In re H & R Block Financial Advisors, Inc. (Tex.App.- Houston [1st Dist.] Aug.
28, 2008)(Guzman) (arbitration mandamus, waiver argument)
MOTION OR WRIT GRANTED: Opinion by Justice Guzman
Before Chief Justice Hedges, Justices Frost and Guzman
14-08-00450-CV In Re H & R Block Financial Advisors, Inc.
Appeal from County Civil Court at Law No 1 of Harris County
Trial Court Judge: R. Jack Cagle
O P I N I O N
Relator H&R Block Financial Advisors, Inc. filed the instant mandamus action seeking an order
compelling the respondent to enforce a contractual arbitration clause. Real party Andrew
Michael Krynik opposes enforcement, asserting that the arbitration provision is moot and that H&R
Block waived arbitration by substantially invoking the judicial process. We conditionally grant the
I. Factual and Procedural Background
When Krynik was a minor, his father opened two Uniform Gift to Minor Act accounts with The Olde
Discount Corporation, now H&R Block. On January 30, 2008, Krynik sued H&R Block and his
ex-stepmother, Julie Vieshe. Krynik contends that H&R Block wrongfully released his account
proceeds to Vieshe, who absconded with the funds. H&R Block timely answered the suit, and
asserted as an affirmative defense that Krynik=s claims are subject to the following contractual
You agree to submit any and all controversies or claims arising out of the relationship established
by this agreement . . . to arbitration to be conducted according to the rules and procedures of the
New York Stock Exchange, Inc. (NYSE) or the National Association of Securities Dealers, Inc.
(NASD), as you may elect, unless the claim or controversy is otherwise found not to be arbitrable. . .
. . . .
Arbitration must be commenced by service of a written demand for arbitration and should indicate
the election of NYSE or NASD arbitration proceedings.
Two weeks after answering, H&R Block moved to dismiss the lawsuit and compel arbitration under
both the Texas General Arbitration Act and Federal Arbitration Act. Krynik responded initially that
he did not sign the investor=s agreement; his father did. As a nonsignatory, Krynik denied that his
claims were subject to the arbitration agreement. Accordingly, H&R Block moved for summary
judgment and argued that, if Krynik was disavowing any contractual claims, the remainder of
Krynik=s causes of action were time-barred.
At the hearing, Krynik acknowledged that his claims were subject to the arbitration clause.
However, he argued that H&R Block substantially invoked the judicial process by moving for
summary judgment, thereby waiving arbitration. The trial court suggested that, in lieu of arbitration
per the terms of the arbitration clause, that is, according to the rules of the NYSE or NASD, the
parties appear before a local arbitrator instead. H&R Block declined that invitation, insisting that
the trial court enforce the clause as written. The trial court denied the arbitration motion.
This mandamus proceeding ensued. On June 5, we stayed all underlying proceedings pending
resolution of this mandamus action.
II. Mandamus Standard of Review
Mandamus relief will lie if the relator establishes a clear abuse of discretion for which there is no
adequate remedy by appeal. In re AutoNation, Inc., 228 S.W.3d 663, 667 (Tex. 2007) (orig.
proceeding). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and
unreasonable as to constitute a clear and prejudicial error of law. Walker v. Packer, 827 S.W.2d
833, 839 (Tex. 1992) (orig. proceeding). With respect to the resolution of factual issues, we will not
disturb the trial court=s ruling unless the record clearly demonstrates that the trial court reasonably
could have reached only one decision. See id. at 839B40. By contrast, review of a trial court=s
determination of legal principles is much less deferential. See id. at 840. A trial court has no
discretion in determining what the law is, or in applying the law to the facts; therefore, a clear failure
by the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Id.
Because a trial court cannot abuse its discretion in reaching a correct result for the wrong reasons,
we will uphold the trial court=s order on any ground supported by the record. See In re ExxonMobil
Corp., 97 S.W.3d 353, 358 (Tex. App.CHouston [14th Dist.] 2003, orig. proceeding); Luxenberg v.
Marshall, 835 S.W.2d 136, 141B42 (Tex. App.CDallas 1992, orig. proceeding).
We first address Krynik=s mootness claim, because mootness is a threshold issue that implicates
subject matter jurisdiction. See Speer v. Presbyterian Children=s Home & Serv. Agency, 847
S.W.2d 227, 229 (Tex. 1993); Labrado v. County of El Paso, 132 S.W.3d 581, 589 (Tex. App.CEl
Paso 2004, no pet.). Generally, Krynik contends that both the NYSE and NASD ceased offering
arbitration in July 2007. Krynik further claims that the rules and procedures of both entities no
longer exist, and that we therefore lack jurisdiction to order relief that has become impossible.
The mootness doctrine prevents courts from rendering advisory opinions, which are outside the
jurisdiction conferred by article II, section 1 of the Texas Constitution. See Valley Baptist Med. Ctr.
v. Gonzalez, 33 S.W.3d 821, 822 (Tex. 2000). An issue may become moot when a party seeks a
ruling on some matter which, when rendered, would not have any practical legal effect on a
then-existing controversy. See City of Farmers Branch v. Ramos, 235 S.W.3d 462, 469 (Tex.
App.CDallas 2007, no pet.); Tex. Health Care Info. Council v. Seton Health Plan, Inc., 94 S.W.3d
841, 846B47 (Tex. App.CAustin 2002, pet. denied). Stated differently, an issue may be moot if it
becomes impossible for the court to grant effectual relief for any reason. See Williams v. Lara, 52
S.W.3d 171, 184 (Tex. 2000). However, the mootness doctrine has no application here, because
the arbitration clause may be enforced according to its terms.
The agreed-upon clause requires the parties to submit their dispute to arbitration Aaccording to the
rules and procedures@ of the NYSE or NASD. Those two entities were consolidated following final
regulatory approval from the Securities and Exchange Commission on July 26, 2007. See Fin.
Indus. Regulatory Auth., Inc. v. Fiero, 882 N.E.2d 879, 880 n.* (N.Y. 2008). The terms of
consolidation called for the NYSE to transfer its member regulatory services to the NASD, which
then changed its name to the Financial Industry Regulatory Authority (AFINRA@). Id. Although
the NASD has changed its name, FINRA continues to apply the NASD arbitration rules and
procedures. Lesjak v. New England Fin., 879 N.E.2d 1129, 1130 n.1 (Ind. Ct. App. 2008) (AIn
July 2007, the NASD consolidated its operations and merged with another entity, though the rules
governing arbitrations remain unchanged.@) (emphasis added); Herbert J. Sims & Co. v. Roven,
548 F. Supp. 2d 759, 762B63 (N.D. Cal. 2008) (AFINRA arbitrations are governed by the NASD
Code of Arbitration Procedure.@). Therefore, it is not impossible for the parties to arbitrate their
dispute under the NASD arbitration rules and principles. In fact, courts continue to enforce NYSE or
NASD arbitration clauses by referring parties to FINRA arbitration. See, e.g., In re H&R Block Fin.
Advisors, Inc., 235 S.W.3d 177, 179 (Tex. 2007) (orig. proceeding) (enforcing H&R Block arbitration
clause in an opinion dated August 24, 2007, after the effective date of the NASD/FINRA
transaction); Shammami v. Broad Street Sec., Inc., 544 F. Supp. 2d 585, 586, 588 (E.D. Mich.
Therefore, because the arbitration provision may be enforced as written, we hold that the
arbitration issue is not moot. Accordingly, we have subject matter jurisdiction over this mandamus
proceeding and will address Krynik=s contention that H&R Block waived arbitration by moving for
Krynik acknowledges the general validity of the arbitration provision, arguing instead that H&R
Block waived enforcement when it moved for summary judgment. We disagree.
A party waives its right to arbitration if it substantially invokes the judicial process to its opponent=s
detriment. See In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998) (orig. proceeding).
Because public policy favors arbitration, the Federal Arbitration Act imposes a strong
presumption against finding waiver. See id. The burden of demonstrating waiver Afalls even more
heavily@ when, as here, the party seeking arbitration included a demand for arbitration in its
original answer. Keytrade USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 897 (5th Cir. 2005).
Krynik cites only Price v. Drexel Burnham Lambert, Inc. to support his claim that H&R Block
substantially invoked the judicial process. 791 F.2d 1156 (5th Cir. 1986). Price does not stand for
the proposition that a summary judgment motion, filed in the alternative to an arbitration demand, is
sufficient to result in waiver. The Price court, as with Keytrade, placed special emphasis on whether
the party requested arbitration in its original pleading:
A demand for arbitration puts a party on notice that arbitration may be forthcoming, and therefore,
affords that party the opportunity to avoid compromising its position with respect to arbitrable and
nonarbitrable claims. Conversely, where a party fails to demand arbitration during pretrial
proceedings, and, in the meantime, engages in pretrial activity inconsistent with an intent to
arbitrate, the party later opposing a motion to compel arbitration may more easily show that its
position has been compromised, i.e., prejudiced.
Id. at 1160B61. The party seeking arbitration in Price did far more than simply move for summary
judgment as an alternative to its arbitration demand. See id. at 1158B59. The Fifth Circuit has
concluded that an alternative summary judgment motion, by itself, does not waive enforcement of
an arbitration clause:
First, KUSA argues that CNAN waived its right because it filed an extensive summary judgment
motion B in excess of 100 pages B with little evidence of an indication for arbitration. KUSA offers
no legal authority for why a motion for summary judgment, filed from a defensive posture, can be
characterized as an invocation of judicial process. Even assuming, arguendo, that it is, CNAN
concurrently filed a motion to compel arbitration in the alternative to its motion for summary
judgment, removing any doubt as to waiver.
Keytrade, 404 F.3d at 897B98 (second emphasis added).
Moreover, the Texas Supreme Court recently confirmed that waiver is decided not on one factor
but, rather, on a totality-of-the-circumstances test. See In re Fleetwood Homes of Tex., L.P., ___
S.W.3d ___, 2008 WL 2487094, at *2 (Tex. June 20, 2008) (orig. proceeding) (citing Perry Homes
v. Cull, ___ S.W.3d ___, 2008 WL 1922978 (Tex. May 2, 2008)). Whether a party seeks a judicial
decision on the merits of the case may be one factor in determining waiver, but it is not the only
factor. Perry Homes, ___ S.W.3d ___, 2008 WL 1922978, at *5. With respect to the Perry Homes
factors, the mandamus record demonstrates that:
$ H&R Block, the movant, is the defendant and did no more than respond to Krynik=s lawsuit;
$ H&R Block immediately asserted the arbitration clause as an affirmative defense and moved
for enforcement within two weeks of answering the lawsuit; and
$ the summary judgment motion filed by H&R Block was presented as an alternative to its
arbitration demand, only after Krynik claimed that he was not a party to the contract containing the
See Perry Homes, ___ S.W.3d ___, 2008 WL 1922978, at *5.
We therefore hold that, as a matter of law, H&R Block did not substantially invoke the judicial
process so as to waive enforcement of the contractual arbitration clause. Because courts are
required to enforce privately-negotiated arbitration agreements in accordance with their terms,
the trial court abused its discretion in denying H&R Block=s motion to compel arbitration.
V. Dismissal or Stay
Because Krynik=s claims against H&R Block are arbitrable, the trial court was required to stay the
underlying lawsuit. See Tex. Civ. Prac. & Rem. Code Ann. '' 171.021(c), 171.025 (Vernon
2005). Krynik argues that, because H&R Block requested dismissal B and not a stay B of his
lawsuit, the trial court did not abuse its discretion in denying this request. Although we agree that
dismissal is not mandatory, the trial court abused its discretion in failing to compel arbitration and
stay the underlying proceedings.
Because Krynik=s claims against H&R Block are arbitrable, the trial court judge was required, at a
minimum, to stay the proceedings and order those claims to arbitration. See id. ' 171.021(c) (AAn
order compelling arbitration must include a stay of any proceeding[.]@). Because he failed to do
so, mandamus relief is warranted. See Fleetwood Homes, ___ S.W.3d ___, 2008 WL 2487094, at
We lift our stay order previously entered on June 5, 2008. We conditionally grant the petition for a
writ of mandamus, and direct the trial court judge to stay the underlying lawsuit and compel
Krynik=s claims against H&R Block to arbitration. The writ will issue only if the trial court fails to act
in accordance with this opinion.
/s/ Eva M. Guzman
Petition Conditionally Granted, Stay Lifted, and Opinion filed August 28, 2008.
Panel consists of Chief Justice Hedges, and Justices Frost and Guzman
 The Honorable R. Jack Cagle, presiding judge of Harris County Court at Law No. 1
 Although Krynik did not raise this argument before the trial court, mootness may be raised for
the first time on appeal inasmuch as the parties must have a justiciable controversy at every stage
of the legal proceedings, including the appeal. See, e.g., Bd. of Adjustment of City of San Antonio
v. Wende, 92 S.W.3d 424, 427 (Tex. 2002).
 The details of the consolidation are set forth in a release from the Securities and Exchange
Commission. See Allocation of Regulatory Responsibilities, Exchange Act Release No. 34-56148,
72 Fed. Reg. 42146-01, 2007 WL 2186049 (July 26, 2007).
 See FINRA, Arbitration & Mediation B Code of Arbitration Procedure, available at
Code of Arbitration Procedure for Customer Disputes, available at http://www.finra.org/web/groups/
 We note that Shammami involved an arbitration clause requiring the parties to submit their
controversy to Aarbitration before the [NYSE] . . . or the [NASD].@ Shammami, 544 F. Supp. 2d at
586 (emphasis added). The Michigan court enforced the clause by referring the parties to
NASD/FINRA arbitration. See id. at 588. By contrast, the arbitration clause in this case does not
specify an arbitrator, and instead merely requires the parties to arbitrate their dispute using the
Arules and procedures@ of the now-consolidated entities.
 At the hearing, Krynik=s counsel conceded, AI agree that before they moved for summary
judgment there was an enforceable arbitration agreement in the contract.@
 H&R Block requested arbitration under both the TAA and FAA. Krynik does not contest that the
FAA applies, or that mandamus relief is proper to enforce an arbitration agreement governed by
the FAA. See In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (orig. proceeding).
 We are not persuaded by Krynik=s suggestion that the summary judgment motion was not filed
as an alternative to the arbitration demand. H&R Block=s motion to compel arbitration was filed
first, on March 13, 2008. The summary judgment motion was filed more than a month later, on April
22, only after Krynik argued that the arbitration agreement was unenforceable as to him. The lead
paragraphs in the summary judgment motion demonstrate that H&R Block requested summary
judgment solely as an alternative to its arbitration demand:
Plaintiff has sued HRBFA for his ex-stepmother=s alleged conversion of funds from two Uniform Gift
to Minors Act (AUGMA@) Accounts. Both accounts, which were opened for Plaintiff by his father[,]
had arbitration clauses. When HRBFA moved to enforce these agreements, Plaintiff argued that he
cannot be compelled to arbitration because he did not sign and is not a party to the account
. . . .
Plaintiff cannot have it both ways. Having attempted to escape arbitration by disavowing a
contractual relationship, his claims are now barred by the 2 year statute of limitations.
At the hearing on both motions, H&R Block=s counsel recounted these events and expressly
described the summary judgment motion as Aalternative.@ He requested first that the trial court
order the case to arbitration but that, if the judge would not enforce arbitration, the summary
judgment motion be granted. The trial court specifically recited that he understood the summary
judgment to be subject to the ruling on the arbitration demand.
 Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478 (1989).
 Even where an arbitration agreement may be subject to the FAA, we still apply Texas law to
resolve procedural issues. Citigroup Global Mkts., Inc. v. Brown, ___ S.W.3d ___, 2008 WL
3016922, at *5 n.2 (Tex. App.CHouston [14th Dist.] Aug. 5, 2008, orig. proceeding); Southland
Corp. v. Keating, 465 U.S. 1, 16 (1984).