law-arbitration waiver by conduct | waived by invoking litigation process | waiver theory generally |
waiver as affirmative defense | waiver of governmental or sovereign immunity by conduct | FAA Federal
Arbitration Act | FAA-applicability 9 U.S.C.S. §§ 1-307 | TAA Tex. Civ. Prac. & Rem. Code Ann. §
171.001-.098 | confirmation of arbitration award under FAA | grounds for vacature under the FAA | TAA
vs. FAA | preemption of TAA by FAA | preemption of state TAA by Federal Arbitration Act |
Appeals from suits to confirm arbitration awards in the Houston Courts of Appeals | Houston Arbitration
ARBITRATION WAIVER: WAS RIGHT TO ARBITRATE WAIVED BY
Whether a party has waived its right to arbitrate presents a question of law that we review de novo. In re
Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999), abrogated in part on other grounds by In
re Halliburton Co., 80 S.W.3d 566 (Tex.2002); Jones v. Citibank (S.D.), NA, 235 S.W.3d 333, 340
(Tex.App.-Fort Worth 2007, no pet.). Because public policy favors arbitration, there is a strong
presumption against waiver under the FAA. See D. Wilson Const., 196 S.W.3d at 783; In re Vesta Ins.
Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006) (per curiam). A "heavy burden of proof" is required to
establish waiver of arbitration rights, and the court must resolve all doubt in favor of arbitration. In re
Bruce Terminix Co., 988 S.W.2d 702, 705 (Tex.1998) (per curiam). Waiver occurs if the party requesting
arbitration "has substantially invoked the judicial process to its opponent's detriment." Id. at 704. Thus,
absent a showing of prejudice by the opposing party, waiver does not result by invoking the judicial
process alone. Id.
Waiver of the right to arbitration must be intentional. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89
(Tex.1996); In re Certain Underwriters at Lloyd's, 18 S.W.3d 867, 872 (Tex.App.-Beaumont 2000, orig.
proceeding). After suit has been filed, a party must make a specific and deliberate act inconsistent with its
right to arbitrate to substantially invoke the judicial process. Sedillo v. Campbell, 5 S.W.3d 824, 827
(Tex.App.-Houston [14th Dist.] 1999, orig. proceeding); Nationwide of Bryan, Inc. v. Dyer, 969 S.W.2d 518,
522 (Tex.App.-Austin 1998, no pet.). For example, substantially invoking the judicial process "may occur
when the party seeking arbitration actively tried, but failed, to achieve a satisfactory result in litigation
before turning to arbitration." Southwind Group, Inc. v. Landwehr, 188 S.W.3d 730, 736
(Tex.App.-Eastland 2006, no pet.) (citing Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d 131,
135 (Tex.App.-Houston 368 [1st Dist.] 2003, no pet.)); see also Vesta Ins. Group, 192 S.W.3d at 764.
Mere delay alone does not suffice to show prejudice. In re Serv. Corp. lnt'l, 85 S.W.3d 171, 174
(Tex.2002) (quoting Marshall 909 S.W.2d at 898-99) ("[A] party does not waive a right to arbitration
merely by delay; instead, the party urging waiver must establish that any delay resulted in prejudice."); In
re Rolland, 96 S.W.3d 339, 343 (Tex.App.-Austin 2001, orig. proceeding) ("Mere delay in requesting
arbitration does not automatically constitute waiver."). Thus, to establish waiver based on the time period
Bath Junkie waited to request arbitration, Hygiene had to show how the delay prejudiced it. The trial court
record does not establish that the delay resulted in prejudice to Hygiene.
While the filing of a counterclaim may not result in waiver, counterclaims based on arbitrable claims, in
combination with other factors, may result in waiver of a contractual right to arbitrate. Sedillo v. Campbell,
5 S.W.3d 824, 828 (Tex.App.-Houston [14th Dist.] 1999, orig. proceeding).
Waiver of Right to Enforce Contractual Arbitration Clause by substantial
Invocation of litigation with prejudice to opposing party
In their fifth issue, the Fogals assert that Stature waived its right to demand arbitration when it filed and
later abandoned the original arbitration proceedings.
"[A] party waives an arbitration clause by substantially invoking the judicial process to the
other party's detriment." Perry Homes v. Cull, 258 S.W.3d 580, 590-91 (Tex. 2008). Waiver is a
legal question for the court based on the totality of the circumstances, and asks whether a party has
substantially invoked the judicial process to an opponent's detriment, the latter term meaning inherent
unfairness caused by "a party's attempt to have it both ways by switching between litigation and
arbitration to its own advantage." Id. at 597.
The Fogals cite In re Bruce Terminix Company in support of their argument, but Terminix likewise asks
whether the appellee waives his right to demand arbitration by substantially invoking the judicial process
to the appellant's detriment. See 988 S.W.2d 702, 704 (Tex. 1998).
Stature never invoked litigation through the judicial process. Stature demanded arbitration, then failed to
pay the arbitration fee, resulting in the dismissal of the arbitration. After that, the Fogals filed suit. Stature
responded by filing a motion to compel arbitration. Thus, Stature has never sought to invoke the litigation
process. Instead, it has only sought arbitration for resolution of the disputes between it and the Fogals.
Stature has not attempted to "have it both ways by switching between litigation and arbitration." See Perry
Homes, 258 S.W.3d at 597. We hold Stature did not waive its right to demand arbitration by previously
We overrule the Fogals' fifth issue.Trial Court's Denial of Motion to Vacate Award
Fogal v. Stature Construction (Tex.App.- Houston [1st Dist.] Jan. 29, 2009)(Alcala)
(confirmation of arbitration award, no waiver, challenges to arb award overruled, award confirmed, open
courts, motion to modify arbitration award under FAA)
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Alcala
Before Justices Taft, Keyes and Alcala
01-07-00456-CV Mary Fogal and Robert Fogal v. Stature Construction, Inc., Jorge Casimiro, Tom
Thibodeau and Bernie Kane
Appeal from 80th District Court of Harris County
Trial Court Judge: Hon. Lynn Bradshaw-Hull
OTHER CASES FROM THE HOUSTON COURTS OF APPEALS INVOLVING
CLAIMS OF ARBITRATION WAIVER
Chambers v. O'Quinn (Tex.App.- Houston [14th Dist.] Oct. 1, 2009)(Opinion on remand by Taft)
(right to arbitration of attorney-client / legal malpractice dispute not waived, conflict in arb agreement as to
whether TAA or FAA applies resolved in favor of Texas Arbitration Act, arbitration of legal malpractice
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Tim Taft
Before Justices Taft, Keyes and Hanks
01-04-01029-CV Bob Chambers, et al. v. John M. O'Quinn, individually d/b/a O'Quinn & Laminack, and
John M. O'Quinn, P.C.
Appeal from 61st District Court of Harris County
Trial Court Judge: Hon. John Donovan
Okorafor v. Uncle Sam & Associates, Inc. (Tex.App.- Houston [1st Dist.] Apr. 23, 2009)(Radack)
(arbitration not compelled, waiver issue raised), preemption issue FAA vs. state TGAA)
AFFIRM TRIAL COURT JUDGMENT: Opinion by Chief Justice Radack
Before Chief Justice Radack, Justices Nuchia and Higley
01-07-00908-CV Elizabeth Okorafor v. Uncle Sam & Associates, Inc.
Appeal from 400th District Court of Ft. Bend County
Trial Court Judge: Hon Clifford J. Vacek
In Re Bison Building Materials (Tex.App.- Houston [1st Dist.] June 26, 2008)(Radack) (opinion in pdf)
(arbitration mandamus, employment, workplace injury, no waiver of right to arbitrate found)
GRANT PETITION FOR WRIT OF MANDAMUS: Opinion by Chief Justice Radack
Before Chief Justice Radack, Justices Alcala and Bland
01-07-00003-CV In re Bison Building Materials, Ltd.
Appeal from 212th District Court of Galveston County
Trial Court Judge: Hon. Susan Elizabeth Criss
Denial of Motion to Compel Arbitration Affirmed - Motion Not Timely, Counterclaim Asserted
Nova Info Systems v. Nidhi (Tex.App.- Houston [14th Dist.] Mar. 29, 2007)(Anderson)
(denial of motion to compel arbitration affirmed)
A party to an arbitration agreement can waive its contractual right to compel arbitration of a dispute in two ways. A party can
waive arbitration if that party delays seeking to compel arbitration and the delay results in prejudice; or if that party
substantially invokes the judicial process and the opposing party suffers prejudice as a result. Prudential Securities, Inc. v.
Marshall, 909 S.W.2d 896, 898-99 (Tex. 1995); Associated Glass, Ltd. v. Eye Ten Oaks Investments, Ltd., 147 S.W.3d 507,
514 (Tex. App.-San Antonio 2004, no pet.).
Here, Nova filed its special appearance in April 2002. Nova then waited approximately thirty months before it filed its
motion to compel arbitration in October 2004, soon after requesting and receiving a continuance of the original trial setting.
In the interim, Nova filed its original answer with affirmative defenses as well as a counterclaim against appellee. In
addition, Mr. Sowada, as well as the other defendants, were not parties to the arbitration agreement and did not join the
motion to compel arbitration which, if it had been granted, would have required appellee to pursue its claims
simultaneously in two different forums. These facts support the trial court's findings that (1) Nova unreasonably delayed in
filing its motion to compel arbitration; (2) Nova substantially invoked the judicial process; and (3) appellee was prejudiced
as a result of Nova's actions. Accordingly, the trial court did not abuse its discretion when it denied appellants' motion for
new trial. See In re E. I. DuPont de Nemours & Co., 136 S.W.3d at 223. We overrule appellants; first issue.
TEXAS SUPREME COURT'S RESOLUTION OF ARB WAIVER CLAIMS
In Re CitiGroup Global Markets, Inc., No. 06-0886 (Tex. May 16, 2008)(per curiam)
(arbitration compelled, no waiver of right to arbitrate found)
Perry Homes v. Cull, No. 05-0882, 258 S.W.3d 580 (Tex. May 2, 2008)(Opinion by Scott A. Brister)
(arbitration award to consumers set aside by Texas Supreme Court on waiver theory)
Justice O'Neill delivered a concurring opinion in Perry Homes vs. Cull.
Justice Johnson wrote an opinion concurring and dissenting in part, which was joined by Chief Justice
and Justice Green
Justice Willett delivered a separate opinion in Perry Homes v. Culls
Once a court has determined a valid arbitration agreement exists, the burden shifts to the party opposing
arbitration to raise an affirmative defense to enforcing arbitration. J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 227 (Tex.2003); Bath Junkie Franchise, 246 S.W.3d at 364. A party waives an arbitration
clause by "`substantially invoking the judicial process to the other party's detriment or prejudice.'" In re
Fleetwood Homes of Tex., L.P., 257 S.W.3d 692, 694 (Tex.2008) (quoting Perry Homes v. Cull, 258
S.W.3d 580, 589-90 (Tex.2008)). There is a strong presumption against waiver under the FAA. In re
Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006). Whether the facts found by the trial court amount
to a waiver is a question of law for the court. Id.
602 "[T]he test for determining waiver is two-pronged: (1) did the party seeking arbitration substantially
invoke the judicial process; and (2) did the opposing party prove that it suffered prejudice as a result?"
Tex. Residential Mortgage, L.P. v. Portman, 152 S.W.3d 861, 863 (Tex. App.-Dallas 2005, no pet.); see In
re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002) (party alleging waiver must establish delay resulted in
prejudice). "Whether a party's conduct waives its arbitration rights under the Federal Arbitration Act is a
question of law." In re Bruce Terminix Co., 988 S.W.2d 702, 703-04 (Tex.1998). Waiver can be implied
from a party's conduct but, in close cases, the "strong presumption against waiver" should govern. Perry
Homes, 258 S.W.3d at 593.
The Texas Supreme Court has recently noted it has never found a waiver merely by filing suit. Id. at
590. The Texas Supreme Court has further mandated that a court should not infer waiver based only
on a minimal amount of discovery. Bruce Terminix Co., 988 S.W.2d at 704. In this case, discovery has not
yet begun. The mere act of filing suit is insufficient to substantially invoke the judicial process.
In addition, there is insufficient evidence of prejudice. Green Tree did not file the motion to compel and
plea in abatement until approximately ninety days after filing suit. However, "[m]ere delay alone does not
suffice to show prejudice." Bath Junkie Franchise, 246 S.W.3d at 368; see Serv. Corp. Int'l, 85 S.W.3d at
174; see also Bruce Terminix Co., 988 S.W.2d at 703-04. The Texas Supreme Court has refused to find
prejudice even when the parties had been litigating for two years, had incurred more than $200,000.00 in
expenses, and had conducted extensive discovery. See Vesta Ins. Group, Inc., 192 S.W.3d at 763. But
see Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 498 (5th Cir.1986) ("A party `may not
invoke arbitration and yet seek pre-trial discovery going to the merits. . . .'"). In contrast, Coyner incurred
$1,500.00 in expenses and discovery has yet to begin. Coyner has failed to show sufficient prejudice. The
trial court erred in finding Green Tree waived its right to arbitration.
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