by the Texas Supreme Court: first, that an arbitration agreement does not have to be included in each of the contract documents it purports to cover, and second, that when parties have two contracts and one provides for AAA arbitration, whether a claim arises under one contract or the other is delegated exclusively to the arbitrator.

Because the valid arbitration agreement in one contract here delegates the scope of that arbitration exclusively to the AAA, the Eighth Division erred by failing to refer Borchers' second suit to the arbitrator to decide whether that suit was included. In its effort to avoid an intra-court conflict, the First Division committed the same error by limiting the scope of the ongoing arbitration and then staying it when the parties had delegated such decisions exclusively to the AAA.

The court reversed Division 8B's denial of the motion to compel arbitration and Division 1A's order staying the arbitration, but affirmed the temporary injunction preserving the membership units pending the arbitrator's decision on scope.

Implications for Business Court Practice

The decision addresses what the court characterized as a novel issue: two appeals from two divisions of a single unitary court, in each of which the parties agreed a decision in one would dispose of the other. The court's resolution reinforces that when parties delegate gateway questions of arbitrability to an arbitral forum like the AAA, trial courts must defer those questions to the arbitrator rather than deciding them independently—even when related disputes involve multiple contracts, only some of which contain arbitration clauses.